The City of Vadnais Heights, Minnesota

Transcription

1 The City of Vadnais Heights, Minnesota 2013 Comprehensive Annual Financial Report Year Ended December 31, 2013 Building on the tradition of yesterday and the promise of tomorrow.

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3 CITY OF VADNAIS HEIGHTS VADNAIS HEIGHTS, MINNESOTA COMPREHENSIVE ANNUAL FINANCIAL REPORT FOR THE YEAR ENDED DECEMBER 31, 2013 REPORT PREPARED BY: THE FINANCE DEPARTMENT MEMBER OF THE GOVERNMENT FINANCE OFFICERS ASSOCIATION IN THE UNITED STATES AND CANADA

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5 CITY OF VADNAIS HEIGHTS, MINNESOTA ANNUAL FINANCIAL REPORT TABLE OF CONTENTS FOR THE YEAR ENDED DECEMBER 31, 2013 Page No. INTRODUCTORY SECTION Letter of Transmittal from Finance Director 7 Certificate of Achievement for Excellence in Financial Reporting 11 Organizational Chart 12 List of Elected and Appointed Officials 13 FINANCIAL SECTION Independent Auditor s Report 17 Management s Discussion and Analysis 21 Exhibit Basic Financial Statements Government-wide Financial Statements Statement of Net Position 1 35 Statement of Activities 2 36 Fund Financial Statements Governmental Funds Balance Sheet 3 40 Reconciliation of the Balance Sheet to the Statement of Net Position 4 43 Statement of Revenues, Expenditures and Changes in Fund Balances 5 44 Reconciliation of the Statement of Revenues, Expenditures and Changes in Fund Balances to the Statement of Activities 6 46 General Fund Statement of Revenues, Expenditures and Changes in Fund Balances - Budget and Actual 7 47 Proprietary Funds Statements of Net Position 8 48 Statements of Revenues, Expenses and Changes in Net Position 9 50 Statements of Cash Flows Fiduciary Fund Statement of Fiduciary Net Position Notes to the Financial Statements 57 Required Supplementary Information Schedule of Funding Progress for the Postemployer Benefit Plan 84 Combining and Individual Fund Financial Statements and Schedules Nonmajor Governmental Funds Combining Balance Sheet A-1 88 Combining Statement of Revenues, Expenditures and Changes in Fund Balances A-2 90 Nonmajor Capital Projects Funds Combining Balance Sheet B-1 94 Combining Statement of Revenues, Expenditures and Changes in Fund Balances B-2 96 General Fund Schedule of Revenues, Expenditures and Changes in Fund Balances - Budget and Actual C-1 98 Debt Service Funds Combining Balance Sheet D Combining Schedule of Revenues, Expenditures and Changes in Fund Balances D Agency Funds Combining Statement of Changes in Fiduciary Assets and Liabilities E Summary Financial Report Revenues and Expenditures for General Operations - Governmental Funds F

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7 CITY OF VADNAIS HEIGHTS, MINNESOTA ANNUAL FINANCIAL REPORT TABLE OF CONTENTS - CONTINUED FOR THE YEAR ENDED DECEMBER 31, 2013 Exhibit Page No. STATISTICAL SECTION (UNAUDITED) Net Position by Component G Changes in Net Position G Governmental Activities Tax Revenues by Sources G Fund Balances of Governmental Funds G Changes in Fund Balances of Governmental Funds G Assessed Net Tax Capacity and Estimated Market Value of Taxable Property G Property Tax Rates - Direct and Overlapping Governments G Principal Property Taxpayers G Property Tax Levies and Collections G Ratios of Outstanding Debt by Type G Ratios of General Bonded Debt Outstanding G Computation of Direct and Overlapping Debt G Legal Debt Margin Information G Demographic and Economic Statistics G Principal Employers G Full-Time Equivalent City Government Employees by Function G Operating Indicators by Function G Capital Asset Statistics by Function G

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9 INTRODUCTORY SECTION CITY OF VADNAIS HEIGHTS VADNAIS HEIGHTS, MINNESOTA FOR THE YEAR ENDED DECEMBER 31,

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11 Bob Sundberg Finance Director Phone Fax The City of Vadnais Heights 800 East County Road E Vadnais Heights, MN June 16, 2014 To the Honorable Mayor, Members of the City Council and Citizens of the City of Vadnais Heights: The Comprehensive Annual Financial Report of the City of Vadnais Heights (the City) for the fiscal year ended December 31, 2013, is hereby submitted. Minnesota Statutes Section 6.74 requires cities to report their financial activities annually to the Office of the State Auditor within 180 days of the fiscal year end. Additionally, cities over 2,500 in population, according to the latest census, must have an annual audit in accordance with generally accepted accounting principles. This requirement has been satisfied by the engagement of the firm of Abdo, Eick & Meyers, LLP; their report is included in the financial section of this report. This report consists of management s representations concerning the finances of the City. Consequently, management assumes full responsibility for the completeness and reliability of the information presented in this report. To provide a reasonable basis for making these representations, management of the City has established a comprehensive internal control network that is designed both to protect the City s assets from loss, theft, or misuse and to compile sufficient reliable information for the preparation of the City s financial statements in conformity with Generally Accepted Accounting Principles (GAAP.) Because the cost of internal controls should not outweigh their benefits, the City s comprehensive framework of internal controls has been designed to provide reasonable rather than absolute assurance that the financial statements will be free of material misstatement. As management, we assert that, to the best of our knowledge and belief, this financial report is complete and reliable in all material respects. The City s financial statements have been audited by Abdo, Eick & Meyers, LLP, a firm of licensed certified public accountants. The goal of the independent audit was to provide reasonable assurance that the financial statements of the City for the fiscal year ended December 31, 2013 are free of material misstatement. The independent audit involved examining, on a test basis, evidence supporting amounts and disclosures in the financial statements; assessing the accounting principles used and significant estimates made by management; and evaluating the overall financial statement presentation. The independent auditor concluded, based on the audit, there was a reasonable basis for rendering an unqualified opinion that the City s financial statements for the year ended December 31, 2013 are fairly presented in conformity with GAAP. The independent auditor s report is presented as the first component of the financial section of this report. -7-

12 GAAP further requires that management provide a narrative introduction, overview, and analysis to accompany the basic financial statements in the form of Management s Discussion and Analysis (MD&A). This letter of transmittal is designed to complement MD&A and should be read in conjunction with it. The City s MD&A can be found immediately following the report of the independent auditors. Profile o f the City o f Vadnais Heights Vadnais Heights is a northeast suburb of the Minneapolis-St. Paul Metropolitan Area and is located seven miles north of the Saint Paul city limits. The City covers an area of approximately 8.3 square miles and its population, according to the 2010 Census, is estimated at 12,302. A hallmark feature in our City is Vadnais-Sucker Lake Regional Park. This scenic and recreational jewel boasts 1,200 acres of woods and lakes. In addition, Vadnais Heights has more than 100 acres of active parkland. The City is empowered by the state to levy property taxes on property within its boundaries. The majority of the tax base in Vadnais Heights is residential property. However, the City s sizable commercial base provides the City with a stable tax revenue flow. A much-deliberated City Center plan, developed in the 1980 s, sparked commercial growth along County Road E. Important to the plan was the major infrastructure improvement to County Road E in the area of I-35E in the 1990 s. The resulting commercial area includes shops, restaurants, and other businesses focusing on service for this community. The City was incorporated in 1957 and became a statutory city in Its governing body, the city council, is comprised of a mayor and four at-large council members. The City provides its residents and businesses a full range of municipal services directly and on a contractual basis consisting of police, fire/emt, paramedics, public works, parks and recreation and general administrative services. The City also operates three enterprises: water utility, sewer utility, and a surface water utility. The City adopts a formal annual budget for the general fund. Less formal operational budgets are approved for special revenue and enterprise funds as these funds are not dependent on property tax revenues and their expenditures are dictated by revenues received. Capital projects are scheduled in the five year capital improvement plan. Local Economy Approximately two thirds of the City s net tax capacity is comprised of residential homesteaded properties; the majority of the remaining tax capacity is comprised of commercial and industrial properties. There are over 300 business establishments in the City including a variety of light manufacturing, research and development, hospitality, health/medical, and various other commercial service and retail establishments. Approximately 7,000 jobs exist within the City. There are promising signs that the worst of the economic downturn is behind the City as inquiries from developers and economic activity in the City continue to rebound. Additionally, residential property values are turning upward after several years of decline according to the Ramsey County Assessor s most recent report. Two separate 60,000 square foot medical office buildings were recently completed and a 90 room hotel is nearing completion. The City continues to receive -8-

13 inquiries into redevelopment of older properties in addition to current owners looking to reinvest in their facilities. Several small residential developments are also in the planning stages. The City is served by several four-lane highways and is intersected by two interstate freeways which enhance the City s desirability for developers. Current property tax collection rates continue to be high although tax abatements from previous years, due to property value appeals, have decreased overall property tax receipts. Financial Planning and Policies The City s general fund balance remained healthy in The fund balance remains at the high end of the required range established by the City Council. In 2011, the City adopted a fund balance policy requiring the maintenance of a balance of 35-60% of the following year s budget as unrestricted fund balance in the general fund. The fund balance is necessary for cash flow purposes as scheduled property tax receipts don t occur until July and December of each year. The City anticipates maintaining a similar fund balance in future years as it has consistently done in the past. In 2010, the City revised its policy related to the accounting for compensated absences. Compensated absences are earned, but unused, vacation, sick and comp time hours. A new internal service fund was created and the liability for compensated absences was fully funded in This fund continues to be fully funded in The annual budget serves as the foundation for the City s financial planning and control. All department heads of the City are required to submit requests for appropriation to the City Administrator by July 1 each year. The city administrator and finance director use these requests as a starting point for developing a preliminary general fund budget. The preliminary budget is reviewed by the Council s Finance Committee. The preliminary budget and the not to exceed tax levy for each subsequent year are approved by the Council by September of each prior year as required by state statute. The specific September date was moved to September 30 from September 15 by 2014 State legislative action. The Council is required to hold a public hearing on the budget and to adopt a final budget and tax levy by December. The objective of these budgetary controls is to ensure compliance with legal provisions embodied in the annually appropriated budget approved by the city council. Activities of the general fund are included in the annually appropriated budget. The level of budgetary control (that is, the level at which expenditures cannot legally exceed the appropriated amount) is established at the department level. Major capital projects in the city are planned and budgeted in the five-year capital improvement plan, which is considered and approved by the City Council each year. The city continued the City-wide pavement management program in Each year, street segments, using the most cost-effective repair methods, are improved. Funding is provided by a combination of assessments to benefiting property owners and city capital contributions. When street segments are scheduled for improvement, pipes underneath these segments are inspected and any deficiencies in the City s underground utility system are corrected in conjunction with that project. The City of Vadnais Heights worker s compensation insurance and its general property and liability coverage are provided through the League of Minnesota Cities Insurance Trust (LMCIT). The LMCIT worker s compensation program is a joint self-insurance plan, designed to lower and stabilize cities workers compensation costs and to assure that cities have a source of coverage available. -9-

14 Financial Reporting Award The Government Finance Officers Association of the United States and Canada (GFOA) awards a Certificate of Achievement for Excellence in Financial Reporting to cities who submit outstanding comprehensive annual financial reports each year. The City received the award for its 2012 financial report. The City expects to submit for the award again for its 2013 financial report. Earning the award is the result of the combined efforts of the city s audit firm, Abdo, Eick & Meyers, LLP, and the city s finance department. In order to be awarded a Certificate of Achievement, a government must publish an easily readable and efficiently organized comprehensive annual financial report. This report must satisfy both accounting principles generally accepted in the United States of America and applicable legal requirements. A Certificate of Achievement is valid for a period of one year only. -10-

15 Government Finance Officers Association Certificate of Achievement for Excellence in Financial Reporting Presented to City of Vadnais Heights Minnesota For its Comprehensive Annual Financial Report for the Fiscal Year Ended December 31,2012 Executive Director/CEO -11-

16 City of Vadnais Heights ORGANIZATIONAL CHART Commissions Historical Parks, Recreation & Trails Planning Health & Public Safety Heritage Days Committee Deer Management Committee Public Works & Engineering Parks & Recreation Administration Finance/ Information Technology (IT) Planning/ Development Public Safety Engineering Recreation Programs Sewer & Water Park Maintenance Hookups Park Development Water Meter Repair Facility/Field Street Lighting Reservations Snow Plowing Sidewalk/Trail Maintenance Street Maintenance Storm Drainage Development Site Review Fleet Maintenance Environmental Issues Recycling/Tree Trimming Facility Mgmt & Maintenance Water System Sanitary Sewer System Elections Voter Registration City Council Agendas Human Resources Records Management Communications Contracts Government Relations General Management Cashier/Receptionist Legislative Advisor Business Licenses General Public Relations Auditing Building Inspection Accounting Building Permits Debt Management Zoning Administration Financial Reporting Development Administration Long-term Financial Contractor Licensing Planning Economic Development Utility Billing/CIP Payroll Accounts Payable Accounts Receivable Credit Card Management Insurance/Risk Management Investments Purchasing Management Fixed Asset Inventory Supplier & Equipment Leases IT Equipment Maintenance/Support Emergency Services Fire Service Law Enforcement (Ramsey County Sheriff) Animal Control Contact Emergency Management Hazardous Material Code Enforcement Rental Housing Inspections -12-

17 CITY OF VADNAIS HEIGHTS, MINNESOTA LIST OF ELECTED AND APPOINTED OFFICIALS FOR THE YEAR ENDED DECEMBER 31, 2013 ELECTED OFFICIALS Name Title Term Expires Marc A. Johannsen D. Joseph Murphy Gerald J. Auge Craig A. Johnson Terry S. Nyblom Kevin Watson Mark Graham Kathy Keefe Ed Leier Bob Sundberg Mayor Council Member Council Member Council Member Council Member APPOINTED OFFICIALS January 5, 2015 January 5, 2015 January 2, 2017 January 2, 2017 January 5, 2015 City Administrator City Engineer/Public Service Director Assistant City Administrator Fire Chief Finance Director -13-

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19 FINANCIAL SECTION CITY OF VADNAIS HEIGHTS VADNAIS HEIGHTS, MINNESOTA FOR THE YEAR ENDED DECEMBER 31,

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21 INDEPENDENT AUDITOR S REPORT Honorable Mayor and City Council City of Vadnais Heights, Minnesota Report on the Financial Statements We have audited the accompanying financial statements of the governmental activities, the business-type activities, each major fund and the aggregate remaining fund information of the City of Vadnais Heights, Minnesota (the City), as of and for the year ended December 31, 2013, and the related notes to the financial statements, which collectively comprise the City s basic financial statements as listed in the table of contents. Management s Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. Auditor s Responsibility Our responsibility is to express opinions on these financial statements based on our audit. The prior year comparative information has been derived from the City s 2012 financial statements and, in our report dated June 17, 2013 (Note 8 was dated July 22, 2013) we express unmodified opinions on the respective proprietary fund financial statements. 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 involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the City s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the City s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall financial statement presentation. 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 as of December 31, 2013, 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 Eden Avenue, Suite 250 Edina, MN Fax

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23 Other Matters Required Supplementary Information Accounting principles generally accepted in the United States of America require that the Management s Discussion and Analysis starting on page 21 and the Schedule of Funding Progress on page 84 be presented to supplement the basic financial statements. Such information, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management s responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance. Other Information Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the City s basic financial statements. The introductory section, statistical section, and combining and individual fund financial statements and schedules are presented for purposes of additional analysis and are not a required part of the basic financial statements. The combining and individual fund financial statements and schedules 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, combining and individual fund financial statements and schedules are fairly stated, in all material respects, in relation to the basic financial statements as a whole. The introductory section and statistical section have not been subjected to the auditing procedures applied in the audit of the basic financial statements, and accordingly, we do not express an opinion or provide any assurance on them. ABDO, EICK & MEYERS, LLP Minneapolis, Minnesota June 16, Process Going Beyondthe Numbers

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25 As management of the City of Vadnais Heights, Minnesota, (the City), we offer readers this expanded narrative and analysis of the financial activities of the City for the fiscal year ended December 31, Pages 7 through 10 provide additional information regarding the City. Financial Highlights Management s Discussion and Analysis The assets of the City exceeded its liabilities at the close of the most recent fiscal year by $65,669,862 (net position). Of this amount, $17,868,599 (unrestricted net position) may be used to meet the City s ongoing obligations to citizens and creditors. The City s total net position increased $197,086 during the year. The increase is mostly due to revenues exceeding expenses. As of the close of the current fiscal year, the City s governmental funds reported combined ending fund balances of $12,220,746, an increase of $822,255 in comparison with the prior year. Of this total amount, $2,894,026 is available for use at the City s discretion, or unassigned. The remainder, $9,326,720 has been classified as nonspendable, restricted, committed or assigned. At the end of 2013, the City s General fund unassigned balance was $2,894,026, or 57.6 percent of 2013 General fund expenditures and 55.9 percent of budgeted 2014 General fund expenditures. These funds are not legally restricted and can be spent at the City s discretion. The remaining balance of General fund, $55,878, is nonspendable because it consists of inventory and prepaid expenses. The City s total debt decreased by $541,614 primarily due to regularly scheduled debt payments. -21-

26 Overview of the Financial Statements This discussion and analysis is intended to serve as an introduction to the City s basic financial statements. The City s basic financial statements comprise three components: 1) government-wide financial statements, 2) fund financial statements, and 3) notes to the financial statements. This report also contains other supplemental information in addition to the basic financial statements themselves. The financial statements also include notes that explain some of the information in the financial statements and provide more detailed data. Figure 1 shows how the required parts of this annual report are arranged and relate to one another. In addition to these required elements, we have included a section with combining and individual fund financial statements and schedules that provide details about nonmajor governmental funds, which are added together and presented in single columns in the basic financial statements. Figure 1 Required Components of the City s Annual Financial Report -22-

27 Figure 2 summarizes the major features of the City s financial statements, including the portion of the City government they cover and the types of information they contain. The remainder of this overview section of management s discussion and analysis explains the structure and contents of each of the statements. Figure 2 Major features of the Government-wide and Fund Financial Statements Scope Required financial statements Accounting basis and measurement focus Type of asset/liability information Type of deferred outflows/inflows of resources information Type of inflow/out flow information Government-wide Statements Entire City government (except fiduciary funds) and the City s component units Statement of Net Position Statement of Activities Accrual accounting and economic resources focus All assets and liabilities, both financial and capital, and short-term and longterm All deferred outflows/inflows of resources, regardless of when cash is received or paid All revenues and expenses during year, regardless of when cash is received or paid Fund Financial Statements Governmental Funds Proprietary Funds The activities of the City that are not proprietary or fiduciary, such as police, fire and parks Balance Sheet Statement of Revenues, Expenditures, and Changes in Fund Balances Modified accrual accounting and current financial resources focus Only assets expected to be used up and liabilities that come due during the year or soon thereafter; no capital assets included Only deferred outflows of resources expected to be used up and deferred inflows of resources that come due during the year or soon thereafter; no capital assets included Revenues for which cash is received during or soon after the end of the year; expenditures when goods or services have been received and payment is due during the year or soon thereafter Activities the City operates similar to private businesses, such as the water and sewer system Statements of Net Position Statements of Revenues, Expenses and Changes in Net Position Statements of Cash Flows Accrual accounting and economic resources focus All assets and liabilities, both financial and capital, and shortterm and long-term All deferred outflows/inflows of resources, regardless of when cash is received or paid All revenues and expenses during the year, regardless of when cash is received or paid Government-wide financial statements. The government-wide financial statements are designed to provide readers with a broad overview of the City s finances, in a manner similar to a private-sector business. The statement o f net position presents information on all of the City 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 is improving or deteriorating. The statement o f activities presents information showing how the City s net position changed during the most recent fiscal year. All changes in net position balances are reported as soon as the underlying event giving rise to the change occurs, regardless o f the timing o f related cash flows. Thus, revenues and expenses are reported in this statement for some items that will only result in cash flows in future fiscal periods (e.g., uncollected taxes and earned but unused vacation leave). Both of the government-wide financial statements distinguish functions of the City that are principally supported by taxes and intergovernmental revenue (governmental activities) from other functions that are intended to recover all or a significant portion of their costs through user fees and charges (business-type activities). The governmental activities of the City include general government, public safety, public works, culture and recreation, community development and interest on long-term debt. The business-type activities of the City include water, sewer, and surface water management. -23-

28 The government-wide financial statements include not only the City itself (known as the primary government), but also a legally separate Economic Development Authority for which the City is financially accountable. When applicable, financial information for this component unit is reported separately from the financial information presented for the primary government itself. The Economic Development Authority, although legally separate, functions for all practical purposes as a department of the City, and therefore is included as an integral part of the primary government when financial activity occurs. The government-wide financial statements start on page 35 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, like other state and local governments, uses fund accounting to ensure and demonstrate compliance with finance-related legal requirements. All of the funds of the City can be divided into three categories: governmental funds, proprietary funds and fiduciary funds. Governmental funds. Governmental funds are used to account for essentially the same functions reported as governmental activities in the government-wide financial statements. However, unlike the government-wide financial statements, governmental fund financial statements focus on near-term inflows and outflows of spendable resources, as well as on balances o f spendable resources available at the end of the fiscal year. Such information may be useful in evaluating a government s near-term financing requirements. Because the focus of governmental funds is narrower than that of the government-wide financial statements, it is useful to compare the information presented for governmental funds with similar information presented for governmental activities in the government-wide financial statements. By doing so, readers may better understand the long-term impact of the government s near-term financing decisions. Both the governmental fund balance sheet and the governmental fund statement of revenues, expenditures and changes in fund balances provide a reconciliation to facilitate this comparison between governmental funds and governmental activities. The City maintains 23 individual governmental funds, four of which are Debt Service 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 Debt Service funds, Public Works Reserve fund, and the TIF-16 fund, all of which are considered to be major funds. Data from the other 16 governmental funds are combined into a single, aggregated presentation. Individual fund data for each of these nonmajor governmental funds is provided in the form of combining statements or schedules elsewhere in this report. The City adopts an annually appropriated budget for its General fund. A budgetary comparison statement has been provided for the General fund to demonstrate compliance with this budget. The basic governmental fund financial statements start on page 40 of this report. Proprietary funds. The City maintains two different types of proprietary funds. Enterprise funds are used to report the same functions presented as business-type activities in the government-wide financial statements. The City uses enterprise funds to account for its water, sewer, and surface water management operations. Internal service funds are an accounting device used to accumulate and allocate costs internally among the City s various functions. The City uses an internal service fund to account for the funding of the City s compensated absences liability. Proprietary funds provide the same type of information as the government-wide financial statements, only in more detail. The proprietary funds financial statements provide separate information for each of the enterprise funds which are considered to be major funds of the City. The basic proprietary funds financial statements start on page 48 of this report. Fiduciary funds. Fiduciary funds are used to account for resources held for the benefit of parties outside the government. Fiduciary funds are not reflected in the government-wide financial statement because the resources of those funds are not available to support the City s own programs. The accounting used for fiduciary funds is much like that used for proprietary funds. Notes to 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 start on page 57 of this report. Other information. The combining statements referred to earlier in connection with nonmajor governmental funds are presented following the notes to the financial statements. Combining and individual fund financial statements and schedules start on page 88 of this report. -24-

29 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, assets exceeded liabilities by $65,669,862 at the close of the most recent fiscal year. A portion of the City s net position (66.3 percent) 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 uses these capital assets to provide services to citizens; consequently, these assets are not available for future spending. Although the City s investment in its capital assets is reported net of related debt, it should be noted that the resources needed to repay this debt must be provided from other sources, since the capital assets themselves cannot be used to liquidate these liabilities. City of Vadnais Heights s Summary of Net Position Governmental Activities Business-type Activities Increase (Decrease) Increase (Decrease) Assets Current and other assets $ 14,607,543 $13,631,095 $ 976,448 $ 9,706,152 $ 9,889,543 $ (183,391) Capital assets 41,031,484 41,594,054 (562,570) 10,694,948 10,890,127 (195,179) Total assets 55,639,027 55,225, ,878 20,401,100 20,779,670 (378,570) Liabilities Noncurrent liabilities outstanding 8,804,603 9,349,059 (544,456) 7,984 5,142 2,842 Other liabilities 1,365,464 1,023, , , ,462 37,752 Total liabilities 10,170,067 10,372,439 (202,372) 200, ,604 40,594 Net Position Net investment in capital assets 32,866,484 32,969,054 (102,570) 10,694,948 10,890,127 (195,179) Restricted for Debt service 362, , , Charitable gambling 60,577 53,578 6, Economic development 3,733,246 5,884,754 (2,151,508) Community development 83,959 54,949 29, Unrestricted 8,362,645 5,784,546 2,578,099 9,505,954 9,729,939 (223,985) Total net position $45,468,960 $44,852,710 $ 616,250 $20,200,902 $20,620,066 $ (419,164) The remaining balance of unrestricted net position ($17,868,599) may be used to meet the City s ongoing obligations to citizens and creditors. At the end of the current fiscal year, the City is able to report positive balances in all categories of net position for the City as a whole, as well as for its separate governmental and business-type activities. -25-

30 Governmental activities. Governmental activities increased the City s net position by $616,250, thereby accounting for the increase in the net position of the City. Key elements of this increase are as follows: City of Vadnais Heights s Changes in Net Position Governmental Activities Business-type Activities Increase Increase (Decrease) (Decrease) Revenues Program revenues Charges for services $ 1,907,624 $ 3,391,610 $ (1,483,986) $ 3,300,988 $ 3,330,978 $ (29,990) Operating grants and contributions 287, ,650 (8,981) Capital grants and contributions 320, ,387 (29,693) General revenues Taxes Property taxes 3,575,401 3,563,677 11, Tax increments and other taxes 1,464,276 2,068,747 (604,471) Grants and contributions not restricted to specific programs 3,600 9,460 (5,860) Unrestricted investment earnings (467,864) 107,550 (575,414) (419,459) 111,188 (530,647) Gain on sale o f capital assets 45,608-45, Total revenues 7,137,008 9,788,081 (2,651,073) 2,881,529 3,442,166 (560,637) Expenses General government 1,129,033 1,142,427 (13,394) Public safety 2,253,586 2,188,839 64, Public works 1,780,217 1,838,208 (57,991) Culture and recreation 1,027,564 4,045,275 (3,017,711) Community development 697, ,114 (240,004) Interest on long-term debt 308, ,300 (148,052) Water ,015, ,794 34,706 Sewer ,335,613 1,261,370 74,243 Surface water management , ,751 12,829 Total expenses 7,195,758 10,608,163 (3,412,405) 2,625,693 2,503, ,778 Increase (decrease) in net position before transfers and contributions (58,750) (820,082) 761, , ,251 (682,415) Contribution o f capital assets - (150,000) 150, ,000 (150,000) Transfers 675, , ,000 (675,000) (385,000) (290,000) Special item-loss on disposal on land held for resale - (3,807,260) 3,807, Special item - gain on discontinued operations - 3,197,538 (3,197,538) Change in net position 616,250 (1,194,804) 1,811,054 (419,164) 703,251 (1,122,415) Net position, January 1 44,852,710 46,047,514 (1,194,804) 20,620,066 19,916, ,251 Net position, December 31 $45,468,960 $44,852,710 $ 616,250 $20,200,902 $20,620,066 $ (419,164) The largest decreases in revenue occurred in charges for services, tax increments and other taxes, and unrestricted investment earnings. The decrease in charges for services is attributable to the discontinuation of the Sportsplex in 2012, which is retroactively restated to be included in governmental activities. The decrease in tax increments and other taxes is due to the decertification of various TIF districts during 2012 and in The decrease in unrestricted investment earnings was due to a large market value adjustment on the City s investments caused by a spike in interest rates at year-end. This adjustment is unrealized by the City. As the City typically holds its investments until maturity, the market value decline will be reversed as the investments approach their maturity dates. -26-

31 The following graph depicts various governmental activities and shows the revenue and expenses directly related to those activities. $2,500,000 Expenses and Program Revenues - Governmental Activities $2,000,000 $1,500,000 $1,000,000 $500,000 $ General Public safety Public works Culture and Community Interest on longgovernment recreation development term debt Program revenues Expenses Revenues by Source - Governmental Activities Property taxes, levied for debt service 8.83% Other -5.92% Charges for services 26.74% Operating grants -and contributions 4.03% Capital grants and contributions 4.49% Property taxes levied for general purposes 61.78% Grants and contributions not restricted to specific programs 0.05% The governmental activities show negative other revenue due to investments requiring a market value adjustment that is greater than the actual interest earned on the investments during the year. -27-

32 Business-type activities. Business-type activities decreased the City s net position by $419,164. Key elements of this decrease are as follows: Expenses and Program Revenues - Business-type Activities $1,800,000 $1,600,000 $1,400,000 $1,200,000 $1,000,000 $800,000 $600,000 $400,000 $200,000 $- W ater Sewer Surface water management Program revenues Expenses Although the above chart shows program revenues in excess of expenses in each enterprise fund, the net position of the business-type activities decreased due to nonoperating expenses, including a negative market value adjustment, and transfers out. Charges for services % Revenues by Source - Business-type Activities Other % The business-type activities show negative other revenue due to investments requiring a market value adjustment that is greater than the actual interest earned on the investments during the year. -28-

33 Financial Analysis of the Government s Funds As noted earlier, the City uses fund accounting to ensure and demonstrate compliance with finance-related legal requirements. Governmental funds. The focus of the City s governmental funds is to provide information on near-term inflows, outflows and balances of spendable resources. Such information is useful in assessing the City s financing requirements. In particular, unassigned fund balance may serve as a useful measure of a government s net resources available for spending at the end of the year. As of the end of the current fiscal year, the City s governmental funds reported combined ending fund balances of $12,220,746, an increase of $822,255 in comparison with the prior year. Approximately 23.7 percent of this total amount, $2,894,026, constitutes unassigned fund balance, which is available for spending at the City s discretion. The remainder of fund balance ($9,326,720) is not available for new spending because it is either 1) nonspendable ($455,878), 2) restricted ($6,989,261), 3) committed ($38,985), or 4) assigned ($1,842,596) for the purposes described in the notes to the financial statements. Activity in the City s major funds is discussed below. Fund Balance December 31, Major funds Increase General $ 2,949,904 $ 628,767 $ 2,321,137 The increase in the General fund was mainly due to the retroactive restatement of 2012 General fund balance that combines the deficit accumulated in the Sportsplex fund with the existing General fund balance in Excluding the 2013 Sportsplex fund s activity, the General fund decreased $83,599. Debt Service $ 502,573 $ 242,539 $ 260,034 The increase in the Debt Service fund balance was due to transfers in from the enterprise funds to assist in the debt payments, as well as lower principal and interest payments. Public Works Reserve $ 536,831 $ 35,652 $ 501,179 The increase in the Public Works Reserve fund balance was due to net transfers in as part of a fund restructuring to payoff the interfund balances of the former Sportsplex fund. T IF 1-16 $ 2,638,077 $ 2,623,230 $ 14,847 The increase in the TIF 1-16 fund balance was due to revenues exceeding expenditures. Proprietary funds. The City s proprietary funds provide the same type of information found in the government-wide financial statements, but in more detail. Unrestricted net position of the enterprise funds at the end of the year amounted to a fund balance of $9,505,954. The total decrease in net position for the funds was $419,164. Other factors concerning the finances of these funds have already been addressed in the discussion of the City s business-type activities. -29-

34 General Fund Highlights The General fund accounts for most of the City s day-to-day operations such as police and fire protection, emergency management, maintenance of streets, community development, administration, and parks and recreation services. As was mentioned earlier, favorable conditions resulted in an increase of $2,321,137 in the fund balance for Final Budget Actual Variance Revenues $ 4,528,633 $ 4,427,287 $ (101,346) Expenditures (5,008,633) (5,025,436) (16,803) Transfer in 475,000 2,974,286 2,499,286 Sale of Capital Assets 5,000 - (5,000) Transfer out - (55,000) (55,000) Increase in fund balance $ - $ 2,321,137 $ 2,321,137 A number of revenue categories varied significantly from budget. Most notably, taxes and interest on investments were $175,149 and $149,756 under budget. Tax revenues were negatively impacted by tax abatements resulting from valuation adjustments for prior years. However, licenses and permits and charges for services were over budget by $128,337 and $72,170, respectively. Overall expenditures were over budget by $16,803. All departments were under budget, except for public works current expenditures, culture and recreation current expenditures, and public safety capital outlay, which were $89,663, $76,408, and $11,837 over budget, respectively. The overage for culture and recreation was primarily due to the success of the Commons, a component of the North Service Center, which is rented out for private gatherings. The positive budgeted revenue variance more than offset the expenditure budget variance. General government current expenditures were $130,861 under budget. Property Tax Management Property taxes are collected for services of general benefit and also for specific development purposes. The vast majority of the property taxes help to pay for the services of the General fund and for capital projects. In 2013, the General fund received approximately 99.0 percent of the tax levy. Taxes generated from subsidized development are referred to as tax increments. These tax revenues are used to assist developers or may be used for public infrastructure improvements. The next table shows the levies for the periods Levy General T ax Increment $ 2,848,030 1,859,578 $ 2,907,968 1,982,981 $ 3,397,817 2,298,992 $ 3,401,400 2,025,497 $ 3,534,366 2,002,516 $ 3,579,662 1,398,

35 Debt Administration Long-term debt. At the end of the current fiscal year, the City had total debt outstanding of $8,812,587. City of Vadnais Heights s Outstanding Debt Governmental Activities Business-type Activities Increase (Decrease) Increase (Decrease) General obligation bonds $ 888,000 $ 1,209,000 $ (321,000) $ - $ - $ - General obligation tax increment bonds 407, ,000 (84,000) General obligation taxable bonds 6,870,000 6,925,000 (55,000) Notes payable 400, , Other postemployment benefits payable 49,087 46,223 2,864 7,984 5,142 2,842 Compensated absences payable 190, ,836 (87,320) Total $ 8,804,603 $ 9,349,059 $ (544,456) $ 7,984 $ 5,142 $ 2,842 Managing debt is a key part of the City s strategy to properly handle its fiscal affairs. Borrowing is limited to capital projects with financing coming from taxes, assessments, development taxes, and enterprise fees. In acknowledgement of its sound fiscal management, Moody s upgraded the bond rating to Aa3 in Reasons cited for the upgrade were the City s strong financial operations, healthy reserve levels, growing tax base, and below average debt burden. In June 2009, the City s bond rating was upgraded to AA by Standard & Poor s. Similar rationale for the upgrade was given. On, August 23, 2012, Standard & Poor's Ratings Services lowered its rating to 'B' from 'A' on Vadnais Heights, Minn.'s general obligation (GO) debt. At the same time, Standard & Poor's lowered its rating to 'CC' from 'A-' on the EDA's lease revenue debt, which provided funds to construct a sports facility. For a more detailed review of debt, please refer to Note 3D in the financial statements. Capital Assets The City s investment in capital assets for its governmental and business type activities as of December 31, 2013, amounts to $51,726,432 (net of accumulated depreciation). This investment in capital assets includes land, structures, improvements, machinery and equipment, park facilities, and roads. City of Vadnais Heights s Capital Assets (net of depreciation) Governmental Activities Business-type Activities Increase (Decrease) Increase (Decrease) Land $ 8,604,096 $ 8,604,096 $ - $ 10,593 $ 10,000 $ 593 Buildings 13,495,161 13,888,949 (393,788) 384, ,198 (10,977) Construction work in process 87,162 8,559 78, Infrastructure 17,007,498 17,302,500 (295,002) Machinery and equipment 1,837,567 1,789,950 47, , ,425 31,766 Improvements other than buildings ,951,943 10,168,504 (216,561) Total $ 41,031,484 $ 41,594,054 $ (562,570) $ 10,694,948 $ 10,890,127 $ (195,179) -31-

36 Capital plans call for continuous repair and development of the municipal infrastructure. Annual street pavement program, construction of trails, park land acquisition and development, fleet purchases, and work on the enterprise systems are examples of capital outlay. Highlights for the year were: Completion of the 2013 Street Project on Springhill Road, Rosebriar Avenue, and International Drive. Replacement of a water pump at well #4, fire hydrants, and a water main interconnection with a neighboring municipality. Installation of new liners in various sewer mains. Purchase of a Caterpillar backhoe loader. Purchase of firefighter exercise equipment Other various improvements and equipment purchases and trade-ins. Additional capital asset information can be found in Note 3D in the financial statements. Tax Increment Projects At year-end, there were seven active tax increment project funds. A separate project fund is set-up to account for revenues and expenditures of each district. The district must be closed when it reaches its statutory end date or de-certified when all obligations have been met. A total of seventeen districts have been closed or decertified by the City since The combined fund balance for the districts is $$6,342,152 at the end of This amount is pledged towards public improvements, note obligations, and debt retirement. Current Events Construction of a 60,000 square foot medical facility was completed in the City. The two story building includes an urgent care center. Land in the City adjacent to the proposed medical facility was sold to a developer that is building a hotel on the site. A 90 room Fairfield Inn and Suites. Construction is under construction. Construction of a 68,000 square foot medical office building began in 2013 and was completed in The building is located in the City Center District of the City. Buerkle Honda, a new and used automobile sales dealer in the City, has begun construction of a 40,000 square foot expansion of their existing facility. Northern Air Corporation, a full-service mechanical, electrical and automation contractor in the City, will complete a 43,000 square foot expansion of their facility in Requests for Information This financial report is designed to provide a general overview of the City 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 financial information should be addressed to the Finance Director, City of Vadnais Heights, 800 East County Road E, Vadnais Heights, Minnesota

37 GOVERNMENT-WIDE FINANCIAL STATEMENTS CITY OF VADNAIS HEIGHTS VADNAIS HEIGHTS, MINNESOTA FOR THE YEAR ENDED DECEMBER 31,

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39 CITY OF VADNAIS HEIGHTS, MINNESOTA Exhibit 1 STATEMENT OF NET POSITION DECEMBER 31, 2013 Governmental Activities Business-type Activities Total ASSETS Cash and temporary investments $ 12,898,717 8,606,003 $ 21,504,720 Receivables Accrued interest 59,771-59,771 Taxes 192,433 4, ,249 Accounts 37, , ,997 Special assessments 743, ,419 1,024,611 Notes 400, ,000 Due from other governments 4,499-4,499 Inventory 50,561-50,561 Land held for resale 215, ,821 Prepaid items 5,317 77,149 82,466 Capital assets Land and construction in progress 8,691,258 10,593 8,701,851 Depreciable assets, net 32,340,226 10,684,355 43,024,581 TOTAL ASSETS 55,639,027 20,401,100 76,040,127 LIABILITIES Accounts payable 427, , ,136 Accrued salaries payable 80,103 2,365 82,468 Due to other governments 153,143 11, ,141 Accrued interest payable 182, ,242 Deposits payable 454, ,878 Unearned revenue 67,813-67,813 Noncurrent liabilities Due within one year 607, ,912 Due in more than one year 8,196,691 7,984 8,204,675 TOTAL LIABILITIES 10,170, ,198 10,370,265 NET POSITION Net investment in capital assets 32,866,484 10,694,948 43,561,432 Restricted for Debt service 362, ,049 Charitable gambling 60,577-60,577 Park dedication 83,959-83,959 Community development 3,733,246-3,733,246 Unrestricted 8,362,645 9,505,954 17,868,599 TOTAL NET POSITION $ 45,468,960 $ 20,200,902 $ 65,669,862 The notes to the financial statements are an integral part of this statement. -35-

40 CITY OF VADNAIS HEIGHTS, MINNESOTA STATEMENT OF ACTIVITIES FOR THE YEAR ENDED DECEMBER 31, 2013 Program Revenues Functions/Programs Expenses Charges for Services Operating Grants and Contributions Capital Grants and Contributions Governmental activities General government $ 1,129,033 $ 783,811 $ 9,315 $ 9,501 Public safety 2,253, ,801 98,130 - Public works 1,780,217 66, , ,463 Culture and recreation 1,027, ,801 44,925 63,730 Community development 697, Interest on long-term debt 308, , Total governmental activities 7,195,758 1,907, , ,694 Business-type activities Water Utility 1,015,500 1,256, Sewer Utility 1,335,613 1,628, Surface water management 274, , Total business-type activities 2,625,693 3,300,988 Total $ 9,821,451 $ 5,208,612 $ 287,669 $ 320,694 General revenues Taxes Property taxes, levied for general purposes Property taxes, levied for debt service Tax increments Franchise taxes Grants and contributions not restricted to specific programs Unrestricted investment earnings Gain on sale of capital assets Transfers Total general revenues and transfers Change in net position Net position as restated, January 1 Net position, December 31 The notes to the financial statements are an integral part of this statement. -36-

41 Exhibit 2 Net (Expense) Revenue and Changes in Net Position Governmental Activities Business-type Activities Total $ (326,406) $ - $ (326,406) (1,652,655) - (1,652,655) (1,331,244) - (1,331,244) (554,108) - (554,108) (697,110) - (697,110) (118,248) - (118,248) (4,679,771) (4,679,771) - 240, , , , , , , ,295 (4,679,771) 675,295 (4,004,476) 2,945, ,391 1,398,827 65,449 3,600 (467,864) 45, ,000 (419,459) (675,000) 2,945, ,391 1,398,827 65,449 3,600 (887,323) 45,608 5,296,021 (1,094,459) 4,201, ,250 (419,164) 197,086 44,852,710 20,620,066 65,472,776 $ 45,468,960 $ 20,200,902 $ 65,669,

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43 FUND FINANCIAL STATEMENTS CITY OF VADNAIS HEIGHTS VADNAIS HEIGHTS, MINNESOTA FOR THE YEAR ENDED DECEMBER 31,

44 CITY OF VADNAIS HEIGHTS, MINNESOTA BALANCE SHEET GOVERNMENTAL FUNDS DECEMBER 31, Debt Public Works General Service Reserve ASSETS Cash and temporary investments $ 3,780,241 $ 493,470 $ 190,945 Receivables Accrued interest 59, Taxes 91,568 9,103 12,307 Accounts 36, Special assessments 14,558 41, ,980 Notes ,000 Due from other governments 4, Inventory 50, Prepaid items 5, TOTAL ASSETS $ 4,042,839 $ 544,291 $ 1,264,232 LIABILITIES Accounts payable $ 545,593 $ - $ 66,421 Accrued salaries payable 80, Due to other governments 153, Deposits payable 180, Unearned revenue 67, TOTAL LIABILITIES 1,027,566-66,421 DEFERRED INFLOWS OF RESOURCES Unavailable revenue - taxes 50, Unavailable revenue - special assessments 14,558 41, ,980 TOTAL DEFERRED INFLOWS OF RESOURCES 65,369 41, ,980 FUND BALANCES Nonspendable 55, ,000 Restricted - 502,573 - Committed Assigned ,831 Unassigned 2,894, TOTAL FUND BALANCES 2,949, , ,831 TOTAL LIABILITIES, DEFERRED INFLOWS OF RESOURCES, AND FUND BALANCES $ 4,042,839 $ 544,291 $ 1,264,232 The notes to the financial statements are an integral part of this statement. -40-

45 Exhibit TIF 1-16 Other Governmental Funds Total Governmental Funds $ 2,647,413 $ 5,596,132 $ 12,708, ,771 14,664 64, , ,232-25, , , , , ,317 $ 2,662,077 $ 5,687,767 $ 14,201,206 $ 24,000 $ 65,235 $ 701, , , , ,813 24,000 65,235 1,183,222-29,171 79, ,256 29, , ,878 2,638,077 3,848,611 6,989,261-38,985 38,985-1,705,765 1,842, ,894,026 2,638,077 5,593,361 12,220,746 $ 2,662,077 $ 5,687,767 $ 14,201,

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47 CITY OF VADNAIS HEIGHTS, MINNESOTA Exhibit 4 RECONCILIATION OF THE BALANCE SHEET TO THE STATEMENT OF NET POSITION GOVERNMENTAL FUNDS AS OF DECEMBER 31, 2013 Total fund balances - governmental $ 12,220,746 Amounts reported for the governmental activities in the statement of net position are different because Capital assets used in governmental activities are not financial resources and therefore are not reported as assets in governmental funds. Cost of capital assets Less accumulated depreciation Land and construction in progress Land held for resale Long-term liabilities, including bonds payable, are not due and payable in the current period and therefore are not reported as liabilities in the funds. Long-term liabilities at year-end consist of Notes payable Bond principal payable Other postemployment benefits payable Some receivables are not available soon enough to pay for the current period's expenditures, and therefore are reported as unavailable in the funds. Special assessments receivable Delinquent taxes receivable 46,475,056 (14,134,830) 8,691, ,821 (400,000) (8,165,000) (49,087) 717,256 79,982 Governmental funds do not report a liability for accrued interest until due and payable. (182,242) Total net position - governmental activities $ 45,468,960 The notes to the financial statements are an integral part of this statement. -43-

48 CITY OF VADNAIS HEIGHTS, M INNESOTA STATEM ENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES G OVERNM ENTAL FUNDS FO R THE YEAR ENDED D ECEM BER 31, D ebt Public W orks General Service Reserve REVENUES Taxes $ 2,700,670 $ 630,391 $ 3,419 Special assessments 9,501 13, ,688 Licenses and perm its 639, Intergovernm ental 193, Charges for services 747, ,000 - Fines and forfeitures 37, Interest on investm ents (119,756) - - M iscellaneous 218,107-7,800 TOTAL REVENUES 4,427, , ,907 EXPENDITURES Current General government 1,158, Public safety 2,031, Public works 803, Culture and recreation 830, Community developm ent 189, Capital outlay General government Public safety 11, Public works ,273 Culture and recreation Community developm ent D ebt service Principal - 460,000 - Interest and other charges - 314,328 - TOTAL EXPEN DITU RES 5,025, , ,273 EXCESS (DEFICIENCY) OF REVENUES O VER (UNDER) EXPENDITURES (598,149) 60,034 (3,366) OTH ER FINANCING SOURCES (USES) Transfer in 2,974, ,000 2,351,608 Sale o f capital assets Transfer out (55,000) - (1,847,063) TOTAL OTH ER FINANCING SOURCES (USES) 2,919, , ,545 N ET CHANGE IN FUND BALANCES 2,321, , ,179 FUND BALANCES, JANU ARY 1 628, ,539 35,652 FUND BALANCES, D ECEM BER 31 $ 2,949,904 $ 502,573 $ 536,831 The notes to the financial statements are an integral part of this statement. -44-

49 Exhibit TIF 1-16 Other Governmental Funds Total Governmental Funds $ 210,728 $ 1,513,748 $ 5,058,956-80, , ,837-25, , ,496 1,098, ,400 (121,726) (226,382) (467,864) - 129, ,185 89,002 1,682,813 7,285, ,158,408-11,158 2,042,634-32, ,774-26, , ,550-4,124 4,124-94, , , , , ,376 34, , , , ,328 34,079 1,053,508 7,142,624 54, , ,747 (40,076) 1,887,139 4,508 (4,795,894) 7,413,033 4,508 (6,738,033) (40,076) (2,904,247) 679,508 14,847 (2,274,942) 822,255 2,623,230 7,868,303 11,398,491 $ 2,638,077 $ 5,593,361 $ 12,220,

50 CITY OF VADNAIS HEIGHTS, MINNESOTA RECONCILIATION OF THE STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES TO THE STATEMENT OF ACTIVITIES GOVERNMENTAL FUNDS FOR THE YEAR ENDED DECEMBER 31, 2013 Total net change in fund balances - governmental funds Exhibit 6 $ 822,255 Amounts reported for governmental activities in the statement of activities are different because Capital outlays are reported in governmental funds as expenditures. However in the statement of activities, the cost of those assets is allocated over the estimated useful lives as depreciation expense. Capital outlays Depreciation expense Governmental funds report a gain (loss) on sale of capital assets to the extent of cash exchanged, whereas the disposition of the assets book value is included in the total gain (loss) in the statement of activities. The issuance of long-term debt provides current financial resources to governmental funds, while the repayment of principal of long-term debt consumes the current financial resources of governmental funds. Neither transaction, however, has any effect on net position. Also, governmental funds report the effect of premiums, discounts and similar items when debt is first issued, whereas these amounts are amortized in the statement of activities. Principal repayments Interest on long-term debt in the statement of activities differs from the amount reported in the governmental funds because interest is recognized as an expenditure in the funds when it is due, and thus requires the use of current financial resources. In the statement of activities, however, interest expense is recognized as the interest accrues, regardless of when it is due. 682,052 (1,285,722) 41, ,000 6,080 Certain revenues are recognized as soon as they are earned. Under the modified accrual basis of accounting certain revenues cannot be recognized until they are available to liquidate liabilities of the current period. Special assessments Property taxes 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. Other postemployment benefits Change in net position - governmental activities (87,372) (19,279) (2,864) $ 616,250 The notes to the financial statements are an integral part of this statement. -46-

51 CITY OF VADNAIS HEIGHTS, MINNESOTA Exhibit 7 STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES - BUDGET AND ACTUAL GENERAL FUND FOR THE YEAR ENDED DECEMBER 31, 2013 Budgeted Amounts Actual Variance with Original Final Amounts Final Budget REVENUES Taxes $ 2,875,819 $ 2,875,819 $ 2,700,670 $ (175,149) Licenses and permits 511, , , ,337 Intergovernmental 188, , ,758 5,444 Charges for services 675, , ,770 72,170 Fines and forfeitures 36,000 36,000 37,400 1,400 Interest on investments 30,000 30,000 (119,756) (149,756) Special assessments 10,000 10,000 9,501 (499) Miscellaneous 201, , ,107 16,707 TOTAL REVENUES 4,528,633 4,528,633 4,427,287 (101,346) EXPENDITURES Current General government 1,289,269 1,289,269 1,158, ,861 Public safety 2,054,490 2,054,490 2,031,476 23,014 Public works 713, , ,485 (89,663) Culture and recreation 754, , ,680 (76,408) Community development 196, , ,550 7,230 Capital outlay Public safety ,837 (11,837) TOTAL EXPENDITURES 5,008,633 5,008,633 5,025,436 (16,803) DEFICIENCY OF REVENUES UNDER EXPENDITURES (480,000) (480,000) (598,149) (118,149) OTHER FINANCING SOURCES (USES) Transfer in 475, ,000 2,974,286 2,499,286 Sale of capital assets 5,000 5,000 - (5,000) Transfer out - - (55,000) (55,000) TOTAL OTHER FINANCING SOURCES (USES) 480, ,000 2,919,286 2,439,286 NET CHANGE IN FUND BALANCES - - 2,321,137 2,321,137 FUND BALANCES, JANUARY 1 628, , ,767 - FUND BALANCES, DECEMBER 31 $ 628,767 $ 628,767 $ 2,949,904 $ 2,321,137 The notes to the financial statements are an integral part of this statement. -47-

52 CITY OF VADNAIS HEIGHTS, M INNESOTA STATEMENTS OF NET POSITION PROPRIETARY FUNDS DECEM BER 31, 2013 AND 2012 ASSETS CURRENT ASSETS Business-type Activities - Enterprise Funds W ater Utility Sewer Utility Cash and temporary investments $ 2,351,998 $ 2,208,116 $ 5,034,003 $ 5,362,403 Receivables Accounts 230, , , ,352 Taxes 1,007 15,038 3,345 25,921 Special assessments 142, , , ,246 Prepaid items ,149 74,464 TOTAL CURRENT ASSETS 2,725,751 2,622,409 5,643,316 5,999,386 NONCURRENT ASSETS CAPITAL ASSETS Land 10,000 10, Buildings 197, , , ,000 Improvements 10,904,783 10,840,261 4,348,378 4,198,420 Machinery and equipment 471, , ,998 78,399 TOTAL CAPITAL ASSETS, COST 11,583,935 11,498,542 4,658,376 4,476,819 LESS ACCUM ULATED DEPRECIATION (6,083,139) (5,817,265) (2,822,042) (2,715,019) N ET CAPITAL ASSETS 5,500,796 5,681,277 1,836,334 1,761,800 TOTAL ASSETS 8,226,547 8,303,686 7,479,650 7,761,186 LIABILITIES CURRENT LIABILITIES Accounts payable 20, , ,891 3,203 Accrued salaries payable 1,426 7, ,622 Due to other governments 11,998 19, Compensated absences payable - current TOTAL CURRENT LIABILITIES 34, , ,830 8,825 NONCURRENT LIABILITIES Compensated absences payable - net o f current portion Other postemployment benefits payable 6,129 3,295 1,855 1,847 TOTAL LIABILITIES 40, , ,685 10,672 N ET POSITION N et investment in capital assets 5,500,796 5,681,277 1,836,334 1,761,800 Unrestricted 2,685,325 2,474,638 5,483,631 5,988,714 TOTAL NET POSITION $ 8,186,121 $ 8,155,915 $ 7,319,965 $ 7,750,514 The notes to the financial statements are an integral part of this statement. -48-

53 Exhibit 8 Business-type Activities - Enterprise Funds - Continued 604 Surface W ater M anagement Totals Internal Service Fund Compensated Absences $ 1,220,002 $ 1,153,437 $ 8,606,003 $ 8,723,956 $ 190,516 95,422 89, , , ,375 4,816 44,334-21,197 21, , , ,149 74,464-1,337,085 1,267,748 9,706,152 9,889, , ,593 10,000-37,000 37, , ,717-5,123,114 5,123,114 20,376,275 20,161,795-96,535 75, , ,627-5,257,242 5,235,778 21,499,553 21,211,139 (1,899,424) (1,788,728) (10,804,605) (10,321,012) - 3,357,818 3,447,050 10,694,948 10,890,127 4,694,903 4,714,798 20,401,100 20,779, , , ,851 2,365 11, ,770 12,826 19, , , , , ,912 27, ,984 5, , , , ,516 3,357,818 3,447,050 10,694,948 10,890,127-1,336,998 1,266,587 9,505,954 9,729,939 - $ 4,694,816 $ 4,713,637 $ 20,200,902 $ 20,620,066 $

54 CITY OF VADNAIS HEIGHTS, MINNESOTA STATEMENTS OF REVENUES, EXPENSES AND CHANGES IN NET POSITION PROPRIETARY FUNDS FOR THE YEARS ENDED DECEMBER 31, 2013 AND 2012 Business-type Activities - Enterprise Funds Water Utility Sewer Utility OPERATING REVENUES Charges for service $ 1,249,829 $ 1,323,329 $ 1,616,489 $ 1,609,540 OPERATING EXPENSES Personnel services 230, , , ,694 Supplies 186, ,602 1,348 2,048 Repair and maintenance 57,330 58,328 27,793 14,527 Fees 1,524 1, Contracted services 26,990 3,046 5,001 4,808 Utilities 84,350 79,247 1,983 1,364 Administrative and general 162, , , ,050 Sewer charges , ,078 Depreciation 265, , ,023 92,774 TOTAL OPERATING EXPENSES 1,015, ,794 1,335,613 1,261,370 OPERATING INCOME 234, , , ,170 NONOPERATING REVENUES Other income 6,651 4,687 12,462 7,893 Interest on investments (105,774) 27,344 (253,887) 70,197 TOTAL NONOPERATING REVENUES (99,123) 32,031 (241,425) 78,090 INCOME BEFORE TRANSFERS AND CONTRIBUTIONS 135, ,566 39, ,260 CAPITAL CONTRIBUTIONS FROM OTHER FUNDS - 150, TRANSFERS OUT (105,000) (25,000) (470,000) (350,000) CHANGE IN NET POSITION 30, ,566 (430,549) 76,260 NET POSITION, JANUARY 1 8,155,915 7,656,349 7,750,514 7,674,254 NET POSITION, DECEMBER 31 $ 8,186,121 $ 8,155,915 $ 7,319,965 $ 7,750,514 The notes to the financial statements are an integral part of this statement. -50-

55 Exhibit 9 Internal Business-type Activities - Enterprise Funds Service Fund 604 Compensated Surface Water Management Totals Absences $ 414,786 $ 384,687 $ 3,281,104 $ 3,317,556 $ 87, , ,192 87, , ,189-49,036 38, , ,707-3,113 3,182 4,688 5, ,364 8, ,333 80, , , , , , , , , , , , ,751 2,625,693 2,503,915 87, , , , , ,884 13,422 - (59,798) 13,647 (419,459) 111,188 - (59,027) 14,489 (399,575) 124,610 81, , , , ,000 - (100,000) (10,000) (675,000) (385,000) - (18,821) 127,425 (419,164) 703,251-4,713,637 4,586,212 20,620,066 19,916,815 - $ 4,694,816 $ 4,713,637 $ 20,200,902 $ 20,620,066 $

56 CITY OF VADNAIS HEIGHTS, MINNESOTA STATEMENTS OF CASH FLOWS - CONTINUED ON THE FOLLOWING PAGES PROPRIETARY FUNDS FOR THE YEARS ENDED DECEMBER 31, 2013 AND 2012 CASH FLOWS FROM OPERATING ACTIVITIES Receipts from customers and users Receipts from interfund services provided Payments to suppliers Payments to employees Business-type Activities - Enterprise Funds Water Utility Sewer Utility $ 1,297,020 (620,759) (236,213) $ 1,269,137 (497,011) (223,192) $ 1,659,306 (1,074,279) (157,875) $ 1,639,072 (1,057,514) (156,858) NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES 440, , , ,700 CASH FLOWS FROM NONCAPITAL FINANCING ACTIVITIES Payment on advance to other funds Transfers to other funds (105,000) 14,884 (25,000) (470,000) 7,610 (350,000) NET CASH USED BY NONCAPITAL FINANCING ACTIVITIES (105,000) (10,116) (470,000) (342,390) CASH FLOWS FROM CAPITAL FINANCING ACTIVITIES Acquisition of capital assets (85,392) (671,371) (31,665) (241,153) CASH FLOWS FROM INVESTING ACTIVITIES Interest received on investments Decrease in fair value of investments 27,582 (133,356) 27,344 66,209 (320,096) 70,197 NET CASH PROVIDED (USED) BY INVESTING ACTIVITIES (105,774) 27,344 (253,887) 70,197 NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 143,882 (105,209) (328,400) (88,646) CASH AND CASH EQUIVALENTS, JANUARY 1 2,208,116 2,313,325 5,362,403 5,451,049 CASH AND CASH EQUIVALENTS, DECEMBER 31 $ 2,351,998 $ 2,208,116 $ 5,034,003 $ 5,362,403 The notes to the financial statements are an integral part of this statement. -52-

57 Exhibit 10 Internal Business-type Activities - Enterprise Funds Service Fund 604 Compensated Surface Water Management Totals Absences $ 412,785 $ 376,941 $ 3,369,111 $ 3,285,150 $ ,320 (164,957) (156,276) (1,859,995) (1,710,801) (394,088) (380,050) (174,640) 247, ,665 1,115,028 1,194,299 (87,320) - 1,512-24,006 - (100,000) (10,000) (675,000) (385,000) - (100,000) (8,488) (675,000) (360,994) (21,465) (24,664) (138,522) (937,188) - 15,596 13, , ,188 (75,394) - (528,846) - - (59,798) 13,647 (419,459) 111,188 66, ,160 (117,953) 7,305 (87,320) 1,153, ,277 8,723,956 8,716, ,836 $ 1,220,002 $ 1,153,437 $ 8,606,003 $ 8,723,956 $ 190,

58 CITY OF VADNAIS HEIGHTS, MINNESOTA STATEMENTS OF CASH FLOWS - CONTINUED PROPRIETARY FUNDS FOR THE YEARS ENDED DECEMBER 31, 2013 AND 2012 Business-type Activities - Enterprise Funds W ater Utility Sewer Utility RECONCILIATION OF OPERATING INCOME (LOSS) TO NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES Operating income $ 234,329 $ 342,535 $ 280,876 $ 348,170 Adjustments to reconcile operating income to net cash provided (used) by operating activities Other income related to operations 6,651 4,687 12,462 7,893 Depreciation 265, , ,023 92,774 (Increase) decrease in assets Accounts receivable 20,627 (16,598) (11,418) 1,953 Taxes receivable 14,031 (7,832) 22,576 (22,771) Special assessments receivable 5,882 (34,449) 19,197 42,457 Prepaid items - - (2,685) (4,707) Increase (decrease) in liabilities Accounts payable (96,533) 20,445 3,796 (41,341) Accrued salaries payable (5,778) 306 (4,683) 836 Due to other governments (7,868) 2,387 - (651) Compensated absences payable Other postemployment benefits payable 2, NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES $ 440,048 $ 548,934 $ 427,152 $ 424,700 NONCASH CAPITAL AND RELATED FINANCING ACTIVITIES Capital assets purchases on account Capital contributions from other funds $ $ $ 149,892 $ $ - $ 150,000 $ - $ - The notes to the financial statements are an integral part of this statement. -54-

59 Exhibit 10 Internal Business-type Activities - Enterprise Funds Service Fund 604 Compensated Surface Water Management Totals Absences $ 140,206 $ 122,936 $ 655,411 $ 813,641 $ ,884 13, , , , ,564 - (5,877) 1,591 3,332 (13,054) - 2,911 (3,041) 39,518 (33,644) (7,138) 25, (2,685) (4,707) - (1,074) (2,755) (93,811) (23,651) (10,461) 1, (7,868) 1, (87,320) - - 2, $ 247,828 $ 220,665 $ 1,115,028 $ 1,194,299 $ (87,320) $ - $ - $ 149,892 $ $ - $ - $ - $ - $ 150,000 $

60 CITY OF VADNAIS HEIGHTS, MINNESOTA Exhibit 11 STATEMENT OF FIDUCIARY NET POSITION FIDUCIARY FUND DECEMBER 31, 2013 Agency ASSETS Cash and temporary investments $ (1,949) Accounts receivable 2,864 TOTAL ASSETS $ 915 LIABILITIES Accounts payable $ 915 The notes to the financial statements are an integral part of this statement. -56-

61 Note 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES A. Reporting entity The City of Vadnais Heights, Minnesota (the City), operates under Optional Plan A as defined in the State of Minnesota (the State) statutes. The City is governed by an elected Mayor and four-member City Council. The City Council exercises legislative authority and determines all matters of policy. The City Council appoints personnel responsible for the proper administration of all affairs relating to the City. The City has considered all potential units for which it is financially accountable, and other organizations for which the nature and significance of their relationship with the City are such that exclusion would cause the City s financial statements to be misleading or incomplete. The Governmental Accounting Standards Board (GASB) has set forth criteria to be considered in determining financial accountability. These criteria include appointing a voting majority of an organization s governing body, and (1) the ability of the primary government to impose its will on that organization or (2) the potential for the organization to provide specific benefits to, or impose specific financial burdens on the primary government. The City has the following component unit: Blended Component Unit. The EDA was created pursuant to Minnesota statutes through to carry out economic and industrial development and redevelopment within the City in accordance with policies established by the City Council. The seven member board consists of the City Council and two other City Council appointed members. Because the EDA may not exercise any of the powers enumerated by the authorizing statutes without prior approval of the City Council, it is reported as a blended component unit in the financial statements. B. Government-wide and fund financial statements CITY OF VADNAIS HEIGHTS, MINNESOTA NOTES TO THE FINANCIAL STATEMENTS DECEMBER 31, 2013 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 and its component units. 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. Amounts reported as 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 (including special assessments) 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, proprietary funds, and fiduciary funds, even though the latter are excluded from the government-wide financial statements. 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 and fiduciary 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, other postemployment benefits, and claims and judgments, are recorded only when payment is due. -57-

62 CITY OF VADNAIS HEIGHTS, MINNESOTA NOTES TO THE FINANCIAL STATEMENTS DECEMBER 31, 2013 Note 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED Property taxes, franchise taxes, licenses 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. Revenue resulting from exchange transactions, in which each party gives and receives essentially equal value, is recorded on the accrual basis when the exchange takes place. On a modified accrual basis, revenue is recorded in the year in which the resources are measurable and become available. Non-exchange transactions, in which the City receives value without directly giving equal value in return, include property taxes, grants, entitlement and donations. On an accrual basis, revenue from property taxes is recognized in the year for which the tax is levied. Revenue from grants, entitlements and donations is recognized in the year in which all eligibility requirements have been satisfied. Eligibility requirements include timing requirements, which specify the year when the resources are required to be used or the year when use is first permitted, matching requirements, in which the City must provide local resources to be used for a specified purpose, and expenditure requirements, in which the resources are provided to the City on a reimbursement basis. On a modified accrual basis, revenue from non-exchange transactions must also be available before it can be recognized. Unearned revenue arises when assets are recognized before revenue recognition criteria have been satisfied. Grants and entitlements received before eligibility requirements are met are also recorded as unearned revenue. 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 certain reported amounts and disclosures. Accordingly, actual results could differ from those estimates. The City reports the following major governmental funds: The General fund is the City s primary operating fund. It accounts for all financial resources of the City, except those required to be accounted for in another fund. The Debt Service funds account for the servicing of general long-term debt not being financed by proprietary funds. Public Works Reserve fund - The purpose of this fund is to account for certain capital projects such as streets, curb and gutter, storm sewer, and sidewalks. Tax Increment Financing District 1-16 fund - The purpose of this fund is to account for public improvements that are allowable under pooled tax increment funding laws in the state. -58-

63 CITY OF VADNAIS HEIGHTS, MINNESOTA NOTES TO THE FINANCIAL STATEMENTS DECEMBER 31, 2013 Note 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED The City reports the following major proprietary funds: The Water Utility fund accounts for costs associated with the City s water system and ensure that user charges are sufficient to pay for those costs. The Sewer Utility fund accounts for the costs associated with the City s sewer system and ensure that user charges are sufficient to pay for those costs. The Surface Water Management fund accounts for the costs associated with the City s storm water system, which are financed by the storm water surcharge and ensure that user charges are sufficient to pay for those costs. Additionally, the City reports the following fund types: The Internal Service fund accounts for the funding of compensated absences provided by one department of the City to other departments on a cost reimbursement basis. The activity of the Internal Service fund is accounted for using the accrual basis of accounting. The Agency fund is custodial in nature and does not present results of operations or have a measurement focus. Agency funds are accounted for using the modified accrual basis of accounting. The City uses this fund to account for developer and planning and zoning deposits. These deposits are used to pay for specific expenses related to development and planning. Once the development or planning and zoning changes have been made, the deposits are returned to the original depositor. As a general rule, the effect of interfund activity has been eliminated from government-wide financial statements. Exceptions to this general rule are charges between the City s water, sewer, and surface water functions 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. 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 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 on capital assets. All revenues and expenses not meeting this definition 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. -59-

64 Note 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED D. Assets, liabilities, deferred inflows of resources, and net position/fund balance Deposits and investments The City s cash and cash equivalents are considered to be cash on hand, demand deposits and short-term investments with original maturities of three months or less from the date of acquisition. Cash balances from all funds are pooled and invested, to the extent available, in certificates of deposit and other authorized investments. Earnings from such investments are allocated on the basis of applicable participation by each of the funds. The City may also invest idle funds as authorized by Minnesota statutes, as follows: 1. Direct obligations or obligations guaranteed by the United States or its agencies. 2. Shares of investment companies registered under the Federal Investment Company Act of 1940 and received the highest credit rating, rated in one of the two highest rating categories by a statistical rating agency, and have a final maturity of thirteen months or less. 3. General obligations of a state or local government with taxing powers rated A or better; revenue obligations rated AA or better. 4. General obligations of the Minnesota Housing Finance Agency rated A or better. 5. Bankers acceptances of United States banks eligible for purchase by the Federal Reserve System. 6. Commercial paper issued by United States banks corporations or their Canadian subsidiaries, of highest quality category by at least two nationally recognized rating agencies, and maturing in 270 days or less. 7. Repurchase or reverse repurchase agreements and securities lending agreements with financial institutions qualified as a depository by the government entity, with banks that are members of the Federal Reserve System with capitalization exceeding $10,000,000, a primary reporting dealer in U.S. government securities to the Federal Reserve Bank of New York, or certain Minnesota securities broker-dealers. 8. Guaranteed Investment Contracts (GIC's) issued or guaranteed by a United States commercial bank, a domestic branch of a foreign bank, a United States insurance company, or its Canadian subsidiary, whose similar debt obligations were rated in one of the top two rating categories by a nationally recognized rating agency. Investments for the City are reported at fair value. The Minnesota Municipal Money Market Fund and broker money market investment pools operate in accordance with appropriate State laws and regulations. The 4M Fund is an external investment pool not registered with the Securities and Exchange Commission (SEC); however, it follows the same regulatory rules of the SEC under rule 2a7. The reported value of the pool is the same as the fair value of the pool share. Financial statements of the 4M Fund can be obtained by contacting RBC Global Management at 100 South Fifth Street, Suite 2300, Minneapolis, MN Property taxes CITY OF VADNAIS HEIGHTS, MINNESOTA NOTES TO THE FINANCIAL STATEMENTS DECEMBER 31, 2013 The City Council annually adopts a tax levy in December and certifies it to the County for collection in the following year. The County is responsible for collecting all property taxes for the City. These taxes attach an enforceable lien on taxable property within the City on January 1 and are payable by the property owners in two installments. The taxes are collected by the County Auditor and tax settlements are made to the City during January, June and November each year. Delinquent taxes receivable include the past six years uncollected taxes. Delinquent taxes have been offset by a deferred inflow of resources for delinquent taxes not received within 60 days after year end in the fund financial statements. -60-

65 Note 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED Accounts receivable Accounts receivable include amounts billed for services provided before year end. Unbilled utility enterprise fund receivables are also included for services provided in The City annually certifies delinquent surface water, water and sewer accounts to the County for collection in the following year. Therefore, there has been no allowance for doubtful accounts established. Special assessments Special assessments represent the financing for public improvements paid for by benefiting property owners. These assessments are recorded as receivables upon certification to the County. Special assessments are recognized as revenue when they are received in cash or within 60 days after year end. All governmental fund special assessments receivable are offset by a deferred inflow of resources in the fund financial statements. Inventory and prepaid items All inventories are valued at cost. Inventories of governmental funds are recorded as expenditures when consumed rather than when purchased. Certain payments to vendors reflect costs applicable to future accounting periods and are recorded as prepaid items in both government-wide and fund financial statements. Prepaid items of the City are accounted for using the consumption method. Interfund receivables and payables Transactions between funds that are representative of lending/borrowing arrangements outstanding at the end of the fiscal year are referred to as either interfund receivables/payables (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. Capital assets CITY OF VADNAIS HEIGHTS, MINNESOTA NOTES TO THE FINANCIAL STATEMENTS DECEMBER 31, 2013 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 (amount not rounded) 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. Donated capital assets are recorded at estimated fair market value at the date of donation. In the case of initial capitalization of general infrastructure assets (i.e., those reported by governmental activities) the City chose to include all such items regardless of their acquisition date. The City was able to estimate the historical cost for the initial reporting of these assets through back trending (i.e., estimating the current replacement cost of the infrastructure to be capitalized and using an appropriate price-level index to deflate the cost to the acquisition year or estimated acquisition year). As the City constructs or acquires capital assets each period, including infrastructure assets, they are capitalized and reported at historical cost. The reported value excludes normal maintenance and repairs which are essentially amounts spent in relation to capital assets that do not increase the capacity or efficiency of the item or extend its useful life beyond the original estimate. In the case of donations the City values these capital assets at the estimated fair value of the item at the date of its donation. -61-

66 CITY OF VADNAIS HEIGHTS, MINNESOTA NOTES TO THE FINANCIAL STATEMENTS DECEMBER 31, 2013 Note 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED Property, plant and equipment will be depreciated in the proprietary funds and government wide statements of the City using the straight-line method over the following estimated useful lives: Assets Useful Lives in Years Buildings 40 Machinery and equipment 3 to 50 Infrastructure 40 to 50 Improvements other than buildings 10 to 50 Compensated absences Subject to certain limitations, it is the City s policy to permit employees to accumulate earned but unused vacation and sick pay benefits. No liability is recorded for unpaid accumulated sick leave that is not vested. All vacation pay is accrued when incurred in the government-wide and proprietary fund financial statements. A liability for these amounts is reported in governmental funds only if they have matured, for example, as a result of employee resignations and retirements. The Internal Service fund is used to liquidate the liability for all compensated absences. Postemployment benefits other than pensions Under Minnesota statute , subdivision 2b, public employers must allow retirees and their dependents to continue coverage indefinitely in an employer-sponsored health care plan, under the following conditions: 1) Retirees must be receiving (or eligible to receive) an annuity from a Minnesota public pension plan, 2) Coverage must continue in a group plan until age 65, and retirees must pay no more than the group premium, and 3) Retirees are able to add dependent coverage during open enrollment period or qualifying life event prior to retirement. All premiums are funded on a pay-asyou-go basis. The liability was determined, in accordance with GASB Statement No. 45, at January 1, The General fund is typically used to liquidate the liability for postemployment benefits other than pensions. Deferred inflows o f resources In addition to liabilities, the fund financial statements will sometimes report a separate section for deferred inflows of resources. This separate financial statement element, deferred inflows of resources, represents an acquisition of net position that applies to a future period(s) and so will not be recognized as an inflow of resources (revenue) until that time. The government has only one type of item, which arises only under a modified accrual basis of accounting that qualifies as needing to be reported in this category. Accordingly, the item, unavailable revenue, is reported only in the governmental funds balance sheet. The governmental funds report unavailable revenues from two sources: taxes and special assessments. These amounts are deferred and recognized as an inflow of resources in the period that the amounts become available. 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 statement of net position. The recognition of bond premiums and discounts are deferred and amortized over the life of the bonds using the straight line method. Bonds payable are reported net of the applicable bond premium or discount. Bond issuance costs are reported as an expense in the period incurred. In the fund financial statements, governmental fund types recognized 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. -62-

67 Note 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED Fund balance In the fund financial statements, fund balance is divided into five classifications based primarily on the extent to which the City is bound to observe constraints imposed upon the use of resources reported in the governmental funds. These classifications are defined as follows: Nonspendable - Amounts that cannot be spent because they are not in spendable form, such as prepaid items, inventory and notes receivable. Restricted - Amounts related to externally imposed constraints established by creditors, grantors or contributors; or constraints imposed by state statutory provisions. Committed - Amounts constrained for specific purposes that are internally imposed by formal action (resolution) of the City Council, which is the City s highest level of decision-making authority. Committed amounts cannot be used for any other purpose unless the City Council modifies or rescinds the commitment by resolution. Assigned - Amounts constrained for specific purposes that are internally imposed. In governmental funds other than the General fund, assigned fund balance represents all remaining amounts that are not classified as nonspendable and are neither restricted nor committed. In the General fund, assigned amounts represent intended uses established by the City Council itself or by an official to which the governing body delegates the authority. The City Council has adopted a fund balance policy which delegates the authority to assign amounts for specific purposes to the Finance Committee. Unassigned - The residual classification for the General fund and also negative residual amounts in other funds. The City considers restricted amounts to be spent first when both restricted and unrestricted fund balance is available. Additionally, the City would first use committed, then assigned, and lastly unassigned amounts of unrestricted fund balance when expenditures are made. The City has formally adopted a fund balance policy for the General fund. The City s policy is to maintain a minimum unassigned fund balance of percent of the next year s budgeted expenditures for cash-flow timing needs. Net position Net position represents the difference between assets and liabilities. Net position balances are displayed in three components: a. Net investment in capital assets - Consists of capital assets, net of accumulated depreciation reduced by any outstanding debt attributable to acquire capital assets. b. Restricted net position - Consists of net position balances restricted when there are limitations imposed on their use through external restrictions imposed by creditors, grantors, laws or regulations of other governments. c. Unrestricted net position - All other net position balances that do not meet the definition of restricted or net investment in capital assets. Comparative data/reclassifications CITY OF VADNAIS HEIGHTS, MINNESOTA NOTES TO THE FINANCIAL STATEMENTS DECEMBER 31, 2013 Comparative total data for the prior year have been presented only for individual enterprise funds in the fund financial statements in order to provide an understanding of the changes in the financial position and operations of these funds. Also, certain amounts presented in the prior year data have been reclassified in order to be consistent with the current year s presentation. -63-

68 Note 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 for the General fund. All annual appropriations lapse at fiscal year-end. The City does not use encumbrance accounting. Before August of each year, all departments of the City submit requests for appropriations to the City Administrator so that a budget may be prepared. Before September 15th, the proposed budget is presented to the City Council for review. The City Council adopts a preliminary budget and maximum tax levy. Truth-in-taxation notices are mailed out to residents by Ramsey County and the City Council holds public hearings and adopts a budget and tax levy in December. The appropriated budget is prepared by fund, function and department. The City s Administrator may make transfers of appropriations within a department. Transfers of appropriations between departments require the approval of the City Council. The legal level of budgetary control is the department level. There were no amendments made to the 2013 budget. B. Excess of expenditures over appropriations CITY OF VADNAIS HEIGHTS, MINNESOTA NOTES TO THE FINANCIAL STATEMENTS DECEMBER 31, 2013 For the year ended December 31, 2013, expenditures exceeded appropriations in the General fund by $16,803. The expenditure over appropriations occurred in the following departments: Excess of Expenditures Over Department Appropriations Public safety Police projection $ 3,583 Capital outlay 11,837 Public works Street maintenance 46,839 Central garage facility 25,119 Engineering 17,705 Culture and recreation Parks and recreation 4,668 Sportsplex 71,740 These over expenditures were funded by transfers in. -64-

69 Note 3: DETAILED NOTES ON ALL FUNDS A. Deposits and investments Deposits CITY OF VADNAIS HEIGHTS, MINNESOTA NOTES TO THE FINANCIAL STATEMENTS DECEMBER 31, 2013 Custodial credit risk for deposits and investments is the risk that in the event of a bank failure, the City s deposits and investments may not be returned or the City will not be able to recover collateral securities in the possession of an outside party. In accordance with Minnesota statutes and as authorized by the City Council, the City maintains deposits at those depository banks, all of which are members of the Federal Reserve System. Minnesota statutes require that all City deposits be protected by insurance, surety bond or collateral. The market value of collateral pledged must equal 110 percent of the deposits not covered by insurance or bonds. Authorized collateral in lieu of a corporate surety bond includes: United States government Treasury bills, Treasury notes, Treasury bonds; Issues of United States government agencies and instrumentalities as quoted by a recognized industry quotation service available to the government entity; General obligation securities of any state or local government with taxing powers which are rated A or better by a national bond rating service, or revenue obligation securities of any state or local government with taxing powers which are rated AA or better by a national bond rating service; General obligation securities of a local government with taxing powers may be pledged as collateral against funds deposited by that same local government entity; Irrevocable standby letters of credit issued by Federal Home Loan Banks to a municipality accompanied by written evidence that the bank s public debt is rated AA or better by Moody s Investors Service, Inc., or Standard & Poor s Corporation; and Time deposits that are fully insured by any federal agency. Minnesota statutes require that all collateral shall be placed in safekeeping in a restricted account at a Federal Reserve Bank, or in an account at a trust department of a commercial bank or other financial institution that is not owned or controlled by the financial institution furnishing the collateral. The selection should be approved by the City. -65-

70 Note 3: DETAILED NOTES ON ALL FUNDS - CONTINUED Investments CITY OF VADNAIS HEIGHTS, MINNESOTA NOTES TO THE FINANCIAL STATEMENTS DECEMBER 31, 2013 At year end, the City s investment balances were as follows: Credit Quality/ Ratings (1) Segmented Time Distribution (2) Fair Value and Carrying Amount Types of Investments Non-pooled investments Negotiable Certificates of Deposit N/A less than 6 months $ 2,489,796 Negotiable Certificates of Deposit N/A 6 months to 1 year 248,702 Negotiable Certificates of Deposit N/A 1 to 3 years 249,426 Government Agency Securities AAA more than 3 years 16,435,551 Pooled investments 4M Fund N/A less than 6 months 2,078,726 Total investments $ 21,502,201 (1) Ratings are provided by Standard & Poor s agency where applicable to indicate associated credit risk. (2) Interest rate risk is disclosed using the segmented time distribution method. N/A Indicates not applicable or available The investments of the City are subject to the following risks: Credit Risk. The credit risk for investments is the risk that an issuer or other counterparty to an investment will not fulfill its obligations. Ratings are provided by various credit rating agencies and where applicable, indicate associated credit risk. Minnesota statutes and the City s investment policy limit the City s investments to the list on page 60 of the notes. Custodial Credit Risk. The custodial credit risk for investments is the risk that, in the event of the failure of the counterparty to a transaction, a government will not be able to recover the value of investment or collateral securities that are in the possession of an outside party. The City typically limits its exposure by purchasing insured or registered investments. Concentration o f Credit Risk. The concentration of credit risk is the risk of loss attributed to the magnitude of a government's investment in a single issuer. The City s investment policy requires diversification of securities to eliminate the risk of loss resulting from overconcentration of assets in a specific maturity, a specific issuer, or a specific class of securities. As of December 31, 2013, the City had invested 5 percent or more of its total investment portfolio in the following issuers: o o FHLB: $13,585,831 (70 percent) FNMA: $2,845,426 (15 percent) Interest Rate Risk. The interest rate risk is the risk that changes in interest rates will adversely affect the fair value of an investment. The City s investment policy seeks to reduce the City s exposure to interest rate risk by diversifying securities in short, intermediate, and long-term maturities. -66-

71 Note 3: DETAILED NOTES ON ALL FUNDS - CONTINUED Cash on hand Cash in the possession of the City, consisting of petty cash totals $570. Cash and investments summary CITY OF VADNAIS HEIGHTS, MINNESOTA NOTES TO THE FINANCIAL STATEMENTS DECEMBER 31, 2013 A reconciliation of cash and investments as shown on the statement of net position for the City follows: Investments $ 21,502,201 Cash on hand 570 Total $ 21,502,771 Classified as follows Statement of net position Cash and temporary investments $ 21,504,720 Statement of fiduciary net position Cash and temporary investments (1,949) Total $ 21,502,771 B. Notes receivable A note receivable is recorded in the Public Works Reserve capital projects fund. The note is secured by a mortgage. Willow Ridge Apartments, Limited Partnership received $400,000 from the City, at no interest due December 31, $ 400,

72 Note 3: DETAILED NOTES ON ALL FUNDS - CONTINUED C. Capital assets CITY OF VADNAIS HEIGHTS, MINNESOTA NOTES TO THE FINANCIAL STATEMENTS DECEMBER 31, 2013 Capital asset activity for the year ended December 31, 2013 was as follows: Governmental activities Capital assets not being depreciated Land and land improvements Construction in progress Beginning Balance Increases Decreases $ 8,604,096 8,559 $ - 414,544 $ - (335,941) Ending Balance $ 8,604,096 87,162 Total capital assets not being depreciated 8,612, ,544 (335,941) 8,691,258 Capital assets being depreciated Buildings Infrastructure Machinery and equipment 15,916,429 25,316,225 4,806,307 17, , ,967 (208,454) 15,934,070 25,660,166 4,880,820 Total capital assets being depreciated 46,038, ,549 (208,454) 46,475,056 Less accumulated depreciation for Buildings Infrastructure Machinery and equipment (2,027,480) (8,013,725) (3,016,357) (411,429) (638,943) (235,350) 208,454 (2,438,909) (8,652,668) (3,043,253) Total accumulated depreciation (13,057,562) (1,285,722) 208,454 (14,134,830) Total capital assets being depreciated, net 32,981,399 (641,173) 32,340,226 Governmental activities capital assets, net $ 41,594,054 $ (226,629) $ (335,941) $ 41,031,484 Depreciation expense was charged to functions/programs of the governmental activities as follows: Governmental activities General government $ 64,092 Public safety 201,785 Public works 884,212 Culture and recreation 135,633 Total depreciation expense - governmental activities $ 1,285,

73 Note 3: DETAILED NOTES ON ALL FUNDS - CONTINUED CITY OF VADNAIS HEIGHTS, MINNESOTA NOTES TO THE FINANCIAL STATEMENTS DECEMBER 31, 2013 Beginning Balance Increases Decreases Ending Balance Business-type activities Capital assets not being depreciated Land $ 10,000 $ 593 $ - $ 10,593 Capital assets being depreciated Buildings 434, ,717 Improvements 20,161, ,480-20,376,275 Machinery and equipment 604,627 73, ,968 Total capital assets being depreciated 21,201, ,821 21,488,960 Less accumulated depreciation for Buildings (39,519) (10,977) (50,496) Improvements other than buildings (9,993,291) (431,041) - (10,424,332) Machinery and equipment (288,202) (41,575) - (329,777) Total accumulated depreciation (10,321,012) (483,593) (10,804,605) Total capital assets being depreciated, net 10,880,127 (195,772) 10,684,355 Business-type activities capital assets, net $ 10,890,127 $ (195,179) $ - $ 10,694,948 Depreciation expense was charged to functions/programs of the business-type activities as follows: Business-type activities Water Utility Sewer Utility Surface Water Management Total depreciation expense - business-type activities $ 265, , ,697 $ 483,

74 Note 3: DETAILED NOTES ON ALL FUNDS - CONTINUED D. Interfund transfers CITY OF VADNAIS HEIGHTS, MINNESOTA NOTES TO THE FINANCIAL STATEMENTS DECEMBER 31, 2013 The composition of interfund transfers as of December 31, 2013, is as follows: Transfers in Fund General Debt Service Public Works Reserve Nonmajor Governmental Total Transfers out General $ - $ $ 55,000 $ - $ 55,000 Public Works Reserve ,847,063 1,847,063 TIF ,076 40,076 Water Utility 50,000 55, ,000 Sewer Utility 375,000 95, ,000 Surface Water Management 50,000 50, ,000 Nonmajor Governmental 2,499,286-2,296,608-4,795,894 Total $ 2,974,286 $ 200,000 $ 2,351,608 $ 1,887,139 $ 7,413,033 The Water, Sewer, and Surface Water funds transferred a total of $475,000 to the General fund to reduce the required levy. The Nonmajor Governmental fund transferred $2,499,286 to the General fund for forgiveness of the VSC interfund loan. The Water, Sewer, and Surface Water funds transferred a total of $200,000 to the Debt Service fund for cash flow. The General fund transferred $55,000 to the Public Works Reserve fund for a fire truck loan installment. The Nonmajor Governmental fund transferred $2,296,608 to the Public Works Reserve fund to close a fund. The Public Works Reserve fund transferred $1,847,063 to the Nonmajor Governmental fund to close a fund. The TIF 1-16 fund transferred $40,076 to the Nonmajor Governmental fund to close the fund for decertified TIF district

75 Note 3: DETAILED NOTES ON ALL FUNDS - CONTINUED E. Long-term debt General obligation bonds CITY OF VADNAIS HEIGHTS, MINNESOTA NOTES TO THE FINANCIAL STATEMENTS DECEMBER 31, 2013 The City issues general obligation bonds to provide funds for the acquisition and construction of major capital facilities. General obligation bonds have been issued for the general government. In addition, bonds have been issued to refund general obligation bonds. General obligation bonds are direct obligations of the City and pledge the full faith and credit of the government. General obligation improvement bonds The following bonds were issued to finance various improvements and will be repaid from special assessments levied on the properties benefiting from the improvements and ad valorem tax levies. All special assessment debt is backed by the full faith and credit of the City. Each year the combined assessment and tax levy equals 105 percent of the amount required for debt service. The excess of 5 percent is to cover any delinquencies in tax or assessment payments. Authorized Description and Issued G.O. Improvement Bonds Series 2004A $ 2,152,000 G.O. Capital Improvement Bonds, Series 2009B 525,000 Interest Issue Maturity Balance at Rate Date Date Year End % 02/01/04 02/01/18 $ 713, /15/09 02/01/14 175,000 Total General Obligation Bonds $ 888,000 Annual debt service requirements for general obligation improvement bonds outstanding at December 31, 2013, are as follows: Year Ending Governmental Activities December 31, Principal Interest Total 2014 $ 309,000 $ 25,850 $ 334, ,000 18, , ,000 13, , ,000 8, , ,000 2, ,869 Total $ 888,000 $ 69,522 $ 957,

76 Note 3: DETAILED NOTES ON ALL FUNDS - CONTINUED General obligation tax increment bonds CITY OF VADNAIS HEIGHTS, MINNESOTA NOTES TO THE FINANCIAL STATEMENTS DECEMBER 31, 2013 The following bonds were issued for development projects. The additional tax increments resulting from increased tax capacity of the redeveloped properties will be used to retire the related debt. Authorized and Issued Interest Rate Issue Date Maturity Date Balance at Year End Description G.O. Tax Increment Bonds Series 2004A $ 1,228, % 02/01/04 02/01/18 $ 407,000 Annual debt service requirements for general obligation tax increment bonds outstanding at December 31, 2013, are as follows: Year Ending Governmental Activities December 31, Principal Interest Total 2014 $ 76,000 $ 13,268 $ 89, ,000 10,668 88, ,000 7,847 89, ,000 4,817 88, ,000 1,630 88,630 Total $ 407,000 $ 38,230 $ 445,230 General obligation taxable bonds In 2009, the City issued general obligation taxable bonds for the construction of the North Service Center. The bonds are backed by the full faith and credit of the City. The bonds are to be repaid out of the 2009A G.O. Build America Bonds Debt Service fund. Due to federal sequestration, the federal interest rebate for these bonds has been reduced indefinitely. Authorized Interest Issue Maturity Balance at Description and Issued Rate Date Date Year End Taxable G.O. Bonds, Series 2009A $ 6,975, % 06/15/09 02/01/34 $ 6,870,

77 Note 3: DETAILED NOTES ON ALL FUNDS - CONTINUED CITY OF VADNAIS HEIGHTS, MINNESOTA NOTES TO THE FINANCIAL STATEMENTS DECEMBER 31, 2013 Annual debt service requirements for general obligation taxable bonds outstanding at December 31, 2013, are as follows: Year Ending Governmental Activities December 31, Principal Interest Total 2014 $ 60,000 $ 391,048 $ 451, , , , , , , , , , , , , ,445,000 1,538,625 2,983, ,745,000 1,105,784 2,850, ,135, ,025 2,647, ,000 15, ,598 Total $ 6,870,000 $ 5,036,166 $ 11,906,166 Notes payable During 2007, the City entered into a $400,000 zero interest note payable due to Metropolitan Council under the Livable Communities grant. The proceeds were used to provide funding to the Willow Ridge Apartments, Limited Partnership. The note is due with a lump sum payment in If the proceeds of the note are used under the term of the grant, the note will become forgivable. Authorized and Issued Interest Rate Issue Date Maturity Date Balance at Year End Description Notes payable Metropolitan Council $ 400,000 - % 05/08/07 12/31/37 $ 400,

78 Note 3: DETAILED NOTES ON ALL FUNDS - CONTINUED Changes in long-term liabilities CITY OF VADNAIS HEIGHTS, MINNESOTA NOTES TO THE FINANCIAL STATEMENTS DECEMBER 31, 2013 Long-term liability activity for the year ended December 31, 2013 was as follows: Beginning Balance Increases Decreases Ending Balance Due Within One Year Governmental activities Bonds payable General obligation bonds $ 1,209,000 $ - $ (321,000) $ 888,000 $ 309,000 General obligation tax increment bonds 491,000 (84,000) 407,000 76,000 Taxable general obligation bonds 6,925,000 (55,000) 6,870,000 60,000 Total bonds payable 8,625,000 - (460,000) 8,165, ,000 Notes payable 400, ,000 - Compensated absences payable 277, ,835 (254,155) 190, ,912 Other postemployment benefits payable 46,223 22,520 (19,656) 49,087 Governmental activity long-term liabilities $ 9,349,059 $ 189,355 $ (733,811) $ 8,804,603 $ 607,912 Business-type activities Other postemployment benefits payable $ 5,142 $ 3,666 $ (824) $ 7,984 $

79 Note 3: DETAILED NOTES ON ALL FUNDS - CONTINUED F. Components of fund balance CITY OF VADNAIS HEIGHTS, MINNESOTA NOTES TO THE FINANCIAL STATEMENTS DECEMBER 31, 2013 At December 31, 2013, portions of the City s fund balance are not available for appropriation due to not being in spendable form (Nonspendable), legal restrictions (Restricted), City Council action (Committed), policy and/or intent (Assigned). The following is a summary of the components of fund balance: Public Works Reserve TIF 1-16 Other Governmental Funds General Debt Service Total Nonspendable Notes receivable $ - $ - $ 400,000 $ - $ - $ 400,000 Inventory 50, ,561 Prepaid items 5, ,317 Total nonspendable $ 55,878 $ - $ 400,000 $ - $ - $ 455,878 Restricted Debt Service $ - $ 502,573 $ - $ - $ - $ 502,573 Charitable Gambling ,577 60,577 Parks ,959 83,959 Community Development ,638,077 3,704,075 6,342,152 T otal restricted $ - $ 502,573 $ - $ 2,638,077 $ 3,848,611 $ 6,989,261 Committed Community Service $ - $ - $ - $ - $ 1,471 $ 1,471 Heritage Days ,514 37,514 Total committed $ - $ - $ - $ - $ 38,985 $ 38,985 Assigned Public Works Reserve $ - $ - $ 136,831 $ - $ - $ 136,831 Capital Improvements ,597,394 1,597,394 Fire Vehicle and Equipmer , ,117 Solid Waste ,254 2,254 Total assigned $ - $ - $ 136,831 $ - $ 1,705,765 $ 1,842,596 Unassigned $ 2,894,026 $ - $ - $ - $ - $ 2,894,

80 A. Plan description All full-time and certain part-time employees of the City of Vadnais Heights are covered by defined benefit plans administered by the Public Employees Retirement Association of Minnesota (PERA). PERA administers the General Employees Retirement Fund (GERF) and the Public Employees Police and Fire Fund (PEPFF), which are cost-sharing, multiple-employer retirement plans. These plans are established and administered in accordance with Minnesota statutes, chapters 353 and 356. GERF members belong to either the Coordinated Plan or the Basic Plan. Coordinated Plan members are covered by Social Security and Basic Plan members are not. 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 Minnesota statute, and vest after three years of credited service. The defined retirement benefits are based on a member's highest average salary for any five successive years of allowable service, age, and years of credit at termination of service. Two methods are used to compute benefits for PERA's Coordinated 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. Vested, terminated employees who are entitled to benefits but are not receiving them yet are bound by the provisions in effect at the time they last terminated their public service. PERA issues a publicly available financial report that includes financial statements and required supplementary information for 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 (800) B. Funding policy CITY OF VADNAIS HEIGHTS, MINNESOTA NOTES TO THE FINANCIAL STATEMENTS DECEMBER 31, 2013 Note 4: DEFINED BENEFIT PENSION PLANS - STATEWIDE 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 Minnesota statutes. GERF Basic Plan members and Coordinated Plan members were required to contribute 9.10 percent and 6.25 percent, respectively, of their annual covered salary in In 2013, the City was required to contribute the following percentages of annual covered payroll: percent for Basic Plan GERF members and 7.25 percent of Coordinated Plan GERF members. The City s contributions to GERF for the years ending December 31, 2013, 2012, and 2011 were $147,650, $148,137, and $145,042, respectively. The City s contributions were equal to the contractually required contributions for each year as set by Minnesota statute. -76-