CITY OF NORTHFIELD, MINNESOTA

Transcription

1 ADDENDUM DATED AUGUST 6, 2014 TO ADDENDUM DATED AUGUST 1, 2014 TO ADDENDUM DATED JULY 30, 2014 TO PRELIMINARY OFFICIAL STATEMENT DATED JULY 24, 2014 New Issue Rating: Standard & Poor's "AA" $3,210,000 GENERAL OBLIGATION BONDS, SERIES 2014A CITY OF NORTHFIELD, MINNESOTA Schedule of Maturity Dates, Principal Amounts, Interest Rates and Yields Serial Bonds Maturity (February 1) Amount Interest Rate Yield CUSIP Base Maturity (February 1) Amount Interest Rate Yield CUSIP Base $160,000 $300,000 $310,000 $315,000 $315,000 $325, % 2.000% 2.000% 2.000% 2.250% 2.250% 0.350% 0.400% 0.700% 1.000% 1.300% 1.500% 7P7 7Q5 7R3 7S1 7T9 7U $325,000 $335,000 $345,000 $355,000 $125, % 2.500% 2.500% 2.500% 2.500% 1.700% 1.850% *2.000% *2.100% *2.150% 7V4 7W2 7X0 7Y8 7Z5 *Priced to call UMB Bank, N.A. has agreed to purchase the Bonds from the City for an aggregate price of $3,298, plus accrued interest, if any, to the date of delivery. It is expected that the Bonds will be available for delivery on or about September 3, Book-Entry-Only: This offering will be issued as fully registered Bonds and will be registered in the name of Cede & Co., as nominee of The Depository Trust Company, New York, New York, to which principal and interest payments on the Bonds will be made. Paying Agent: Bond Trust Services Corporation, Roseville, Minnesota. THIS ADDENDUM TOGETHER WITH THE OFFICIAL STATEMENT DATED JULY 24, 2014, SHALL CONSTITUTE A "FINAL OFFICIAL STATEMENT" OF THE ISSUER WITH RESPECT TO THE BONDS AS THAT TERM IS DEFINED IN RULE 15c2-12 OF THE SECURITIES AND EXCHANGE COMMISSION. UMB BANK, N.A. Kansas City, Missouri

2 ADDENDUM DATED AUGUST 1, 2014 TO PRELIMINARY OFFICIAL STATEMENT DATED JULY 24, 2014 CITY OF NORTHFIELD, MINNESOTA $3,345,000* GENERAL OBLIGATION BONDS, SERIES 2014A PROPOSAL OPENING: August 5, 2014, 10:00 A.M. The dated and closing date has been moved to September 3, Following are the pages of the Preliminary Official Statement which have been revised.

3 In the opinion of Kennedy & Graven, Chartered, Bond Counsel, based on present federal and Minnesota laws, regulations, rulings and decisions (which exclude any pending legislation which may have a retroactive effect), and assuming compliance with certain covenants, interest to be paid on the Bonds is excluded from gross income for federal income tax purposes and, to the same extent, from taxable net income of individuals, estates and trusts for Minnesota income purposes, and is not a preference item for purposes of computing the federal alternative minimum tax or the Minnesota alternative minimum tax imposed on individuals, trusts, and estates. Such interest is taken into account in determining adjusted current earnings for the purpose of computing the federal alternative minimum tax imposed on certain corporations and is subject to Minnesota franchise taxes on corporations (including financial institutions) measured by income. No opinion will be expressed by Bond Counsel regarding other state or federal tax consequences caused by the receipt or accrual of interest on the Bonds or arising with respect to ownership of the Bonds. See "Tax Exemption" herein. The Issuer will designate the Bonds as "qualified tax-exempt obligations" for purposes of Section 265(b)(3) of the Internal Revenue Code of 1986, as amended, relating to the ability of financial institutions to deduct from income for federal income tax purposes, interest expense that is allocable to carrying and acquiring tax-exempt obligations. New Issue Rating Application Made: Standard & Poor's PRELIMINARY OFFICIAL STATEMENT DATED JULY 24, 2014 CITY OF NORTHFIELD, MINNESOTA (Dakota and Rice Counties) $3,345,000* GENERAL OBLIGATION BONDS, SERIES 2014A PROPOSAL OPENING: August 5, 2014, 10:00 A.M., C.T. CONSIDERATION: August 5, 2014, 7:00 P.M., C.T. PURPOSE/AUTHORITY/SECURITY: The $3,345,000 General Obligation Bonds, Series 2014A (the "Bonds") are being issued pursuant to Minnesota Statutes, Chapters 429, 469, and Section , by the City of Northfield, Minnesota (the "City") for the purposes of: (i) financing various public improvements within the City; and (ii) acquiring the existing Memorial Park pool from the Economic Development Authority of the City of Northfield, Minnesota (the EDA ) by effecting a full net cash advance refunding of certain outstanding general obligations of the EDA as more fully described herein. The Bonds will be general obligations of the City for which its full faith, credit and taxing powers are pledged. Delivery is subject to receipt of an approving legal opinion of Kennedy & Graven, Chartered, Minneapolis, Minnesota. DATE OF BONDS: September 3, 2014 MATURITY: February 1 as follows: Year Amount* Year Amount* Year Amount* 2015 $170, $335, $345, , , , , , , , ,000 MATURITY ADJUSTMENTS: * The City reserves the right to increase or decrease the principal amount of the Bonds on the day of sale, in increments of $5,000 each. Increases or decreases may be made in any maturity. If any principal amounts are adjusted, the purchase price proposed will be adjusted to maintain the same gross spread per $1,000. TERM BONDS: See "Term Bond Option" herein INTEREST: February 1, 2015 and semiannually thereafter OPTIONAL REDEMPTION: Bonds maturing February 1, 2023 and thereafter are subject to call for prior redemption on February 1, 2022 and any date thereafter, at par MINIMUM PROPOSAL: $3,304,860 GOOD FAITH DEPOSIT: $66,900 PAYING AGENT: Bond Trust Services Corporation, Roseville, Minnesota ESCROW AGENT: U.S. Bank National Association, St. Paul, Minnesota BOOK-ENTRY-ONLY: See "Book-Entry-Only System" herein (unless otherwise specified by the purchaser) This Preliminary Official Statement will be further supplemented by an addendum specifying the offering prices, interest rates, aggregate principal amount, principal amount per maturity, anticipated delivery date, and Syndicate Manager and Syndicate Members, together with any other information required by law, and, as supplemented, shall constitute a "Final Official Statement" of the City with respect to the Bonds, as defined in S.E.C. Rule 15c2-12.

4 INTRODUCTORY STATEMENT This Preliminary Official Statement contains certain information regarding the City of Northfield, Minnesota (the "City") and the issuance of its $3,345,000 General Obligation Bonds, Series 2014A (the "Bonds"). Any descriptions or summaries of the Bonds, statutes, or documents included herein are not intended to be complete and are qualified in their entirety by reference to such statutes and documents and the form of the Bonds to be included in the resolution authorizing the sale of the Bonds ("Award Resolution") to be adopted by the City Council on August 5, Inquiries may be directed to Ehlers & Associates, Inc. ("Ehlers" or the "Financial Advisor"), Roseville, Minnesota, (651) , the City's Financial Advisor. A copy of this Preliminary Official Statement may be downloaded from Ehlers web site at by connecting to the link to the Bond Sales and following the directions at the top of the site. THE BONDS GENERAL The Bonds will be issued in fully registered form as to both principal and interest in denominations of $5,000 each or any integral multiple thereof, and will be dated, as originally issued, as of September 3, The Bonds will mature on February 1 in the years and amounts set forth on the cover of this Preliminary Official Statement. Interest will be payable on February 1 and August 1 of each year, commencing February 1, 2015, to the registered owners of the Bonds appearing of record in the bond register as of the close of business on the 15th day (whether or not a business day) of the immediately preceding month. Interest will be computed upon the basis of a 360-day year of twelve 30-day months and will be rounded pursuant to rules of the MSRB. The rate for any maturity may not be more than 1.00% less than the rate for any preceding maturity (for example, if a rate of 4.50% is proposed for the 2017 maturity, then the lowest rate that may be proposed for any later maturity is 3.50%). All Bonds of the same maturity must bear interest from date of issue until paid at a single, uniform rate. Each rate must be expressed in an integral multiple of 5/100 or 1/8 of 1%. Unless otherwise specified by the purchaser the Bonds will be registered in the name of Cede & Co., as nominee for The Depository Trust Company, New York, New York ("DTC"). (See "Book-Entry-Only System" herein.) As long as the Bonds are held under the book-entry system, beneficial ownership interests in the Bonds may be acquired in book-entry form only, and all payments of principal of, premium, if any, and interest on the Bonds shall be made through the facilities of DTC and its Participants. If the book-entry system is terminated, principal of, premium, if any, and interest on the Bonds shall be payable as provided in the Award Resolution. The City has selected Bond Trust Services Corporation, Roseville, Minnesota ( BTSC ), to act as paying agent (the "Paying Agent"). BTSC and Ehlers are affiliate companies. The City has selected U.S. Bank National Association, St. Paul, Minnesota, to act as escrow agent (the Escrow Agent ). The City will pay the charges for Paying Agent and Escrow Agent services. The City reserves the right to remove the Paying Agent and/or Escrow Agent and to appoint a successor. 1

5 CITY OF NORTHFIELD, MINNESOTA Schedule of Bonded Indebtedness General Obligation Debt Being Paid From Revenues (As of 9/3/14) Refunding 1) Series 2007C Refunding 2) Series 2013B Dated Amount 11/07/07 $2,185,000 8/08/13 $8,920,000 Maturity 2/01 8/20 Fiscal Year Total Total Total Principal Fiscal Year Ending Principal Interest Principal Interest Principal Interest P & I Outstanding % Paid Ending ,000 27,300 1,075, ,790 1,320, ,090 1,484,090 7,335, % ,000 19,300 1,085, ,398 1,240, ,698 1,384,698 6,095, % ,000 13,000 1,095, ,973 1,255, ,973 1,376,973 4,840, % ,000 6,500 1,110,000 88,438 1,275,000 94,938 1,369,938 3,565, % ,000 1,600 1,135,000 62,900 1,215,000 64,500 1,279,500 2,350, % ,160,000 33,320 1,160,000 33,320 1,193,320 1,190, % ,190,000 1,190, ,190, % ,000 67,700 7,850, ,818 8,655, ,518 9,278,518 1) This issue refunded the 2009 through 2019 maturities of the City's $1,245,000 General Obligation Sewer Revenue Bonds, Series 1999A, dated February 1, 1999; the 2010 through 2020 maturities of the City's $1,065,000 General Obligation Sewer Revenue Bonds, Series 1999F, dated December 1, 1999; and the 2009 through 2016 maturities of the City's $1,020,000 General Obligation Storm Sewer and Water Revenue Bonds, Series 2000B, dated August 1, ) This issue refunds the 2014 through 2021 principal installments of the City's $18,390,072 Minnesota Public Facilities Authority Clean Water Revolving Fund Loan of 2000, dated April 25, Prepared by Ehlers GO Revenue 13

6 CITY OF NORTHFIELD, MINNESOTA Schedule of Bonded Indebtedness General Obligation Debt Being Paid From Tax Increment Revenues (As of 9/3/14) Tax Increment Series 2002 Taxable Tax Increment Ref 1) Series 2007D Dated Amount 8/01/02 $140,000 11/07/07 $960,000 Maturity 12/15 2/01 Fiscal Year Total Total Total Principal Fiscal Year Ending Principal Interest Principal Interest Principal Interest P & I Outstanding % Paid Ending ,000 4, ,000 4,684 10, , % ,000 4,402 70,000 35,095 76,000 39, , , % ,000 4,114 75,000 31,144 81,000 35, , , % ,500 3,820 75,000 27,056 81,500 30, , , % ,500 3,495 75,000 22,856 81,500 26, , , % ,500 3,170 80,000 18,400 86,500 21, , , % ,000 2,842 90,000 13,513 97,000 16, , , % ,000 2,485 95,000 8, ,000 10, , , % ,000 2,124 95,000 2, ,000 4, ,855 33, % ,000 1,764 7,000 1,764 8,764 26, % ,000 1,400 7,000 1,400 8,400 19, % ,000 1,036 7,000 1,036 8,036 12, % , , ,668 5, % , , , % ,000 36, , , , , ,286 1) This issue refunded the 2010 through 2022 maturities of the City's $1,050,000 Taxable General Obligation Prepared by Ehlers GO TIF 14

7 CITY OF NORTHFIELD, MINNESOTA Schedule of Bonded Indebtedness General Obligation Debt Being Paid From Taxes (As of 9/3/14) Community Center Refunding 1) Series 2007B Dated Amount 11/07/07 $1,650,000 Maturity 2/01 Fiscal Year Total Total Total Principal Fiscal Year Ending Principal Interest Principal Interest P & I Outstanding % Paid Ending ,000 20, ,000 20, , , % ,000 12, ,000 12, , , % ,000 3, ,000 3, , % ,000 36, ,000 36, ,100 1) This issue refunded the 2009 through 2017 maturities of the City's $2,220,000 General Obligation Community Center Resource Bonds, Series 1998A, dated June 1, Prepared by Ehlers GO Tax 15

8 CITY OF NORTHFIELD, MINNESOTA Schedule of Bonded Indebtedness General Obligation Debt Being Paid From Revenues and Taxes (As of 9/3/14) G.O. Bonds 1) Series 2012C Dated Amount 12/27/12 $1,640,000 Maturity 2/01 Fiscal Year Total Total Total Principal Fiscal Year Ending Principal Interest Principal Interest P & I Outstanding % Paid Ending ,000 27, ,000 27, ,150 1,230, % ,000 21, ,000 21, , , % ,000 16, ,000 16, , , % ,000 11, ,000 11, , , % ,000 5, ,000 5, , , % ,000 2,200 40,000 2,200 42,200 90, % ,000 1,350 45,000 1,350 46,350 45, % , , , % ,485,000 86,150 1,485,000 86,150 1,571,150 1) A portion of this issue refunded the 2014 through 2022 maturities of the City's $2,245,000 General Obligation Water and Sewer Revenue Bonds, Series 2004B, dated April 28, A portion of this issue is subject to the legal debt limit (equipment certificate portion currently outstanding in the principal amount of $495,000). Prepared by Ehlers GO Revenue & Tax 16

9 CITY OF NORTHFIELD, MINNESOTA Schedule of Bonded Indebtedness General Obligation Debt Being Paid From Special Assessments and Taxes (As of 9/3/14) Improvement Series 2011A Improvement Series 2012A Improvement Series 2013A Dated Amount 7/14/11 $1,205,000 7/12/12 $965,000 8/08/13 $830,000 Maturity 2/01 2/01 2/01 Fiscal Year Total Total Total Principal Fiscal Year Ending Principal Interest Principal Interest Principal Interest Principal Interest P & I Outstanding % Paid Ending ,000 19, ,000 12,023 80,000 21, ,000 53, ,138 2,375, % ,000 17, ,000 11,348 80,000 20, ,000 49, ,483 2,075, % ,000 16,205 95,000 10,521 80,000 18, ,000 45, ,276 1,775, % ,000 14,055 95,000 9,429 80,000 16, ,000 40, ,434 1,485, % ,000 11,555 95,000 8,146 85,000 14, ,000 34, ,576 1,185, % ,000 8,643 95,000 6,650 85,000 12, ,000 27, , , % ,000 5,393 95,000 4,940 85,000 9, ,000 20, , , % ,000 1,853 95,000 3,064 85,000 7, ,000 12, , , % ,000 1,021 85,000 4, ,000 5, ,484 85, % ,000 1,488 85,000 1,488 86, % ,000 95, ,000 67, , ,550 2,675, ,744 2,964,744 Prepared by Ehlers GO Sp Assmt & Tax 17

10 CITY OF NORTHFIELD, MINNESOTA Schedule of Bonded Indebtedness General Obligation Debt Being Paid From Revenues, Special Assessments and Taxes (As of 9/3/14) Improvement & Utility G.O. Bonds 1) G.O. Bonds Series 2007A Series 2009A Series 2010A Dated Amount 10/24/07 12/28/09 12/28/10 $3,295,000 $4,300,000 $2,305,000 Maturity 2/01 2/01 2/01 Fiscal Year Total Total Total Principal Fiscal Year Ending Principal Interest Principal Interest Principal Interest Principal Interest P & I Outstanding % Paid Ending ,000 57, ,000 33, ,000 42,556 1,365, ,756 1,497,756 3,765, % ,000 41, ,000 22, ,000 39, , , ,894 2,935, % ,000 25, ,000 17, ,000 35, ,000 78, ,482 2,075, % ,000 8, ,000 10, ,000 31, ,000 50, ,610 1,185, % ,000 5, ,000 26, ,000 31, , , % ,000 1, ,000 20, ,000 22, , , % ,000 13, ,000 13, , , % ,000 9,450 55,000 9,450 64, , % ,000 7,470 55,000 7,470 62, , % ,000 5,400 60,000 5,400 65, , % ,000 3,240 60,000 3,240 63,240 60, % ,000 1,080 60,000 1,080 61, % ,610, ,800 1,730,000 90,575 1,790, ,422 5,130, ,797 5,589,797 1) A portion of this issue refunded the 2011 through 2018 maturities of the City's $1,510,000 General Obligation Storm Water Revenue Bonds, Series 2002B, dated August 1, 2002; and the 2011 through 2014 maturities of the City's $3,435,000 General Obligation Improvement Bonds, Series 2004A, dated April 28, Prepared by Ehlers GO Rev, Sp Assmts & Tax 18

11 CITY OF NORTHFIELD, MINNESOTA Schedule of Bonded Indebtedness General Obligation Debt Being Paid From Special Assessments, Tax Abatement Revenues & Taxes (As of 9/3/14) This Issue G.O. Bonds 1) Series 2014A Dated Amount 8/28/14 $3,345,000 Maturity 2/01 Fiscal Year Estimated Total Total Total Principal Fiscal Year Ending Principal Interest Principal Interest P & I Outstanding % Paid Ending ,000 54, ,000 54, ,450 3,175, % ,000 57, ,000 57, ,873 2,860, % ,000 55, ,000 55, ,095 2,525, % ,000 51, ,000 51, ,358 2,195, % ,000 46, ,000 46, ,699 1,860, % ,000 40, ,000 40, ,958 1,520, % ,000 34, ,000 34, ,158 1,180, % ,000 26, ,000 26, , , % ,000 17, ,000 17, , , % ,000 8, ,000 8, , , % ,000 1, ,000 1, , % ,345, ,365 3,345, ,365 3,740,365 1) This issue is refunding the 2015 through 2025 maturities of the Economic Development Authority's $3,210,000 Public Project Revenue Bonds, Series 2006A, dated 7/18/06. The Escrow Account is responsible for paying the principal and interest on the non-refunded maturities through 2/1/16 (the "Call Date"), and the principal being refunded on the Call Date. Therefore, the refunded issue has not been included above and has not been included in the calculation of debt ratios. Prepared by Ehlers GO Sp Assmt, Tax Abate, Tax 19

12 CITY OF NORTHFIELD, MINNESOTA Schedule of Bonded Indebtedness General Obligation Debt Being Paid From Revenues, Special Assessments, Tax Increment Revenues and Taxes (As of 9/3/14) G.O. Bonds Series 2008B Dated Amount 12/18/08 $1,530,000 Maturity 2/01 Fiscal Year Total Total Total Principal Fiscal Year Ending Principal Interest Principal Interest P & I Outstanding % Paid Ending ,000 21,730 90,000 21, , , % ,000 18,355 90,000 18, , , % ,000 14,768 95,000 14, , , % ,000 10,873 95,000 10, , , % ,000 6,764 95,000 6, , , % ,000 2, ,000 2, , % ,000 74, ,000 74, ,814 Prepared by Ehlers GO Rev, Sp Assmts, TIF & Tax 20

13 CITY OF NORTHFIELD, MINNESOTA Schedule of Bonded Indebtedness Non-General Obligation Debt Being Paid From Annual Appropriations (As of 9/3/14) Cert. of Participation Series 2012B Dated Amount 9/18/12 $6,280,000 Maturity 4/01 Fiscal Year Total Total Total Principal Fiscal Year Ending Principal Interest Principal Interest P & I Outstanding % Paid Ending , ,013 77,013 6,100, % , , , , ,833 5,835, % , , , , ,155 5,565, % , , , , ,915 5,295, % , , , , ,960 5,020, % , , , , ,960 4,740, % , , , , ,168 4,455, % , , , , ,840 4,165, % , , , , ,905 3,865, % , , , , ,493 3,560, % , , , , ,650 3,250, % ,000 95, ,000 95, ,380 2,930, % ,000 86, ,000 86, ,603 2,600, % ,000 77, ,000 77, ,220 2,260, % ,000 67, ,000 67, ,213 1,910, % ,000 56, ,000 56, ,650 1,550, % ,000 44, ,000 44, ,775 1,180, % ,000 31, ,000 31, , , % ,000 18, ,000 18, , , % ,000 6, ,000 6, , % ,100,000 1,884,536 6,100,000 1,884,536 7,984,536 Prepared by Ehlers Non-GO Annual App 21

14 CITY OF NORTHFIELD, MINNESOTA Schedule of Bonded Indebtedness Non-General Obligation Debt Being Paid From Hospital Revenues (As of 9/3/14) Hospital 1) Series 2006 Dated Amount 8/02/06 $31,930,000 Maturity 11/01 Fiscal Year Total Total Total Principal Fiscal Year Ending Principal Interest Principal Interest P & I Outstanding % Paid Ending , , , ,444 1,637,444 25,830, % ,000 1,388, ,000 1,388,888 2,353,888 24,865, % ,025,000 1,335,813 1,025,000 1,335,813 2,360,813 23,840, % ,080,000 1,279,438 1,080,000 1,279,438 2,359,438 22,760, % ,140,000 1,220,038 1,140,000 1,220,038 2,360,038 21,620, % ,200,000 1,157,338 1,200,000 1,157,338 2,357,338 20,420, % ,255,000 1,094,338 1,255,000 1,094,338 2,349,338 19,165, % ,335,000 1,028,450 1,335,000 1,028,450 2,363,450 17,830, % ,395, ,363 1,395, ,363 2,353,363 16,435, % ,475, ,381 1,475, ,381 2,358,381 14,960, % ,555, ,100 1,555, ,100 2,359,100 13,405, % ,635, ,519 1,635, ,519 2,355,519 11,770, % ,725, ,638 1,725, ,638 2,357,638 10,045, % ,820, ,919 1,820, ,919 2,359,919 8,225, % ,915, ,094 1,915, ,094 2,357,094 6,310, % ,015, ,163 2,015, ,163 2,354,163 4,295, % ,125, ,856 2,125, ,856 2,355,856 2,170, % ,170, ,638 2,170, ,638 2,286, % ,750,000 14,889,413 26,750,000 14,889,413 41,639,413 1) A portion of this issue refunded the City's $22,000,000 Hospital Revenue Bonds, Series 2001, dated November 1, Prepared by Ehlers Non-GO Hospital Rev 22

15 APPENDIX E TERMS OF PROPOSAL $3,345,000* GENERAL OBLIGATION BONDS, SERIES 2014A CITY OF NORTHFIELD, MINNESOTA Proposals for the purchase of $3,345,000 General Obligation Bonds, Series 2014A (the "Bonds") of the City of Northfield, Minnesota (the "City") will be received at the offices of Ehlers & Associates, Inc. ("Ehlers"), 3060 Centre Pointe Drive, Roseville, Minnesota , Financial Advisors to the City, until 10:00 A.M., Central Time, and ELECTRONIC PROPOSALS will be received via PARITY, in the manner described below, until 10:00 A.M. Central Time, on August 5, 2014, at which time they will be opened, read and tabulated. The proposals will be presented to the City Council for consideration for award by resolution at a meeting to be held at 7:00 P.M., Central Time, on the same date. The proposal offering to purchase the Bonds upon the terms specified herein and most favorable to the City will be accepted unless all proposals are rejected. PURPOSE The Bonds are being issued by the City, pursuant to Minnesota Statutes, Chapters 429, 469, and Section , for the purposes of: (i) financing various public improvements within the City; and (ii) acquiring the existing Memorial Park pool from the Economic Development Authority of the City of Northfield, Minnesota (the EDA ) by effecting a full net cash advance refunding of certain outstanding general obligations of the EDA as more fully described herein. The Bonds will be general obligations of the City for which its full faith, credit and taxing powers are pledged. DATES AND MATURITIES The Bonds will be dated September 3, 2014, will be issued as fully registered Bonds in the denomination of $5,000 each, or any integral multiple thereof, and will mature on February 1 as follows: Year Amount* Year Amount* Year Amount* 2015 $170, $335, $345, , , , , , , , ,000 ADJUSTMENT OPTION * The City reserves the right to increase or decrease the principal amount of the Bonds on the day of sale, in increments of $5,000 each. Increases or decreases may be made in any maturity. If any principal amounts are adjusted, the purchase price proposed will be adjusted to maintain the same gross spread per $1,000. TERM BOND OPTION Proposals for the Bonds may contain a maturity schedule providing for any combination of serial bonds and term bonds, subject to mandatory redemption, so long as the amount of principal maturing or subject to mandatory redemption in each year conforms to the maturity schedule set forth above. All dates are inclusive. E-1

16 INTEREST PAYMENT DATES AND RATES Interest will be payable on February 1 and August 1 of each year, commencing February 1, 2015, to the registered owners of the Bonds appearing of record in the bond register as of the close of business on the 15th day (whether or not a business day) of the immediately preceding month. Interest will be computed upon the basis of a 360-day year of twelve 30-day months and will be rounded pursuant to rules of the MSRB. The rate for any maturity may not be more than 1.00% less than the rate for any preceding maturity (for example, if a rate of 4.50% is proposed for the 2017 maturity, then the lowest rate that may be proposed for any later maturity is 3.50%). All Bonds of the same maturity must bear interest from date of issue until paid at a single, uniform rate. Each rate must be expressed in an integral multiple of 5/100 or 1/8 of 1%. BOOK-ENTRY-ONLY FORMAT Unless otherwise specified by the purchaser, the Bonds will be designated in the name of Cede & Co., as nominee for The Depository Trust Company, New York, New York ("DTC"). DTC will act as securities depository for the Bonds, and will be responsible for maintaining a book-entry system for recording the interests of its participants and the transfers of interests between its participants. The participants will be responsible for maintaining records regarding the beneficial interests of the individual purchasers of the Bonds. So long as Cede & Co. is the registered owner of the Bonds, all payments of principal and interest will be made to the depository which, in turn, will be obligated to remit such payments to its participants for subsequent disbursement to the beneficial owners of the Bonds. PAYING AGENT/ESCROW AGENT The City has selected Bond Trust Services Corporation, Roseville, Minnesota ( BTSC ), to act as paying agent (the "Paying Agent"). BTSC and Ehlers are affiliate companies. The City has selected U.S. Bank National Association, St. Paul, Minnesota, to act as escrow agent (the Escrow Agent ). The City will pay the charges for Paying Agent and Escrow Agent services. The City reserves the right to remove the Paying Agent and/or Escrow Agent and to appoint a successor. OPTIONAL REDEMPTION At the option of the City, Bonds maturing on or after February 1, 2023 shall be subject to redemption prior to maturity on February 1, 2022 and on any date thereafter, at a price of par plus accrued interest. Redemption may be in whole or in part of the Bonds subject to prepayment. If redemption is in part, the selection of the amounts and maturities of the Bonds to be redeemed shall be at the discretion of the City. If only part of the Bonds having a common maturity date are called for redemption, then the City or Paying Agent, if any, will notify DTC of the particular amount of such maturity to be redeemed. DTC will determine by lot the amount of each participant's interest in such maturity to be redeemed and each participant will then select by lot the beneficial ownership interest in such maturity to be redeemed. Notice of redemption shall be sent by mail not more than 60 days and not fewer than 30 days prior to the date fixed for redemption to the registered owner of each Bond to be redeemed at the address shown on the registration books. E-2

17 DELIVERY On or about September 3, 2014, the Bonds will be delivered without cost to the winning bidder at DTC. On the day of closing, the City will furnish to the winning bidder the opinion of bond counsel hereinafter described, an arbitrage certification, and certificates verifying that no litigation in any manner questioning the validity of the Bonds is then pending or, to the best knowledge of officers of the City, threatened. Payment for the Bonds must be received by the City at its designated depository on the date of closing in immediately available funds. LEGAL OPINION An opinion as to the validity of the Bonds and the exemption from taxation of the interest thereon will be furnished by Kennedy & Graven, Chartered, Minneapolis, Minnesota, bond counsel to the City, and will accompany the Bonds. The legal opinion will state that the Bonds are valid and binding general obligations of the City; provided that the rights of the owners of the Bonds and the enforceability of the Bonds may be limited by bankruptcy, insolvency, reorganization, moratorium, and other similar laws affecting creditors' rights and by equitable principles (which may be applied in either a legal or equitable proceeding). SUBMISSION OF PROPOSALS Proposals must not be for less than $3,304,860 plus accrued interest on the principal sum of $3,345,000 from date of original issue of the Bonds to date of delivery. A signed proposal form must be submitted to Ehlers prior to the time established above for the opening of proposals as follows: 1) In a sealed envelope as described herein; or 2) A facsimile submission to Ehlers, Facsimile Number (651) ; or 3) Electronically via PARITY in accordance with this Terms of Proposal until 10:00 A.M. Central Time, but no proposal will be received after the time for receiving proposals specified above. To the extent any instructions or directions set forth in PARITY conflict with this Terms of Proposal, the terms of this Terms of Proposal shall control. For further information about PARITY, potential bidders may contact Ehlers or i-deal LLC at 1359 Broadway, 2 nd Floor, New York, New York 10018, Telephone (212) Proposals must be submitted to Ehlers via one of the methods described above and must be received prior to the time established above for the opening of proposals. Each proposal must be unconditional except as to legality. Neither the City nor Ehlers shall be responsible for any failure to receive a facsimile submission. A good faith deposit (the "Deposit") in the amount of $66,900, complying with the provisions below, must be submitted with each proposal. The Deposit must be in the form of a certified or cashier's check, or a financial surety bond or a wire transfer of funds to KleinBank, 1550 Audubon Road, Chaska, Minnesota, ABA No for credit: Ehlers & Associates Good Faith Account No The Deposit will be retained by the City as liquidated damages if the proposal is accepted and the bidder fails to comply therewith. The Deposit will be returned to the winning bidder at the closing for the Bonds. The Deposit, payable to the City, shall be retained in the offices of Ehlers with the same effect as if delivered to the City. Alternatively, bidders may wire the Deposit to KleinBank, 1550 Audubon Road, Chaska, Minnesota, ABA No for credit: Ehlers & Associates Good Faith Account No The City and any bidder who chooses to so wire the Deposit hereby agree irrevocably that Ehlers shall be the escrow holder of the Deposit wired to such account subject only to these conditions and duties: 1) All income earned thereon shall be retained by the escrow holder as payment for its expenses; 2) If the proposal is not accepted, Ehlers shall, at its expense, promptly return the Deposit amount to the E-3

18 losing bidder; 3) If the proposal is accepted, the Deposit shall be returned to the winning bidder at the closing; 4) Ehlers shall bear all costs of maintaining the escrow account and returning the funds to the bidder; 5) Ehlers shall not be an insurer of the Deposit amount and shall have no liability hereunder except if it willfully fails to perform, or recklessly disregards, its duties specified herein; and 6) FDIC insurance on deposits within the escrow account shall be limited to $250,000 per bidder. If a financial surety bond is used, it must be from an insurance company licensed to issue such a bond in the State of Minnesota, and preapproved by the City. Such bond must be submitted to Ehlers prior to the opening of the proposals. Such bond must identify each bidder whose Deposit is guaranteed by such financial surety bond. If the Bonds are awarded to a bidder using a financial surety bond, then that bidder is required to submit its Deposit to Ehlers in the form of a certified or cashier's check or wire transfer as instructed by Ehlers not later than 3:00 P.M., Central Time, on the next business day following the award. If such Deposit is not received by that time, the financial surety bond may be drawn by the City to satisfy the Deposit requirement. The amount securing the successful proposal will be retained as liquidated damages if the proposal is accepted and the bidder fails to comply therewith. No proposal can be withdrawn after the time set for receiving proposals unless the meeting of the City scheduled for award of the Bonds is adjourned, recessed, or continued to another date without award of the Bonds having been made. AWARD The Bonds will be awarded to the bidder offering the lowest interest rate to be determined on a True Interest Cost (TIC) basis. The City s computation of the interest rate of each proposal, in accordance with customary practice, will be controlling. In the event of a tie, the sale of the Bonds will be awarded by lot. The City reserves the right to reject any and all proposals and to waive any informality in any proposal. BOND INSURANCE If the Bonds are qualified for any bond insurance policy, the purchase of such policy shall be at the sole option and expense of the winning bidder. Any cost for such insurance policy is to be paid by the winning bidder, except that, if the City requested and received a rating on the Bonds from a rating agency, the City will pay that rating fee. Any rating agency fees not requested by the City are the responsibility of the winning bidder. Failure of the municipal bond insurer to issue the policy after the Bonds are awarded to the winning bidder shall not constitute cause for failure or refusal by the winning bidder to accept delivery of the Bonds. CUSIP NUMBERS The City will assume no obligation for the assignment or printing of CUSIP numbers on the Bonds or for the correctness of any numbers printed thereon, but will permit such numbers to be printed at the expense of the winning bidder, if the winning bidder waives any delay in delivery occasioned thereby. QUALIFIED TAX-EXEMPT OBLIGATIONS The City will designate the Bonds as qualified tax-exempt obligations for purposes of Section 265(b)(3) of the Internal Revenue Code of 1986, as amended. E-4

19 CONTINUING DISCLOSURE In order to assist the Underwriters in complying with the provisions of Rule 15c2-12 promulgated by the Securities and Exchange Commission under the Securities Exchange Act of 1934 the City will enter into an undertaking (the "Undertaking") for the benefit of the holders of the Bonds. A description of the details and terms of the Undertaking is set forth in the Official Statement. The City has complied in all material respects with any undertaking previously entered into by it under the Rule. INFORMATION FROM WINNING BIDDER The winning bidder will be required to provide, in a timely manner, certain information relating to the initial offering prices of the Bonds necessary to compute the yield on the Bonds pursuant to the provisions of the Internal Revenue Code of 1986, as amended. PRELIMINARY OFFICIAL STATEMENT Bidders may obtain a copy of the Preliminary Official Statement relating to the Bonds prior to the proposal opening by request from Ehlers at by connecting to the link to the Bond Sales. The Syndicate Manager will be provided with an electronic copy and up to 10 printed copies upon request of the Final Official Statement within seven business days of the proposal acceptance. Additional copies of the Final Official Statement will be available at a cost of $10.00 per copy. Information for bidders and proposal forms may be obtained from Ehlers at 3060 Centre Pointe Drive, Roseville, Minnesota , Telephone (651) By Order of the City Council City of Northfield, Minnesota E-5

20 PROPOSAL FORM The City Council August 5, 2014 City of Northfield, Minnesota RE: $3,345,000* General Obligation Bonds, Series 2014A DATED: September 3, 2014 For all or none of the above Bonds, in accordance with the Terms of Proposal and terms of the Global Book-Entry System (unless otherwise specified by the Purchaser) as stated in this Preliminary Official Statement, we will pay you $ (not less than $3,304,860) plus accrued interest to date of delivery for fully registered Bonds bearing interest rates and maturing in the stated years as follows: % due 2015 % due 2019 % due 2023 % due 2016 % due 2020 % due 2024 % due 2017 % due 2021 % due 2025 % due 2018 % due 2022 * The City reserves the right to increase or decrease the principal amount of the Bonds on the day of sale, in increments of $5,000 each. Increases or decreases may be made in any maturity. If any principal amounts are adjusted, the purchase price proposed will be adjusted to maintain the same gross spread per $1,000. The rate for any maturity may not be more than 1.00% less than the rate for any preceding maturity (for example, if a rate of 4.50% is proposed for the 2017 maturity, then the lowest rate that may be proposed for any later maturity is 3.50%). All Bonds of the same maturity must bear interest from date of issue until paid at a single, uniform rate. Each rate must be expressed in an integral multiple of 5/100 or 1/8 of 1%. We enclose our good faith deposit in the amount of $66,900, to be held by you pending delivery and payment. Alternatively, we have provided a financial surety bond or have wired our good faith deposit to the KleinBank, 1550 Audubon Road, Chaska, Minnesota, ABA No for credit: Ehlers & Associates Good Faith Account No If our proposal is not accepted, said deposit shall be promptly returned to us. If the good faith deposit is wired to such escrow account, we agree to the conditions and duties of Ehlers & Associates, Inc., as escrow holder of the good faith deposit, pursuant to the Preliminary Official Statement dated July 24, This proposal is for prompt acceptance and is conditional upon deposit of said Bonds to The Depository Trust Company, New York, New York, in accordance with the Terms of Proposal. Delivery is anticipated to be on or about September 3, This proposal is subject to the City s agreement to enter into a written undertaking to provide continuing disclosure under Rule 15c2-12 promulgated by the Securities and Exchange Commission under the Securities Exchange Act of 1934 as described in the Preliminary Official Statement for this Issue. We have received and reviewed the Preliminary Official Statement and have submitted our requests for additional information or corrections to the Final Official Statement. As Syndicate Manager, we agree to provide the City with the reoffering price of the Bonds within 24 hours of the proposal acceptance. Account Manager: By: Account Members: Award will be on a true interest cost basis. According to our computations (the correct computation being controlling in the award), the total dollar interest cost (including any discount or less any premium) computed from September 3, 2014 of the above proposal is $ and the true interest cost (TIC) is %. The foregoing offer is hereby accepted by and on behalf of the City Council of the City of Northfield, Minnesota, on August 5, By: Title: By: Title:

21 ADDENDUM DATED JULY 30, 2014 TO PRELIMINARY OFFICIAL STATEMENT DATED JULY 24, 2014 CITY OF NORTHFIELD, MINNESOTA $3,345,000 GENERAL OBLIGATION BONDS, SERIES 2014A PROPOSAL OPENING: August 5, 2014, 10:00 A.M. The current population estimate has been corrected. Following are the pages of the Preliminary Official Statement which have been revised.

22 DEBT RATIOS Debt/Economic Market Value ($1,252,917,757) Debt/Current Population Estimate (20,436) G.O. Debt Direct G.O. Debt Being Paid From: Revenues $ 8,655,000 Tax Increment Revenues 747,000 Taxes 605,000 Revenues & Taxes 1,485,000 Special Assessments & Taxes 2,675,000 Revenues, Special Assessments & Taxes 5,130,000 Special Assessments, Tax Abatement Revenues & 3,345,000 Taxes Revenues, Special Assessments, Tax Increment 565,000 Revenues & Taxes Total General Obligation Debt $23,207,000 Less: G.O. Debt Paid Entirely from Revenues 1 (11,690,000) Tax Supported General Obligation Debt $11,517, % $ City's Share of Total Overlapping Debt $27,990, % $1, Total $39,507, % $1, DEBT PAYMENT HISTORY The City has never defaulted in the payment of principal and interest on its debt. FUTURE FINANCING The City reports no plans for additional financing in the next three months. 1 Debt service on the City s general obligation revenue debt is being paid entirely from revenues and therefore is considered self-supporting debt. Includes portions of the following issues, which are payable entirely from revenues: $3,295,000 General Obligation Improvement and Utility Revenue Bonds, Series 2007A ($660,000 principal currently outstanding); $1,530,000 General Obligation Bonds, Series 20008B ($80,000 principal currently outstanding); $4,300,000 General Obligation Bonds, Series 2009A ($680,000 principal currently outstanding); $2,305,000 General Obligation Bonds, Series 2010A ($625,000 principal currently outstanding); and $1,640,000 General Obligation Bonds, Series 2012C ($990,000 principal currently outstanding). 24

23 GENERAL INFORMATION LOCATION The City of Northfield, with a 2010 U.S. Census population of 20,007, a current population estimate of 20,436, and comprising an area of 7.6 square miles, is located approximately 40 miles south of the Minneapolis-St. Paul metropolitan area. For additional information regarding the City, please visit its website at LARGER EMPLOYERS Larger employers in the City of Northfield include the following: Firm Type of Business/Product Estimated No. of Employees St. Olaf College Private liberal arts college 860 Malt-O-Meal Co. Breakfast cereal 750 Carleton College Private liberal arts college 700 Northfield Hospital Hospital and nursing home 700 I.S.D. No. 659 (Northfield) Elementary and secondary education 504 McLane Minnesota, Inc. Food service distribution 480 Multek Flexible Circuits, Inc. Manufacturer of printed and etched circuits 450 Taylor Truck Line, Inc. Trucking/motor freight 360 Three Links Care Center Nursing and convalescent home 250 City of Northfield Municipal government and services 170 Source: ReferenceUSA, written and telephone survey (July 2014), and the Minnesota Department of Employment and Economic Development. 31

24 U.S. CENSUS DATA Population Trend: City of Northfield, Minnesota Income and Age Statistics 2000 U.S. Census population 17, U.S. Census population 20, State Demographer's Estimate 20,436 Percent of Change % City of Northfield Rice County State of Minnesota United States 2011 per capita income $23,057 $25,245 $30,656 $28, median household income $58,594 $60,438 $59,126 $53, median family income $77,058 $71,569 $74,032 $64, median gross rent $706 $759 $802 $ median value owner-occupied units $211,800 $197,100 $194,300 $181, median age 23.9 yrs yrs yrs yrs. State of Minnesota United States City % of 2011 per capita income 75.21% 82.20% City % of 2011 median family income % % Housing Statistics City of Northfield Percent of Change All Housing Units 5,119 6, % Source: 2000 and 2010 Census of Population and Housing, and 2012 American Community Survey, U.S. Census Bureau ( EMPLOYMENT/UNEMPLOYMENT DATA Rates are not compiled for individual communities within counties. Average Employment Average Unemployment Year Rice County Rice County State of Minnesota , % 7.4% , % 6.5% , % 5.6% , % 5.1% 2014, June 31, % 4.6% Source: Minnesota Department of Employment and Economic Development. 33

25 In the opinion of Kennedy & Graven, Chartered, Bond Counsel, based on present federal and Minnesota laws, regulations, rulings and decisions (which exclude any pending legislation which may have a retroactive effect), and assuming compliance with certain covenants, interest to be paid on the Bonds is excluded from gross income for federal income tax purposes and, to the same extent, from taxable net income of individuals, estates and trusts for Minnesota income purposes, and is not a preference item for purposes of computing the federal alternative minimum tax or the Minnesota alternative minimum tax imposed on individuals, trusts, and estates. Such interest is taken into account in determining adjusted current earnings for the purpose of computing the federal alternative minimum tax imposed on certain corporations and is subject to Minnesota franchise taxes on corporations (including financial institutions) measured by income. No opinion will be expressed by Bond Counsel regarding other state or federal tax consequences caused by the receipt or accrual of interest on the Bonds or arising with respect to ownership of the Bonds. See "Tax Exemption" herein. The Issuer will designate the Bonds as "qualified tax-exempt obligations" for purposes of Section 265(b)(3) of the Internal Revenue Code of 1986, as amended, relating to the ability of financial institutions to deduct from income for federal income tax purposes, interest expense that is allocable to carrying and acquiring tax-exempt obligations. New Issue Rating Application Made: Standard & Poor's PRELIMINARY OFFICIAL STATEMENT DATED JULY 24, 2014 CITY OF NORTHFIELD, MINNESOTA (Dakota and Rice Counties) $3,345,000* GENERAL OBLIGATION BONDS, SERIES 2014A PROPOSAL OPENING: August 5, 2014, 10:00 A.M., C.T. CONSIDERATION: August 5, 2014, 7:00 P.M., C.T. PURPOSE/AUTHORITY/SECURITY: The $3,345,000 General Obligation Bonds, Series 2014A (the "Bonds") are being issued pursuant to Minnesota Statutes, Chapters 429, 469, and Section , by the City of Northfield, Minnesota (the "City") for the purposes of: (i) financing various public improvements within the City; and (ii) acquiring the existing Memorial Park pool from the Economic Development Authority of the City of Northfield, Minnesota (the EDA ) by effecting a full net cash advance refunding of certain outstanding general obligations of the EDA as more fully described herein. The Bonds will be general obligations of the City for which its full faith, credit and taxing powers are pledged. Delivery is subject to receipt of an approving legal opinion of Kennedy & Graven, Chartered, Minneapolis, Minnesota. DATE OF BONDS: August 28, 2014 MATURITY: February 1 as follows: Year Amount* Year Amount* Year Amount* 2015 $170, $335, $345, , , , , , , , ,000 MATURITY ADJUSTMENTS: * The City reserves the right to increase or decrease the principal amount of the Bonds on the day of sale, in increments of $5,000 each. Increases or decreases may be made in any maturity. If any principal amounts are adjusted, the purchase price proposed will be adjusted to maintain the same gross spread per $1,000. TERM BONDS: See "Term Bond Option" herein INTEREST: February 1, 2015 and semiannually thereafter OPTIONAL REDEMPTION: Bonds maturing February 1, 2023 and thereafter are subject to call for prior redemption on February 1, 2022 and any date thereafter, at par MINIMUM PROPOSAL: $3,304,860 GOOD FAITH DEPOSIT: $66,900 PAYING AGENT: Bond Trust Services Corporation, Roseville, Minnesota ESCROW AGENT: U.S. Bank National Association, St. Paul, Minnesota BOOK-ENTRY-ONLY: See "Book-Entry-Only System" herein (unless otherwise specified by the purchaser) This Preliminary Official Statement will be further supplemented by an addendum specifying the offering prices, interest rates, aggregate principal amount, principal amount per maturity, anticipated delivery date, and Syndicate Manager and Syndicate Members, together with any other information required by law, and, as supplemented, shall constitute a "Final Official Statement" of the City with respect to the Bonds, as defined in S.E.C. Rule 15c2-12.

26 REPRESENTATIONS No dealer, broker, salesperson or other person has been authorized by the City to give any information or to make any representation other than those contained in this Preliminary Official Statement and, if given or made, such other information or representations must not be relied upon as having been authorized by the City. This Preliminary Official Statement does not constitute an offer to sell or a solicitation of an offer to buy any of these Bonds in any jurisdiction to any person to whom it is unlawful to make such an offer or solicitation in such jurisdiction. This Preliminary Official Statement is not to be construed as a contract with the Syndicate Manager or Syndicate Members. Statements contained herein which involve estimates or matters of opinion are intended solely as such and are not to be construed as representations of fact. Ehlers prepared this Preliminary Official Statement and any addenda thereto relying on information of the City and other sources for which there is reasonable basis for believing the information is accurate and complete. Bond Counsel has not participated in the preparation of this Preliminary Official Statement except as described herein and is not expressing any opinion as to the completeness or accuracy of the information contained therein. Compensation of Ehlers, payable entirely by the City, is contingent upon the sale of the issue. COMPLIANCE WITH S.E.C. RULE 15c2-12 Certain municipal obligations (issued in an aggregate amount over $1,000,000) are subject to General Rules and Regulations, Securities Exchange Act of 1934, Rule 15c2-12 Municipal Securities Disclosure (the "Rule"). Preliminary Official Statement: This Preliminary Official Statement was prepared for the City for dissemination to potential customers. Its primary purpose is to disclose information regarding these Bonds to prospective underwriters in the interest of receiving competitive proposals in accordance with the sale notice contained herein. Unless an addendum is posted prior to the sale, this Preliminary Official Statement shall be deemed nearly final for purposes of the Rule subject to completion, revision and amendment in a Final Official Statement as defined below. Review Period: This Preliminary Official Statement has been distributed to members of the legislative body and other public officials of the City as well as to prospective bidders for an objective review of its disclosure. Comments or requests for the correction of omissions or inaccuracies must be submitted to Ehlers at least two business days prior to the sale. Requests for additional information or corrections in the Preliminary Official Statement received on or before this date will not be considered a qualification of a proposal received from an underwriter. If there are any changes, corrections or additions to the Preliminary Official Statement, interested bidders will be informed by an addendum at least one business day prior to the sale. Final Official Statement: Upon award of sale of these Bonds, the Preliminary Official Statement together with any previous addendum of corrections or additions will be further supplemented by an addendum specifying the offering prices, interest rates, aggregate principal amount, principal amount per maturity, anticipated delivery date, and Syndicate Manager and Syndicate Members, together with any other information required by law, and, as supplemented, shall constitute a "Final Official Statement" of the City with respect to the Bonds, as defined in the Rule. Copies of the Final Official Statement will be delivered to the underwriter (Syndicate Manager) within seven business days following the proposal acceptance. Continuing Disclosure: Subject to certain exemptions, issues in an aggregate amount over $1,000,000 may be required to comply with provisions of the Rule which require that underwriters obtain from the issuers of municipal securities (or other obligated party) an agreement for the benefit of the owners of the securities to provide continuing disclosure with respect to those securities. This Preliminary Official Statement describes the conditions under which these Bonds are exempt or required to comply with the Rule. CLOSING CERTIFICATES Upon delivery of these Bonds, the purchaser (underwriter) will be furnished with the following items: (1) a certificate of the appropriate officials to the effect that at the time of the sale of these Bonds and all times subsequent thereto up to and including the time of the delivery of these Bonds, this Preliminary Official Statement did not and does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading; (2) a receipt signed by the appropriate officer evidencing payment for these Bonds; (3) a certificate evidencing the due execution of these Bonds, including statements that (a) no litigation of any nature is pending, or to the knowledge of signers, threatened, restraining or enjoining the issuance and delivery of these Bonds, (b) neither the corporate existence or boundaries of the City nor the title of the signers to their respective offices is being contested, and (c) no authority or proceedings for the issuance of these Bonds have been repealed, revoked or rescinded; and (4) a certificate setting forth facts and expectations of the City which indicates that the City does not expect to use the proceeds of these Bonds in a manner that would cause them to be arbitrage bonds within the meaning of Section 148 of the Internal Revenue Code of 1986, as amended, or within the meaning of applicable Treasury Regulations. ii

27 TABLE OF CONTENTS INTRODUCTORY STATEMENT... 1 THE BONDS... 1 GENERAL... 1 OPTIONAL REDEMPTION... 2 AUTHORITY; PURPOSE... 2 ESTIMATED SOURCES AND USES... 3 SECURITY... 4 RATING... 4 CONTINUING DISCLOSURE... 4 LEGAL OPINION... 5 TAX EXEMPTION... 5 QUALIFIED TAX-EXEMPT OBLIGATIONS... 6 FINANCIAL ADVISOR... 6 RISK FACTORS... 6 VALUATIONS... 8 OVERVIEW... 8 CURRENT PROPERTY VALUATIONS /14 NET TAX CAPACITY BY CLASSIFICATION. 10 TREND OF VALUATIONS LARGER TAXPAYERS DEBT DIRECT DEBT SCHEDULES OF BONDED INDEBTEDNESS DEBT LIMIT OVERLAPPING DEBT DEBT RATIOS DEBT PAYMENT HISTORY FUTURE FINANCING TAX RATES, LEVIES AND COLLECTIONS TAX LEVIES AND COLLECTIONS LEVY LIMITS TAX CAPACITY RATES THE ISSUER CITY GOVERNMENT EMPLOYEES; PENSIONS; UNIONS LIABILITIES FOR OTHER POST EMPLOYMENT BENEFITS LITIGATION FUNDS ON HAND ENTERPRISE FUNDS SUMMARY GENERAL FUND INFORMATION GENERAL INFORMATION LOCATION LARGER EMPLOYERS BUILDING PERMITS U.S. CENSUS DATA EMPLOYMENT/UNEMPLOYMENT DATA EXCERPTS FROM FINANCIAL STATEMENTS...A-1 FORM OF LEGAL OPINION... B-1 BOOK-ENTRY-ONLY SYSTEM... C-1 FORM OF CONTINUING DISCLOSURE CERTIFICATE. D-1 TERMS OF PROPOSAL... E-1 iii

28 CITY COUNCIL Term Expires Dana Graham Mayor January 2017 Suzie Nakasian Council Member January 2015 David DeLong Council Member January 2017 Erica Zweifel Council Member January 2017 Jessica Peterson White Council Member January 2015 David Ludescher Council Member January 2017 Rhonda Pownell Council Member January 2015 ADMINISTRATION Tim Madigan, City Administrator Deb Little, City Clerk Melanie Schlomann, Finance Director PROFESSIONAL SERVICES Kennedy & Graven, Chartered, Bond Counsel, Minneapolis, Minnesota Ehlers & Associates, Inc., Financial Advisors, Roseville, Minnesota (Other offices located in Brookfield, Wisconsin and Lisle, Illinois) iv

29 INTRODUCTORY STATEMENT This Preliminary Official Statement contains certain information regarding the City of Northfield, Minnesota (the "City") and the issuance of its $3,345,000 General Obligation Bonds, Series 2014A (the "Bonds"). Any descriptions or summaries of the Bonds, statutes, or documents included herein are not intended to be complete and are qualified in their entirety by reference to such statutes and documents and the form of the Bonds to be included in the resolution authorizing the sale of the Bonds ("Award Resolution") to be adopted by the City Council on August 5, Inquiries may be directed to Ehlers & Associates, Inc. ("Ehlers" or the "Financial Advisor"), Roseville, Minnesota, (651) , the City's Financial Advisor. A copy of this Preliminary Official Statement may be downloaded from Ehlers web site at by connecting to the link to the Bond Sales and following the directions at the top of the site. THE BONDS GENERAL The Bonds will be issued in fully registered form as to both principal and interest in denominations of $5,000 each or any integral multiple thereof, and will be dated, as originally issued, as of August 28, The Bonds will mature on February 1 in the years and amounts set forth on the cover of this Preliminary Official Statement. Interest will be payable on February 1 and August 1 of each year, commencing February 1, 2015, to the registered owners of the Bonds appearing of record in the bond register as of the close of business on the 15th day (whether or not a business day) of the immediately preceding month. Interest will be computed upon the basis of a 360-day year of twelve 30- day months and will be rounded pursuant to rules of the MSRB. The rate for any maturity may not be more than 1.00% less than the rate for any preceding maturity (for example, if a rate of 4.50% is proposed for the 2017 maturity, then the lowest rate that may be proposed for any later maturity is 3.50%). All Bonds of the same maturity must bear interest from date of issue until paid at a single, uniform rate. Each rate must be expressed in an integral multiple of 5/100 or 1/8 of 1%. Unless otherwise specified by the purchaser the Bonds will be registered in the name of Cede & Co., as nominee for The Depository Trust Company, New York, New York ("DTC"). (See "Book-Entry-Only System" herein.) As long as the Bonds are held under the book-entry system, beneficial ownership interests in the Bonds may be acquired in book-entry form only, and all payments of principal of, premium, if any, and interest on the Bonds shall be made through the facilities of DTC and its Participants. If the book-entry system is terminated, principal of, premium, if any, and interest on the Bonds shall be payable as provided in the Award Resolution. The City has selected Bond Trust Services Corporation, Roseville, Minnesota ( BTSC ), to act as paying agent (the "Paying Agent"). BTSC and Ehlers are affiliate companies. The City has selected U.S. Bank National Association, St. Paul, Minnesota, to act as escrow agent (the Escrow Agent ). The City will pay the charges for Paying Agent and Escrow Agent services. The City reserves the right to remove the Paying Agent and/or Escrow Agent and to appoint a successor. 1

30 OPTIONAL REDEMPTION At the option of the City, Bonds maturing on or after February 1, 2023 shall be subject to redemption prior to maturity on February 1, 2022 and on any date thereafter, at a price of par plus accrued interest. Redemption may be in whole or in part of the Bonds subject to prepayment. If redemption is in part, the selection of the amounts and maturities of the Bonds to be redeemed shall be at the discretion of the City. If only part of the Bonds having a common maturity date are called for redemption, then the City or Paying Agent, if any, will notify DTC of the particular amount of such maturity to be redeemed. DTC will determine by lot the amount of each participant's interest in such maturity to be redeemed and each participant will then select by lot the beneficial ownership interest in such maturity to be redeemed. Notice of redemption shall be sent by mail not more than 60 days and not fewer than 30 days prior to the date fixed for redemption to the registered owner of each Bond to be redeemed at the address shown on the registration books. AUTHORITY; PURPOSE The Bonds are being issued by the City, pursuant to Minnesota Statutes, Chapters 429 and 469, and Section , for the purposes of: (i) financing the City s 2014 Sixth Street Improvement Project (the Improvement Portion ); and (ii) acquiring the existing Memorial Park pool (the Pool ) from the Economic Development Authority of the City of Northfield, Minnesota (the EDA ) (the Refunding Portion ). The EDA originally financed the Pool with its $3,210,000 Public Project Revenue Bonds, Series 2006A, (the Series 2006A Bonds ) dated July 18, 2006 and the City will acquire the Pool by effecting a full net cash advance refunding of the 2015 through 2025 maturities of the Series 2006A Bonds. Following are the maturities of the Series 2006A Bonds which are being refunded by this issue: Issue Being Refunded Date of Refunded Issue Call Date Call Price Maturities Being Refunded Interest Rates Principal to be Refunded CUSIP Base 66618P Series 2006A Bonds 7/18/06 Paid at maturity by escrow % $155,000 AJ8 Paid at maturity by escrow % 160,000 AK5 2/1/16 Par % 170,000 AL % 175,000 AM % 185,000 AN9 (Term) % 395,000 AQ2 (Term) % 430,000 AS8 (Term) % 480,000 AU3 Total Series 2006A Bonds Being Refunded $2,150,000 The Bonds are being sold in advance of the call date of the Series 2006A Bonds and proceeds of the Refunding Portion of the Bonds will be invested in accordance with the Internal Revenue Code of 1986, as amended. Acceptance of a bid is dependent upon a satisfactory escrow account being established in an amount sufficient to pay all principal and interest payments due on the Series 2006A Bonds from August 28, 2014 through February 1, 2016 (the Call Date ), and to pay the principal being called on the Series 2006A Bonds on the Call Date. The City will establish an escrow account with direct obligations of the U.S. Government. Actuarial services necessary to ensure adequacy of the escrow account to provide timely payment of the Series 2006A Bonds to be refunded on the Call Date will be performed by a certified public accountant. 2

31 ESTIMATED SOURCES AND USES Sources Improvement Portion Refunding Portion Total Bond Issue Par Amount of Bonds $1,255,000 $2,090,000 $3,345,000 Prepaid Special Assessments 104, ,605 Planned Issuer Equity Contribution 1,360, ,360,996 Transfer from Prior Issue Debt Service Reserve 0 259, ,431 Total Sources $2,720,601 $2,349,431 $5,070,032 Uses Project Costs $2,681,555 $0 $2,681,555 Deposit to Escrow Fund 0 2,286,640 2,286,640 Discount Allowance 15,060 25,080 40,140 Finance Related Expenses 21,386 35,614 57,000 Contingency 2,600 2,097 4,697 Total Uses $2,720,601 $2,349,431 $5,070,032 Breakdown of Principal Payments: Payment Date Improvement Portion Refunding Portion Total Bond Issue 2/01/2015 $0 $170,000 $170,000 2/01/ , , ,000 2/01/ , , ,000 2/01/ , , ,000 2/01/ , , ,000 2/01/ , , ,000 2/01/ , , ,000 2/01/ , , ,000 2/01/ , , ,000 2/01/ , , ,000 2/01/ , ,000 Total $1,255,000 $2,090,000 $3,345,000 3

32 SECURITY The Bonds are general obligations of the City for which its full faith, credit and taxing powers are pledged without limitation as to rate or amount. The City anticipates that the debt service on the Improvement Portion of the Bonds will be paid from a combination of special assessments levied against properties benefitted by improvements financed by the Improvement Portion of the Bonds and from ad valorem property taxes. The City anticipates that the debt service on the Refunding Portion of the Bonds will be paid from abating the City s portion of taxes from specific parcels which benefit from the Pool. Receipt of special assessments, collection of ad valorem taxes, and receipt of tax abatement revenues will be sufficient to provide not less than 105% of principal and interest on the Bonds as required by Minnesota law. Should the revenues pledged for payment of the Bonds be insufficient to pay the principal and interest as the same shall become due, the City is required to pay maturing principal and interest from moneys on hand in any other fund of the City not pledged for another purpose and/or to levy additional taxes for this purpose upon all the taxable property in the City, without limitation as to rate or amount. RATING General obligation debt of the City, with the exception of any outstanding credit enhanced issues, is currently rated AA by Standard & Poor's. The City has requested a rating on this issue from Standard & Poor's, and bidders will be notified as to the assigned rating prior to the sale. Such a rating, if and when received, will reflect only the view of the rating agency and any explanation of the significance of such rating may only be obtained from Standard & Poor's. There is no assurance that such rating, if and when received, will continue for any period of time or that it will not be revised or withdrawn. Any revision or withdrawal of the rating may have an effect on the market price of the Bonds. CONTINUING DISCLOSURE In order to comply with the provisions of Rule 15c2-12 promulgated by the Securities and Exchange Commission under the Securities Exchange Act of 1934 (the "Rule") the City has entered into an undertaking (the "Undertaking") for the benefit of the holders of the Bonds. Through the Undertaking, the City covenants and agrees to provide certain annual financial information and operating data about the City and to provide notice of the occurrence of certain material events. This information shall be provided according to the time parameters described in the Undertaking to the Municipal Securities Rulemaking Board as required by the Rule. The specific provisions of the Undertaking are set forth in the Continuing Disclosure Certificate in substantially the form attached hereto as Appendix D. The Continuing Disclosure Certificate will be executed and delivered by the City at the time the Bonds are delivered. The City is the only "obligated person" with respect to the Bonds within the meaning of the Rule. The City has complied in all material respects with any previous undertaking under the Rule. 4

33 LEGAL OPINION An opinion as to the validity of the Bonds and the exemption from taxation of the interest thereon will be furnished by Kennedy & Graven, Chartered, Minneapolis, Minnesota, bond counsel to the City, and will accompany the Bonds. The legal opinion will state that the Bonds are valid and binding general obligations of the City; provided that the rights of the owners of the Bonds and the enforceability of the Bonds may be limited by bankruptcy, insolvency, reorganization, moratorium, and other similar laws affecting creditors' rights and by equitable principles (which may be applied in either a legal or equitable proceeding). TAX EXEMPTION In the opinion of Bond Counsel, under existing statutes, regulations, rulings and decisions, interest on the Bonds is excluded from gross income of the owners thereof for purposes of federal income taxation and is excluded from taxable net income of individuals, estates or trusts for purposes of State of Minnesota income taxation, but is subject to State of Minnesota franchise taxes measured by income that are imposed upon corporations, including financial institutions. Noncompliance following the issuance of the Bonds with certain requirements of the Internal Revenue Code of 1986, as amended (the "Code") and covenants of the Award Resolution may result in the inclusion of interest on the Bonds in gross income (for federal tax purposes) and taxable net income (for State of Minnesota tax purposes) of the owners thereof. No provision has been made for redemption of the Bonds, or for an increase in the interest rate on the Bonds, in the event that interest on the Bonds becomes subject to United States or State of Minnesota income taxation. The Code imposes an alternative minimum tax with respect to individuals and corporations on alternative minimum taxable income. Interest on the Bonds will not be treated as a preference item in calculating alternative minimum taxable income. The Code provides, however, that a portion of the adjusted current earnings of a corporation not otherwise included in the minimum tax base is included in adjusted current earnings for purposes of calculating the alternative minimum tax that may be imposed with respect to corporations. Adjusted current earnings include income received that is otherwise exempt from taxation such as interest on the Bonds. The Code provides that in the case of an insurance company subject to the tax imposed by Section 831 of the Code, the amount which otherwise would be taken into account as "losses incurred" under Section 832(b)(5) shall be reduced by an amount equal to 15% of the interest on the Bonds that is received or accrued during the taxable year. Interest on the Bonds may be included in the income of a foreign corporation for purposes of the branch profits tax imposed by Section 884 of the Code. Under certain circumstances, interest on the Bonds may be subject to the tax on "excess net passive income" of Subchapter S corporations imposed by Section 1375 of the Code. The above is not a comprehensive list of all Federal tax consequences which may arise from the receipt of interest on the Bonds. The receipt of interest on the Bonds may otherwise affect the Federal or State income tax liability of the recipient based on the particular taxes to which the recipient is subject and the particular tax status of other items or deductions. Bond Counsel expresses no opinion regarding any such consequences. All prospective purchasers of the Bonds are advised to consult their own tax advisors as to the tax consequences of, or tax considerations for, purchasing or holding the Bonds. Legislative proposals Bond Counsel s opinion is given as of its date and Bond Counsel assumes no obligation to update, revise, or supplement such opinion to reflect any changes in facts or circumstances or any changes in law that may hereafter 5

34 occur. Proposals are regularly introduced in both the United States House of Representatives and the United States Senate that, if enacted, could alter or affect the tax-exempt status on municipal bonds. For example, legislation has been proposed by President Obama that would, among other things, limit the amount of exclusions (including taxexempt interest) or deductions that certain higher-income taxpayers could use to reduce their tax liability. The likelihood of adoption of this or any other such legislative proposal relating to tax-exempt bonds cannot be reliably predicted. If enacted into law, current or future proposals may have a prospective or retroactive effect and could affect the value or marketability of tax-exempt bonds (including the Bonds). Prospective purchasers of the Bonds should consult their own tax advisors regarding the impact of any such change in law. QUALIFIED TAX-EXEMPT OBLIGATIONS The City will designate the Bonds as "qualified tax-exempt obligations" for purposes of Section 265(b)(3) of the Code relating to the ability of financial institutions to deduct from income for federal income tax purposes, interest expense that is allocable to carrying and acquiring tax-exempt obligations. "Qualified tax-exempt obligations" are treated as acquired by a financial institution before August 8, Interest allocable to such obligations remains subject to the 20% disallowance under prior law. FINANCIAL ADVISOR Ehlers has served as Financial Advisor to the City in connection with the issuance of the Bonds. The Financial Advisor will not participate in the underwriting of the Bonds. The financial information included in this Preliminary Official Statement has been compiled by the Financial Advisor. Such information does not purport to be a review, audit or certified forecast of future events and may not conform with accounting principles applicable to compilations of financial information. Ehlers is not a firm of certified public accountants. Ehlers is registered with the Securities and Exchange Commission and the Municipal Securities Rulemaking Board as a Municipal Advisor. RISK FACTORS Following is a description of possible risks to holders of these Bonds without weighting as to probability. This description of risks is not intended to be all-inclusive, and there may be other risks not now perceived or listed here. Taxes: The Bonds of this offering are general obligations of the City, the ultimate payment of which rests in the City's ability to levy and collect sufficient taxes to pay debt service should other revenue (special assessments, tax abatement revenues) be insufficient. State Actions: Many elements of local government finance, including the issuance of debt and the levy of property taxes, are controlled by state government. Past and future actions of the State may affect the overall financial condition of the City, the taxable value of property within the City, and the ability of the City to levy property taxes. Determination of Net Tax Capacity: The State of Minnesota calculates net tax capacity as a ratio of market value for various property classifications which are subject to change. Any reduction in these ratios may generate lower net tax capacities resulting in lower tax increment revenues. Ratings; Interest Rates: In the future, the City's credit rating may be reduced or withdrawn, or interest rates for this type of obligation may rise generally, either possibility resulting in a reduction in the value of the Bonds for resale prior to maturity. 6

35 Tax Exemption: If the federal government or the State of Minnesota taxes all or a portion of the interest on municipal obligations, directly or indirectly, or if there is a change in federal or state tax policy, the value of the Bonds may fall for purposes of resale. Noncompliance following the issuance of the Bonds with certain requirements of the Code and covenants of the Award Resolution may result in the inclusion of interest on the Bonds in gross income of the recipient for United States or in taxable net income of individuals, estates or trusts for State of Minnesota income tax purposes. No provision has been made for redemption of the Bonds, or for an increase in the interest rate on the Bonds, in the event that interest on the Bonds becomes subject to United States or State of Minnesota income taxation, retroactive to the date of issuance. Continuing Disclosure: A failure by the City to comply with the Undertaking for continuing disclosure (see "Continuing Disclosure") will not constitute an event of default on the Bonds. Any such failure must be reported in accordance with the Rule and must be considered by any broker, dealer, or municipal securities dealer before recommending the purchase or sale of the Bonds in the secondary market. Such a failure may adversely affect the transferability and liquidity of the Bonds and their market price. State Economy; State Aids: State of Minnesota cash flow problems could affect local governments and possibly increase property taxes. Book-Entry-Only System: The timely credit of payments for principal and interest on the Bonds to the accounts of the Beneficial Owners of the Bonds may be delayed due to the customary practices, standing instructions or for other unknown reasons by DTC participants or indirect participants. Since the notice of redemption or other notices to holders of these obligations will be delivered by the City to DTC only, there may be a delay or failure by DTC, DTC participants or indirect participants to notify the Beneficial Owners of the Bonds. Economy: A combination of economic, climatic, political or civil disruptions or terrorist actions could affect the local economy and result in reduced tax collections and/or increased demands upon local government. 7

36 VALUATIONS OVERVIEW All non-exempt property is subject to taxation by local taxing districts. Exempt real property includes Indian lands, public property, and educational, religious and charitable institutions. Most personal property is exempt from taxation (except investor-owned utility mains, generating plants, etc.). The valuation of property in Minnesota consists of three elements. (1) The estimated market value is set by city or county assessors. Not less than 20% of all real properties are to be appraised by local assessors each year. (2) The taxable market value is the estimated market value adjusted by all legislative exclusions. (3) The tax capacity (taxable) value of property is determined by class rates set by the State Legislature. The tax capacity rate varies according to the classification of the property. Tax capacity represents a percent of taxable market value. The property tax rate for a local taxing jurisdiction is determined by dividing the total tax capacity or market value of property within the jurisdiction into the dollars to be raised from the levy. State law determines whether a levy is spread on tax capacity or market value. Major classifications and the percentages by which tax capacity is determined are: Type of Property 2011/ / /14 Residential homestead 1 First $500, % Over $500, % Agricultural homestead 1 First $500,000 HGA % Over $500,000 HGA % First $1,210, % 2 Over $1,210, % 2 First $500, % Over $500, % First $500,000 HGA % Over $500,000 HGA % First $1,290, % 2 Over $1,290, % 2 First $500, % Over $500, % First $500,000 HGA % Over $500,000 HGA % First $1,500, % 2 Over $1,500, % 2 Agricultural non-homestead Land % 2 Land % 2 Land % 2 Seasonal recreational residential First $500, % 3 Over $500, % 3 First $500, % 3 Over $500, % 3 First $500, % 3 Over $500, % 3 Residential non-homestead: 1 unit - 1st $500, % Over $500, % 2-3 units % 4 or more % Small City % Industrial/Commercial/Utility 5 First $150, % Over $150, % 1 unit - 1st $500, % Over $500, % 2-3 units % 4 or more % Small City % First $150, % Over $150, % 1 unit - 1st $500, % Over $500, % 2-3 units % 4 or more % Small City % First $150, % Over $150, % 1 A residential property qualifies as "homestead" if it is occupied by the owner or a relative of the owner on the assessment date. 2 Applies to land and buildings. Exempt from referendum market value tax. 3 Exempt from referendum market value tax. 4 Cities of 5,000 population or less and located entirely outside the seven-county metropolitan area and the adjacent nine-county area and whose boundaries are 15 miles or more from the boundaries of a Minnesota city with a population of over 5, The estimated market value of utility property is determined by the Minnesota Department of Revenue. 8

37 CURRENT PROPERTY VALUATIONS 2013/14 Economic Market Value $1,252,917, /14 Assessor's Estimated Market Value Rice County Dakota County Total Real Estate $1,018,570,200 $106,903,300 $1,125,473,500 Personal Property 9,237, ,100 9,346,900 Total Valuation $1,027,808,000 $107,012,400 $1,134,820, /14 Net Tax Capacity Rice County Dakota County Total Real Estate $10,911,170 $ 1,031,467 $11,942,637 Personal Property 184,248 2, ,430 Net Tax Capacity $11,095,418 $ 1,033,649 $12,129,067 Less: Captured Tax Increment Tax Capacity 2 (265,528) 0 (265,528) Job Zone 3 (168,476) 0 (168,476) Taxable Net Tax Capacity $10,661,414 $ 1,033,649 $11,695,063 1 According to the Minnesota Department of Revenue, the Economic Market Value (the "EMV") for the City of Northfield in Rice County is about 89.66% and in Dakota County is about 98.7% of the actual selling prices of property most recently sold in the City. The sales ratio was calculated by comparing the selling prices with the Assessor's Estimated Market Value (the "AEMV"). Dividing the AEMV of real estate by the sales ratio and adding the AEMV of personal property and utility, railroads and minerals, if any, results in an EMV for the City of $1,252,917, The captured tax increment value shown above represents the captured net tax capacity of tax increment financing districts in the City. 3 Property located in state-designated Job Zones are exempt from most forms of property taxes. However, they do participate in payment of general obligation bonds. 9

38 2013/14 NET TAX CAPACITY BY CLASSIFICATION 2013/14 Net Tax Capacity Percent of Total Net Tax Capacity Residential homestead $ 6,742, % Agricultural 50, % Commercial/industrial 3,138, % Public utility 48, % Railroad operating property 100, % Non-homestead residential 1,855, % Commercial & residential seasonal/rec. 7, % Personal property 186, % Total $12,129, % TREND OF VALUATIONS Assessor's Assessor's Taxable Percent +/- in Levy Year Estimated Market Value Taxable Market Value Net Tax Capacity 1 Net Tax Capacity 2 Estimated Market Value 2009/10 $1,390,432,900 $1,380,944,100 $16,174,277 $15,100, % 2010/11 1,283,007,600 1,276,943,900 15,169,312 14,139, % 2011/12 1,235,917,600 1,146,669, ,762, ,638, % 2012/13 1,122,949,800 1,034,487,519 12,310,260 11,470, % 2013/14 1,134,820,400 1,044,117,469 12,129,067 11,695, % 1 Net Tax Capacity includes tax increment and Job Zone values. 2 Taxable Net Tax Capacity does not include tax increment or Job Zone values. 3 Beginning with taxes 2011/12, a portion of the Estimated Market Value is excluded from the calculation of Taxable Market Value and Net Tax Capacity for residential homesteads valued at $413,800 or less. 10

39 LARGER TAXPAYERS Percent of Taxpayer Type of Property 2013/14 Net Tax Capacity City's Total Net Tax Capacity Malt-O-Meal Co Industrial $ 395, % Xcel Energy Utility 231, % McLane Minnesota Inc. Industrial 184, % Community Resource Bank Commercial 126, % Dayton Hudson Corp Commercial 112, % Hayzin LLC Commercial 99, % Allina Health System Healthcare 87, % Cardinal CG Company Commercial/Industrial 78, % Hidden Valley Apartments Ltd Apartments 92, % Carleton College University 80, % Total $ 1,488, % City's Total 2013/14 Net Tax Capacity $12,129,067 Source: Current Property Valuations, Net Tax Capacity by Classification, Trend of Valuations and Larger Taxpayers have been furnished by Rice and Dakota Counties. 11

40 DEBT DIRECT DEBT 1 General Obligation Debt (see schedules following) Total g.o. debt being paid from revenues $ 8,655,000 Total g.o. debt being paid from tax increment revenues 747,000 Total g.o. debt being paid from taxes 605,000 Total g.o. debt being paid from revenues & taxes 1,485,000 Total g.o. debt being paid from special assessments & taxes 2,675,000 Total g.o. debt being paid from revenues, special assessments & taxes 5,130,000 Total g.o. debt being paid from special assessments, tax abatement revenues & taxes (the Bonds of this offering) 3,345,000 Total g.o. debt being paid from revenues, special assessments, tax increment revenues & taxes 565,000 Total General Obligation Debt $ 23,207,000 Revenue Debt (see schedules following) Total revenue debt paid by hospital revenues $ 26,750,000 Lease Purchase Obligations (see schedule following) Total lease purchase obligations paid by annual appropriations 2 $ 6,100,000 1 Outstanding debt is as of the dated date of the Bonds. 2 Non-general obligation debt has not been included in the debt ratios. 12

41 CITY OF NORTHFIELD, MINNESOTA Schedule of Bonded Indebtedness General Obligation Debt Being Paid From Revenues (As of 8/28/14) Refunding 1) Series 2007C Refunding 2) Series 2013B Dated Amount 11/07/07 $2,185,000 8/08/13 $8,920,000 Maturity 2/01 8/20 Fiscal Year Total Total Total Principal Fiscal Year Ending Principal Interest Principal Interest Principal Interest P & I Outstanding % Paid Ending ,000 27,300 1,075, ,790 1,320, ,090 1,484,090 7,335, % ,000 19,300 1,085, ,398 1,240, ,698 1,384,698 6,095, % ,000 13,000 1,095, ,973 1,255, ,973 1,376,973 4,840, % ,000 6,500 1,110,000 88,438 1,275,000 94,938 1,369,938 3,565, % ,000 1,600 1,135,000 62,900 1,215,000 64,500 1,279,500 2,350, % ,160,000 33,320 1,160,000 33,320 1,193,320 1,190, % ,190,000 1,190, ,190, % ,000 67,700 7,850, ,818 8,655, ,518 9,278,518 1) This issue refunded the 2009 through 2019 maturities of the City's $1,245,000 General Obligation Sewer Revenue Bonds, Series 1999A, dated February 1, 1999; the 2010 through 2020 maturities of the City's $1,065,000 General Obligation Sewer Revenue Bonds, Series 1999F, dated December 1, 1999; and the 2009 through 2016 maturities of the City's $1,020,000 General Obligation Storm Sewer and Water Revenue Bonds, Series 2000B, dated August 1, ) This issue refunds the 2014 through 2021 principal installments of the City's $18,390,072 Minnesota Public Facilities Authority Clean Water Revolving Fund Loan of 2000, dated April 25, Prepared by Ehlers GO Revenue 13

42 CITY OF NORTHFIELD, MINNESOTA Schedule of Bonded Indebtedness General Obligation Debt Being Paid From Tax Increment Revenues (As of 8/28/14) Tax Increment Series 2002 Taxable Tax Increment Ref 1) Series 2007D Dated Amount 8/01/02 $140,000 11/07/07 $960,000 Maturity 12/15 2/01 Fiscal Year Total Total Total Principal Fiscal Year Ending Principal Interest Principal Interest Principal Interest P & I Outstanding % Paid Ending ,000 4, ,000 4,684 10, , % ,000 4,402 70,000 35,095 76,000 39, , , % ,000 4,114 75,000 31,144 81,000 35, , , % ,500 3,820 75,000 27,056 81,500 30, , , % ,500 3,495 75,000 22,856 81,500 26, , , % ,500 3,170 80,000 18,400 86,500 21, , , % ,000 2,842 90,000 13,513 97,000 16, , , % ,000 2,485 95,000 8, ,000 10, , , % ,000 2,124 95,000 2, ,000 4, ,855 33, % ,000 1,764 7,000 1,764 8,764 26, % ,000 1,400 7,000 1,400 8,400 19, % ,000 1,036 7,000 1,036 8,036 12, % , , ,668 5, % , , , % ,000 36, , , , , ,286 1) This issue refunded the 2010 through 2022 maturities of the City's $1,050,000 Taxable General Obligation Prepared by Ehlers GO TIF 14

43 CITY OF NORTHFIELD, MINNESOTA Schedule of Bonded Indebtedness General Obligation Debt Being Paid From Taxes (As of 8/28/14) Community Center Refunding 1) Series 2007B Dated Amount 11/07/07 $1,650,000 Maturity 2/01 Fiscal Year Total Total Total Principal Fiscal Year Ending Principal Interest Principal Interest P & I Outstanding % Paid Ending ,000 20, ,000 20, , , % ,000 12, ,000 12, , , % ,000 3, ,000 3, , % ,000 36, ,000 36, ,100 1) This issue refunded the 2009 through 2017 maturities of the City's $2,220,000 General Obligation Community Center Resource Bonds, Series 1998A, dated June 1, Prepared by Ehlers GO Tax 15

44 CITY OF NORTHFIELD, MINNESOTA Schedule of Bonded Indebtedness General Obligation Debt Being Paid From Revenues and Taxes (As of 8/28/14) G.O. Bonds 1) Series 2012C Dated Amount 12/27/12 $1,640,000 Maturity 2/01 Fiscal Year Total Total Total Principal Fiscal Year Ending Principal Interest Principal Interest P & I Outstanding % Paid Ending ,000 27, ,000 27, ,150 1,230, % ,000 21, ,000 21, , , % ,000 16, ,000 16, , , % ,000 11, ,000 11, , , % ,000 5, ,000 5, , , % ,000 2,200 40,000 2,200 42,200 90, % ,000 1,350 45,000 1,350 46,350 45, % , , , % ,485,000 86,150 1,485,000 86,150 1,571,150 1) A portion of this issue refunded the 2014 through 2022 maturities of the City's $2,245,000 General Obligation Water and Sewer Revenue Bonds, Series 2004B, dated April 28, A portion of this issue is subject to the legal debt limit (equipment certificate portion currently outstanding in the principal amount of $495,000). Prepared by Ehlers GO Revenue & Tax 16

45 CITY OF NORTHFIELD, MINNESOTA Schedule of Bonded Indebtedness General Obligation Debt Being Paid From Special Assessments and Taxes (As of 8/28/14) Improvement Series 2011A Improvement Series 2012A Improvement Series 2013A Dated Amount 7/14/11 $1,205,000 7/12/12 $965,000 8/08/13 $830,000 Maturity 2/01 2/01 2/01 Fiscal Year Total Total Total Principal Fiscal Year Ending Principal Interest Principal Interest Principal Interest Principal Interest P & I Outstanding % Paid Ending ,000 19, ,000 12,023 80,000 21, ,000 53, ,138 2,375, % ,000 17, ,000 11,348 80,000 20, ,000 49, ,483 2,075, % ,000 16,205 95,000 10,521 80,000 18, ,000 45, ,276 1,775, % ,000 14,055 95,000 9,429 80,000 16, ,000 40, ,434 1,485, % ,000 11,555 95,000 8,146 85,000 14, ,000 34, ,576 1,185, % ,000 8,643 95,000 6,650 85,000 12, ,000 27, , , % ,000 5,393 95,000 4,940 85,000 9, ,000 20, , , % ,000 1,853 95,000 3,064 85,000 7, ,000 12, , , % ,000 1,021 85,000 4, ,000 5, ,484 85, % ,000 1,488 85,000 1,488 86, % ,000 95, ,000 67, , ,550 2,675, ,744 2,964,744 Prepared by Ehlers GO Sp Assmt & Tax 17

46 CITY OF NORTHFIELD, MINNESOTA Schedule of Bonded Indebtedness General Obligation Debt Being Paid From Revenues, Special Assessments and Taxes (As of 8/28/14) Improvement & Utility G.O. Bonds 1) G.O. Bonds Series 2007A Series 2009A Series 2010A Dated Amount 10/24/07 12/28/09 12/28/10 $3,295,000 $4,300,000 $2,305,000 Maturity 2/01 2/01 2/01 Fiscal Year Total Total Total Principal Fiscal Year Ending Principal Interest Principal Interest Principal Interest Principal Interest P & I Outstanding % Paid Ending ,000 57, ,000 33, ,000 42,556 1,365, ,756 1,497,756 3,765, % ,000 41, ,000 22, ,000 39, , , ,894 2,935, % ,000 25, ,000 17, ,000 35, ,000 78, ,482 2,075, % ,000 8, ,000 10, ,000 31, ,000 50, ,610 1,185, % ,000 5, ,000 26, ,000 31, , , % ,000 1, ,000 20, ,000 22, , , % ,000 13, ,000 13, , , % ,000 9,450 55,000 9,450 64, , % ,000 7,470 55,000 7,470 62, , % ,000 5,400 60,000 5,400 65, , % ,000 3,240 60,000 3,240 63,240 60, % ,000 1,080 60,000 1,080 61, % ,610, ,800 1,730,000 90,575 1,790, ,422 5,130, ,797 5,589,797 1) A portion of this issue refunded the 2011 through 2018 maturities of the City's $1,510,000 General Obligation Storm Water Revenue Bonds, Series 2002B, dated August 1, 2002; and the 2011 through 2014 maturities of the City's $3,435,000 General Obligation Improvement Bonds, Series 2004A, dated April 28, Prepared by Ehlers GO Rev, Sp Assmts & Tax 18

47 CITY OF NORTHFIELD, MINNESOTA Schedule of Bonded Indebtedness General Obligation Debt Being Paid From Special Assessments, Tax Abatement Revenues & Taxes (As of 8/28/14) This Issue G.O. Bonds 1) Series 2014A Dated Amount 8/28/14 $3,345,000 Maturity 2/01 Fiscal Year Estimated Total Total Total Principal Fiscal Year Ending Principal Interest Principal Interest P & I Outstanding % Paid Ending ,000 54, ,000 54, ,450 3,175, % ,000 57, ,000 57, ,873 2,860, % ,000 55, ,000 55, ,095 2,525, % ,000 51, ,000 51, ,358 2,195, % ,000 46, ,000 46, ,699 1,860, % ,000 40, ,000 40, ,958 1,520, % ,000 34, ,000 34, ,158 1,180, % ,000 26, ,000 26, , , % ,000 17, ,000 17, , , % ,000 8, ,000 8, , , % ,000 1, ,000 1, , % ,345, ,365 3,345, ,365 3,740,365 1) This issue is refunding the 2015 through 2025 maturities of the Economic Development Authority's $3,210,000 Public Project Revenue Bonds, Series 2006A, dated 7/18/06. The Escrow Account is responsible for paying the principal and interest on the non-refunded maturities through 2/1/16 (the "Call Date"), and the principal being refunded on the Call Date. Therefore, the refunded issue has not been included above and has not been included in the calculation of debt ratios. Prepared by Ehlers GO Sp Assmt, Tax Abate, Tax 19

48 CITY OF NORTHFIELD, MINNESOTA Schedule of Bonded Indebtedness General Obligation Debt Being Paid From Revenues, Special Assessments, Tax Increment Revenues and Taxes (As of 8/28/14) G.O. Bonds Series 2008B Dated Amount 12/18/08 $1,530,000 Maturity 2/01 Fiscal Year Total Total Total Principal Fiscal Year Ending Principal Interest Principal Interest P & I Outstanding % Paid Ending ,000 21,730 90,000 21, , , % ,000 18,355 90,000 18, , , % ,000 14,768 95,000 14, , , % ,000 10,873 95,000 10, , , % ,000 6,764 95,000 6, , , % ,000 2, ,000 2, , % ,000 74, ,000 74, ,814 Prepared by Ehlers GO Rev, Sp Assmts, TIF & Tax 20

49 CITY OF NORTHFIELD, MINNESOTA Schedule of Bonded Indebtedness Non-General Obligation Debt Being Paid From Annual Appropriations (As of 8/28/14) Cert. of Participation Series 2012B Dated Amount 9/18/12 $6,280,000 Maturity 4/01 Fiscal Year Total Total Total Principal Fiscal Year Ending Principal Interest Principal Interest P & I Outstanding % Paid Ending , ,013 77,013 6,100, % , , , , ,833 5,835, % , , , , ,155 5,565, % , , , , ,915 5,295, % , , , , ,960 5,020, % , , , , ,960 4,740, % , , , , ,168 4,455, % , , , , ,840 4,165, % , , , , ,905 3,865, % , , , , ,493 3,560, % , , , , ,650 3,250, % ,000 95, ,000 95, ,380 2,930, % ,000 86, ,000 86, ,603 2,600, % ,000 77, ,000 77, ,220 2,260, % ,000 67, ,000 67, ,213 1,910, % ,000 56, ,000 56, ,650 1,550, % ,000 44, ,000 44, ,775 1,180, % ,000 31, ,000 31, , , % ,000 18, ,000 18, , , % ,000 6, ,000 6, , % ,100,000 1,884,536 6,100,000 1,884,536 7,984,536 Prepared by Ehlers Non-GO Annual App 21

50 CITY OF NORTHFIELD, MINNESOTA Schedule of Bonded Indebtedness Non-General Obligation Debt Being Paid From Hospital Revenues (As of 8/28/14) Hospital 1) Series 2006 Dated Amount 8/02/06 $31,930,000 Maturity 11/01 Fiscal Year Total Total Total Principal Fiscal Year Ending Principal Interest Principal Interest P & I Outstanding % Paid Ending , , , ,444 1,637,444 25,830, % ,000 1,388, ,000 1,388,888 2,353,888 24,865, % ,025,000 1,335,813 1,025,000 1,335,813 2,360,813 23,840, % ,080,000 1,279,438 1,080,000 1,279,438 2,359,438 22,760, % ,140,000 1,220,038 1,140,000 1,220,038 2,360,038 21,620, % ,200,000 1,157,338 1,200,000 1,157,338 2,357,338 20,420, % ,255,000 1,094,338 1,255,000 1,094,338 2,349,338 19,165, % ,335,000 1,028,450 1,335,000 1,028,450 2,363,450 17,830, % ,395, ,363 1,395, ,363 2,353,363 16,435, % ,475, ,381 1,475, ,381 2,358,381 14,960, % ,555, ,100 1,555, ,100 2,359,100 13,405, % ,635, ,519 1,635, ,519 2,355,519 11,770, % ,725, ,638 1,725, ,638 2,357,638 10,045, % ,820, ,919 1,820, ,919 2,359,919 8,225, % ,915, ,094 1,915, ,094 2,357,094 6,310, % ,015, ,163 2,015, ,163 2,354,163 4,295, % ,125, ,856 2,125, ,856 2,355,856 2,170, % ,170, ,638 2,170, ,638 2,286, % ,750,000 14,889,413 26,750,000 14,889,413 41,639,413 1) A portion of this issue refunded the City's $22,000,000 Hospital Revenue Bonds, Series 2001, dated November 1, Prepared by Ehlers Non-GO Hospital Rev 22

51 DEBT LIMIT The statutory limit on debt of Minnesota municipalities other than school districts or cities of the first class (Minnesota Statutes, Section , subd. 1) is 3% of the Assessor's Estimated Market Value of all taxable property within its boundaries. "Net debt" (Minnesota Statutes, Section , subd. 4) is the amount remaining after deducting from gross debt: (1) obligations payable wholly or partly from special assessments levied against benefitted property (e.g. the Bonds of this offering); (2) warrants or orders having no definite or fixed maturity; (3) obligations issued to finance any public revenue producing convenience; (4) obligations issued to create or maintain a permanent improvement revolving fund; (5) funds held as sinking funds for payment of principal and interest on debt other than those deductible under 1-4 above; and (6) other obligations which are not to be included in computing the net debt of a municipality under the provisions of the law authorizing their issuance. Assessor's Estimated Market Value $ 1,134,820,400 Multiply by 3% 0.03 Statutory Debt Limit $ 34,044,612 Less: Long-Term Debt Outstanding Being Paid Solely from Taxes 1 (1,100,000) Less: Long-Term Debt Outstanding Being Paid Solely from Annual Appropriations (applies to issues in excess of $1,000,000 originally issued after 6/1/97 which do not have revenues pledged) (6,100,000) Unused Debt Limit $ 26,844,612 OVERLAPPING DEBT 2 Taxing District 2013/14 Taxable Net Tax Capacity % In City Total G.O. Debt City's Proportionate Share Rice County $ 51,653, % $25,455,000 $ 5,253,978 Dakota County 352,976, % 42,730, ,130 I.S.D. No. 659 (Northfield) 22,997, % 44,465,000 22,611,863 City's Share of Total Overlapping Debt $27,990,971 1 Includes the portion of the $1,640,000 General Obligation Bonds, Series 2012C which is payable entirely from taxes ($495,000 principal currently outstanding). 2 Only those taxing jurisdictions with general obligation debt outstanding are included in this section. Does not include non-general obligation debt, self-supporting general obligation revenue debt, short-term general obligation debt, or general obligation tax/aid anticipation certificates of indebtedness. 23

52 DEBT RATIOS Debt/Economic Market Value ($1,252,917,757) Debt/Current Population Estimate (19,207) G.O. Debt Direct G.O. Debt Being Paid From: Revenues $ 8,655,000 Tax Increment Revenues 747,000 Taxes 605,000 Revenues & Taxes 1,485,000 Special Assessments & Taxes 2,675,000 Revenues, Special Assessments & Taxes 5,130,000 Special Assessments, Tax Abatement Revenues & 3,345,000 Taxes Revenues, Special Assessments, Tax Increment 565,000 Revenues & Taxes Total General Obligation Debt $23,207,000 Less: G.O. Debt Paid Entirely from Revenues 1 (11,690,000) Tax Supported General Obligation Debt $11,517, % $ City's Share of Total Overlapping Debt $27,990, % $1, Total $39,507, % $2, DEBT PAYMENT HISTORY The City has never defaulted in the payment of principal and interest on its debt. FUTURE FINANCING The City reports no plans for additional financing in the next three months. 1 Debt service on the City s general obligation revenue debt is being paid entirely from revenues and therefore is considered self-supporting debt. Includes portions of the following issues, which are payable entirely from revenues: $3,295,000 General Obligation Improvement and Utility Revenue Bonds, Series 2007A ($660,000 principal currently outstanding); $1,530,000 General Obligation Bonds, Series 20008B ($80,000 principal currently outstanding); $4,300,000 General Obligation Bonds, Series 2009A ($680,000 principal currently outstanding); $2,305,000 General Obligation Bonds, Series 2010A ($625,000 principal currently outstanding); and $1,640,000 General Obligation Bonds, Series 2012C ($990,000 principal currently outstanding). 24

53 TAX RATES, LEVIES AND COLLECTIONS TAX LEVIES AND COLLECTIONS Tax Year Net Tax Levy 1 Total Collected Following Year Collected to Date 2 % Collected 2009/10 $ 5,992,427 $ 5,842,703 $ 5,985, % 2010/11 6,084,438 5,936,535 6,077, % 2011/12 6,742,977 6,616,946 6,719, % 2012/13 7,338,387 7,268,771 7,307, % 2013/14 7,338,003 In process of collection Property taxes are collected in two installments in Minnesota--the first by May 15 and the second by October Mobile home taxes are collectible in full by August 31. Minnesota Statutes require that levies (taxes and special assessments) for debt service be at least 105% of the actual debt service requirements to allow for delinquencies. LEVY LIMITS The State Legislature has periodically imposed limitations on the ability of municipalities to levy property taxes. In 2013, the Legislature imposed a one year levy limit on all counties with a population greater than 5,000, and all cities with a population greater than 2,500. These limitations do not apply to taxes levied to pay debt service. While these limitations apply for one year, the potential exists for future legislation to limit the ability of local governments to levy property taxes. All previous limitations have not limited the ability to levy for the payment of debt service on bonded indebtedness. For more detailed information about Minnesota levy limits, contact the Minnesota Department of Revenue or Ehlers & Associates. 1 This reflects the Final Levy Certification of the City after all adjustments have been made. 2 Collections are through June 1, 2014 for Rice County, and May 31, 2014 for Dakota County. 3 Second half tax payments on agricultural property are due on November 15th of each year. 25

54 TAX CAPACITY RATES / / / / /14 Rice County % % % % % Dakota County % % % % % City of Northfield % % % % % I.S.D. No. 659 (Northfield) % % % % % Northfield HRA 1.431% 1.528% 1.844% 1.838% 1.751% Northfield EDA 1.651% 1.761% 1.728% 1.801% 1.716% Rice County HRA 0.486% 0.471% 0.526% 0.568% 0.601% Dakota County CDA 1.692% 1.718% 1.724% 1.664% 1.650% Light Rail 0.256% 0.389% 0.401% 0.423% 0.403% Referendum Market Value Rates: Dakota County % % % % % City of Northfield % % % % % I.S.D. No. 659 (Northfield) % % % % % Source: Tax Levies and Collections and Tax Capacity Rates have been furnished by Rice and Dakota Counties. 1 After reduction for state aids. Does not include the statewide general property tax against commercial/industrial, non-homestead resorts and seasonal recreational residential property. 26

55 THE ISSUER CITY GOVERNMENT The City of Northfield was organized as a municipality in The City operates under a home rule charter form of government consisting of a seven-member City Council of which the Mayor is a voting member. The City Administrator, Clerk, and Finance Director are responsible for administrative details and financial records. EMPLOYEES; PENSIONS; UNIONS The City currently has 83 full-time, 52 part-time, and 35 seasonal employees. All full-time and certain part-time employees of the City are covered by defined benefit pension plans administered by the Public Employee 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. PERA members belong to either the Coordinated Plan or the Basic Plan. Coordinated members are covered by Social Security. See the Notes to Financial Statements in Appendix A for a detailed description of the Plans. Recognized and Certified Bargaining Units Expiration Date of Bargaining Unit Current Contract LELS - Patrol December 31, 2014 LELS - Sergeants December 31, 2014 IUOE Local 70 - General December 31, 2014 IUOE Local 70 - Utility December 31, 2014 LIABILITIES FOR OTHER POST EMPLOYMENT BENEFITS The City has obligations for some post-employment benefits (some mandated by State Statute and others that cover a portion of the cost of health insurance during retirement) for the majority of its employees. Accounting for these obligations is dictated by Governmental Accounting Standards Board Statement No. 45 (GASB 45). The City has completed an actuarial study of its obligations. The study shows an actuarial accrued liability of $381,772 as of January 1, The City is currently funding these obligations on a pay-as-you-go basis, and will continue to do so in the future. LITIGATION There is no litigation threatened or pending questioning the organization or boundaries of the City or the right of any of its officers to their respective offices or in any manner questioning their rights and power to execute and deliver these Bonds or otherwise questioning the validity of these Bonds. 27

56 FUNDS ON HAND (As of May 31, 2014) Total Cash Fund and Investments General $ 4,240,038 Special Revenue 4,395,255 Debt Service 3,045,959 Capital Projects 1,447,230 Enterprise Funds 8,585,414 Internal Service 755,413 Trust 357,920 Escrow 2,203,681 Total Funds on Hand $25,030,909 28

57 ENTERPRISE FUNDS Cash flows for the City's enterprise funds have been as follows as of December 31 each year: Water Total Operating Revenues $ 2,118,157 $ 2,229,562 $ 2,237,112 Less: Operating Expenses (1,400,773) (1,152,713) (1,201,689) Operating Income $ 717,384 $ 1,076,849 $ 1,035,423 Plus: Depreciation 315, , ,656 Revenues Available for Debt Service $ 1,032,954 $ 1,402,023 $ 1,355,079 Wastewater Total Operating Revenues $ 3,471,535 $ 3,602,649 $ 3,778,543 Less: Operating Expenses (2,755,141) (2,669,661) (2,859,363) Operating Income $ 716,394 $ 932,988 $ 919,180 Plus: Depreciation 1,050,109 1,104,703 1,113,750 Revenues Available for Debt Service $ 1,766,503 $ 2,037,691 $ 2,032,930 Garbage Total Operating Revenues $ 743,329 $ 777,370 $ 889,533 Less: Operating Expenses (828,705) (831,541) (669,859) Operating Income $ (85,376) $ (54,171) $ 219,674 Plus: Depreciation 15,453 20,346 2 Revenues Available for Debt Service $ (69,923) $ (33,825) $ 219,676 Storm Water Total Operating Revenues $ 576,867 $ 659,622 $ 675,838 Less: Operating Expenses (307,583) (350,484) (393,123) Operating Income $ 269,284 $ 309,138 $ 282,715 Plus: Depreciation 167, , ,627 Revenues Available for Debt Service $ 436,387 $ 497,870 $ 485,342 Municipal Liquor Store Total Operating Revenues $ 740,056 $ 747,518 $ 787,780 Less: Operating Expenses (541,411) (533,401) (564,293) Operating Income $ 198,645 $ 214,117 $ 223,487 Plus: Depreciation 5,967 5,967 2,486 Revenues Available for Debt Service $ 204,612 $ 220,084 $ 225,973 29

58 SUMMARY GENERAL FUND INFORMATION Following are summaries of the revenues and expenditures and fund balances for the City's General Fund for the past five fiscal years. These summaries are not purported to be the complete audited financial statements of the City. Copies of the complete audited financial statements are available upon request. See Appendix A for excerpts from the City's 2013 audited financial statement. FISCAL YEAR ENDING DECEMBER 31 COMBINED STATEMENT Revenues Property taxes $ 4,667,164 $ 4,672,080 $ 4,764,112 $ 5,101,238 $ 5,315,103 Special assessments Fees, licenses and permits 326, , , , ,599 Intergovernmental 3,531,025 2,927,131 2,872,164 3,081,301 3,066,511 Charges for services 1,310,290 1,377,978 1,451,710 1,514,709 1,475,615 Fines and forfeitures 116, , , , ,442 Interest 50, , ,159 90,893 (91,408) Other miscellaneous revenues 265, , , , ,592 Total Revenues $ 10,267,863 $ 10,124,493 $ 10,084,859 $ 10,514,985 $ 10,517,482 Expenditures Current: General government $ 2,303,867 $ 2,300,078 $ 2,071,664 $ 2,294,042 $ 2,165,610 Public safety 3,617,035 3,459,798 3,552,039 3,299,874 3,335,072 Public works 2,105,459 1,941,562 2,013,997 1,881,458 2,329,237 Culture and recreation 1,621,095 1,573,044 1,650,121 1,735,283 1,804,710 Miscellaneous 193, , , , ,087 Debt service 205, , , , ,659 Capital outlay 22,938 12,040 22,784 27,769 6,350 Total Expenditures $ 10,069,299 $ 9,663,631 $ 9,695,017 $ 9,565,649 $ 9,962,725 Excess of revenues over (under) expenditures $ 198,564 $ 460,862 $ 389,842 $ 949,336 $ 554,757 Other Financing Sources (Uses) Sale of capital assets $ 12,543 $ 4,163 $ 15,152 $ 1,029 $ 5,682 Transfer from component unit 5, Operating transfers in 278, , , , ,719 Operating transfers out (307,341) (199,809) (151,787) (750,000) (503,617) Total Other Financing Sources (Uses) $ (10,726) $ 87,733 $ 155,138 $ (457,463) $ (217,216) Net Changes in Fund Balances $ 187,838 $ 548,595 $ 544,980 $ 491,873 $ 337,541 General Fund Balance January 1 4,886,626 5,117,464 5,666,059 6,211,039 6,702,912 Prior Period Adjustment 43, Residual Equity Transfer in (out) General Fund Balance December 31 $ 5,117,464 $ 5,666,059 $ 6,211,039 $ 6,702,912 $ 7,040,453 DETAILS OF DECEMBER 31 FUND BALANCE Reserved $ 68,339 $ 62,297 $ 0 $ 0 $ 0 Unreserved: Designated 5,049,125 5,603, Unreserved: Undesignated Nonspendable ,933 77,534 98,503 Restricted ,002 4,651 5,054 Committed , Assigned , ,397 0 Unassigned 0 0 5,071,260 6,368,330 6,936,896 Total $ 5,117,464 $ 5,666,059 $ 6,211,039 $ 6,702,912 $ 7,040,453 30

59 GENERAL INFORMATION LOCATION The City of Northfield, with a 2010 U.S. Census population of 20,007, a current population estimate of 20,436, and comprising an area of 7.6 square miles, is located approximately 40 miles south of the Minneapolis-St. Paul metropolitan area. For additional information regarding the City, please visit its website at LARGER EMPLOYERS Larger employers in the City of Northfield include the following: Firm Type of Business/Product Estimated No. of Employees St. Olaf College Private liberal arts college 860 Malt-O-Meal Co. Breakfast cereal 750 Carleton College Private liberal arts college 700 Northfield Hospital Hospital and nursing home 700 I.S.D. No. 659 (Northfield) Elementary and secondary education 504 McLane Minnesota, Inc. Food service distribution 480 Multek Flexible Circuits, Inc. Manufacturer of printed and etched circuits 450 Taylor Truck Line, Inc. Trucking/motor freight 360 Three Links Care Center Nursing and convalescent home 250 City of Northfield Municipal government and services 170 Source: ReferenceUSA, written and telephone survey (July 2014), and the Minnesota Department of Employment and Economic Development. 31

60 BUILDING PERMITS All Building Permits (includes additions and remodels) No. of building permits Valuations $59,439,518 $16,657,366 $20,018,472 $37,905,058 $9,035,746 New Single Family Homes No. of building permits Valuation $2,603,150 $3,348,710 $3,155,350 $6,508,390 $2,719,000 New Multiple Family Buildings No. of building permits Valuation $0 $0 $0 $4,000,000 $0 New Commercial/Industrial No. of building permits Valuation $2,917,169 $0 $0 $17,708,500 $0 1 As of June 30,

61 U.S. CENSUS DATA Population Trend: City of Northfield, Minnesota Income and Age Statistics 2000 U.S. Census population 17, U.S. Census population 20, State Demographer's Estimate 19,207 Percent of Change % City of Northfield Rice County State of Minnesota United States 2011 per capita income $23,057 $25,245 $30,656 $28, median household income $58,594 $60,438 $59,126 $53, median family income $77,058 $71,569 $74,032 $64, median gross rent $706 $759 $802 $ median value owner-occupied units $211,800 $197,100 $194,300 $181, median age 23.9 yrs yrs yrs yrs. State of Minnesota United States City % of 2011 per capita income 75.21% 82.20% City % of 2011 median family income % % Housing Statistics City of Northfield Percent of Change All Housing Units 5,119 6, % Source: 2000 and 2010 Census of Population and Housing, and 2012 American Community Survey, U.S. Census Bureau ( EMPLOYMENT/UNEMPLOYMENT DATA Rates are not compiled for individual communities within counties. Average Employment Average Unemployment Year Rice County Rice County State of Minnesota , % 7.4% , % 6.5% , % 5.6% , % 5.1% 2014, June 31, % 4.6% Source: Minnesota Department of Employment and Economic Development. 33

62 APPENDIX A EXCERPTS FROM FINANCIAL STATEMENTS Reproduced on the following pages are excerpts from the City's audited Financial Statements for the fiscal year ending December 31, The Financial Statements have been prepared by the City and audited by a certified public accountant. The Management s Discussion and Analysis and the Notes to Financial Statements are an integral part of the audit and any judgment of the Financial Statements should be based on the Financial Statements as a whole. Copies of the complete audited financial statements for the past three years and the current budget are available upon request from Ehlers. A-1

63 G!rti}'ied Puhlie Accountants & Consultants INDEPENDENT AUDITOR'S REPORT Honorable Mayor and City Council City of Northfield, Minnesota Report on the Financial Statements We have audited the accompanying financial statements of the governmental activities, the business-type activities, the aggregate discretely presented component units, each major fund and the aggregate remaining fund information of the City of Northfield, 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 an opinion on these financial statements based on our audit. We did not audit the financial statements of the Northfield Municipal Hospital discretely presented component unit. Those financial statements were audited by other auditors, whose report has been furnished to us, and our opinion insofar as it relates to the amounts included for the Northfield Municipal Hospital, is based solely on the report of the other auditors. The prior year comparative infonnation has been derived from the City's 2012 financial statements and, in our report dated June 18,2013, we expressed 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 and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The financial statements of the Hospital were not audited in accordance with Government Auditing Standards. 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. Opinion 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, the aggregate discretely presented component units, 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 cash flows, where applicable, 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. 11 Civic Center Plaza, Suite 300 P.O. Box 3166 Mankato, MN 560D / Fax 5D A-2

64 Other Matters Change in Accounting Standards As described in Note 9 to the basic financial statements, the City adopted the provisions of Governmental Accounting Standard Board (GASB) Statement No. 61, The Financial Reporting Entity: Omnibus an Amendment ofgasb Statements No. 14 and No. 34 for the year ended December 31, Adoption of the provisions of this statement results in significant changes to the classifications of the components of the financial statements. Required Supplementary Information Accounting principles generally accepted in the United States of America require that the Management's Discussion and Analysis starting on page 31 and the Schedule of Funding Progress on page 119 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 infonnation 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. Supplementary Information in Relation to the Financial Statements as a Whole Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the City's basic financial statements. The introductory section, combining and individual fund financial statements and schedules, and statistical section 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, the information is 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. Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated June 16,2014, on our consideration of the City'S internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on the internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the City'S internal control over financial reporting and compliance. ~, "r. ~ M~/L'; ABDO, EICK & MEYERS, LLP Mankato, Minnesota June 16,2014 A-3 Peopl + Pro Going Hevondthe Nmrlhers

65 This discussion and analy!'is are intended to-set\.'l!ns:u1 introdlll;:tiun to the City's basic finrilncial stotements. The City's basic financial statements compri,\ic three components:: I) gl)\ OtT1l1'1cnl-wlde financial statements, 2) fund financial statements, and 3) notcs to the financial statements. This report al~ co"iuins Oth":T :Ollpplclll4:ntal information in addition to the basic financial statements themselves. The financial statements also include notes th:\i c.>:plnin rom!: (If 1m: inrorm.lti~n in rhe finnncial ItRlcmtnt,!1I'ld rrovid.: moic d"tolfcd data. 1bc statements are followed by a sectioll or combminy. :Ind Huhvidulil rund OnnJIClal.sl:ucrncnll' nnd """hcdbl~ lhnt funher explains lind supports the information in the fin.,ntii'll st::u(mc..nt~ I1iftU~ ll'(ht\ \~ how the rcql.lll't'd Pilrt<; nr,hi, :ulluwl ftpdr1 a n." arranged and relate to one another. In addition r,o 1.hese required cll,lmenr,. v.c luvc included n ~Cl r(\n '''1Ih I!Omhrm:Jg.tnd hufh, duaj fund financial statements and schedules that pj'o'vidc dcl:l il.'i aboul nnnlfwjul' guvcnul\ctl!:a! lundrl. whir.h fit\.: luhit:"ij fn&clhur :1nd presented in single columns in the basie financial statcments ~ Required SuppJrmentary Inrormarton Nott5to th t'inancial Sh,temenb Od:dl Overview of the Financial Statements Management's Discussion and Analysis A~ "",nagemenl orlhe Cily of NOl'lhficld (Ih. City)... offer rend<i'li oflh. City's finnno,.1 stolcmollis Ihis narrative overview and 1lM1>",;' oflhe finnntinl.thvw... rthe City ror 'he liscol year end.'" December \Va OJ,cOI,mg".. aders to consider the infqrm;;rion p.rtscnh:d ht:tq in conjunction with addi1ioml iurqrm:uion that we have rwrushed in our Ic:n:cr ortransmittal, which can be found on page 9 of this report. Figure 1 Required Components of the City's Annual Financial Report A-4 Financial Highlights The assets and of the City exceeded its liabilities at the close of the most recent fiscaj year by $76,444,610 (net position). Of this amount~ $19,787,358 (unrestricted net position) may be used to meet the City's ongoing obligations to citizens and creditors. The City's IOlDl no' position incr""",d by SJ,"SO,S14 os comp.red ,.583 in Illc previnu. ),<aj'. Th" uliiily enl<l)'lrise operations g.~nern(td 31" inqtca.~ in chiuw;:s (or $rvfcc.t ofs Bath rhll go\it"n'inw:ntal l'lnd bu.tincss-lypcilcohvllics had increases in cxpoils!" compntm 10 the priory., C!podally In lb. public ""fcl~ nnd 511 ' ",id b'g"\\"'~ dcp;trtmon13 As of,,",olo,;eorlbo currenl r.~""l year,lh. Ci'Y'$ g<lvemm.n'31 runds repot\cd combined cnding fund bal""ees or S22,4OO.112, 4 d.cnmse ofs2,8j1,793 fn <ornporison wlih Ill. prior ),ear. The key molor.; In this decrease were Ibe decrease In intotll"vcmn.(:tij.[oi r~v.nue.<.nd tho mer... m publio lilliel), c"pll )'.~pondlilln:s. Of this total amount, $6, , is "vnuilbl.fqr$p~lrdi"!!."h< Ci,y'" discretion (IInoS$ign""fulld 'wlu""c). At the end of the current fiscal year, unassib'1lcd fund balance for the General fund was $6,936,896, or 69.6 percent of tot a} General fund expenditures. The City's total debt decrea.'i;ed by $4,067,428, or L 0. 1 percent during the current fiscal year. The key factors in this decrease were the issuance of debt totaling $9,750,000 and the rctiremcn' of debt totaling $13,817,428. Management's DiscuS!lion and AnalYl'IilO G.vernmetlt widtt Financ:llll Statemtntlii Summary Ballic: Financial Statements -F_nd "'nanelal Statements

66 A-5 Figure 2 summarizes the major features of the City's linancial stalements, including [h(.' portion of the City government they cover and the types of information they contain. Thc rcmainder of this overview ~cclj()n of management's discussion and ~nalysis explains the structure and content!; of c<jch of thc statements. Scope Required financial statements Accounting basis and measurement focus Type o(assctlliability information Type ofdcfcrred outflowslinflows of resources information Type of in flow/out Ilow information Figure 2 Major Features of the Government-wide and Fund Financial Statements Government-wide Statements Entire City government (except fiduciary rund~) and the City's component units Statement of Net Position Statement of Activities Accrual accounting and economic resources focus All assetn and Jiabililies. both financial and capitaj, and short-term and long-term All deferred outflows/inflows of resources. regardless of when cash is received or paid. All reven ues and cxpenses during year. rcgardle8s or when cash is received or paid Fund ]lin,nc!. 1 Slot.mcnU Governmental Funds Propriefary,...ulld ~ The activities ofthc City that are nut proprietary Of tiduciary, s.uch as police, firc 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 resoun;cs expected to be used up and deferred inflows of resources thai come c.iu~ during the year or soon thereafter; no capital assets included Revenues foj' which cash is reccived during or soon after the end of the year; expenditures when goods or services ha.ve been received and payment is due during th~car or soon thereafter Activities the Cily operates similar to private ousincsses, such as the water und sewer :;ystem Statement of Net Position Statement of Revenues, Expenses and Changes in Net Position Statement or Cash Flows Accrual accounting and economic resources focus All "s..~is and liahilities. both financial and capital, and short-term and long-t(!l m All deferred outflows/inflows of resources, regardless of when cash is received or paid All revenues and expenses during the year, regardlcss of when ca... h is received or paid GoveTnment-wide financial statements. The govemmelll-widejinoncial slatements arc designed 10 provide readers with a broad overview of the City's fina.nces, in a manner similar tu a private-sector business. The statement ojnel position pre~cnts information on all of the City's assets and deferred outflows ofrcsourees, and liabilities and deferrcd innows of resources, with the difference reported as net position. Over time, increases or decrease,", in nct position may serve as a uscl'ul indicator of whether the financial position of the City is improving or deteriorating. nlc Jlalcnlttll l>/ ljctf\ j,ir1$ p.rescnls infotmlltion showing how the City's ncr position changed during the most recent fiscal year, All c;huns\.'1t in n~l po!;itioo nrc reponed 3... oon M Iht: urwcrlytng event giviny rilfclq the- (.hans~ occurs.,.egard/e,~,~ nfthe. liming of I'clUl('d ca.~hjl(j.i ~t. ThlL";;~ tc\'''mlc$ Zlnd C:qK'JlSe5 W1! rcpart.:.d in this stal.t.!jtbml ror $Ome ltl!ms that will only result in cash tl()w~ in utul1! fi~ l periods- (c.s un(oljcttcd tnxc'snnd 1:00nl+!d bue tlt,used vacali,m lea\'t), ljath oi tho govomn\<:n, whl. financinl <l.tcitll:"ts ~i"inj;uwl (u.clio of,h. City 'I!iIt.~ prin<:ip:>lly A1rrom'<l by I"~"~.nd IDu:rgovcmmcnlal TCvc:nu4:.t (g{'i'f1rnnu:.mul Qc(i\';II<~f) (rom o th~ (unctions th:t.r nrc 1r'reJ1d~d 10 rec.~\i~r all or a. s'l;nific3m pomon of their CO~1$ through u~r rcd: nnd chal'g.c;'i (Jw,timJ..$J-~Vfltf actl.,iji(!:,), Tho,s.ovcmmc:ntnJ ncnvrne:g or Ihe Chy mctuljt:' grncrnl govcftlmcn,. public :rioircty. ruc~ls n-od b l~hwli)" cuhurc and f'clc.-c."ioo.,(,. t ~'ng and cl.a>tlomfc dc\"1:loprt'lcl1l, Il"Ou$il ajld mi~ccllqneous The busin~~typc nettv.rid or Ihe Cily include \vt1lcr. wa,; tc\va~er, glsrb:tgc. SfOrtfi \-\""';Ilcr ~mj munu:.ip;11 Ifllu"'r. 10r\!. Th~ a;ovcrnmc1u-""dc- finnl:qlul ~at.:tnt:1\"'<t includc not only the City il.'icl( (known as the primary goi'cmmcnr), but also the legally SClp;1f'Qtc: Hou"ins RctJevclopmt:nl AUllu.lrily and Municipal l-lospil<ll for which the City IS financially :;l.cl..:()unlable, hnanclal mform::ltion for thc$c: (O'''JlfJJrNIf unil> JIC' reported separately from the financial information pr~sentcd (or the primar)' governmenl il!'elf. I he govcmffient-wide financial slatcmcllls can be found starting on page 46 of this repoi1. Fund financial statements. A/imd is a grouping ofrclhtcd ll.ccounts that is llsed to main lain control over rcsoun;cs [hal have been segregated for spccific activities or objectives. The City, like othl.:r statc Dnd local govcrnmeni. uses fund accounting to ensure' and umnonstrate compliance with finance-related Jcg:al requirements. An of the funds o(lhc Ci!y can be divided into two catcgurit:s: governmental funds and proprielolry funds, GmlfnrmCllfuJ/tuzds. Governmental fimd,' arc used to acc'ullllt for l!."""ch,inlly the $In't nln.cll011.) ~1.'"1~ nc'd 1lS~oHrnmrflJflJ lk.t/l'irie,\ 111 the SD"'cmnwnt-widc financial stalemcnls. Howc\oItr. unlike Ihel p.oljcnnnc.nr.. w~dc'. {intlndn' :\I~ll.'"rrwntf.. t:.q\"(:rnnt-c11'nl rumj H.n:.ncinl ",o\c.rncnts focus on near-term in/lvws and (''If/l(Jl ~ '$ (" If/~truuhlt. rtrs(lnrr('~. DJ wt'li us on nolulft:a D/lptJlllnhl.:. "f'.\"burc(!s Itvail:1blc n..llht'cnd of rhc fiscal year. Such in()((1union may be uscrul UI e\'aluiulng.:\ go,,'cmmtnl '~ {ldr-lcrm nnn.ucln~ requirements. B\"~u:'C the r\x:us. or govcmmtn1ul funds is narrower than thtu ()fuw 1stO\lCf11.incnt-wide linlmc.i.. l ~'J:nl;mc1U~ h ~ u.seli.d to C'omr.lln:- I,he informlliion prc~,cd for,goll('l'jlllumrnl/umj;. wdh ~ in\llnt inior1t1:iii[l\n prcsl.:n:cd rot~t)l-~nll"r",al Qr:I 'lfu"j; In.he go\ ernml!'nt.widc in;ulc.:i.:il lctl1.tcnlcnls.. B~ doing so. n:."d.c~ nuy beui.!( tu1dcrs111nd tbe!ollg-.t,=un Imp;lC'l by Ihl.! l!o\ at1lth:nt".s. :li~!lr it'1ln fin:sm:ing. dt!ch:ion~. BOlh lhe. go\oernn1outal fund b,d.(u\cc ~llr:c-l:tnd Iho u-ovclmrncolnt (ul'ki :-IAtcmcnt orrc\'cnut:~ c~llci.1ditun..'iii' ant' ~bnn~c'> 1n r\uld hl11nne~~ pro\jidl.: 0. IcccUlcHinrion 1,0 fhc.iium: jh~ cqmpl\ri~on bcl'olllt'c" ~m't!nwlt>l1wl.lumjr IImJ J:(J~.,.nllm'JllullJC:lH ' ItJt:I n,c Ci1Y mi11n1a10-1ct SI llld~\'[duni {!QvummcnL.11 nh~;c. \"'hich include; 1 ~ Jkbt Scr\'lct' funds lb.'1 nrn..:onllidcrl'd one fund for financial rqmnmg.. tnfmml1tiun i$ p:--cscnic,j.scpar1lltly ill tho.govc'rnjncnl~1 fund b:.l:utcc ~hc,ct find tn the go\~"mlental fund statcmcnt of n:-"o cnu~. t,."lipcodilurc.-c:md changes in (und Mfnul:'t:S" ronhc Geucrnl runt!. tbe fkj..11 Service fund,.lnd 1h<! Public S"fcly Centcr Projecl rullrj, iau o(whleh itnl C!oll..-.;Idcrcd to be rmtjor fund~ Onrn front tho olhar KU\jCrnnu:rn~t (und,.. nrc t'omhinl.':d jn1<j a single, nggrcg,lteti PZ"CkrI1;1I10n.. lul.hvidu~' fund dat:l ror c.1r.h tlflbc;..:c no:hnnjor,0\,~tll4:nflll (und." is; r ro\~dcd In Iho rorm of c:omhining statements elscwhere in [his rcport. The City adopts an annual appropri<ltcd budget for its GcnerClI fund A budgctary comparison st:ltcmenl ha..o; been provided for the General fund to demonstrate compliance with this budget. The b:jsic governmental fund finaoci... 1 statements can be found stnning nn p3ge 54 of this report, PI'.upriC'lU.ry/iUIIJl'. TIll: Cil)' rrullrullin~ 1'.'.'0 dlfrl:n:-j1t ')'1)C$ ot prl,1prit"hll)' '\11141,. 1 :ml."71"l"ejmu/~ tl rc' ust"tl to rtjh.ut the ~:'U~ nmeliom: pn:m:'ll1c:d :IS OIlXUlfS$-typr- acth.,ilr..f in the SO\'cmn\\'nt Witli! 1ii1:uti:i~t :«1! 1Clntnl~. The C'ily tucs' cn.h "Tp~ IUllds: T(I :1c.wunt lor J\,ti "'tue,.. wl.\.\1cwnlcf. glltba,ge. \StOrm W~It:,T ~ruj liqu(lr 5t(\fi:. npem1ion!t. 1m," flul.(rjlvlet fiold, rlrc.l.ln accouutins d~vlc.c usoo 10 uetumut:ale nnd rutoc:uiil CO~IS. 'nh:m.. liy "01111\.111&,I~ Cil)'~S \'Ilcim~ f... nctl~ru.. The City U!'IU inu.un.:jl,~",' kc runu.1t to u(c01,1nt rm ib in (orrn:;\,fon technology :md insunuw,.e apcr... t1o~ Bcc.'UI.JC both orthts"c scfv-icc5 rrcdonunalct) bcqt:lit gu\~ml1\c:nlnl r.l1hcr Ih:1n bji,fltlrt,\"j.iy/hjjiiul:t(nai. tbey hft\lt been ilw=l u\ll."cj within lile :mv'nrml'liffj/ (U. /h';rlc ~ in.he ~u\'vnuncn'.wl lfu!hlllncil1l (tnicnlcrt'll!t.. Proprietary fuuds proyjde lb~ snmi! 1)"(l~ ufincoilt1alicn tis Ihe g"v'cmmcnl-widc fin"rn:id.l,"'~it. mcnut. nnjy in Jt\(\~ tkt:s11 Th, proprietary fund flnnncinl ~rntcmenl$ rf\)vld~ ~Jl~m:e Inronn:uitm rnr each or 1I.s "rnrncions Ih~1 un:! con::ldercd 10 be n1u)or fllml nfthe City, Both inlcrrtnl J.crvitC' ItUU,b bn han"c.-; IUlVe been Incarp...,I':Ul.'U intt) the funcliotts o(1hc' J!QvC'fm:ntn~' rlcll\'ifie.. 'hili bcncfih:d from these services. Indivldunl fund d:l11l lur the tnlclmu.scn'iec.s iimd~ i.~ provided In dw: tor", of combining ftlgtcmenlj clscwhdrc: il'l lhis report. The OMit propru:,nry filnu lil1lu\citti :r;.tnlctn(:nl$ t:)n be roum) slarling on JlDgC 64 or,hts rqx'il Notes to the financial statemcnt~, The note:, pro... ide additional inlormalion Ihat is. CSSClliial to a full understanding oflhc dala providcd in the govcmmcnt-wlde and fund financial stale mcnt~, Thl: nolcs to the financial s[arcmenl~ ean be found starting on page 75 o(lhis report. Othn information_ The combining ~talements rcferrcd to earlier in connection with llonmajor g()vemmcntal ftmds arc presenlc<.i immediately rollowing the notes to Ihe I1nancial statements Combining and individmll fund statements and schedules can be found starting on page 124 ofthis repon

67 Total expenses ,900, ,050 ~ Increase in net position before transfers 1,321, (1,792,884) ,152 (19,885) Transrers of capital assets 176,462 (134,3 14) 310,776 ( ) 134,314 (310,776) Transfers 343, ,834 (343,839) ( ) (170,834) Change in net position 1,841,848 3, 153,122 (1,31 I.274) 1, , (501,495) Net position - January 1, as restated 45, , ,153']22 27,259,904 25, , NCl position - December 31 S 47,575,740 S 45,733,892 $ 1.841,848 S 28,868,870 $ 27,259,904 $ 1.608,966 A-6 Gove.-nment-wide.~inancial 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, asset:; exceeded liabilities by $76,444,610 at the close of the most recent iiscal year. By far, the largesl poni\>n Orthc Cily'~ lull po.ltlon (63.6 rere<nl) rell IS its inv<!si"""'1 In cnpil~1,~-;01,' (1:.\1-.!ooo, bllilding~ infrntructure, machinery Olnd equlpmcnn. 1t5~ :lny reluled debt u..~d 10 :l.cqufrc those n~.q;! ls th:u ",e sliu UUllf,I01I1dir.g The Csty il<e:~ these capital assets to providc' wn icc:;. 10 cili.«:os; cotl'lcqucml)" lhc.<c ~t..~ci$ An: nqi Q\':tilabh! far (UI'U1't' ~liding.. AlIhougb Ihe City's investment in its C3pi1l11 W>~Cl$l,s rt'poncd net Ortel:n~d debl, it sho uld be: noled thtn the rd",un:cs m:tji."d to repay this dc:bl must be provided [rom olhe!' ~uufc.c$. sino; the asptull UStl:t I hcm ~c!\.-c$ C:lnnot be us.cd to Hquinlth:~ 11rCl~ tinbili\ie~. City of Northfield's Summary of Net Position Governmental Activities Business-type Activities Restated Increase Increase ~ 2012 (Decrease) (Decrease) Current and other assets $ 27,495,987 S 29,729,333 S (2,233,346) 9,97l,026 $ 10,639,979 (668,953) Capital assets 44,971,104 41,611,555 3,359, ,891i 34,512,679 (643,7M3) Total a... sels 72,467,091 71,340,888 1,126,203 43,839,922 45, ll,312,736) Long-teon liabilities outstanding 22, (l,35g,870) 14,499, ,989 (2,811,887) Other liabilities 2,042,2 14 1,398, , , ,765 (109,815) Total liabilities 24,891,351 25,606,996 (715,645) 14, ,892,754 l2.921,702) Net invc.<;tment in capital assets 28, ,190,260 1,313,328 20,110, ,165,124 Restricted 8,043,606 6,364,734 1,678,872 Unrestricted 11,028,546 12,178,89S (l,150,352) 8,758,812 9,314,970 (556,158) Total net position $ 47, $ 45,733,892 $ 1,841,848 $ 28,868,870,$ 27, ,966 An additional portion of Ihe City's net position (10.5 percent) represents resources that are subject lo,xternal re.<;trictions on how they may be used. The remaining balance of unrestricted net p().~itjon (25.9 percent) may be urjed to meet the Cily'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 lhree categories or net position, both for the City as a whole, as well as fot its separate governmentaj and business-type activities. The City's nct position increased by $3,450,8 1 4 during thc currcnt fiscal year. Governmental activities. Governmental octivi;!cs incu:il.<!ed,h~ Chy's nc! position hy $1.l'!4 L84R, accollnling ror 53.4 percent of the tutal change in net position. The General fund c<'lil'ttcd:sn :ujdilional $ of inlcrgov C rl1jnel1t~1 revenue Ihan whal was budgeted mainly due to addilional local governmenl uid :dlotjlu:d ii12013 ~ Key clements of these changes arc <:IS follows; Revenues Capital grants and contributions decreased $1, due to state funds allocaled for street project in Property taxes/lax increment revenues increased $614,020. Public sufety cxpcnsc~ increased $432,753. StrecL<; and highways expense~ increased S466,919. City of Northfield's Changes in Net Position Governmental Activitlc:-- Hm;incss-typc Activities Resl31ed Tncrease Increase (Decrease) JDcercase) Program revenlles Charges lor ~crviccs 2.541,394 S (156,698) S (154 S ,341 47R.713 Operating grants and contributions 815,Y95 690, S ,R05 Capital grants ilnd contributions 1,081,129 2, (1, ) (79,561) General revenues Propeny taxes! lax incrcments , l Grants and contributions not restricted to specific programs ,640,967 (2 12,827) Unrestricted investmenl earnings (loss) 1260,663) 246,536 (507, 199j Other 60, ,900 (137,4721 (109,135) 73,282 (182,417) Total revenues ,531 17,015,359 (1.581,828) 10,581,724 10,356, ,540 E.""nsC$ Genoml s<",o: rnmenl 2.471,488 2,522,007 (50,519) Public sorci}' 3,373, , Slr""t> lind h;!!hw3y~ 4,376,670 3,909, ,919 Culiu", ond rc<n:arion 2,795, ,557 (103,341 ) Housing and economic development 259, ,155 (IOo,6XO) Tnmsit 48, ,134 (285, 1(5) Miscellaneous 119,OX7 121,764 12,677) Intert::Sl on 1I,:m~.lenn debl 668,615 ~O~.q69 ( 140.2Q4) W.,.r I.U4.(i() ~ 39,211 \V:I$1C-W1tI.u- 3.l.'i (.9.4~2 IR1.S39 '",rb.gt G61!.627 X2S.IS1 (159.)54) Sturmwntu 444,145 4Z ,9S2 l..jq'lor 5l0re 2,~60.() $32 165,217

68 Unrestricted for services 100.9% Lilluor The following graphs depict varjous governmental activities and show the revenue and expenses directly related to those activities. $5,0()(),OOO $4,500,000 $4,000,000 $3,500,000 $3,000,000 $2,500,000 $2,000,000 $),500,000 $1,000,000 $500,000 $- Expenses and Program Revenues - Governmental Activities -- General Public safety Streel and Culture and Housing and Transit Miscellaneou!I> [nteresl {In government highways recreation economic J(mg-lerm developmenl debt Expenses Program Revenues Business-type acth'ities. Business-type actjvitje~ increased the City\ nel pm.;irion by S 1,608,966, accqunling ten 46,6 percent of the totallncreasc. Key clements of this increase arc as follows: $4,000,000 $3,500,000 $3,000,000 $2,500,000 S2.000,OOO $),500,000 $1,000,000 $500,000 Charges [or services incn.;ascd $429,635 from the prior fiscal year. Operating expenses increased by $235,530, with a large portion of the increase relating to Wastewater and Liquor Garbage expenses decreased by $) 59,554. Expenses and Program Revenues - Businc~s-typc Activities Revenues by Source - Governmental Activities $- Water Wastewater Garbage Storm water A-7 Expenses Program Revenues Revenues by Source - Business-type Activities Opcrnting graotg and c4,1ntribullo!\s Q. I~" Property inererrents 56.8";' lunrcstricted grants and contributions l5,7%

69 Tolal $ 21,987,425 $ ,907 S (1.259,482) $ 14,269,31 J $ 17,077,257 $ (2,8()7,9461 A-8 Financial An:llysis of the City's Funds As noted earlier, thc City uses fund accounting lo ensure and demonstrate compliance with fin.1nce-rclatcd legal n:quirements Govemmental.fund:~. The focus of the City's govermnentalfunds i.s to provido infi:jrrmuiun on n~il! l~r rn inl1ow$, olltnows,md balances ofspr:!/1dah/e resources. Such inforrrultion is useful in assessing the Clty's firusncing n..""quh'c1tlc111s.. In p"... rncular. unassigned timd ba(am.:e may servc as a useful measurc of a government's net re..c;ourccs a~nllqblc for ~dul at 1 h~!;ik.i or.he fiscal year. A~ of' '''' 01",," of,he cu,mo' tls<:d! >=,!h_ City'5 J;o, cnll"en"" fu ods reponcd combin ~d cnding fui1d h:t1.i1cc$of~22,400.! 72. n dec~ or s:u"' in c:am~ri.'1()n wit.h the.priot yqlr. The k,-t'y rac;ors In this dc~~'<c 'VC'IC: Ihc d\.'c:r~1\.«i in intcrgo\'cmdtcnt:tl revenue!" nod Ih~ Inc':CD~ In public surely capitol ou;l.,)' CXrenmlutcS-, Orthi$: IQ~nl.t\n'lount, S6.748.()fil tic li\'(1fl"hl~fgr $pl!nd;ij~ al the City's dl~11on f"r:a.\"'si~liudfimj 1u"tlJlc~). The rc:m.,ind(.,'f affund b~lnncc i!o: n01 nvolhnblo for nc'w~l"cl1dins. ~ellluse it j3 na11..".nd.oblt (SIOI,691), ~1'i<ted IS! I. 7~2,636), co.runille<l (Sl>9,816), or :lssl~ (Sj, ), The Genern(fund is the chief operating fund of the City. At Ihe end of the current year total fund balance of the General fund was S7,040,453, most or which was una'i!<iigncd. As a measure of the General fund's liquidity, it muy be useful to compare una~r i gl1ed fund balance to total fund expendilures, Unassigned fund balance represents 69,(' percent of total General fund expenditures. The key raclor in the growth in ilic fund balance of the City'S General fund was a combination of expenditures coming in under budget and revenues exceeding budget, which consists of approximately $650,000 of additional local government compared to hudgcl for The Debt Service fund has a total fund balance of$3,903,600, all ofwhieh is restricted rot lhe payment of debt servicc. The net decrease in fund balance during the current year in the Debt Service fund wa<; S 154,647. The key factor in this decrease was due to the scheduled retirement of debt. The Public Safery Center Project fund has a total fund balance ofs3,702,538. Bond proceeds for the project were received in so the decrease in fund balance during the current year is duc to the capital outlay expenditures for the construction of$2,716,116. Thc fund balance is assigned for capital projects. Proprietary filnds, The City'S proprietary funds provide the same type ofinrormation found in the govcrnmcllt-widc financial statemcntc;. but in more detail. Unrestricted net position of the Water, Wa~tcwater, Garbage, Stann W<.Iter and Municipal Liquor Store funds at the end oflhe yc~r tolaled $8,704,509, The total growth in net position forthcsc funds totaled WilS $1,601,8 16. General Fund Budgetary Highlight, rhe orlghuj.dopteu budget "J"lPrOfl'/"w rund balance of $ Am<:nd... "nl> we,e made during Ihe year which increased budg<;cd ",'coucs by 5"..5,800 "nd,"",",,;.cd budgeted cxpendituros by S~O, 300, Tnlnsfers in increased by S 1 O,50n, and t,ansfers out ;"a... cd by S Revcmu.:< "'en: ov.r budget by S ex""",'i,u",," WOI" under budget by $442,955, anj Ihe othe, jjmndns IOU,""< (use,) tvel<) undc, budget by S causing ruod!):ri.nce to ;"... ase in The major variance in budst:ttd l 't\"\.'lluc.~ rqr lhe- Gcncm) rund WI.1$ rclulco 10 intcl'go\'cmmenl:ti revenues. primarily under-budgeted local government aid. In ~"diuo~ gl,'html sovtmn'lttu c:umm~ cxjnnd f l u~ wr,c undrr budstl by S , publie safety current expenditures were under budg~' by $249,1 SR. 3Jld public workn\\p.n,jiturei Were ovo, budcct by $ Capital Asset and Debt Administration Capital assets. Thc Chy"s investmenl til c;jpitw ~"t!t$ lor its governmt:mal and bu3incss I)1lC ~Itlivi,ies a... ordeccmbcr amounts to S78,S40,OOO (net ofacl'umulared dcprt"d~lion ). This investment in cnpho1 ~'SCl'i inchujg land, huildingj;. infra~truclllre, machinery <lnd cquipment. The lotal lnere.'1:\c In tht' Cit)l'to investmenl in capital ;wo.:li) for Iht (:UfTCn.l fisc,,1 year wa:-; 3.6 percent. Major capital asset activity during the currcntliscal year inelud~d the rolillwing: Completion o[lhe 2012 Division and 3 th Sired:;; implo VClllcnt<; for $2.737,01 K Purchase ofa tire truck for $692,860 Utility portions of the 2013 Maple Sircel irnprovcmcnts compleled for,t504, J2R Additions to 1he Public Safety Center projcct or$2.72i, 193 Additional information on the City's capital assets can bl.! found in Note 3C starting on page 90 orlhis report. City of Northlield's Capital Assets (net of depreciation) Governmenlal Activilics Busincs!Hypc Activities Increase Increase (Decrease) (Deere",e) Land 1,268,793 1,237,790 31,OU3 9 I ,.1.14 Buildings and improvementl' 7,934,458 ~.386, ,Og6) ,239 18, (794,466) Infrastructure 28,284,570 27,949, ,222 14,g7R, ,IlR2 322,895 Machinery and equipment 2,396,766 1,647, , , ,866 (172,212) ('..onstnlclion in progress 5,OR ,390,598 2,695, , ,472 Total S 44,971,104 $ 41,611,555 3, S 33,RIiR,R96 S 34,512,679 (643,JR3) Lon~,term dobc. AI the rnd orche COTTom jj...! yeo",he City h.,~ 'ot.1 oond.d Joht Ilu~,t!di" ofs2~.~97,ooo. Oflhi, amount, $1,295,000 comprises deb' bock.d by til< 'ulititith and e",dil of 'h. ti,},. S7JI1.07(, i, "i"'dnl oucssmcnt debt for which the City is liable in the c\"t!nt of d'dnuh by 1he. Pf(lpCriy uwrtct5: :cubjc:ct u) 'hi! a.~il.i:nlt and 59S7.00D rcp(l"$cj111 tnx' incrcmc!nt bond1'. The rcmajndcr orlha City',5 bond~ d~b-t rcplcst1ij1 ~ ban.tb: :<eeur-ed wtely by ~'pcciri':ll rg;v.:nuc sources (i,e:" rc... cnue honds) in the amount 01"$16,327,924, City of Northfield's Outstanding Debt Governmental ActivitlCS Business-type Activitie~ TncTcasc Jncrcl:t~c (Decrease) (Dccrcasej General obligation honds $ 1,295,000 S 1,480,000 $ (185,000) S S General ()bligation improvcment bonds 7.317,076 7,773,440 (456,364) General obligation tax increment bond~ 957,000 1,163,0011 (206,000) GcncTal obligation revenue bonds 2,295,000 2,435,000 (140,000) ,924 16,821,560 (2,188,636) Certificates of participation 6,280,000 6,280,01111 Capital leascs 2,147,655 2,32 1,148 (173,493) 236, (19,JIO) Notes 1.695,694 J,794,319 (98,625)

70 The City's total debt decreased by $4,067,428 (10.1 percent) during the current fiscal year. The kcy factors in this decrease were the issuance of debt totaled $9,750,000 and the retirement of debt totaled $13.817,428. The CilY'S bond rating was' AA' from Standard & Poor's for their 2013 issues. Minnesota statules limit the amount of net general obligation dcbt a City may issue to three percent of the market value of taxable property within the City. Net debt is debt payable solely [rom ad valorem taxes. The current dcbt limitation for the City is $34, 189,118, which is significantly in excess of the City's outstanding gencnll obligation debt. Additional information on the City's long-term debt can be found in Notc 3E starting on page 96 o[this report. Economic Factors and Next Yea,.'.~ Budgets and Rates The 2013 unemployment rate for Rice CounLy, where the City is located, was 5.0 percent, which is a decrease from:l rate of 6.0 percent a year ago. This compares unfavorably to the State's averagl! unemployment rate of4.6 percenr and favorably to the national average rale of 6 5 percent. Intlationary trends in the region compare favorably to national indices. A-9 All ofthcsc factors were considered in pn~paring the City's budget for the 2014 fiscal YCaI. During the current fiscal y~ar, unassibrned fund balance in the General fund increased La $6,936,896 This unassigned fund balance is designated for cash flow pwposes and revenue stabilization. The overall property tax levy for 2014 stayed the same as 2013 levels. The Vehicle and Equipment replacement fund levy was decreased from $310,075 in 2013, to $216,802 in The tax abatement levy 0[$ was completed and not required for An additional $110,200 was levied for equipment certificales for a new fire truck. For garbage eo11ection rates stayed the same. Sewer rates increased by 3 percent. Storm water rates increased by 4 percent Water rates remained the same in Requests for Inrorrnation Th i~ fin."lnci.l rcpru1 it de:signcd to provide 0 general overview of the City's lino.necs: fur an.hose wllh nn interest in the City's fin:m«s.. QUc:8tiollS conc'ttminc, any of the Information provided in this reporl or n:qut.:it~ for nddillonal financial information should be.dd,... <! 10 tho FinlUlC< 0;(0<[0'. City of Northfield, 801 Washington Str_..,I. NOrthOo.ld. SS0S7-2$9R.

71 CITY OF NORTHFIELD, MINNESOTA STATEMENT OF NET POSITION DECEMBER 31, 2013 Primary Government Governmental Business-type Activities Activities Total ASSETS Cash and temporary investments $ 19,448,962 $ 8,114,158 $ 27,563,120 Cash held with fiscal agent 4,897,240 4,897,240 Restricted cash and investments Receivables Interest 86,254 34, ,363 Delinquent taxes 194, ,360 Accounts, net of allowances 145,651 1,436,896 1,582,547 Notes, mortgages and leases 569, ,057 Special assessments 1,711,204 15,305 1,726,509 Intergovernmental 198,935 9, ,560 Internal balances (54,303) 54,303 Due from primary government Inventories , ,605 Prepaid items 117,327 13, ,669 Land held for resale 180, ,983 Capital assets Nondepreciable 6,355,310 1,069,026 7,424,336 Depreciable 38,615,794 32,799,870 71,415,664 DEFERRED OUTFLOWS OF RESOURCES Loss on refunding TOTAL ASSETS AND DEFERRED OUTFLOWS OF RESOURCES 72,467,091 43,839, ,307,013 LIABILITIES Accounts payable 1,313, ,483 1,591,367 Contracts payable 212,770 1, ,318 Deposits payable 49, ,256 Due to component unit 14,000 14,000 Due to other governments 16,809 31,878 48,687 Accrued interest payable 258, , ,680 Accrued wages payable 177,449 39, ,856 Noncurrent liabilities Due within one year 2,349,707 2,047,264 4,396,971 Due in more than one year 20,499,430 12,451,838 32,951,268 TOTAL LIABILITIES 24,891,351 14,971,052 39, NET POSITION Net investment in capital assets 28,503,588 20,110,058 48,613,646 Restricted for Police forfeitures 5,054 5,054 Debt service 3,456,576 3,456,576 Library 632, ,898 Redevelopment and housing 3,591,568 3,591,568 Recreational activities 347, ,357 Rescue squad 10,153 10,153 Unrestricted 11,028,546 8,758,812 19,787,358 TOTAL NET POSITION $ $ 28,868,870 $ 76,444,610 The notes to the financial statements are an integral part of this statement. A-10

72 Housing Redevelopment Authority Component Units Municipal Hospital $ 737,064 $ 1,663,794 44,256,870 3,250 4,855 8,341,805 2,173 14, ,779 1,627, ,704 56, ,950 4,163,907 38,186,253 1,036,940 1,330,028 99,888,792 2,335 1,700 3,873,379 16,945 2, ,148 6,908, ,000 26,531,884 6,631 38,490, ,944 14,898,276 3,025,873 1,063,453 $ 1,323,397 43,474,337 $ 61,398,486 A-11

73 CITY OF NORTHFIELD, MINNESOTA STATEMENT OF ACTIVITIES FOR THE YEAR ENDED DECEMBER 31, 2013 Program Revenues Functions/Programs Primary government Governmental activities General government Public safety Streets and highways Culture and recreation Housing and economic development Transit Miscellaneous Interest on long-term debt Expenses Charges for Services $ 2,471,488 $ 1,355,390 3,373, ,846 4,376, ,374 2,795, , ,475 48, , ,675 Operating Grants and Contributions $ 307, , ,242 7,993 Capital Grants and Contributions $ 1,047,376 33,753 Total governmental activities 14,111,984 2,541, ,995 1,081,129 Business-type activities Water Wastewater Garbage Storm water Liquor 1,224,605 2,254,872 3,255,031 3,781, , , , , ,049 3,080,768 8,805 Total business-type activities 8,452,457 10,682,054 8,805 Total primary government $ 22,564,441 $ 13,223,448 $ $ Component units Housing Redevelopment Authority $ 152,881 $ 39,514 $ $ Municipal Hospital $ 77,306,438 $ 81,192,653 $ $ 62,000 General revenues Property taxes, levied for general purposes Property taxes, levied for debt service Tax increments Franchise taxes Lodging taxes Property taxes, levied for housing redevelopment Grants and contributions not restricted to specific programs Unrestricted investment earnings (loss) Other revenues Gain on sale of capital assets Transfer of capital assets Transfers Total general revenues and transfers Change in net position Net position, January 1, as restated Net position, December 31 The notes to the financial statements are an integral part of this statement. A-12

74 Net (Expense) Revenue and Changes in Net Position Primary Government Component Units Housing Governmental Business-type Redevelopment Municipal Activities Activities Total Authority Hospital $ (1,116,098) $ $ (1,116,098) $ $ (2,925,788) (2,925,788) (2,881,870) (2,881,870) (1,696,190) (1,696,190) (259,475) (259,475) (14,276) (14,276) (111,094) (111,094) (668,675) (668,675) (9,673,466) (9,673,466) 1,030,267 1,030, , , , , , , , ,719 2,238,402 2,238,402 (9,673,466) 2,238,402 (7,435,064) (113,367) 4,062,524 6,081,429 6,081,429 1,587,022 1,587, , , , ,314 82,123 82, ,938 2,428,140 2,428,140 (260,663) (109,135) (369,798) (14,956) (1,306,560) 44,119 44,119 5,866 16,309 16,309 2, ,462 (176,462) 343,839 (343,839) 11,515,314 (629,436) 10,885, ,848 (1,304,155) 1,841,848 1,608,966 3,450,814 87,481 2,758,369 45,733,892 27,259,904 72,993,796 1,235,916 58,640,117 $ 47,575,740 $ 28,868,870 $ 76,444,610 $ 1.323,397 $ 61,398,486 A-13

75 CITY OF NORTHFIELD, MINNESOTA BALANCE SHEET - CONTINUED ON THE FOLLOWING PAGES GOVERNMENTAL FUNDS FOR THE YEAR ENDED DECEMBER 31, 2013 Debt Public Safety General Service Center Project ASSETS Cash and temporary investments $ 6,376,082 $ 3,784,216 $ 160,986 Cash held with fiscal agent 257,800 4,639,440 Receivables Interest 29,299 17,132 Delinquent taxes 149,569 11,522 Accounts 86,979 Leases Notes Special assessments 1,469,700 Intergovernmental 45,174 9,903 Due from other funds 1,038,398 Advance to other funds Inventories 317 Prepaid items 98,186 Land held for resale TOTAL ASSETS $ 7,824,004 $ 5,550,273 $ 4,800,426 LIABILITIES Accounts payable $ 505,023 $ 1,657 $ 426,602 Contracts payable 121,375 Accrued wages payable 122,026 Due to other funds 99, ,911 Due to component unit 14,000 Advance from other funds 50,000 Due to other governments 4,883 Deposits payable 2,050 TOTAL LIABILITIES 633, ,451 1,097,888 DEFERRED INFLOWS OF RESOURCES Unavailable revenue - taxes 149,569 11,522 Unavailable revenue - special assessments 1,469,700 Unavailable revenue - loans TOTAL DEFERRED INFLOWS OF RESOURCES 149,569 1,481,222 The notes to the financial statements are an integral part of this statement. A-14

76 Other Governmental Funds Totals $ 8,167,026 $ 18,488,310 4,897,240 35,588 82,019 33, ,360 58, , , , ,504 1,711, , ,173 1,038,398 50,000 50, , , , ,983 $ 9.477,389 $ 27,652,092 $ 335,188 $ 1,268,470 91, ,770 5, , ,693 1,038,398 14,000 50,000 11,926 16,809 47,006 49, ,096 2,777,417 33, , ,504 1,711, , , ,712 2,474,503 A-15

77 CITY OF NORTHFIELD, MINNESOTA BALANCE SHEET - CONTINUED GOVERNMENTAL FUNDS FOR THE YEAR ENDED DECEMBER 31, 2013 Debt Public Safety General Service Center Project FUND BALANCES Nonspendable Inventories $ 317 $ $ Prepaid items 98,186 Restricted Police forfeitures 5,054 Debt service 3,903,600 Library Redevelopment and housing Recreational activities Rescue squad Capital projects 3,702,538 Committed Community resource center operations Assigned Community resource center operations Motor vehicle operations Communications Park improvements Capital projects Unassigned 6,936,896 TOTAL FUND BALANCES 7,040,453 3,903,600 3,702,538 TOTAL LIABILITIES, DEFERRED INFLOWS OF RESOURCES AND FUND BALANCES $ 7,824,004 $ 5,550,273 $ 4,800,426 The notes to the financial statements are an integral part of this statement. A-16

78 Other Governmental Funds Totals $ $ 317 3, ,380 5,054 3,903, , ,898 2,989,360 2,989, , ,357 10,153 10, ,676 3,864,214 89,816 89, , , , , , , , ,539 2,607,564 2,607,564 (188,835) 6,748,061 7,753,581 22, $ 9 l 477 l 389 $ 27 l A-17

79 CITY OF NORTHFIELD, MINNESOTA RECONCILIATION OF THE BALANCE SHEET TO THE STATEMENT OF NET POSITION GOVERNMENTAL FUNDS DECEMBER 31, 2013 Primary Government Total fund balances - governmental funds $ 22,400,172 Amounts reported for 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 the funds. 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: Severance payable Bonds payable Capital lease payable Notes payable Other postemployment benefit payable Bond discounts, net of accumulated amortization Bond premium, net of accumulated amortization Long-term assets are not available to pay current-period expenditures and, therefore, are unavailable in the funds. Delinquent property taxes receivable Special assessments receivable Notes receivable Governmental funds do not report a liability for accrued interest until due and payable. Internal service funds are used by management to charge the costs of various services to individual funds. The assets and liabilities of certain internal service funds are included in governmental activities in the statement of net position. Total net position - governmental activities 44,971,104 (660,009) (11,864,076) (8,427,655) (1,695,694) (187,398) 37,288 (51,593) 194,360 1,711, ,939 (258,246) 837,344 $ 47,575,740 The notes to the financial statements are an integral part of this statement. A-18

80 CITY OF NORTHFIELD, MINNESOTA STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES GOVERNMENTAL FUNDS FOR THE YEAR ENDED DECEMBER 31,2013 Debt Public Safety General Service Center Proj ect REVENUES Taxes $ 5,315,103 $ 1,854,878 $ Special assessments ,146 Licenses and permits 464,599 Intergovernmental 3,066,511 Charges for services 1,475,615 Fines and forfeits 119,442 Investment earnings (loss) (91,408) (51,678) 575 Miscellaneous 167, TOTAL REVENUES 10,517,482 2,236,346 1,075 EXPENDITURES Current General government 2,165,610 Public safety 3,335,072 Public works 2,329,237 Culture and recreation 1,804,710 Housing and economic development Transit Miscellaneous 119,087 Capital outlay General government 6,350 Public safety 2,716,116 Public works Culture and recreation Housing and economic development Transit Debt service Principal 135,955 1,915,989 Interest and other 66, ,157 Issuance fees TOTAL EXPENDITURES 9.962,725 2,550,146 2,716,116 EXCESS (DEFICIENCY) OF REVENUES OVER (UNDER) EXPENDITURES (313,800) (2,715,041 ) OTHER FINANCING SOURCES (USES) Sale of capital assets 5,682 Transfers in 280, ,000 Debt issued 11,153 Bond premiums Transfers out (503,617) TOTAL OTHER FINANCING SOURCES (USES) (217,216) 159,153 NET CHANGE IN FUND BALANCES 337,541 (154,647) (2,715,041) FUND BALANCES, JANUARY I (RESTATED) 6,702,912 4,058,247 6,417,579 FUND BALANCES, DECEMBER 31 $ 7, $ 3,903,600 $ 3,702,538 The notes to the financial statements are an integral part of this statement. A-19

81 Other Governmental Funds Totals $ 1,557,890 $ 8,727, , , , ,604 3,638, ,477 1,695, ,442 (118,152) (260,663) 491, ,955 2,890,770 15,645, ,730 2,440,340 3,335,072 2,329, ,731 2,244, , ,733 55,832 55, , , , ,111 3,420,227 1,630,427 1,630, , ,920 55,365 55,365 1,508 1,508 37,538 2,089,482 19, , ,149 4,451,743 19,680,730 (1,560,973) (4,035,057) 10,627 16,309 1,604,183 2,032, , ,000 27,116 27,116 (1,185,446) (1,689,063) 1,275,327 1, (285,646) (2,817,793) 8,039,227 25,217,965 $ 7,753,581 $ 22,400,172 A-20

82 CITY OF NORTHFIELD, 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 Primary Government Net change in fund balances - governmental funds $ (2,817,793) Amounts reported for governmental activities in the statement of activities are different because Governmental funds report capital outlay as expenditures. However, in the statement of activities the cost of those assets is allocated over the estimated useful lives and reported as depreciation expense. Capital outlay Depreciation expense The net effect of various miscellaneous transactions involving capital assets Sale of capital assets Capital assets contributed from other funds 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 delayed and amortized in the statement of activities. Principal repayments Debt issued or incurred Premium on bonds issued, net of amortization expense Discount on bonds issued, net of amortization expense Interest on long-term debt in the statement of activities differs from the amount reported in the governmental fund 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. Delinquent property taxes receivable will be collected this year, but are not available soon enough to pay for the current period's expenditures, and therefore are unavailable in the funds. Property taxes 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 Loan repayments Some expenditures in the governmental funds are not available to pay for current-period expenditures and, therefore, are unavailable in the funds. Loans made 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 benefit costs Compensated absences Internal service funds are used by management to charge the costs of various services to individual funds. The net revenues of certain of the internal activities of internal service funds are reported in governmental activities Change in net position - governmental activities 5,771,573 (2,584,791) (3,695) 176,462 2,089,482 (830,000) (27,116) 4,255 78,145 (92,027) (101,047) (134,580) 258 (30,491) 152, ,473 $ 1,841,848 The notes to the financial statements are an integral part of this statement. A-21

83 CITY OF NORTHFIELD, MINNESOTA 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 Ori~inal Final Amounts Final Budget REVENUES Taxes $ 5,238,637 $ 5,238,637 $ 5,315,103 $ 76,466 Special assessments Licenses and pernlits 352, , ,599 96,319 Intergovernmental 2,227,462 2,237,462 3,066, ,049 Charges for services 1,503,585 1,503,585 1,475,615 (27,970) Fines and forfeits 148, , ,442 (29,363) Investment earnings (loss) 150, ,000 (91,408) (241,408) Miscellaneous 267, , ,592 (100,033) TOTAL REVENUES 9,888,594 9,914,394 10,517, ,088 EXPENDITURES Current General government 2,362,796 2,362,796 2,165, ,186 Public safety 3,568,430 3,584,230 3,335, ,158 Public works 2,114,958 2,137,458 2,329,237 (191,779) Culture and recreation 1,854,988 1,856,988 1,804,710 52,278 Miscellaneous 215, , ,087 96,365 Capital outlay General government 29,000 29,000 6,350 22,650 Public works 10,000 10,000 10,000 Culture and recreation 4,000 4,000 4,000 Debt service Principal 136, , , Interest and other 69,495 69,495 66,704 2,791 TOTAL EXPENDITURES 10365,380 10,405,680 9,962, ,955 EXCESS (DEFICIENCY) OF REVENUES OVER (UNDER) EXPENDITURES (476,786) (491,286) 554,757 1,046,043 OTHER FINANCING SOURCES (USES) Sale of capital assets 5,682 5,682 Transfers in 324, , ,719 (54,169) Transfers out (303,617) (503,617) (200,000) TOTAL OTHER FINANCING SOURCES (USES) 324,388 31,271 (217,216) (248487) NET CHANGE IN FUND BALANCES (152,398) (460,015) 337, ,556 FUND BALANCES, JANUARY I 6,702,912 6,702,912 6,702,912 FUND BALANCES, DECEMBER 31 $ 6,550,514 $ $ 7: $ 797:556 The notes to the financial statements are an integral part of this statement. A-22

84 CITY OF NORTHFIELD, MINNESOTA STATEMENTS OF NET POSITION - CONTINUED ON THE FOLLOWING PAGES PROPRIETARY FUNDS DECEMBER 31,2013 AND 2012 Business-type Activities - Enterprise Funds 601 Water 602 Wastewater ASSETS CURRENT ASSETS Cash and temporary investments Receivables Interest Accounts Intergovernmental Due from other funds Inventories Prepaid items 2013 $ 5,141,261 $ 21, ,944 2,388 18,199 2, ,050,109 $ 1,435,488 $ 5, , ,395 4, ,000 16,224 2,920 6, ,752, , ,000 6,997 TOTAL CURRENT ASSETS 5,597,911 5,660,471 2,207,944 2,674,977 NONCURRENT ASSETS Special assessments receivable - noncurrent Capital assets Land Buildings Infrastructure Machinery, equipment and vehicles Construction in progress Less accumulated depreciation 110,290 1,563,528 7,105, ,838 19,231 (3,882,519) 15, ,290 5,250 1,563,528 23,794,485 6,591,410 9,620, , ,872 19,231 16,207 p,562,863) (10,725,009) 15,305 5,250 23,794,485 9,271, ,950 16,207 (9,640,168) TOTAL CAP IT AL ASSETS 5, ,097,434 23,585,862 24,271,220 TOTAL NONCURRENT ASSETS 5,291,515 5,097,434 23,601,167 24,286,525 TOTAL ASSETS 10,889,426 10,757,905 25,809,111 26,961,502 The notes to the financial statements are an integral part of this statement. A-23

85 Business-type Activities - Enterprise Funds Governmental Garbage Storm Water Municipal Liquor Store Totals Activities - Internal Service Funds $ 227,287 $ 24,035 $ 245,300 $ 653,504 $ 1,064,822 $ 971,423 $ 8,114,158 $ 8,451,830 $ 960,652 1,002 1,754 1,219 4,687 34,109 1,754 4, , ,718 84, ,407 33,446 28,170 1,436,896 1,397,734 1,639 1,270 48,827 9,625 48,827 5, , , , , , ,475 3,888 13,342 13,942 15, , , , ,842 1,382,519 1,274,691 9,901,418 10,577, ,596 15,305 15, , , , , , ,804 25,551,817 25,551,817 5,938,066 5,708,995 42,151 42,151 22,705,421 21,614,052 75, ,103 13,011 13,011 85,452 94,646 1,424,814 1,586,548 87, , , , ,472 (75,641 ) (102,640) (1,909,814) (1,707,187) (289,199) (295,906) (16,882,182) (15,308,764) (87,080) 176,463 4,959,311 4,932,867 32,208 34,695 33,868,896 34,512, ,463 4,959,311 4,932,867 32,208 34,695 33,884,201 34,527, , ,003 5,291,376 5,736,709 1,414,727 1,309,386 43,785,619 45,105, ,596 A-24

86 CITY OF NORTHFIELD, MINNESOTA STATEMENTS OF NET POSITION - CONTINUED PROPRIETARY FUNDS DECEMBER 31,2013 AND 2012 Business-type Activities - Enterprise Funds Water Wastewater LIABILITIES CURRENT LIABILITIES Accounts payable $ 17,976 $ 40,247 $ 59,820 $ 82,677 Contracts payable Due to other governments , Accrued interest payable 13,064 20,294 81, ,071 Accrued wages payable 8,670 6,648 17,675 10,553 Compensated absences payable - current portion 11,748 16,516 22,917 18,339 Deposits payable Capital leases - current portion 2,007 1,931 18,060 17,379 Bonds payable - current portion 287, ,000 1,296,136 1,534,636 TOTAL CURRENT LIABILITIES 341, ,052 1,496,870 1,821,077 NONCURRENT LIABILITIES Compensated absences payable, net of current portion 49,661 46,063 52,740 41,100 Other postemployment benefits payable 11,676 10,189 14,944 17,592 Capital leases payable, net of current portion 10,520 12, , ,860 Bonds payable, net of current portion 969,862 1,259,531 9,829,688 11,046,636 TOTAL NONCURRENT LIABILITIES 1,041,719 1,328,310 10,103,172 11,329,188 TOTAL LIABILITIES 1,383,111 2,099,362 11,600,042 13,150,265 NET POSITION Net investment in capital assets 4,587,755 3,704,574 12,236,178 11,429,178 Unrestricted 4,918,560 4,953,969 1,972,891 2,382,059 TOTAL NET POSITION $ 9,506,3 15 $ 8,658,543 $ 14,209,069 $ 13, The notes to the financial statements are an integral part of this statement. A-25

87 Business-type Activities - Enterprise Funds Governmental Garbage Storm Water Municipal Liquor Store Totals Activities - Internal Service Funds $ 44,633 $ 52,511 $ 6,817 $ 4,714 $ 145,311 $ 128,321 $ 274,557 $ 308,470 $ 45,414 1,548 1,548 1,548 1,548 6,857 5, ,349 26,216 34,804 33,066 27,238 34, , , ,896 9,316 39,407 26,579 49,535 8,896 8,337 43,561 43, ,067 19, , ,000 1,983,636 2,884,636 51,573 58, , , , ,390 2,519,214 3,52,903 94,949 13,919 12, , ,093 7,908 6,049 34,528 33, , ,387 1,285,120 1,687,374 12,084,670 13,993,541 1,285,120 1, ,827 18,979 12,451,838 14,363,851 51,573 58,461 1,720,847 2,393, , ,369 14,971,052 17,892,754 94, ,463 3,274,191 2,580,493 11,934 14,421 20,110,058 17,905, , , , ,919 1,187,314 1,103,596 8,704,509 9,307, ,647 $ 329A06 $ 281,542 $ 3,570,529 $ 3,343,412 $ 1,199,248 $ 1,118,017 28,814,567 27,212,751 $ 891,647 Adjustments to reflect the consolidation of internal service fund activities related to enterprise funds. 54,303 47,153 Net position of business-type activities $ 28,868,870 $ 27,2-9,904 A-26

88 CITY OF NORTHFIELD, MINNESOTA STATEMENTS OF REVENUES, EXPENSES AND CHANGES IN NET POSITION PROPRIETARY FUNDS FOR THE YEARS ENDED DECEMBER 31, 2013 AND 2012 Business-type Activities - Entcr11ri e Funds Water Wastewater OPERATING REVENUES Sales $ $ $ $ Cost of sales GROSS PROFIT Charges for services 2,227,279 2,213,648 3,759,391 3,576,528 Penalties 9,833 15,914 19, ,121 TOTAL OPERATING REVENUES 2,237,11 2 2,229,562 3,778,543 3, OPERATING EXPENSES Personal services 337, , , ,768 Supplies 175, , , ,824 Other services and charges 240, , , ,067 Insurance 19,800 28,456 27,167 38,565 Utilities 109,132 98, , ,734 Depreciation ,174 1,113,750 1,104,703 TOTAL OPERATING EXPENSES 1,201,689 1,152,713 2,859,363 2,669,661 OPERATING INCOME (LOSS) 1,035,423 1,076, , ,988 NONOPERATING REVENUES (EXPENSES) Intergovernmental 7,979 9,900 Property taxes Investment income (loss) (69,319) 43,187 (22,218) 15,646 Other income (expense) 1, Rents 13,310 15,226 Contributions from component unit 2,500 2,500 Interest expense (34,271) (49,340) (308,042) (410,426) Issuance fees (11,111) (94,909) (12,012) TOTAL NON OPERA TING REVENUES (EXPENSES) (77, ,862 (422,669) ~406,5292 INCOME (LOSS) BEFORE CONTRIBUTIONS AND TRANSFERS 957,572 1,084,7\ I 496, ,459 CAPITAL CONTRIBUTIONS TO (FROM )OTHER FUNDS CAPITAL CONTRIBUTIONS TRANSFERS OUT (109,8002 (14,510) (98,679) (23,215) CHANGE IN NET POSITION 847,772 1,070, , ,244 NET POSITION, JANUARY I 8,658,543 7,588,342 13,811,237 13,307,993 NET POSITION, DECEMBER 31 $ 9,506,315 $ 8,658,543 $ 14,209,069 $ The notes to the financial statements are an integral part of this statement. A-27

89 Business-type Activities - Enterprise Funds Governmental Garbage Stonn Water Municipal Liquor Store Totals Activities - Internal Service \ Funds $ $ $ $ $ 3,078,247 $ 2,915,670 $ 3,078,247 $ 2,915,670 $ (2,290,467) (2,168,152) (2,290,467) (2,168,152) 787, , , , , , , ,639 7,538,061 7,210, ,016 9,023 10,319 4,957 5,983 42,965 58, , , , ,368,806 8,01 6, , ,054 22,592 6,797 11, , ,510 1,267,967 1,216, ,678 3, ,623 23,042 \3,941 10,150 7\0, ,922 68, , , , , , ,246 1,519,472 1,563, ,656 4,000 6,349 1,220 2,052 1,194 9,736 53,381 85, ,260 16, , , , , ,486 5,967 1,638,521 1,644, , , , , ,401 5,688,327 5,537, ,674 (54,171) 282, , , , ,479 2,478,921 41,236 7,979 9,900 99,203 (2, 113) 1,585 (1,988) 3,861 (13,497) 9,003 (\09,135) 73,282 (12,332) 8,805 (440) (1,260) 2,521 3,242 12,836 2,245 69,516 13,310 15,226 5,000 (5 1, 130) (78,804) (393,443) (538,570) (94,909) (23,123) 6,692 1,585 (53,5581 (76,203) ( ,245 (558,362) (46 1,040) ,366 (52,586) 229, , , ,362 2,122, ,017, ,623 (176,462) \34,31 4 (1 76,462) 134, ,298 79,298 (2,040) ~2,OOO) (2,040) (2,000) (131,280) (13\.280) (343,839) (173,005) 47,864 (54,586) 227, ,547 81, ,082 1,601,816 2,058, , , ,128 3,343,412 2,89&,865 1,11 8,017 1,022,935 27,212,751 25,154, ,024 $ 329,406 $ $ 3,570,529 $ 3,343,4 12 $ 1,199,248 $ 1, 11 8,017 $ 28,814,567 $ 27,212,751 $ Change in net position as shown above $ 1,601,816 $ 2,058,488 Adjustment to reflect the consolidation of internal service fund activities related to enterprise funds 7,150 51,973 Change in net position of business-type activities $ 1,608,966 $ 2,110,461 A-28

90 CITY OF NORTHFIELD, MINNESOTA STATEMENT OF CASH FLOWS PROPRIETARY FUNDS - CONTINUED ON THE FOLLOWING PAGES FOR THE YEARS ENDED DECEMBER 31,2013 AND 2012 Business-type Activities - Entelllrise Funds Water Wastewater CASH FLOWS FROM OPERATING ACTIVITIES Receipts from customers and users $ 2,225,998 $ 2,232,190 $ 3,745,041 $ 3,599,836 Payments to suppliers and vendors (567,800) (473,352) (1,249,170) (1,114,219) Payments to and on behalf of employees (335,489) (340,303) (512,218) (466,019) Other receipts 15,260 15,226 1,073 NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES 1,337,969 1,433,761 1,983,653 2,020,671 CASH FLOWS FROM NONCAPIT AL FINANCING ACTIVITIES County operating subsidy Intergovernmental revenue 7,979 9,900 Contributions from component unit 2,500 2,500 Transfers to other funds (109,800) (14,510) (98,679) (23.215) NET CASH PROVIDED (USED) BY NONCAPIT AL FINANCING ACTIVITIES (99321) (4,610) (96,179l (23,215) CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES (Increase) decrease in due from other funds 188, ,000 Intergovernmental revenue Acquisition of capital assets (513,737) (183,044) (428,392) (176,578) Proceeds from bond issue 414,531 8,920, ,812 Principal paid on revenue bonds payable (685,000) (285,000) (10,358,636) (1,143,540) Principal paid on capital lease payable (1,931) (1,856) (17,379) (16,707) Issuance costs paid from proceeds (II, Ill) (94,909) (12,012) Interest paid on revenue bonds payable (43.670) (52,622) (385,849l ~425,564) NET CASH PROVIDED (USED) BY CAPITAL AND RELATED FINANCING ACTIVITIES (1,056,3382 (119,102) (2,177, 165) (1,417,589) CASH FLOWS FROM INVESTING ACTIVITIES Change in interest received and market value on cash and investments (91,158) 54,999 (27,58Ol 18,256 NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 91,152 1,365,048 (317,271) 598,123 CASH AND CASH EQUIVALENTS, JANUARY 1 5,050,109 3,685,061 1,752,759 1,154,636 CASH AND CASH EQUIVALENTS, DECEMBER 31 $ 5,141,261 $ 5,050,109 $ 1,435,488 $ The notes to the financial statements are an integral part of this statement. A-29

91 Business-type Activities - Enterprise Funds Governmental Garbage Storm Water Municipal Liquor Store Totals Activities - Internal Service Funds $ 876,412 $ 777,413 $ 692,973 $ 645,654 $ 3,072,971 $ 2,916,798 $ 10,613,395 $ 10,171,891 $ 508,016 (654,922) (790,245) (181,548) (147,768) (2,456,295) (2,324,325) (5,109,735) (4,849,909) (179,601) (22,002) (22,611) (6,745) (11,351) (376,335) (359,693) (1,252,789) (1,199,977) (253,994) 7,166 (440) (1,260) 2,521 3,242 24,507 18, , (35,443) , , ,022 4, ,140, , ,979 9,900 5,000 (2,040) (2,000) (2,040) (2,000) (131,280) (131,280) (343,839) (173,005) (2,040) (1,857) (2,040) (2,000) (131,280) (131,280) (330,860) (162,962) 376,000 47, ,318 47, ,318 (229,071) (390,703) (1,171,200) (750,325) 430,274 8,920,000 1,201,617 (665,000) (210,000) (11,708,636) (1,638,540) (19,310) (18,563) (94,909) (23,123) (60,683) (81,435) (490,202) (559,621) (907,197) (93,546) (4,140,700) (1,630,237) (1,362) 407 (3,207) 5,429 (18,183) 12,146 (141,490) 91,237 (14,777) 203,252 (36,893) (408,204) 395,158 93, ,888 (337,672) 2,438, ,836 24,035 60, , , , ,535 8,451,830 6,013, ,816 $ 227,287 $ 24,035 $ 245,300 $ 653,504 $ 1,064,822 $ 971,423 $ 8,114,158 $ 8,451,830 $ 960,652 A-30

92 CITY OF NORTHFIELD, MINNESOTA ST A TEMENTS OF CASH FLOWS PROPRIETARY FUNDS - CONTINUED FOR THE YEARS ENDED DECEMBER 31, 2013 AND 2012 Business-type Activities - Enterprise Funds Water Wastewater RECONCILIATION OF OPERATING INCOME (LOSS) TO NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES Operating income (loss) $ 1,035,423 $ 1,076,849 $ 919,180 $ 932,988 Adjustments to reconcile operating income to net cash provided (used) by operating activities Other income (expense) related to operations 15,260 15, Depreciation 319, ,174 1,113,750 1,104,703 (Increase) decrease in assets Accounts receivable (8,726) 2,373 (29,174) (3,096) Due from other governments (2,388) 255 (4,328) 283 Special assessments receivable 810 Inventories (1,975) (7,633) Prepaid items Increase (decrease) in liabilities Accounts payable (22,260) 19,978 (22,857) (23,391 ) Due to other governments Accrued wages payable 2, ,122 2,247 Other postemployment benefits payable 1,487 2,036 3,347 4,887 Compensated absences payable (1,170) (1,813) (4,721) 615 NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES $ 1,337,969 $ 1,433,761 $ 1,983,653 $ 2, NONCASH INVESTING CAPITAL AND FINANCING ACTIVITIES Capital assets contributed by other funds $ $ $ $ Capital assets contributed to other funds Net amortization of bond discounts and premiums 2,169 1,868 Premium on bonds issued 19,531 16,812 The notes to the financial statements are an integral part of this statement. A-31

93 Business-type Activities - Enterpri e Funds Governmental Garbage Storm Water Municipal Liquor Store Totals Activities Funds $ 219,674 $ (54,171) $ 282,715 $ 309,138 $ 223,487 $ 214,117 $ 2,680,479 $ 2,478,921 $ 41,236 8,805 (440) (1,260) 2,521 3,242 26,146 17, , , , ,732 2,486 5,967 1,638,521 1,644,922 (13,121) 43 17,135 (13,968) (5,276) 1,128 (39,162) (13,520) (1,639) (8,355) 538 (2,527) 810 (3,879) (14,499) (5,854) (22,132) (179) (94) (587) ,087 (2,490) (7,878) (1,845) 2,103 2,704 16,990 18,180 (33,902) 15,626 45, (52) (35) 1, (19) 52 (54) 3,580 2,271 12,828 4,892 (9,739) 1,859 2,036 6,693 8,959 1, (4,343) 2,312 $ 206,654 $ (35,443) $ 504,240 $ 485,275 $ 242,862 $ 236,022 $ 4,275,378 $ 4,140,286 $ 240,613 $ $ $ $ 134,314 $ $ $ $ 134,314 $ 176, ,462 2,254 6,291 20,274 56,617 A-32

94 A-33 CITY OF NORTHfIELD, MINNESOTA NOTES TO THE FINANCIAL S r ATEMENTS DECEMBER 31, 2013 Notet: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES A. Reporting entity The City of Northfield (the City) was incorpora'ed in 187S. Tbe CilY opat"lt$uncie,. 110m<: Rule Cha"", 0.' dcfine~ by Minnesota Statutes which provides fot D Mayor Councll rarm o f govcmmclit. The Connell exeroises IClPs1:tli\'c l3iut hority and den:mune.s rul mittie III orpojicy. The Council u~poinls thc g;ty t\d",jni~ l f\.i,lor who ls rcspon;'ibtc for Ihl." proper ndtmnistrutln'l ornn nrr.i", rd"tin~ I\) Ih. CilY, The CilY has consldered.1i polenl;"1 unilll ror which it fincllll:'lalty a,counlobll: t :\nli olh\:r ()rg:anizu'ion.~ Ibr whicb Ih~ tu.uure :1nd SIgJ1iticOlnco orlilt:lr reltuionship Wilh Ihl: ("i'~ "TC J'Uch olml ""elusion would 12U.<C lb. Chy's lin.nei"1 stutemcnl< IQ be nll'leading or Iq.-ompicle. 11,. Go,'cmm.IIf,1 Accounting Standards Board (<lass) has set forth criltritllc be considered in delermining finf1l1tiat nc.c:ounlnmliry. These erileria include appointing a voting majority of on Q'Slllli7JIlion s governing bady, ~nd ( I) Ihe.~ilhy of Ill. pn"",ry ~ovon:urn:l1t to impomllis will on IIIlII Q'll"nl'.IIlloII or (2) Ih. polenl;,1 fo',"" Qtg,,";,>tion 10 provido.-p«ific benefi t..' to. or imposc~ccific firulfl(;:i.ol burdcm un Ihl:' prinmry llo\'l!mn..c.il1. Each dfscrciclly presented componcm unit is: reponed in ~ $cpm"ntl:l column in the 4.!omb"incd fimlncml ~n l c.ml'nt" to amphnsllo il is: legally!!cpn(j.do (rom tho Chy. I!ach diju~lcly presqnted con1(kjncnt unit h.:\~ :I December 31!,~r rnd. Blended Componf!nl Unit. Th~ Norlhfield Economic Developmenl Authorily (EDA) was created pllrsuant to Minnesola Slatutes through 469. J 08 to carry out economic and industrial development and redcvelopment within the City in accordance with policies established by the Cily Council. The scven member board consist.:: of two Council members and five other Council approved members. Thc EDA may not exercise any Qfthe powcrs enumerated by the authorizing statules without prior approval of the City Council. The City make.'\ annuaj payments to the EDA to cover the EDA's bond payments. In accordance with GASB Statcments No. 14 and 61, tbis entity is presented as a blended component uni1 as a governmenlal fund. Separate financial slatements are not issued for this component unit. Discretely Presenled Component Unils. The component uoir's columns in the combined financial statements include the financial data of the Housing and Redevelopment Authority and the Northfield Municipal Hospital. These component units are presented in separate columns to emphasize that they a rc legally separate from the City. The Northfield Housing and Redevt:lopment Authority (BRA) wcre cr(lnt~ Jlumrnnl to Chnplcr ';87 o(thc Mlnnt:.liorll Session Law~ of The HRA was created by the CIt)' ~ cnrry out (lertain 1:dc.volopJnen:lITOJecl... The governing board~ which i$; comprised of five members~ one of which is II {;:ty Council ntombc!r. is: appl)lnh:d hy lhe- MIl)'t1r and approved by the Cily Council, The Council reviews nod 'ppmvcd lira '". levies. "rod the Cily pm" idos m'jor community development financing for HRA activities. The lira ~ reporlcd qs Q govemmcnml fund lyr..e Scp:u1tIC financial statements are not is:::iued for this component unil, The Northfield Municipal H'''pital board of director<.. 'I'{'OIOI«I by Ihe City Council. The Hospit.1 h"';i. own budget review and prepares its own financial statements. tt.1! oul.. t.crnding b"ndcd indcbledness i~ Ihcho$pilltl's debll1nd ($ not lhe responsibility ofthc Cily. The Hospilal is reporh.. 'tf Il.'-I ~I ijisctl!lc1'l pt'c$c)lie:d enterprise fuj\l.l. Camplc.lo fin:'nc1dl statemeots may be obtained at the entity's admini~lnuivc o(ficq..,~. Nonbfietd Municipal H<>... piull. 2001) North Avenue, Northfield, MN Government-wide and rund financial statements The government-wide financial statements (I.e., the Mtemcn1 of net po.~iliort n.nd the sto.ltment oructlvitlcs) report information on all of the activities of the City and its C()mpnnt!tll unh1. Gu~~n"'h:IlI(l1 tu:i;",jlfil!j.. whu:h nnm1.1uy are: supported by taxe!i and lufcfj;.o""l!'m m~ntjj rt"venuos., ale reporled Mlp.1rntcfy from I.mJmcss~tyIHJ Ot:,ir/ru:s, which ro~y to a signi ficant extent on fees 3nd Chl1rgclC fur supporl Likowise. the: prima,,' gow!rlull'~111 is rcportl:d ~p.'1ialcly from c.crtain legally separate compon(t.nt JmllJJ for whicf1 Lht primil1i' Goveml"TlCJU i~ finqnc~ny n«eunlnhlc. The~ l ntqmcn' or;~t i \-'itic... damomtmtcs the def~ 10 whlch the direct expenses ora given function or scgmenl is oft:-ct by prognm I' ".nll.,.. Dtrocl"'IM''<r<l ttte,''''''' 'hot file c1curly.dtnoif1nbk wilh. :<peclfic I\IIl<tlon or $Ol![I1Cnl i\ mounts rc:partcd.d...~ pf'tll{rllltl Yt!Wfm / ~.r 1ncllld\!: 1) Ch!U\}C6 to CUSlomefS or ~ppuc:lnl... who purchase. utoe. ur dinclly b<.nefll from 1:"",1 servioc1. or privileges provided b)' ~ sh'en ru~ction er sctm.,u ruod Z) sfttnt., nttd con'nb.,ion.,hat arc rostric:u:d 10 mccfiolj, lho opcrulionnt or tjjjlital tc(luirgtnc:nt~ ofa ~culnr limclion or scemen.t. Taxes.. nd other il C:~ nol propecly il1dudc.d :1RlOng ptosram revethlc$ ttl'o reponed lns1cud ~!{8cmJr#II'e\"Cmu:$~ CI fy Or NORTHFIELD, MINNESOTA NOTES TO me FINANCIAl, S r ATEMENTS DECEMBER 31,2013 Notet: SUMMARY OF SIGNtFICANT ACCOUNTING I'OLICIES - CONTINUED C. Measurement f4)cus, basis of accounting. and financial sl:1temcnt presentation The gu\lcrnftm.'jll... \Yidc fitldnc-illl $1r1temc,nllrttn: Icpanrd u..r,;lng Iht:!,.nmo/JII~ l'csources mca.'wrcmenlji)(:1ij and the or:cnfol bn.t1, 'if uccmmt"tg, M p~ the ('Irorri':L:U'Y fund$_ RC\1:nucs ore retorded when earned and expenses are ttcorded when u nl!blh~y lsiru:urn:d. re)plrdl~ s." of lbe h",,"~ "rr~j~:cd ctlslt flows. Propcny la:<,cs tjrc rceogni;.r.cd as 1C:\'Clnucs In.he! )'\.',nr rijr- whi c.h 'hey IIro!! levlcd. OnlLlIS :md similnr i l( l n~ a(o recognized as revenuc as SOOLl as all elicibilily "' q u;,cm~nl' imposed by Ih< Ph, wi"", h."" be"» m<, GO\'Crnm~nlllllufUI rrmmqinl.sultt~nt.( nl~ ICf'oncd w:lnc,lhc r!1i"'('u' /1"am:ltJl '~50 "rcc'1t m~l.i"'''clllt rll1l(j(.' ''~ and 1he modifrtd oct:nltll bt~l."(ll (Jc..'cowrrffJg RCV.:.il\1cC: t'tr(l rc'~l~lli7.4.."t1 :1!:. ~Ion 1l.'" they nrc' bolb men... urublc and ;j,,,.,.ljnble Revenue:s lir' considered to be tltl(tl((ibir wheal I~J' ar.: ~onrcublc: wnlnn Ih(' ':UJl~nt flcnod ur soon enuugh ;hr:r~:tnc:r 10 P"Y liobljirics Uflh" tjjl<cul porill<l Fer Ihi. pulpose. tl.. C;I)' ""n,;,lc" I'OVI:""""IO be 'v"il.~i. if II"')' ore <QlIceleri w"hln r;o d.)~ or'ltu <nd /\flh. eurrent [isall period. E.,pondulIr", gen.",uy,,'",,,,,o~d \\h~"" l/nb,lhy 1$ incumd. :sl u.nd.er oltcruftllh..;c.ouniulg. H'owc\'~r_ dcbr ~rvicc ClC~ndIlUI"C'5. ",. W~U:2.< C';tCpc:ndituf(',~ rt:wu:d 10 ~ompcn~l~d :i~m.~cs. olher pos,remploymon1 benefits. ilnd clnlm, ttndjudemenl". an: t~go,dt."" only whet' rm)'m~lls due.. (lrvpcl1y rflxcs. franchise taxes, licenses. lind inu:rot ~oc ialcd with The cun c:m. ii~f (It'nod nrc 011 c(\n.. fdc!~rtj t~ be susceptible to.,ccrunl and so have beed reeo.t;nited a" f.:vcnucs of the curren' fi,h::1i1 ("K'"riNJ Only Ihe pnninn ~r...;pcdt" :1S.""($Smcr.r.1 tecdv.nbk due within the clittc'n1 f\scott pc1'lod is considered 10 he.:'""..:.tl.:pubfc 10 ;ua:nl.. t:l' fc','eniac orthc currt'nl period.. All olhcr revenue items nrc con"idcn;tj 10 be measurrble:and :IYalhlhh: onjy when cn~h j"" r'c\'c'h'cd by the City Revenue resulting from exch:1m~c Ir:lnncrions. in which eaeh party give~ ami n:ecivcs essentially equal value, is recorded on the accrual ha~ i )o. WhC11 1hc ex-chi\nge takes place. On a mod ified accrual basis, reve11llc is recorded in the year in which the resources art' m~u",ble ~nti hecomc 3vailablc. Nun... :\chll't"@cu1ljj-suelionr.. in which.lhc Chy r~c iy~ "atue whhout dltl:"('if)' (l.1... jr~lj..t'qu.l1 \'i'hl0 I" return.,"ch",' j ~ pcoperty l"~ctt. httt'mt.j. Cl1lHkml.'l\l nnd donl1lo11" On :tu tll:cnmllr.1~i::. f"c,\'lo!llut rroifj 1'lop~n 'Y ~a.e": i\. '\:'lo.:tr~~l1tlc\j jn lhc yc.,r ref willeh Ih\: I~"" J:' Icvi.;u. RC\'r:nut: fi'nm g.rnn~.:ntltlen1n1llt MLt don.ltitwls i~ n.:to!!niz.cd In Ihe yt:.tr III,,,hlch DlI elogibility rcq";,,,mcnls Ir.",e be"n ilili$fiod, 1!1il!ihllhy roquj",n.",... ind'''k """"11 r<qu,,,,n\<nt which :<J><dfy Ihe ya.nrwl1en d\~j nes(llircl.:jr,:u.r.: n:.lo.1ull\. d IQ be usct.i or tlu! ),(,,:1r when usc' ~ (jest pcfm1ht.:d.nntehlng n:tl'i{r\,,.u:nl1, ~n whkb lho Cit)' mtl" pro'itl< kx:.ltc."'... ct> 10 be """d rot" $po<liticd pu'l"'.c.. "'Ii <xpcn~ilurc '«lul",,,,,,n,., in which Ih. r~out«:$:li~ prnvh..l\ld 1" the City on n rdmbnr;:cmc:m b:lsi~ On tj. nuj(lifil'd M'cru.,1 "Mi.s. fc\oanuc fro n1 noil-qcbj:lngc' l~;iorul mu.~l :also b..: J.v:.ilubJe lwforc II can be m:ognir..<:d. The preparation offimtncial statements in conformity with accqun LinJ,; rtmclrlcs generally acceflted in Lhe Unilcd States of America requires management to make estimates an~ O$~\\mpltor.s Iluli affect certain reported amounls and disclosure::;. Accordingly, actual results could differ rrom those: eslurulll!s. The City reports the following major govemmental runds: The Gencr{J/lund is the government's primary operating fund. It a\:cc)utlts for ah financial resoureell ofthe general government. cxcepl tbose required 10 be accounted for in another fund. The Debt Sen'jc~fuJld accounts for re.o;ourtxs accumulated and payments made for prjncipal and lnterest 011 longtcrm general obligation debt of governmental runds. The Public Safety Cenler Project [lind accounts [or thc construction co.'\ts associatcd with I'uhlic Safety Center. Separate financial statements are pmvidcd for governmental funds and proprietary funds. Major individual government.al funds and major individual cnterprise funds are reported a!i separate columns in llle fund fin31lcial statcments,

95 A-34 CITY OF NORTHFIELD, MINNESOTA NOTES TO THE FINANCIAL STATEMENTS DECEMBER 3 I, 20 I 3 Nole I: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED The City reports the following major proprielary funds: The Water fimd accounl~ for the water service charges which are used to finance the water system opcratmg expenses. The Wastewater fund accqunt~ for (he waslewater service charges which :lre used 10 finance the sanitary sewer system operating expenses. The Garbogefond accounls for the revenues and expenses associated with organized collection of refuse and recycling within the CilY. The Storm Water fund accounts for revenues <lnd expense" wilh storm water disposaj. The Municipal Liquor Store/und accounts for operations of the municipal liquor store. Additionally, the City reports the fojlowing fund types: Inlernal Service fonds are used to provide insurance coverage I:md data processing to other departments of tht: City. Enterprise funds are used to account ror those operations that are financed and operated in a manner similar to private business or where the Council has decided that the dctcnnination of revenues earned, costs incurred alld/or net income is necessary for management accountability, As a gencral rule the cifcel ofinrc,rrunrj ud"hy h~ been eliminaled from government-wide financial statements. Exceptions to this general rule 3R' ci~u's-~ bctweon the City's watcr, sewer and sanitation collection functions and various other [unctions ofrhc City. EJimf,..,tlon ofthcsc charges would distort the direct cosl~ and program revenues reported for lhe various functions concerned. Proprh.::t4ry funds di!j,1in~'\lis.h ojji:i'(lling re>o:enucs Dnd C.XPCJUC.. " from " O tl flp~,..itllnl: itc'.l'n~. Opcmlin;: h! 'IIrn~ and "'1"'''''''' gencrolly f'mm p",vid ln~ ~oc.. And productnl and dcll\'cring ~ood. In conncl:tion with. prppriotary rund', princl[liu onsoing opcrohons, The prinaipal op<:r.!'ins rovedu orthe C;t~'"cn.. rprl<e runds nrc ohnr&~ '0 tuluonu:f;.; ror sal" and $trvl.:cs.. The: City I'IJIO tcc08n~ 3.5 t.\pt!rnting revenue Ihe j)c)jt1on of hlp fcc's intended io ft'covc:r 11K COlilt ofeondcgtlng nc:\y C:U~tOlntf$ to Ihe system. An rqvcnucs lmd t;ll,"c-n..~ not u'w:-tlinb lhill definition arc reported as non-opcrating revenues and expenses. When both re:;;tricted and unrestricted resources are available for usc, it is the Cily's policy to usc restricted resources flcst, lhen unrestricted resources as they are needed CITY OF NOR11W1ELD, MINNESOTA NOTES TO THE FINANCIAL STATEMENTS DECEMBER 31, 2013 Note I: SUMMARY OF SIGNU'ICANT ACCOUNTING POLICIES - CONTINUED D. Assets, liabilities, deferred outflow!> or resources, and net position/fund balance Depo,\ ;ts and inve.~tmenl$ The City'S cash and cash equivalents are considered to he cash (In hand. dcmilnd deposits and short-term investmcnlo; with original maturities of three montns or less from the date of acquisition. Cash balances from <lll funds arc pooled and invested, to Lhc extcnt available, in certificat(;~ of deposit ami olher aulhnri'l.eo investments. Earnings from such inve.~tmenl S are allocated on the basi.. of applicable participation by each of the fund" Thc Cily may invest idle funds (IS authorized by MinneSOLiI statutes, as f01l0\vs: I. Direct obligations or obligations guaranteed by 'he United Stales or its agencies Shares of investment companies rcgi~t~rcd under the Federal lnvcstment Company Act of 1940 and received the highest credit rating, rared in one of the (WO highest nuing categories by a SlrtliSlical rating agency. and have a final maturity of thirteen months or less. General obligations of a slate or local government with taxing power!' rated "A" or beltt:r; revenue obligations rated "AA" or better. 4 Gener::tl obligations of the Minnesota Housing Finant;C' Agency rated "A" or betle r 5. Bankers' acceptances of United States banks ctigible for purchase by the Federal Reserve System Commercial paper issued by United States banks corporations or lhcir Canndian., uhsidiaric~, of highest quality category by at least two nationally recognized rating <:tgencies. and maturing: III 270 days or less. RGptlrc:iln14C or u.wc~ n:pun::lmsc "greemcn~ cno ~un'u. ", lo:ldin~ asfccmun'l~ \\;th financial institutions quajillc'd :;t.!\::2 "depository'" b)',h~ SQvcmIl1C,",I anrily, with h:mk:o;.lh:,. :ne. member(\- orthe Federal Rc:::erve Sy~tclll \\'lih Ct.1piut1i7.;won (!xccec1ins-s I , n pr!",!u)' ~('Ionlll rle;:tlcr in U.S. government sccuri1ies to lhr: Fcdl..'r.lI ReserVe! Bnnk ufncw York, or (crtnm MlllUi!'Io(IHt :-~urltics b,ukqr ~tlt.."":jt(](s. ~.;. Guaranteed investmenl contracts (Oles) i~\i~'t. 1 ur ~u;lmnu,:cd by R U"IIl:d States commercial bc'mk, a domcstic branch of a foreign bank, a Unitcd Sunes insurnru.::c conlp:my. or lb (."ltmdian subsidiary.. whose similar debt obligalions were rated in onc oftbc lop two ru\!n& ""liit.:~qnc$ b~' n luitiu"lilly recognized rating agency. The M1 TUl~lb MuniClp:11 Money Market Fund optf1l1ci in ~~(;nr dance v. hh uppf"dfjr[;ju,,' SlJ:ltc Il1wt;:md Jt.~ul:nions. The 4M Fund is: 1111 cx.ccru:ll i nv~ lm..'fi1 puc.1 not tcsi ~lorcd,,,i lh the Securities nnd fi.'(crumg,, Conunu... "on (SEC'i however, il roll!},", tho orunc tcbul"tol')' 'II"" orllu: SEC IInlier ",10 1J7. The repono<!,~hlc Ilf,h pool,,,,,,.""'"',he lair ""Iu< uf tho [JQOI <h:uc, Fin.,nci.l stllttlnont' of,'''' 4~1 FUlld "'" be obtlllllod by.iilitn""in); RBe Global,\ <5et M.nogcmClIt n\ 100 SOll1h Fifth S"..", Sllit~ nco, Minno"1'ol i<, MN 5S4(u 1240

96 CITY OF NORTHFIELD, MTNNESOTA NOTES TO THE FINANCIAL STATEMENTS DECEMBER 31, 2013 Note1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED The City's investmcntpojicy [ollows Minnesota slatutes, which reduces the City's exposure to credit, custodial credit and intcfc~ t rale risks. Specific risk infounation for the City i!' as follows: CITY OF NOWI HFIELD, MINNESO r A NOTES TO THE financial STATEMEN rs DECEMBER 31, 201) Note I: SUMMARY OF SIGNWICANT ACCOUNTING POLICIES - CONTlNUF.O lnt(!rfimd rece;"obles and pay"hle.~ A-35 Custodial Credit Rh'k - For investments, cuslodial credit risk 1S the risk thai in the event ofa faijure oflhe counrcrparty, the government would not be able to recover the value of its inve!':tttlcnt or collateral st!curilies that are in the possession of an out.o.;idc party. As of December all inveshncnts were insured or registered, or securities were held by the City or its agent in the City's name. Credit Risk - Credil risk js the risk that an issuer or other counterpal1y to an investment will nol fulfill it..; obligation~. SLate law limits investments in commercial paper thai is rated in the highest qu(llity category by at teast two nationally recogni7.ed rating agencies. The City's investment policy Joes not further limit the nnings of their illvcstments. Concentration Risk The City's investmcn~ policy docs not address concentration with a particular broker Investment in.~trumcnl:-; arc varied to prevent concentration in anyone investment type In/erest Rate Ri... k - In accordance with its invcslment policy, the City diversifies its investment portfolio to eliminale the risk ofloss resulting from the over~conccntratioll ofassets in a specific maturity. The maturities selected!;hall provide for stability of income and reasonable liquidity. lnvestments for the City arc reported at fair value. The broker money market accounts operate in accordance with appropriate ~Iate laws and regulations. The reported value oftbe pools is tbe same as the fair value oflhe pool shares. Property taxes The City Council.M.OUy adop" n Ill> Ie',)' DJld «nino." '" Ih< County in December ror..'lioello11 InC fallowing )'<:nr. The Counly i. '''",,"Sible fo,coliectlng.1i prop"")' lox,," ror U,. City. These Ul"",< Nl.lI!ch on cnt",e1:3blclicn On taxable propert~ wilh," Ih. Cioy on ;"n.",y I.nd orc payable by IhI: propclty O\\IIlCN in two 1,."lh nenl. Til< In'", ", collected by lht Count)' Tren.wrcr ",nd In.scUh:mrnL<: M'e mnt/. I() Ute CllY durin!; JruUI:lry, June. :U1d No'\ tmbec roch year. DeHnquent taxe::; receivable lnt.:jude the pa~t six years' uncollected taxes. Delinquent taxes have been offset by deferred inflow of resources for delinquent taxes n"t rcecived within 60 days after year end in the fund timmeial statemcnts. ACC()Ullts rel:eivable Accounts "",dvablc Includ. omounl, buiod for services prqvided beron> yo., cnd, ljnhllkd utilily enterprise fimd receivables "r~ ntw included rot :tc-rvh;cs provided in The City lujs: no ;:,liowilqr.:c (or uncolkotible account~, as the City is gc1'lerally abto to certify :lino\l~n5 not collected to the towu)' rorcullt:etion ru. ~c.:ial wtssments. All trade receivablc6 fm the Mun icipal I fospical arc: shown ne~ of an Dllow;mc~ (0: um:ulicctiblc -acc.,'\mts. SJUdal asse... ments Special ""C$$mems rep""""'t II", linnncing for 1'oOllc Imp,ov<menlS paid ibr by b.~.fiolns propcrt) owner:<. These :JSSes..~moCnUl CU"C recorded tf5 rccc'lvubjes upon ecnifi';:ctuon,n 11,,: County. Sprci.a:l i1s!ilei-s-il)c.nts. :I~O U.':COh'fli:t.RU 3!; revenue when they me zmnu:dly certified 10 1hc County or reccl\.ocd irt ca$h or wllhin 6() dnys nf\c::r yenr c"d~ All KovClf1rucntlil spechd ll~s,'!o1n,=-nls rccciynbit.arc (lft~ 1 by a d~rcrtcd inflow Or'N!MJuro~ ltlthe fund Annnciul statements. AClivh)' Ixtwuc:n runos Ih:11 nrc reprcllc:ntut;vc ttl' l ~ndins ;borr(\wul!t nr;';utsc'nu~nl," O\ll~1D:nding nl I he: C1tt! "ftll.. ' r~-:al y~r ~ te rclcrnd In tl.!= dlhc:j hduc' to/from other fillld:t' (i, ~,~ Iht: ~.. un.:.nl pl.rti('1) urmt~,fi..lluj h\"i1~) til mh.. utll!,," ~ h.1from o1hrr fund.~ (i..e... lhc I'Kln~(Unun1 poruod ofjnl~rfund )0""$)_ All ather. 1UI~l1fuJIIIS h:llunet$lx:l\h'~ fjlnd~ a!~ reponed [hi. ""JUt ;otrum'l other (und~' Any re.~duu l hul:.uicci i"iui5uu1(ling, ""=' \.1.(,-1:11 1h~ t;iwcmrmmtdj uctf.. titrc:, ;md bu.l\incs1"f)"pc :J,!livlIU... -.n: reponed in the oq\'cm~nl wldc finauc:l.nl (14 Icmcnl ~ ~ ''In(c",l\! b..,lnnc~ Advances between funds. as reponed in the fund financial statements, ;trc orr... cl by a fund balance reserve account tn applicable governmental funds to indicate that lhey arc nol available for appropriation <1nd arc not cxpcnd,lbjc availabll.! financial resources. IlIvcntor;e.o, and prepaid items/ultcanu!d dtargcj All inventories arc stared at Ihe lower of COSI or market on the first-in, first ollt (FIFO) mcthl)d lnvcntolics of governmental funds are recorded as expenditures when consumed rather than wh~l1 purcha~cd. Certain payments to vendors ret1ec! eosl., applicable to future aecounling periods and arc recorded as prcphid items or unearned charges in both govemme:nt widc and fund financia l statemcnts. The co::;t ('I(prepaic.l items is recordcd as expendilw es./cxpensc when consumed rather than when pureha.c;cd. Restricted a.,+set... Restricled H.!\Scts include assets set a::;idc by the Hospital Board of Directors for future capilal improvements, asse\s sct aside under bond indenture a.brrccment", and assets set aside under employec heallh in~lirancc arrangcmcnls. Capital a.'isel~ Capital assets, which include property. plant, equipmcnt and infrastructure assets (e.g., roads, bridgc$, sidewulks ~ and similar items). arc reported in the applicable govcmmt:nlai or bllsincss typc activities columns in the govemmcll,.widc financial statements. Capilal assels arc defined by the government as assets with an initial. individual cost Ilfmon:: than $5,000 (amount no{ rounded).md an cslimated Hseli.ljlitc in excess of Ol1e year. Such assets arc (Ccorded ot historical cost or c!;timated historical cost if purchased or constructed. Donated capital a:::scts are rccorded at estimated fair market value at the date uf donation. )n the cast ofinhiul c:aplmi-ix'l1iun ()"stncmj inrrnjt.nlclur.: o.~tt.f llc.. lho~'t rcpone(j oy govemmental activities) the City ehosr: 10 im:ludt! iltu'fl.'l dnlin,m: bllu 10 J.ltK:.JO, 19~O, Th~ City had ulrcqd)'olccoul1h::d for its prior infrastructure at historical CO~l ror 'hi! iniuni rcpt>rtins ofthcse a~ls. A... ill<: Chy (or..slruds or :u.:quin:s -cnpital assets eru:h period, including infmstnc lur~ tb--sc.ts. they 1).1'\:' cppilnlizqd 1II111~ClriC';t ' em-t. Tl...: COM" ninom'ulltiaimcn<lncc and repair/: that do not add 11) Ihe \,due: ordlt :ts-i't:1 cr rn.1lcrinlly cxtcmtl :w.&:;~ IIVC$- arc nm c.1pilnli/a:lj. Major outlays for capital n.,-,.c:bi. :md impnwemcnts arc capitalized as projecis ~n: constructed. Tnterest incurred durin the construction phase orc::rpiwl tlr'cil' ofbusiness.typc activities is included as part of the c3pitalizcd value of the assets constructed. Fortllc ytttlf<!nd('tl Dec.ember 31, interest was capitfl}ized in eonncction v.:ith conslrul:tion In progress.

97 CITY OF NORTHFIELD, MINN ESOTA NOTES TO THE FINANCIAL S ratements DECEMBER 31, 2013 Note I: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED Propeny, plant lnd equipment of the primary govcrnmcnl, lis well as the component units, ilre dcprccialcd using the straight line merhod over the tollowing estimated useful lives: CiTY OF NORTIlFIELD, MINNESOTA NOTES TO TH E financial S rati :ME:-1IS DECEMBER 31, 2013 Notel: SUMMARY O~ SIGNIFICAN'I ACCOUNTING POLlCI~:S - CONTlNtlt:n De.lerred tmtj10wslirtjlmvs of rr!.~mm:e.'i A<;sels Land Improvements Building and improvements r nfrastructurc Machinery and equipment Years In ",!dilion 10 3SSC~~. tht: :r-ln1ccncnt uf I'inam:lDI11M'lth.\fI wui <'\tn~ujnq ~"Hrt n 6U,,;,mlc.~(Hott for tlcrclh.-d l'uijlowj or rc..~(lll rc C"i. This ':l:p;nrn!~ rinnhcu.l.. I::UClntf1l rlcnn:nt. ~k'(l"trcd OulnUW.lt ufrc!iourccl. n:p~nlji: n (vruumplhju of nat po~l1on II~ \ upphcs 100 (UIUIC J)\! rl{h.l.(~l nne! so \l'ili not be recognized ~t~ nn OUIOO\\l ofrc..'iourccl" (~xpc.~s.t:1 t:-'ipcn\illui L ) until d~n The i:(\\ronum:nl OIj]Y h:1:t 01\(;' 110m Ih.\1 qw'lhti~ ror rt:(1"r11nl; In IhJ~ (";l1c',i!:u')' II ilo- lh~ h.ss 01\ ~rllnding ~pol1l.'tf in the,govemnacnr.w;dc: Sf.t\lctru:m (lfm:1 po$ilign. 1\ loc$ ol1 lt.:furu:hn!t rc: uit.,. f.l\lt1\ Ihe: dlffcn:tl<:c in lhe cnrryin; vnluo or",runued deb, ""d Iii' ~cqu\"'lon r~o: ThlJ limoun: I. Jcfcm:d.",j ",nnn;"ed 0""' 'he _,hme, "f the life oflhc refunded or refunding dcbl A-36 Cmnpen,\'oted absence.'! h..,he sovc:mmcn r~ policy to pemlil omployee:< '" ""own" l.. o conwd bui unu<cd v~ Wllio" omd 8,.k pay ben<fi \!S, Then: IS no liability ror unp;lid.u:cumul ::m:d sick I~\'c s;n\!~ rue il-0\,(!mnlcul d~ ItOl h;wc II poticy to p..1y gny nl'twunl."1 \'\"hen emj'lio)'ces. ""p.-srutc rrom t<rrvicc wilh the Bov.:rnnk'lIt. LloWc.\ c;r~ ti Ii.ability is rr "t"cgnll..cd (or thdt ponion of nec.untulaliug.sick lenvc lh:n.:nt,. th:tj is \;,(!:ut:d us scvernnce JW.Y. All v~cation pay i~.",:crucd wh..:-n inc'ujtt'd in lbc i;ovommcm -wldo nod pi'u»r;clo,,- fund fin.""i.1 Sl ft'~'nc,,1s A Iklbllily for Ih~~c.mou nl~ i. J'Cj'Oncd in ~'<lvcmmcn"l rullds only ifilley h.ve ",.tured_ fo r ""ample, as a 1t.",11 of cii1ploytc tcl:isnol'o"s.nd «I'Il:mtll\S. The vent",1 f,,"d is 'Yrio::tlly u.<(;d 10 Uqllid". gllvcm"",nrol COD\perusu'ed nb,cn"" ~ roy.ble. PO."iJemploymenl benefits other thalj pensions Under MrHllCSOlD $ta UIt ~ '. ~ubdjvision 2b. pubhe-.,tnploycrs mwt allow n::tin:t: ~ ami Ihdr dcpcndonl$ 10 fontinut.! COVCIl I~. indofinitdy in I1J1 eonployer-,ponsortd bcnllh CIlrll , under 1110 following cnndilions, I) Rcli~ mw:i be teeclvin~ (or oli:llblc to... eel",,) om '!IInuity fron\ a ~l ;n""",,ui rublie p"rulan plnn. 2) C~.c ml>c must conlinu. 1\ 1l"'''P plnn until il,ge 65. nnd ri!l ir~ n Hl~ l psy no more Ihan the.,grour (t~mfwn. :md J.) Ret iree\{ UlG'y obtain dc'pendent.0"."'so ;nuncdl.toll' before ';:lircmcnl All premium, no\' fundod 011 P3Y-OS-YOu-so b..,j" The liabnily w.,.ctll.fijllly dclcrmlnod_,n nccontanc:c with G,\sa SUU""' 1 4S. 0\ J.nu4'Y I. 2011, Long-term obligations In the I)OV01'M1C'Dt-widC' I1nanclUl ~ltulcnrs. ~nd proj"'ichuy (und '>"Ptti in the fund tinbndnl :ru"itumc:nfs. lon,.;..tcnn dcbl and ",I"" long-iem\.bllg;ulons arc "'1",ncJ Q.\ li.b, l ioi~ in Ihe.rplieablo govcjull1<n'al,olivities, b\l(l n CSS-~)Jl<l :U:hvit1cs. or proprit~lm')' fu oo type.,iilt:ltcmenr ofnc.t porition. Bond prclniull1!!i nnd dl~oln\ L~ are dt'id~",d ::Jnd amortized over th ~ lifcoflhc bon,l. IJj!lng Ih~, I raisin-line mo,n.,.!. BOnds pll)'lbl. on: n:poned lit' "rln. applic1lblc bond p",mlum Qr du..::o"n!. l'lnnd...,t«cosls a«: an."p""!c in tho period in=d, In the fund financial statemnus. govcmmcnla! fund lypt::t rrtogntl.cd bor.\i fjfcm1un v.- a.nu dj.~cou n tj. os \... ( 11 ns hand issuance costs. during: the CUJTel)\ poriod. "~face llm4)unl o( debt is..;;u.td i$,-e~r1cd D$ Qlher fin>lncing s,of)rce,..;. Prcmiums received on debt I~u llm:cs arc. Icpcmed ns. other firua.ncillg sources white d~couru.$ on debt is5uflllcc! arc report~d as other fimmcing US\"$. I ~ua.ncc cos1~ whether Of noi 'oio'ithhcld rrom 1m: :\C1U:" debl ptocccdi rcccivc~ arc reported as debt service expendilurcs. In :.ddirion 10 linbil idc$, the 5UllC11\::nt of fi~ncilll pcl!o'h[l)l) ajlll ru,tt.f fln:'tncl:.1 sralc:tntnls wili ~ nwfl loes tcpor1 Q sop,,",c.<callon for deferrej inr.o'w nrn:souro... Tbl$ ser"me filllonc ool '1ntemen'.kmclIl. derorrc<lltlilow. of rc:( O lln:,,~. fc~m!; nn n.cq ui ~ t1on ('I.r ncl poii~ion 1lcu :lfllllh.""'il,0 ::t (\1\1.1,(' pcriodt~' ruul $0 \...,11 nm he rc4:ognil.:d llj;,:m fn ilow or resources (fc\'enuc:) unril lhdl Itnu~ Trw ~Ol c:rnfllcrnl h~:'o unt)' unc Iypc. oritem. which #rl$b anl) undcj 0 roodified "cen",1 b""is of.ccotm"n~ lhal qu.ufi.. 3S nccdill!}iii be n:j'orlcd in Ihl.","'el,""Y. A<C(I1'din1!ly.,h. ilcon. un:wnilnble rc\'cnuc, ls ~J1(:d only' m the go\'cmmcnf::al ruruh: b.dmc.c.dl\!.c!:t. The- gtwrmmcntnl fi.mds: It'port UMvttil41l)lc r\:"ctlucs" rrom Ihroc.suu~ : U1.'(d'. :tpeclnl D"ru.(f1h" ~n:",. ::uullu:tus, n,~ IlI00unts :m: dcfcm:d lind rt'~ugnizoo ;l'i rrn iunow ofre.,;ou~cc::'o in Ihe period th;tllhe amolllltliro I~como I:wnilQblc Net pathml and resident service rel'enue N~t patlonl.jj:uj rc.(:dc:nl5l:'rvic.re\'cuic I~ n::(loned :1.1 the Cs.Hm:lle(] nct realizable nmuu.m,.- (n'n' patients. re.';iden ls, Ihlrrl-pany ra~c)n;. ~ QJUj othor~ ror i:t4jv1cics rc'n(km:d. includln}! c.\timatcd retroactive,n,iju!oimcnl't U11der reimbursement 3grtttJU:nts wilh thlll.l"p.luty pi1>'o~, IU:lntm.:ti... c :tdj J.\lmCn li\o ;m:: accrued on an csum;\t.cd NlIi1C In the period Ihe rcjalcd.en-lcc$- an:: 1\.'"J1dC'rcd H.nd..,rc tldjn;'tt~d m IiUl~ l)c'rit'ld$. Il8 fim.l $ettlcments arc dcicnmr}f;\.1 COllcelrlrations of credit ris/l The Hospital granls credit without collateral to its paticnts. mosl or who arc local residents and arc insured under thirdparty paym agreements CrmlrihllliOlrs From lime 10 time_ lhe H~'piu:tl t(ccivc.,, c;'unuibmion'i from mdividualt Ilnd 'prh7l1t' fllw'n ilauon.~. RC:\!\' Tn~e C<Jntribullnn:-. (including conlnnutlon." or capifol :LSset~).nc Kt4)l;llh.cd wlw:n 1\11 ~Hg{kih\y ~q l1 lrom('dls. It1C'1uding lime rcquitt:lncnl'" an!" met Contnbullo~ mil> bo fwricl('d tor ~Jlbc,... fl\."cit1c opcnhin~ ru~~ or for c.1piull rhirposcs. Arnn\H1lo; [bllt ~t(o unw.strittcd or 111:'1.1 UN 1('\lf;<:"U~d to n I'O j1cdlic' Orcmtiltb rll.tposti:lrj rtlrc1ncd as nun-i)pc::1liiing rev~nl'ei. AmounlJl. n:stric:tcd 1(, cnpibt' ncqul~ltintu,[jre reponed ~ lftc'r non ('pc~hln!! tcyenll~ end ~~pcnscs.

98 Actual 1] L 12,849 These over expc:ndirures were funded by excess revenues over budget :lnd avajlablc fund balance ~ ] ~ A-37 CLTY OF NORTHFLELD, MINNESOTA NOTES TO THE FINANCIAL STATEMENTS DEC~,MBER 3 L Note I: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED Fund balance In the rund Jinanciai statements, fund balance is divided into rlve classifications based primarily on the extgnt to which the City is bound to observe constraints imposed upon (he lise of resources reported in the govemmcnt~t funds. These da~ification~ are defined as follows: NonspendolJ}e - Amounls that cannot be spent because they arc not in spcndabh.: form, such as prepaid items. Restric.:ted - Amollnts related to cxl y impo!':ed conslraints established by creditors, grantors or contributor::;; or constraints imposed by state statutory provisions. C(Jmmilled - Amounts conslrained for specific purposes thal an: internally imposed by fonnal action (resolution) of the City Council (the Counc.;i1), which i.'> the City's highest level of decision-making authority, Committed amounts cannot be used fot any other purpose unless the Council modifies or rescinds the commitmcnl by resolution. Assigned - Amounts constrained for specific purposes thut :tre lfltcfl'u;liy imposed, In governmental n.mds olh~ than the General fund. assigned fund balance represent!': nil re",aining 'llmounl)ol ltuu Qtl: nul cln.,:r.ified Ml nonspendablc and are neither restricted nor committed. In the Gt:oc:ul fund. 3~i~ed Dmounts rcprc:lc1l1 inlcncjc.d uscs established by the Council itself 0' by an official '0 whkh Illo ~ovtlnlng body del.glll". til. ""therily. The Council has adopted a fund balance policy which dclcgal~ Ihe ~ulhority to nssign n.moums rllt -sp«ific; l'urposc;~ to the Finance Director. UnlUJigm.ui ~ "rhc fc!sidunl eln$.-~t(jcal..iojl ror the General fund and al);o negative residual amounts in other funds. The Cif)' con sidc~ restricted om()ljnt~ to be spent first when both restricted and unrestricted fund balance is D-vaihtble. Addltic:moJly ~ lhe Cily,would first usc conunittcd, then assigned, and Jastly unassigned amounts of unrestricted fund balance when expenditures arc made. The City considers restricted amounts to be spent first when bolh restricted and unrcstrictl.!d fund balance i.s available Additionally, the City would firsl use committed, then 3!'signcd, and lastly unnssi.b'lled amounts of unrestricted fund balance when expenditures are made. The City has formally adopted a fund balance polic) for the General fund. Thc City's policy is to maintain a minimum unrestricted fund balance of35 percent ofbuugeted operating expenditures for eash flow timing needs. Net position Net position represents the difference hetween assets :md Jiabilities. Net position is displayed in three components: b. Net investment in capital assets - Consists of capital assets. nct of accumulated depreciation reduced by any outstandiog debt attributable to acquiring: capital assets. Restrictcd net position - Consist of net position balances restricted by limitations imposed on their use through external restrictions imposed by creditors, granton;, laws or regulations of other govcmmcnts ~ CITY OF NORl HFLELD. MINNESOTA NOTES TO THE FINANCIAL STATEMENTS DECI,MBf':R \3 Note I: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED COInparal;ve dalo/recfassijicution.li Comparative total oata for the prior year have been presented only for ind iv idutti coicrprise fund!:' in the fund financial statements in order to provide an understanding of the changes in Ihe tinullt:ial pljsition and opcn"lions or these funds. Also, ccj1ain amounls presented in the prior year have been reclassified in order lo be con~islellt wilh Ihe c urrent year's prcsentation. To bcuer,.oecllh.,,,i'vliy orlh. pnmji'y g~\'ljmm."'.nj 'he I!DA. Ih. cl.,,,,,illcndnn of'l,e BDA ch""~ru 10 be,.ho\\'n 8.0.;:.3 blended COl'lpcmc.t'lol lioi\ Clflh..: primllty t:.ovc:rn ment nnd is repnnc'd n< (1 ~pccinl rcvt:nl.j( fund, i',~iol1!'ly. Ih~ E..DA was rcrcttcd IU i\ dt~rddy prc~nlcd c.ompwu:nlllnit. rite 10MI c()mhin\:d bcclnnnlc1 nei po:"illon or the pnrmry SQvCnll1\c1I1 and CD" tjiti not ch!ll'1s-c due tl) the restatcmcl\1. Howc... t1'. n p1'litf (l4:nud adji6i111\.'.1u W~,. recorded TO dimin.,h:,h,c un.1\1uhublc revctn..!:' ofrsct fo:, tht.! ctlpitcl lcase, Th:- C.11}1 1l1 h.!tl"< bctyl\!cn the f DA tm~llh e primary governmenf i~ now reported as,m advance to/from ofht:r funds, Note 2; STEWARDSHIP, COMPLIANCE AND ACCOUNTABILITV A. Budgetary information AnnUllI blldgct:"l'lf'c Podopled on a. n.,~5 C(lnfii!Otcnt with tlcc-oulluns luincwlcs gencra!ly accepted in the United Stales of Amcrkn fhr the Gcnt't:ll llnd -'JlCcu.1 revenue IlmdJ c:.'(npllhc TnmJih fund. C.c. Cloherty Endowed Book fund, Tralll"it era"!.' fuml. Joire,,,,," Squ:l", T1F rl1n~, \\Ihillier TI'U$1 fund :,"<1 Rc.sout Squad Tn.,' fum!' which arc not legally oblig(al~ to c;~'mrleu: budgets. AU :\llnu-;11 :)P~lfovri:lhQn ~ I~p~c.Il fi~,j y~r-end. The City docs not usc encumhrance Hccounling. In August of each year, nil departments of the City submit requests for appropriutions lo the Administrator l"o th(lt a budger may be prepared. Before September 15, the proposed budget is presented 10 the Council for review anti the proposed levy is adopted. The Council hold!' public hearings and a final budgct and a final tax levy are prepared and adopted io early Deeembcr. The City', ks~llevol ofb"dr;o"''y.""uol Ls nt the Iilnd l el fur rund.< Olhcr Ihnn Ihc Oc""ral Fund The 1<!;>Illewl of bnugc1nr:r control roc Ihc <.icncrg\ rund i!' ttt the depjrrn'l\lm 1... 'VelL rhe City,lij tjcpl1r'irn:nl heml..; ""'Y moke Ir:mtt:fcf5 ur opp"'rri'uqns within" dcp"mlllcnl with III<! ~pl"ovnl aflhe ClIy,\dnllnt>!mIOr. Tr:m"f<,~ of.ppropri"i\ii\< bel"'''''" dc:pm1mojnljl require the :tppro"'bl nfll~ Admini.slmlt:lt 'I'ran... r<:'f}ij nrllppropniltlcm\ n..:t\vl.l\,!!l rundj: r'lo!quirc chi: urrw\,111 orthc Council Bud,g.elcd :lr"nuunl~!in: "'~.uri.smnl1y mloplcd. or I&$ ~U1tmdc:tJ by.he ("('tandt. TllCfC! WCf~ \'lnic'1.11'o huilbet oml!ndml;:nls \\"Cf'C n\tldc' Ilurln u; Ibr.: year. rroldi buds.:clcd rc\"c.'np e.~ W~fQ. incnln,.oo in lhe l;(wcmmcnl;'[ rund~ hy SSl.xOO whil olnl governmen,.i budgeled ""pendil.'''' Irn;=.ed S:OI.SOO. l 'hc nel el\:llll1" crill. ndl'",,"onls IV lb. ('"",nernl rund bodgel """lliru In. $L".500 dccron<e to li,e huo~cl, c;otnpm'"d 10 Ih. "ligula I budb"icd dcr..h or S47fi.1~6. fhctc WM =1$ ='" in the budfil:lcd 1r.ulSref' (1UI 0(5)03.6L 7 B. Excess of expenditures over appropriations For the year cnded December , expcndirures cxce~jcd approprihtions in Ih~ following nmds: Excess of Expenditures Over Appropriations c, Unrestricted net position - All other net position balances that do not meet the definition of"reslricted" or "ncl investment in capital assets." fund B\ldget Special revenue CHbJe Television Library Gift G.W, Bunday R.O()O Park

99 A-38 CJTY OF NORTH FJELD, MlNNESOTA NOTES TO TilE FlNANCIALSTATEMENTS DHCEMI3ER3l,20[) Nole 2: STEWARDSHIP, COMPLIANCE AND ACCOUNTABILITY - CONTINUED C. Deficit fund cquily The following funds had fund equity deficits at December 31, 2013: Fund Nonmajor Special Revenue Transil Community DevclopmcLlt Block Grdnt Transit Grants Capital Projects 2014 Capital Project 2015 Capital Project Tran~portation City Facilities Debt SeI'Vice 2012 Equipment Certificates (1999C) Presidential Commons TlF Bonds Hilcy Neff T1F Bonds Amount 52,104 2,394 36,940 5J, ,169 17,664 The above deficits will be eliminated through transfers from other funds and filturc taxes and assessments and futurc bond procecds. Nole3: DETAILED NOTES ON ALL FUNDS A. Deposits and investments Depo."i/~ 5,8R5 3,6~3 107,909 Custodial ercilil risk for deposits and inyc:wn('n1..i 1ft.he n!l:k dull in the t\'f:nl of:t h:mk failure, the City'S deposits and Invcstments may not be returned or the: City will not be «bit tn recover coll11c'rttllle:c.urilics in the possession of an out.ltidc piln)'. In aecordaocc with MlnnCSbta smh,ucs :md I1S 3ulhorrzcd by 111e Counell, the City maintains deposits ~t tho"" dcpo.hqry banks, all of which "ro,"<rnl>c... or,h. red"".1 R=rvc SYSlom, Minne~ota 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 Ihe deposits not covered by insurance or bonds. Authorized cojlateral in lieu of a corporate surety bond incjudes: United Sfates government Treasury bills, Treasury notes, Trea.<;ury bonds; Issues of United States government agencies and instrumentalities as quoted by a recognized industry quotation service available to the government entity; Gcneml obhgotlinn securities o f a1\)' stur..c cr loenl SQ-vcmmeRl wilh JlUCI~ [lowcrs; which is rated "A" or better by :l natiou,,' bond nutt1g. kn1c:e. or revenue. obligntion ~curill/:sa ( An)'!\:t)le or loc;al government with taxing PO'~ which i!c r:st~d "A/\ ' c"r bcu\'"f by LI ncnionnl bond raung DlCI'YICC: Ol.:nC'r:ll obllga.lion ~C\lrities ota local governmen1 wilh r:uoug pow'c1's mby ~ p!c:ds.\,'tl as collateral again~t rund$ 4cposited by thol some loc31 government entit)'; Irrevocable standby Ietten; of credit issued by federal Home Loan Banks to a municipality accompanied by written evidence lhat the bank's public debt is rated "AA" or better by Moody's Investors Service, inc., or Standard & Poor's Corporation; und Time deposits that are Cully insured by any fedcral agency. CITY or NORTlIFII;U), MINNESOTA NOTES TO TIlE FINANCIAL S ratements DECEMBER 31, 20\3 Nole 3: DETAILED NOTES ON ALL FUNDS - CONTINUED Minnesota slatulc.' require that all collateral shall he placed in safekeeping in a restricted account ill a federal Reserve Bank, or in an account at a tmst department ora commercial bank or other linancial institll1ion that is nnt owned or CODlroll~d by the financial instirurlon furnishing the collateral. The selec1ion should he approved by the govcrnment entity, Al year end. the City's carrying amount of deposits was.~ 1.6J 1,171 amllhe bank halalh::c was $ The bank balance was covered hy federal depository in~urance totaling $250,000. Of the remaining balance, $1,451,700 WlL'i collater<11iud with securities held by (he pledging financi,d institution's trust department illlhc City's name. lnr/!!,'fments As of December , the City had the following invl:s1mcnts that arc insured or registered. or securities held by the city Of it's agent in the City'S name: Credif Scgml!nLcd Qualityl Time T~cs oftiiycslmcnts Ratings ( I ) Distribution (2) Pooled Jnvcstments Broker Money Market Accounts N/A less than (j mollths 4-M Fund NIA less than 6 mon.hs Total pooled investments Non-pooled investments Asset back securities N/A less than 6 months Asset back ~ecuritics N/A more than 3 years Commercial pttpcr N/A less than 6 months Municipal securities AA I I to J years Municipal securities AA- I 103 years Municipal securities AAA more them 3 year!' Municipal securities AA~ more than 3 ycnrs Municipal securities AA more than 3 years Municipal securities :-.IIA morc tha n 3 years U. S. Government securities AAA less thhn fi monlhs U.S Governmenl secunties AAA les~ than J year u.s. Goverrunent sccuntie.s AAA 1103 years U.S. Government securities AAA more than 3 years Total non-pooled inveslments Total investment.;; (I) Ratings are providcd by various credit ra1ing agencies where applicable to indicate a'isot:iatcd credit risk. (2) Lnterest rate risk is dil\ejosed using the segmented time distribution method NIA Indicates not applicable or available. Fair Value and Cal rying Amount 924,921 7_, ~ , ,621 25\ ,090 3,R , ,344,350 2,332,8 t 9 753,X70 3,434,535 ~117 23,607,017 $

100 $ 2,655,'10, 22,9RK,169 4,184,240 5, ,053,827 3,~40,4M 2,579,818 3,063,674 ~'onccnlcj! l!nn lor crcdil n~\ Tho Ilospita' d<k..9 nol place a limit on the alnaunt of the total portfolio that may be IOvC21ed in any 000. d,p~.h(jr)' or\s~tcr. The Finance Departmenl is responsible for the rormulation, documentation tiond monitoring O(im,'estnlcnl )(1r.uC.S)' Ct)rLl(l,"cnt with the invc~tment policy. CITY OF NORTHFIELD, MINNESOTA NOTES TO THE FINANCIAL STATEMENTS DECEMBER31,2013 Note3: DETAILED NOTES ON ALL FUNDS - CONTINUED Cash on hand Cash in the possesslon of the City, consisting of petty cash and change funds, totals $ A reconciliation of cash and investments as shown on the statement of'net posilion for the Cily, induding Lhc component unil HRA is as follows: Deposits - city pooled account [nvestments - city J)Qoled account Ca'ih on hand $ 1.631,171 31,563,503 2,750 CITY OF NORTHFIELD, MINNESOTA NOTES TO THE FINANCIAL STATEMENTS DECEMBER Note 3: DETAILED NOTES ON ALL FUNDS - CONTINUED The Hospital had the following ij\vc~t111cnts at Deccmher 3J, 2013: Deposirs Federal Home Loan Bank Federnl National Mortgage AssociatiHn Federal Home Loan Mortgage Corp federal Agricultural Mortg~gc Corp Federal Farm Crcdit Bank U.S. Treasury Notes Certificate of Deposit Total Cash and inveslments - Primary Government Cash held with fiscaj agent - Primary Governmenr Cash and inveslments - Component unit - HRA Total S 33,197,424 $ 27,563,120 4,&97, ,064 $ 33,197,424 Total $ 45,920,664 Federal Home Loan BanJe Consisls of discount notes and notes wilh intercgl rates of 1.625% to 5,375% maturing from 2014 to 2023 and have M-+ ratings by Standard & Pom's Federal National Mortgage Association: Consists of discount noles and notes with interesl ra tes of2.0% to 3.0%. maturing rrom 2020 to 2027 and have AA+ ratings by Standard & Poor's. A-39 Component unit - Municipal HospiJal lli~ Custodial eredit riik for th:i'os h~ ' MUj in\'e.5unc:nts js Ike: nsk ltun in Ihe event ora bunk f~.rlute, the City's deposits and investments may no: be returned orche City will n01 be nbtt: to r\.ul'o'{:rcau:umlsc'c:urillc$ in the possession of an outside party. In IICC()rdJ:Jncc with M in o.c~old $'1.11tntcs und as authorized hy Ihe Council. Ihe City maintains deposits at those depository b"nk~ all orwhkh or" ",,,,,,b'b orin: Feder:ll Rae, Sy<lom, 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 nol covered by insurance or bonds. Authorized wlhucr:tl inclul1~ lhl: J c~lidv~1tnenj.j dc;.\ctibcd below, a!t well ns ccrinio fir.ca mortgage noles, and certain olher S,.tc O' 10<~1 gqvcmmenl Qbli~ations. Mlnnc:\o", $1111\""" "'quire thm SC"<)urilies pledged as collateral be held in ~"k<cping by tbe City ur in IilUUlcloJ nulituljen olher thllll ~,", n,mi,hing the collntcra!. The Hospital's deposits in banh at December 3 J. 20 I 3 were entirely covered by federal depository insuianee or by collateral held by the Hospital's custodial bank in the Hospital's name. Federal Home Loan Morlgage Corp: COl'sil'ts of a discount notes with interest rales nr 1 05% to 4.875% maluring from 2018 to 2027 and has an AA+ rating by Standard & PoofS. Federal Agricultural Mortgage Corp: Consists of discount notes \'\Iith interest rates rallging 01'0,93% maturing in 2018 and have an AA+ rating by Standard & Poor's. Federal Farm Credit Bank Consists of discount notes with interest rales ranging ITom 1.36% to 2.44% Inanlring in 2019 to 2023 and h",ve AA+ ratings by Standurd & Poor::;. Treasury Notes: Consists ofunilcd States Treasury Noles maturing in 201 tl with a 5. I 25% interest ralc. Certificates of Deposits (CD): Com,ists of dcpnsjts with interc~t nites ranging from 0 30% to 2.10% maturing in 2014 to 2018 Interest race risk - The Hospital has <I forma! investment policy thal ;uldrcsscs permissible investmenls, portfolio diversification and instrument maturities. Within these parameters, the liquidity of the inv~stments is a concern maximizing income and the quajity of the investments arc paramolmt. Credit risk - StatL; law limits investmeoc$ in commercial paper and C(Jrporate bonds t(l the top two ratings i5sucd by nationally recognized statistical rating organizations. As of Dec~mhc r 31,2013. the Ho~pi1<tI's invc.";tmcnts were raled as shown above. Cut::tod lal C'(tId., rj5.lc a For fjn investm.::01. CUSlOdial credit ri~k is the risk that, in the evenl ofth~ f~itun! o f lho counturpl1rty. lhc H()sp i l~1 will nul be flq' Q to recover the value of il.. in vestments or colialernl!'ccuriut' Ilml :uc in the rn~ts..~ion arnn ou!.sldc pnny. The:: l-i o ~p it,,1 does nol have a formal policy regarding the I1nldmg of.securhl(::~ hy COl_mer par'ues however. as nr Dccc:nlbtr 3 t the llospital dij not have any such attlingcnliqfils.

101 Ending ~ 1.268,793 5,()86, ,924,113 62,499,976 7,046,966 86,471,055 (8,989,655) (34, ) (4,650,200) ~&55.261) 38,615,794 $ 44,971,104 A-40 CITY OF NORTHFIELD, MINNESOTA NOTES TO THE FfNANCIAL STATEMENTS DECEMBER 31, 2013 Note 3: DETAILED NOTES ON ALL FUNDS - CONTINUED Cash and investments summary A reconciliation of cash and investments as shown on the Statement ()fnet Position for the Component Unit Municipal Hospital. is as follow:,,;: Cash and investments Res1ricted assets Total B. Receivables $ 1,663,794 44,256,870 S 45, The Ha,p.llil ~",vid",~ an wlgw""",, fo, IIncali..rublc.OCOllnlS lxi.<-'<i no the nllowmco IIlCthod los.llilooj;cmcnt', judgment. PAticnLS tint! Icsidenls ;.re not r equi~d LO pro",idc ~ol 1:nern.l ror "crviccs rendercd. Payment fur.j<rvices to\, tcqulred wllmn 30 dry:< Of n:cdpt of invoice. ['u.<l dut accounts Of\'.ndividoally OIlJlIYl.od rarcouccinhilily. nnd Ihtn NfIlcd over 10 collection 0sortl<. liecoun", ror which"" payments hsrvc been ",cdved "'" "".l~d nnd ancr "pi'",,,1 Qrc wrille" of[ In ndditiol1. on ouownncc 15 "" ;"li,ted far other DCCOllnlS b."ed on h",o,ie,,1 expcri.c!1cc "fib" HQ!;piuol. At Dcocnnhcr Md the nnowllrj«far uncoll<'ctiblo oc<olin.. Wl1~ S),S(l4,OO(] 011" , rcspectively ~ Patient receiljable.f Patient recei... ables reported as current assets by the Hospital at December 31, 20J 3 consist of the fonowing: Receivable from patient!; and their insurance carriers Receivable from Medicare Receivables from Medicaid Total patient receivable Less: Allowance for doubtful accounts Patient receivable, net There arc other accounls receivable in the amount of$117, 154 COT 2013 $ ,272 1,035, ,287 12,028,651 (3,804,000) 8,224,651 CITY OF NORTHFIELD, MINNESOTA NOTES TO THE FINANCIAL STATEMENTS DECEMBER 31,2013 Not.3: DETAILED NOTES ON ALL FUNDS - CONTINUED C. Capital assets Capital asset aclivity for primary government for the year cmled DL:ccmhcr 31, 2013 was as rollows: Primary govemment Governmental activities Capital assets not being depreciated Laod 1,237,790 31,003 Construction in progres..c;; 2.390,59R 4,944,876 (2,248,957) Total capital assets not being depreciated 3, ,975,879 (2,248,957) Capital assets being depreciated Buildings and improvements 16, ,365 Infrastructure 60,570,055 2,227,421 (297,50() Machinery, equipment and vehicles 5,R83,097 1,189,672 (25,803) Total (;api lal a".;;ets being depreciated _83,3~ ,422,4iR (323,303) Less accumulated depreciation for Buildings and improvements (8,482,204) ( ) Infrastructure (32,620,707) (1, ) 73,156 Machinery, equipment and vehicles (4,235,822) (436,4&4) 22,106 Total accumulated depreciation (45,33R,733) (2,611,790) r otal capital assel"i being depreciated, net ?83, ,668 (228,041) Governmental activilies capital assets. net $ ,555 $ 5.836,547 $ (2, ) No(es/lease receiljable The City has made several business subsidy Loans to local businesses. The tenns of repayment vary with each load. The total of these notes recei... able for December 31, 2013 is $209,808. The City ha!; entered into lease agreements with sevetal nonprofit organizations to lease space at the Northfield Community Resource Center. The balance of the lease receivable for December 31,2013 is $118. The EDA - Component unit has se... eral business subsidy loans Lo local busine5iscs. The tenns of repayment vary with each loan. The total of these notes receivable December 31,2013 is $430,169. There is an allowance for uncollectible accounts for $71,038 on these loans.

102 A-41 ClTY OF NORTHFIELD, MINNESOTA NOTES TO THE FINANCIAL STATEMENTS DECEMBER 31, 2013 Note 3: DETAILED NOTES ON ALL FUNDS - CONTINUED BegilUling Balance Increases Decreases Business-type activities Capital assets not being depreciated Land 918,554 S S Construction in progress 150,472 Total capital assets nol being depreciated 1,069,026 Capital assets being depreciated Buildings and improvements 25,551,817 Infrastructure 21,614,052 1,091,369 Machinery, equipment and vehicles 1, ,832 (241,566) Total capital assets being depreciated 4&, ,171,201 (241,566) Less accumulated depreciation for Buildings and improvements 17,383,112) (794,466) Infrastructure (7,057,970) (768,474) Machinery. equipment and vehicles (867,682) (75,581) 65,103 Total accwnulaled depreciation ~308,764) (1,638,52 1) 65,103 Total capital assets being depreciated, net 33,443,653 ( ) (176,463) Business-type activities capital assets) net $ 34,512,679 (467,320) (176,463) Depreciation expense was charged to functions/programs oftbe primary government as follows: Governmental activities General government Publie safety Srreet!<> and highways, including depreciation of general infrastructure assets Culture and recreation Miscellaneous Total depreciation expense governmental activities Business~type activities Wafer Utility Sewer UtiJity Garbage Stonn Sewer Utility Municipal Liquor Store Total depreciation expense - busi ness-type activities Ending Balance 918, ,472 1, ,55 1,817 22,705,421 1,424,814 49,682,052 (8,177,578) (7,826,444) (878,160) (16,882,182) 32,799,&70 $ 33,868, , ,339 1,624, , S 2.5~ ,656 1, ,627 ~ 1,638,521 CITY OF NORTHFIELD, MINNESOTA NOTES TO THE FINANCIAL STATEMEN-IS DECEMBER 31, 2013 Note3: DETAILED NOTES ON ALL FUNDS - CONTINUED Di:t'cretely presented component ",,;15 Capilal asset activity for the Municipal Hospit~1 for the year ended December 31,2013 was af' follows: Beginning Ending BaJance lncre~ scs Decreases Balance Municipal Hospital Capital assets nol being depreciated Land 3,694, Construction in progres.<: 429, Total capiwl asset..- nol bdng depreciated 4,123,493 40, ,907 Capital assets being depreciated Land improvements ,6~ 1 Buildings and improvements 54,140, ,969 (1,051) 54,301,208 Machinery, equipment and vehicles 23,341, ~,299 (493,680) Toml capital assets being depreciated 77,857,620 1, (494,73 1) 79, Less accumulated depreciation filr Land improvements ( ) (33,479) (2.958) (212,727) Buijclings and improvements (18.358,092) (2.546,560) 1,044 (20,903,608) Machinery, equipment and vehicles (18,310,315) (1,938,R53) 498,047 (19, ) Total aceurnulatf:d depreciation (36,844,697) (4,518,~92l 496,133 ~ ) Total capi.tal assets being depredated, net 41,012,923 (2,828,072) 1,402 38, Municipal Hospital capital assets, net $_ 45,136,416 S (2,787,658) $

103 Amount CITY OF NORTHFIELD, MINNESOTA NOTES TO THE FINANCIAL STATEMENTS DECEMBER 31, 2Q13 Note 3: DETAILED NOTES ON ALL FUNDS - CONTINUED Capital asset aclivity for the HRA for the year ended December 31, 2013 was as follows: lira Capital assets not being depreciated Land CapitaJ assets being depreciated Buildings and structures S Beginning Balance Increases 56, ,532 Decreases Ending Balance 56, ,532 CITY OF NOR1HF1ELD, MINNESOTA NOTES TO THE FINANCIAL STATEMENTS DECEMBER 31, 2013 Note3: DETAILED NOTES ON ALI. }'UNDS - CONTINUED D. Intcrfund receivables, payables and transfers The r.;omposition of interfund balance~ at December 31, 20 1:\ is as foll ows: P,imary government Receivable found Governmental GcnerClI Debt Service Other non major Payable Fund A-42 Less accumulated depreciation for Buitding~ and structures Total capital assets being depreciated, net HRA capital assets. net (40,658) (6,924) 209,874 (6.924) 266,868 (6,924) Depreciation expense was charged to functions/programs ofthc discretely presented component units as follows: Discretely presenled component units Mu"ieipal Hospital HRA Cunstruction commitments (47,582) 202, ,518,R92 $ The City has active construction projects as of December 3 J The projects include street construction and various public facilities_ At year cod the City's commitments with contractors arc a<; follows: Project Spent-to Date Remaining Comrrtitment Total Dlle tolfrom primary government Qnd c:nmpotlent units Receivable Fund Component unit Housing redevelopment authority Payable Fund Primary govemmcnt Debt servicc 1,038,398 ArnOWlt The outstanding balances between funds result mainly from the time lag between the dates that (1) intcrfuno goods and service!; are provided or reimbursable expenditures occur, (2) transactions are recorded in the accounting ~y~tem, and (3) payments between funds are made. These balances also include temporary loans made to other funds caused by the timing of bond sales, temporary capital loans and special a..~scssmcnt collections in the subsequent year. Adtlunces tol/rom other /lind."i In the Mo;I.' DIIVclupmc:m TIF ru"~ luaned the Presidential Commom TIF fund $50,000 to puy qualified T1F c)pendilllii:s. The S511,O()O loan ~ 10 be p~ ;d back wilh semi-annual paymen's 10 be made on Au~ust 1 and February I Pt1ynlcntS v..ill coml"~nce ~m the first I,aynttllt date in which available tax im:rcment fund~ exist, at an interesl rate of ),0 pcrc':,,!. The h.,i.i>ee or till' o"yonoc., December 31, 2013 was $50,000, Public Safety Center Sixth and Ninth Street Reconstruction Maple Street, Prairic Street, and Vet's Park Pavement Total 1,901,524 1,064, ,664 3,782,915 2,922,719 36,192 93,605 3,052,516

104 A-43 CITY OF NORTH"'ELD. MINNESOT A NOTES TO THE FINANCIAL STATEMENTS DECEMBER 31, 2013 Note 3: DETAILED NOTES ON ALL FUNDS - CONTINUED Inter/and transfel"s Tnmsferout General fund Nonmajor governmentat funds Water fund Sewer fund Garbage fund Storm water fund Municipailiqllor fund TOlal General Fund 106, ,679 2,040 2,040 1_3_1, ,719 Transfer in Nonmajor Debt Service Governmental S ~~ 503, ,566 95, ,000 1,604,183 Total 503,6\7 1,185, ,800 98,679 2,040 2, , Tntn~r(lnl: 1I.fl: u~j lo I, movq revenues rronl 1bc rund with collc(lirln :tulhorwlion to ahe Debl Se'f\'ico rund a$ debt $\:rvicc principal and intc'rc,lif pa)mcois become due.. 2) move reslflcteel J:ln)ountS (ron.' i)omwi:1gs 101hc Debl Service fund to cstabh,.h m,mdlltory I'c!Jcrve m:coul\l~ 3) move: urur~riolc!d Gencml njnd ~ \ enur.=, 10 rmllj'lce vmiolis pn.'gj.1ms dun lbe government musi account fur in Olncr (unds in accord;u\ol!e with badgculry QUlhori1;lUlc;ub. includ in~ a~luntl provided "5,,,,,,,,,,Ii,,,, ~r l\1alching fund.. ror,.. Iou' sn>nl progrnm.. TI rollowlt1\! I... sr... were.."de durin!; 201): From General fund ($273,617) to nonmajor governmental funds for the Tiger Grant project. From Waler ($14,800), Sewer ($23,679), Garbage ($2,040), Stormwaler ($2,040), Liquor ($6,280), nonmajor governmental funds ($106,880) 10 Ihe General fund for IT operations and,uppon. From Ihe Liquor fund ($ ) to the General fund to transfer profils. From the General fund ($30,000) to the nonmajor governmental funds for the Skatcpark pioject ~ From the General fund ($200,000), Waler ($95,000), Sewer ($75,000) and the norunajor governmental fund, (5385,000) to the non major govcmmcntal funds for the City Hall renovation project. From nonmajor governmental fund to Ihe Debt service fund ($ I 48,000) for scheduled dcbl funding. From nonmajor 20 loa CapitaL Project fund ($545,566) 10 the 2011 Capital Project fund 10 close the funci CITY OF NORTHFIELD, MINNESOTA NOTES TO THE FINANei A L STATEMENTS DECEMllER31, 2013 Note3: DETAIL.ED NOTES ON ALL FUNDS - CONllNUED Eo Long-term debt General obli~tlon lmnd~ T~ City isjj:ucs genoral Obtll}.'1IiOl1 b4'1nd'lo pto\fidc: "mel.. thr Ihe :u:quisitlon:'lrnj consltuction of major capital facilities. Ch:ncr;l1 Obtig.1UOU bonds Imve be!;!" i~llf.:j ror bolh gov('mmenini <1nd hu.~in('~.typc activities. Thc~c bonds arc f'(!por1~ In rhe proprkurr)' Puntls if'hey lu..:.expeclecll0 b~ f\..1"llid frl'u\\ pmpriet;1t'y fund revenues. In addition. general ~blil\illl~" hondo b."" been i,;sued 10 1c1\mu specinl "',.,,,,,,,nl, ",bled bood., Primary government debt General obligation bonds ~rc direct obligalions and pledge the fi..lll faith and credit of the government. General oblig<jtion bonds currently outslandjng arc as (oljows; Authorized Interest DCl;cription and rssucd Rate G.O. Conununity Resource Center Refunding Bond, of 2007B 1,650, G.O. Bonds of2012c 495, Total General Obligation Bonds Issue Date % 11107/07 12/27112 The annual debt service requirements to malmity for general obligation bonds are as follows: Maturity Date 02101/17 02/01119 Balance at Year End ROO,OOO ,295,000 General Obligation Bonds Year Ending a,wc:.mmen1al Activities December 31, l'rinctfl:,1 Interest Total 2014 $ 195, , , , , , , , ,000 1,000 1_0_1,000 Total $ 1.295, S

105 Total 7, ,083,007 CiTY OF NORTHFIELD, MINNESOTA NOTES TO THE FINANCIAL sr A TEMENTS DECEMBER 31, 2013 Note 3: DETAILED NOTES ON ALL FUNDS - CONTINUED General obligation tnx increment bonds The following bonds were issued for rcdevclopmcnl projecl<i. The additional tax increments rcsulling from increased tax capacity of redevelopment properties will be used to retire the related debt. Balance Authorized Interest Issue Maturity al Dcscri2tion and issued Rate Date Date Ycar End 0.0 Tax Increment Bonds of , % /3l127 92,000 G.O. Tax. Increment Bonds Refunding Bonds of 200m 960, / G.O. Improvement Bonds of2008b 620,000 3, [4 1_ Total General Obligation Tax Incremenf Bonds The annual debt service requirements to maturity for general obligation tax increment bonds are as follows: CiTY OF NORTHF[ELD, MINNESOTA NOTES TO THE financ[al STATEMENTS DECEMBER 31, 2013 Nole 3: DETAILED NOTES ON ALL FUNDS - CONTINU~:D G.O. special assessment (improvement) bonds Tho fotl()\\'inu. bqnd< wen: i~ucd to ITmrn~ variou.t improvements and will be repaid pnmnrily from ~pccit\1 :l.iscs.slncnt.si \,ied (In Ih~ propcnies bcndillng rf(lit1 the improvements. Some issues, h~\\'\"\ l:r. :U1:~. p;'l"t)' finllru:.cc1 by.d ",lomn I<_jes_ All >1"'.;.I'~SOJsmrn.,<b. "backed by the full faith and credit ~rtlm: thy Each y.,.,.ho combinl."d ;)!\:SC$smcnt;md tilx h.. ""')' I!qunls los Ill,'rC'ent of the amount required for deb\ 'k. rvl~ The e)(qcs';: 0(5 J,c(C~t is to cover any ddinqucncics in lax or assessment payments Balance Authorized Inlercst Issue Maturity at Description and I,sued Rate Date Date Year End GO Improvement Bonds of2007a 2,065, % \0/ \118 \,165,000 G.O. Improvement Bonds of J ,000 G.O. Improvemellt Bonds of2009a 2.750, ,00 \ 2/28/ ,530,000 GO. Improvement Bonds of20loa 1,4\ !28/ 1(J ,212,076 G.O. Improvement Bond, of2011a \, \122 1, G.O, hnprovcment Bonds of2012a 965,0(] / 12/ ,000 G.O. Improvement Bonds of2013a 830, / /01 /24 ~OOO A-44 G.O. Tax Increment Bonds Year Ending Go"'<:mrru::ntrtl Activities December 31, f'~ Interest Total ,000 46, , ,000 39, , ,000 35, , , , , , ,500 55, , ,500 3,400 29_,900 TOlal $ ,778 $ Total G.O. Special Assessments Bouds $ 7,3t 7,076 The annual dcbl service requirements to maturity t(jf general obligation special assessments bonus are as rollows: G.O. Special Assessment Bond~ YcarEnding Govcrnmcnlai Activities December 3 1, ~al Interest Total , , , I, ,349, ,364 \ 25, , , \16 984, ,938 78, ,680 20\ ,276, ,710 2,41 \, ,OU(J 1,487

106 A-45 CITY OF NORTHFIELD, MINNESOTA NOTES TO THE FINANCIAL STATEMENTS DECEMBER 3 I, 2013 Note3: DETAILED Non:s ON ALL FUNDS - CONTINUED Q.,O. revenue bonds The following bonds were issued to finance capital improvements in the enterprise funds. They will be retired from net revenues of the enterprise fundi'. The EDA has issued public project Jca~e revenue bonds for financing building projects in accordance wjth Minnesota statutes. The ab"teemenl~ are supported by capilallcascs between the EDA and the City. The bonds will be paid hack with future property tax levic.., Balance Authorized IntereSl Issue Maturity at Description and Js~ued Rate Date Date Year End Governmental G.O. EDA Public Project Revenue Bonds of2oo6a $ 3,040, % 07118/ /25 $ 2, Business-type G.O. Utility Revenue Bonds of2007a 1,230, /24/07 02/01/18 790,000 G.O. Utility Revenue Refunding Bonds of2007c 2,185, /20 1,260,000 G.O. Storm Sewcr Revenue Bonds of 2008B 140, / 18/0R 02/0 1/20 95,000 G O. Utility Revenue Bonds or2009a 1,550, ,00 12/28/09 02/01/20 1,000,000 G.O. Utility Revenue Bonds of 20 loa 887,100 0, /28/10 02/ ,924 G.O. Utility Revenue Bonds o[2011a 45, / 14/1 I 02/01/ 17 40,000 G.O. Revenue Refunding Bunds 0[2012C 1,145,000 2, I2 02/01/22 1,145,000 G.O. Revenue Refunding Bonds of2013b 8,920, /13 08/ ,920,000 Total business-type 14,032,924 Total G.O. Revenue Bonds $ 16,327,924 The annual debt service requirements to maturity for general obligation revenue bond.!' are as follows: G.O. R ~v~nu. Bonds G.O. Revenue Bonds Year Ending Govemmaltal f' ctivili~ Bu.'5incss type Activities December 3 I,!. ['rind!!.1 IHlclTcs:t To"'l PrinciEal lntcrcsl Total CITY OF NORTHFIELD, MINNESOTA NOTES TO THE FINANCIAL STATEMEN rs DECEMBER 3 1,2013 Note 3: DETAILED NOTES ON ALL FUNDS - CONTINUED!&.rtifica~articipation These certificates were issued to faciti(arc fiouncing cosl..; as~oc i atcd with (he design, construction, instaha(ion, and t!quipping of the public safety cenler. The participation certlficate~ arc secured by lease revenues. Balaocc Authorized Interest ls~lje Maturity at Description and Issued Rate Dale Dale Year End Certificates of participation of2012b $ 6,2RO,OOO /18/ $ The annual debt SCMce requirements to maturity tor cerlificates of participation are as fojlm'vs: Certificates of Participation Year Ending Governmental Activities December 31, ~nl Interest Total , , ,832 4 I 7, , , , , , , , ,460, ,365 2,OR6, (),065 2,080, ,910, ,232 2_,068,232 Total S 8.242, S 145,000 S 102,097 S S 1.9g1,63G S & S 2,27G,RI~ ,000 ~5,S)A ,O1~,63~ 258,341 2,27~, ,000 X~,() ,863, ,665 2,089, ,000 81AG-! g9,~62 1'11,653 L9S0,nU 2018 m,ooo 73, ,O~1 153,24; I,Y~2, I,O IO,QOU 235,9~3 1,245,983 4, ,247 4,678, ~ 28, ,(){X) Y.no!~120 Total 2,295, ,001,244 $ 14,()32,924 1,391,056 $ 15,423,980

107 Total 236, R7 2,147, , ,725 Advance Refunding. On August 8, 2013 the City issued a."el\ll ObllsllliO" \\I"<1""",'or ReI.'1'tue Rcflmdinl: Bonds of 20131l for $8,920,000. The Refunding Bonds were issued willt. nel intt"'" co', "f~ per«.t to ",rund tho 2013 through 2021 maturities of the Cily's General Obligoll"" S."",. Revellue Bond. 0(2000. The rcfulldcd l,..lrds carried an average coupon rate of percent. It i~ ~imnh.-d Ihat the (11)' whl reduce Its Qggn!gtlIC dt.:hi ~"\ icc payments by approximately $300,668 over the nine: years nrul ubulin on cqmomlt ~in (dirr..:rcnc:e: bctwfco Ihe prcs1tnt values of the ojd and new debt service payments) ofs2?6.4sq, A-46 ClTY OF NORTHFIELD, MINNESOTA NOTES TO THE FINANCIAL STATEMENTS DECEMBER 31, 2013 Note 3: DETAILED NOTES ON ALL FUNDS - CONTINUED Notc.."S payable These notes were issued to fund the Community Resource Center and the Cro~sing Tax increment district projects Balance Authorized Jn1ercst Issue Maturity at Description and Issued Rate Date Date YearEnd Taxable Tax increment Note of The Crossing $ 2,035, % 08/ /01131 $ 1.695,694 The annual debt service requirements to maturity for notes payable ace a.<; follows: Notes payable Year Ending Governmental Activities December 31" Principal Interest Total ,827 66, , ,468 63, , ,027 60, , ,059 58, , ,026 55, , , , , , , , ,059 28,440 ~99 Total 1,695, ,388 $ 2, ClTY OF NORTHFIELD, MINNESOTA NOTES TO THE FINANCIAL STATEMENTS DECEMBER 31, 2013 Note 3: DETAILED NOTES ON ALL FUNDS - CONTINUED Capital leases payable The Capital Lease Payable - Energy Improvement was used for city-wide energy improvements. These oblig<ltion~ arc being funded through ad valorem tax levies. Description GoYernmental Capital lease payable Energy Improvements Business-type Capital lease payable - Energy rmprovements Total capital leases Authorized and Issued $ 2,414, , 170 Interest Rate 3.88 % us Issue Date 03128/fl8 03/2K{OR The annual debt service requirements to maturily for capital leases payable arc as follows: Maturity Date /01123 Balance al Year End $ 2,147, , Capital Leases Capital Leases Year Eoding 1l1l.fnl.'!.'-1~P<: A<uvlli<o,s Governmental J\c;j."ilic-< December 31 ~ Pnn<i~1 Jnterest TOla1 Principal rntc' J'C!l Total 2014 S 20,061 9,O~ ~ S 180r~9~ S RI,J6J S 262, ~O,8S1 g.l66 2P.IIH 1~ '92 262Jl , $ 19~,0\~ C,i.04;l 262J)( ,511 (,,/>01 ::!9.I1~ 202.6~ 59, UQ , ,5~9 51.7~ ;.$ Z3 1.29S,I49

108 A-47 CITY OF NORTHFIELD, MINNESOTA NOTES TO THE FINANCIAL STATEMENTS DECEMBER 31, 2013 Notd: DETAILED NOTES ON ALL FUNDS - CONTINUED Changes in long-term liabilities Long-term liability activity for lhe year ended December 31 ~ was as follows: Restated Beginning Ending Balance Increases Decreases Balance Governmental activities Bond, payable General obligation bonds 1,480,000 (185,000) 1,295,000 General obligation special assessment bonds 7,773, ,000 (1,286,364) 7, General obligation tax increment bonds 1, 163,000 (206,000) 957,000 GeneralobHgation revenue bonds 2,435,000 (140,000) 2,295,000 Plus amounts for unamortized premiums 30,694 27,116 (6,217) 51,593 Less amounts for unamortized discounts (39,250) 1,962 (37,288) Total bonds payable 12,842, ,116 (1, ) 11,878,381 Certificates of participation 6,280,000 6,280,000 Capital leases payable 2,321,148 (I73,493) 2, Notes payable 1,794,319 (98,625) 1,695,694 Other post-employment benefit liability 156,907 30, Compensated absences payable 812, ,754 (60h494) 660,009 Governmental activity long-tenn liabilities $ $ 1.338,36 1 $ (2.697,231) $ ,137 Due Within ---2.ne Year 195,000 1,121, , ,000 1,677, , ,598 66, ,9 18 $ 2, CITY OF NORl HF1ELD, MINNESOTA NOTES TO THE FINANCIAL STATEMENTS DECEMBER Note 3: DETAILED NOTES ON ALL FUNDS - CONTINURD BU!iincss-type activities Bond, payable General obligation revenue bonds Capital1cases payable Plu::; amounts for unamortized premiwns Total bonds payable Othcr post-employment benefit liability Compensated absences payable Business-type activity long-term liabilities Restated Beginning Balance $ 1 (,, ,(, ,133,874 33, ,285 $ 17,310.98~ Incrt!ascs Dccrcal:iCS $(11.708,636) (19.310) (11, ) 6,693 76,644 (80.987) ~ 9.003,337 $(\ ) Ending Balance $ 14, (6.291) _ 5o_, , ,942 $ S Due Within One Year 1.983, , _3,561 S 2, In the coming years, the other postcmployment benefit obligation is expected to be liquidated by Ihc General fund ror the governmental liability, Conduit debt ohligatlons!'rollll;"," 10.i1llO. the Ci.y hll> ;"''\lcd rjou$lnll Revcnuo H""llh C~ rc Foollill.> Rev.llue Bond$.nd Scli<1<>1 f'at'lrhj\!s Revenue Bonds In pro'tlilic lim:ncull :I~ I f:.lu1('e ~o p' i vnll..'-~ t(tr cntitic.s for lhe acquisition nnd conru'h~ lilln of '''''toj h<>using, <du... rloru.t Or hcl.llh "ore r.<.l{ticsdccn1ed 10 l>< '" ei,. ""bile inlo'''-<l. The 1><",d~rt l'c ""eu r~ by 'he pml"'t'y tin.need. nd = poy"bl",<,kty nom P'Y""''''' "",.i... J ~n II", undorlyi"l' morta.go!".ti.<. Upon ror.y",,,nl Oflh Ixmds, o w,,,,.. hip or"",.<quln:d f~cilitit$,,,,nsf... II' tho privlltc",",c'ot.nl i l ~ ",,,,,,,d b.y Ihe bo,,<llssu;lncc. Noillr.r the Cily. tl,e SIOIC, no r "ny politi",,1 filbdlvjnolllhor<of is oblisoltcd in nnym"n"" for r<p. ymcm "flhe "<r"rh, l\g(lurdillg,ly. W bonds:s.ro n.,! rt:f'c'lncd.u lio b jjjri~s in the -acc<tmpanyl n~ firmm:iq I.$ Hltc:tn('nl~ As of Decembcr 31, 2013, the total conduit debt issued for issues oulmanding lofaled $30,627.gS8,

109 CITY OF NORTHFIELD. MINNESOTA NOTES TO THE FINANCIAL STATEMENTS DECEMBER Note 3: DETAILED NOTES ON ALL FUNDS - CONTINUED Compone", unit debt CITY OF NORTHFIELD. MINNESOTA NOTES TO THE FINANCIAL STATEMENTS DECEMBER Note 4: DEFINf:D BENEFIT PENSION PLAN - STAn;WIDE A. Plan description A-48 Revenue bonds - Municipal Hoslri!.~J The following bonds were issued to provide partial funding for the construcrion orthc fannington Clinic, Camp'\.l~ Clinic, and to extinguish the Ilospilai Revenue Bonds Series 2001 C. Thcy will be retired from net revenues of the liospilal. BaJam:c Authorized interest issue Maturity at Description and lssued Rate Date Date Year End Hospital Revenue Donds of2006 $ 31,930, % OKlO 1/06 11/01/31 $ The annual debt service requirements to maturity for revenue bond~ arc as follows: Revenue Bonds Year Ending Component Unit - Municipal Hospital December 31!.. Principal Interest Total ,000 1,434,888 2,354, , ,888 2, ,025,000 1,335,813 2, ,080,000 1,279,438 2,359, ,000 1, ,360, ,660,000 5,121, , ,650,000 3, I ,789, ,3 10, , Total $ 26,750,000 $ $ ,859 Changcs in long-tc~rn lia~.i1itics Long-term liability activity for the year ended December 31, 2013, was as follows: Beginning Ending Due Within Balance Increases Decreases Balance One Year Component unit activities MuniCipal Hospital Bonds payable Revenue bonds $ 27,630,000 (880,000) $ 26,750, ,000 Bond premium ~243 (39,359) 701,884 All ruil nolo ond oen,li" pori Ii"", employ... orthc City "rnonhi;old!lf\: "~",,' ed hy dolincd bcnor., pin,..,.dminl$'<tcd by the Public 1!,"plo)'CCS RC1ircmcn' AssociaUo!! orm,nn"-,,,," (I'FRA). rem odm!ni*", the Ci</I';Tal Empl~)'cO$ Retire"""1 F"nd IGF.RF) Ol1d tho Public Employ."" ralie. IIn,1 h,o Fund (I'F.I'FF!. w!li.h or" <n,,-,horing. muhipjc:...c,mploycr rl!h,,,mcnl Ill:ut.'(, These plans are e:-;t<!bli;;hc:d nnd.o.dmini:i\c:rcd in ai.!c:ordanc~ wnh M,"uc"",ln slatutes, chapters 353 and 356. GERF members belong to either the Coordinated Plan or the Ba!;ic Plan. CooTdinnlcU Plan members an: t:(jycred..,y Social Security and Basic Plan m~mbers arc not. All new Il1clllb~rs must pl;lrticipalc in the Coordinated Plan. All police officers, fire-fighters and peace officers who qualify for mcmbcrsbip by statull.! arc covered by the PEPFF. PERA provides retirement henelits as well as disabijity henefits to members, and henefits to survivors upon death of eligible members. Benefits are estahlished by State statule, and vc,'!'1 after three yelm; of credited.c:;erviee. The defined retirement benefits arc based on a member's highest avet"'age salary for any five successive yean-; of allowable service, age, ami years oferedit at tenninalion Of)Ocfvice. "fwc) rnc'tl~ 1U'!' u$cd 10 colnpute bcn(lrias for rem '). Conrdin:llcd "md BS:!'It' Pl41n nlc'n,bg"l's. rhe n:millg. member ",,,,,h'c.< Ih. high<rof.lcp mle beno fil.ecru.1 (ormul. (1'>1.,100<1 l) ur " 1.~tI.CCJU.1 ron11l1l" (Method 2). Und", Method 1,Ihe :utlll\;ty lioenml mlo rqr. li.. i. 1'1\\I11110I1\ber porcelli C\ u,'t"rnl.'" ",I;uy for, ".h of lilt t1,., 10 )eor.l of ~r\jit.c... nd 2.7 p(lf'ccnt ror e:lch rcrl'l;unllls year. The annuli}' ~ti.!uu:li nhe rot "Cuurdllllltcd Pta.n n~mber i" U porcelli ofa"crore ",IilI)' r,,,en<h oflhc O~ to )."r~,"j 1.1 porcanl fo,,,,,eh r<molnl"~ Y'"'" Unde, Melhad 2. Ih.: smnulty acc'l I.Ul:I nne is ~.i pert~-'u or lwcrn-sc ~3lar')' fot IJn~ie PhUl InClmbl"rs nnd 1,7 J\CA:..:nl (or CoordinatC'd ria",tlclllbom; ror e"eli YO"' of ~CM"" I'm PIlPFI',noonbcrs.,h. ""IIully.«ruol nue ts.3.0 1',""';011 (or ""ch year o{ ""TV)CC. for.1i PEI'I'F,noll\bcr.< "lid ClERP "IoConb\.'tS hired prj", 10 Jllty I, 1989 \\1\1lSC ann"lly" ",,1<111.1<-d ",,;ng M.lh~J 1 full.n""it~ i. """il.bl. whon 'S" plu.< yo... o( ",,''''C< cquol 90, Non",,1 ""i,emenl "I:< l.55 for PEPFF ",",nbel)(:ond 65 for Aa.<ic and Coordi",,'ed mc:mbc:s lured proof 10 J.. ly I, 19~9. Nomo,1 ",lire"",", as. i. the.~. for unroducod Sox:;ul SecurilY ""neli" CQP~.' 66 ror Cootdinnlcd mcmh.", h"~ "n (Or "Iler July I, 19~9. i\ roduccd 'ellle"",nl.,niloble [0 ollgiblc mc:'n i>cts scc:king ~.rly,"ura,,,,,n,. IlI\nuIIY i. "'ii\) 'rner(' un: diffetc:nt t;'pcs orilnnllill~ uvrull3blc to mtlmn~n: upon 1"('11rtn'l4tll. 1\ sinltlc~hr~ {l,nl\uny IS :llifcllmc unj1uity,bul CdI~C:$ upc'ln d~lh Of1ht: te'''~!'!-liu &"UNivor rutm.iit) Hi p.:lyablc. TtlC"rc Drc nllo vnnotb '>'PC> or joint ~no ~lirvi\'or unnuity uption~ Avotfic.blc whit:h ""'ill 11'1! rn),l1blc over jolnl h\'u. Mcmbcf$ mlly ;,!!,<,I tea"'! Ih~ r \''Urtln''hudolU in lhco rund upon ~ermilu tion of pubu, S"cr... icc.. in order 10 qu;aliry rnr.*. dcjcm:d annwty ill relirerncd\ age-. Rcfun.ds or c:onuihutioru arc' avo:ilnbl..: Q1 :my tunc to meu,bas whl) f~.. V\: ruhljc lli4j'vit'''''. tmt 'b.:fon! r-';:iirerncnt bcru:lils be-vjn. The benefit provisions stated in the previous paragraphs of lhis section me current provisions and apply 10 al.:tivc plan participanls. Vested, tetminaleu t;mployccs who are entitled Lo hcl1cfit~ but :lrc not Tt!ceiving them yet, are bnmd by th~ provisil)ns in effect at the time they (ast terminated their public service. I' F.RA iuuc:s 3. publicly owls.liable financial report that includes financial :;;tatcmenls and required supplemenlary turonmniljn rorger'f nnd PEPFF'. TJlat report may be obtained on the Tntemet <.II rr;ra. ItO limpi", 011"" #100, SI. Palll, Minno,ola, or by calling (65 1) or I-ROO Component unit long-tenn liabililies S $ (919,359) $

110 ~ ') 4g,OM 5,722 (9,5~R) (7.016) 37,IR4 190, A-49 CITY OF NORTHfIELD, M1NNESOTA NOTES TO THE FINANC1AL sr ATEMENTS DECEMBER31,2013 Note 4: ()EFINEO BI:NEFIT PENSION PLAN - STATEWIDE - CONTINUED B. Funding policy ~fi,"ioso" <totules, chhplor )53 ""~, UlC mt;:,; lor empl"yer and employ. " """lribullol'! ' nlt.~ $Inlul.. nn:.,inblish<d D.nrl ~lmend~d by Iho Slll11: Icgi!iilalurc. The City m.lk\:~ =,nni.j1l1 comributiqn\, tn Ih(! p<lluion plnos-!!qtj:"il w the 'L'1lnUm ''''Iuired by MlIlI":Stltn ~DIUI~, ('ierf BD';C PI.n m.m~... rut Coordin:>led 1'1," mc,nbcrs W"", required 10 c.mlribole ~, IO pcrcenl ""d 6.25 pert"nt, ~pccli\"'ly. of.helronntllll co''tlcd snlnl)l in ZOll o 1'r;:PFF ""'tubers were "'quon:d 10 comriblltc 9.60 ",,",em of litei, :Il.nual <overed ~IJ' in 2013, PEel" members ure n'qumd 10 c~nlri!rnte 5.$3 ~crccnl uf 1I",;r.nnu.1 covered ~'Inry. In 20n, the City or Nonbfiold wus '«juired I~ ""n!ribule Ih.: following pct'c<."'i'ijle~ of.,111",,1 covered p'~nll: II. 7~ iwrrom Cor llj.,c Pl.n CiERI'.ncmb'II, 7.2S p<roclll rur Comdlnmcd Plnn (:r,rf,""mho... ond (4.40 perr<nl rot rlil'f~ member.. Th., C;ly', c~nlribullo.\s 10 Iho Gl!Rf for Iht )"C.n o"dina IJcc<mhtr , 2012.n~ ,"" S174,9aS.s210,79~. "lid S2~S,833, rc.."j1.. H'~Iy. The City s COllllibuUQIIS In Ihe PBI'FF (or lite )'e",. end l n~ r>cceonbcr , ~ \\~rc Sll~.670. S212,3OO. ODd S:!J n:,.'ipcctivcly. Tho City"s J;OnmhUlioM were equal 100 the cot1tmc.:.lu:tlly required conliibuliolu (or c.1ch YC~lr I1Jii ~L h)l Minnesota statute. C. Defined contribution plan E'lcoIC~ offielol. orlhe Cily m. covered by Iht: Public C!l11Jllayee., Defined Contribution Plan (PEDCP), a multiple cmr1oyc:r darc.ncd compcdsnlion plan admju ist~ by 1t1e.I' ubtic Employces:-Rctfr!l!llHcnl Association of Mlnnesota (para). Tho REDCP is I"" qualified plan under l«lion 401(0) of the Inlom.,1 Revenue Code and all conlributions by or on hefualr"c e"'l'lo),oo$ are I"" deferred until '!n'e ofwilhj",","1. rl3r bah:cil~ depend solely Oil mnounl~ cornrib\llcd 10 lhe plnn "I~ invcstm.:ru euming.'i., }CS,(.:Kfmjnistnuiv<: e~pe.u~~.!1 ~ Minne",u>... IUles. ch.:oplc1' )53D,03, 'pccif:v.he emplo)'«dnd cnlployere<>nlribuli,," mi." ror wo>o q""li ficd p~.. onllel who c.tccliq particip.le. An eligible elcctcd oltoc;,,1 who decides '0 p.rn!cipllic eolllribu."" 5 pc~1 or ""lory which" RlMclted by.he elcclcd Qfficl"l'~.mployer, Emplnyer "lid employcc conuibijlion.<.re combined "rod "icd to purch.. t... e sha.~ in one or mon: orthc 5c'\'C!n IlllX"ount$ on he- I\rlinnCliQltI Suppiemcnlal JnVtziilmC!1\ Fund. for Gdmi~i~!trinG Ih~ phm. r F.RA n.-cdvts 2 pcrttru of rolp(o~' c.r cqjltribulions nnd four 'enlh..~ ('If onl! p'c"(ccn~ oftbc u~cl'l in each member's account alidually. The City's conlributions 1(1 the PEDCP for the yems ending December 31, 2013 and 2012 were $1,789 and $1,841, respectively, The City's contributions were equal to the contractually required contributions for eaeh year.us set by Minnesota statule~ CITY OF NORTHFIEI.J). Mlt-INESOTA NOTES TO THE I'INANCIAL STATEMENTS DECEMBER31,20J3 Note 4: DEFINED BENEFIT PENSION PLAN - STATEWIDE - CON'IINU!:() Voluntary plans The ho$piuu ofthrs ~, voluniary ~ t l;t r )' deren-al pit'" under I RC Section 45 7(b). All employees arc di gibtc to panicipfltc inule rl""~nrproxint'lic l )' S5.7~5,2()9."d S4.iS8.(Kll1 bros ~n deferred as of December 31, 2013 and ft!'spccuvcl)'. b:.scd on declions lnude by 'he p:lnu:ip;u ll ~.l1h: hospital made no contribufions lo. nnr received any l>crlcfil ("Y"ICnl. frolj\lh" plnn Illnh" Yell" e~d~d Dceoonbl:T andlor 2012, Note S: POSTEMPLOYMENT BENEFITS OTHER THAN PENSIONS A. Plan description Tho; CIi~.dmiDi"...,inlllc,ol11Jlloycr defilled bendi. be.1ith<",v r lon ("the Rei!"," He.llh Plan''). Tht: pi"" pl'ovidos I!fCI,1nC: hcllllhenn: in.q,jr,tn.cc lor ehgible relirees nnd their SP('tu~<t through tl.e ("1\:«sump hcs!lth 'n.<n rj.l\c~ rim. wl,ich CO\!"t1"S both :u;tjvc und t"ctire(i mcmllcrs. Buncfi\ pro\ ifiun'\. nrc establi'lh,-,d through nclj;ollnlionb bclwcc'o Ih~ City Qnd Ihe uni('m rgprc&cl1dng ernploytcs "nd JUC IC:flcgntjnted ('11th IhJee-year btlj'wtlnjng. period. The tomponc.nl unit I, JIIeluden in Ih. Cily" pion. n,e R<:Iir.-e lleallh l'lnn does nil! 1..,,"". publicly.""iloble finlljlcinl "'pt)i1. B. Funding policy Conlrihution requirements also arc ne otiated between the City and union representatives. The City docs not contribute [Q the cost of current-year premiums for eligible retired plan members and their sp()uses. For tiscal year 2013, the City did not contribute to the plan. C. Annual OPEB cost and net OPEB obligation The Cily nnunl "ti~r P"" tmploymclllfi<;iierol (OPEB) eo~1 (e~p"'''"'1 i ~ c.l~ul.le~ bosed on lit nnllnl ru'iuired contribulion Qrll.. emplo)'of (ARC). The ARC "'p"""." 3 IC"c1.,rfin\din~ lhal. ifpaid 011 on OOlloilljt l\.'l<i... ", projec.ed 10 ",,"or norm,l c~ eneh ycllr "nd 10 oorril:c >ny un!ljn~t>d :rellwrillll"'blllli., (or 1\,ndi.U c.,..,._) <'Vcr a p<:nod not 10 ex<ccd IIliny Y,".I\< The following I~blc,how> Ibe c"m~nc,,'" "f:li. Cily's.. un.. t 01'1'[1 <0,1 fu, Ihe Y""'. Ibe omounl '<Nolly eontrlhuled 10 lite pl.n. ond.h.~.. in 'he C:il),'$IIOI OPES obli!;l1tion '".he Roli",. Health Plan. Primary D. Defi.ned henelit pension pjan Substantially all employees of the Hospital are reqlllted by State: Law to belong to a pension plan adrrunistered hy the Public Employees Retirement Association (PERA), Plan descnplian The HO"l'i\.1 conllibute.< to.hc GGRf oosl-$hll1lnll mulliple-en'ployor der.""d bcn<fill'"u.ion "I.~ ndminl$lerctl by PERA, GERF provld"" "'Iireme.t ilisnbility n"d denlh b,,' n.r.~' lo plnn member< ond bcncfici.ri"" licncfil> ure established by Stute S",,". 0,,<1 "<:<1.ncr dll~ Y.'''I/ "r.rctlltcd oeni... PHRA I"m",. "ublioly,, oil.bl. li"'iii.;.1 report th:u inol~dts tin:mci~1 JitgtC fl1ci1t$ and requirw surn1c.n\enttuy in(ormul ;l'in tilr IIH: Pbln Thnl repon Iml)' be oblained on 11.. idlemel 31 I.ER 60Emplrolmv. 1I2oo. 51 Pnul. Mlnn",,,,! or by calling (651) or Funding policy Plt'lo I1lCn\bcB n.re required IQ cronkldtu(l 6.25 pcn:\:iu oftht.ir ~1U 1 L1pl ('O\lcrcU salary and the Hospital is required to connibult at ~ n ;:clui.ul:djy dctcrm:jned rotc. '1,c cu.mmt cmplo)'qr C:ClRlribution rate is 6.25 percent. The contribution Tcquiral\cntS orl h ~ pllln mc.mbcn;).od the llealih Ccnt(,tare cstnblishc'd and may be amended by Minnesota statute. The Ho;pitnl'HOlllnbutio... o PER" for lho yca,"clldins Docomber , 2012, and 2011 were $ $ lind $1.9 14,000. rcspccti,'.ly. Annual required contribution Interest on nct OPEB obligation Adjustment to annual required contribution Annual OPEB cost (l!xpcl1se) Contributions made Increase in net OPEB obligalion Net OPES obligation - beginning of year NET OPEB obligation - end of year

111 CTTY OF NORTHFIELD, MINNESO ra NOTES TO THE FINANCIAL S r ATEMENTS DECEMBER 31, 2013 Note 5: POSTEMPLOYMENT BENEFITS OTHER THAN PENSIONS - CONTINUED The City's annual OPES cost, the percentage of annual OPEB cost contributed to the plan. and [he nc1 OPEB obligation for fiscal year 20) 3 was as follows: Year Ending Three Year Trend Information Percentage Annual Annual OPES NetOPEB OPEB Cost Contributed Obligation CITY (W NORTHFIELD. MINNESOTA NOTES TO THE FINANCIA L STATEMENTS DECEMBER 31, 2013 Note 6: COMMITMENTS AND CONTENGENT L1ABIUTTES A. Land lease Tht: flwpi\;j11wt" 'he- lund on whi4,.:h Ih~ fhcllit~ i.i 1~11!'d rmm:2 1tX.."l1 cul1 1;'"~, 'h(' ILlasc term is for sixty years with l\ll... lwt'ut} year option'lit, The ~unuhl n:nl cxpcn.w ft.r lit..: rioli tw<:ltt)')'t.'1n or.he h.:asc is approxilllatdy $ The 1t",1 ""pcllse In.'~lb.. qucnl yollrs will be <qu.,ii" S IlCI'C<nl o(lhc ~pplt\j~od market price for rural ftyricultuntlland in the- Onli:otUJR.,ee CQunty Rcgio,,_ n ", n:nl (''tpc.n,~ would he :ufllll'lctl 10 current market rates i r cetusln e\'l,,'inl.'; were to occur, ~uth:.t:o. the.)tile oflhcl HO )l['lih~t. A-50 12/31/13 12/31 /12 12/31/11 D. Funded status and funding progress % S 227,921 45,024 9_6 190,737 43, ,015 As of December 31,2013 the City's acruarial accrued liability for benefits was $381,772, all of which was unfunded. The City's CQvered payroll (annual payroll of active employees covered by the plan) was $4,tOO.240, and tbe ratio of the unfunded ~ctuarial accrued liability to the covered payroll wa!i 7.9 percent. The projoclior of fulule bonelit paymonts ror.n ongoinij rl." imuh'" nm:lies orth. v:1h,. nf r"florted nmount. nlld lssumptiol1$ about Ihe prob.billly of occurrence of "".,"' for IntO,h. future. Ex'nlpl.,,; include O$;S\lmptiorr.l.boot futu.. omploynlcn', "llllulity. ond the ~lthc:" < CQ:jt In:nd. A",OU,,1S delorrnljlod te~.n1 int:,he fundod ~tus of tho pl~n nnd the arutllj;1 required I;Oninbul:on.c; or.he cmplo)'cr arc :,ubjeel tl) continual tc\."~sion l1s :1I:IO~.i I'C..liuhs M'C compqircd with pmn c"'pe-cuu.10n15 Dud no.w cslim:ues 3I'C n\o\dc ~ fxlljllhc future. The sch~dulc of runding pro{;tcsj.. prcs.."t1i.t'd os rcqmrcd :iupph:nu:juluy inrolmnl[on rorl('l~i", lhe. no\~ to tho f.in3nci.:l15 Inltl~C,m". prcsc.,u muhl ycm trend infom'ultion n.ooul wht.1hcr the 11C:~~tlr:.:d vttiuc of pb" ~.!\.~t~ is inc':j"l!ailng or dotn'a.~ing over lime rc-inti\'c 10 the actuarial accrued liabilities for benefits, I!:. Actuarial methods and assumptions l'rojoctioos ofbcncou ror O",",ci.1 ror)oning.purpu,,,,,.ie b"""d 011 Ute 5ubSt:tntive plan (the plan as understood by the employer.od pllijl mcmbc/$) "lid indude 'ht i)1ic$ of beneol. provided allho time of each valualion and the historical pattern Clr"harin,s; "rbe.n-:ilt com be-l ween the tmlltoy,;rbnd. rleln ll)ctnoor510 that point. The actuarial methods and assumptions u.\ed Include tcochnlquc"s lh!lt IIfC de$1gjlli.-d to reduce die effects or short-term volatility in actuarial ~ccrucd liabilitie$ onti Ihc:l ac:lmtril1l value of MiSC's.. COnji)1~"t 'vllh the klng-hmn perspective of the calculations. B. Co Operating Icases The Hospital lease equipment and facilities under operating leases expiring at vario\.ls uatcs lhrough November The following is a schedule by year of future millimuill lease payments under operating leas~s as of December J 1,2013, that has initial or remaining lease terms in execs:;; of DOC year. Year Ending D~c em ber 31, Amount , IO~~9 Total $ 45K.041 Self-insurance plan The Hospill,t. elf-1i1.ure.' 11)0" employee lleult" 8nd dcntllln."tt'ii1cc p'''~j1l_ Tho Hooplr"l hn.< <ntorn.1110 an 'grt:cltlc:nt with 0",nSUI"II«company to ptn<'ik:.<lop-ioss ill. "macc 10 limit lite 1= on mrllv'd\j1li",>ii "Il,rcgole c1nlm$ Dnd h) PJu... id~ claims prc.:u.. ir.g :lnlt nthor a.dmlhismnlvl:! (unctiulls Clnims :\1\: ncctlu:d as Incurred THe a.rnounts c:h~rgc'd B) ClJ1m8C include tl.d mil1 i~rntion (C~,.:il0 p -los... ln:"rurnncc {'IIClIli"lms.. chnm!' {'aft!. and ~c.run l s for cjninu lncumu bu, uut yet poid 01 >",orcnd_ IIl,ur,u".c "~pense lor Ihe Y"'''' ended D<.'Celnho:r 31. ~1l1J.IId WI2 Were S3, :alld ,149. rc'''ll''cli 'y and nrc!ncludcd WIth ACCNed Puy,,,n.nrlllrncuts- Estimates of amounts incurred but not reported at December 31, 2013 and 2012 arc as follnws: In the Jo.,,1llY I. WII ~chl1lri.1 ".lulilion, Ih. projected unil cn:dit.ctullti.j co," method ",.S 11.1<<1. The.clUlIn.1 3$$umpllDIl$ include" J.\l perc"., for unfunded pl.n> ror the invcslmcnl Mlto of n:lum. wh ich.s ble"ded mtc oflhc C'Xp4."(led JonSHetm in' C$lrnenl rc1urns 00 plan.cissets nnd an tho employec's, own lnvc"",ln\cnls. "f1tc: 3Clu.urinl intlarjt.lnltry "10 ""od W;O ~ ).0 p."'<iii. '11,. in i li~1 he:tlthclt", II'CIld nue WI'" 8 jlc'«lnl. n:d""cd by,1""1'<"",""'10 nn ullim."e rotc of4 pcrocnt.ftor four )'OJ";. The unfunded u<nrnri.l accrued liability (\JAAL) i. being r.moni>cd 05" level pcn:c.iilge of projoct.ed p.yron on an 0p.11 b:l>l5. The romainlng.monr~\ion period "' Dccetnbor ll, 20 I J. WI" twtllty-clj;ht )',.. ",., Beginning IBNR Claims raid Claims Incurred ,926,248 (4.994,831 ) 4.997, , (4,856,994) 4, Ending lbnr 1,92R ,24R

112 CITY OF NORTHFIELD, MlNNESOT A NOTES TO THE FINANCIAL STATEMENTS DECEMBER 3], 20 J3 Note 6: COMMITMIlNTS AND CONTENGENT LIABILITIES - CONTINUED D, Medical malpractice insurance The Hospircd purc~ mooicnt mcllpmclice insurance under claims made policy ()n a lixcd-prcmium basis lhe Hospital i!'i rqs"pon~i blt for an)' mdi\'idual da.im~ exceeding $1, , and for aggregate claims exceeding $3,000,000 ro" policy}"",,, Should 'his policy lapse and not be replaced wi,h equivalent coverage, claim, based upon occurrence Juring its term, but reported subsequent thereto, will be uninsllred_ Rb;k managemenl Note 7: NET PATIENT SERVICE Rt:Vt:NUE A. Medicare CITY OF NORTHFIELD, MINNESOTA NOTES TO THE F]NANCIAL STATEMENTS DECEMIiIiR 31, 2013 By Minnesota statute. a nursing facility. which participate:. in Medicaid program. must also p<.trticipate in the Medicare program. This program is administered by the Umted States Centers for Medicare and Medicaid Services (ems). The NunhficLd Hospical Long Term Care Center is paid under tile Medicare Prospective P:lymcnt System (prs) Cor residents who are Medicare Part A eligible ami meet the coveragc guidelines for skilled nlln.ing faciliry scrvicl.:s (SNF,), The PPS is a per diem ptice-based sy,lem A-51 The I fruipiusl is axroscj 10 v:.riou! ris.k5 of 10$..o( from ton15; theft of, damage to, and destruction of "sset:;; business Intarrupliofi: error!. nnil o.ru~lcns; employer:: l",l1ries anll illnesses; natural disasters. These ri!'ks arc covered by CQJ1l.nll.'~.,cJat in~ur.tf1c'c purcha~ frorn independent third panics. There has been no significant reduction in in.'mntnge c~vc'rasc rmm dw prcwiou$ Far in ;,ny of the Hospital's policies. Settled claims from these risks have not exceeded commercial insurance coverage for the past three years. HC(J/thcare legislation and regulalimz The hcalthcate industty is subject to numerous laws ilnd regulation., of (ederal. S1iUC, nr~ '()CUI go\"gnhncn,t..~ Th~ laws and rcgl1lation~ include, but arc not necessarily limited Ill,,"~, ntrasuch ni lk(!:t\sutci.ljccrt"dit::'lljc:m. government heahhcare program participation rcquinnntnls, n:s.nhun;cmcnt for pbtfc.nl $t'rvic:es :.md Ml:diCQfC and Medicaid fraud and abuse. Recently, govenunent nc:hvity lui.!; incrcn.1ocd ".. ith rcsi')c'(.lto invc$ligalliunj I:llld allegations concerning possible violations offtaud an'" nbuse Jlt':tlutC'$ ~i,nd 1"Cg'JIQILOOS by h~hhclln: provida1 Violation of these laws and regulations could result in C)(fJuhnon rrom gq,\ cmmcnt hcahhcur prognllns \o~clhcr with the imposition of significant fines and penalties, IJ.'5 wc:1i 3:S liilgnificnnt repo.ymcnls for }l;ni~nt ~(rvfcc:c prcviously billed, Congress passed the Medicare Mo(kmi~rion ACI in which :IIfKlng other things csl~hli~o.d.. dcmonsmnion ofthc Medicare Recovery Audit COOlr.IClar (RAC) prqgl)!nl, Durln~ fl"".1 yen, 2001, 'he RA(.".,dcnlificd om! corrected a significant amount or improper OV(.rpi'ylOcrU providers in.he ~1l()nS1rnI10n S~U cs. which did not include Minnesota. In 2006, Co"JlrC's ",,,,cd,110 To.. ReI!.r and 1-I.. llh Co... ACl or20()6 which al"ho,17cd Ih. expansion of the RAe program to all 50 statcs. While the hospital was selected for a RAe audit during 2013 and 2012, tj,ey were not materi~liy impacted and appear to have appropriate policics and procedures to mitigate the risks related to RAe reviews. ~-I RI)o""lgtmenl believe,", that the Hospital is in suhslmlial cnrnf'li~n«v,1th fraud and abuse as well a" other applicable government!:'iws nod regulations. While no regulatory inquirie..<: M"C- been made, compliance with such laws and ~gul;:,' lnm i~ S'UbjC'C'\ to government review and in1cqm:!tallou. Il,"j; wen as regulatory aclions unknown or l1nasscrted at this time ~ E. Annexation agreements The City ofnorthfielc.l has annexation agreements with rour surrounding townships. Under the agreements, the City is required to make annual payment~ to the townships. The payments continue through For 2013, the payment was $35,316. Nursing facilities Itccf1!1(d (Oor panidr~o'ion in the Mc,lItnr-.: unj Mt::lJicald programs nrc Sllbjcct to anmm.1 ~urveys. If it is determined that a nur!\ing f."1.c.ilily is not in subs!nnl':.1!o:omplinm:.c with the rcquiremcnl'l of participation, CMS m3y impose sanctions altd Iton3ities duriu!; lht' period O rllot\comptwru..~~ which would have a negative impact on the revenues (,)r the nursing facility. In~",lcnt '0\110 c:m: l;clvices provided to ~ I edit,,,<: prob""m hcjlcroci.ri.~,ii\: ~!d al p.g<peelivcly dctorntillcd mtes per dil'ithllrge.. l1lcst' TOI'~ v:uy ;\ceording 10' ~ pnrft:'nl thl.'\silitulioil ~y.c;1.en11h~t i~ ba->cd on cltnh;ol. diaprio:;(ic. :md other foe",,,,, TIle 1l 000pll.I, cl:usilic.tion ofp.tienl's unden"" Mcoic.", prugmm nnd,h pplojlli.. e"=oflhcir admis:rion "rc ~ubjw I~ "It independent Nvlcw b\' n pee.! R\'icw orgum:ij.lllon Ulldcr ~n1hlc1 w'ilh the: HO.'q:titlll. O\lll"ltticnt SCTvlccs pnj\'idcd (t Mcdiure OUIJlo'\tlcnl progrum bi:r.cliclonqt ilrc )i:ubjo.:t IL't Iii-: A,nbulD10ry rd~lmcnl Cla.:n.:ificBlIon (APC) fll~lhod Mcdh:DfC n::imbu~ the HCliphal., pr.:dctclnltr.cd II!.mount f(\r nlc).~t (lulp.:u'ant ~f'\ i(lcj,. The follqwli1g «rv,"'" on: "".Iuded r,uln 'h~ APe p"yn,unl met!><kmi01ty; ","vi,... lrtlldy ~id OIl a foe schedule, ""tvr«. 10 SNF,...idcnh which Me ah.. dy included in tho S~I ". po),",cnl, Ol,d ""n,un.knfs_ biologic.] and D\<dl t~1 de';,c",' idcn'iftc\l h, p:ljrlh,uugh ;'0"\8, Tho APe PO)"""'"'' "'" '"" b..,,,d on til<: p"o"';dcr';tannudi ""OS rrp<!rt. B. Medicaid The Stale ofminocsota uses a Minimum Dfltc Set (MDS)-hllscd resident a.<;;s~ssmel1t system. As a result, M edicaid und private paying rcsidcn1s are classified into one of]4 Resource Utilization (itoups (RUG) for purposes of establishing payment rates. By Minnesota statute, a nursing facility may not charge private paying residents in multiple occupancy rooms per diem rales in excess of the approved Medicaid rates for similar services. I-lus[lilaJ inpatient services rendered to Medicaid program beneficiaries arc rcimbur~cd undcr a reimbursement mcthodol(jgy similar to inpatiem Medicare. Hospital outpi1ticnt Medicaid serviccs are reimbursed 011 the Medicaid fee schedule Other The Hospital ha!i also entered into payment agreements with Blue Cross and other commercial insunmce carriers.. The basis for reimbursement under these agreement.:; includes tlisc()ullts rrom established chargcs, and prospectively determined rates, l.uw~ and n:guln.tldns govcm:ng Medicare and Medicaid I)10 8fDI1 1~ arc. cxmmdy oomph::o( And 6nhjC'Cl In int~11m:l:uion. A~ It n:':sult. thet~ is al Ica~1 il ~n:son!lble possibility thai rccqrtkd ct.1im.'lics will,hans~ by Q nuncrinl tlinouni (" Ihe near lerm. Net paricn't nnd rt'stdc:m SOTVico revenue decreased ror lhe" )'1:fif ended December by n.pprn:\;n\ij!t-(y S16.00(lond incn:tl.scd by SI.l3~.OOO for 'he yeor ended 1)<'«'"l\><r 3L, d"oio t1'"o~", In."lnmtcd.clllo"",n, amounts.

113 CITY OF NORTHFIELD, MINNESOTA NOTES TO THE FINANCIAL ST ATEMENTS DECEMBER 31, 20 i3 Not. 7: NET PATIENT SERVICE REVENUE - CONTINUED A ~ummary o[palient and resident revenues and contractual adjustments is as follows: Total Patient and Resident Revenues S 167,38J,96~ $ 151,~ 05, toj $ 144,805,095 S 131,068,108 Contractual Adjustments: Medicare (J2,672,539) (28,584,366) (26, ) (23,594,362) Medicaid (9,685,1l91 ) (8,998,778) (8,197,251) (7,734,308) Commercial / HMO's (38,521,902) (33,819,978) (31.606,591) (28,078,400) Provision or Bad Debts (2,432,402) (1,877,497) (1,905,046) (2,007,049) Other (4,648,145) (4,38~,972) (4,795,760) (4,316, 193) Tolal Contractual Adjustments (87,960,079) (77,667,591) (72,838,096) ~65,730, 312) Net Patient and Resident Revenues $ 79,423,889 74, ,966,999 05,337,796 Note 8: OTHER INFORMATION - CONTINUED C. Federal and State funds CITY OF NORTJlFIELD. MINNESOTA NOTES TO THE FINANCIAL STATEMENTS DECF-MBEJ( The City rcccive:-; financial ~l.s~jstance rrom federal and Slate govl:rnmcntal agencies in [he form of grants. The disbursement offund~ received under these programs generally requires compliance with the terms and conditions specified in the b't(lnt agreements and n.r~ snhjcct tu audit by the grantor agem:ies. Any disallowed claims reslliting from such audirs CQuid become a liabi lity ofrhe applicable fund However. in the opinion of management, any such disallowed claims will not have (l rnateri~l l erfect on any oflhc financial statements of the individual rund types included herein or on the overall financj~l position of the City at December D. Tax increment districts Tbc City's tax increment districts are subject to Teview hy lhe Stale ofminncsljl<t Otlicc of the Siale AucJilor (OSA) Any disallowed claims or misuse of tax increments could become;t liatl1lily or Ihc aprlicahlc rund. Management has indicijtcd that they are no1 aware of any instances ofnonc01llpiiance which would have a material effect on the financial statements. E. Legal dcb~ margin A-52 Note 8: OTHER INFORMATION A. Risk management The City is exposed to various risks ofloss related to torts; Iheft of, damage fo and destruction of assets; error5 and omissions; injuries to employees; and natural disasters for which the City carries in:-;urancc. The CiLY obtains insurance through participation in the League of Minncsot<l Cities InsuTance Trust (LMCIT) which is a risk Shil.Ting pool with approximately ROO other governmental units. Thc City pays an annual premium to LMCLT for its workers compensation and property and casualty insurance. Thc LMCIT 1S self sl1staining through member premiums and will reinsure for claims above a prescribed dollar amount for each insurance event. Settled claims ha.ve not exceeded the City's covcrage in any of the past three fiscal years. Liabilities are reported when it is probable [hat a Joss has occurred and the amount of the loss ean be reasonably estimated. Liabilities, if any, include an amount for claims that have been incurred bur not reported (IBNRs). The City'S management is not aware of any incurrcd but not reported claims. B. Contingent liabilities Amountft (('lctivcd or J'ecclwtble from grant agcnclcs.ll~.ocinbjc:t1 III mwit lind a.dj u~! mcnl by grantor agencies, prilld polly 'he fod<mj ttovemmcnl Any d,;o,liowod ell!.im,. in<:ludins AlOOun". I,,,,,uy.ollected, may constitute a Ilobillty of. he npplicobte ruoo$ The omoo"'. ifony. ur ""pwdi.u..., which moy bc dl",liuwed by the grantor cannol bo delermined OI.his.imo.Ithough.h. Cil~ ""pcc\l<.uth,lmounl<, lrnny o be: lotm.\ui;li. The City'$ t.~ Incremcnt di<1rlol~ nre$llbject to review by Ihe State of Minnesola omce "r.h< SIOIC AuJilor (OSA), Any disallowed ti:dms gr misuse apt:tx increments could become a liability ofthc applicable nmu, ManO'lg,an1t't\: hj.<; indicated,h:tt they nrc no~ t'1 wtj re Or:tny instances or noncompliance which would have u material CITC:C1 on tht financial st(ltements. in accordance wilh Minnesota statules, the City may not incut or be ~ubject to general ohligation debt in excess of three percent oflhc market value of taxable IJropcrty within the City. (ienerfi] obligation deht is payable solely from au valorem taxes and therefore. excludes debt tinanced p,h1i<jlly or entirely by spc<.:ial flssessmenls, enterpri~c- fund receipts or tax illcrcments. Currently, the City's general obligation debt outsrnnding of$1.295,ono is hdow this limil F. Concentrations The City recclvcs a significant amount of its ailnu<l1 Gencr<ll fund revenues from lhe Slale or Minnesota fmrn the Local Government Aid (LGA) program. The amount received in 2013 was $2.243,397 rot LGA. This accounted lor 21 perccnt of General fund revenues G. Electronic Health Record Incentive Program TI,e Elcotmnic Heohh Rccord (EHR) moe.m'o prosrnm "'"' Cll:l"I<:<l "" p;ln orlt.: "mo",," R«,,,,,,'Y ruld RcinvCSUll""l Ac. onoo? (ARRAlood.ho Hcnl.h In(ormnlkm T,.. hnoigi'y r"r I"'"nom M~ Chniooll1c:U.h (HITECH) '\ 0' 'oos. ACI$ provid~d ror I"o<:nth'. pn)'1l1c"i> UII\I,,,. both 'he Motn"", nd M<lhcald pl'ii~rnm' Il' elisible hq'fji ta l~nlld providers IhOl dcmomnn. """,nin81i1l ",e urcc~ifi(d m IR 'ochn"lblly' TI", inoenl;v< Jl"'yment' :ue made b.ll;1\c:d on 0. suuutoj)' formula nnij :ate coiutnrcnt on Ih('l Or);anilUllon ~OIuim"1DE: co ~"Cllh-e CScl1.l:lting merut{ngful I.lr,c crito:rifl for Ihe first p.1ymcnl )~'U'.lhc OryDl1i./;uion nm,.1 nne:;i, :;lihj~ lu "''' audh, Ihi.11l m<llii" ",enninsrul.., e... n. (or 0 cominllou. 90-dny pmod. For the oub"'qucnl P'ym.!nI y".r, ll,e OI];',"i"'II". mu ;';t demons. rotc meamngful ~c rorlha rn1ir' )'CO\r. The 'nc:(lnt!\-c p:l)'tncnb nrc' KCI''It~t;IIl')' mjisc' OVer.1 raur ~c..!f JIC,iod. For hospit.'. II"" do 110f..." fccci"ng m nln~fill''''' I'>'>-IIl.nl, unlrl reden.lli,cul yom, 2014 or 20I~. the base paymcnt amount will reduce in sub~cquent yean: by'/., 'h, and Jk The HONpi",1 deruonsun«d menntr'llfnl lt<. to the W oiiy permd,-"d.ci "\li~i'" D n:oci.. d 'he r",,,.en..,,!ve incolll;vo p"yme,n orss69,079 on Otllohtr 21, loll, Adtli. it'm.t.o.nl,"ce"live Ptl)'mcnl< ors~91. 77S ~nd SG98,774 "'ore rcce;"cd in.be fi'cl\ 1 YOM' oncilnlllk<:<mhor 11, 200.,,< ""'IJt:C.i\'ci)' lhl mc>uni!. [ccc)snl'zcci ;l$ olrn:r opcmlin.s rc\'cnu~ in the ~11ItC.I1~nl of Rc:vC1\t1'l!.-" P'q"ICn"Cs!lmS Ch:~C\'C In.!'l(,'1 PI',:nli()n. The fil':l'i "Illounl of \It<) pnp""'" rel.ltd to Ihe ho.'i'h.l'~.1i01l Qr MC1Utlngful U will be duicilninco bmw OIl Inrormnt!On (rom lheo~n {vlllon' s M,dicnro,o,'1 "'1''''' ror the >"",.'fi,!>n!! nco<moor J I. loj):u:d 2012 E"""", ~ould CXCiJr I,Mt \VOuJd (:lust ttlc' fin!!1 p.'y"1tml It) differ n~ut-ri:aijy uj'ion on:i' ~ll lcmcn;. 1hcn::r"n: 1m: ho"'~lll1' I"IS estimated a 10% rcserve tor a potential payback of the incentive dollats for the ho~pital

114 Note 9: CHANGE IN ACCOUNTING STANDARD CITY OF NORTHFIELD, M!NNESOT A NOTES TO THE FINANCIAL STATEMENTS DECEMBER 31, 2013 OurinJJ fisclll y~;,r the Cily IInplcmcnted ;u:counting pn,mounc\'"1'i\tnl Statement No. "I. "The Fi"aud lllllcpor/;ng Srulf)'; Omnibu... (m Am{!1rdmcllr 11/GASB SfmcmrllfS No. 14 mil/ Na. J,J,. iuuoo by lh~ Govemmcnl A'CC',ollnting Slandards BOllia «(;AS8), n!': $1ond3rd ceq"iew. r.i"'xii,< imjllcmcnlj>linn which ",-",lted in the C"-<lel.menl of bcginnlnl\ bnllu\.c" In lh1: lx'c<:mha 31, WI J fjn:>neiol <lat<mcn'" Chnnl\os Ic"lted 10 the,se Jlandard$ arc: ccl1<:<:led in the rin.nnctnl,!u=ue.ment~ nnj.schedules IIIl,d tcitllcd rim(' disc:lo~urcs.. Due to!he rcclt1s~ilic:;uion O(dH: ~f)a us a govemrncntal fund of the pdljl.lt)' gg\,'~nu1\cnl t'i prior period adju:-tmcnt was ncccssury 10 c:hmin;uc. unuvtu!uhlt (C1/\;"ouc. in the fund that was used n..; an oft~1 (l1f Ihe ~p-i'a.llc:~ between the primary tovcmmonl and the EDA. Chung~,~ t \1li:tl to the prior period adju$irn.::nl ure rcntctc'd in tbe linarn;.fai statements and schedules and related note disdosutcs As a result of the restatement of beginning balanc(!s and the prior period adjustment, the following schedule reconciles the previously reported December 31,2012 balances to the December 31, 2013 financial sratcmcnls: Net Position December 31, 2012 as Previously Reported December 31, 2013 Restatement for Reclassification of Funds (1) Net Position January 1,2013 as Restated Governmental activities 44,147,291 1,586,601 45,733,892 A-53 Discretely presented component l1nit - EDA Governmental fund Economic Development Authority 1,586,601 ( 1,586,60 1),,;'~==~= 1,1 30,5 16 1,130,5 16 (1) To show the fda as a blended component unit under lhc requirements of GASB 61 _ The I-JQspit:d iufillcmtntcd C;ovcmmcnml AC'ctiunling StlUlU4td~ Bo;;,rd SlntC'.I1lC1U 6S, IttiltS' I'rcvlnU,fl), RcpnrlcJ os A.~,~("ll' m,t! IJabllitl.J (GASS S"' I~n10Ili 6S). GASO S',,'cm.n' 65 required 'he Hosp;I.1 10 "",I sil)' ccn~m ilem, lhol w,"" rrcviou!ly "'p"rted.. ~15 "nd If.bili,ics '0 defcrred o.,now" of resources or d.fcrm[ innu\\'~ of','1o\ii""-,, G,\lill Siotement 65 h. < heen 'pplied,otro,'pl.'<tivcly '0 Ilo,'lJ.o11'. 20! ~ fionllcio.l 'I.tCll1I:nts by ft'~ ' "'in8 nel """i,lol' and C",,:ngoS in net I'0,;\ton e.lnto<! 10: (I)!Illn"",T1f7.«l1i1l"r.<in~ 00<1$ I~II Md heel! p,,,,,lously cnpiln1i~.cd ond 'I!t\(jrtV.>!d, hul nn: 00 longar m:osnl.cd "-, a.ss.:1s.nd (2) 10 rcc"!.'ili~d deferred h<lnd rcl\tndi~g COStS.. " ~eierr.<1 o",l1olv of I"""uco,,, Ouc II,. adoplion ofoasb Stotclll'"'' 65, lung-tonn ~ bl inclc""ed b)' S 1,095.0$5 in 2012 ~ s a dorer",i!""." on,.funding wa.".. rcalu_!;sitit.-d as 3 d.armed OUIOo.w nrro:ouccd ~\Iso, duro!' 10 Ihe -adopl1on orgash SUHcnlCn16S. Ihe 20i 2. bci.iflnioq nel JIO"ilion wo.' dc<)",asod by 5435,752.nd inlerc:~1 expe't'" w.. ~ decrcnscd by SlI,971 for2012. Note 10: SUBSEQUENT EVENT On APIIII, :!Ol~, the City enlered In'o ~joinl PI'w." "Jl.n:cn,cul ",i:h "" offteli, o dote ofsep'embel , TIr.jOln!»(11\>\111 "~n:"nlcnl i. for,he «en'lon of'ho!'!on!rlle!.! Atco!'ire nnd Rescue Scl'\';co CNAFRS) bclw,""nlhc Cl!),or Nonhr.d ~, C,ty ordor-do<, Rur.ll Fire. Bridll",,"'crTuwl1ohip, Nonhlicld To,_hip, W.b.1crTowm,hlp, hi""" Towll,hip, Wat",rOfd Town.,hip, Sci." Townshljl, nnd Green.ale Town..hip. 't>;afrs is B~v<",ed by ~ Jol"1 go.....",'n... b,,,,d fol Iho pu""",,,,, orpnwidlng I1rc prol""',ml,, " pp"",';"n, pl."".,;o", Icchnlc.1 ",",CU,,.nd non 'n",.""n cl""'gcney medlcol ""rvices. TheC,'y or Northfield wiil canlnbul< percc111 of'ho Iilndlns for NAI' RS for In.: fisclli years 2014 through 2017,