City of Mounds View Minnesota

Transcription

1 City of Mounds View Minnesota Comprehensive Annual Financial Report For the Year Ended December 31, 2012

2 COMPREHENSIVE ANNUAL FINANCIAL REPORT OF THE CITY OF MOUNDS VIEW, MINNESOTA FOR THE YEAR ENDED DECEMBER 31, 2012 Prepared By Finance Department

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4 CITY OF MOUNDS VIEW Table of Contents SECTION I INTRODUCTORY SECTION LETTER OF TRANSMITTAL GFOA CERTIFICATE OF ACHIEVEMENT PRINCIPAL CITY OFFICIALS ORGANIZATIONAL CHART Page i iv v vi vii SECTION II FINANCIAL SECTION INDEPENDENT AUDITOR S REPORT 1 3 MANAGEMENT S DISCUSSION AND ANALYSIS 4 14 BASIC FINANCIAL STATEMENTS Government-Wide Financial Statements Statement of Net Position 15 Statement of Activities 16 Fund Financial Statements Governmental Funds Balance Sheet 17 Statement of Revenues, Expenditures, and Changes in Fund Balances 18 Reconciliation of the Statement of Revenues, Expenditures, and Changes in Fund Balances to the Statement of Activities 19 Statement of Revenues, Expenditures, and Changes in Fund Balances Budget and Actual General Fund Statement of Revenues, Expenditures, and Changes in Fund Balances Budget and Actual Tax Increment Financing District No. 1 Special Revenue Fund 22 Statement of Revenues, Expenditures, and Changes in Fund Balances Budget and Actual Tax Increment Financing District No. 5 Special Revenue Fund 23 Proprietary Funds Statement of Net Position 24 Statement of Revenues, Expenses, and Changes in Fund Net Position 25 Statement of Cash Flows 26 Notes to Basic Financial Statements REQUIRED SUPPLEMENTARY INFORMATION Schedule of Funding Progress - Other Postemployment Benefits Plan 50 COMBINING AND INDIVIDUAL FUND STATEMENTS AND SCHEDULES Nonmajor Governmental Funds Combining Balance Sheet 51 Combining Statement of Revenues, Expenditures, and Changes in Fund Balances 52 Nonmajor Special Revenue Funds Combining Balance Sheet Combining Statement of Revenues, Expenditures, and Changes in Fund Balances 55 56

5 Page COMBINING AND INDIVIDUAL FUND STATEMENTS AND SCHEDULES (CONTINUED) Schedule of Revenues, Expenditures, and Changes in Fund Balances Budget and Actual Cable Television Fund 57 Police DARE Fund 58 Police Forfeiture Fund 59 Economic Development Authority Fund 60 Community Center Fund 61 Lakeside Park Fund 62 Recycling Grant Fund 63 Tax Increment Financing District No. 2 Fund 64 Tax Increment Financing District No. 3 Fund 65 Nonmajor Debt Service Fund Balance Sheet 66 Combining Statement of Revenues, Expenditures, and Changes in Fund Balances 67 Nonmajor Capital Projects Funds Combining Balance Sheet 68 Combining Statement of Revenues, Expenditures, and Changes in Fund Balances 69 SECTION III STATISTICAL SECTION (UNAUDITED) CITY OF MOUNDS VIEW Table of Contents (continued) Net Position by Component 70 Changes in Net Position Governmental Activities Tax Revenues by Source 73 Fund Balances of Governmental Funds 74 Changes in Fund Balances of Governmental Funds 75 General Governmental Tax Revenues by Source 76 Tax Capacity Value and Estimated Market Value of Taxable Property 77 Property Tax Rates - Direct and Overlapping Governments 78 Principal Property Taxpayers 79 Property Tax Levies and Collections 80 Ratios of Outstanding Debt by Type 81 Ratios of General Bonded Debt Outstanding 82 Direct and Overlapping Governmental Activities Debt 83 Legal Debt Margin Information 84 Pledged Revenue Coverage 85 Demographic and Economic Statistics 86 Principal Employers 87 Full-time Equivalent City Government Employees by Function 88 Operating Indicators by Function 89 Capital Asset Statistics by Function 90

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8 Phone: (763) Fax: (763) April 16, 2013 Honorable Mayor, Members of the City Council, and Residents City of Mounds View, Minnesota State law requires that all municipalities complete a set of financial statements presented in conformity with accounting principles generally accepted in the United States of America, and these statements are to be audited by a firm of certified public accountants or the Office of the State Auditor. Pursuant to that requirement, we hereby submit the comprehensive annual financial report (CAFR) of the City of Mounds View, Minnesota (the City) for the fiscal year ended December 31, This report consists of management s representations concerning the finances of the City. Consequently, management assumes full responsibility for the completeness and reliability of all of the information presented in this report. To provide a reasonable basis for making these representations, management of the City has established a comprehensive internal control framework that is designed both to protect the City s assets from loss, theft, or misuse and to compile sufficient reliable information for the preparation of the City s financial statements in conformity with accounting principles generally accepted in the United States of America. Because the cost of internal controls should not outweigh their benefits, the City s comprehensive framework of internal controls has been designed to provide reasonable, rather than absolute, assurance that the financial statements will be free from material misstatement. As management, we assert that, to the best of our knowledge and belief, this financial report is complete and reliable in all material respects. The City s financial statements have been audited by Malloy, Montague, Karnowski, Radosevich & Co., P.A. (MMKR), a firm of certified public accountants. The goal of the independent audit was to provide reasonable assurance that the financial statements of the City for the fiscal year ended December 31, 2012 are free of material misstatement. The independent audit involved examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements; assessing the accounting principles used and significant estimates made by management; and evaluating the overall financial statement presentation. The independent auditor concluded, based upon the audit, that there was a reasonable basis for rendering an unqualified opinion that the financial statements for the year ended December 31, 2012 are fairly presented in conformity with accounting principles generally accepted in the United States of America. The independent auditor s report is presented as the first component of the financial section of this report Highway 10 Mounds View, MN Website address: i

9 Accounting principles generally accepted in the United States of America require that management provide a narrative introduction, overview, and analysis to accompany the basic financial statements in the form of Management s Discussion and Analysis (MD&A). This letter of transmittal is designed to complement the MD&A and should be read in conjunction with it. The City s MD&A can be found immediately following the report of the independent auditor. Profile of the City The City is located in northern Ramsey County approximately eight miles north of the city of St. Paul. The City encompasses an area of approximately 4.25 square miles. Population was 10,599 in 1970, 12,593 in 1980, 12,541 in 1990, 12,738 in 2000 and 12,155 in The City is empowered to levy a property tax on both real and personal property located within its boundaries. The City has been a municipal corporation since The City operates under a Home Rule Charter that was adopted in The Charter was most recently amended on March 8, The form of government established by the Charter is the Mayor/City Council plan. There is a Mayor and four City Council members, all of whom are elected at large. The City provides a full range of services, including police and fire protection, planning and zoning, streets and roads, parks and recreation, and a community center. Certain utilities are provided through Water, Sanitary Sewer, Storm Water, and Street Light Funds that operate as departments of the City. The Economic Development Authority of the City is treated as a blended component unit of the City and is reported as a Special Revenue Fund. Fire protection is provided through the joint Spring Lake Park Blaine Mounds View Fire Department (the Fire Department). Only the City s contribution to the Fire Department is reported in these financial statements. The annual operating budget is the core of the City s financial planning. All departments and all funds are required to submit budget requests. The state of Minnesota requires local governments to meet certain processes and deadlines for consideration, public notification, and adoption of property tax levies. These requirements form the basis of the City s entire budget process. Additional details on the profile of the City can be found in Note 1 of the basic financial statements. Local Economic Condition and Outlook The City is over 90% developed with the majority of land having been developed as single-family housing. Since the City is primarily residential, many residents are employed in other parts of the metropolitan area. Interstate Highway 35W, U.S. Highway 10, and County Highway 10 traverse the City, providing easy access routes for commuters and commercial traffic. County Highway 10 was formerly U.S. Highway 10 until a new freeway segment was constructed and took the name. The City of Mounds View s residential development remained slow in Three permits were issued for new residential dwelling units in This compares with zero permits in The City issued no commercial building permits in 2012 and one permit valued at $183,025 in The City issued a total of 386 building permits in 2012 compared with 420 in 2011 at a total constructed value of $5,543,514 compared with $3,935,509 in The City anticipates improving residential and two commercial developments in ii

10 Long-term Financial Planning The City maintains a bond rating of AA3 which reflects the City s favorable financial position. This would provide for a lower interest rate should the City desire to use long-term borrowing for future capital and infrastructure improvements. The single greatest infrastructure need facing the City is the condition of its streets. The City adopted a ten year street improvement program in 2007 and substantially completed reconstructing 15.4 miles of 26 miles of streets thru The City will reconstruct 3.0 miles of streets in Future street reconstruction will be financed by a combination of different revenue sources, franchise taxes, Municipal State Aid, unobligated tax increment, and a general property tax levy will serve as the primary sources. The adopted street program does not utilize assessments to finance any part of the reconstruction which had been a major impediment in initiating past projects. Making street reconstruction affordable for citizens was a goal of the City. The reduction of state funding to cities has forced the City s staff and City Council to make difficult choices in determining the manner to finance services provided to citizens. The economic slow down will impact the City thru lower or no aid payments from the state. The state recently reported a surplus in the current budget cycle thus reducing the probability of aid reductions. Final determination will not be known until the legislature has adjourned. As of the time of writing this report the Legislature was still in session. The City continues to work on redevelopment opportunities in other parts of the City that will enhance the tax base, increase job opportunities, and provide amenities desired by the residents. Relevant Financial Policies The state has suffered significant budgetary issues over the last few years and has dramatically reduced aid to local governments. The City of Mounds View s policy will not anticipate future aid payments and will construct future budgets without these aid payments. Major Initiatives The major economic development initiative continues to be the upgrading of County Highway 10. The objective is to improve traffic flow and safety on the major corridor through the City s main commercial district. This is a multi-year project and achieving this should trigger new interest in development and redevelopment of commercial properties along the corridor. Two major intersections are scheduled for reconstruction and safety improvements in the near future. It is expected that federal, state, and county grants will be needed along with a significant local match to undertake this project. The local match for the County Highway 10 corridor would need to come from unobligated tax increment. The City continues to implement the 10 year street improvement program. The City will also undertake rehabilitation of several parking lots, trail improvements, and sealcoat projects. The tax increment financing (TIF) districts have had positive cash flows for the last eight years. The City will be using a significant amount of unobligated tax increment for street reconstruction. This reduces the amount available for funding projects in the corridor. The City will have to rank and choose the projects that are most important along the corridor. iii

11 Awards and Acknowledgements The Government Finance Officers Association of the United States and Canada (GFOA) awarded a Certificate of Achievement for Excellence in Financial Reporting to the City for its comprehensive annual financial report for the fiscal year ended December 31, In order to be awarded a Certificate of Achievement, the City had to publish an easily readable and efficiently organized comprehensive annual financial report that satisfied both generally accepted accounting principles and applicable legal requirements. A Certificate of Achievement is valid for a period of one year only. We believe that our current comprehensive annual financial report continues to meet the Certificate of Achievement Program s requirements and we are submitting it to the GFOA to determine its eligibility for another certificate. The preparation of this report would not have been possible without the dedicated services of the finance and administrative staff of the City. I would like to express my appreciation to all staff members who assisted in the preparation of this report. Credit must also be given to the Mayor and City Council who have supported changes to improve the financial processes and position of the City. Respectfully submitted, James Ericson City Administrator Mark Beer Finance Director iv

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14 CITY OF MOUNDS VIEW Principal City Officials Year Ended December 31, 2012 ELECTED OFFICIALS Joe Flaherty Roger Stigney Carol Mueller Alan Hull Sherry Gunn Mayor Councilmember Councilmember Councilmember Councilmember APPOINTED OFFICIALS James Ericson Mark Beer Scott Riggs Tom Kinney Nick DeBar Heidi Steinmetz Administrator Finance Director City Attorney Police Chief Public Works Director Economic Development Specialist vi

15 City of Mounds View Organizational Chart Citizens of Mounds View Mayor and City Council Charter Commission Cable Committee Economic Development Authority Economic Development Commission Planning Commission Police Civil Service Commission Parks and Recreation Commission City Administrator Assistant City Administrator Receptionist Cable TV Coordinator Cable TV Production Tech Finance Director City Administrator Public Works Director Police Chief Accountant Planner Public Works Supervisor Deputy Cheif Payroll/Utility Billing Tech Economic Development Specialist Building Official Fire Marshal/Code Enforcement Inspector Administrative Assistant Maintenance (8) Seasonals Parks Supervisor Sergeant (3) Patrol Officers (12) PSO Park Maintenance (1) Administrative Assistant Custodian Seasonals Info. Services Engineer/Tech. Records/Evidence Tech Investigator (2) Administrative Assistant vii

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21 CITY OF MOUNDS VIEW Management s Discussion and Analysis Year Ended December 31, 2012 As management of the City of Mounds View, Minnesota (the City), we offer readers of the City s financial statements this narrative overview and analysis of the financial activities of the City for the fiscal year ended December 31, We encourage readers to consider the information presented here in conjunction with additional information that we have furnished in our letter of transmittal, which can be found in the beginning of this report. FINANCIAL HIGHLIGHTS The assets of the City exceeded its liabilities at the close of the most recent fiscal year by $61,805,543 (net position). Of this amount, $24,038,068 (unrestricted net position) may be used to meet the government s ongoing obligations to citizens and creditors. The government s total net position increased by $2,356,158, of this amount $2,468,034 or 104.7% was attributable to governmental activities, ($111,876) or (4.7%) was attributable to business-type activities. As of the close of the current fiscal year, the City s Governmental Funds reported combined ending fund balances of $24,063,410, a decrease of ($394,069) in comparison with the prior year. Approximately 16.7% of this total amount, $4,029,265, is restricted for debt service, tax increment purposes, parks and recreation, communications, public safety, and conservation. Approximately 70.1% or $16,857,179 is assigned for future expenditures and 13.2% or $3,176,966 is unassigned, which is available for spending at the government s discretion. At the end of the current fiscal year, unassigned fund balance for the General Fund was $3,176,966, or 61.8% of total General Fund expenditures. The City s total debt (excluding compensated absences and net other post employment benefit obligations) decreased by $520,928 or 20.6% during the current fiscal year. The decrease was the result of annual debt service. OVERVIEW OF THE FINANCIAL STATEMENTS This discussion and analysis is intended to serve as an introduction to the City s basic financial statements. The City s basic financial statements are comprised of three components: 1) governmentwide financial statements, 2) fund financial statements, and 3) notes to basic financial statements. This report also contains other supplementary information in addition to the basic financial statements themselves. Government-Wide Financial Statements The government-wide financial statements are designed to provide readers with a broad overview of the City s finances, in a manner similar to a private sector business. The Statement of Net Position presents financial information on all of the City s assets, liabilities, and deferred inflows/outflows of resources, with the difference reported as net position. Over time, increases or decreases in net position may serve as a useful indicator of whether the financial position of the City is improving or deteriorating. -4-

22 The Statement of Activities presents information showing how the government s net position changed during the most recent fiscal year. All changes in net position are reported as soon as the underlying event giving rise to the change occurs, regardless of the timing of related cash flows. Thus, revenues and expenses are reported in this statement for some items that will only result in cash flows in future fiscal periods (e.g. uncollected taxes and earned, but unused, vacation leave). Both of the government-wide financial statements distinguish functions of the City that are principally supported by taxes and intergovernmental revenues (governmental activities) from other functions that are intended to recover all or a significant portion of their costs through user fees and charges (business-type activities). The governmental activities of the City include general government, public safety, streets and highways, sanitation, culture and recreation, and economic development. The business-type activities of the City include water, sanitary sewer, storm water, and street light. The government-wide financial statements include only the City itself. The Economic Development Authority, although legally separate, functions for all practical purposes as a department of the City, and therefore has been included as an integral part of the primary government. The government-wide financial statements can be found on pages Fund Financial Statements A fund is a grouping of related accounts that is used to maintain control over resources that have been segregated for specific activities or objectives. The City, like other state and local governments, uses fund accounting to ensure and demonstrate compliance with finance-related legal requirements. All of the funds of the City can be divided into two categories: Governmental Funds and Proprietary Funds. Governmental Funds Governmental Funds are used to account for essentially the same functions reported as governmental activities in the government-wide financial statements. However, unlike the governmental-wide financial statements, Governmental Fund financial statements focus on the near-term inflows and outflows of spendable resources, as well as on balances of spendable resources available at the end of the fiscal year. Such information may be useful in evaluating a government s near-term financing requirements. Because the focus of Governmental Funds is narrower than that of the government-wide financial statements, it is useful to compare the information presented for Governmental Funds with similar information presented for governmental activities in the government-wide financial statements. By doing so, readers may better understand the long-term impact of the government s near-term financing decisions. The Governmental Fund Balance Sheet and the Governmental Fund Statement of Revenues, Expenditures, and Changes in Fund Balances provide a reconciliation to facilitate this comparison between Governmental Funds and governmental activities. The City maintains several Individual Governmental Funds. Information is presented separately in the Governmental Fund balance sheet and statement of revenue, expenditures, and changes in fund balances for the General Fund; the TIF District No. 1 Special Revenue Fund; the TIF District No. 5 Special Revenue Fund and the Street Improvement Capital Projects Fund, all are considered to be Major Funds. Data from the other Governmental Funds are combined into a single, aggregated presentation. Combining and individual fund data for each of these Nonmajor Governmental funds can be found on pages The City adopts an annual appropriated budget for its General Fund and the Special Revenue Funds. Budgetary comparisons for the General and Major Special Revenue Funds are included in the basic financial statements. Budgetary comparisons for Nonmajor Special Revenue Funds are provided elsewhere in the report to demonstrate compliance with these budgets. The basic Governmental Fund financial statements can be found on pages

23 Proprietary Funds The City maintains only one type of Proprietary Fund. Enterprise Funds are used to report the same functions presented as business-type activities in the government-wide financial statements. The City uses Enterprise Funds to account for its water, sanitary sewer, storm water, and street light operations. Proprietary Funds provide the same type of information as the government-wide financial statements, only in more detail. The City has chosen to report all of the Enterprise Funds as Major Funds of the City. The basic Proprietary Fund financial statements can be found on pages Notes to Basic Financial Statements The notes provide additional information that is essential to a full understanding of the data provided in the government-wide and fund financial statements. The notes to basic financial statements are included as a component of the basic financial statements and can be found on pages Other Information In addition to the basic financial statements and accompanying notes, this report also presents certain required supplementary information concerning the City of Mounds View s progress in funding its other post employment benefits plan. Required supplementary information can be found on page 50 of this report. GOVERNMENT-WIDE FINANCIAL ANALYSIS As noted earlier, net position may serve over time as a useful indicator of a government s financial position. In the case of the City, assets exceeded liabilities by $61,805,543 at the close of the most recent fiscal year. A significant portion of the City s net position (53.5%) reflects its net investment in capital assets (e.g. land, buildings, infrastructure, and equipment); less any related debt used to acquire those assets that is still outstanding. The City uses these capital assets to provide services to citizens; consequently, these assets are not available for future spending. Although the City s investments in its capital assets is reported net of related debt, it should be noted that the resources needed to repay this debt must be provided from other sources, since the capital assets themselves cannot typically be used to liquidate these liabilities. -6-

24 The City s Net Position Governmental Activities Busines-Type Activities Total Current and other assets $ 25,381,153 $ 26,112,370 $ 5,904,670 $ 6,581,274 $ 31,285,823 $ 32,693,644 Capital assets 26,964,355 24,231,032 7,041,382 6,796,886 34,005,737 31,027,918 Total assets $ 52,345,508 $ 50,343,402 $ 12,946,052 $ 13,378,160 $ 65,291,560 $ 63,721,562 Long-term liabilities outstanding $ 2,615,269 $ 2,887,085 $ 305,425 $ 515,149 $ 2,920,694 $ 3,402,234 Other liabilities 451, , , , , ,943 Total liabilities $ 3,066,852 $ 3,532,780 $ 419,165 $ 739,397 $ 3,486,017 $ 4,272,177 Net position Net investment in capital assets $ 26,264,355 $ 23,301,032 $ 6,811,382 $ 6,351,886 $ 33,075,737 $ 29,652,918 Restricted 4,691,738 5,572,244 4,691,738 5,572,244 Unrestricted 18,322,563 17,937,346 5,715,505 6,286,877 24,038,068 24,224,223 Total net position $ 49,278,656 $ 46,810,622 $ 12,526,887 $ 12,638,763 $ 61,805,543 $ 59,449,385 An additional portion of the City s net position, 7.6%, represents resources that are subject to external restrictions on how they may be used. The remaining balance of unrestricted net position $24,038,068, may be used to meet the government 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 three categories of net position, both for the government as a whole, as well as for its separate governmental and businesstype activities. The same situation held true for the prior fiscal year. Total net position increased by $2,356,158 during the current year. A significant factor attributing to the increase in net position was the use of unobligated tax increment revenue for the continuation of municipal street construction. -7-

25 Governmental Activities Governmental activities increased the City s net position by $2,468,034. Governmental activities accounted for 104.7% of the total growth in the net assets of the City. Key elements of this increase are seen in the table below. The City s Changes in Net Position Governmental Activities Business-Type Activities Total Revenues Program revenues Charges for services $ 834,525 $ 700,717 $ 2,478,863 $ 2,395,649 $ 3,313,388 $ 3,096,366 Operating grants and contributions 401, , , ,010 Capital grants and contributions 374, , , ,815 General revenues Property taxes 4,189,258 4,049, ,189,258 4,049,525 Tax increments 3,795,758 3,367, ,795,758 3,367,496 Franchise taxes 559, , , ,345 Lodging taxes 54,088 53, ,088 53,516 Grants and contributions not restricted to specific programs 241, , , ,312 Gain on sale or trade of assets - 29, ,549 Unrestricted investment earnings 238, ,179 55, , , ,860 Total revenues 10,689,425 10,389,464 2,534,209 2,513,330 13,223,634 12,902,794 Expenses General government 1,057,520 1,066, ,057,520 1,066,488 Public safety 2,816,428 2,651, ,816,428 2,651,254 Streets and highways 1,325, , ,325, ,383 Sanitation 25,581 28, ,581 28,563 Culture and recreation 1,410,918 1,324, ,410,918 1,324,772 Economic development 1,743,520 2,089, ,743,520 2,089,528 Interest on long-term debt 88,854 44, ,854 44,506 Water , , , ,540 Sanitary sewer - - 1,290,361 1,332,661 1,290,361 1,332,661 Storm water , , , ,650 Streetlight ,413 88,480 82,413 88,480 Total expenses 8,468,684 8,173,494 2,398,792 2,446,331 10,867,476 10,619,825 Change in net position before transfers 2,220,741 2,215, ,417 66,999 2,356,158 2,282,969 Transfers 247, ,055 (247,293) (186,055) - - Change in net position 2,468,034 2,402,025 (111,876) (119,056) 2,356,158 2,282,969 Net position beginning 46,810,622 44,408,597 12,638,763 12,757,819 59,449,385 57,166,416 Net position ending $ 49,278,656 $ 46,810,622 $ 12,526,887 $ 12,638,763 $ 61,805,543 $ 59,449,385 Capital grants and contributions decreased by $129,305 as a result of a reduction of Municipal State Aid construction grants for street reconstruction. Tax increments increased $428,262 or 12.7% as a result of a shift toward commercial and industrial property values. Unrestricted investment earnings decreased $218,216 or 47.7% as a result of lower returns on government bonds. -8-

26 Expenses and Program Revenues Governmental Activities General Government Public Safety Streets and Highways Sanitation Culture and Recreation Economic Development Interest on Long-Term Debt $ $500,000 $1,000,000 $1,500,000 $2,000,000 $2,500,000 $3,000,000 $3,500,000 Program Revenues Expenses Revenues by Source Governmental Activities -9-

27 Business-Type Activities Key factors in the business-type activities during 2012 are as follows: Utility rates were reviewed in conjunction with planning the 2012 fiscal year. Modest changes in the utility rate structures were necessary to offset increased capital activity. A dry summer and fall provided increased water operating revenues. Operating expenses were slightly lower overall when compared to the previous year and attributable to fewer contracted repair charges. Nonoperating activities reported a decrease in investment income due to lower interest rates compared to the prior period. Interest expense decreased slightly due to lower required debt service. Transfer activity in and out of the City s Enterprise Funds increased over the previous year as approved by City Council resolution. Expenses and Program Revenues Business-Type Activities $1,800,000 $1,600,000 $1,400,000 $1,200,000 $1,000,000 $800,000 $600,000 $400,000 $200,000 $ Sanitary Storm Street Water Sewer Water Light Expenses $867,966 $1,290,361 $158,052 $82,413 Program Revenues $943,731 $1,192,506 $266,395 $76,

28 Revenues by Source Business-Type Activities FINANCIAL ANALYSIS OF THE GOVERNMENT S FUNDS As noted earlier, the City uses fund accounting to ensure and demonstrate compliance with finance-related legal requirements. Governmental Funds The focus of the City s Governmental Funds is to provide information on near-term inflows, outflows, and balances of spendable resources. Such information is useful in assessing the City s financing requirements. In particular, assigned and unassigned fund balance may serve as a useful measure of a government s net resources available for spending at the end of the fiscal year. As of the end of the current fiscal year, the City s Governmental Funds reported combined ending fund balances of $24,063,410, a decrease of ($394,069) in comparison with the prior year. Approximately 16.7% of this total amount, $4,029,265, is restricted for debt service, tax increment purposes, or park capital projects. Approximately 70.1% or $16,857,179 is assigned for future expenditures and 13.2% or $3,176,966 is unassigned. Assigned and unassigned fund balance is available for spending at the government s discretion. The General Fund is the chief operating fund of the City. At the end of the current fiscal year, unassigned fund balance was $3,176,966. As a measure of the General Fund s liquidity, it may be useful to compare fund balance to total fund expenditures. Due to the pattern of receipt of taxes and intergovernmental revenues mandated by the state, Minnesota cities do not receive any significant revenues in their General Funds until July of each year. The City s policy is to end the year with a fund balance equal to 35% to 50% of the subsequent years budgeted revenues and transfers or a minimum of five months expenditures and transfers. Unassigned fund balance represents 60.6% of the 2013 General Fund revenue and transfers from other funds. -11-

29 Fund balance for the City s General Fund, increased by $162,757 during the current fiscal year. Key factors in this change are as follows: Actual revenues were modestly above budgeted amounts primarily from intergovernmental revenues and tax increment resulting in a total variance of $396,207. Transfers in were reduced by $90,000, as a result of deferred capital purchases and favorable operations. Expenditures were less than approved in the budget as a result of city efforts to maintain fiscal responsibility and to spend within approved appropriations. The City deferred purchases of capital equipment, resulting in a variance of $74,077. The Tax Increment Financing District No. 1 Special Revenue Fund experienced decreased revenues of ($34,348) from budget as a result of tax abatements within the district and lower than expected interest rates. Expenditures plus transfers to other funds of $2,339,804 increased from the prior year by $130,222. The resulting deficit can be attributed to unplanned expenditures. The fund balance decreased $676,531 or 95.5% from The Tax Increment Financing District No. 5 Special Revenue Fund experienced increased revenues of $118,516 because of a shift towards commercial and industrial taxable values. Expenditures and transfers decreased from the prior year by $252,714 due to no abated taxes that had to be repaid. Fund balance increased by $60,571 from The Street Improvement Fund (Capital Projects) experienced an increase in fund balance of $710,806 as a result of a planned building of reserves to fund planned future street projects. Proprietary Funds The City s Proprietary Funds provide the same type of information found in the government-wide financial statements, but in more detail. The four Utility Funds (Water, Sanitary Sewer, Storm Water, and Street Light) saw mixed results with regard to total net position: the Water fund increased by $145,193; the Sanitary Sewer fund decreased by ($314,295); the Storm Water fund increased by $64,466; and the Street Light fund decreased by ($7,240). The Sanitary Sewer and Street Light funds had modestly unfavorable changes in net position, increased contractual services, supply costs, and reduced transfers in contributed to this change. The Water and Storm Water funds had a slight increase in net position as a result of a planned increase. All four funds experienced lower investment earnings. GENERAL FUND BUDGETARY HIGHLIGHTS During the year there were no changes made to the original General Fund budget. General Fund revenues were over the budgeted amount by $396,207 as a result of higher than expected intergovernmental revenues and tax increment. Total expenditures were under budget and resulted in a variance of $74,077. The Election function exceeded budgeted amounts as a result of additional contract expenditures. The Government Buildings function exceeded budgeted amounts due to higher electric and contractual services costs. The Police function exceeded budgeted amounts due to higher overtime costs related to a grant program. The Vehicle Maintenance function exceeded budgeted amounts due to higher repair costs. The Parks function exceeded budgeted amounts due to weather damage to a park structure. The Convention and Visitors Bureau exceeded budgeted amounts due to higher hotel activity. The Debt Service - interest function exceeded budgeted amounts due to changes in the City s share of joint costs. -12-

30 CAPITAL AND DEBT ADMINISTRATION Capital Assets The City s investment in capital assets for its governmental and business-type activities as of December 31, 2012 was $34,005,737 (net of accumulated depreciation). This net investment in capital assets includes land, land improvements, buildings, infrastructure, equipment, and construction in progress. The City s net investment in capital assets increased in the current year by 9.6%. This was composed of a 8.8% increase for governmental activities, which reflects an increase infrastructure and a 0.8% increase for business-type activities due to rehabilitation of the water tower and equipment purchases. Major capital asset events during the current fiscal year included the following: 2012 Street Improvement Program was substantially completed. Engineering for the 2013 Street Improvement Program began. Engineering and rehabilitation of the municipal water tower was completed. The City s Capital Assets (Net of Depreciation) Governmental Activities Business-Type Activities Total Land $ 642,416 $ 642,416 $ 10,851 $ 10,851 $ 653,267 $ 653,267 Land improvements 132, , , ,658 Buildings 12,117,985 11,471,195 4,807,667 4,760,249 16,925,652 16,231,444 Infrastructure 19,727,575 17,264,813 11,471,852 10,862,441 31,199,427 28,127,254 Equipment 4,322,092 4,039,986 2,370,267 2,363,884 6,692,359 6,403,870 Construction in progress 3,381,979 2,690,160 35,910 38,410 3,417,889 2,728,570 Total capital assets 40,325,008 36,307,228 18,696,547 18,035,835 59,021,555 54,343,063 Accumulated depreciation (13,360,653) (12,076,196) (11,655,165) (11,238,949) (25,015,818) (23,315,145) Total capital assets - net $ 26,964,355 $ 24,231,032 $ 7,041,382 $ 6,796,886 $ 34,005,737 $ 31,027,918 Additional information on the City s capital assets can be found on pages Long-Term Debt At the end of the current year, the City had total bonded debt outstanding of $2,013,790 and this is backed by the full faith and credit of the City. The City s Outstanding Debt G.O. Bonds, Equipment Certificates and Revenue Bonds Governmental Activities Business-Type Activities Total General obligation bonds $ 1,594,348 $ 1,854,602 $ $ $ 1,594,348 $ 1,854,602 G.O. fire equipment certificates 189, , , ,116 G.O. water revenue bonds 230, , , ,000 Total $ 1,783,790 $ 2,089,718 $ 230,000 $ 445,000 $ 2,013,790 $ 2,534,

31 Bonded debt decreased by $520,928, or 20.6% during the current year as a result of regular debt service payments. The City maintained its bond rating of AA3 from Moody s for general obligation debt. State statutes limit the amount of general obligation debt a governmental entity may issue to 3% of its total estimated market value. The current debt limitation for the City is $27,185,130, which is significantly in excess of the City s outstanding general obligation debt. Additional information on the City s long-term debt note can be found in the notes to basic financial statements on pages ECONOMIC FACTORS AND NEXT YEAR S BUDGETS AND RATES The unemployment rate for Ramsey County (which includes the City) is 5.3%, which is a decrease from the rate of 5.5% a year ago. This rate compares favorably to the national rate of 7.8%. Inflationary trends in the region compare favorably to national indices. Home foreclosures are average to below average for the region. The State of Minnesota has seen improvement in economic conditions and is reporting a surplus for the current budget cycle and a deficit for the next budget cycle. The City may not see a reduction in anticipated aid payments in the next state budget cycle. The City prepared the 2013 budget without state aid and thus any reduction will not have an adverse impact on the City. All of these factors were considered in preparing the City s budget for the 2013 fiscal year. Utility rate studies are prepared for each of the City s four utilities every year. Water, Sanitary Sewer and Street Light rates will increase for Storm Water rates will remain the same as fiscal REQUESTS FOR INFORMATION This financial report is designed to provide a general overview of the City s finances for all those with an interest in the government s finances. Questions concerning any of the information provided in this report or requests for additional financial information should be addressed to the Office of the Finance Director, 2401 Highway 10, City of Mounds View, Minnesota

32 BASIC FINANCIAL STATEMENTS

33 CITY OF MOUNDS VIEW Statement of Net Position December 31, 2012 Governmental Business-Type Activities Activities Total Assets Cash and temporary investments $ 24,234,450 $ 5,238,113 $ 29,472,563 Cash with fiscal agent 44,572-44,572 Receivables Accounts 133, , ,153 Intergovernmental 72,173 3,316 75,489 Delinquent taxes 82,649-82,649 Special assessments 275,873 72, ,334 Notes 4,763-4,763 Land held for resale 533, ,300 Capital assets not being depreciated Land 642,416 10, ,267 Land improvements 132, ,961 Construction in progress 3,381,979 35,910 3,417,889 Capital assets being depreciated Buildings 12,117,985 4,807,667 16,925,652 Infrastructure 19,727,575 11,471,852 31,199,427 Equipment 4,322,092 2,370,267 6,692,359 Less accumulated depreciation (13,360,653) (11,655,165) (25,015,818) Total capital assets, net of depreciation 26,964,355 7,041,382 34,005,737 Total assets $ 52,345,508 $ 12,946,052 $ 65,291,560 Liabilities Accounts payable $ 160,110 $ 42,410 $ 202,520 Contracts payable 84,201 5,498 89,699 Accrued wages and benefits 83,171 13,820 96,991 Due to other governments 42,134 1,104 43,238 Unearned revenue 49,746-49,746 Deposits payable 6,559 47,563 54,122 Accrued interest payable 25,662 3,345 29,007 Noncurrent liabilities Due within one year 450, , ,826 Due in more than one year 2,164,299 56,569 2,220,868 Total noncurrent liabilities 2,615, ,425 2,920,694 Total liabilities 3,066, ,165 3,486,017 Net position Net investment in capital assets 26,264,355 6,811,382 33,075,737 Restricted for Debt service 409, ,448 Tax increment 3,369,378-3,369,378 Parks and recreation 537, ,922 Communications 314, ,398 Public safety 44,949-44,949 Conservation 15,643-15,643 Unrestricted 18,322,563 5,715,505 24,038,068 Total net position 49,278,656 12,526,887 61,805,543 Total liabilities and net position $ 52,345,508 $ 12,946,052 $ 65,291,560 The notes to the financial statements are an integral part of this statement. -15-

34 CITY OF MOUNDS VIEW Statement of Activities Year Ended December 31, 2012 Program Revenues Net (Expense) Revenue Operating Capital and Changes in Net Position Charges for Grants and Grants and Governmental Business-Type Functions/Programs Expenses Services Contributions Contributions Activities Activities Total Governmental activities General government $ 1,057,520 $ 238,633 $ $ $ (818,887) $ $ (818,887) Public safety 2,816,428 95, ,248 3,276 (2,481,443) (2,481,443) Streets and highways 1,325,863 52, , ,234 (795,613) (795,613) Sanitation 25,581 25,199 (382) (382) Culture and recreation 1,410, ,589 33,716 (1,103,613) (1,103,613) Economic development 1,743, ,431 (1,569,089) (1,569,089) Interest on long-term debt 88,854 (88,854) (88,854) Total governmental activities 8,468, , , ,510 (6,857,881) (6,857,881) Business-type activities Water 867, ,731 75,765 75,765 Sanitary sewer 1,290,361 1,192,506 (97,855) (97,855) Storm water 158, , , ,343 Street light 82,413 76,231 (6,182) (6,182) Total business-type activities 2,398,792 2,478,863 80,071 80,071 Total government $ 10,867,476 $ 3,313,388 $ 401,768 $ 374,510 (6,857,881) 80,071 (6,777,810) General revenues Property taxes 4,189,258 4,189,258 Tax increments 3,795,758 3,795,758 Franchise taxes 559, ,043 Lodging taxes 54,088 54,088 Grants and contributions not restricted to specific programs 241, ,512 Unrestricted investment earnings 238,963 55, ,309 Transfers 247,293 (247,293) Total general revenues and transfers 9,325,915 (191,947) 9,133,968 Change in net position 2,468,034 (111,876) 2,356,158 Net position beginning 46,810,622 12,638,763 59,449,385 Net position ending $ 49,278,656 $ 12,526,887 $ 61,805,543 The notes to the financial statements are an integral part of this statement. -16-

35 CITY OF MOUNDS VIEW Balance Sheet Governmental Funds December 31, 2012 Tax Increment Tax Increment Financing Financing Street District No. 1 District No. 5 Improvement Special Special Capital Other General Revenue Revenue Projects Governmental Total Assets Cash and temporary investments $ 9,764,854 $ 90,057 $ 682,745 $ 7,853,182 $ 5,843,612 $ 24,234,450 Cash with fiscal agent ,572 44,572 Receivables Accounts 46, ,735 63, ,373 Intergovernmental 58, ,247 9,079 72,173 Delinquent taxes 56,053 21, ,270 82,649 Special assessments 4, , , ,873 Notes ,763 4,763 Land held for resale - 446, , ,300 Total assets $ 9,930,592 $ 557,383 $ 682,745 $ 8,023,161 $ 6,187,272 $ 25,381,153 Liabilities and Fund Balances Liabilities Accounts payable $ 50,072 $ 2,108 $ - $ 26,784 $ 81,146 $ 160,110 Contracts payable - 56, ,172 84,201 Accrued wages and benefits 78, ,019 83,171 Due to other governments 29, ,627 42,134 Deferred revenue 60, , , , ,822 Unearned revenue 49, ,746 Deposits payable 6, ,559 Total liabilities 274, , , ,042 1,317,743 Fund balances Restricted for Debt service , ,870 Tax increment - 31, ,745-2,094,818 2,809,483 Parks and recreation , ,922 Communications , ,398 Public safety ,949 44,949 Conservation ,643 15,643 Assigned to Levy reduction 6,103, ,103,255 Balance subsequent budget 375, ,914 Street reconstruction ,854,380-7,854,380 Other capital projects ,523,630 2,523,630 Unassigned 3,176, ,176,966 Total fund balances 9,656,135 31, ,745 7,854,380 5,838,230 24,063,410 Total liabilities and fund balances $ 9,930,592 $ 557,383 $ 682,745 $ 8,023,161 $ 6,187,272 $ 25,381,153 Total fund balances Governmental Funds $ 24,063,410 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 in the funds. 26,964,355 Other long-term assets are not available to pay for current period expenditures and thus, are deferred in the funds. 891,822 Liabilities, including bonds ($1,783,790), compensated absences ($461,995), and net other post-employment benefits obligation payable ($369,484)(noncurrent liabilities) and accrued interest ($25,662), are not due and payable in the current period and therefore are not reported in the fund based statements. (2,640,931) The notes to the financial statements are an integral part of this statement. Net position of governmental activities $ 49,278,

36 CITY OF MOUNDS VIEW Statement of Revenues, Expenditures, and Changes in Fund Balances Governmental Funds Year Ended December 31, 2012 Tax Increment Tax Increment Financing Financing Street District No. 1 District No. 5 Improvement Special Special Capital Other General Revenue Revenue Projects Governmental Total Revenues Taxes Property $ 3,751,056 $ $ $ 268,636 $ 190,965 $ 4,210,657 Tax increment 131,545 1,665,009 1,326,776 10, ,990 3,884,428 Franchise 219, , , ,043 Lodging 54,088 54,088 Special assessments 4,160 40,229 34,095 78,484 Licenses and permits 162, ,955 Intergovernmental 587, ,732 58, ,288 Charges for services 27, , ,131 Fines and forfeits 52,054 27,587 79,641 Investment earnings (charges) 116,056 (1,736) 2,435 83,914 38, ,963 Miscellaneous 304,518 7,898 32, ,284 Total revenues 5,411,510 1,663,273 1,329, ,098 1,468,870 10,834,962 Expenditures Current General government 886,808 17, ,199 Public safety 2,696,701 10,125 2,706,826 Streets and highways 567, ,165 Sanitation 25,360 25,360 Culture and recreation 468, ,979 1,055,945 Economic development 362,291 3,973 1,205, ,452 1,739,980 Debt service Principal 75, , ,928 Interest 61,571 30,719 92,290 Capital outlay General government 72,139 72,139 Public safety 21,956 29,311 51,267 Streets and highways 2,312, , ,711 3,317,040 Culture and recreation 638, ,185 Total expenditures 5,141,386 2,316,010 1,205, ,292 2,262,372 11,476,324 Excess (deficiency) of revenues over (under) expenditures 270,124 (652,737) 123, ,806 (793,502) (641,362) Other financing sources (uses) Transfers in 137, , , ,391 Transfers out (245,000) (23,794) (63,376) (347,928) (680,098) Total other financing sources (uses) (107,367) (23,794) (63,376) 300, , ,293 Net change in fund balance 162,757 (676,531) 60, ,806 (651,672) (394,069) Fund balances beginning 9,493, , ,174 7,143,574 6,489,902 24,457,479 Fund balances ending $ 9,656,135 $ 31,920 $ 682,745 $ 7,854,380 $ 5,838,230 $ 24,063,410 The notes to the financial statements are an integral part of this statement. -18-

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38 CITY OF MOUNDS VIEW Reconciliation of the Statement of Revenues, Expenditures, and Changes in Fund Balances to the Statement of Activities Governmental Funds Year Ended December 31, 2012 Amounts reported for governmental activities in the Statement of Activities are different because: Net change in fund balances total Governmental Funds $ (394,069) Governmental Funds report capital outlays as expenditures. However, in the Statement of Activities the cost of those assets is allocated over their estimated useful lives and reported as depreciation expense. Capital outlays 4,078,631 Sales, trade-ins, and donations 935 Depreciation expense (1,346,243) Payments on general obligation debt 305,928 Changes in bond interest payable 3,436 Changes in compensated absences 670 Some expenses (Other Post Employment Benefits) 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. (34,782) Certain revenues are included in the change in net position, but are excluded from the change in fund balances until they are available to liquidate liabilities of the current period. Delinquent taxes (21,398) Delinquent tax increment (88,670) Special assessments (36,404) Changes in net position of governmental activities $ 2,468,034 The notes to the financial statements are an integral part of this statement. -19-