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Home My WebLink About2007 CAFRCOMPREHENSIVE ANNUAL FINANCIAL REPORT FOR THE YEAR ENDED DECEMBER 31, 2007 MINNESOTA - This page intentionally left blank - 1685 CROSSTOWN BOULEVARD N.W. ANDOVER, MINNESOTA 55304 (763) 755-5100 FAX (763) 755-8923 WWW.CI.ANDOVER.MN.US Comprehensive Annual Financial Report of the City of Andover, Minnesota For the Year Ended December 31, 2007 Prepared By: Finance Department City of Andover CITY OF ANDOVER, MINNESOTA TABLE OF CONTENTS Page ReferenceNo. I. INTRODUCTORY SECTION Letter of Transmittal2 Organization10 Organizational Chart11 Certificate of Achievement12 II. FINANCIAL SECTION Independent Auditor's Report14 Management's Discussion and Analysis16 Basic Financial Statements: Government-Wide Financial Statements: Statement of Net AssetsStatement 129 Statement of ActivitiesStatement 230 Fund Financial Statements: Balance Sheet - Governmental FundsStatement 332 Statement of Revenues, Expenditures, and Changes in Fund Balances - Governmental FundsStatement 434 Reconciliation of the Statement of Revenues, Expenditures, and Changes in Fund Balances of Governmental Funds Statement 537 Statement of Net Assets - Proprietary FundsStatement 638 Statement of Revenues, Expenses, and Changes in Fund Net Assets - Proprietary FundsStatement 740 Statement of Cash Flows - Proprietary FundsStatement 842 Statement of Fiduciary Net Assets - Fiduciary FundsStatement 944 Notes to Financial Statements45 Required Supplementary Information: Budgetary Comparison Schedule - General FundStatement 1078 Notes to Required Supplementary Information: Budgets80 Modified Approach for City Streets and Trails Infrastructure Capital Assets80 Combining and Individual Fund Statements and Schedules: Nonmajor Governmental Funds: Combining Balance Sheet - Nonmajor Governmental FundsStatement 1185 Combining Statement of Revenues, Expenditures and Changes in Fund Balances - Nonmajor Governmental FundsStatement 1286 CITY OF ANDOVER, MINNESOTA TABLE OF CONTENTS Page ReferenceNo. Nonmajor Special Revenue Funds: Subcombining Balance Sheet - Nonmajor Special Revenue FundsStatement 1388 Subcombining Statement of Revenues, Expenditures and Changes in Fund Balances - Nonmajor Special Revenue FundsStatement 1490 Nonmajor Debt Service Funds: Subcombining Balance Sheet - Nonmajor Debt Service FundsStatement 1594 Subcombining Statement of Revenues, Expenditures and Changes in Fund Balances - Nonmajor Debt Service FundsStatement 1696 Nonmajor Capital Projects Funds: Subcombining Balance Sheet - Nonmajor Capital Project FundsStatement 17100 Subcombining Statement of Revenues, Expenditures and Changes in Fund Balances - Nonmajor Capital Project FundsStatement 18102 Special Revenue Funds: Schedules of Revenues, Expenditures and Changes in Fund Balances - Budget and Actual: EDA GeneralStatement 19104 Community Development Block GrantStatement 20105 Community CenterStatement 21106 Drainage and MappingStatement 22107 LRRWMOStatement 23108 ForestryStatement 24109 Trail and TransportationStatement 25110 Right-of-Way Management/UtilityStatement 26111 Capital Equipment ReserveStatement 27112 Charitable GamblingStatement 28113 Construction Seal CoatingStatement 29114 Internal Service Funds: Combining Statement of Net Assets - Internal Service FundsStatement 30116 Combining Statement of Revenues, Expenses, and Changes in Fund Net Assets - Internal Service FundsStatement 31117 Combining Statement of Cash Flows - Internal Service FundsStatement 32118 Agency Funds: Combining Statement of Net Assets - Fiduciary FundsStatement 33120 Combining Statement of Changes in Assets and Liabilities - Fiduciary FundsStatement 34121 Supplementary Financial Information: Combined Schedule of IndebtednessExhibit 1124 Schedule of Tax Capacity Rates and LeviesExhibit 2126 Schedule of Deferred Tax Levies - General Obligation BondsExhibit 3127 Schedule of Fund TransfersExhibit 4128 CITY OF ANDOVER, MINNESOTA TABLE OF CONTENTS Page ReferenceNo. III. STATISTICAL SECTION Net Assets by Component - Last Five Fiscal Years Table 1132 Changes in Net Assets - Last Five Fiscal Years Table 2133 Fund Balances - Governmental Funds - Last Five Fiscal Years Table 3135 Changes in Fund Balances - Governmental Funds - Last Five Fiscal Years Table 4136 Assessed and Estimated Actual Value of Taxable Property - Last Ten Fiscal YearsTable 5137 Property Tax Rates - Per $1,000 of Assessed Tax Capacity Value - Years 1999 through 2008Table 6138 Property Tax Levies and Collections - Last Four Fiscal YearsTable 7139 Principal Taxpayers - Current Year and Eleven Years AgoTable 8140 Estimated Market Values and New Construction - Last Ten Fiscal YearsTable 9141 Special Assessment Levies and Collections - Last Ten Fiscal YearsTable 10142 Ratio of Net Bonded Debt to Assessed Value and Net Bonded Debt Per Capita - Last Ten Fiscal YearsTable 11143 Computation of Direct and Overlapping DebtTable 12144 Computation of Legal Debt Margin - Last Five Fiscal YearsTable 13145 Pledged-Revenue Coverage - Last Five Fiscal YearsTable 14146 Outstanding Debt by Type - Last Five Fiscal YearsTable 15147 Demographic and Economic Statitistics - Last Five YearsTable 16148 Principal Employers - Previous Year and Nine Years AgoTable 17149 Full Time Equivalent Employees - City Government Employees by Function / Program - Last Five Fiscal YearsTable 18150 Operating Indicators by Function / Program - Last Five YearsTable 19151 Capital Asset Statistics by Function / Program - Last Five YearsTable 20152 I. INTRODUCTORY SECTION 1 1685 CROSSTOWN BOULEVARD N.W. ANDOVER, MINNESOTA 55304 (763) 755-5100 FAX (763) 755-8923 WWW.CI.ANDOVER.MN.US April 30, 2008 To the Honorable Mayor and City Council City of Andover 1685 Crosstown Blvd. NW Andover, Minnesota 55304 Dear Honorable Mayor and Council Members: The Comprehensive Annual Financial Report is submitted in conformance with all applicable governing laws and regulations. The following has set the standards forth: *Andover City Policy and Code *The State Auditor, State of Minnesota *Government Finance Officers Association *Governmental Accounting Standards Board RESPONSIBILITY. Responsibility for both the accuracy of the presented data and the completeness of the financial statements including all disclosures rests with the City. We believe the data, as presented, is accurate in all material aspects. This report has been presented in a manner designed to fairly set forth the financial position and results of operations as measured by the financial activity of its various funds. FINANCIAL STATEMENT FORMAT. This Comprehensive Annual Financial Report is presented in three main sections: I. Introductory II. Financial III. Statistical Introductionincludes a list of the City's principal officials as of December 31, 2007, the table of contents, organizational The Financial Section chart, and this Letter of Transmittal. The includes: (1) independent auditor's report; (2) management’s discussion and analysis; (3) government wide and fund financial statements; (4) notes to the financial statements; (5) required supplementary information; (6) the combining statements, individual fund statements; and, (7) the supplemental information. Statistical Section The includes tables and reports of various economic, social, financial and fiscal data designed to reflect trends and ratios. Generally Accepted Accounting Principles (GAAP) requires that management provide a narrative introduction, overview, and analysis to accompany the basic financial statements in the form of Management’s Discussion and Analysis (MD&A). This letter of transmittal is designed to complement the MD&A and should be read in conjunction with it. The City of Andover’s MD&A can be found immediately following the report of the independent auditors. REPORTING ENTITY. All City funds, departments, commissions, and other organizations for which the City of Andover is financially accountable are presented within the Comprehensive Annual Financial Report. The Andover Firefighters’ Relief Association does not meet the established criteria for inclusion in the reporting entity, and accordingly are excluded from this report. GENERAL INFORMATION. The city we know today as Andover was first organized in 1857 under the name “Round Lake Township.” However, in 1860 the name was changed to “Grow Township” in honor of Senator Galusha A. Grow of Pennsylvania. Senator Grow spoke at a political campaign in Anoka that year, and the town name was changed to reflect Senator Grow because of his strong advocacy of the Union cause. At that time, the population was 330 and included the geographical area we know today as Ham Lake. In fact, the area of Ham Lake was considered a part of Grow Township until 1871. In 1972, the Grow Township Board of Supervisors recognized that the town was growing at a very rapid rate. They felt a village form of government would provide better services to the community. Board supervisors then voted in favor of proceeding with the incorporation process. The board voted to submit a new name for the village. “Andover Village” was chosen because the name Andover had historical interest. The historical interest, we believe, came from the Andover train station. 2 To the Honorable Mayor and City Council City of Andover, Minnesota You may have heard the popular “train myth” about how Andover received its name. The myth states that a train tipped over in a swamp, and an eyewitness, relaying the incident, said it “went over and over,” thereby naming the city “Andover.” However, Anoka County Union Newspaper research reveals that the name Andover first appeared in an article dated March 14, 1899 in the - before train tracks were ever built in the city. The article stated that the Eastern Minnesota line of the Great Northern Railway was in the process of constructing railroad tracks from the Coon Creek Cut-off to the North. The railway announced that new railroad stations with mathematical precision were to be located five miles apart from each other. The new stations (from Coon Creek to the North, along the new railroad line) were to be named Andover, Cedar, Bethel, Isanti, Cambridge, Stanchfield, Braham, Grasston, Cornell, and Brook Park. On July 4, 1899, the first train passed through the Andover Station. Where the railway came up with the name Andover still remains unknown. Andover Village was established in 1972 and then became the City of Andover, a city of the fourth class, in 1974. Today the City of Andover’s population exceeds 20,000, classifying it as a second class city. The City of Andover as it exists today consists of 23,040 acres. Andover has a population estimated at 30,500. A rapidly growing suburb of the northern metropolitan area, the City of Andover is approximately sixteen miles from Minneapolis. SERVICES PROVIDED. The City of Andover provides various services to the residents in the community. The current services are: General Government: Mayor and City councilFinancial administrationInformation systems NewsletterElectionsFacility management City clerkAssessingEngineering AdministrationLegalRisk management Human resourcesPlanning and zoning Public Safety: PoliceProtective inspectionAnimal control Fire protectionCivil defense Public Works: Streets and highwaysStreet signsTraffic signals Snow and ice removalCentral equipment maintenanceWater maintenance Street lighting Sanitation: Storm sewersTree preservation & weed controlSanitary sewer maintenance Parks and Recreation Recycling GOVERNMENT STRUCTURE. Andover is a statutory city with the City Council appointing a City Administrator. The City Administrator has operating responsibilities for all City functions. A list of public officials and organizational chart can be found on page 10 and 11 respectively. IMPLEMENTATION OF GASB 34 In June 1999, the GASB issued Statement 34, which is the most comprehensive government accounting rule ever developed. This standard substantially changes the way state and local governments report their financial activity. Andover had implemented these changes in 2002. A summary of the most significant changes is as follows: 1. Government-wide financial statements are prepared using full accrual accounting 2. Basic fund financial statements present major funds instead of fund types 3. Budgetary comparisons include original and amended budgets 4. All infrastructures have been capitalized and all capital assets are depreciated except streets and trails that are under the modified approach. 5. A management discussion and analysis is included as required supplemental information 3 To the Honorable Mayor and City Council City of Andover, Minnesota ECONOMIC CONDITION AND OUTLOOK Very moderate population growth is expected to continue in 2008 and 2009, with an estimated population of 33,000 by 2010. The rate of residential growth as compared to the growth in the 90’s has significantly declined as the availability of residentially zoned property decreased. The City has experienced a significant amount of commercial growth from 2000 through current 2007. Continual commercial growth is anticipated over the next five to ten years, beyond that growth will slow as the amount of undeveloped commercially zoned property also declines. The City's General Fund has two major categories of revenue, which accounted for 80% of the total in 2007. They are general property taxes at 67%, and charges for services at 13%. In prior years, intergovernmental revenue was the second largest category of revenue for the General Fund. Intergovernmental revenue includes state aids, such as local government aid (LGA), market value homestead credit (MVHC), highway maintenance aid, fire relief aid and police aid; and county grants, such as recycling and community development. During the past several years, the State of Minnesota has made numerous changes to laws pertaining to the distribution of LGA, Homestead and Agricultural Credit Aid (HACA) and MVHC resulting in a significant reduction in intergovernmental revenue. The City was able to make up this loss in aid through efficiencies and an increased tax levy, substantially increasing the local tax rate in 2002. The tax laws that resulted in this change also greatly reduced school district property tax levies, resulting in no net tax increase for most residential property owners. Sweeping changes approved in 2003 resulted in the loss of approximately $590,000 in aid to Andover, that loss in aid was originally intended to be for two years (2003 & 2004) but that loss was extended to include years 2005 and 2006. The state allowed cities the ability to levy up to 60% of the lost 2003 aid in 2004. LGA, HACA and MVHC for 1998 through 2007 are as follows: YearLGAHACAMVHCTotal 1998122,651$$378,975$ 501,626-$ 1999111,145462,796 573,941- 2000119,752490,237 609,989- 2001119,758489,991 609,749- 2002119,827 563,754-683,581 2003*--65,63265,632 2004--57,93457,934 * 2005--13,17913,179 * 2006--1,7001,700 * 2007- 410,519-410,519 *Due to the State Legislative actions to deal with the state budget deficits, the City will not be receiving any LGA and significantly reduced MVHC. For 1998 through 2000, cities with populations over 2,500 were under levy limit restrictions imposed by the State. Levy limits severely curb the ability of cities to generate additional tax revenue needed to respond to an increasing demand for services. For 1999 and 2000, the levy limit formula was modified to allow for increases based on commercial and industrial growth. This was a favorable change for Andover, as the City experienced a surge in commercial growth during the past few years. Levy limits were lifted for 2001 but were reinstated for 2002 - 2004. The 2004 levy limits were so severe that the State did not allow cities the ability to capture residential and commercial market value growth. Levy limits have since been lifted. 4 To the Honorable Mayor and City Council City of Andover, Minnesota The State's property tax reform efforts have also included modifications to property class rates. Reductions in the class rates for all major types of property have occurred in 1998, 1999, 2000, and for 2002. These changes resulted in a decrease in the taxable value of most properties. These changes and the impact on various valued properties are shown in the following table: Class Rate 199819992000 & 20012002 & 2003 Residential Homestead Value to $75,0001.00%1.00%1.00%1.00% $76,000 to $500,0001.85%1.70%1.65%1.00% Over $500,0001.85%1.70%1.65%1.25% Commercial / Industrial Value to $150,0002.70%2.45%2.40%1.50% Value above $150,0004.00%3.50%3.40%2.00% Tax Capacity 199819992000 & 20012002 & 2003 Taxable Market Value Residential Homestead $100,000$1,213$1,175$1,000 $ 1,163 150,0002,1382,0251,500 1,988 200,0003,0632,8752,000 2,813 250,0003,9883,7252,500 3,638 300,0004,9134,5753,000 4,463 Commercial / Industrial $550,000$17,675$10,250 $ 2 0,050$ 17,200 750,00024,67514,250 2 8,050 24,000 1,000,00038,05033,42519,250 32,500 2,500,00098,05085,92549,250 83,500 The City received a substantial amount of revenue from licenses and permits from 1990 through 2007. The past seven years are shown below: RevenuesChange 2001720,712$n/a 2002588,965$(131,747) 2003551,385(37,580) 2004674,008122,623 2005724,43650,428 2006598,094(126,342) 2007475,893(122,201) The $131,747 decrease in revenue for 2002 is due to reclassification of plan check fees ($263,535), which were previously recorded as license and permit fee and are now recorded as a charges for services revenue. Revenue from residential building continued to modestly increase through 2002 but declined in 2003, as a reduced number of new residential lots were being added to the overall lot inventory. License and permit fees increased substantially in 2004 as the number of residential lots available and built on has increased and the value of new construction is on the rise. The decrease in 2006 and 2007 is largely due to a slowing economy and home building market and the decline is expected to continue in 2008. The City analyzes user fees every year as part of the budget process and makes adjustments where appropriate. Revenue from charges for services totaled $780,273 in 2006 and $1,121,642 in 2007. This increase can be linked to the number of public improvement projects being finalized and assessed in 2007. 5 To the Honorable Mayor and City Council City of Andover, Minnesota EMPLOYMENT The City of Andover’s largest employers are government entities. The Anoka-Hennepin School District has a significant presence in the community and Anoka County’s Parks and Highway Departments and Sheriffs Office headquarters are located in Andover. The City of Andover is best classified as a bedroom community, since a majority of the residents commute outside of Andover for employment opportunities. The City does anticipate with the development of the Andover Station Commercial Park and other commercial developments that additional employment opportunities will be provided to residents in the near future. Major employers in Andover are as follows: Number of FirmType of Business / ProductEmployees ISD No 11 Anoka-HennepinElementary and secondary education639 Anoka County Parks and Highway DepartmentsCounty government and services350 Kottkes' Bus Service, Inc.Bus transportation200 TargetRetail182 Columbia Park Medical GroupMedical clinic115 Festival FoodsGrocery store102 Meadow Creek Christian SchoolPrivate education K-1292 City of AndoverMunicipal government and services92 Tanners Steakhouse & BarRestaurant83 Farmstead at AndoverSenior housing and assisted living facilities80 MAJOR INITIATIVES FOR THE YEAR. The City has many accomplishments to report for 2007. The following list is a summary of some of the major initiatives completed throughout the year. 1) The response to significant storm damage continues. The Building Department has been very busy with various permits related to 2006 & 2007 severe storm activity in the community that has damaged a significant number of roofs and siding on resident homes. 2) Implementation of the roadway reconstruction assessment policy through the 2007 roadway reconstruction project. In 2006 a roadway reconstruction assessment policy was approved which provided a clear understanding for staff and the Council on how the process is handled. The clear policy provided information for the residents and was supported by the Council during public hearings. 3) Construction of the wayside horn at Andover Boulevard and the construction of the Railroad Quiet Zone at Bunker Lake Boulevard. These two projects were a challenge from the standpoint of this being something new and the challenges working with and communication with the Burlington Northern Santa Fe (BNSF) Railroad. Most of this work (design and project administration) was done in-house which was a substantial cost savings to the City. 4) The Fire Department received a grant from F.E.M.A./Homeland Security that has allowed the Fire Department to hire five part time fire inspectors along with purchasing two laptop computers that have streamlined the fire inspection program for the Fire Department. 5) Under the Fire Chief’s leadership, the City updated the City Emergency Plan to include a Continuity of Operations Plan and Pandemic Flu Guidelines should some type of flu outbreak occur and completed a review and update of the City of Andover Employee Safety Manual. 6) Two new rescue trucks were added to the fleet of Fire Department vehicles. The additional vehicles have allowed for increased staffing to respond on one truck versus two. The new vehicles also have been designed with more storage capabilities making the rescue trucks much more versatile for all types of rescue calls. 7) The successful hosting of the City’s Annual Business Appreciation Day to recognize and build awareness of the local business community and strengthens relationships with this important element of the Andover community. This event was coordinated through the Community Development Department. 8) The City started planning for the future expansion of the City Center campus to the west of existing Public Works facilities. Previous land negotiations with the property owner resulted in a three-phase acquisition schedule of 6 To the Honorable Mayor and City Council City of Andover, Minnesota approximately 29 acres of land and the acquisition of two additional parcels of land along Crosstown Boulevard just west of the Water Treatment facility. These property acquisitions are anticipated to serve the ultimate expansion of the Public Works facilities, potential expansion of the Community Center and additional recreational amenities. The planning will continue to be part of the capital improvement planning process. 9) The development of three baseball fields at the Andover Station North complex, which includes ball field lighting, a new playscape, parking lot, pavilion building and paved trail. This park was designed by the City’s Engineering Department and constructed by a partnership of Public Works staffing, contracted service and volunteer labor. The final product is a true testament of what can be accomplished when residents and City staff work together toward a common goal. 10) Crooked Lake Boat Landing. The boat landing and parking lot were reconstructed this year as a joint effort between the Minnesota Department of Natural Resources (DNR) and the City. A grant was awarded to the City from the DNR, which was a 50-50 split between the two agencies. City Engineering staff did the design and project administration in- . house 11) The successful negotiation with Anoka County of the turn-back of a section of Crosstown Boulevard to the City. As part of the turn-back, Anoka County facilitated a significant upgrade to the roadway. Now under the City control, the City can more effectively manage commercial and residential development along this roadway. 12) The marketing of Andover Station North, a new commercial park within the City of Andover. The Andover Economic Development Authority along with City staff has developed this commercial park and has seen commercial building activity throughout 2007. Bruggeman Homes continues to construct and market high-quality multi-family units to complement the area. 13) In 2007, the City Planning Department facilitated the updating of various City Codes, including the Buildability Requirements and the Subdivision Code. This process has updated the dated City Code to a more readable and user- friendly document. 14) The City staff completed various studies as part of a Comprehensive Plan Update including: a park dedication study, sanitary sewer study, water system study and transportation system study. The City is required to submit these documents to the Metropolitan Council after the completion of a public hearing and a six month review by neighboring cities. By doing these studies with City staff, the City was able to save considerably on outside consultant expense. 15) The City created a new Open Space Commission to assist in managing the successful $2,000,000 open space referendum ballot in 2006. The charge of the Open Space Commission is to make recommendations to the City Council on land that should be purchased as permanent open space in the community. 16) The City's Comprehensive Annual Financial Report (CAFR) for the year ended December 31, 2006 was awarded the Government Finance Officers Association’s "Excellence in Financial Reporting Award.” The City completes this document internally and recognized significant cost savings in the form of reduced financial consulting fees. This is the fifth consecutive year receiving the award and it is anticipated that the City’s CAFR for the year ended December 31, 2007 will also achieve this award. 17) For the sixth year in a row, the City of Andover was awarded the Government Finance Officers Association Distinguished Budget Presentation Award for the City's 2007 Annual Budget. This award recognizes excellence in the preparation of the City’s budget document as a policy document, an operations guide, as a financial plan and as a communications device. 18) The City has made significant progress after the implementation of hardware and software to start the process of digital imaging documents retained by the City. The imaging project will assist the City in staffing and data storage and retrieval efficiencies. 19) The City continues to utilize the new financial management software to improve reporting and operating efficiencies. The implementation continues to yield reduced personnel costs and more timely reports. Residential Development The City continued to experience steady growth in both the urban and rural areas during 2007. New residential developments ndrd reviewed during 2007 include Timber Trails 2 Addition, Woodland Hills, Hickory Meadows, Smith Addition, Woodland 3 nd Addition and Parkside 2 Addition. These developments included a total of 81 new rural and urban single family lots and townhouse units. 7 To the Honorable Mayor and City Council City of Andover, Minnesota Commercial Industrial Development Commercial development in the City also continued at a steady pace over 2007. Commercial site plans reviewed during the year included Northpointe Plaza Shopping Center, Twin River’s Auto Sales, Grace Lutheran Church – classroom, Buddhist Temple, Northgate Liquors, Pineapple Island, Metro – Mosquito Control expansion, Anoka County Radio Dispatch Building expansion and the Pollution Control Agency’s Gas-to-Energy Building. These projects added a total of 18,000 square feet of commercial space to the City. FOR THE FUTURE. The City continues to focus on quality of life improvements throughout the City. These efforts cover a broad array of areas including: protecting and improving the environment, revitalization of parks and public areas, expanding recreational opportunities, providing cost-effective city services, increased communication between city representatives and the public and added commercial/retail opportunities. The City utilizes many avenues to reach its residents, whether through community access television, the City newsletter or the City’s webpage (www.ci.andover.mn.us). It is important to the City that our residents are informed and have the ability to participate in the activities of their City. The City did conduct a community survey in 2006, with the help of a polling firm, to secure opinions and suggestions from the public. FINANCIAL INFORMATION INTERNAL CONTROL. The City's accounting system was developed and is continually evaluated to assure the adequacy of internal accounting controls. Internal accounting controls are designed to provide reasonable but not absolute assurance in the areas of: (1) safeguarding assets against loss from unauthorized use or disposition; and (2) reliability of financial records and convenience of access for preparing financial statements and maintaining accountability for assets. The concept of reasonable assurance adopted by the City of Andover recognizes that: (1) the evaluation of cost and benefits requires estimates and judgments by management; and (2) the cost of a control should not exceed the benefits likely to be derived. All internal controls are evaluated against the above criteria. It is our belief that the City's internal accounting controls adequately safeguard the City's assets and also provide reasonable assurance of properly recording financial transactions. BUDGETING CONTROLS. In addition to internal accounting controls, the City maintains budgetary controls. The objective of these budgetary controls is to ensure compliance with legal provisions embodied in the annual budget approved by the City Council. Activities of the General Fund and Special Revenue Funds are included in the annual budget. As demonstrated by the statements and schedules included in the financial section of this report, the City continues to meet its responsibility for sound financial management. CASH MANAGEMENT. Cash temporarily idle during the year was invested in demand deposits, certificates of deposit, U.S. government and agency securities, state and local government securities and commercial paper. The City's investment policy is to minimize credit and market risks while maintaining a competitive yield on its portfolio. Accordingly, deposits are required to be insured by federal depository insurance or collateralized. The City, its agent or a financial institution’s trust department in the City’s name held all collateral on deposits. RISK MANAGEMENT. The City Finance Department performs the duties of risk management. The Finance Department continually reviews the City's exposures to losses, evaluates insurance specifications, coordinates with an insurance broker the placement and renewal of coverage and reviews programs to reduce costs and improve cash flow. Although the City experiences population growth, additional miles of road, payroll, and expenditures increase, the City has been able to keep insurance costs fairly flat over the past five years. OTHER INFORMATION AWARDS. The Government Finance Officers Association (GFOA) of the United States and Canada presented a Distinguished Budget Presentation Award to the City of Andover for its annual budget for the fiscal year beginning January 1, 2007. This is the sixth year in a row the City of Andover has received this award. In order to receive this award, a governmental unit must publish a budget document that meets program criteria as a policy document, as an operations guide, as a financial plan and as a communications device. This award is valid for a period of one year only. We believe that the annual budget for the fiscal year beginning January 1, 2008 continues to conform to the program requirements and have submitted it to the GFOA to determine its eligibility for another award. The GFOA also presented the Certificate of Achievement for Excellence in Financial Reporting Award to the City of Andover for its 2006 Comprehensive Annual Financial Report. This is the fifth time the City of Andover has received this award. In 8 9 CITY OF ANDOVER, MINNESOTA ORGANIZATION December 31, 2007 OfficeNameTerm MayorMichael GamacheJanuary 6, 2009 Council MemberDon JacobsonJanuary 2, 2011 Council MemberMichael KnightJanuary 6, 2009 Council MemberKen OrttelJanuary 6, 2009 Council MemberJulie TrudeJanuary 2, 2011 City AdministratorJames DickinsonAppointed Community Development DirectorWill NeumeisterAppointed Director of Public Works / City EngineerDavid BerkowitzAppointed Finance DirectorJames DickinsonAppointed Building OfficialDon OlsonAppointed Fire ChiefDan WinkelAppointed City ClerkVicki VolkAppointed AttorneyHawkins & Baumgartner, P.A.Appointed Fiscal ConsultantsEhlers & Associates, Inc.Appointed 10 CITY OF ANDOVER Organizational Chart 11 12 II. FINANCIAL SECTION 13 14 15 CITY OF ANDOVER, MINNESOTA MANAGEMENT’S DISCUSSION AND ANALYSIS December 31, 2007 As management of the City of Andover, we offer readers of the City of Andover’s financial statements this narrative overview and analysis of the financial activities of the City for the fiscal year ended December 31, 2007. 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 on pages 2 through 9 of this report. Financial Highlights The assets of the City of Andover exceeded its liabilities at the close of the most recent fiscal year by $148,585,014 (Net assets). Of this amount, $8,446,773 (unrestricted net assets) may be used to meet the government’s ongoing obligations to citizens and creditors in accordance with the City's fund designations and fiscal policies. The City’s total net assets increased by $8,122,248, primarily due to the completion and the assessment of a number of development projects. As of the close of the current fiscal year, the City of Andover’s governmental funds reported combined ending fund balances of $39,156,711. SpecialDebtCapital GeneralRevenueServiceProjectsTotals Reserved$208,216$12,457$ 735,14121,359,062$$22,314,876 Designated3,682,2441,685,045 12,011,083-17,378,372 Undesignated-(480,592)-(55,945)(536,537) $3,890,460$1,216,910$ 12,690,27921,359,062$ 39,156,711$ The City’s total long-term liabilities increased by $10,641,105 during the current fiscal year, primarily due to the issuance of the $6,865,000 EDA Public Facility Lease Revenue Refunding Bonds, Series 2007 and the issuance of the $6,570,000 Water Revenue Refunding Bonds, Series 2007B. BeginningEnding BalanceAdditionsReductionsBalance Governmental activities: Bonds payable$50,850,000$7,625,000$ 55,200,000(3,275,000)$ Compensated absences459,299334,339(283,787)509,851 Total governmental activities51,309,2997,959,339(3,558,787)55,709,851 Business-type activities: Bonds payable8,815,0006,570,000(345,000)15,040,000 Compensated absences74,67554,336(38,783)90,228 Total business-type activities8,889,6756,624,336(383,783)15,130,228 Total City long-term liabilities60,198,974$$ (3,942,570)14,583,675$ 70,840,079$ Overview of the Financial Statements The discussion and analysis are intended to serve as an introduction to the City of Andover’s basic financial statements. The City’s basic financial statements comprise three components: 1) government-wide financial statements, 2) fund financial statements, and 3) notes to the financial statements. This report also contains other supplementary information in addition to the basic financial statements themselves. Government-wide financial statements . The government-wide financial statements are designed to provide readers with a broad overview of the City of Andover’s finances, in a manner similar to a private-sector business. The statement of net assets presents information on all of the City of Andover’s assets and liabilities, with the difference between the two reported as net assets. Over time, increases or decreases in net assets may serve as a useful indicator of whether the financial position of the City of Andover is improving or deteriorating. The statement of activities presents information showing how the City’s net assets changed during the most recent fiscal year. All changes in net assets are reported as soon as the underlying event giving rise to the change occurs, regardless of the timing of related cash flows. Thus, 16 CITY OF ANDOVER, MINNESOTA MANAGEMENT’S DISCUSSION AND ANALYSIS December 31, 2007 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 of Andover that are principally supported by taxes and intergovernmental revenues (governmental activities) from other functions that are intended to recover all or a significant portion of their costs through user fees and charges (business-type activities). The governmental activities of the City of Andover include general government, public safety, public works, sanitation, parks and recreation, recycling and economic development. The business-type activities of the City of Andover include water, sewer and storm sewer. The government-wide financial statements can be found on pages 29 through 31 of this report. Fund Financial statements . A fund is a grouping of related accounts that is used to maintain control over resources that have been segregated for specific activities or objectives. The City of Andover, like other state and local governments, uses fund accounting to ensure and demonstrate compliance with finance-related legal requirements. All of the funds of the City of Andover can be divided into three categories: governmental funds, proprietary funds, and fiduciary funds. Governmental funds . Governmental funds are used to account for essentially the same functions reported as governmental activities in the government-wide financial statements. However, unlike the government-wide financial statements, governmental fund financial statements focus on near-term inflows and outflows of spend-able resources, as well as on balances of spend-able resources available at the end of the fiscal year. Such information may be useful in evaluating a government’s near-term financial requirements. Because the focus of governmental funds is narrower than that of the government-wide financial statements, it is useful to compare the information presented for governmental funds with similar information presented for governmental activities in the government-wide financial statement. By doing so, readers may better understand the long-term impact of the City's near term financial decisions. Both the governmental fund balance sheet and governmental fund statement of revenues, expenditures, and change in fund balances provide a reconciliation to facilitate this comparison between governmental funds and governmental activities. The City of Andover maintains eight individual major governmental funds. Information is presented separately in the governmental fund balance sheet and in the governmental fund statement of revenues, expenditures, and changes in fund balances for the following major funds: General Fund, 2006 Economic Development Authority (EDA) Public Facility Lease Revenue Refunding Bonds Debt Service Fund, 2007 EDA Public Facility Lease Revenue Refunding Bonds Debt Service Fund and the following capital projects funds (CPF): Water Trunk, Sewer Trunk, Road and Bridge, Tax Increment Projects and Permanent Improvement Revolving. Data from the other governmental funds are combined into a single, aggregated presentation. Individual fund data for each of these non- major governmental funds is provided in the form of combining statements elsewhere in this report. The City of Andover adopts an annual appropriated budget for its general and special revenue funds. unds to demonstrate compliance with this budget. A budgetary comparison statement has been provided for those f The basic governmental fund financial statements can be found on pages 32 through 37 of this report. Proprietary funds . When the City charges customers for the services it provided – whether to outside customers or to other departments of the City – these services are generally reported in proprietary funds. Proprietary funds are reported in the same way that all activities are reported in the statement of net assets and the statement of revenues, expenses and changes in net assets. The enterprise funds are the same as the business-type activities reported in the government-wide statements but provide more detail and additional information, such as cash flows, for proprietary funds. The City of Andover uses enterprise funds to account for its water, sanitary sewer and storm sewer operations. Internal service funds are used to report activities that provide supplies and services for the City’s other departments, such as the equipment maintenance and insurance funds. The internal service funds are reported with governmental activities in the government-wide financial statements. The basic proprietary fund financial statements can be found on pages 38 through 43 of this report. Fiduciary funds . Fiduciary funds are used to account for resources held for the benefit of parties outside the government. Fiduciary funds are not reflected in the government-wide financial statements because the resources of those funds are not available to support the City of Andover’s own program. The accounting used for fiduciary funds is much like that used for proprietary funds. The basic fiduciary fund financial statement can be found on page 44 of this report. 17 CITY OF ANDOVER, MINNESOTA MANAGEMENT’S DISCUSSION AND ANALYSIS December 31, 2007 Notes to the financial statements . The notes provide additional information that is essential to a full understanding of the data provided in the government–wide and fund financial statements. The notes to the financial statements can be found on pages 45 through 76 of this report. Other information. The combining statements referred to earlier in connection with non-major governmental funds is presented immediately following the required supplementary information on budgetary comparisons, and on the modified approach for streets and trails infrastructure. Combining and individual fund statements and schedules can be found on pages 83 through 121 of this report. Government-wide Financial Analysis As noted earlier, net assets may serve over time as a useful indictor of a government's financial position. In the case of the City of Andover, assets exceeded liabilities by $148,585,014 at the close of the most recent fiscal year. The largest portion of the City of Andover’s net assets ($115,866,535 or 78 percent) reflects its investment in capital assets (e.g. land, buildings, machinery, and equipment) less any related debt used to acquire those assets that is still outstanding. It does not include any refunding debt that has not met the refunding date of the original issue. The City of Andover uses these capital assets to provide services to citizens; consequently, these assets are not available for future spending. Although the City of Andover's investment in its capital assets is reported net of related debt, it should be noted that the resources needed to repay this debt must be provided from other sources, since the capital assets themselves cannot be used to liquidate these liabilities. CITY OF ANDOVER’S NET ASSETS Governmental ActivitiesBusiness-Type ActivitiesTotals 200620072006200720062007 Current and other assets36,787,210$$48,179,407$3,623,126$10,717,872$40,410,336$58,897,279 Capital assets115,708,759115,620,90547,234,30247,050,630162,943,061162,671,535 Total assets152,495,969163,800,31250,857,42857,768,502203,353,397221,568,814 Long-term liabilities outstanding51,309,29955,709,8518,889,67515,130,22860,198,97470,840,079 Other liabilities2,425,0811,745,964266,576397,7572,691,6572,143,721 Total liabilities53,734,38057,455,8159,156,25115,527,98562,890,63172,983,800 Net assets: Invested in capital assets, net of related debt74,858,75977,285,90538,419,30238,580,630113,278,061115,866,535 Restricted14,838,78824,271,706 14,838,788-24,271,706 - Unrestricted9,064,0424,786,8863,281,8753,659,88712,345,9178,446,773 Total net assets$98,761,589$ 41,701,177106,344,497$$42,240,517$ 148,585,014140,462,766$ A portion of the City of Andover's net assets represents resources that are subject to external restrictions on how they may be used. The remaining balance of unrestricted net assets ($8,446,773) may be used to meet the City's ongoing obligations to citizens and creditors. At the end of the current fiscal year, the City of Andover is able to report positive balances in all three categories of net assets, both for the government as a whole, as well as for its separate governmental and business-type activities. 18 CITY OF ANDOVER, MINNESOTA MANAGEMENT’S DISCUSSION AND ANALYSIS December 31, 2007 Government-wide Activities Governmental activities increased the City of Andover's net assets by $7,582,908 and business-type activities increased net assets by $539,340. Key elements of the activities are as follows: City of Andover's Changes in Net Assets Governmental ActivitiesBusiness-Type ActivitiesTotal 200620072006200720062007 Revenues: Program revenues: Charges for services2,605,083$$3,025,085$3,747,513$4,085,494$6,352,596$7,110,579 Operating grants and contributions959,2861,129,099-959,2861,129,099 - Capital grants and contributions4,920,6948,794,1642,761,282158,1137,681,9768,952,277 General revenues: Property taxes8,084,5598,897,755-8,084,5598,897,755 - Tax increment1,562,1311,661,204-1,562,1311,661,204 - Grants and contributions not restricted to specific programs77,642486,626-77,642486,626 - Unrestricted investments earnings1,019,3041,874,27787,376337,3781,106,6802,211,655 Total revenues19,228,69925,868,2106,596,1714,580,98551,693,08037,045,366 Expenses: General government2,637,5842,509,011-2,637,5842,509,011 - Public safety 3,851,0863,443,285-3,443,2853,851,086 - Public works3,031,4593,783,509-3,031,4593,783,509 - Parks and recreation2,442,3052,954,753-2,442,3052,954,753 - Recycling91,37894,929-91,37894,929 - Economic development626,1032,265,605-626,1032,265,605 - Interest on long-term debt1,668,4442,303,567-1,668,4442,303,567 - Water--2,232,1442,587,8472,232,1442,587,847 Sewer--1,585,5481,631,2241,585,5481,631,224 Storm sewer--408,003537,151408,003537,151 Total expenses13,940,55817,762,4604,225,6954,756,22218,166,25322,518,682 Increase (decrease) in net assets before gain on the sale of capital assets and transfers5,288,1418,105,7502,370,476(175,237)7,658,6177,930,513 Gain on the sale of capital assets219,910191,7355,900-225,810191,735 Transfers(704,042)(714,577)704,042714,577 - - Increase in net assets4,804,0097,582,9083,080,418539,3407,884,4278,122,248 Net assets - beginning93,957,58098,761,58938,620,75941,701,177132,578,339140,462,766 Net assets - ending$98,761,589$ 41,701,177106,344,497$$42,240,517$ 148,585,014140,462,766$ 19 CITY OF ANDOVER, MINNESOTA MANAGEMENT’S DISCUSSION AND ANALYSIS December 31, 2007 Governmental Activities Following are specific graphs that provide comparisons of the governmental activities revenues and expenses: Governmental Activities - Revenues Grants and contributions not restricted for specific Charges for services Unrestricted investments programs 11.6% earnings 1.9% 7.2% Tax increment Gain on the sale of capital 6.4% assets 0.7% Capital grants and Property taxes contributions 34.2% 33.7% Operating grants and contributions 4.3% Governmental Activities - Expenses General government Interest on long-term 14.1% debt Recycling 13.0% 0.5% Economic development Public safety 12.8% 21.7% Parks and recreation 16.6% Public works 21.3% 20 CITY OF ANDOVER, MINNESOTA MANAGEMENT’S DISCUSSION AND ANALYSIS December 31, 2007 Business-Type Activities Business-type activities increased net assets by $539,340. Below are graphs showing the business-type activities revenue and expense comparisons: Business-Type Activities - Revenues Unrestricted investments earnings 7.4% Capital grants and contributions 3.5% Charges for services 89.1% Business-Type Activities - Expenses Storm sewer 11% Water 55% Sewer 34% 21 CITY OF ANDOVER, MINNESOTA MANAGEMENT’S DISCUSSION AND ANALYSIS December 31, 2007 Financial Analysis of the Government's Funds Governmental Funds . The focus of the City of Andover’s governmental funds is to provide information on near-term inflows, outflows, and balances of spendable resources. Such information is useful in assessing the City of Andover’s financing requirements. In particular, unreserved fund balance may serve as a useful measure of a government’s net resources available for spending at the end of the fiscal year. At the end of the current fiscal year, the City of Andover's governmental funds reported combined ending fund balances of $39,156,711. Approximately 43 percent of this total amount ($16,841,835) constitutes unreserved fund balance. The remainder of the fund balance ($22,314,876) is reserved because it has already been committed 1) to provide for prepaid items ($126,558), 2) to provide for inventory ($89,854), 3) to provide for economic development ($4,261), 4) to pay debt service ($21,359,062) and 5) bond proceeds specified for a project ($735,141). Major Funds The general fund increased by $497,647 in 2007, which was a $493,322 change from the final budget. The adopted budget had a balanced budget where revenues equaled expenditures, but the final budget showed an increase in fund balance of $4,325. The increase in fund balance is due to employee vacancies in the finance department, various departments under-spending and finance fees for a number of developments that were finalized and assessed. The Andover Economic Development Authority issued $6,865,000 EDA Public Facility Lease Revenue Refunding bonds, which added $6,828,467 in fund balance to the debt service fund. This is a partial refunding of the EDA’s $19,580,000 Public Facility Lease Revenue Bonds, Series 2004. Additional information can be found in Note 6 on this issuance. The water and sewer trunk capital projects funds both increased largely due a number of develops that were finalized and assessed. The road and bridge capital projects fund increased by $129,976 primarily due to the change in calculating tax levy needs. Previously, Council was designating a one percent tax levy and capturing one percent of new growth for transportation infrastructure needs. In 2007, the capturing of new growth was increased to two percent per Council direction. The tax increment capital projects fund decreased by $1,167,907 due to the assessment of Jay Street in Andover Station North. The permanent improvement revolving capital projects fund decreased by $1,825,415 due to the transfer of monies to the debt service funds and the planned usage of fund balance for improvement projects not fully bonded for. Nonmajor Funds The community center special revenue fund decreased by $161,047, primarily due to the transfer of monies to the debt service fund. Half of the building is leased to the Greater Minneapolis YMCA and they will start making lease payments in 2008. Future YMCA lease payments will significantly reduce the City’s obligation to finance annual debt service. The 2005A G.O. improvement bonds debt service fund increased by $1,989,607 largely due to the assessment of Jay Street in Andover Station North to the tax increment capital projects fund. The park dedication capital projects fund decreased by $660,730 due to the construction of the numerous park improvements, the lighting of ball fields and the construction of a building for bathrooms, concessions and storage at Andover Station North. The building capital projects fund decreased by $176,610 due to the purchase of property adjacent to Sunshine Park. Proprietary funds . The City of Andover’s proprietary funds provide the same type of information found in the government-wide financial statements, but in more detail. The unrestricted net assets in the respective proprietary funds are enterprise funds of $3,766,663 (water $1,331,938, sewer $2,230,509 and storm sewer $204,216) and internal service funds of $144,682. The enterprise funds had a net increase in net assets in 2007 of $559,741 (water $55,906, sewer $287,784 and storm sewer $216,051). The increase in the enterprise funds is primarily due to the capital contributions of equipment and infrastructure. The internal service funds had a net decrease in net assets of $63,368. Capital Asset and Debt Administration Capital assets . The City of Andover’s investment in capital assets for its governmental and business type activities as of December 31, 2007, amounts to $162,671,535 (net of accumulated depreciation). This investment in capital assets includes land, buildings, infrastructure, machinery and equipment. 22 CITY OF ANDOVER, MINNESOTA MANAGEMENT’S DISCUSSION AND ANALYSIS December 31, 2007 The City has elected to use the modified approach as defined in GASB Statement No. 34 for infrastructure reporting for its Pavement Management Program, which includes streets and trails. Under GASB Statement No. 34, eligible infrastructure capital assets are not required to be depreciated under the following requirements: 1) The City manages the eligible infrastructure capital assets using an asset management system with characteristics of (a) an up to- date inventory; (b) perform condition assessments and summarize the results using a measurement scale; and (c) estimate annual amount to maintain and preserve at the established condition assessment level. 2) The City documents that the eligible infrastructure capital assets are being preserved approximately at or above the established and disclosed condition assessment level. The City’s policy is to achieve an average rating of good (56 – 70) for all streets and trails. In the fall of 2007, the City conducted a physical condition assessment of the streets and trails constructed since 1974. This assessment will be completed every three years. As of December 31, 2007, the City’s street and trail system was rated at an Overall Condition Index (OCI) of 81, which is higher than the City’s policy level. The City’s streets and trails are constantly deteriorating resulting from the following factors: (1) traffic using the system; (2) the sun’s ultra- violet rays drying out and breaking down the top layer of pavement; (3) utility company/private development trenching operations; (4) water damage from natural precipitation; and (5) frost heave. The City is continuously taking actions to prolong the life of the system through short-term maintenance activities such as pothole patching, crack sealing, seal coating and overlaying. The City expended $1,256,433 on street and trail maintenance for the year ending December 31, 2007. These expenditures delayed deterioration; however, the overall condition of the system declined slightly (82 OCI to an 81 OCI) through these maintenance expenditures. The City has estimated that the amount of annual expenditures required to maintain the City’s street and trail system at the average OCI rating of good is approximately $1,150,000. MaintenanceActualOCI YearEstimateExpendituresRating 2003950,000$$956,68882 20041,000,0001,847,06682 20051,000,0001,655,71583 20061,150,0001,228,98182 20071,150,0001,256,43381 Primary Government BeginningEnding BalanceAdditionsDeletionsBalance Governmental activities: Land and improvements$6,886,761$1,431,209$(428,793)$7,889,177 Streets and trails73,968,3964,720,213 78,688,609- Construction in progress6,696,702663,194(6,999,155)360,741 Buildings and improvements26,265,061 26,265,061- - Furniture and equipment253,59665,626-319,222 Machinery and equipment5,790,488543,840(93,142)6,241,186 Other park improvements3,417,6981,503,470(23,148)4,898,020 Total capital assets 123,278,7028,927,552(7,544,238)124,662,016 Less accumulated depreciation for: Buildings and improvements2,678,432886,021-3,564,453 Furniture and equipment102,41639,936-142,352 Machinery and equipment3,769,039395,194(45,999)4,118,234 Other park improvements1,020,056211,448(15,432)1,216,072 Total accumulated depreciation7,569,9431,532,599(61,431)9,041,111 Governmental activities capital assets - net$115,708,759$7,394,953$(7,482,807)$115,620,905 23 CITY OF ANDOVER, MINNESOTA MANAGEMENT’S DISCUSSION AND ANALYSIS December 31, 2007 BeginningEnding BalanceAdditionsDeletionsBalance Business-type activities: Land and improvements$730,243$-$-$730,243 Buildings and improvements14,810,983 14,810,983- - Furniture and equipment52,11513,000-65,115 Machinery and equipment1,109,3835,000-1,114,383 Collection and distribution46,953,4771,393,944 48,347,421- Total capital assets being depreciated 1,411,94463,656,201 65,068,145- Less accumulated depreciation for: Buildings and improvements3,543,973529,840-4,073,813 Furniture and equipment35,9733,750-39,723 Machinery and equipment612,853101,526-714,379 Collection and distribution12,229,100960,500 13,189,600- Total accumulated depreciation16,421,8991,595,616 18,017,515- Business-type activities capital assets - net47,234,302(183,672) 47,050,630- Total capital assets$162,943,061$7,211,282$(7,482,807)$162,671,536 Additional information on the City of Andover’s capital assets can be found in Note 5. Long-term debt . At the end of the current fiscal year, the City of Andover had total long-term debt outstanding of $70,840,079, an increase of $10,641,105 from 2006. General obligation revenue bonds ($51,115,000) were used to finance the construction of the water treatment facility and the community center, and the refunding of portions of the community center bonds and water treatment facility bonds. Special assessment bonds ($3,560,000) financed improvement projects within the City and are assessed to the benefiting properties. Tax increment bonds ($4,010,000) financed the City’s economic development plan within tax increment districts. Certificates of indebtedness ($1,280,000) financed capital equipment purchases. Capital improvement bonds ($3,525,000) financed the construction of Fire Station #3, the purchase of the Public Works building from the EDA and some improvements done at the Public Works building and City Hall. Permanent improvement revolving bonds ($4,835,000) financed improvement projects within the City and are assessed to the benefiting properties. State aid bonds ($1,915,000) were used to finance Municipal State Aid (MSA) eligible road projects. Additional long-term debt in the amount of $600,079 is for compensated absences. City of Andover’s Outstanding Debt GovernmentalBusiness-Type ActivitiesActivitiesTotal Bonds payable: G.O. revenue bonds$36,075,000$15,040,000$51,115,000 Special assessment bonds3,560,000-3,560,000 Tax increment bonds4,010,000-4,010,000 Certificates of indebtedness1,280,000-1,280,000 Capital improvement bonds3,525,000-3,525,000 Permanent improvement revolving bonds4,835,000-4,835,000 State aid bonds1,915,000-1,915,000 Total bonds payable55,200,00015,040,00070,240,000 Compensated absences509,85190,228600,079 Total$55,709,851$15,130,228$70,840,079 The City of Andover maintains an AA- rating with a stable outlook from Standard and Poor’s. 24 CITY OF ANDOVER, MINNESOTA MANAGEMENT’S DISCUSSION AND ANALYSIS December 31, 2007 State statutes limit the amount of general obligation debt a Minnesota city may issue to 2% of total Estimated Taxable Market Value. The current debt limitation for the City of Andover is $56,009,252. Only $23,057,582 of the City's outstanding debt is counted within the statutory limitation. Additional information on the City of Andover’s long-term debt can be found in Note 6 and 7. Requests for information. This financial report is designed to provide a general overview of the City of Andover’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 City of Andover, Attn: Finance Manager, 1685 Crosstown Boulevard NW, Andover, Minnesota 55304 or by calling 763-755-5100. 25 - This page intentionally left blank - 26 BASIC FINANCIAL STATEMENTS 27 - This page intentionally left blank - 28 CITY OF ANDOVER, MINNESOTA STATEMENT OF NET ASSETSStatement 1 December 31, 2007 Primary Government GovernmentBusiness-TypeTotals ActivitiesActivities20072006 Assets: Cash and investments 21,598,456$$3,034,428$ 24,632,884$24,223,203 Cash and investments with escrow agent17,210,3736,493,774 23,704,14710,523,065 Accrued interest502,719123,011 625,730133,084 Due from other governmental units104,0397,165 111,204107,233 Accounts receivable - net207,096974,956 1,182,0521,080,567 Prepaid items128,30816,500 144,80896,497 Property taxes receivable: Unremitted92,884- 92,88482,153 Delinquent247,536- 247,536181,048 Special assessments receivable: Unremitted3871,192 1,5792,952 Delinquent32,33444,085 76,41951,721 Deferred6,371,533- 6,371,5332,194,956 Notes receivable1,527,013- 1,527,0131,558,055 Inventories - at cost156,72922,761 179,490175,802 Capital assets - net Nondepreciable86,938,527730,243 87,668,77088,282,102 Depreciable28,682,37846,320,387 75,002,76574,660,959 Total assets163,800,31257,768,502221,568,814203,353,397 Liabilities: Interfund payable(30,550)30,550 -- Accounts payable281,34835,218 316,566239,954 Contracts payable33,73616,691 50,427430,479 Developer advances5,000- 5,000119,210 Deposits payable22,1762,234 24,41030,262 Due to other governmental units115,60323,315 138,918557,071 Salaries payable81,60714,356 95,96378,314 Unearned revenue279,128- 279,128322,775 Accrued interest payable957,916275,393 1,233,309913,592 Compensated absences: Due within one year50,9859,023 60,00853,397 Due in more than one year458,86681,205 540,071480,577 Bonds/notes payable: Due within one year3,460,000360,000 3,820,0003,620,000 Due in more than one year51,740,00014,680,00066,420,00056,045,000 Total liabilities57,455,81515,527,985 72,983,80062,890,631 Net assets: Invested in capital assets, net of related debt77,285,90538,580,630115,866,535113,278,061 Restricted for: Debt service21,993,711- 21,993,71111,494,949 Capital improvements735,141- 735,141633,078 Tax increment purposes1,542,854- 1,542,8542,710,761 Unrestricted4,786,8863,659,887 8,446,77312,345,917 Total net assets$106,344,497$42,240,517$148,585,014$140,462,766 The accompanying notes are an integral part of these financial statements. 29 CITY OF ANDOVER, MINNESOTA STATEMENT OF ACTIVITIES For The Year Ended December 31, 2007 Program Revenues ChargesOperatingCapital ForGrants andGrants and ExpensesServicesContributionsContributions Functions/Programs Primary government: Government activities: General government 2,509,011$ $785,600$17,693$- Public safety 3,851,086662,299333,394- Public works 3,783,509408,656727,210 8,552,181 Parks and recreation 2,954,753859,531 -241,983 Recycling94,92933,15850,802- Economic development 2,265,605182,535 -- Interest on long-term debt 2,303,567- -- Total government activities 17,762,4602,931,7791,129,099 8,794,164 Business-type activities: Water 2,587,8472,025,452 -50,023 Sewer 1,631,2241,771,670 -58,725 Storm sewer537,151288,372 -49,365 Total business-type activities 4,756,2224,085,494 -158,113 Total primary government$ 22,518,682$7,017,273$1,129,099$ 8,952,277 The accompanying notes are an integral part of these financial statements. 30 Statement 2 Net (Expense) Revenue and Changes in Net Assets Primary Government GovernmentalBusiness-TypeTotals ActivitiesActivities20072006 $(1,705,718)$-$(1,705,718)$(2,154,638) (2,855,393)-(2,855,393)(2,301,896) 5,904,538-5,904,5382,014,772 (1,853,239)-(1,853,239)(928,391) (10,969)- (10,969)(9,400) (2,083,070)-(2,083,070)(407,498) (2,303,567)-(2,303,567)(1,668,444) (4,907,418)-(4,907,418)(5,455,495) -(512,372) (512,372)1,014,942 -199,171 199,171846,287 -(199,414) (199,414)421,871 -(512,615) (512,615)2,283,100 (4,907,418)(512,615)(5,420,033)(3,172,395) General revenues: General property taxes8,897,755-8,897,7558,084,559 Tax increment collections1,661,204-1,661,2041,562,131 Grants and contributions not restricted to specific programs486,626- 486,62677,642 Unrestricted investment earnings1,967,583337,3782,304,9611,106,680 Gain on sale of capital assets191,735- 191,735225,810 Transfers(714,577)714,577 -- Total general revenues, gain on sale of capital assets and transfers12,490,3261,051,95513,542,28111,056,822 Change in net assets7,582,908539,3408,122,2487,884,427 Net assets - beginning98,761,58941,701,177140,462,766132,578,339 Net assets - ending$106,344,497$42,240,517$148,585,014$140,462,766 31 CITY OF ANDOVER, MINNESOTA BALANCE SHEET GOVERNMENTAL FUNDS December 31, 2007 2006 EDA Public 2007 EDA Public Facility Lease Facility Lease Revenue Revenue Refunding BondsRefunding BondsWater TrunkSewer Trunk GeneralDSFDSFCPFCPF Assets Cash and investments$3,096,704$385$385$ 3,111,053$2,142,370 Cash and investments with escrow agent-9,762,1526,707,362 -- Accrued interest12,477176,330121,220 17,40311,760 Due from other governmental units37,136-- -- Accounts receivable - net68,153-- -- Interfund receivable671,000-- 60,000- Prepaid items126,558-- -- Property taxes receivable: Unremitted52,843-- -- Delinquent141,768-- -- Special assessments receivable: Unremitted134-- -- Delinquent5,007-- 799384 Deferred--- 395,533109,267 Notes receivable--- -- Inventory81,658-- -- Total assets4,293,4389,938,8676,828,967 3,584,7882,263,781 Liabilities and Fund Balances Liabilities: Interfund payable-500500 -- Accounts payable103,215---- Contracts payable16,008-- 1,656- Developer advances--- -- Deposits payable12,126-- -- Due to other governmental units57,827-- -- Salaries payable67,028-- -- Deferred revenue146,774-- 396,333109,651 Total liabilities402,978500500397,989109,651 Fund balances: Reserved for: Prepaid items126,558---- Inventory81,658-- -- Economic development--- -- Debt service-9,938,3676,828,467 -- Projects--- -- Unreserved reported in: Designated: General fund3,682,244-- -- Special revenue funds--- -- Capital projects funds--- 3,186,7992,154,130 Undesignated: Special revenue funds--- -- Capital projects funds--- -- Total fund balances3,890,4609,938,3676,828,467 3,186,7992,154,130 Total liabilities and fund balances$4,293,438$9,938,867$6,828,967$ 3,584,788$2,263,781 Fund balance reported above Amounts reported for governmental activities in the statement of net assets are different because: Capital assets used in governmental activities are not financial resources and, therefore, are not reported in the funds. Other long-term assets are not available to pay for current-period expenditures and, therefore, are deferred in the funds. Internal service funds are used by management to charge the cost of equipment maintenance and insurance to individual funds. The assets and liabilities are included in the governmental activities statement of net assets along with a deduction of net revenue attributable to business-type activities. Long-term liabilities, including bonds payable, are not due and payable in the current period and, therefore, are not reported in the funds. Net assets of governmental activities The accompanying notes are an integral part of these financial statements. 32 Statement 3 TaxPermanent tImprovementOtherIntraTotals Road &Incremen BridgeProjectsRevolvingGovernmentalActivityGovernmental Funds CPFCPFCPFFundsEliminations20072006 $ 3,179,414$ 1,326,608$ 1,623,860$7,017,483$-$21,498,262$ 21,401,005 - --740,859-17,210,373 10,523,065 15,327 86,717 12,65348,075- 501,962123,377 - 23,123-43,780- 104,03996,888 2,185 --136,758- 207,096211,984 - ---(731,000) -- - ---- 126,55885,657 9,305 --30,736- 92,88482,153 25,703 --80,065- 247,536181,048 - -253-- 3872,260 2,290 - 23,854-- 32,33431,662 1,256,9412,926 4,045,171561,695-6,371,533 2,194,956 42,200 1,431,000-53,813-1,527,013 1,558,055 - --8,196- 89,85468,993 4,533,365 2,870,374 5,705,7918,721,460(731,000)48,009,83136,561,103 - --730,000(731,000) -- 2,185 2-155,790- 261,192188,497 5,1601,553-9,259- 33,636417,420 -5,000--- 5,000119,210 - --10,050- 22,17628,028 16,7176,0392,27032,750- 115,603533,670 - --9,941- 76,96963,367 1,327,133 1,314,926 4,069,025974,702-8,338,544 4,169,496 1,351,195 1,327,520 4,071,2951,922,492(731,000)8,853,120 5,519,688 - ---- 126,55885,657 ---8,196- 89,85468,993 - --4,261- 4,26136,695 - --4,592,228-21,359,062 11,342,527 ---735,141- 735,141707,616 - ----3,682,244 3,248,317 - --1,685,045-1,685,045 1,569,792 3,182,170 1,542,854 1,634,496310,634-12,011,083 14,433,934 - --(480,592)- (480,592)(323,404) - --(55,945)- (55,945)(128,712) 3,182,170 1,542,854 1,634,4966,798,968-39,156,711 31,041,415 $ 4,533,365$ 2,870,374$ 5,705,791$8,721,460$(731,000)$48,009,831$ 36,561,103 $39,156,711$ 31,041,415 115,620,905 115,708,759 8,059,416 3,846,721 175,232218,199 (56,667,767) (52,053,505) $106,344,497$ 98,761,589 33 CITY OF ANDOVER, MINNESOTA STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE GOVERNMENTAL FUNDS For The Year Ended December 31, 2007 2006 EDA Public 2007 EDA Public Facility Lease Facility Lease Revenue Revenue Refunding Bonds Refunding Bonds Water TrunSewer Trun kk GeneraDSFDSFCPFCPF l Revenues: General property taxes$5,776,653$-$-$-$- Tax increment collections-- - - - Licenses and permits475,893- - - - Intergovernmental853,30523,745428 - - Special assessments-58,07928,493 - - Charges for services1,121,642- - - - Fines101,445- - - - Investment income157,513424,423291,300177,021126,348 Miscellaneous Park dedication fees-- - - - Connection charges-624,068205,556 - - Other90,293- - - - Total revenues8,576,744424,423291,300882,913360,825 Expenditures: Current: General government2,319,766- - - - Public safety3,538,116- - - - Public works1,454,286168,56086,672 - - Parks and recreation850,907- - - - Recycling94,669- - - - Economic development-- - - - Unallocated6,915-- - - Capital outlay: General government--- - - Public safety-- - - - Public works-- - - - Parks and recreation63- - - - Economic development-- - - - Debt service: Principal retirement-- - - - Interest-282,818170,323- - Paying agent fees-115115- - Professional services-157,395- - - Construction/acquisition costs-- - - - Total expenditures8,264,722282,933327,833168,56086,672 Revenues over (under) expenditures312,022141,490(36,533)714,353274,153 Other financing sources (uses): Transfers in185,625-350,000 - - Transfers out--(57,671) - - Bonds issued-- - - - Refunding bonds issued-6,865,000- - - Bond premium--- - - Proceeds from the sale of capital assets--- - - Total other financing sources (uses)185,6256,865,000(57,671)350,000 - Net increase (decrease) in fund balance497,647141,4906,828,467656,682624,153 Fund balance - January 13,392,8139,796,8772,530,1171,529,977 - Fund balance - December 31$3,890,460$9,938,367$6,828,467$3,186,799$2,154,130 The accompanying notes are an integral part of these financial statements. 34 Statement 4 TaxPermanen t RoadIncremenImprovemenOtheIntraTotals &ttr Governmental Funds BridgProjectsRevolvinGovernmentaActivit egly CPFCPFCPFFundsElimination20072006 s $1,034,147$-$-$2,022,449$-$8,833,249$8,057,592 -185,003-1,474,2191,659,2221,546,394 - ---475,893598,094 - - 277,85666,014-423,5661,644,9142,661,726 - 272,8811,096959,8692,021,6213,342,0391,289,590 - ---914,0932,035,7351,770,156 - ---101,44591,490 - - 175,463177,06795,649337,5951,962,3791,014,801 - ---113,013113,013626,567 - ---829,624372,133 - - 190,563-20,678348,564(28,300)621,798395,789 1,950,910429,1801,076,1967,655,120(28,300)21,619,31118,424,332 ---79,5312,399,2972,343,332 - ---42,1243,580,2403,268,236 - 1,180,353-388,995212,4873,491,3532,817,475 - ---974,7991,825,7061,599,885 - ---94,66990,590 - - -2,105,554-160,0512,265,605626,103 - ---6,9158,454 - - -----144,689 - ---82,15282,15234,091 - 594,574-300,041503,1911,397,806486,936 - --213,730818,7961,032,589321,359 - -150,776-140,162290,938 - - ---3,275,0003,275,0005,254,000 - -- -1,636,7162,089,8571,683,599 - ---8,1328,3625,534 - ---1,430158,825247,600 - 93,807--266,935360,7424,579,910 - 1,868,7342,256,330902,7668,201,50622,360,05623,511,793 - 82,176(1,827,150)173,430(546,386)(28,300)(740,745)(5,087,461) 47,800--2,334,610(2,339,110)578,925522,000 --(1,998,845)(368,565)2,367,410(57,671)(167,424) ---760,000760,0002,910,000 - ---6,865,00010,000,000 - - ---3,401-3,401- -659,243-47,143706,386603,959 - 47,800659,243(1,998,845)2,776,58928,3008,856,04113,868,535 129,976(1,167,907)(1,825,415)2,230,2038,115,2968,781,074 - 3,052,1942,710,7613,459,9114,568,76531,041,41522,260,341 - $3,182,170$1,542,854$1,634,496$6,798,968$-$39,156,711$31,041,415 35 - This page intentionally left blank - 36 CITY OF ANDOVER, MINNESOTA RECONCILIATION OF THE STATEMENT OF REVENUES, Statement 5 EXPENDITURES, AND CHANGES IN FUND BALANCES OF GOVERNMENTAL FUNDS For The Year Ended December 31, 2007 20072006 Amounts reported for governmental activities in the statement of activities (page 35) are different because: Net changes in fund balances - total governmental funds (page 35) 8,115,296$ 8,781,074$ 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. This is the amount by which capital outlays exceeded depreciation in the current period. 1,631,6284,400,530 The net effect of various miscellaneous transactions involving capital assets is to increase (decrease) net assets (i.e., sales, trade-ins, and donations). (483,651)761,249 Revenues in the statement of activities that do not provide current financial resources are not reported as revenues in the funds. 4,212,695(345,434) The issuance of long-term debt (e.g., bonds, leases) provides current financial resources to governmental funds, while the repayment of the principal of long-term debt consumes the current financial resources of governmental funds. Neither transaction, however, has any effect on net assets. This amount is the net effect of these differences in the treatment of long-term debt and related items. (4,350,000)(7,656,000) Transfer out of governmental capital assets contributed to Enterprise Funds. (1,235,831)(1,058,618) Some expenses reported in the statement of activities do not require use of current financial resources and, therefore, are not reported as expenditures in governmental funds. (264,262)(33,741) Internal service funds are used by management to charge the cost of equipment maintenance and insurance to individual funds. This amount is the portion of net revenue attributable to governmental activities. (42,967)(45,051) Change in net assets of governmental activities (page 31)$ 7,582,908$4,804,009 The accompanying notes are an integral part of these financial statements. 37 CITY OF ANDOVER, MINNESOTA STATEMENT OF NET ASSETS PROPRIETARY FUNDS December 31, 2007 rSewerStorm Sewer Wate Assets Current assets: Cash and cash equivalents$1,188,298$1,703,918$142,212 Restricted assets: Cash and cash equivalents6,493,774 -- Accrued interest114,394 8,051566 Due from other governmental units- 7,165- Accounts receivable - net351,240 536,09987,617 Prepaid items16,500 -- Special assessments receivable: Unremitted452 66674 Delinquent18,295 23,0552,735 Inventories - at cost22,761 -- Total current assets8,205,7142,278,954233,204 Noncurrent assets: Capital assets: Land730,243 -- Buildings and structures14,810,983 -- Machinery and equipment323,257 447,357408,884 Distribution and collection system15,267,40923,318,2839,761,730 Total capital assets31,131,89223,765,64010,170,614 Less: Allowance for depreciation(8,074,015)(7,231,343)(2,712,158) Total noncurrent assets23,057,87716,534,2977,458,456 Total assets31,263,59118,813,2517,691,660 Liabilities Current liabilities: Accounts payable26,452 5,6903,076 Contracts payable5,675 1,9469,070 Deposits payable2,234 -- Interest payable275,393 -- Due to other governmental units17,819 5,496- Salaries payable6,190 6,1771,989 Bonds payable - due within one year360,000 -- Compensated absences payable - due within one year4,624 2,9141,485 Total current liabilities698,387 22,22315,620 Noncurrent liabilities: Bonds payable - due in more than one year14,680,000 -- Compensated absences payable - due in more than one year41,615 26,22213,368 Total noncurrent liabilities14,721,615 26,22213,368 Total liabilities15,420,002 48,44528,988 Net assets Invested in capital assets, net of related debt14,511,65116,534,2977,458,456 Unrestricted1,331,9382,230,509204,216 Total net assets$15,843,589$18,764,806$7,662,672 Net assets reported above Amounts reported for business-type activities in the statement of net assets are different because: Internal service funds are used by management to charge the cost of equipment maintenance and insurance to individual funds. This amount is the portion of net revenue attributable to business-type activities. Net assets of business-type activities The accompanying notes are an integral part of these financial statements. 38 Statement 6 Totals Governmental Activities - TotalsInternal Service Funds 2007200620072006 $ 3,034,428$ 2,659,993$100,194$162,205 6,493,774 --- 123,0118,921757786 7,165 10,345-- 974,956 868,583-- 16,5009,7601,7501,080 1,192 692-- 44,085 20,059-- 22,761 44,77366,87562,036 10,717,872 3,623,126169,576226,107 730,243 730,243-- 14,810,983 14,810,983-- 1,179,498 1,161,498-- 48,347,422 46,953,478-- 65,068,146 63,656,202-- (18,017,516) (16,421,900)-- 47,050,630 47,234,302-- 57,768,502 50,857,428169,576226,107 35,218 37,69120,15613,766 16,691 12,959100100 2,234 2,234-- 275,393 169,386-- 23,315 22,784-617 14,356 11,3734,6383,574 360,000 345,000-- 9,0237,467-- 608,89424,89418,057 736,230 14,680,000 8,470,000-- 81,205 67,208-- 14,761,205 8,537,208-- 15,497,435 9,146,10224,89418,057 38,504,404 38,419,302-- 3,766,663 3,292,024144,682208,050 $ 42,271,067$ 41,711,326$144,682$208,050 $ 42,271,067$ 41,711,326 (30,550) (10,149) $ 42,240,517$ 41,701,177 39 CITY OF ANDOVER, MINNESOTA STATEMENT OF REVENUES, EXPENSES AND CHANGES IN FUND NET ASSETS PROPRIETARY FUNDS For The Year Ended December 31, 2007 WateSeweStorm Sewe rrr Operating revenues: User charges$ 1,759,0451,981,854$ 286,244$ Meters17,503-- Permit fees4,500-- Penalties9,84912,4182,128 Other11,746207- Total operating revenues2,025,4521,771,670288,372 Operating expenses: Personal services380,509237,722141,489 Supplies214,50533,34816,366 Other service charges527,731118,336141,129 Disposal charges-748,678- Depreciation862,001498,447235,168 Total operating expenses1,984,7461,636,531534,152 Operating income (loss)40,706135,139(245,780) Nonoperating revenues (expenses): Investment income249,99980,0967,283 Gain on sale of capital assets--- Interest expense(608,692)-- Total nonoperating revenues (expenses)(358,693)80,0967,283 Income (loss) before contributions and transfers(317,987)215,235(238,497) Capital contributions457,847466,549469,548 Transfers: Transfers in57,671-- Transfers out(141,625)(394,000)(15,000) Total transfers(83,954)(394,000)(15,000) Change in net assets55,906287,784216,051 Net assets - January 115,787,68318,477,0227,446,621 Net assets - December 31$15,843,589$18,764,806$7,662,672 Net changes in net assets reported above Amounts reported for business-type activities in the statement of activities are different because: Transfer in of capital assets from governmental activities. Contribution revenue reported above. Internal service funds are used by management to charge the cost of equipment maintenance and insurance to individual funds. This amount is the portion of net revenue attributable to business-type activities. Change in net assets of business-type activities The accompanying notes are an intregral part of these financial statements. 40 Statement 7 Totals Intra Governmental Activities - ActivityTotalsInternal Service Funds Eliminations2007200620072006 $-$4,027,143$ 783,1283,658,699$ 711,485$ -17,50322,563-- -4,5003,100-- -24,39561,843-- -11,9531,30826,61123,314 -4,085,4943,747,513809,739734,799 -759,720700,612299,857281,431 -264,219259,317290,400243,483 (28,300)758,896540,712288,054278,491 -748,678767,798-- -1,595,6161,530,811-- (28,300)4,127,1293,799,250878,311803,405 28,300(41,635)(51,737)(68,572)(68,606) -337,37887,3765,2044,503 --5,900-- -(608,692)(407,393)-- -(271,314)(314,117)5,2044,503 28,300(312,949)(365,854)(63,368)(64,103) -1,393,9443,819,900-- -57,671167,424-- (28,300)(578,925)(522,000)-- (28,300)(521,254)(354,576)-- -559,7413,099,470(63,368)(64,103) -41,711,32638,611,856208,050272,153 $-$42,271,067$41,711,326$144,682$208,050 $559,741$3,099,470 1,235,8311,058,618 (1,235,831)(1,058,618) (20,401)(19,052) $539,340$3,080,418 41 CITY OF ANDOVER, MINNESOTA STATEMENT OF CASH FLOWS PROPRIETARY FUNDS For The Year Ended December 31, 2007 rSewerStorm Sewer Wate Cash flows from operating activities: Receipts from customers and users$1,951,459$ 1,721,270$285,046 Payment to suppliers(741,144) (892,164)(149,723) Payment to employees(374,019) (228,840)(138,325) Net cash flows from operating activities836,296 600,266(3,002) Cash flows from noncapital financing activities: Receipt of advances from other funds- -- Payment of advances to other funds- -- Transfers in57,671 -- Transfers out(141,625) (394,000)(15,000) Net cash flows from noncapital financing activities(83,954) (394,000)(15,000) Cash flows from capital and related financing activities: Acquisition of capital assets(6,500) (6,500)(5,000) Interest paid on debt(502,685) -- Receipt of bonds6,570,000 -- Payment of bonds(345,000) -- Proceeds from the sale of capital assets- -- Net cash flows from capital and related financing activities5,715,815 (6,500)(5,000) Cash flows from investing activities: Investment income138,461 77,4597,368 Net increase in cash and cash equivalents6,606,618 277,225(15,634) Cash and cash equivalents - January 11,075,454 1,426,693157,846 Cash and cash equivalents - December 31$7,682,072$ 1,703,918$142,212 Reconciliation of operating income to net cash provided (used) by operating activities: Operating income (loss)$40,706$ 135,139$(245,780) Adjustments to reconcile operating income (loss) to net cash flows from operating activities: Depreciation862,001 498,447235,168 Changes in assets and liabilities: Decrease (increase) in due from other governmental units- 3,180- Decrease (increase) in accounts receivable(63,068) (41,640)(1,665) Decrease (increase) in prepaid items (11,620) 4,880- Decrease (increase) in special assessments(10,925) (11,940)(1,661) Decrease (increase) in inventory22,012 -- Increase (decrease) in accounts payable(7,693) 3,1132,107 Increase (decrease) in contracts payable(1,948) 155,665 Increase (decrease) in deposits payable- -- Increase (decrease) in due to other governmental units341 190- Increase (decrease) in salaries payable882 1,676425 Increase (decrease) in compensated absences5,6087,2062,739 242,778 Total adjustments795,590465,127 Net cash provided by operating activities$836,296$ 600,266$(3,002) Noncash investing, capital and financing activities: Assets contributed to the Enterprise Funds$457,847$ 466,549$469,548 The accompanying notes are an integral part of these financial statements. 42 Statement 8 Totals Governmental Activities - TotalsInternal Service Funds 2007200620072006 $ 3,957,775$ 3,682,753$809,739$734,799 (1,783,031) (1,623,269)(578,190)(544,954) (741,184) (691,208)(298,793)(281,019) 1,433,560 1,368,276(67,244)(91,174) - -80,000- - -(80,000)- 57,671 167,424-- (550,625) (495,000)-- (492,954) (327,576)-- (18,000) (33,487)-- (502,685) (411,721)-- 6,570,000 --- (345,000) (335,000)-- - 5,900-- 5,704,315 (774,308)-- 223,288 83,9695,2334,684 6,868,209 350,361(62,011)(86,490) 2,659,993 2,309,632162,205248,695 $ 9,528,202$ 2,659,993$100,194$162,205 $ (69,935)$ (78,737)$(68,572)$(68,606) 1,595,616 1,530,811-- 3,180 (2,698)-- (106,373) (55,646)-- (6,740) (1,372)(670)1,416 (24,526)(6,416)-- 22,012 5,467(4,839)(16,007) (2,473) (26,315)6,390(8,836) 3,732 (2,841)-- - (4,900)-- 531 1,519(617)447 2,983 1,5451,064412 15,553 7,859-- 1,503,495 1,447,0131,328(22,568) $ 1,433,560$ 1,368,276$(67,244)$(91,174) $ 1,393,944$ 3,819,900$-$- 43 CITY OF ANDOVER, MINNESOTA STATEMENT OF FIDUCIARY NET ASSETS Statement 9 FIDUCIARY FUNDS Agency Funds December 31, 2007 20072006 Assets Cash and investments 283,056$ 495,684$ Accounts receivable - net -5,000 Total assets288,056495,684 Liabilities Accounts payable3,64953 Due to other governments 92184 Deposits payable284,315495,447 Total liabilities$288,056$495,684 The accompanying notes are an integral part of these financial statements. 44 CITY OF ANDOVER, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2007 Note 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The City of Andover was incorporated in 1974 and operates under the State of Minnesota Statutory Plan A form of government. The governing body consists of a five-member City council elected by voters of the City. The financial statements of the City of Andover have been prepared in conformity with generally accepted accounting principles as applied to governmental units by the Governmental Accounting Standards Board (GASB). The following is a summary of the significant accounting policies. A. FINANCIAL REPORTING ENTITY As required by generally accepted accounting principles, the financial statements of the reporting entity include those of the City of Andover (the primary government) and its component units. The component units discussed below are included in the City's reporting entity because of the significance of their operational or financial relationships with the City. COMPONENT UNITS In conformity with generally accepted accounting principles, the financial statements of the component units have been included in the financial reporting entity as blended component units. The Andover Economic Development Authority (EDA) is an entity legally separate from the City. However, for financial reporting purposes, the EDA is reported as if it were part of the City's operations because the members of the City Council serve as EDA Board Members and its purpose is to promote development within the City of Andover. The activity of the EDA is reported in the EDA General Special Revenue Fund. Separate financial statements are not prepared for the EDA. B.GOVERNMENT-WIDE AND FUND FINANCIAL STATEMENTS The government-wide financial statements (i.e., the statement of net assets and the statement of changes in net assets) report information on all of the nonfiduciary activities of the primary government and its component units. For the most part, the Governmental activities effect of interfund activity has been removed from these statements., which normally are supported by business-type activities taxes and intergovernmental revenues, are reported separately from , which rely to a significant extent on fees and charges for support. The statement of activities demonstrates the degree to which the direct expenses of a given function or business-type activity Direct expenses are offset by program revenues. are those that are clearly identifiable with a specific function or business-type Program revenues activity. include 1) charges to customers or applicants who purchase, use, or directly benefit from goods, services, or privileges provided by a given function or business-type activity and 2) grants and contributions that are restricted to meeting the operational or capital requirements of a particular function or business type activity. Taxes and other items not general revenues included among program revenues are reported instead as . Separate financial statements are provided for governmental funds, proprietary funds, and fiduciary funds, even though the latter are excluded from the government-wide financial statements. Major individual governmental funds and major individual enterprise funds are reported as separate columns in the fund financial statements. C. MEASUREMENT FOCUS, BASIS OF ACCOUNTING, AND FINANCIAL STATEMENT PRESENTATION economic resources measurement focusaccrual basis The government-wide financial statements are reported using the and the of accounting , as are the Proprietary Fund financial statements. Revenues are recorded when earned and expenses are recorded when a liability is incurred, regardless of the timing of related cash flows. Property taxes are recognized as revenues in the year for which they are levied. Grants and similar items are recognized as revenue as soon as all eligibility requirements imposed by the provider have been met. The City’s only fiduciary funds are agency funds. Agency funds are custodial in nature (assets equal liabilities) and do not involve measurement of results of operations. current financial resources measurement focusmodified Governmental fund financial statements are reported using the and the accrual basis of accounting . Revenues are recognized as soon as they are both measurable and available. Revenues are available considered to be when they are collectible within the current period or soon enough thereafter to pay liabilities of the current period. For this purpose, the government considers all revenues, except reimbursement grants, to be available if they 45 CITY OF ANDOVER, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2007 are collected within 60 days of the end of the current fiscal period. Reimbursement grants are considered available if they are collected within one year of the end of the current fiscal period. Expenditures generally are recorded when a liability is incurred, as under accrual accounting. However, debt service expenditures, as well as expenditures related to compensated absences and claims and judgments, are recorded only when payment is due. Property taxes, special assessments, intergovernmental revenues, charges for services and interest associated with the current fiscal period are all considered to be susceptible to accrual and so have been recognized as revenues of the current fiscal period. Only the portion of special assessments receivable due within the current fiscal period is considered to be susceptible to accrual as revenue of the current period. All other revenue items are considered to be measurable and available only when cash is received by the government. The government reports the following major governmental funds: General Fund Theis the government’s primary operating fund. It accounts for all financial resources of the general government, except those required to be accounted for in another fund. 2006 EDA Public Facility Lease Revenue Refunding Bonds Debt Service Fund (DSF) The was established to refund portions of debt associated with the construction of the Andover YMCA Community Center. 2007 EDA Public Facility Lease Revenue Refunding Bonds DSF The was established to refund portions of debt associated with the construction of the Andover YMCA Community Center. Water Trunk Capital Projects Fund (CPF) The is used to account for water access fees and trunk improvements as part of development. It is also used to reserve monies that will be needed for capital infrastructure replacements in the future. Sewer Trunk CPF The is used to account for sewer access fees and sanitary sewer improvements. Road and Bridge CPF The accounts for all road projects and the pavement management program, which includes annual seal coating, crack sealing and overlays for roads. Tax Increment Projects CPF The is used to account for activities in TIF districts 1-1, 1-2, 1-3, 1-4 and all TIF land sales and expenditures to reach the goals of the TIF district plans. Permanent Improvement Revolving CPF The serves as a long-term funding source for large capital improvement expenditures. The government reports the following major proprietary funds: Water Fund The accounts for the water service charges, which are used to finance the water system operating expenses. Sewer Fund The accounts for the sewer service charges, which are used to finance the sanitary sewer system operating expenses. Storm Sewer Fund The accounts for the storm sewer utility charges, which are used to finance the storm sewer operating expenses. Additionally, the government reports the following fund types: Internal Service Funds (ISF) are used to provide equipment maintenance and insurance to other departments of the City on a cost reimbursement basis. Agency Funds The are used to account for assets held by the City in a trustee capacity or as an agent for individuals, private organizations, and/or other governmental units. It is used to account for the collection and distribution of funds relating to development activities and retiree insurance premiums. Private-sector standards of accounting and financial reporting issued prior to December 1, 1989, generally are followed in both the government-wide and proprietary-fund financial statements to the extent that those standards do not conflict with or contradict guidance of the Governmental Accounting Standards Board. Governments also have the option of following 46 CITY OF ANDOVER, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2007 subsequent private-sector guidance for their business-type activities and enterprise funds, subject to this same limitation. The government has elected not to follow subsequent private-sector guidance. As a general rule the effect of interfund activity has been eliminated from the government-wide financial statements. Exceptions to this general rule are transactions that would be treated as revenues, expenditures or expenses if they involved external organizations, such as buying goods and services or payments in lieu of taxes, are similarly treated when they involve other funds of the City of Andover. Elimination of these charges would distort the direct costs and program revenues reported for the various functions concerned. program revenues Amounts reported as include 1) charges to customers or applicants for goods, services, or privileges provided, 2) operating grants and contributions, and 3) capital grants and contributions, including special assessments. general revenues Internally dedicated resources are reported as rather than as program revenues. Likewise, general revenues include all taxes. operatingnonoperating Proprietary funds distinguish revenues and expenses from items. Operating revenues and expenses generally result from providing services and producing and delivering goods in connection with a proprietary fund’s principal ongoing operations. The principal operating revenues of the water and sewer enterprise funds are charges to customers for sales and services. Operating expenses for enterprise funds include the cost of sales and services, administrative expenses, and depreciation on capital assets. All revenues and expenses not meeting this definition are reported as nonoperating revenues and expenses. When both restricted and unrestricted resources are available for an allowable use, it is the government’s policy to use restricted resources first, and then unrestricted resources as they are needed. D.BUDGETS Budgets are legally adopted on a basis consistent with generally accepted accounting principles. Annual appropriated budgets are legally adopted for the General and Special Revenue Funds. Budgeted expenditure appropriations lapse at year-end. Encumbrance accounting, under which purchase orders, contracts, and other commitments for the expenditure of monies are recorded in order to reserve that portion of the appropriation, is not employed by the City because it is at present not considered necessary to assure effective budgetary control or to facilitate effective cash management. E.LEGAL COMPLIANCE - BUDGETS The City follows these procedures in establishing the budgetary data reflected in the financial statements: 1. The City Administrator submits to the City Council a proposed operating budget for the fiscal year commencing the following January 1. The budget includes proposed expenditures and the means of financing them. 2. Public hearings are conducted to obtain taxpayer comments. 3. The budget is legally enacted through City Council action. 4. Expenditures may legally exceed budgeted appropriations at the fund level through City Council action. Also, the City Council may authorize transfers of budgeted amounts between departments within any fund. 5. Formal budgetary integration is employed as a management control device during the year for the General Fund and Special Revenue Funds. Budgetary control for Capital Projects Funds is accomplished through the use of project controls. 6. The legal level of budgetary control is at the department level for the General Fund and at the fund level for the Special Revenue Funds. Also inherent in this controlling function is the management philosophy that the existence of a particular item or appropriation in the approved budget does not automatically mean that it will be spent. The budget process has flexibility in that, where need has been properly demonstrated, an adjustment can be made within the department budget by the City Administrator or between departments by the City Council. 47 CITY OF ANDOVER, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2007 7. The City Council made supplemental budget appropriations throughout the year. Individual amendments were not material in relation to the original appropriations which were adjusted. The following is a listing of Special Revenue Funds whose expenditures exceed budget appropriations: FinalOver BudgetActualBudget Special Revenue Funds: Community Development Block Grant10,000$$43,413$33,413 Community Center776,317799,90923,592 Forestry-18,52618,526 Capital Equipment Reserve78,400148,78770,387 Construction Seal Coating51,07974,27023,191 The over expenditures were funded by greater than anticipated revenues and/or available fund balance. F. CASH AND INVESTMENTS Cash balances from all funds are combined and invested to the extent available in authorized investments. Earnings from such investments are allocated to the individual funds on the basis of applicable cash balance participation of each fund. The City provides temporary advances to funds that have insufficient cash balances by means of an advance from another fund shown as interfund receivables in the advancing fund, and an interfund payable in the fund with the deficit, until adequate resources are received. These interfund balances are eliminated on the government-wide financial statements. Investments are stated at fair value, based upon quoted market prices. Short-term investments, such as commercial paper and banker’s acceptances, are reported as amortized cost. For purposes of the Statement of Cash Flows of Proprietary Fund Types, cash equivalents are defined as short-term, highly liquid investments that are both: a. readily convertible to known amounts of cash, or b. so near their maturity that they present insignificant risk of changes in value because of changes in interest rates. The City’s policy considers cash equivalents to be those that meet the above criteria and have original maturities of three months or less. G. RECEIVABLES AND PAYABLES During the course of operations, numerous transactions occur between individual funds for goods provided or services rendered. Short-term interfund loans are classified as “interfund receivables/payables.” All short-term interfund receivables and payables at December 31, 2007 are planned to be eliminated in 2008. Long-term interfund loans are classified as “interfund loan receivable/payable.” Any residual balances outstanding between the governmental activities and business-type activities are reported in the government-wide financial statements as “internal balances.” Interfund loan receivables, as reported in the fund financial statements, are offset by a fund balance reserve account in applicable governmental funds to indicate that they are not available for appropriation and are not expendable available financial resources. Property taxes and special assessments receivable have been reported net of estimated uncollectible accounts. (See Note 1 H and I). Because utility bills are considered liens on property, no estimated uncollectible amounts are established. Uncollectible amounts are not material for other receivables and have not been reported. 48 CITY OF ANDOVER, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2007 H. PROPERTY TAX REVENUE RECOGNITION The City levies its property tax for the subsequent year during the month of December and it is certified to Anoka County. December 30th is the last day the City can certify a tax levy to the County Auditor for collection the following year. Such taxes become a lien on the following January 1. Anoka County is the collecting agency for the levy and remits the collections to the City three times a year. Taxes not collected as of December 31 each year are shown as delinquent taxes receivable. The County Auditor prepares the tax list for all taxable property in the City, applying the applicable tax rate to the tax capacity of individual properties, to arrive at the actual tax for each property. The County Auditor also collects all special assessments, except for certain prepayments paid directly to the City. The County Auditor submits a list of taxes to be collected on each parcel of property to the County Treasurer in January of each year. The County Treasurer collects all taxes and is required to mail copies of all personal property tax statements by April 15, and copies of all real estate tax statements by April 15, of each year. Property owners are required to pay one-half of their real estate taxes due by May 15 and the balance by October 15. If taxes due May 15 are not paid on time, a penalty of 3% is assessed on homesteaded property and 7% on nonhomesteaded property. An additional 1% penalty is added each month the taxes remain unpaid, until October 15. If the taxes due May 15 are not paid by October 15, a 2% penalty per month is added to homesteaded property and 4% per month to nonhomesteaded property until January 1. If the taxes are not paid by January 1, further penalties are added. Penalties and interest apply to both taxes and special assessments. There are some exceptions to the above penalties, but they are not material. Within 30 days after the tax settlement date, the County Treasurer is required to pay 70% of the estimated collections of taxes and special assessments to the City Treasurer. The County Treasurer must pay the balance to the City Treasurer within 60 days after settlement, provided that after 45 days interest accrues at the rate of 8% per annum. GOVERNMENT-WIDE FINANCIAL STATEMENTS The City recognizes property tax revenue in the period for which the taxes were levied. Uncollectible property taxes are not material and have not been reported. GOVERNMENTAL FUND FINANCIAL STATEMENTS The City recognizes property tax revenue when it becomes both measurable and available to finance expenditures of the current period. In practice, current and delinquent taxes and State credits received by the City in July, December and January are recognized as revenue for the current year. Taxes collected by the County by December 31 (remitted to the City the following January) and taxes and credits not received at the year-end are classified as delinquent and due from County taxes receivable. The portion of delinquent taxes not collected by the City in January is fully offset by deferred revenue because they are not available to finance current expenditures. I. SPECIAL ASSESSMENT REVENUE RECOGNITION Special assessments are levied against benefited properties for the cost or a portion of the cost of special assessment improvement projects in accordance with State Statutes. These assessments are collectible by the City over a term of years usually consistent with the term of the related bond issue. Collection of annual installments (including interest) is handled by the County Auditor in the same manner as property taxes. Property owners are allowed to (and often do) prepay future installments without interest or prepayment penalties. Once a special assessment roll is adopted, the amount attributed to each parcel is a lien upon that property until full payment is made or the amount is determined to be excessive by the City Council or court action. If special assessments are allowed to go delinquent, the property is subject to tax forfeit sale. Proceeds of sales from tax forfeit properties are allocated first to the County’s costs of administering all tax forfeit properties. Pursuant to State Statutes, a property shall be subject to a tax forfeit sale after three years unless it is homesteaded, agricultural or seasonal recreational land in which event the property is subject to such sale after five years. 49 CITY OF ANDOVER, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2007 GOVERNMENT-WIDE FINANCIAL STATEMENTS The City recognizes special assessment revenue in the period that the assessment roll was adopted by the City Council. Uncollectible special assessments are not material and have not been reported. GOVERNMENTAL FUND FINANCIAL STATEMENTS The City recognizes revenue from special assessments when it becomes measurable and available to finance expenditures of the current fiscal period. In practice, current and delinquent special assessments received by the City are recognized as revenue for the current year. Special assessments that are collected by the County by December 31 (remitted to the City the following January) and are also recognized as revenue for the current year. All remaining delinquent, deferred and special deferred assessments receivable in governmental funding are completely offset by deferred revenues. J. INVENTORIES Inventories of the Governmental Funds and the Proprietary Funds are stated at cost, which approximates market, using the first-in, first-out (FIFO) method. Inventories of Governmental funds are recorded as expenditures when consumed rather than when purchased. K. PREPAID ITEMS Certain payments to vendors reflect costs applicable to future accounting periods and are recorded as prepaid items in both government-wide and fund financial statements. L. CAPITAL ASSETS Capital assets, which include property, plant, equipment and infrastructure assets (e.g., roads, bridges, sidewalks, and similar items), are reported in the applicable governmental or business-type activities columns in the government-wide financial statements. Capital assets are defined by the government as assets with an initial, individual cost of more than $5,000 (amount not rounded) and an estimated useful life in excess of one year. Such assets are recorded at historical cost or estimated historical cost if purchased or constructed. Donated capital assets are recorded at estimated fair market value at the date of donation. The City has chosen the modified approach for reporting street and trail system capital assets. The costs of normal maintenance and repairs that do not add to the value of the asset or materially extend assets lives are not capitalized. Major outlays for capital assets and improvements are capitalized as projects are constructed. Interest incurred during the construction phase of capital assets of business-type activities is included as part of the capitalized value of the assets constructed. For the year ended December 31, 2007, no interest was capitalized in connection with construction in progress. Property, plant and equipment of the primary government, as well as the component units, is depreciated using the straight line method over the following estimated useful lives: AssetsLife Buildings and improvements10 - 30 years Furniture and equipment5 - 10 years Machinery and equipment5 - 10 years Other park improvements10 - 30 years Storm sewer50 years Distribution and collection systems50 years The City elected to use the modified approach as defined by GASB Statement No. 34 for infrastructure reporting of its streets and trails. The City conducted a physical assessment in the Fall of 2007 of the condition of the streets and trails constructed 50 CITY OF ANDOVER, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2007 since 1974. This condition assessment will be performed every 3 years. Each segment of City owned street or trail was assigned a physical condition based on potential defects. A Overall Condition Index (OCI) was assigned to each segment. The index is expressed in a continuous scale from 0 to 100, where 0 is assigned to the least acceptable physical condition and 100 is assigned to those segments that have the characteristic of a new street or trail. The following conditions were defined: RangeDescription 86 - 100Excellent 71 - 85Very good 56 - 70Good 41 - 55Fair 26 - 40Poor 11 - 25Very poor 0 - 10Failed The City’s policy relative to maintaining the street and trail assets is to achieve an average rating of “Good” for all segments. This acceptable rating allows minor cracking and patching of the pavement along with minor roughness that could be noticeable to the users of the system. M. COMPENSATED ABSENCES City employees earn vacation and sick pay accruing each payroll period. Unused vacation can be accrued by the employees up to a maximum of 200 hours as of the anniversary date of the individual’s employment with the City, unless a specific authorization is granted to an employee. All vacation pay is accrued when incurred in the government-wide and proprietary fund financial statements. A liability for these amounts is reported in governmental funds only if they have matured, for example, as a result of employee resignations and retirements. Employees can also accrue an unlimited amount of unused sick leave. Employees with two or more years of service are entitled to receive severance pay equal to a percentage of unused sick pay ranging from 20-50 percent based on years of service, up to a maximum of 400 hours. The liability for severance pay is accounted for the same as accrued vacation pay. N. LONG-TERM OBLIGATIONS In the government-wide financial statements and proprietary fund types in the fund financial statements, long-term debt and other long-term obligations are reported as liabilities in the applicable governmental activities, business-type activities, or proprietary fund type statement of net assets. Bond premiums and discounts, as well as issuance costs, are immaterial and are expensed in the year of bond issuance. In the fund financial statements, governmental fund types recognize bond premiums and discounts, as well as bond issuance costs, during the current period. The face amount of debt issued is reported as other financing sources. Premiums received on debt issuances are reported as other financing sources while discounts on debt issuances are reported as other financing uses. Issuance costs, whether or not withheld from the actual debt proceeds received, are reported as debt service expenditures. O. FUND EQUITY In the fund financial statements, governmental funds report reservations of fund balance for amounts not appropriable for expenditure or legally segregated for a specific future use. Designated fund balances represent tentative plans for future use of financial resources. P. INTERFUND TRANSACTIONS Interfund services provided and used are accounted for as revenues, expenditures or expenses.Transactions that constitute reimbursements to a fund for expenditures/expenses initially made from it that are properly applicable to another fund, are recorded as expenditures/expenses in the reimbursing fund and as reductions of expenditures/expenses in the fund that is 51 CITY OF ANDOVER, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2007 reimbursed. Interfund loans are reported as an interfund loan receivable or payable which offsets the movement of cash between funds. All other interfund transactions are reported as transfers. Q. RESTRICTED ASSETS Certain assets in the water fund are restricted for future debt service payments. R. USE OF ESTIMATES The preparation of financial statements in accordance with generally accepted accounting principles (GAAP) requires management to make estimates that affect amounts reported in the financial statements during the reporting period. Actual results could differ from such estimates. S. RECONCILIATION OF GOVERNMENT-WIDE AND FUND FINANCIAL STATEMENTS 1. EXPLANATION OF CERTAIN DIFFERENCES BETWEEN THE GOVERNMENTAL FUND BALANCE SHEET AND THE GOVERNMENT-WIDE STATEMENT OF NET ASSETS fund balance – total governmental funds net The governmental fund balance sheet includes a reconciliation between and assets – governmental activities as reported in the government-wide statement of net assets. One element of that reconciliation explains that “long-term liabilities, including bonds payable, are not due and payable in the current period and therefore are not reported in the funds.” The details of this ($56,667,767) difference are as follows: Bonds payable$(55,200,000) Accrued interest payable(957,916) Compensated absences(509,851) Net adjustment to reduce fund balance - total governmental funds to arrive at net assets - governmental activities$(56,667,767) Another element of that reconciliation states that “internal service funds are used by management to charge the cost of equipment maintenance and insurance to individual funds. The assets and liabilities are included in the governmental statement of net assets along with a deduction of net revenue attributable to business-type activities.” The details of this $175,232 difference are as follows: Internal Service Funds net assets$154,831 Net revenue attributable to business-type activities20,401 Net adjustment to increase fund balance - total governmental funds to arrive at net assets - governmental activities$175,232 52 CITY OF ANDOVER, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2007 2. EXPLANATION OF CERTAIN DIFFERENCES BETWEEN THE GOVERNMENTAL FUND STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES AND THE GOVERNMENT-WIDE STATEMENT OF ACTIVITIES The governmental fund statement of revenues, expenditures, and changes in fund balances includes a reconciliation net changes in fund balances – total governmental fundschanges in net assets of governmental activities between and as reported in the government-wide statement of activities. One element of that reconciliation explains that “Governmental funds report capital outlays as expenditures. However, in the statement of activities the cost of those assets is allocated over their estimated useful lives and reported as depreciation expense.” The details of this $1,631,628 difference are as follows: Capital outlay$2,803,485 Construction/acquisition costs360,742 Depreciation expense(1,532,599) Net adjustment to increase net changes in fund balances - total governmental funds to arrive at changes in net assets of governmental activities$1,631,628 Another element of that reconciliation states that “The net effect of various miscellaneous transactions involving capital assets (i.e., sales, trade-ins, and donations) is to increase (decrease) net assets.” The details of this ($483,651) difference are as follows: In the statement of activities, only the gain on the sale of capital assets is reported. However, in the governmental funds, the proceeds from the sale increase financial resources. Thus, the change in net assets differs from the change in fund balance by the cost of the capital assets sold.$(483,651) Another element of that reconciliation states “Revenues on the Statement of Activities that do not provide current financial resources are not reported as revenues in the funds.” The details of this $4,212,695 difference are as follows: General property taxes deferred revenue: At December 31, 2006$(153,260) At December 31, 2007217,766 Tax increment taxes deferred revenue: At December 31, 2006(27,788) At December 31, 200729,770 Special assessments deferred revenue: At December 31, 2006(2,226,618) At December 31, 20076,403,867 Notes receivable deferred revenue: At December 31, 2006(1,439,055) At December 31, 20071,408,013 Net adjustments to decrease net changes in fund balances - total governmental funds to arrive at changes in net assets of governmental activities$4,212,695 53 CITY OF ANDOVER, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2007 Another element of that reconciliation states “the issuance of long-term debt (e.g., bonds, leases) provides current financial resources to governmental funds, while the repayment of the long-term debt consumes the current financial resources of governmental funds.” Neither transaction, however, has any effect on net assets. The details of this ($4,350,000) difference are as follows: Debt issued or incurred: Issuance of revenue bonds$(6,865,000) Issuance of certificates of indebtedness(760,000) Principal repayments: Revenue bonds185,000 Capital improvement bonds350,000 Special assessment bonds1,825,000 Tax increment bonds705,000 Certificates of indebtedness60,000 State aid bonds150,000 Net adjustment to increase net changes in fund balances - total governmental funds to arrive at changes in net assets of governmental activities$(4,350,000) Another element of that reconciliation states that “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.” The details of this ($264,262) difference are as follows: Compensated absences$(50,552) Accrued interest(213,710) Net adjustment to increase net changes in fund balances - total governmental funds to arrive at changes in net assets of governmental activities$(264,262) Another element of that reconciliation states that “internal service funds are used by management to charge the cost of equipment maintenance and insurance to individual funds. This amount is the portion of net revenue attributable to governmental activities.” The details of this ($42,967) difference are as follows: Internal Service Funds change in net assets$(63,368) Net revenue attributable to business-type activities20,401 Net adjustment to increase fund balance - total governmental funds to arrive at net assets - governmental activities$(42,967) Note 2 DEPOSITS AND INVESTMENTS DEPOSITS In accordance with Minnesota Statutes, the City maintains deposits at those depository banks authorized by the City Council, all of which are members of the Federal Reserve System. Minnesota Statutes require that all City deposits be protected by insurance, surety bond, or collateral. The market value of collateral pledged must equal 110% of the deposits not covered by insurance or bonds. 54 CITY OF ANDOVER, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2007 Minnesota Statutes require that securities pledged as collateral be held in safekeeping by the City Clerk/Treasurer or in a financial institution other than that furnishing the collateral. Authorized collateral includes the following: a) United States government treasury bills, treasury notes, treasury bonds; b) Issues of United States government agencies and instrumentalities as quoted by a recognized industry quotation service available to the government entity; c) General obligation securities of any state or local government with taxing powers which is rated “A” or better by a national bond rating service, or revenue obligation securities of any state or local government with taxing powers which is rated “AA” or better by a national bond rating service; d) Unrated general obligation securities of a local government with taxing powers may be pledged as collateral against funds deposited by that same local government entity; e) Irrevocable standby letters of credit issued by Federal Home Loan Banks to a municipality accompanied by written evidence that the bank’s public debt is rated “AA” or better by Moody’s Investors Service, Inc. or Standard & Poor’s Corporation; and f) Time deposits that are fully insured by the Federal Deposits Insurance Corporation. At December 31, 2007, the carrying amount of the City’s deposits with financial institutions was $4,247,732 (bank amount of $3,311,828). INVESTMENTS Minnesota Statutes authorize the City to invest in the following: a) Direct obligations or obligations guaranteed by the United States or its agencies, its instrumentalities or organizations created by an act of congress, excluding mortgage-backed securities defined as high risk. b) Shares of investment companies registered under the Federal Investment Company Act of 1940 and whose only investments are in securities described in (a) above, general obligation tax-exempt securities, or repurchase or reverse repurchase agreements. c) Obligations of the State of Minnesota or any of its municipalities as follows: 1) any security which is a general obligation of any state or local government with taxing powers which is rated “A” or better by a national bond rating service; 2) any security which is a revenue obligation of any state or local government with taxing powers which is rated “AA” or better by a national bond rating service; and 3) a general obligation of the Minnesota housing finance agency which is a moral obligation of the State of Minnesota and is rated “A” or better by a national bond rating agency. d) Bankers acceptance of United States banks eligible for purchase by the Federal Reserve System. e) Commercial paper issued by United States corporations or their Canadian subsidiaries, of the highest quality, and maturing in 270 days or less. f) Repurchase or reverse repurchase agreements with banks that are members of the Federal Reserve System with capitalization exceeding $10,000,000; a primary reporting dealer in U.S. government securities to the Federal Reserve Bank of New York; certain Minnesota securities broker-dealers; or, a bank qualified as a depositor. g) General obligation temporary bonds of the same governmental entity issued under section 429.091, subdivision 7; 469.178, subdivision 5; or 475.61, subdivision 6. 55 CITY OF ANDOVER, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2007 As of December 31, 2007, the City had the following investments and maturities: Investment Maturities (in Years) CreditFairLess ThanMore Than Investment TypeRatingValue11 - 56 - 1010 Money marketN/A1,570,248$$1,570,248$- $ -$ - Commercial paperA1/A24,578,9124,578,912 - - - Certificates of depositFDIC814,714290,332488,623-35,759 AA334,747-34,747 - - Local governmentsA1/A2294,069130,993163,076 - - AA1/AA2/AA3700,369351,789244,442 104,138- AAA1,318,047350,037830,383 137,627- U.S. agenciesA11,995,0001,995,000 - - - AAA32,360,1402,029,7128,101,94319,565,2862,663,199 N/A706,1092,755-75,632627,722 Total investments 11,299,77844,372,355$$9,828,467$ 3,603,19219,640,918$ Deposits4,247,732 Total cash and investments$48,620,087 Following is a reconciliation of the City’s total cash and investment balances at December 31, 2007: Government-wide statement of net assets: Cash and investments$24,632,884 Cash and investments with escrow agent23,704,147 Fiduciary funds statement of net assets283,056 Total$48,620,087 Interest rate risk - The City has a formal investment policy that states the City will minimize the risk that the market value of securities in the portfolio will fall due to the changes in general interest rates, by: 1) Structuring the investment portfolio so that securities mature to meet cash requirements for ongoing operations, thereby avoiding the need to sell securities on the open market prior to maturity. 2) Investing operating funds primarily in shorter-term securities, money market mutual funds or similar investment pools. Credit Risk - The City has a formal investment policy that states the City will minimize the credit risk, the risk of loss due to the failure of the security issuer or backer, by: 1) Limiting investments to the safest types of securities. 2) Pre-qualifying the financial institutions, broker/dealers, intermediaries and advisers with which the City will do business. A list will be maintained of financial institutions authorized to provide investment services. In addition, a list also will be maintained of approved security broker/dealers selected by creditworthiness. These may include “primary” dealers or regional dealers that qualify under Securities and Exchange Commission (SEC) Rule 15C3-1. All financial institutions and broker/dealers who desire to become qualified for investment transactions must supply; audited financial statements, proof of National Association of Securities Dealers (NASD) certification, proof of state 56 CITY OF ANDOVER, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2007 registration, completed broker/dealer questionnaire, and certification of having read and understood and agreeing to comply with the City’s investment policy. An annual review of the financial condition and registration of qualified financial institutions and broker/dealers will be conducted by the City Administrator. Concentration of Credit Risk - More than 70% of the City’s investments are in various holdings with U.S. agencies; Federal Home Loan Bank (12.2%), Federal National Mortgage Association (3.7%), Federal Home Loan Mortgage Corporation (8.9%) and U.S. Treasury (53.4%). The City’s policy on concentration of investments is as follows: 1) Diversification - The investments shall be diversified by: a) investments to avoid over concentration in securities from a specific issuer or business sector (excluding U.S. Treasury securities), b) limiting investment in securities that have higher credit risks, c) investing in securities with varying maturities, and d) continuously investing a portion of the portfolio in readily available funds such as local government investment pools (LGIPs), money market funds or overnight repurchase agreements to ensure that appropriate liquidity is maintained in order to meet ongoing obligations. s 2) Maximum Maturitie - To the extent possible, the City shall attempt to match its investments with anticipated cash flow requirements. Unless matched to a specific cash flow, the City will not directly invest in securities maturing, or having average lifes, of more than five (5) years from the date of purchase or in accordance with state and local statues and ordinances. Reserve funds and other funds with longer-term investment horizons may be invested in securities exceeding five (5) years if the maturity of such investments are made to coincide as nearly as practicable with the expected use of funds. The intent to invest in securities with longer maturitues shall be disclosed in writing to the legislative body. Because of inherent difficulties in accurately forecasting cash flow requirements, a portion of the portfolio should be continuously invested in readily available funds such as local government investment pools, money market funds, or overnight repurchase agreements to ensure that appropriate liquidity is maintained to meet ongoing obligations. Note 3 RECEIVABLES Significant receivables balances not expected to be collected within one year of December 31, 2007 are as follows: Due FromDelinquentDelinquentSpecial OtherPropertyTaxAssessment GovernmentsTaxesIncrementReceivableTotal Major Funds: General Fund$ 53,872-$$-$-$53,872 Water Trunk CPF- 359,143-359,143 - Sewer Trunk CPF--92,38592,385 - Road and Bridge CPF-9,767 1,119,846-1,129,613 Tax Increment Projects CPF23,123-2,00725,130 - Permanent Improvement Revolving CPF- 3,627,593-3,627,593 - Nonmajor Funds-19,112499,203525,460 7,145 Total$23,123$82,751$5,700,177$5,813,196 $ 7,145 57 CITY OF ANDOVER, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2007 Governmental funds report deferred revenue in connection with receivables for revenues that are not considered to be available to liquidate liabilities of the current period. Governmental funds also defer revenue recognition in connection with resources that have been received, but not yet earned. At the end of the current fiscal year, the various components of deferred revenue reported in the governmental funds were as follows: UnavailableUnearned Delinquent property taxes receivable: General Fund$ -141,768$ Road & Bridge CPF25,703 - Nonmajor Funds50,295 - Delinquent tax increment collections: Nonmajor Funds29,770 - Special assessments not yet due: General Fund5,007 - Water Trunk CPF396,332 - Sewer Trunk CPF109,651 - Road & Bridge CPF1,259,231 - Tax Increment Projects CPF2,926 - Permanent Improvement Revolving CPF4,069,025 - Nonmajor Funds561,695 - Notes receivable not yet due: Road & Bridge CPF42,200 - Tax Increment Projects CPF1,312,000 - Nonmajor Funds53,813 - Unearned miscellaneous fees: Nonmajor funds-1,500 Unearned construction seal coat fees: Nonmajor funds-277,628 Total$8,059,416$279,128 Note 4 LOANS RECEIVABLE As part of a development agreement entered into with a private developer in June 2006, the City received a promissory note for $50,000. The note is for intersection improvements on Hanson Blvd. The note bears an interest rate of 5.5% and calls for 16 semi-annual payments to be made to the City through July 2014. As of December 31, 2007, the remaining balance due of $42,200 is offset by deferred revenue, as it is not available to finance current activities. As part of a development agreement entered into with a private developer in June 2005, the City received a promissory note for $1,505,000. The note is for the purchase of land within Andover Station North. The note bears an interest rate of 6% and calls for the note to be paid off by May 2010. As of December 31, 2007, the remaining balance due of $1,312,000 is offset by deferred revenue, as it is not available to finance current activities. As part of a rental rehabilitation revolving loan program, the City entered into a loan agreement with a property owner in October 2006. The loan is for the rehabilitation of a rental property located within the City. The loan bears an interest rate of 3.0 % and calls for 180 equal monthly payments to be made to the City through November 2021. As of December 31, 2007, the remaining balance due of $46,626 is offset by deferred revenue, as it is not available to finance current activities. As part of a housing rehabilitation revolving loan program, the City entered into a loan agreement with a property owner in July 2007. The loan is for the rehabilitation of a property located within the City. The loan bears an interest rate of 3.0 % and calls for 57 equal 58 CITY OF ANDOVER, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2007 monthly payments to be made to the City through August 2012. As of December 31, 2007, the remaining balance due of $7,187 is offset by deferred revenue, as it is not available to finance current activities. Note 5 CAPITAL ASSETS In accordance with GASB Statement No. 34, the City has reported all capital assets including infrastructure in the government-wide statement of net assets. The City elected to use the modified approach as defined by GASB Statement No. 34 for infrastructure reporting for its streets and trails. As a result, no accumulated depreciation or depreciation expense has been recorded for this system. A more detailed discussion of the modified approach is presented in the Required Supplementary Information section of this report. All other capital assets including other infrastructure systems were reported using the basic approach whereby accumulated depreciation and depreciation expense have been recorded.Adjustments due to restatement represent the changes due to an extensive inventory of all capital assets, implementation of GASB Statement No. 34 and a policy change related to capitalization thresholds. Capital asset activity for the year ended December 31, 2007 as previously reported was as follows: BeginningEnding Primary Government BalanceAdditionsDeletionsBalance Governmental activities: Capital assets not being depreciated: Land and improvements$6,886,761$1,431,209$(428,793)$7,889,177 Streets and trails73,968,3964,720,213 78,688,609- Construction in progress6,696,702663,194(6,999,155)360,741 Total capital assets not being depreciated87,551,8596,814,616(7,427,948)86,938,527 Capital assets being depreciated: Buildings and improvements26,265,061 26,265,061- - Furniture and equipment253,59665,626-319,222 Machinery and equipment5,790,488543,840(93,142)6,241,186 Other park improvements3,417,6981,503,470(23,148)4,898,020 Total capital assets being depreciated35,726,8432,112,936(116,290)37,723,489 Less accumulated depreciation for: Buildings and improvements2,678,432886,021 3,564,453- Furniture and equipment102,41639,936-142,352 Machinery and equipment3,769,039395,194(45,999)4,118,234 Other park improvements1,020,056211,448(15,432)1,216,072 Total accumulated depreciation7,569,9431,532,599(61,431)9,041,111 Total capital assets being depreciated - net28,156,900580,337(54,859)28,682,378 Governmental activities capital assets - net115,708,759$$7,394,953$(7,482,807)$115,620,905 59 CITY OF ANDOVER, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2007 BeginningEnding Primary Government BalanceAdditionsDeletionsBalance Business-type activities: Capital assets not being depreciated: Land and improvements$730,243$-$ 730,243-$ Capital assets being depreciated: Buildings and improvements14,810,983 14,810,983- - Furniture and equipment52,11513,000-65,115 Machinery and equipment1,109,3835,000 1,114,383- Collection and distribution46,953,4771,393,944 48,347,421- 62,925,9581,411,944 64,337,902- Total capital assets being depreciate d Less accumulated depreciation for: Buildings and improvements3,543,973529,840 4,073,813- Furniture and equipment35,9733,750-39,723 Machinery and equipment612,853101,526 714,379- Collection and distribution12,229,100960,500 13,189,600- Total accumulated depreciation16,421,8991,595,616 18,017,515- Total capital assets being depreciated - net46,504,059(183,672) 46,320,387- Busness-type actvtes capta assets - net47,234,302183,672 47,050,630- iiiiil$$()$$ Depreciation expense was charged to functions/programs of the primary government as follows: Governmental activities: General government$73,661 246,764 Public safet y Public works261,413 Parks and recreation950,761 Total depreciation expense - governmental activities1,532,599 $ Business-type activities $862,001 Wate r 498,447 Sewe r 235,168 Storm sewe r Total depreciation expense - business-type activities1,595,616 $ CONSTRUCTION COMMITMENTS At December 31, 2007, the City had no construction project contracts in progress. Note 6 LONG-TERM DEBT The City issues general obligation bonds and equipment certificates to provide funds for the acquisition and construction of major capital facilities. The reporting entity’s long-term debt is segregated between the amounts to be repaid from governmental activities and amounts to be repaid from business-type activities. 60 CITY OF ANDOVER, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2007 IssueMaturitInterestOriginalPayable y DateDateRateIssue12/31/07 GOVERNMENTAL ACTIVITIES: General Obligation Revenue Bonds: 2004 EDA Pub Fac Lease Rev Bonds4/23/20042/1/20142.125-5.400%19,580,000$$19,210,000 2006 EDA Pub Fac Lease Rev Ref Bonds12/1/20062/1/20344.00-4.50%10,000,00010,000,000 2007 EDA Pub Fac Lease Rev Ref Bonds1/1/20072/1/20344.00-4.50%6,865,0006,865,000 Total general obligation revenue bonds36,445,00036,075,000 Special Assessment Bonds: 2005A G.O. Improvement Bonds4/28/20052/1/20132.95-3.65%3,560,0003,560,000 Tax Increment Bonds: 2003B G.O. Tax Increment Refunding Bonds6/1/20038/1/20102.00-3.00%1,530,000720,000 2004B G.O. Tax Increment Refunding Bonds3/16/20048/1/20102.00-3.25%4,260,0003,290,000 Total tax increment bonds5,790,0004,010,000 Certificates of Indebtedness: 2005B G.O. Equipment Certificates4/28/20052/1/20082.65-3.10%310,00060,000 2006B G.O. Equipment Certificates5/10/20062/1/20103.60-3.65%460,000460,000 2007A G.O. Equipment Certificates3/13/200702/01/0114.00%760,000760,000 Total certificates of indebtedness1,530,0001,280,000 Capital Improvement Bonds: 2004A G.O. Capital Improvement Bonds3/16/20042/1/20172.00-3.75%3,890,0003,295,000 2005B G.O. Capital Improvement Bonds4/28/20052/1/20092.65-3.10%340,000230,000 Total capital improvement bonds4,230,0003,525,000 Permanent Improvement Revolving (PIR) Bonds: 2003A G.O. PIR Bonds6/1/20032/1/20102.00-2.60%4,580,0002,385,000 2006A G.O. PIR Bonds5/10/20062/1/20143.60-3.85%2,450,0002,450,000 Total permanent improvement revolving bonds7,030,0004,835,000 State Aid Bonds: 2001B G.O. State Aid Street Bonds6/5/20012/1/20172.90-5.00%2,755,0001,915,000 Total - bonded indebtedness61,340,00055,200,000 Compensated absences payable-509,851 Total governmental activities indebtedness61,340,00055,709,851 BUSINESS-TYPE ACTIVITIES General Obligation Revenue Bonds: 2002 G .O. Water Revenue Bonds5/9/20028/1/20122.30-5.00%9,780,0008,470,000 2007B G.O. Water Revenue Refunding Bonds3/13/20072/1/20234.00-4.25%6,570,0006,570,000 Total general obligation revenue bonds16,350,00015,040,000 Compensated absences payable-90,228 Total business-type activities indebtedness16,350,00015,130,228 Total City indebtedness$77,690,000$70,840,079 61 CITY OF ANDOVER, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2007 Annual debt service requirements to maturity for general obligation bonds are as follows: Governmental Activities G.O. Revenue BondsSpecial Assessment BondsTax Increment Bonds PrincipalInterestPrincipalInterestPrincipalInterest 2008$190,000$1,670,591$545,000$110,534$735,000$105,033 2009390,0001,661,016565,00093,738760,00087,620 2010405,0001,646,894580,00075,555780,00068,313 2011415,0001,631,101600,00055,930565,00045,050 2012435,0001,613,666625,00034,636580,00027,875 2013-201719,125,0004,790,758645,00011,771590,0009,588 2018-20223,420,0002,897,379 - - - - 2023-20274,175,0002,117,850 - - - - 2028-20325,135,0001,123,334 - - - - 2033-20342,385,000108,338 - - - - Total36,075,000$$19,260,927$3,560,000$382,164$4,010,000$343,479 Governmental Activities Permanent Improvement Certificates of IndebtednessCapital Improvement BondsRevolving Bonds PrincipalInterestPrincipalInterestPrincipalInterest 2008$385,000$41,769$370,000$107,370$1,080,000$132,806 2009340,00028,149380,00097,3631,120,000104,493 2010355,00014,820280,00088,4181,155,00072,686 2011200,0004,000295,00080,143345,00049,530 2012--315,00070,993360,00036,398 2013-2017- 1,885,000-178,426775,00030,031 Total$1,280,000$88,738$3,525,000$622,713$4,835,000$425,944 Governmental ActivitiesBusiness-Type Activities State Aid BondsG.O. Revenue Bonds PrincipalInterestPrincipalInterest 2008$155,000$85,120$360,000$654,373 2009160,00078,583375,000640,585 2010170,00071,568395,000625,367 2011175,00064,063415,000608,654 2012185,00056,0506,925,000590,586 2013-20171,070,000136,8342,635,0001,075,831 2018-2022--3,210,000491,299 2023-2027--725,00015,406 Total$1,915,000$492,218$ 4,702,10115,040,000$ It is not practical to determine the specific year for payment of long-term accrued compensated absences. 62 CITY OF ANDOVER, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2007 CHANGE IN LONG-TERM LIABILITIES Long-term liability activity for the year ended December 31, 2007, was as follows: BalanceAdditionsReductionsBalanceOne Year Governmental activities: Bonds payable: G.O. revenue bonds$ 6,865,00029,395,000$$(185,000)$36,075,000$190,000 Special assessment bonds3,560,000 3,560,000-545,000 - Tax increment bonds4,715,000-(705,000)4,010,000735,000 Certificates of indebtedness580,000760,000(60,000)1,280,000385,000 Capital improvement bonds3,875,000-(350,000)3,525,000370,000 Permanent improvement revolving bonds6,660,000 (1,825,000)-4,835,0001,080,000 State aid bonds2,065,000-(150,000)1,915,000155,000 Total bonds payable50,850,0007,625,000(3,275,000)55,200,0003,460,000 Compensated absences459,299314,539(263,987)509,85150,985 Total governmental activities long-term liabilities$ 7,939,53951,309,299$$(3,538,987)$55,709,851$3,510,985 Business-type activities: Bonds payable: G.O. revenue bonds$8,815,000$6,570,000$(345,000)$15,040,000$360,000 Compensated absences74,67574,146(58,593)90,2289,023 Total business-type activities long-term liabilities$8,889,675$6,644,146$(403,593)$15,130,228$369,023 For the governmental activities, bonds payable can be summarized in the following categories: G.O. revenue bonds The were used to construct a 132,000 square foot community center. The bonds are payable from annual lease payments received by the EDA from the YMCA, operating revenues from the ice arena and field house, and, if necessary, a debt service tax levy. These bonds do constitute debt for the purpose of computing statutory debt limits. special assessment bonds The are used to finance assessable improvements within the City, including but not limited to sanitary sewer and water line connections, storm sewer, streets, sidewalks and curb & gutter. The bonds are payable primarily from special assessments levied against properties benefited by the improvements. In addition, 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. tax increment bonds The are used to finance land acquisition and other public costs to facilitate development in the City’s tax increment districts. The bonds are payable from tax increment revenues generated by existing and new development with the district. In addition, 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. certificates of indebtedness The are used to finance the purchase of capital equipment. The certificates are general obligations of the City for which it pledges its full faith, credit and taxing powers to the payment of principal and interest on the certificates. capital improvement bonds The were used to purchase the 30,000 square foot public works building from the EDA and to finance the construction of a new fire station. The bonds are general obligations of the City for which it pledges its full faith, credit and taxing powers to the payment of principal and interest on the certificates. permanent improvement revolving bonds The are used to finance assessable improvements within the City, including but not limited to sanitary sewer and water line connections, storm sewer, streets, sidewalks and curb & gutter. The bonds are payable 63 CITY OF ANDOVER, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2007 primarily from special assessments levied against properties benefited by the improvements. In addition, 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. Thestate aid bonds were used to finance the Municipal State Aid (MSA) eligible costs of the Andover Boulevard project. The bonds are payable entirely from state-aid received by the City from construction and maintenance of the state aid street system. The City has pledged an amount of money from its account in the state-aid street fund sufficient to pay the principal and interest of the bonds. In addition, 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. For the governmental activities, compensated absences are generally liquidated through the General Fund. For the business-type activities, the G.O. revenue bonds were used to finance the construction of a water treatment plant. The bonds are payable from net revenues of the water system and are general obligations of the City for which its full faith, credit and taxing powers are pledged. REVENUES PLEDGED 2004 EDA Public Facility Lease Revenue Bonds. The EDA has pledged future lease revenue, operating revenues (net of operating expenses) and, if necessary, a debt service tax levy to repay the $19,580,000 Bonds issued in April 2004. Proceeds from the bonds provided financing for the construction of Andover YMCA Community Center. Lease revenues were projected to produce 100% of the debt service requirements over the life of the bonds. Total principal and interest remaining on the bonds is $25,165,130, payable through February 2014. For the current year, principal and interest paid and total net operating revenues, lease revenue and tax levy were $1,144,731 and $920,350, respectively. A portion of the Series 2004 Bonds were refunded by the 2006 Series Refunding Bonds of $10,000,000 and the 2007 Series Refunding Bonds of $6,865,000, both with a crossover date of February 1, 2014. At which time, future lease revenues, net operating revenues and ,if necessary, debt service tax levy will be used to repay the Series 2006 and Series 2007 Refunding Bonds through 2034. 2005A G.O. Improvement Bonds. The City has pledged future special assessment revenue to repay the $3,560,000 Bonds issued in April 2005. Proceeds from the bonds provided financing for the construction of Jay Street located in Andover Station North. Special assessments were projected to produce 100% of the debt service requirements over the life of the bonds. Total principal and interest remaining on the bonds is $3,942,164, payable through February 2013. For the current year, principal and interest paid and total special assessment revenues were $118,572 and $2,006,511, respectively. 2003B G.O. Tax Increment Refunding Bonds. The City has pledged future tax increment revenue to repay the $1,530,000 Bonds issued in June 2003. Proceeds from the bonds refunded the Series 1996 Bonds. Incremental property taxes were projected to produce 100% of the debt service requirements over the life of the bond issue. Total principal and interest remaining in the bonds is $758,140, payable through August 2010. For the current year, principal and interest paid and total tax increment revenues were $236,920 and $399,673, respectively. 2004B G.O. Tax Increment Refunding Bonds. The City has pledged future tax increment revenue to repay the $4,260,000 Bonds issued in March 2004. Proceeds from the bonds refunded the Series 1995D Bonds. Incremental property taxes were projected to produce 100% of the debt service requirements over the life of the bond issue. Total principal and interest remaining in the bonds is $3,595,339, payable through August 2010. For the current year, principal and interest paid and total tax increment revenues were $588,625 and $1,074,546, respectively. 2003A Permanent Improvement Revolving Bonds. The City has pledged future special assessment revenue to repay the $4,580,000 Bonds issued in June 2003. Proceeds from the bonds provided financing for the construction of public improvements in the th following developments: Foxborough Crossing, Shady Oak Cove, Woodland Estates 4 Addition, Constance Corner, Maple Hollow, Woodland Creek Golf Course Villas and City View Farms. Special assessments were projected to produce 100% of the debt service requirements over the life of the bonds. All revenues from the special assessments are paid into the Permanent Improvement Revolving CPF and used to pay debt service as needed. Total principal and interest remaining on the bonds is $2,473,427, payable through February 2010. For the current year, principal and interest paid and monies transferred from the Permanent Improvement Revolving CPF were $812,505 and $807,000, respectively. 2006A Permanent Improvement Revolving Bonds. The City has pledged future special assessment revenue to repay the $2,450,000 Bonds issued in May 2006. Proceeds from the bonds provided financing for the construction of public improvements in the following developments: Andover Station North Ballfields, Cardinal Ridge, Shaw’s Glen and Woodland Crossing. Special assessments were projected to produce 100% of the debt service requirements over the life of the bonds. All revenues from the special assessments are paid into the Permanent Improvement Revolving CPF and used to pay debt service as needed. Total 64 CITY OF ANDOVER, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2007 principal and interest remaining on the bonds is $2,787,517, payable through February 2014. For the current year, principal and interest paid and monies transferred from the Permanent Improvement Revolving CPF were $111,575 and $120,000, respectively. 2001B State Aid Street Bonds. The City has pledged future municipal state aid (MSA) allotments to repay the $2,755,000 Bonds issued in June 2001. Proceeds of the bonds provided financing for the construction of the Andover Boulevard Project. The bonds are payable solely from MSA allotments through 2017. Total principal and interest remaining on the bonds is $2,407,218, payable through February 2017. For the current year, principal and interest paid and MSA revenues were $241,298 and $243,298, respectively. 2002 G.O. Water Revenue Bonds. The City has pledged future water customer revenues, net of operating expenses, to repay the $9,780,000 Bonds issued in May 2002. Proceeds of the bonds provided financing for the construction of a water treatment plant. The bonds are payable from water customer net revenues and are payable through 2012. The total principal and interest remaining on the bonds is $10,258,835. The principal and interest paid for the current year and total customer net revenues were $847,685 and $818,753, respectively. A portion of the Series 2002 Bonds were refunded by the 2007 Series Refunding Bonds of $6,570,000 with a crossover date of August 1, 2012. At which time, future water customer revenues, net of operating expenses, will be used to repay the Series 2007 Refunding Bonds through 2023. ADVANCE CROSSOVER REFUNDING On December 1, 2006, the City issued $10,000,000 in Public Facility Lease Revenue Refunding Bonds, Series 2006 with an average interest rate of 4.29% to advance refund $9,755,000 of outstanding 2004 Series Bonds with an average interest rate of 5.17%. The net proceeds of $9,782,338 were used to purchase U.S. Government Securities. Those securities were deposited in an irrevocable trust with an escrow agent to provide for the interest on the refunding bonds before the crossover date and called principal on the refunded bonds on February 1, 2014. The City advance refunded a portion of the 2004 Public Facilities Lease Revenue Bonds to reduce its total debt service payments over the last twenty years of the bond by $755,979 and to obtain an economic gain (difference between the present value of the debt service payments on the old and new debt) of $375,573. The City is responsible for the debt service of the refunded bonds and the debt service of the refunding bonds after the crossover date. The debt service of the refunding bonds before the crossover date is payable from the escrow account. Assets held with the escrow agent total $9,762,152 at December 31, 2007. On January 1, 2007, the City issued $6,865,000 in Public Facility Lease Revenue Refunding Bonds, Series 2007 with an average interest rate of 4.31% to advance refund $6,700,000 of outstanding 2004 Series Bonds with an average interest rate of 5.17%. The net proceeds of $6,710,306 were used to purchase U.S. Government Securities. Those securities were deposited in an irrevocable trust with an escrow agent to provide for the interest on the refunding bonds before the crossover date and called principal on the refunded bonds on February 1, 2014. The City advance refunded a portion of the 2004 Public Facilities Lease Revenue Bonds to reduce its total debt service payments over the last twenty years of the bond by $517,163 and to obtain an economic gain (difference between the present value of the debt service payments on the old and new debt) of $250,417. The City is responsible for the debt service of the refunded bonds and the debt service of the refunding bonds after the crossover date. The debt service of the refunding bonds before the crossover date is payable from the escrow account. Assets held with the escrow agent total $6,707,362 at December 31, 2007. 65 CITY OF ANDOVER, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2007 RefundedDebt Service Commitment PaymentBondsRefunding BondsEscrow Account DateTotalSeries 2006Series 2007Series 2006Series 2007City 2008$1,144,381$424,227$291,983$424,227$291,983$1,144,381 20091,334,806424,227291,983424,227291,9831,334,806 20101,335,684424,227291,983424,227291,9831,335,684 20111,329,891424,227291,983424,227291,9831,329,891 20121,332,456424,227291,983424,227291,9831,332,456 20131,328,534424,227291,983424,227291,9831,328,534 201417,359,373424,227291,9839,967,1146,845,9921,262,477 2015-752,527512,483-1,265,010 - 2016-753,827513,283-1,267,110 - 2017-749,628513,683-1,263,311 - 2018 - 2022-3,748,6752,568,704-6,317,379 - 2023 - 2027-3,729,1952,563,655-6,292,850 - 2028 - 2032-3,693,3142,565,020-6,258,334 - 2033 - 2034-1,474,1261,019,212-2,493,338 - $25,165,125$17,870,881$12,299,921$12,512,476$8,597,890$34,225,561 On March 13, 2007, the City issued $6,570,000 in General Obligation Water Revenue Refunding Bonds, Series 2007B with an average interest rate of 4.07% to advance refund $6,490,000 of outstanding 2002 Series Bonds with an average interest rate of 4.90%. The net proceeds of $6,491,509 were used to purchase U.S. Government Securities. Those securities were deposited in an irrevocable trust with an escrow agent to provide for the interest on the refunding bonds before the crossover date and called principal on the refunded bonds on August 1, 2012. The City advance refunded the 2002 General Obligation Water Revenue Bonds to reduce its total debt service payments over the last ten years of the bond by $265,904 and to obtain an economic gain (difference between the present value of the debt service payments on the old and new debt) of $164,664. The City is responsible for the debt service of the refunded bonds and the debt service of the refunding bonds after the crossover date. The debt service of the refunding bonds before the crossover date is payable from the escrow account. Assets held with the escrow agent total $6,493,774 at December 31, 2007. RefundedRefundingDebt Service Commitment PaymentBondsBondsEscrow DateTotalTotalAccountCity 2008$748,228$266,146$266,146$748,228 2009749,439266,146266,146749,439 2010754,221266,146266,146754,221 2011757,507266,146266,146757,507 20127,249,440266,1466,756,146759,440 2013-741,446-741,446 2014-741,646-741,646 2015-741,046-741,046 2016-744,546-744,546 2017-742,146-742,146 2018 - 2022-3,701,299-3,701,299 2023-740,406-740,406 $10,258,835$9,483,265$7,820,730$11,921,370 66 CITY OF ANDOVER, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2007 Note 7 LEGAL DEBT MARGIN The City is subject to a statutory limitation by the State of Minnesota for bonded indebtedness payable principally from property taxes. The City of Andover's legal debt margin for 2007 and 2006 is computed as follows: December 31, 20072006 Estimated taxable market value$2,800,462,600$2,543,591,200 Debt limit (2% of market value)56,009,25250,871,824 Amount of debt applicable to debt limit: Total bonded debt$70,240,000$59,665,000 Less: Nonapplicable debt G.O. water revenue bonds(15,040,000)(8,815,000) Special assessment bonds(3,560,000)(3,560,000) Tax increment bonds(4,010,000)(4,715,000) Permanent improvement revolving bonds(4,835,000)(6,660,000) State aid bonds(1,915,000)(2,065,000) Less: Cash and investments in related debt service funds(17,822,418)(10,739,510) Total debt applicable to debt limit23,057,58223,110,490 Legal debt margin$32,951,670$27,761,334 Note 8 DEFINED BENEFIT PENSION PLANS - STATEWIDE A. PLAN DESCRIPTION All full-time and certain part-time employees of the City of Andover are covered by defined benefit plans administered by the Public Employees Retirement Association of Minnesota (PERA). PERA administers the Public Employees Retirement Fund (PERF) and the Public Employees Police and Fire Fund (PEPFF), which are cost-sharing, multiple-employer retirement plans. These plans are established and administered in accordance with Minnesota Statute, Chapters 353 and 356. PERF members belong to either the Coordinated Plan or the Basic Plan. Coordinated Plan members are covered by Social Security and Basic Plan members are not. All new members must participate in the Coordinated Plan. All police officers, firefighters and peace officers who qualify for membership by statute are covered by the PEPFF. PERA provides retirement benefits as well as disability benefits to members, and benefits to survivors upon death of eligible members. Benefits are established by State Statute, and vest after three years of credited service. The defined retirement benefits are based on a member’s highest average salary for any five successive years of allowable service, age, and years of credit at termination of service. Two methods are used to compute benefits for PERF’s Coordinated and Basic Plan members. The retiring member receives the higher of a step-rate benefit accrual formula (Method 1) or a level accrual formula (Method 2). Under Method 1, the annuity accrual rate for a Basic Plan member is 2.2% of average salary for each of the first 10 years of service and 2.7% for each remaining year. The annuity accrual rate for a Coordinated Plan member is 1.2% of average salary for each of the first 10 years and 1.7% for each remaining year. Under Method 2, the annuity accrual rate is 2.7% of average salary for Basic Plan members and 1.7% for Coordinated Plan members for each year of service. For PEPFF members, the annuity accrual rate is 3.0% for each year of service. For all PEPFF and PERF members hired prior to July 1, 1989 whose annuity is calculated using Method 1, a full annuity is available when age plus years of service equal 90. Normal retirement age is 55 for PEPFF members and 65 for Basic and Coordinated members hired prior to July 1, 1989. Normal retirement age is the age for unreduced Social Security benefits capped at 66 for Coordinated members hired on or after July 1, 1989. A reduced retirement annuity is also available to eligible members seeking early retirement. 67 CITY OF ANDOVER, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2007 There are different types of annuities available to members upon retirement. A single-life annuity is a lifetime annuity that ceases upon the death of the retiree – no survivor annuity is payable. There are also various types of joint and survivor annuity options available which will be payable over joint lives. Members may also leave their contributions in the fund upon termination of public service in order to qualify for a deferred annuity at retirement age. Refunds of contributions are available at any time to members who leave public service, but before retirement benefits begin. The benefit provisions stated in the previous paragraphs of this section are current provisions and apply to active plan participants. Vested, terminated employees who are entitled to benefits but are not receiving them yet are bound by the provisions in effect at the time they last terminated their public service. PERA issues a publicly available financial report that includes financial statements and required supplementary information for PERF and PEPFF. That report may be obtained on the internet at www.mnpera.com, by writing to PERA, 60 Empire Drive #200, St. Paul, Minnesota, 55103-1855 or by calling (651) 296-7460 or 1-800-652-9026. B. FUNDING POLICY Minnesota Statutes Chapter 353 sets the rates for employer and employee contributions. These statutes are established and amended by the state legislature. The City makes annual contributions to the pension plans equal to the amount required by state statutes. PERF Basic Plan members and Coordinated Plan members are required to contribute 9.10% and 5.75%, respectively, of their annual covered salary in 2007. Contribution rates in the Coordinated Plan will increase in 2008 to 6.00%. PEPFF members are required to contribute 7.80% of their annual covered salary in 2007. That rate will increase to 8.60% in 2008. The City of Andover is required to contribute the following percentages of annual covered payroll: 11.78% for Basic Plan PERF members, 6.25% for Coordinated Plan PERF members, and 11.70% for PEPFF members. Employer contribution rates for the Coordinated Plan and PEPFF will increase to 6.50% and 12.90% respectively, effective January 1, 2008. The City’s contributions to the Public Employees Retirement Fund for the years ending December 31, 2007, 2006 and 2005 were $213,396, $194,241 and $167,142, respectively. The City’s contributions to the Public Employees Police and Fire Fund for the years ending December 31, 2007, 2006 and 2005 were $18,060, $14,782 and $12,351, respectively. The City’s contributions were equal to the contractually required contributions for each year as set by state statute. C. DEFINED CONTRIBUTION LUMP SUM SERVICE PENSION PLAN – VOLUNTEER FIREFIGHTERS RELIEF ASSOCIATION PLAN DESCRIPTION Members of the City’s volunteer fire department are members of the Andover Firefighters’ Relief Association. The Association is the administrator of a single-employer defined contribution plan available to firefighters that was established October 9, 1979 and operates under the provisions of Minnesota Statutes Section 424A. It is governed by a board of six members elected by the members of the Association for three-year terms. The City’s Mayor, City Clerk and Fire Chief are ex- officio members of the Board of Trustees. The Association provides retirement benefits as well as disability benefits to members, and benefits to survivors upon death of eligible members. 1. Twenty-Year Service Pension – In order to be entitled to a pension benefit, a firefighter must have completed a minimum of five years of service with the Department and five years membership in the Association and attain the age of 50 years. The firefighter will then be 40% vested. This percentage increases 4% per year until the twentieth year when 100% vesting will occur. Because this is a defined contribution plan, the amount of the retirement benefit is not predetermined, but rather is based on the individual member’s allocable portion of contributions made during the participation period. 2. Deferred Pension – If the retired or terminated member has not attained age 50 years and is otherwise eligible for the pension benefit, the balance of the member’s account will be credited with earned interest at the rate permitted by Minnesota Statutes Section 424.A02, Subd.7. 3. Disability Benefit – If a member of the Association becomes totally and permanently disabled due to injury, disability, sickness or dismemberment as a result of performance of duty, a disability payment will be made after one hundred days of disability. 68 CITY OF ANDOVER, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2007 4. Death Benefit – In the event of death of an active member or deferred pensioner, the member’s individual account balance will be paid to the surviving spouse, surviving children or the estate of the member after approval by the Board. The Association issues a publicly available financial report that includes financial statements and required supplementary information. That report may be obtained by writing to Andover Firefighters’ Relief Association, 13875 Crosstown Boulevard, Andover, Minnesota 55304. FUNDING POLICY The State of Minnesota contributes amortization aid, or two percent fire aid, in accordance with state statute requirements. Plan members are not required to contribute to the plan. The state legislature may amend contribution requirements of the City and State. The City is allowed to make voluntary contributions of other public funds pursuant to Minnesota Statutes Chapter 69. The City receives the State aid contribution and is required by state statutes to pass this through as payment to the Association. This transaction is recorded as revenue and expenditure in the City’s financial statements. Contributions for the last three years are as follows: Year EndingCitStateTotal y 12/31/200550,000$$ 156,263$206,263 12/31/200650,000 165,915215,915 12/31/200750,000 143,666193,666 Note 9 INTERFUND RECEIVABLES/PAYABLES, LOANS AND TRANSFERS Individual fund interfund receivable and payable balances at December 31, 2007 are as follows: FundReceivablePayable Governmental Funds: Major Funds: General Fund$671,000$- 2006 EDA Public Facility Lease Revenue Refunding Bonds DSF-500 2007 EDA Public Facility Lease Revenue Refunding Bonds DSF-500 Water Trunk CPF60,000 - Nonmajor Governmental Funds-730,000 Total governmental funds$731,000$731,000 Proprietary Funds: Internal Service Funds: Central Equipment ISF$-$80,000 Risk Management ISF80,000 - Total proprietary funds$80,000$80,000 Interfund receivables and payables are representative of lending/borrowing arrangements to cover deficit cash balances at the end of the fiscal year. 69 CITY OF ANDOVER, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2007 Interfund transfers: FundTransfer InTransfer Out Governmental Funds: Major Funds: General Fund185,625$$- Water Trunk CPF-57,671 Sewer Trunk CPF350,000 - Road and Bridge CPF47,800 - Permanent Improvement Revolving CPF 1,998,845- Nonmajor Funds2,334,610368,565 Total governmental funds2,918,0352,425,081 Proprietary Funds: Enterprise Funds: Wate57,671141,625 r Sewe 394,000- r Storm Sewe 15,000- r Total proprietary funds550,625 57,671 Total 2,975,7062,975,706 $$ Interfund transfers allow the City to allocate financial resources to the funds that receive benefit from services provided by another fund. Most of the City’s interfund transfers fall under that category. Non-routine transfers include a one-time transfer of $47,800 to the Road and Bridge CPF from the Right of Way Management / Utility SRF for degradation of roadways. Additionally, computer service fees paid by the Water, Sewer and Storm Sewer Enterprise Funds to the General Fund have been reclassified as transfers on the Government-Wide Statement of Activities as follows: Transfer InTransfer Out Governmental Activities$28,300$- Business-Type Activities-28,300 Total28,30028,300 $$ 70 CITY OF ANDOVER, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2007 Note 10 TAX INCREMENT DISTRICTS The City of Andover is the administering authority for the following tax increment finance districts: 1.Name of District:Andover Redevelopment District 1-1 Type of District:Redevelopment Authorizing Law:M.S. Section 472 Established:1986 Duration of District:Through 2011 Original net tax capacity:$4,542 Current net tax capacity:230,156 Captured net tax capacity - retained by the Cit$225,614 y 2.Name of District:Andover Redevelopment District 1-2 Type of District:Redevelopment Authorizing Law:M.S. Section 472 Established:1986 Duration of District:Through 2011 Original net tax capacity:125,386$ Current net tax capacity:1,771,154 Captured net tax capacity - retained by the Cit$1,645,768 y Total District Bonds issued$19,250,000 Amount redeemed(15,240,000) Bonds outstanding December 31, 2007$4,010,000 3.Name of District:Tax Increment Financing District 1-3 (Farmstead Project) Type of District:Redevelopment Authorizing Law:M.S. Section 469 Established:1997 Duration of District:Through 2024 Original net tax capacity:$7,314 Current net tax capacity:163,790 Captured net tax capacity - retained by the Cit$156,476 y 4.Name of District:Tax Increment Financing District 1-4 Type of District:Redevelopment Authorizing Law:M.S. Section 469 Established:2005 Duration of District:Through 2031 Original net tax capacity:67,467$ Current net tax capacity:87,671 Captured net tax capacity - retained by the Cit$20,204 y 71 CITY OF ANDOVER, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2007 Note 11 DEFICIT FUND BALANCES The City has deficit fund balances at December 31, 2007 as follows: FundAmount Special Revenue Funds: Community Cente$472,396 r Capital Projects Funds: Storm Sewer Project54,174 Note 12 CONTINGENCIES A. RISK MANAGEMENT The City is exposed to various risks of loss related to torts, theft of, damage to and destruction of assets; errors and omissions; injuries to employees; and natural disasters. The City participates in the League of Minnesota Cities Insurance Trust (LMCIT), a public entity risk pool for its general property and casualty, workers’ compensation, and other miscellaneous insurance coverages. Workers compensation coverage is provided through a pooled self-insurance program through the LMCIT. The City pays an annual premium to LMCIT. The City is subject to supplemental assessments if deemed necessary by the LMCIT. The LMCIT reinsures through Workers Compensation Reinsurance Association (WCRA) as required by law. For workers compensation, the City enrolls with a state-certified managed care organization to receive a 5% premium credit towards the cost of coverage. The City also has a $2,500 deductible per occurrence to further decrease the cost of coverage.Final premiums are determined after an audit of payroll subsequent to the close of the agreement year and are subject to revisions in rates, payrolls and experience modification. The amount of premium adjustment, if any, is considered immaterial and not recorded until received or paid. Property, casualty, and automobile insurance coverage are provided through a pooled self-insurance program through the LMCIT. The City pays an annual premium to the LMCIT. The LMCIT reinsures through commercial companies for claims in excess of various amounts. The City retains risk for the deductible portions. These deductibles are considered immaterial to the financial statements. The City continues to carry commercial insurance for all other risks of loss, including employee health and disability insurance. There were no significant reductions in insurance from the previous year or settlements in excess of insurance coverage for any of the past three fiscal years. B. LITIGATION The City attorney has indicated that existing and pending lawsuits, claims and other actions in which the City is a defendant are either covered by insurance; of an immaterial amount; or, in the judgment of the City attorney, remotely recoverable by plaintiffs. C. FEDERAL AND STATE FUNDS The City receives financial assistance from federal and state governmental agencies in the form of grants. The disbursement of funds received under these programs generally requires compliance with the terms and conditions specified in the grant agreements and are subject to audit by the grantor agencies. Any disallowed claims resulting from such audits could become a liability of the applicable fund. However, in the opinion of management, any such disallowed claims will not have a material effect on any of the financial statements of the individual fund types included herein or on the overall financial position of the City at December 31, 2007. 72 CITY OF ANDOVER, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2007 D. TAX INCREMENT DISTRICTS The City’s tax increment districts are subject to review by the State of Minnesota Office of the State Auditor (OSA). Any disallowed claims or misuse of tax increments could become a liability of the applicable fund. Management has indicated that they are not aware of any instances of noncompliance that would have a material effect on the financial statements. E. PAY-AS-YOU-GO TAX INCREMENT The City has one tax increment pay-as-you-go agreement. The agreement is not a general obligation of the City and is payable solely from tax increments. Accordingly, this agreement is not reflected in the financial statements of the City. Details of the pay-as-you-go are as follows: TIF District #1-3, Farmstead Project: The pay-as-you-go agreement for TIF District #1-3 provides for the payment of 90% of all tax increment received and will be completed February 1, 2015. Note 13 DEFERRED AD VALOREM TAX LEVIES - BONDED DEBT General Obligation bond issues sold by the City are financed by ad valorem tax levies and special assessment bond issues sold by the City are partially financed by ad valorem tax levies in addition to special assessments levied against the benefiting properties. When a bond issue to be financed partially or completely by ad valorem tax levies is sold, specific annual amounts of such tax levies are stated in the bond resolution and the County Auditor is notified and instructed to levy these taxes over the appropriate years. The future tax levies are subject to cancellation when and if the City has provided alternative sources of financing. The City Council is required to levy any additional taxes found necessary for full payment of principal and interest. These future scheduled tax levies are not shown as assets in the accompanying financial statements at December 31, 2007. Future scheduled tax levies for all bonds outstanding at December 31, 2007 totaled $27,416,853. 73 CITY OF ANDOVER, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2007 Note 14 DESIGNATIONS AND RESERVATIONS OF FUND EQUITY Fund equities are classified as follows to reflect limitations and restrictions of the respective funds: 20072006 Governmental Funds: Major Funds: General Fund Reserved for prepaid items$126,558$82,677 Reserved for inventor 61,81981,658 y Designated for snow emergenc 50,00060,000 y Designated for public safet -60,000 y Designated for facility management60,00050,000 Designated for economic development25,000100,000 Designated for information technolog 50,00060,000 y Designated for working cash flow3,417,2442,998,317 2006 EDA Public Facility Lease Revenue Refunding Bonds DSF Reserved for debt service9,938,3679,796,877 2007 EDA Public Facility Lease Revenue Refunding Bonds DSF Reserved for debt service6,828,467- Water Trunk CPF Designated for projects3,186,7992,530,117 Sewer Trunk CPF Designated for projects2,154,1301,529,977 Road & Bridge CPF Designated for projects3,182,1703,052,194 Tax Increment Projects CPF Designated for projects1,542,8542,710,761 Permanent Improvement Revolving CPF Designated for projects1,634,4963,459,911 Nonmajor Funds Reserved for prepaid items-2,980 Reserved for inventor 7,1748,196 y Reserved for economic development4,26136,695 Reserved for debt service4,592,2281,545,650 Reserved for projects735,141707,616 Designated for working cash flow374,402334,717 Designated for projects951,4221,741,963 Designated for equipment669,855644,086 Total Governmental Funds$39,693,248$31,493,531 Note 15 POST EMPLOYMENT BENEFITS The City provides the ability for employees to maintain insurance coverage with the City after retirement. The retired employee is responsible for 100% of the cost. The employee has the option of taking a payout of sick leave or have the monies deposited in a separate medical premium account to be used towards insurance premiums. 74 CITY OF ANDOVER, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2007 Note 16 CONDUIT DEBT OBLIGATION Conduit debt obligations are certain limited-obligation revenue bonds or similar debt instruments issued for the express purpose of providing capital financing for a specific third party. The City has issued various revenue bonds to provide funding to private-sector entities for projects deemed to be in the public interest. Although these bonds bear the name of the City, the City has no obligation for such debt beyond the resources provided by related leases or loans. Accordingly, the bonds are not reported as liabilities in the financial statements of the City. As of December 31, 2007, the following revenue bonds were outstanding: Date ofOriginalOutstanding ProjectIssueIssueRetired12/31/2007 Downtown Cente7/15/19975,645,000$$(3,440,000)$2,205,000 r Downtown Cente7/15/19971,250,000 (1,250,000) r - Presbyterian Homes of Andover, Inc.12/1/1998720,000(720,000) - Presbyterian Homes of Andover, Inc.11/1/200313,145,000(879,783)12,265,217 Total$ (6,289,783)20,760,000$$14,470,217 Note 17 OPERATING LEASES The City received revenue from two agreements for the lease of space for antennas placed on the water tower. The City also has a lease with the Greater Minneapolis YMCA for building space at the Andover YMCA Community Center. Terms of each lease are as follows: 2007 LeaseAnnual LeaseExpirationRenewal LocationLesseeAmountAdjustment FactorDateOptions City Hall water towerSprint Nextel$ Greater of CPI or 4%12/31/20123 - 5 year terms24,501 City Hall water towerT-Mobile USA, Inc Greater of CPI or 4%12/31/20113 - 5 year terms18,473 Andover YMCA Comm CtrGreater Minneapolis YMCA- None8/1/2035N/A Future minimum lease payments are unavailable at this time due to changing variables: CPI and the completion of the capital campaign for the community center. Note 18 RECENTLY ISSUED ACCOUNTING STANDARDS The Governmental Accounting Standards Boards (GASB) recently approved the following statements which were not implemented for these financial statements: Statement No. 45Accounting and Financial Reporting by Employers for Post Employment Benefits Other Than Pension Plans. Implementation is required in three phases based on a government’s total annual revenues in the first fiscal year ending after June 15, 1999. This Statement is effective for periods beginning after December 15, 2006, for phase 1 governments (those with total annual revenues of $100 million or more); after December 15, 2007, for phase 2 governments (those with total annual revenues of $10 million or more but less than $100 million); and after December 15, 2008, for phase 3 governments (those with total annual revenues of less than $10 million). Early implementation is encouraged. Statement No. 49Accounting and Financial Reporting for Pollution Remediation Obligation.The provisions of this Statement are effective for financial statements for periods beginning after December 15, 2007. Statement No. 50Pension Disclosures – an amendment of GASB Statements No. 25 and No. 27.The provisions of this Statement are effective for financial statements for periods beginning after June 15, 2007. 75 CITY OF ANDOVER, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2007 Statement No. 51Accounting and Financial Reporting for Intangible Assets.The provisions of this Statement are effective for financial statements for periods beginning after June 15, 2009. The effect these standards may have on future financial statements is not determinable at this time. 76 REQUIRED SUPPLEMENTARY INFORMATION 77 CITY OF ANDOVER, MINNESOTA REQUIRED SUPPLEMENTARY INFORMATION Statement 10 BUDGETARY COMPARISON SCHEDULE - GENERAL FUND For The Year Ended December 31, 2007 With Comparative Actual Amounts For The Year Ended December 31, 2006 Variance with Final Budget - Budgeted AmountsPositive2006 OriginalFinalActual(Negative)Actual Revenues: General property taxes$ 6,114,479$5,845,994$5,776,653$ (69,341)$5,324,649 Licenses and permits 572,350572,350475,893 (96,457)598,094 Intergovernmental 592,840861,325853,305 (8,020)602,256 Charges for services 801,650801,6501,121,642 319,992780,273 Fines 91,50091,500101,445 9,94591,490 Investment income 90,00090,000157,513 67,513125,539 Miscellaneous 86,53086,53090,293 3,76390,463 Total revenues 8,349,3498,349,3498,576,744 227,3957,612,764 Expenditures: Current: General government: Mayor and City council 103,126103,126102,883 243106,075 Administration 181,197181,197155,623 25,574140,370 Newsletter 26,00026,00018,334 7,66622,020 Human resources 91,05991,05958,573 32,48656,907 Legal 165,000165,000167,110 (2,110)162,134 City clerk 152,047152,047150,843 1,204136,811 Elections7,2117,2117,072 13938,457 Financial administration 294,699294,699 202,664 92,035205,958 Assessing 124,000124,000117,174 6,826114,093 Information systems 137,844132,844117,523 15,321125,003 Planning and zoning 365,733365,733364,982 751340,859 Engineering442,564442,564420,32022,244383,461 Facility management 422,507432,507436,665 (4,158)334,283 Total general government 2,512,9872,517,9872,319,766 198,2212,166,431 Public safety: Police 2,085,1222,085,1222,083,861 1,2611,861,610 Fire protection 1,023,6021,023,602969,162 54,440903,347 Protective inspection 486,273486,273463,859 22,414454,073 Civil defense 20,84220,84213,748 7,09412,056 Animal control9,6809,6807,486 2,19411,811 Total public safety 3,625,5193,625,5193,538,116 87,4033,242,897 Public works: Streets and highways 582,139582,139581,459 680521,255 Snow and ice removal 495,365495,365505,579 (10,214)429,474 Street signs 173,440173,440180,277 (6,837)153,364 Traffic signals 20,50020,50011,399 9,10119,268 Street lighting 188,900188,900175,572 13,328181,345 Total public works$ 1,460,344$1,460,344$1,454,286$ 6,058$1,304,706 (Continued) 78 CITY OF ANDOVER, MINNESOTA REQUIRED SUPPLEMENTARY INFORMATION Statement 10 BUDGETARY COMPARISON SCHEDULE - GENERAL FUND (Continued) For The Year Ended December 31, 2007 With Comparative Actual Amounts For The Year Ended December 31, 2006 Variance with Final Budget - Budgeted AmountsPositive2006 OriginalFinalActual(Negative)Actual Expenditures: Current: (continued) Parks and recreation$ 816,195$816,195$850,907$ (34,712)$789,350 Recycling 99,92999,92994,669 5,26090,590 Unallocated 20,00010,6756,915 3,7608,454 Total current 8,534,9748,530,6498,264,659 265,9907,602,428 Capital outlay Parks and recreation63 (63) - - - Total expenditures 8,534,9748,530,6498,264,722 265,9277,602,428 Revenues over (under) expenditures (185,625)(181,300)312,022 493,32210,336 Other financing sources (uses): Transfers in 185,625185,625185,625180,000 - Net increase (decrease) in fund balance$4,325$497,647$ 493,322$190,336 $ - Fund balance - January 13,392,8133,202,477 Fund balance - December 31$3,890,460$3,392,813 79 CITY OF ANDOVER, MINNESOTA REQUIRED SUPPLEMENTARY INFORMATION NOTES TO REQUIRED SUPPLEMENTARY INFORMATION December 31, 2007 Note A BUDGETS The General Fund budget is legally adopted on a basis consistent with accounting principles generally accepted in the United States of America. The legal level of budgetary control is at the departmental level for the General Fund. The following is a listing of General Fund departments whose expenditures exceed budget appropriations. FinalOver BudgetActualBudget General Fund: Current: General government: Legal165,000$ 167,110$$2,110 Facility management432,507436,6654,158 Public works: Snow and ice removal495,365505,57910,214 Street signs173,440180,2776,837 Parks and recreation:816,195850,90734,712 Capital outlay: Parks and recreation-6363 Note B MODIFIED APPROACH FOR CITY STREETS AND TRAILS INFRASTRUCTURE CAPITAL ASSETS In accordance with GASB Statement No. 34, the City is required to account for and report infrastructure capital assets. The City defines infrastructure as the basic physical assets including the street and trail system; water treatment and distribution system; wastewater collection system; park and recreation lands and improvement system; storm water conveyance system; and building combined with site amenities such as parking and landscape areas used by the City in the conduct of its business. Each major infrastructure can be divided into subsystems. For example, the street and trail system can be divided into pavement widths, curb type and sidewalk. City owned streets could further be classified as collector or local. Subsystem detail is not presented in these basic financial statements; however, the City maintains detailed information on these subsystems. The City has elected to use the modified approach as defined in GASB Statement No. 34 for infrastructure reporting for its Pavement Management Program. Under GASB Statement No. 34, eligible infrastructure capital assets are not required to be depreciated under the following requirements: 1) The City manages the eligible infrastructure capital assets using an asset management system with characteristics of (a) an up to-date inventory; (2) perform condition assessments and summarize the results using a measurement scale; and (3) estimate annual amount to maintain and preserve at the established condition assessment level. 2) The City documents that the eligible infrastructure capital assets are being preserved approximately at or above the established and disclosed condition assessment level. 80 CITY OF ANDOVER, MINNESOTA REQUIRED SUPPLEMENTARY INFORMATION NOTES TO REQUIRED SUPPLEMENTARY INFORMATION December 31, 2007 In the fall of 2007, the City conducted a physical condition assessment of the streets and trails constructed since 1974. This assessment will be performed every three years. Each street and trail segment was assigned a physical condition based on potential defects. An Overall Condition Index (OCI) was assigned to each street and trail and expressed in a continuous scale from 0 to 100, where 0 is assigned to the least acceptable physical condition and 100 is assigned the physical characteristics of a new street or trail. The following conditions were defined: ConditionRating Excellent86 - 100 Very Good71 - 85 Good56 - 70 Fair41 - 55 Poor26 - 40 Very Poor11 - 25 Substandard0 - 10 As of December 31, 2007, the City’s street and trail system was rated at an OCI index of 81 on the average with detail condition as follows: % of Street Conditionand Trails Excellent to Good90% Fair6% Poor to Substandard4% The City’s streets and trails are constantly deteriorating resulting from the following factors: (1) traffic using the system; (2) the sun’s ultra-violet rays drying out and breaking down the top layer of pavement; (3) utility company/private development trenching operations; (4) water damage from natural precipitation; and (5) frost heave. The City is continuously taking actions to prolong the life of the system through short-term maintenance activities such as pothole patching, crack sealing, seal coating and overlaying. The City expended $1,256,433 on street and trail maintenance for the year ending December 31, 2007. These expenditures delayed deterioration; however, the overall condition of the system was not improved through these maintenance expenditures. The City has estimated that the amount of annual expenditures required to maintain the City’s street and trail system at the average OCI rating of good is approximately $1,150,000. MaintenanceActualOCI YearEstimateExpendituresRating 2003950,000$$956,68882 20041,000,0001,847,06682 20051,000,0001,655,71583 20061,150,0001,228,98182 20071,150,0001,256,43381 The City has an on-going street and trail rehabilitation program funded in the Capital Improvement Program that is intended to improve the condition rating of the City streets and trails. The rehabilitation program is formulated based on the deficiencies identified as a part of its Pavement Management Program. 81 - This page intentionally left blank - 82 COMBINING AND INDIVIDUAL FUND STATEMENTS AND SCHEDULES 83 NONMAJOR GOVERNMENTAL FUNDS SPECIAL REVENUE FUNDS A Special Revenue Fund is used to account for the proceeds of specific revenue sources that are legally restricted to expenditures for specified purposes. Revenues for these funds can come from a variety of sources, such as taxes, fees, gifts and grants or contributions from other governmental entities. Expenditures from these funds are normally restricted by statute, local ordinance or grant agreements. The funds may be used for either operations or capital outlay as legal restrictions mandate. DEBT SERVICE FUNDS A Debt Service Fund accounts for the accumulation of resources for, and the payment of general long-term principal, interest and other related costs. CAPITAL PROJECTS FUNDS A Capital Projects Fund is used to account for acquisition or construction of major capital facilities financed mainly with governmental fund resources, general obligation debt, special assessments, special assessment debt, grants or other resources that are not part of Proprietary Funds or Trust Funds. 84 CITY OF ANDOVER, MINNESOTA COMBINING BALANCE SHEETStatement 11 NONMAJOR GOVERNMENTAL FUNDS December 31, 2007 With Comparative Totals For December 31, 2006 Totals SpecialDebCapitalNonmajor Governmental Funds t RevenueServiceProjects20072006 Assets Cash and investments$2,003,115$3,862,978$1,151,390$ 7,017,483$4,787,804 Cash and investments with escrow agent 740,859 - 740,859 - 740,309 Accrued interest10,39930,1527,524 48,07533,025 Due from other governmental units43,780 43,78046,391 - - Accounts receivable - net136,758 136,758 - - 144,795 Prepaid items2,980 - - - - Property taxes receivable: Unremitted2,02528,239472 30,73628,661 Delinquent5,80872,9541,303 80,06560,334 Special assessments receivable: Deferred 561,69592,834 - 561,695 - Notes receivable53,813 53,81348,585 - - Inventory8,196 8,1967,174 - - Total assets2,263,894 8,721,460 5,296,877 1,160,689 5,992,892 Liabilities and Fund Balance Liabilities: Interfund payable600,00070,00060,000 730,000 560,000 Accounts payable46,234 155,790 - 109,556 126,754 Contracts payable9,259 9,259 - - 188,313 Deposits payable10,050 10,05015,950 - - Due to other governmental units32,750 32,7501,194 - - Salaries payable9,941 9,9417,388 - - Deferred revenue338,7501,303974,702524,528 634,649 Total liabilities1,046,984 1,922,492 704,649 170,859 1,424,127 Fund balance (deficit): Reserved12,457 5,339,826 4,592,228 735,141 2,300,115 Unreserved: Designated1,685,045 1,995,679 - 310,634 2,720,766 Undesignated(480,592)(55,945) (536,537)(452,116) - Total fund balance1,216,910 6,798,968 4,592,228 989,830 4,568,765 Total liabilities and fund balance$2,263,894$5,296,877$1,160,689$ 8,721,460$5,992,892 85 CITY OF ANDOVER, MINNESOTA COMBINING STATEMENT OF REVENUES, EXPENDITURES AND Statement 12 CHANGES IN FUND BALANCES NONMAJOR GOVERNMENTAL FUNDS For The Year Ended December 31, 2007 With Comparative Totals For The Year Ended December 31, 2006 Totals Special DebCapitalNonmajor Governmental Funds t RevenuServiceProjects20072006 e Revenues: General property taxes$ 230,301$1,739,742$52,406$ 2,022,449$2,003,113 Tax increment collections1,474,219 1,474,2191,414,254 - - Intergovernmental 34,950323,79864,818 423,566324,689 Special assessments2,021,621 2,021,621299,510 - - Charges for services 914,093 914,093989,883 - - Investment income 93,306147,11697,173 337,595156,176 Miscellaneous Park dedication fees113,013 113,013626,567 - - Other 348,46995 348,564317,220 - Total revenues 1,621,1195,706,496327,505 7,655,1206,131,412 Expenditures: Current: General government 64,42215,109 79,531176,901 - Public safety8,45333,671 42,12425,339 - Public works 186,11726,370 212,487184,552 - Parks and recreation 793,414181,385 974,799810,535 - Economic development 160,051 160,05199,474 - - Capital outlay: General government144,689 - - - - Public safety82,152 82,15234,091 - - Public works 148,107355,084 503,191486,936 - Parks and recreation 98,951719,845 818,796321,359 - Economic development140,162140,162- - - Debt service: Principal retirement3,275,000 3,275,0005,254,000 - - Interest1,636,716 1,636,7161,683,599 - - Paying agent fees8,132 8,1325,534 - - Professional service1,430 1,4309,145 - - Construction/acquisition costs266,935 266,93555,395 - - Total expenditures 1,459,5154,921,2781,820,713 8,201,5069,291,549 Revenues over (under) expenditures 161,604785,218(1,493,208) (546,386)(3,160,137) Other financing sources (uses): Transfers in2,261,36073,250 2,334,6103,047,322 - Transfers out (285,074)(83,491) (368,565)(345,144) - Bonds issued760,000 760,000460,000 - - Bond premium3,401 3,401 - - - Proceeds from sale of capital assets 47,143 47,14310,317 - - Total other financing sources (uses) (237,931) 2,261,360753,160 2,776,5893,172,495 Net increase (decrease) in fund balance (76,327) 3,046,578(740,048) 2,230,20312,358 Fund balance - January 1 1,293,2371,545,6501,729,878 4,568,7654,556,407 Fund balance - December 31$ 1,216,910$4,592,228$989,830$ 6,798,968$4,568,765 86 NONMAJOR SPECIAL REVENUE FUNDS The City of Andover had the following Special Revenue Funds during the year: EDA General - This fund was established to account for activities designed to promote quality economic development within in the community. - This fund accounts for the financial operations of a federal grant for rental Community Development Block Grant housing rehabilitation. Community Center - This fund is used to account for the operations of the Andover/YMCA Community Center, particularly the ice arena, field house and concessions. The aquatic’s portion of the Community Center is under the operations of the YMCA. Drainage and Mapping - This fund accounts for resources necessary to maintain existing maps and developing new maps and mapping systems for the City. LRRWMO - This fund is used to account for the City’s involvement with the Lower Rum River Watershed Management Organization (LRRWMO). Forestry - This fund was established to account for the protection of forest resources and the development of control plans to ensure preservation or restoration of these resources. - This fund is used to account for contributions associated with land development to be Trail and Transportation used for constructing and upgrading the City’s trail system. Right-of-Way Management/Utility - This fund is used to account for activity associated with the management of the public right-of-ways. Capital Equipment Reserve - This fund is used to account for the capital equipment/projects levy and the various capital expenditures it will be used for. Charitable Gambling - This fund accounts for the 10% of net profits received from gambling activities by the Andover Lions and Andover Baseball Association. According to state statute, all expenditures from this fund must be for public services and police, fire and other emergency or public safety-related services, equipment, and training, excluding pension obligations. Construction Seal Coating - This fund accounts for the contributions associated with land development to be used for the respective developments first application of crack seal and seal coat. 87 CITY OF ANDOVER, MINNESOTA SUBCOMBINING BALANCE SHEET NONMAJOR SPECIAL REVENUE FUNDS December 31, 2007 With Comparative Totals For December 31, 2006 CommunityDrainage EDADevelopmentCommunityand GeneralBlock GrantCenterMappingLRRWMO Assets Cash and investments$ 235,639$ 4,261$ 25,392$ 73,877$ 12,043 Accrued interest 1,321 389 - - - Due from other governmental units 39,493 - - - - Accounts receivable 15,913 117,621 - - - Prepaid items - - - - - Property taxes receivable: Unremitted 252 - - - - Delinquent 910 - - - - Notes receivable 53,813 - - - - Inventory 8,196 - - - - Total assets252,87358,074190,702 74,26613,205 Liabilities and Fund Balance Liabilities: Interfund payable 600,000 - - - - Accounts payable 852 42,676 43 - - Contracts payable - - - - - Deposits payable 10,050 - - - - Due to other governmental units 2,044 - - - - 6,828 418 Salaries payable 1,604 - - Deferred revenue 53,813 1,500- 910 - Total liabilities 2,456 53,813 663,098 1,371 - Fund balance (deficit): Reserved for: Prepaid items - - - - - Inventory 8,196 - - - - Economic development 4,261 - - - - Unreserved: Designated for working capital 250,417 13,251 11,834 - - Designated for projects 61,015 - - - - Designated for equipment - - - - - Undesignated (480,592) - - - - Total fund balance (deficit) 250,417 4,261 (472,396) 74,266 11,834 Total liabilities and fund balance$252,873$58,074$190,702$ 74,266$13,205 88 Statement 13 Right-of-WayCapitalTotals Trail andManagement/EquipmentCharitableConstructionNonmajor Special Revenue Funds ForestryTransportationUtilityReserveGamblingSeal Coating20072006 $ 3,023$ 71,285$ 183,498$ 1,045,419$ 20,865$ 327,813$ 2,003,115$ 1,913,922 429 991 5,326 107 1,836 10,399 8,159 - 4,287 43,780 46,391 - - - - - 3,224 136,758 144,795 - - - - - 2,980 - - - - - - - 1,773 2,025 1,996 - - - - - 4,898 5,808 746 - - - - - 53,813 48,585 - - - - - - 8,196 7,174 - - - - - - 7,310 71,714 187,7131,057,41620,972329,649 2,263,8942,174,748 600,000430,000 - - - - - - 2,663 - 46,234 35,109 - - - - 792 8,467 9,259 19,764 - - - - 10,050 15,950 - - - - - - 30,706 32,750 1,194 - - - - - 1,091 9,941 7,388 - - - - - 4,898 277,629 338,750 372,106 - - - - 792 39,173 1,091 7,561 277,629 1,046,984 881,511 - 2,980 - - - - - - - 8,196 7,174 - - - - - - 4,261 36,695 - - - - - - 6,518 71,410 20,972 374,402 334,717 - - - 32,541 115,212 380,000 52,020 640,788 590,989 - - - 669,855 669,855 644,086 - - - - (480,592) (323,404) - - - - - - 6,518 32,541 186,622 1,049,855 20,972 52,020 1,216,910 1,293,237 $ 7,310$ 71,714$ 187,713$1,057,416$20,972$329,649$ 2,263,894$2,174,748 89 CITY OF ANDOVER, MINNESOTA SUBCOMBINING STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES NONMAJOR SPECIAL REVENUE FUNDS For The Year Ended December 31, 2007 With Comparative Totals For The Year Ended December 31, 2006 CommunityDrainage EDADevelopmentCommunityand GeneralBlock GrantCenterMappingLRRWMO Revenues: General property taxes$ 33,254 $ - $ - $ - $ - Intergovernmental 7,300 1,554 - - - Charges for services 162,553 590,935 46,579 - - Investment income 12,190 178 (19,170) 3,480 (71) Miscellaneous 11,253 3,501 304,371 - - Total revenues 185,996 10,979 876,136 50,059 34,737 Expenditures: Current: General government - - - - - Public safety - - - - - Public works 8,291 26,265 - - - Parks and recreation 793,414 - - - - Economic development 116,638 43,413 - - - Capital outlay: General government - - - - - Public works 5,187 - - - - Parks and recreation 6,495 - - - - Total expenditures 116,638 43,413 799,909 13,478 26,265 36,581 8,472 Revenues over (under) expenditures 69,358 (32,434)76,227 Other financing sources (uses): Transfers out (237,274) - - - - Proceeds from sale of capital assets - - - - - Total financing sources (uses) (237,274) - - - - Net increase (decrease) in fund balance 69,358 (32,434) (161,047) 36,581 8,472 Fund balance (deficit) - January 1 181,059 36,695 (311,349) 37,685 3,362 Fund balance (deficit) - December 31$250,417$4,261$(472,396)$ 74,266$11,834 90 Statement 14 Totals Right-of-WayCapital Nonmajor Special Revenue Funds Trail andManagement/EquipmentCharitableConstruction ForestryTransportationUtilityReserveGamblingSeal Coating20072006 $ 197,047$ 230,301$ 226,945 $ - $ - $ - $ - $ - 16,896 9,200 34,950 14,548 - - - - 16,541 25,088 72,397 914,093 989,883 - - - 343 6,324 11,206 57,221 1,114 20,491 93,306 65,270 9,706 1,945 17,693 348,469 223,678 - - - 26,945 22,865 36,294 265,413 18,807 92,888 1,621,119 1,520,324 47,878 16,544 64,422 85,433 - - - - 8,453 8,453 - - - - - - 18,526 1,810 56,955 74,270 186,117 184,552 - - 793,414 748,146 - - - - - - 160,05199,474 - - - - - - - 48,038 - - - - - - 142,920 148,107 110,687 - - - - - 92,456 98,951 - - - - - - 18,526 144,730 56,955 148,787 16,544 74,270 1,459,515 1,276,330 8,419 (121,865) (20,661) 116,626 2,263 18,618 161,604 243,994 (47,800) (285,074) (284,013) - - - - - 47,143 47,143 10,317 - - - - - (47,800) 47,143 (237,931) (273,696) - - - - 8,419 (121,865) (68,461) 163,769 2,263 18,618 (76,327) (29,702) (1,901) 154,406 255,083 886,086 18,709 33,402 1,293,237 1,322,939 $ 6,518$ 32,541$ 186,622$1,049,855$20,972$52,020$ 1,216,910$1,293,237 91 - This page intentionally left blank - 92 NONMAJOR DEBT SERVICE FUNDS The City's Debt Service Funds account for six types of bonded indebtedness: Certificates of Indebtedness Capital Improvement Bonds G.O. Revenue Bonds Tax Increment Bonds Permanent Improvement Revolving Bonds State Aid Bonds Special Assessment Bonds Certificates of Indebtedness - (G.O. Equipment Certificate 2005B, G.O. Equipment Certificate 2006B and G.O. Equipment Certificate 2007A) are repaid primarily from general property taxes. Capital Improvement Bonds - (G.O. Capital Improvement Bonds 2004A and 2005B) are repaid primarily from general property taxes G.O. Revenue Bonds - (EDA Public Facility Lease Revenue Bonds 2004) are repaid from annual lease payments from the YMCA, Community Center operations and general property tax. Tax Increment Bonds - (Tax Increment Refunding Bonds of 2003B and 2004B) are repaid primarily from tax increments. - (G.O. PIR Bonds of 2001A, 2003A and 2006A) are used to Permanent Improvement Revolving (PIR) Bonds finance assessable improvements within the City and are repaid primarily from special assessments levied against benefited properties. - (2001B State Aid Bonds) are used to finance MSA eligible cost for road construction and State Aid Bonds improvements. These bonds are repaid from a portion of state aid allotments received by the City. Special Assessment Bonds - (G.O. Improvement Bonds 2005A) are used to finance assessable improvements within the City and are repaid primarily from special assessments levied against benefited properties. 93 CITY OF ANDOVER, MINNESOTA SUBCOMBINING BALANCE SHEET NONMAJOR DEBT SERVICE FUNDS December 31, 2007 With Comparative Totals For December 31, 2006 EDA Public G.O.G.O.G.O.G.O. CapitalG.O. CapitalFacility Lease EquipmentEquipmentEquipmentImprovementImprovementRevenue CertificateCertificateCertificateBondsBondsBonds 2005B2006B2007A2004A2005B2004 Assets Cash and investments $ 7 5,999$ 196,657$ 199,016$ 13,908$ 1 25,041$ 654 Cash and investments with escrow agent - - - - - 740,859 Accrued interest - 653 639 - 4 00 14,780 Property taxes receivable: Unremitted 5 49 1,614 1,714 3,128 1 ,082 7,623 Delinquent 1 ,507 4,439 4,711 8,598 2 ,975 20,954 Special assessments receivable: Deferred - - - - - - Total assets 7 8,055 203,363 206,080 25,634 1 29,498 784,870 Liabilities and Fund Balance Liabilities: Interfund payable - - - - - 70,000 Deferred revenue 1 ,507 4,439 4,711 8,598 2 ,975 20,954 Total liabilities 1 ,507 4,439 4,711 8,598 2 ,975 90,954 Fund balance: Reserved for debt service 7 6,548 198,924 201,369 17,036 1 26,523 693,916 Total liabilities and fund balance $ 7 8,055$ 203,363$ 206,080$ 25,634$ 1 29,498$ 784,870 94 Statement 15 G.O. TIFG.O. TIFG.O.G.O.G.O. RefundingRefundingPIR FundPIR FundStateImprovementTotals BondsBondsBonds ofBonds ofAid BondsBondsNonmajor Debt Service Funds 2003B2004B2003A2006A2001B2005A20072006 $2,097,374 $ 2 84,670$ 5 76,099$ 4 5,312$ 27,151$ 221,097$ 3 ,862,978$ 832,884 - - - - - - 7 40,859 740,309 11,605 30,152 8 90 5 24 2 51 150 260 16,243 28,239 3 ,132 9 ,397 - - - - 26,214 72,954 1 4,885 1 4,885 - - - - 59,588 - 8 0,673 - - - 481,022 5 61,695 92,834 3 03,577 6 81,578 4 5,563 27,301 221,357 2,590,001 5 ,296,877 1,768,072 70,000 - - - - - - 70,000 1 4,885 9 5,558 - - - 481,022 6 34,649 152,422 1 4,885 9 5,558 - - - 481,022 7 04,649 222,422 2 88,692 5 86,020 4 5,563 27,301 221,357 2,108,979 4 ,592,228 1,545,650 $2,590,001$1,768,072 $ 3 03,577$ 6 81,578$ 4 5,563$ 27,301$ 221,357$ 5 ,296,877 95 CITY OF ANDOVER, MINNESOTA SUBCOMBINING STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES NONMAJOR DEBT SERVICE FUNDS For The Year Ended December 31, 2007 With Comparative Totals For The Year Ended December 31, 2006 EDA Public G.O.G.O.G.O.G.O. CapitalG.O. CapitalFacility Lease EquipmenEquipmenEquipmenImprovemenImprovemenRevenu ttttte CertificateCertificateCertificateBondsBondsBonds 2005B2006B2007A2004A2005B2004 Revenues: General property taxes $ 60,717$ 178,845$ 189,806$ 346,383$ 119,868$ 844,123 Tax increment collections - - - - - - Intergovernmental 2,822 8,258 8,790 16,026 5,560 39,044 Special assessments - - - - - - Investment income 1,332 5,387 4,970 (8,313) 3,287 17,604 Total revenues 64,871 192,490 203,566 354,096 128,715 900,771 Expenditures: Debt service: Principal retirement 60,000 - - 240,000 110,000 185,000 Interest 2,655 20,431 11,653 107,668 8,583 959,731 Paying agent fees 115 547 785 115 517 2,116 Professional services - - - - - - Total expenditures1,146,847 62,770 20,978 12,438 347,783 119,100 Revenues over (under) expenditures 2,101 171,512 191,128 6,313 9,615 (246,076) Other financing sources (uses): Transfers in - 15,000 10,241 - - 237,274 Transfers out - - - - - - Total other financing sources (uses) - 15,000 10,241 - - 237,274 Net increase (decrease) in fund balance186,512201,369 2,101 6,313 9,615 (8,802) Fund balance - January 1 74,447 12,412 - 10,723 116,908 702,718 Fund balance - December 31 $ 76,548$ 198,924$ 201,369$ 17,036$ 126,523$ 693,916 96 Statement 1 6 G.O. TIFG.O. TIFG.O.G.O.G.O.G.O. RefundinRefundinPIR FunPIR FunPIR FunStateImprovemen ggdddtTotals BondsBondsBonds ofBonds ofBonds ofAid BondsBondsNonmajor Debt Service Funds 2003B2004B2001A2003A2006A2001B2005A20072006 $ -$ - $ -$ -$ -$ -$ -$ 1,739,742$ 1,725,641 399,673 1,074,546 - - - - - 1,474,219 1,414,254 - - - - - 243,298 - 323,798 310,141 2,021,621 - 15,110 - - - -2,006,511 287,348 8,910 ( 4,793) - 6,109 7,177 3,376 102,070 147,116 888 5,706,4962,108,581 408,583 1,084,863 - 6,109 7,177 246,674 3,738,272 215,000 490,000 1,075,000 750,000 - 150,000 - 3,275,000 5,254,000 21,920 98,625 21,500 62,505 111,575 91,298 118,572 1,636,716 1,683,599 546 919 - 978 546 546 402 8,132 5,534 - - - 1,430 - - - 1,430 9,145 237,466 589,544 1,096,500 814,913 112,121 241,844 118,974 4,921,278 6,952,278 171,117495,319 785,2181,989,607 (1,096,500) (808,804) (104,944) 4,830 (3,214,006) - - 1,071,845 807,000 120,000 - - 2,261,360 2,945,888 - - - - - - - - (58,831) - - 1,071,845 807,000 120,000 - - 2,261,360 2,887,057 3,046,5781,989,607 171,117 495,319 (24,655) (1,804) 15,056 4,830 (326,949) 117,575 90,701 24,655 47,367 12,245 216,527 119,372 1,545,650 1,872,599 $ 288,692$ 586,020$ -$ 45,563$ 27,301$ 221,357$2,108,979$ 4,592,228$ 1,545,650 97 - This page intentionally left blank - 98 NONMAJOR CAPITAL PROJECT FUNDS The City of Andover had the following Capital Projects Funds during the year: Storm Sewer Project - This fund was established to account for storm sewer fees and improvements as part of development and ongoing maintenance. - This fund was established to account for contributions associated with land development to be Park Dedication used for constructing and upgrading the City’s park system. Building Fund - This fund was established to account for miscellaneous building improvements for all facilities. Equipment Certificates 2006B - This fund was established to account for the purchase of capital equipment that was financed through the issuance of capital notes. - This fund was established to account for the purchase of capital equipment that was Equipment Certificates 2007A financed through the issuance of capital notes. Capital Improvement Bonds 2004A - This fund was established to account for the construction of a fire station with the use of bond proceeds. Capital Improvement Bonds 2005B - This fund was established to account for improvements to the Public Works building and City Hall with the use of bond proceeds. Community Center Project - This fund was established to account for the bond proceeds associated with the construction of a community center consisting of an ice arena, field house and aquatics center. - This fund was established to account for the various improvement projects at Andover Improvement Bonds 2005A Station North, including the construction of Jay Street. 99 CITY OF ANDOVER, MINNESOTA SUBCOMBINING BALANCE SHEET NONMAJOR CAPITAL PROJECTS FUNDS December 31, 2007 Comparative Totals For December 31, 2006 StorEquipmen mt SeweParkBuildinCertificates rg ProjecDedicatioFund2007 tnA Assets Cash and investments$4,055$212,621$147,461$306,605 Accrued interest1,0821,6632,106 - Property taxes receivable: Unremitted472- - - Delinquent1,303- - - Total assets4,055215,478149,124308,711 Liabilities and Fund Balance Liabilities: Interfund payables60,000- - - Accounts payable52,665-56,891 - Contracts payable- - - - Deferred revenue1,303- - - Total liabilities60,00053,968-56,891 Fund balance (deficit): Reserved for projects-251,820 - - Unreserved: Designated for projects161,510149,124 - - Undesignated(55,945)- - - Total fund balance (deficit)(55,945)161,510149,124251,820 Total liabilities and fund balance$4,055$215,478$149,124$308,711 100 Statement 17 Totals Improvemen t BondsNonmajor Capital Projects Funds 200520072006 A $480,648$1,151,390$2,040,998 2,6737,5248,623 -472451 -1,303- 483,3211,160,6892,050,072 -60,00060,000 -109,55691,645 --168,549 -1,303- -170,859320,194 483,321735,141707,616 -310,6341,150,974 -(55,945)(128,712) 483,321989,8301,729,878 $483,321$1,160,689$2,050,072 101 CITY OF ANDOVER, MINNESOTA SUBCOMBINING STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES NONMAJOR CAPITAL PROJECTS FUNDS For The Year Ended December 31, 2007 With Comparative Totals For The Year Ended December 31, 2006 EquipmenEquipmen Stormtt SeweParBuildinCertificateCertificate rkgss ProecDedicatioFun2006B2007A jtnd Revenues: taxes$52,406 General property $ -$ -$ -$ - Interovernmental g - 64,818 - - - Special assessments - - - - - Investment income(1,771) (283) 21,943 18,878 27,330 Miscellaneous Park dedication fees - 113,013 - - - Other - 95 - - - Total revenues(1,771) (283) 252,275 18,878 27,330 Expenditures: Current: overnment Generalg - - - - - Public safet y - - - - 25,545 Public works - - - - 26,370 Parks and recreation - 182,673 - - - : Capital outlay Generalovernment g - - - - - 29,030 Public safety - - - 53,122 Public works 2,460 - 5,000 - 347,624 Parks and recreation 60,201 - 484,406 175,238 - Economic developmen t - - - - - Construction/acquisition costs - 190,926 - - 76,009 Total expenditures 91,691 - 863,005 175,238 528,670 Revenues over (under) expenditures(1,771)(610,730)(156,360) (91,974)(501,340) Other financin sources (uses): g Transfers in - - - - - Transfers out(50,000)(23,250)(10,241) - - Bonds issued - - - - 760,000 Bond premium - - - - 3,401 Total other financin sources (uses)(50,000)(23,250) g - - 753,160 Net increase (decrease) in fund balance(1,771)(660,730)(179,610) (91,974) 251,820 Fund balance (deficit) - Januar 1(54,174) 91,974 y 822,240 328,734 - Fund balance (deficit) - December 31$(55,945)$161,510$149,124$251,820 $ - 102 Statement 18 CapitaCapita ll Total ImprovemenImprovemenCommunitImprovemens ttyt Nonmajor Capital Projects Fund BondsBondsCenteBondss r ec2005A20072006 2004A2005BProjt $52,406$ 50,527 $ -$ -$ -$ - - - - - 64,818 - - - - - - 12,162 189 - - 30,887 97,173 90,018 - - - - 113,013 626,567 - - - - 95 93,542 189 - - 30,887 327,505 872,816 15,109 - - - 15,109 91,468 8,126 - - - 33,671 25,339 - - - - 26,370 - (1,288) - - - 181,385 62,389 - - - - - 96,651 - - - - 82,152 34,091 - - - - 355,084 376,249 - - - - 719,845 321,359 -140,162 - - 140,162 - - - - - 266,935 55,395 8,126 15,109 (1,288) 140,162 1,820,713 1,062,941 (8,126) (14,920) 1,288(109,275)(1,493,208)(190,125) 73,250 - - - 73,250 101,434 (83,491) (2,300) - - - - - - - - 760,000 460,000 - - - - 3,401 - 73,250 - - - 753,160 559,134 (8,126) (14,920) 74,538(109,275)(740,048) 369,009 8,126 14,920 (74,538) 592,596 1,729,878 1,360,869 $483,321$989,830$1,729,878 $ -$ -$ - 103 CITY OF ANDOVER, MINNESOTA SPECIAL REVENUE FUND - EDA GENERAL Statement 19 SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES - BUDGET AND ACTUAL For The Year Ended December 31, 2007 With Comparative Actual Amounts For The Year Ended December 31, 2006 Variance with Final Budget - Budgeted AmountsPositive2006 OriginalFinalActual(Negative)Actual Revenues: Charges for services$ 150,000$150,000$162,553$ 12,553$155,250 Investment income1,0001,00012,190 11,1905,261 Miscellaneous11,253 11,25314,770 - - Total revenues 151,000151,000185,996 34,996175,281 Expenditures: Current: Economic development 123,477123,477116,638 6,83982,817 Net increase (decrease) in fund balance$ 27,523$27,52369,358$ 41,83592,464 Fund balance (deficit) - January 1181,05988,595 Fund balance (deficit) - December 31$250,417$181,059 104 CITY OF ANDOVER, MINNESOTA SPECIAL REVENUE FUND - COMMUNITY DEVELOPMENT BLOCK GRANT Statement 20 SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES - BUDGET AND ACTUAL For The Year Ended December 31, 2007 With Comparative Actual Amounts For The Year Ended December 31, 2006 Variance with Final Budget - Budgeted AmountsPositive2006 OriginalFinalActual(Negative)Actual Revenues: Intergovernmental$7,300$ 7,300 $ -$ -$ - Investment income300300178 (122)2,282 Miscellaneous3,5003,5003,501 1337 Total revenues3,8003,80010,979 7,1792,619 Expenditures: Current: Economic Development 10,00010,00043,413 (33,413)16,657 Net increase (decrease) in fund balance$ (6,200)$(6,200)(32,434)$ (26,234)(14,038) Fund balance (deficit) - January 136,69550,733 Fund balance (deficit) - December 31$4,261$36,695 105 CITY OF ANDOVER, MINNESOTA SPECIAL REVENUE FUND - COMMUNITY CENTER Statement 21 SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES - BUDGET AND ACTUAL For The Year Ended December 31, 2007 With Comparative Actual Amounts For The Year Ended December 31, 2006 Variance with Final Budget - Budgeted AmountsPositive2006 OriginalFinalActual(Negative)Actual Revenues: Charges for services$ 554,500$554,500$590,935$ 36,435$584,239 Investment income(19,170) (19,170)(20,584) - - Miscellaneous 134,400134,400304,371 169,971177,586 Total revenues 688,900688,900876,136 187,236741,241 Expenditures: Current: Parks and recreation 760,817760,817793,414 (32,597)748,146 Capital outlay: Parks and recreation 15,50015,5006,495 9,005 - Total expenditures 776,317776,317799,909 (23,592)748,146 Revenue over (under) expenditures (87,417)(87,417)76,227 163,644(6,905) Other financing sources (uses) Transfers out (237,274)(237,274)(237,274)(284,013) - Net increase (decrease) in fund balance (324,691)$ $(324,691)(161,047)$ 163,644(290,918) Fund balance (deficit) - January 1(311,349)(20,431) Fund balance (deficit) - December 31$(472,396)$(311,349) 106 CITY OF ANDOVER, MINNESOTA SPECIAL REVENUE FUND - DRAINAGE AND MAPPING Statement 22 SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES - BUDGET AND ACTUAL For The Year Ended December 31, 2007 With Comparative Actual Amounts For The Year Ended December 31, 2006 Variance with Final Budget - Budgeted AmountsPositive2006 OriginalFinalActual(Negative)Actual Revenues: Charges for services$ 10,000$10,000$46,579$ 36,579$3,735 Investment income1,0001,0003,480 2,4801,775 Total Revenues 11,00011,00050,059 39,0595,510 Expenditures: Current: Public works 15,80015,8008,291 7,5099,648 Capital outlay: Public works5,187 (5,187) - - - Total expenditures 15,80015,80013,478 2,3229,648 Net increase (decrease) in fund balance$ (4,800)$(4,800)36,581$ 41,381(4,138) Fund balance (deficit) - January 137,68541,823 Fund balance (deficit) - December 31$74,266$37,685 107 CITY OF ANDOVER, MINNESOTA SPECIAL REVENUE FUND - LRRWMOStatement 23 SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES - BUDGET AND ACTUAL For The Year Ended December 31, 2007 With Comparative Actual Amounts For The Year Ended December 31, 2006 Variance with Final Budget - Budgeted AmountsPositive2006 OriginalFinalActual(Negative)Actual Revenues: General property taxes$ 35,000$35,000$33,254$ (1,746)$31,700 Intergovernmental1,554 1,554 - - - Investment income(71) (71)(510) - - Total revenues 35,00035,00034,737 (263)31,190 Expenditures: Current: Public works 28,08528,08526,265 1,82025,291 Net increase (decrease) in fund balance$6,915$6,9158,472$ 1,5575,899 Fund balance (deficit) - January 13,362(2,537) Fund balance (deficit) - December 31$11,834$3,362 108 CITY OF ANDOVER, MINNESOTA SPECIAL REVENUE FUND - FORESTRYStatement 24 SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES - BUDGET AND ACTUAL For The Year Ended December 31, 2007 With Comparative Actual Amounts For The Year Ended December 31, 2006 Variance with Final Budget - Budgeted AmountsPositive2006 OriginalFinalActual(Negative)Actual Revenues: Intergovernmental$16,896$ 16,896$14,548 $ -$ - Charges for services260 - - - - Investment income343 343(108) - - Miscellaneous9,706 9,70613,614 - - Total revenues26,945 26,94528,314 - - Expenditures: Current: Public works18,526 (18,526)36,323 - - Net increase (decrease) in fund balance8,419$ 8,419(8,009) $ -$ - Fund balance (deficit) - January 1(1,901)6,108 Fund balance (deficit) - December 31$6,518$(1,901) 109 CITY OF ANDOVER, MINNESOTA SPECIAL REVENUE FUND - TRAIL AND TRANSPORTATION Statement 25 SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES - BUDGET AND ACTUAL For The Year Ended December 31, 2007 With Comparative Actual Amounts For The Year Ended December 31, 2006 Variance with Final Budget - Budgeted AmountsPositive2006 OriginalFinalActual(Negative)Actual Revenues: Charges for services$ 88,500$88,500$16,541$ (71,959)$153,829 Investment income2,5002,5006,324 3,8249,662 Total revenues 91,00091,00022,865 (68,135)163,491 Expenditures: Current: Public works1,810 (1,810)5,853 - - Capital outlay: Public works 210,000210,000142,920 67,080110,687 Total expenditures 210,000210,000144,730 65,270116,540 Net increase (decrease) in fund balance (119,000)$ $(119,000)(121,865)$ (2,865)46,951 Fund balance (deficit) - January 1154,406107,455 Fund balance (deficit) - December 31$32,541$154,406 110 CITY OF ANDOVER, MINNESOTA SPECIAL REVENUE FUND - RIGHT-OF-WAY MANAGEMENT/UTILITY Statement 26 SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES - BUDGET AND ACTUAL For The Year Ended December 31, 2007 With Comparative Actual Amounts For The Year Ended December 31, 2006 Variance with Final Budget - Budgeted AmountsPositive2006 OriginalFinalActual(Negative)Actual Revenues: Charges for services$ 40,000$40,000$25,088$ (14,912)$62,554 Investment income5,0005,00011,206 6,20610,760 Total revenues 45,00045,00036,294 (8,706)73,314 Expenditures: Current: Public works 67,98767,98756,955 11,03268,990 Revenue over (under) expenditures (22,987)(22,987)(20,661) 2,3264,324 Other financing sources (uses) Transfers out (47,800)(47,800)(47,800) - - Net increase (decrease) in fund balance$ (70,787)$(70,787)(68,461)$ 2,3264,324 Fund balance (deficit) - January 1255,083250,759 Fund balance (deficit) - December 31$186,622$255,083 111 CITY OF ANDOVER, MINNESOTA SPECIAL REVENUE FUND - CAPITAL EQUIPMENT RESERVE Statement 27 SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES - BUDGET AND ACTUAL For The Year Ended December 31, 2007 With Comparative Actual Amounts For The Year Ended December 31, 2006 Variance with Final Budget - Budgeted AmountsPositive2006 OriginalFinalActual(Negative)Actual Revenues: General property taxes$ 210,000$210,000$197,047$ (12,953)$195,245 Intergovernmental9,200 9,200 - - - Investment income 15,00015,00057,221 42,22140,758 Miscellaneous1,945 1,9455,705 - - Total revenues 225,000225,000265,413 40,413241,708 Expenditures: Current: General government 20,00020,00047,878 (27,878)74,631 Public safety 10,00010,0008,453 1,547 - Capital outlay: General government48,038 - - - - Public works8,4008,400 8,400 - - Parks and recreation 40,00040,00092,456 (52,456) - Total expenditures 78,40078,400148,787 (70,387)122,669 Revenues over (under) expenditures 146,600146,600116,626 (29,974)119,039 Other financing sources (uses): Proceeds from the sale of capital assets47,143 47,14310,317 - - Net increase (decrease) in fund balance 146,600$ $146,600163,769$ 17,169129,356 Fund balance (deficit) - January 1886,086756,730 Fund balance (deficit) - December 31$1,049,855$886,086 112 CITY OF ANDOVER, MINNESOTA SPECIAL REVENUE FUND - CHARITABLE GAMBLING Statement 28 SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES - BUDGET AND ACTUAL For The Year Ended December 31, 2007 With Comparative Actual Amounts For The Year Ended December 31, 2006 Variance with Final Budget - Budgeted AmountsPositive2006 OriginalFinalActual(Negative)Actual Revenues: Investment income$1,114$ 1,114$876 $ -$ - Miscellaneous 13,00013,00017,693 4,69311,666 Total revenues 13,00013,00018,807 5,80712,542 Expenditures: Current: General government 27,30427,30416,544 10,76010,802 Net increase (decrease) in fund balance$ (14,304)$(14,304)2,263$ 16,5671,740 Fund balance (deficit) - January 118,70916,969 Fund balance (deficit) - December 31$20,972$18,709 113 CITY OF ANDOVER, MINNESOTA SPECIAL REVENUE FUND - CONSTRUCTION SEAL COATING Statement 29 SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES - BUDGET AND ACTUAL For The Year Ended December 31, 2007 With Comparative Actual Amounts For The Year Ended December 31, 2006 Variance with Final Budget - Budgeted AmountsPositive2006 OriginalFinalActual(Negative)Actual Revenues: Charges for services$ 51,079$51,079$72,397$ 21,318$30,016 Investment income 10,00010,00020,491 10,49115,098 Total revenues 61,07961,07992,888 31,80945,114 Expenditures: Current: Public works 51,07951,07974,270 (23,191)38,447 Net increase (decrease) in fund balance$ 10,000$10,00018,618$ 8,6186,667 Fund balance (deficit) - January 133,40226,735 Fund balance (deficit) - December 31$52,020$33,402 114 INTERNAL SERVICE FUNDS Internal Service Funds are used to account for the financing of goods or services provided by one department or agency to other departments or agencies of the government and to other government units, on a cost reimbursement basis. The City of Andover had the following Internal Service Funds during the year: Central Equipment Maintenance – This fund accounts for the maintenance of the equipment for the City. Risk Management – This fund accounts for the expenditures in payment of insurance deductibles, loss reduction, safety training and administrative expense. 115 CITY OF ANDOVER, MINNESOTA COMBINING STATEMENT OF NET ASSETSStatement 30 INTERNAL SERVICE FUNDS December 31, 2007 With Comparative Totals for December 31, 2006 CentralIntra EquipmenRisActivitTotals tky MaintenanceManagemenElimination20072006 t Assets Current assets: Cash and cash equivalents$ 2,909$97,285$ 100,194$162,205 $ - Accrued interest757 757786 - - Interfund receivable80,000(80,000) - - - Prepaid items 1,750 1,7501,080 - - Inventories - at cost 66,875 66,87562,036 - - Total assets 71,534178,042(80,000) 169,576226,107 Liabilities Current liabilities: Interfund payable 80,000(80,000) - - - Accounts payable 19,0401,116 20,15613,766 - Contracts payable100 100100 - - Due to other governmental units617 - - - - Salaries payable 4,384254 4,6383,574 - Total liabilities 103,4241,470(80,000) 24,89418,057 Net assets Unrestricted$ (31,890)$176,572$ 144,682$208,050 $ - 116 CITY OF ANDOVER, MINNESOTA COMBINING STATEMENT OF REVENUES, EXPENSES AND Statement 31 CHANGES IN FUND NET ASSETS INTERNAL SERVICE FUNDS For The Year Ended December 31, 2007 With Comparative Totals For The Year Ended December 31, 2006 Central EquipmentRiskTotals MaintenanceManagement20072006 Operating revenues: User charges$503,501$279,627$783,128$711,485 Other4,49222,119 26,61123,314 Total operating revenues507,993301,746809,739734,799 Operating expenses: Personal services206,76593,092299,857281,431 Supplies287,1223,278290,400243,483 Other service charges98,321189,733288,054278,491 Total operating expenses592,208286,103878,311803,405 Operating income (loss)(84,215)15,643(68,572)(68,606) Nonoperating revenues (expenses): Investment income(261)5,465 5,2044,503 Change in net assets(84,476)21,108(63,368)(64,103) Net assets - January 152,586155,464208,050272,153 Net assets - December 31$(31,890)$176,572$144,682$208,050 117 CITY OF ANDOVER, MINNESOTA COMBINING STATEMENT OF CASH FLOWSStatement 3 2 INTERNAL SERVICE FUNDS For The Year Ended December 31, 2007 With Comparative Totals For The Year Ended December 31, 2006 Centra l Totals EquipmenRis tk MaintenancManagemen20072006 et Cash flows from operating activities: Receipts from customers and users$507,993$301,746$809,739$734,799 Payment to suppliers(385,400)(192,790)(578,190)(544,954) Payment to employees(205,765)(93,028)(298,793)(281,019) Net cash flows from operating activities(83,172)15,928(67,244)(91,174) Cash flows from noncapital financing activities: Receipt of advances from other funds80,00080,000 - - Payment of advances to other funds(80,000)(80,000) - - Net cash flows from noncapital financing activities80,000(80,000)- - Cash flows from investing activities: Investment income(30)5,2635,2334,684 Net increase in cash and cash equivalents(3,202)(58,809)(62,011)(86,490) Cash and cash equivalents - January 16,111156,094162,205248,695 Cash and cash equivalents - December 31$2,909$97,285$100,194$162,205 Reconciliation of operating income to net cash provided (used) by operating activities: Operating income (loss)$(84,215)$15,643$(68,572)$(68,606) Adjustments to reconcile operating income (loss) to net cash flows from operating activities: Changes in assets and liabilities: Decrease (increase) in prepaid items(670)(670)1,416 - Decrease (increase) in inventory(4,839)(4,839)(16,007) - Increase (decrease) in accounts payable5,5528386,390(8,836) Increase (decrease) in due to other governmental units (617)(617)447 - Increase (decrease) in salaries payable1,000641,064412 Total adjustments1,0432851,328(22,568) Net cash provided by operating activities$(83,172)$15,928$(67,244) $(91,174) 118 AGENCY FUNDS Agency Funds are used to account for assets held by the City in a trustee capacity or as an agent for individuals, private organizations and/or other governmental units. The City of Andover had the following Agency Funds during the year: General Escrow – This fund is used to account for distribution of funds for insurance premiums of retirees. General Agency – This fund is used to account for the collection and distribution of funds relating to development activities. 119 CITY OF ANDOVER, MINNESOTA COMBINING STATEMENT OF NET ASSETS Statement 33 FIDUCIARY FUNDS December 31, 2007 GeneralGeneral EscrowAgencyTotal Assets Cash and investments 16,742$ 266,314$$ 283,056 Accounts receivable - net 5,000-5,000 Total assets16,742271,314 288,056 Liabilities Accounts payable-3,6493,649 Due to other governments-9292 Deposits payable16,742267,573 284,315 Total liabilities$16,742$271,314$ 288,056 120 CITY OF ANDOVER, MINNESOTA COMBINING STATEMENT OF CHANGES IN ASSETS AND LIABILITIES Statement 34 FIDUCIARY FUNDS For The Year Ended December 31, 2007 BalanceBalance January 1,December 31, 2007AdditionsDeletions2007 General Escrow Fund Assets Cash and investments 22,611$ 15,624$$(21,493)$16,742 Liabilities Accounts payable5310,247(10,300)- Deposits payable22,5585,377(11,193)16,742 Total liabilities$22,611$15,624$(21,493)$16,742 General Agency Fund Assets Cash and investments 473,073$ 801,394$$(1,008,153)$266,314 Accounts receivable - net-5,000 5,000- Total assets$473,073$806,394$(1,008,153)$271,314 Liabilities Accounts payable-459,453(455,803)3,650 Due to other governments18492 (184)92 Deposits payable472,889346,849(552,166)267,572 Total liabilities$473,073$806,394$(1,008,153)$271,314 Total Fiduciary Funds Assets Cash and investments 495,684$ 817,018$$(1,029,646)$283,056 Accounts receivable - net-5,000 5,000- Total assets$495,684$822,018$(1,029,646)$288,056 Liabilities Accounts payable53469,700(466,103)3,650 Due to other governments18492 (184)92 Deposits payable495,447352,226(563,359)284,314 Total liabilities$495,684$822,018$(1,029,646)$288,056 121 - This page intentionally left blank - 122 SUPPLEMENTARY FINANCIAL INFORMATION 123 CITY OF ANDOVER, MINNESOTA COMBINED SCHEDULE OF INDEBTEDNESS December 31, 2007 Authorized IssueMaturityInterestand DateDateRateIssue GOVERNMENTAL ACTIVITIES: General Obligation Revenue Bonds: 2004 EDA Pub Fac Lease Revenue Bonds4/23/20042/1/20142.215-5.400%19,580,000$ 2006 EDA Pub Fac Lease Revenue Refunding Bonds 12/1/20062/1/20344.00-4.50%10,000,000 2007 EDA Pub Fac Lease Revenue Refunding Bonds 1/1/20072/1/20344.00-4.50%6,865,000 Total general obligation revenue bonds36,445,000 Special Assessment Bonds: 2005A G.O. Improvement Bonds4/28/20052/1/20132.95-3.65%3,560,000 Tax Increment Bonds: 2003B G.O. Tax Increment Refunding Bonds6/1/20038/1/20102.00-3.00%1,530,000 2004B G.O. Tax Increment Refunding Bonds3/16/20048/1/20102.00-3.25%4,260,000 Total tax increment bonds5,790,000 Certificates of Indebtedness: 2005B G.O. Equipment Certificates4/28/20052/1/20082.65-3.10%310,000 2006B G.O. Equipment Certificates5/10/20062/1/20103.60-3.65%460,000 2007A G.O. Equipment Certificates3/13/20072/1/20114.00%760,000 Total certificates of indebtedness1,530,000 Capital Improvement Bonds: 2004A G.O. Capital Improvement Bonds3/16/20042/1/20172.00-3.75%3,890,000 2005B G.O. Capital Improvement Bonds4/28/20052/1/20092.65-3.10%340,000 Total capital improvement bonds4,230,000 Permanent Improvement Revolving Bonds: 2001A Permanent Improvement Revolving Bonds 6/5/20012/1/20073.20-4.00%4,975,000 2003A Permanent Improvement Revolving Bonds 6/1/20032/1/20102.00-2.60%4,580,000 2006A Permanent Improvement Revolving Bonds 5/10/20062/1/20143.60-3.85%2,450,000 Total permanent improvement revolving bonds12,005,000 State Aid Bonds: 2001B State Aid Street Bonds6/5/20012/1/20172.90-5.00%2,755,000 Total Bonded Indebtedness66,315,000 Compensated absences509,851 Total governmental activities indebtedness66,824,851 BUSINESS-TYPE ACTIVITIES: General Obligation Revenue Bonds: 2002 G.O. Water Revenue Bonds5/9/20028/1/20122.30-5.00%9,780,000 2007B G.O. Water Revenue Refunding Bonds3/13/20072/1/20234.00-4.25%6,570,000 Total general obligation revenue bonds16,350,000 Compensated absences90,228 Total business-type activities indebtedness16,440,228 Total City indebtedness$83,265,079 124 Exhibit 1 Principal Payments PriorCurrentOutstanding2008 Payment YearsYear12/31/07PrincipalInterestTotal $ 185,000$ 185,000$ 19,210,000$190,000$954,381$ 1,144,381 10,000,000424,228 424,228 - - - 6,865,000291,983 291,983 - - - 185,000 185,000 36,075,000190,0001,670,592 1,860,592 3,560,000545,000110,534 655,534 - - 595,000 215,000 720,000230,00017,620 247,620 480,000 490,000 3,290,000505,00087,413 592,413 1,075,000 705,000 4,010,000735,000105,033 840,033 190,000 60,000 60,00060,000900 60,900 460,000145,00014,069 159,069 - - 760,000180,00026,800 206,800 - - 190,000 60,000 1,280,000385,00041,769 426,769 355,000 240,000 3,295,000255,000102,080 357,080 110,000 230,000115,0005,290 120,290 - 355,000 350,000 3,525,000370,000107,370 477,370 3,900,000 1,075,000 - - - - 1,445,000 750,0002,385,000770,00047,305 817,305 2,450,000310,00085,501 395,501 - - 5,345,000 1,825,000 4,835,0001,080,000132,806 1,212,806 690,000 150,000 1,915,000155,00085,120 240,120 7,840,000 3,275,000 55,200,0003,460,0002,253,224 5,713,224 509,851 - - - - - 7,840,000 3,275,000 55,709,8513,460,0002,253,224 5,713,224 965,000 345,000 8,470,000360,000388,227 748,227 6,570,000266,146 266,146 - - - 965,000 345,000 15,040,000360,000654,373 1,014,373 90,228 - - - - - 965,000 345,000 15,130,228360,000654,373 1,014,373 $ 8,805,000$ 3,620,000$ 70,840,079$3,820,000$2,907,597$ 6,727,597 125 CITY OF ANDOVER, MINNESOT A SCHEDULE OF TAX CAPACITY RATES AND LEVIESExhibit 2 Taxes Payable 20082007 Tax capacity values$31,162,334$29,337,162 Captured tax increment value(2,220,301)(2,048,058) Fiscal disparities - contribution(989,407) (914,433) Local taxable value27,952,62626,374,671 Fiscal disparities - distribution3,903,250 3,500,744 Adjusted tax capacit$31,855,876$29,875,415 y 20082007 dTax CapacityCertifiedTax Capacity Certifie LevyRateLevyRate General Revenue Levy: General Fund6,526,135$ 6,080,179$ Capital Equipment/Projects210,000 210,000 Parks Projects57,680 56,000 Road and Bridge1,107,341 1,052,953 Pedestrian Trail Maintenance50,265 48,801 Total General Revenue Levy7,951,42124.962% 7,447,93324.948% Debt Service Levy: 2004A G.O. Capital Improvement Bonds374,934 365,051 2004 EDA Public Facility Revenue Bonds934,203 889,718 2005B G.O. Capital Improvement Bonds122,622 126,305 2005B G.O. Equipment Certificate 63,945 - 2006B G.O. Equipment Certificate171,832 188,475 2007A G.O. Equipment Certificate235,806 200,000 2008 G.O. Equipment Certificate165,000 - Total Debt Service Levy2,004,3976.333% 1,833,4946.055% Lower Rum River Watershed 0.308%35,00035,000 0.325% Total9,990,81831.603% 9,316,42731.328% Voter-Approved Open Space Referendum - MV162,9000.00554% - - $10,153,718$ 9,316,427 126 CITY OF ANDOVER, MINNESOTA SCHEDULE OF DEFERRED TAX LEVIESExhibit 3 GENERAL OBLIGATION BONDS December 31, 2007 Tax Increment Bond sCertificates of Indebtedness Taxes Paabl2003B2004BTota2005B2006B2007ATota yell $ 449,126 2008$ 2 47,620$ 5 92,413$ 8 40,033$ 60,900$ 163,649$ 224,577 373,720 2009 2 53,020 5 94,600 8 47,620 - 162,920 210,800 208,000 2010 2 57,500 5 90,812 8 48,312 - - 208,000 2011 - 6 10,050 6 10,050 - - - - 2012 - 6 07,875 6 07,875 - - - - 2013 - 5 99,588 5 99,588 - - - - $3,595,338$60,900$ 1,030,846 $ 7 58,140$ 4 ,353,478$ 326,569$ 643,377 EDA Public Facility Leas e RevenuRefundinRefundinTota eggl Capital Improvement Bond TaxessBondsBondsBondsDeferred Ta x Paabl2004A2005BTotaof 2004of 2006of 2007TotaLevie yells $ 908,695$2,675,224 2008$ 3 57,080$ 1 20,290$ 4 77,370$ 908,695$ -$ - 699,8062,398,509 2009 3 60,580 1 16,783 4 77,363 699,806 - - 700,6842,125,414 2010 3 68,418 - 3 68,418 700,684 - - 694,8911,680,084 2011 3 75,143 - 3 75,143 694,891 - - 697,4561,691,324 2012 3 85,993 - 3 85,993 697,456 - - 693,5341,684,027 2013 3 90,905 - 3 90,905 693,534 - - 627,4781,032,074 2014 4 04,596 - 4 04,596 269,373 212,114 145,991 630,0111,047,011 2015 4 17,000 - 4 17,000 - 371,528 258,483 632,1111,055,161 2016 4 23,050 - 4 23,050 - 372,828 259,283 629,9121,057,787 2017 4 27,875 - 4 27,875 - 369,589 260,323 2018 628,837628,837 - - - - 369,064 259,773 2019 632,811632,811 - - - - 368,628 264,183 2020- 630,739630,739 - - - 372,525 258,214 2021 628,577628,577 - - - - 366,328 262,249 2022 626,066626,066 - - - - 369,921 256,145 2023 623,254623,254 - - - - 370,234 253,020 2024 629,630629,630 - - - - 365,207 264,423 2025 625,273625,273 - - - - 367,812 257,461 2026 625,793625,793 - - - - 364,346 261,447 2027 625,333625,333 - - - - 363,444 261,889 2028 623,897623,897 - - - - 359,127 264,770 2029 622,158622,158 - - - - 362,690 259,468 2030 625,221625,221 - - - - 363,030 262,191 2031-359,379 621,665621,665 - - - 262,286 2032 621,233621,233 - - - - 362,592 258,641 2033 624,980624,980 - - - - 362,313 262,667 2034 954,771954,771 - - - - 563,660 391,111 $3,910,640$ 237,073$4,147,7134,664,439$ 17,884,816$ $27,416,853 $ $ 7,736,3595,484,018 127 CITY OF ANDOVER, MINNESOTA SCHEDULE OF FUND TRANSFERSExhibit 4 December 31, 2007 TransfeTransfe rr InOu t General Fund Water Fund EF$141,625$ General Fund Admin Allocatio- n Sewer Fund EF44,000-General Fund Admin Allocatio n Total General Fund185,625- Special Revenue Funds (SRF) Community Center SRF Lease Revenue Bonds - Community Center DS 237,274- Debt Service Allocatio Fn Right of Way Management / Utility Fund SRF Road and Bridge Fund CPF 47,800- Degradation of Roadways Allocatio n Total Special Revenue Funds-285,074 Debt Service Funds (DSF) 2001A PIR DSF PIR CPF1,071,845-Debt Service Allocatio n 2003A PIR DSF PIR CPF -807,000 Debt Service Allocatio n 2004 EDA Public Facility Lease Revenue Bond DSF Lease Revenue Bonds - Community Center SR237,274-Debt Service Allocatio Fn 2006A PIR PIR CPF -120,000 Debt Service Allocatio n 2006B G.O. Capital Note DSF Storm Sewer Fund EF -15,000 Debt Service Allocatio n 2007 G.O. Capital Note DSF 2007 G.O. Capital Note CPF -10,241 Capitalized interest Total Debt Service Funds2,261,360- Capital Projects Funds (CPF) Water Trunk Fund CPF Water Fund EF 57,671- Debt Service Allocatio n Sewer Trunk Fund CPF Sewer Fund EF -350,000 Replacement Reserv e Road and Bridge Fund CPF Right of Way Management / Utility Fund SRF47,800 Degradation of Roadways Allocatio- n Park Improvement Fund CPF Community Center Project Fund CPF 50,000- Close Fun d Building Fund CPF Community Center Project Fund CPF$ 23,250-$ Close Fun d 128 CITY OF ANDOVER, MINNESOTA SCHEDULE OF FUND TRANSFERSExhibit 4 December 31, 2007Continue d TransfeTransfe rr InOu t Capital Projects Funds (CPF) - Continued 2007 G.O. Capital Note CPF 2007 G.O. Capital Note DSF$ 10,241-$ Capitalized interest Community Center Project Fund CPF Park Improvement Fund CPF Close Fun50,000 d Building Fund CPF23,250Close Fun d -73,250 PIR CPF 2001A PIR DSF- 1,071,845 Debt Service Allocatio n 2003A PIR DSF 807,000- Debt Service Allocatio n 2006A PIR DSF 120,000- Debt Service Allocatio n 1,998,845- Total Capital Projects Funds471,0502,140,007 Enterprise Funds (EF) Water Fund EF Water Trunk Fund CPF -57,671 Debt Service Allocatio n General Fun 141,625- General Fund Admin Allocatio dn 141,62557,671 Sewer Fund EF General Fun 44,000- General Fund Admin Allocatio dn Sewer Trunk Fund CPF-350,000Replacement Reserv e 394,000- Storm Sewer Fund EF 2006B G.O. Capital Note DSF- 15,000 Debt Service Allocatio n Total Enterprise Funds57,671550,625 Total All Funds$2,975,706$2,975,706 129 - This page intentionally left blank - 130 III. STATISTICAL SECTION This part of the City of Andover’s comprehensive annual financial report presents detailed information as a context for understanding what the information in the financial statements, note disclosures, and required supplementary information says about the City’s overall financial health. Contents Page Financial Trends 132 These tables contain trend information to help the reader understand how the City’s financial performance and well-being have changed over time. 137 Revenue Capacity These tables contain information to help the reader assess the City’s most significant local revenue source, the property tax. 143 Debt Capacity These tables present information to help the reader assess the affordability of the City’s current levels of outstanding debt and the City’s ability to issue additional debt in the future. 148 Demographic and Economic Information These tables offer demographic and economic indicators to help the reader understand the environment within which the City of Andover’s financial activities take place. Operating Information150 These tables contain service and infrastructure data to help the reader understand how the information is the City’s financial report relates to the services the City provides and the activities it performs. 131 CITY OF ANDOVER, MINNESOTA NET ASSETS BY COMPONENTTable 1 Last Five Fiscal Years (accrual basis of accounting) 20032004200520062007 Governmental Activities Invested in capital assets, net of related debt61,941,541$ $ 52,230,713$ 67,652,236$ 74,858,759$ 77,285,905 Restricted 4,277,835 17,182,422 6,565,168 14,838,788 24,271,706 Unrestricted 18,992,188 19,617,813 19,740,176 9,064,042 4,786,886 Total governmental activities net assets 85,211,564 89,030,948 93,957,580 98,761,589 106,344,497 Business-Type Activities Invested in capital assets, net of related debt33,379,384 35,111,309 35,588,013 38,419,302 38,580,630 Restricted 437,077 - - - - Unrestricted 2,898,244 3,197,522 3,032,746 3,281,875 3,659,887 Total business-type activities net assets 36,714,705 38,308,831 38,620,759 41,701,177 42,240,517 Primary Government Invested in capital assets, net of related debt95,320,925 87,342,022 103,240,249 113,278,061 115,866,535 Restricted 4,714,912 17,182,422 6,565,168 14,838,788 24,271,706 Unrestricted 21,890,432 22,815,335 22,772,922 12,345,917 8,446,773 Total primary government net assets$ 121,926,269$ 127,339,779$ 132,578,339$ 140,462,766$ 148,585,014 Note: The City began to report accrual information when it implemented GASB 34 in 2002. 132 CITY OF ANDOVER, MINNESOTA CHANGES IN NET ASSETSTable 2 Last Five Fiscal Years (accrual basis of accounting) 20032004200520062007 Expenses Governmental activities: General government$ 2,431,252$ 2,265,215$ 2,432,433$ 2,637,584$ 2,509,011 Public safety 2,766,694 3,138,069 3,353,798 3,443,285 3,851,086 Public works 3,361,255 5,268,813 3,937,423 3,031,459 3,783,509 Sanitation 160,548 26,843 - - - Parks and recreation 802,131 2,028,177 1,575,582 2,442,305 2,954,753 Recycling 115,016 113,234 118,599 91,378 94,929 Economic development 470,172 941,624 459,635 626,103 2,265,605 Unallocated - - - - - Interest on long-term debt 1,255,888 1,708,303 1,797,469 1,668,444 2,303,567 Total governmental activities expenses 11,362,956 15,490,278 13,674,939 13,940,558 17,762,460 Business-type activities: Water 1,737,596 1,956,995 2,160,502 2,232,144 2,587,847 Sewer 1,344,857 1,351,506 1,555,010 1,585,548 1,631,224 Storm sewer 168,203 389,290 400,114 408,003 537,151 Total business-type activities expenses 3,250,656 3,697,791 4,115,626 4,225,695 4,756,222 Total primary government expenses 14,613,612 19,188,069 17,790,565 18,166,253 22,518,682 Program Revenues Governmental activities: Charges for services: General government593,568 814,518 709,538 471,573785,600 Public Safety793,306 936,061 1,001,912 804,447 662,299 Public works 312,110 495,835 379,890 325,672 408,656 Parks and recreation 29,683 461,679 749,407 859,531 - Recycling 22,450 29,062 32,810 35,379 33,158 Economic development 218,605 182,535 - - - Operating grants and contributions 732,011 1,640,389 2,535,140 959,286 1,129,099 Capital grants and contributions 5,350,283 7,010,826 3,934,686 4,920,694 8,794,164 Total governmental activities program revenue7,803,728 10,956,374 9,055,655 8,485,063 12,855,042 Business-type activities: Charges for services: Water 1,399,798 1,723,068 1,510,119 1,768,388 2,025,452 Sewer 1,309,584 1,361,839 1,550,745 1,691,728 1,771,670 Storm sewer 118,638 242,090 248,753 287,397 288,372 Capital grants and contributions 214,920 823,797 2,761,282 158,113 - Total business-type activities program revenue2,828,020 3,541,917 4,133,414 6,508,795 4,243,607 Total primary government program revenues 10,631,748 14,498,291 13,189,069 14,993,858 17,098,649 Net (Expense)/Revenue Governmental activities (3,559,228) (4,533,904) (4,619,284) (5,455,495) (4,907,418) Business-type activities (422,636) (155,874)17,788 2,283,100 (512,615) Total primary government net expense$ (3,981,864)$(4,689,778)$(4,601,496)$ (3,172,395)$ (5,420,033) 133 CITY OF ANDOVER, MINNESOTA CHANGES IN NET ASSETSTable 2 Last Five Fiscal Years(Continued) (accrual basis of accounting) 20032004200520062007 General Revenues and Other Changes in Net Assets Governmental activities: Taxes General property taxes5,682,498$ 6,260,772$ 7,066,852$ 8,084,559$ 8,897,755$ Tax increment collections 1,140,040 1,186,396 1,285,195 1,562,131 1,661,204 Unrestricted grants and contributions 158,694 141,870 86,906 77,642 486,626 Unrestricted investment earnings 568,042 681,563 690,648 1,019,304 1,967,583 Gain on sale of capital assets 591,063 1,817,938 251,504 219,910 191,735 Transfers (6,426,181) (1,735,251) (438,426) (704,042) (714,577) Total governmental activities 1,714,156 8,353,288 8,942,679 10,259,504 12,490,326 Business-type activities: Unrestricted investment earnings (94,931) 7,895 47,620 87,376 337,378 Gain on sale of capital assets 6,854 5,900 - - - Transfers 6,426,181 1,735,251 438,426 704,042 714,577 Total business-type activities 6,331,250 1,750,000 486,046 797,318 1,051,955 Total primary government 8,045,406 10,103,288 9,428,725 11,056,822 13,542,281 Change in Net Assets Governmental activities (1,845,072) 3,819,384 4,323,395 4,804,009 7,582,908 Business-type activities 5,908,614 1,594,126 503,834 3,080,418 539,340 Total primary government$ 4,063,542$ 5,413,510$ 4,827,229$ 7,884,427$ 8,122,248 Note: The City began to report accrual information when it implemented GASB 34 in 2002. 134 CITY OF ANDOVER, MINNESOTA FUND BALANCES - GOVERNMENTAL FUNDSTable 3 Last Five Fiscal Years (modified accrual basis of accounting) 20032004200520062007 General Fund Reserved$87,766$85,586$126,320$144,496$208,216 Unreserved2,505,2613,216,9793,076,1573,248,3173,682,244 Total general fund2,593,0273,302,5653,202,4773,392,8133,890,460 All Other Governmental Funds Reserved for: Special revenue funds-35,78358,57046,84912,457 (1)(2) 21,359,062 Debt service funds1,567,3655,934,3461,872,59911,342,527 Capital project funds609,3397,293,6901,335,858633,078735,141 Unreserved reported in: Designated: Special revenue funds1,207,5371,927,3811,262,8821,569,7921,685,045 Capital project funds14,698,49515,213,11015,018,31714,433,93412,011,083 Undesignated: Special revenue funds18,08924,1481,487(323,404)(480,592) Debt service funds(9,706)--- - Capital project funds(1,008,104)(230,160)(491,849)(54,174)(55,945) Total all other governmental funds17,083,01530,198,29819,057,86427,648,60235,266,251 Total governmental funds$19,676,042$33,500,863$22,260,341$31,041,415$39,156,711 (1) Note:In 2006, the EDA issued $10,000,000 of Public Facility Lease Revenue Refunding Bonds to refund a portion of the 2004 EDA's $19,580,000 Public Facility Lease Revenue Bonds, Series 2004. (2) In 2007, the EDA issued $6,865,000 of Public Facility Lease Revenue Refunding Bonds to refund a portion of the 2004 EDA's $19,580,000 Public Facility Lease Revenue Bonds, Series 2004. 135 CITY OF ANDOVER, MINNESOTA CHANGES IN FUND BALANCES - GOVERNMENTAL FUNDSTable 4 Last Five Fiscal Years (modified accrual basis of accounting) 20032004200520062007 Revenues General property taxes$ 5,671,277$ 6,272,762$ 7,033,613$ 8,057,592$ 8,833,249 Tax increment collections 1,136,574 1,193,467 1,285,639 1,546,394 1,659,222 Licences and permits 551,385 674,008 724,436 598,094 475,893 Intergovernmental 890,705 1,755,041 2,663,683 2,661,726 1,644,914 Special assessments 5,121,636 4,243,328 2,045,969 1,289,590 3,342,039 Charges for services 863,794 1,389,245 1,692,316 1,770,156 2,035,735 Fines 68,686 79,450 90,530 91,490 101,445 Investment income 563,824 678,308 684,173 1,014,801 1,962,379 Miscellaneous Park dedication fees 357,483 842,042 286,316 626,567 113,013 Connection charges 1,044,752 1,720,520 1,311,426 372,133 829,624 Other 392,752 658,037 578,389 395,789 621,798 Total Revenues 16,662,868 19,506,208 18,396,490 18,424,332 21,619,311 Expenditures General government 2,181,354 2,171,248 2,349,965 2,343,332 2,399,297 Public safety 2,631,991 2,915,958 3,093,298 3,268,236 3,580,240 Public works 3,136,081 4,944,489 3,650,351 2,817,475 3,491,353 Sanitation 80,901 26,732 -- - Parks and recreation 613,078 1,315,100 1,309,987 1,599,885 1,825,706 Recycling 114,784 114,052116,50690,590 94,669 Economic development 471,172 918,451 426,708 626,103 2,265,605 Unallocated 25,865 21,992 9,798 8,454 6,915 Capital outlay 2,610,333 1,420,387 1,616,709 987,075 2,803,485 Debt service Principal 6,124,000 6,839,000 8,487,000 5,254,000 3,275,000 Interest 1,276,057 1,063,363 2,042,003 1,683,599 2,089,857 Other 31,436 94,869 13,226 253,134 167,187 Construction/acquisition costs 3,513,115 12,154,653 11,146,387 4,579,910 360,742 Total expenditures 22,810,167 34,000,294 34,261,938 23,511,793 22,360,056 Excess (deficiency) of revenues over expenses(6,147,299) (14,494,086) (15,865,448) (5,087,461) (740,745) Other Financing Sources (Uses) Transfers in 1,328,909 1,076,000 224,000 522,000 578,925 Transfers out (485,170) (739,438) - (167,424) (57,671) Bonds issued 6,904,000 21,280,000 4,210,000 2,910,000 760,000 Refunding bonds issued - 6,450,000 - 10,000,000 6,865,000 Payment to refunded bonds escrow agent - (2,145,864) - - - Bond premium5,18823,438--3,401 Bond discount(3,169)(497,883)(28,961)-- Proceeds from the sale of capital assets841,906 2,872,654 219,887 603,959 706,386 Total other financing sources (uses) 8,591,664 28,318,907 4,624,926 13,868,535 8,856,041 Net change in fund balances$ 2,444,365$ 13,824,821$(11,240,522)$ 8,781,074$ 8,115,296 Debt service as a percentage of noncapital expenditures44.54%39.15%49.04%40.07%28.82% 136 CITY OF ANDOVER, MINNESOTA ASSESSED AND ESTIMATED ACTUAL VALUE OF TAXABLE PROPERTYTable 5 Last Ten Fiscal Years Real PropertyPersonal PropertyTotalTotalNet Tax Capacity EstimatedNet TaxEstimatedNet TaxEstimatedNet TaxDirectas a Percentage YearMarket ValueCapacityMarket ValueCapacityMarket ValueCapacityTax Rateof Market Value 1998$ 947,942,300n/a$ 16,095,000n/a$ 964,037,300$13,887,78621.824%n/a 19991,051,879,200 n/a 17,547,300n/a 1,069,426,500 14,605,63323.508%n/a 20001,171,553,600 $15,690,055 18,139,600 1,189,693,200 16,305,88522.735%1.37% $ 615,830 20011,354,146,000 18,348,662 18,285,500 1,372,431,500 18,969,45922.736%1.38% 6 20,797 20021,539,835,500 15,336,075 17,999,800 1,557,835,300 15,695,61533.511%1.01% 3 59,540 20031,886,169,900 17,549,064 20,202,300 1,906,372,200 17,951,90433.376%0.94% 4 02,840 20042,059,947,400 20,142,088 20,761,100 2,080,708,500 20,556,10431.584%0.99% 4 14,016 20052,321,605,300 23,027,376 21,718,900 2,343,324,200 23,461,04531.414%1.00% 4 33,669 20062,603,704,500 26,204,279 22,003,500 2,625,708,000 26,643,63531.556%1.01% 4 39,356 20072,853,152,300 28,897,916 21,998,500 2,875,150,800 29,337,16231.003%1.02% 4 39,246 Source : Anoka County Property Tax Division 137 CITY OF ANDOVER, MINNESOTA PROPERTY TAX RATES - PER $1,000 OF ASSESSED TAX CAPACITY VALUE Table 6 DIRECT AND OVERLAPPING GOVERNMENTS Years 1999 through 2008 TaxesDirectOverlapping Governments PayableCity (1)SchoolCountyOtherTotalTotal 1999 23.508 57.095 32.265 2.472 91.832 115.340 2000 22.735 55.589 30.861 3.134 89.584 112.319 2001 22.736 50.230 28.859 2.850 81.939 104.675 2002 33.511 29.070 37.976 3.745 70.791 104.302 2003 33.376 27.802 37.714 3.755 69.271 102.647 2004 31.584 21.218 35.340 3.482 60.040 91.624 2005 31.414 21.492 33.080 4.021 58.593 90.007 2006 31.556 20.046 32.096 3.755 55.897 87.453 2007 31.003 19.337 30.675 3.671 53.683 84.686 2008 31.414 16.962 31.041 4.604 52.607 84.021 Source : Anoka County Property Tax Division Note : (1) Includes the Lower Rum River Watershed 138 CITY OF ANDOVER, MINNESOTA PROPERTY TAX LEVIES AND COLLECTIONSTable 7 Last Four Fiscal Years Collected Within the Fiscal Year of Levy TotalMarket ValueCollections InTotal Collections to Date TaxTaxHomesteadTotalPercentageSubsequentPercentage YearLevyLevyCreditCollectedof LevyYearsAmountof Levy 20046,781,700$ $ 6,184,626$ *6,242,56057,934$ 92.05%56,875$ $ 6,299,43592.89% 20057,556,813 6,973,307 *6,986,48613,179 92.45%79,399 7,065,88593.50% 20068,550,919 7,977,279 *7,978,9791,700 93.31%79,450 8,058,42894.24% 20079,316,427 8,738,606 410,519 9,149,12598.20%Not Available * Included in the total tax levy is $470,001 of market value homestead credit (MVHC) that the City will not be receiving. Due to State legislative actions to deal with the State budget deficit, the MVHC program was significantly reduced for the City of Andover. 139 CITY OF ANDOVER, MINNESOTA PRINCIPAL TAXPAYERSTable 8 Current Year and Eleven Years Ago 20071997 NetPercentage ofNetPercentage of TaxTotal CityTaxTotal City TaxpayersCapacityRankTax CapacityCapacityRankTax Capacity Connexus Energy$217,87210.73%$364,4622.03% 1 Target Corporation212,31220.71%- - - Presbyterian Homes of Andover163,79030.55%- - - Andover Limited Partnership158,55440.53%228,8231.27% 2 Minnegasco, Inc.140,11850.47%137,0380.76% 3 116 LLC132,63060.44%- - - Andover Station LLC103,28070.35%- - - Great River Energy101,28680.34%57,7400.32% 7 Grey Oaks Inc.69,93990.23%- - - Rademacher Family Ltd Partnership66,016100.22%- - - Individual - Residential--76,4810.43% 4 Xcel Energy--75,4680.42% 5 Minnesota Pipe Line Company--63,6160.35% 6 Individual - Restaurant--49,2890.27% 8 MN Interstate Pipeline--46,0970.26% 9 Kottke Bus Service, Inc.--41,4990.23% 10 Total$1,365,7974.57%$1,140,5136.35% Net Tax Capacity$29,875,415$17,951,904 Source: Anoka County Property Tax Division 140 CITY OF ANDOVER, MINNESOTA ESTIMATED MARKET VALUES AND NEW CONSTRUCTION Table 9 Last Ten Fiscal Years Estimated Market ValuesNew Construction CommercialCommercial / IndustrialResidential / YeaIndustrial (1)ResidentialTotalPermitsValuePermitsValue r 1998$ 68,591,800$ 895,445,500$964,037,300$$53,742,133 1012,625,960 4 48 1999 73,940,400 995,486,1001,069,426,50047,763,200 51,404,084 4 11 2000 82,616,300 1,107,076,9001,189,693,20046,322,000 1412,672,448 3 42 2001 95,215,200 1,277,216,3001,372,431,50043,378,128 821,086,481 2 85 2002107,671,600 1,450,163,7001,557,835,30031,848,000 1910,616,851 2 18 2003127,728,400 1,778,643,8001,906,372,2004,764,04628,973,300 13 1 82 2004144,629,100 1,936,079,4002,080,708,50036,224,546 1619,926,817 2 51 2005168,684,200 2,174,640,0002,343,324,2006,571,67134,309,393 20 2 26 2006191,931,800 2,433,776,2002,625,708,00025,236,120 81,791,896 1 53 2007211,760,900 2,663,389,9002,875,150,800 92,403,831 9 118,347,873 Note : (1) also includes agricultural, public utility, railroad operating property, and personal property 141 CITY OF ANDOVER, MINNESOTA SPECIAL ASSESSMENT LEVIES AND COLLECTIONSTable 10 Last Ten Fiscal Years TotalDelinquent CollectionsTaxes CurrentCurrentPercent ofDelinquentTotalas a Percent ofOutstandingas a Percent of AssessmentsAssessmentsAssessmentsAssessmentAssessmentCurrentDelinquentCurrent YearDue (1)CollectedCollectedCollectionsCollectionsAssessments DueAssessmentsAssessments Due 84.81%$ 19,78788.47%$ 72,34213.38% 1998$ 5 40,783$ 4 58,655$ 4 78,442 93.96% 38,568102.12% 71,48915.13% 1999 4 72,647 4 44,080 4 82,648 98.06% 36,374106.46% 15,8713.66% 2000 4 33,242 4 24,854 4 61,228 94.95% 5,93396.32% 26,2646.08% 2001 4 32,207 4 10,380 4 16,313 93.38% 5,69495.11% 37,40411.37% 2002 3 28,831 3 07,051 3 12,745 98.03% 5,91799.14% 49,3299.25% 2003 5 33,340 5 22,851 5 28,768 98.39% 7,921102.51% 15,1577.88% 2004 1 92,373 1 89,279 1 97,200 98.34% 4,002100.58% 22,21712.45% 2005 1 78,434 1 75,471 1 79,473 85.41% 4,79087.53% 51,72122.95% 2006 2 25,365 1 92,477 1 97,267 87.14% 12,46094.75% 76,42046.65% 2007 1 63,817 1 42,750 1 55,210 Note : (1) Only includes assessments certified to Anoka County. 142 CITY OF ANDOVER, MINNESOTA RATIO OF NET BONDED DEBTTable 11 TO ASSESSED VALUE AND NET BONDED DEBT PER CAPITA Last Ten Fiscal Years General Bonded Debt Outstanding (2) GrossLess DebtNetPercentageNet Bonded FiscalEstimatedBondedServiceBondedof EstimatedDebt YearPopulation (1)Market ValueDebtFundDebtMarket ValuePer Capita 1998 23,213$ 964,037,300$ 2,670,000$ (104,235)$ 2,565,7650.27% $ 1 10.53 1999 24,358 1,069,426,500 3,500,000 (123,675) 3,376,3250.32% 1 38.61 2000 26,588 1,189,693,200 3,280,000 (48,001) 3,231,9990.27% 1 21.56 2001 27,446 1,372,431,500 4,210,000 (94,728) 4,115,2720.30% 1 49.94 2002 28,664 1,557,835,300 3,680,000 (112,848) 3,567,1520.23% 1 24.45 2003 28,939 1,906,372,200 3,710,000 (88,875) 3,621,1250.19% 1 25.13 2004 29,262 2,080,708,500 24,236,000 (815,322) 23,420,678*1.13% 8 00.38 2005 30,080 2,343,324,500 24,389,000 (1,041,140) 23,347,8601.00% 7 76.19 2006 30,222 2,625,708,000 33,850,000 (10,739,510) 23,110,4900.88% 7 64.69 2007 30,500 2,875,150,800 40,880,000 (17,822,418) 23,057,5820.80% 7 55.99 Notes: (1) Source: Metropolitan Council (2) Only includes debt supported by tax levy. * 2004 is the start of the 2004 EDA Public Facility Revenue Bonds of which approximately half of the annual debt service payments will come from a lease with the YMCA. 143 CITY OF ANDOVER, MINNESOTA COMPUTATION OF DIRECT AND OVERLAPPING DEBT Table 12 December 31, 2007 Gross General ObligationPercentageNet Amount Bonded DebtApplicableApplicable Outstandingto Cityto City Direct: City of Andover40,880,000$ (1)100.0000%40,880,000$ Overlapping: Anoka County$ 110,050,000(2)6.3457%6,983,423 ISD No. 11 Anoka-Hennepin 154,980,485(2)12.8671%19,941,473 ISD No. 15 St. Francis 48,810,000(2)5.7323%2,797,939 Metropolitan Council 181,150,000(2)0.6725%1,218,158 Total Overlapping Debt 30,940,993 Total Overlapping and Direct Debt$ 71,820,993 Notes: (1) Only includes debt supported by tax levy. (2) Information obtained from Anoka County. 144 CITY OF ANDOVER, MINNESOTA COMPUTATION OF LEGAL DEBT MARGINTable 13 Last Five Fiscal Years 20032004200520062007 Estimated Taxable Market Value1,719,429,400$ $ 1,966,284,300$ 2,244,286,800$ 2,543,591,200$ 2,800,462,600 Debt limitation (2% of estimated market value) 34,388,588 39,325,686 44,885,736 50,871,824 56,009,252 Debt applicable to limit: Total bonded debt 38,405,000 56,941,000 52,344,000 59,665,000 70,240,000 Less: Nonapplicable debt G.O. water revenue bonds (9,780,000) (9,470,000) (9,150,000) (8,815,000) (15,040,000) Special assessment bonds (1,255,000) - (3,560,000) (3,560,000) (3,560,000) Tax increment bonds (9,815,000) (13,215,000) (7,065,000) (4,715,000) (4,010,000) Permanent improvement revolving bonds (11,375,000) (7,680,000) (5,975,000) (6,660,000) (4,835,000) State aid bonds (2,470,000) (2,340,000) (2,205,000) (2,065,000) (1,915,000) Less: Cash and investments in related debt service funds (88,875) (815,322) (1,041,140) (10,739,510) (17,822,418) Total debt applicable to limitation 3,621,125 23,420,678 23,347,860 23,110,490 23,057,582 Legal debt margin$ 30,767,463$ 15,905,008$ 21,537,876$ 27,761,334$ 32,951,670 Total debt applicable to the limit as a percentage of debt limit10.53%59.56%52.02%45.43%41.17% 145 CITY OF ANDOVER, MINNESOTA PLEDGED-REVENUE COVERAGETable 14 Last Five Fiscal Years 2002 G.O. Water Revenue Bonds Water Enterprise Fund Less:Net FiscalOperatingOperatingTransfersAvailableDebt Service YearRevenuesExpenses (1)In (2)RevenuePrincipalInterestCoverage 2003$1,904,968$1,339,225$565,743$-$216,501 $ - 2.61 20041,723,0681,492,307739,438970,199310,000429,438 1.31 20051,510,1191,111,874398,245320,000421,393 - 0.54 20061,768,3881,139,500167,474796,362335,000411,720 1.07 20072,025,4521,264,37057,671818,753345,000502,685 0.97 2004 EDA Public Facility Lease Revenue Bonds (3) Community Center Special Revenue FundDebt Service Less:NetGeneral FiscalOperatingOperatingAvailableProperty TaxDebt Service YearRevenueExpensesRevenueRevenuePrincipalInterestCoverage 2005$522,839$589,900$(67,061)$748,376$-$1,194,167 0.57 2006741,241748,146(6,905)800,349185,000964,102 0.69 2007876,136799,90976,227844,123185,000959,731 0.80 Special Assessment and Permanent Improvement Revolving Bonds Special FiscalAssessmentDebt Service YearCollectionsPrincipalInterestCoverage 2003$5,121,636$3,070,000$426,3751.46 20044,243,3282,210,000283,6571.70 20052,045,9691,705,000192,1531.08 20061,289,5901,765,000289,1740.63 20073,342,0391,825,000314,1521.56 Tax Increment Financing Bonds Tax FiscalIncrementDebt Service YearRevenuePrincipal (4)InterestCoverage 2003$991,980$2,165,000$565,4730.36 20041,072,852675,000450,1390.95 20051,160,1901,975,000419,2200.48 20061,414,2542,350,000193,0450.56 20071,474,219705,000120,5451.79 Notes:Details regarding the City's outstanding debt can be found in the notes to the financial statements. (1) Operating expenses includes transfers out because the administrative allocation and replacement reserve transfer is built into the user fees. Operating expenses does not include interest and depreciation. (2) The transfer in is included because a portion of the trunk connection charge associated with adding additional users to the water system is designated to compensate prior years capital investment in water utility infrastructure and the treatment plant. (3) Half of the facility financed by these bonds is leased to the Greater Minneapolis YMCA, their lease payments start in 2008. Future YMCA lease payments will significantly reduce the City's obligation on debt service payments. (4) Net of crossover refundings. 146 CITY OF ANDOVER, MINNESOTA OUTSTANDING DEBT BY TYPETable 15 Last Five Fiscal Years 20032004200520062007 City of Andover's Outstanding Debt Governmental activities G.O. revenue bonds$ 2,045,000$ 19,580,000$ 19,580,000$ 29,395,000$ 36,075,000 Special assessment bonds 1,255,000 - 3,560,000 3,560,000 3,560,000 Tax increment bonds 9,815,000 13,215,000 7,065,000 4,715,000 4,010,000 Certificates of indebtedness 1,665,000 766,000 699,000 580,000 1,280,000 Capital improvement bonds - 3,890,000 4,110,000 3,875,000 3,525,000 Permanent improvement revolving bonds 11,375,000 7,680,000 5,975,000 6,660,000 4,835,000 State aid bonds 2,470,000 2,340,000 2,205,000 2,065,000 1,915,000 Compensated absences 347,534 359,355 410,402 459,299 509,851 Total governmental activities28,972,534 47,830,355 43,604,402 51,309,299 55,709,851 Business-type activities G.O. revenue bonds 9,780,000 9,470,000 9,150,000 8,815,000 15,040,000 Compensated absences 58,967 65,234 66,816 74,675 90,228 Total business-type activities9,838,967 9,535,234 9,216,816 8,889,675 15,130,228 Total outstanding debt$ 38,811,501$ 57,365,589$ 52,821,218$ 60,198,974$ 70,840,079 Total outstanding debt as a percentage of personal income5.34%7.74%6.41%7.06%8.07% Total outstanding debt per capita$ 1,341$ 1,960$ 1,756$ 1,992$ 2,323 147 CITY OF ANDOVER, MINNESOT A DEMOGRAPHIC AND ECONOMIC STATISTICSTable 16 Last Five Years City of AndoverAnoka County PersonalPersonalPer CapitaUnemployment YearPopulation (1)Income (2)Population (3)Income (2)Income (3)Percentage $ 726,687,229$7,808,491,4494.8% 2003 2 8,939 310,959$ 2 5,111 741,235,7228,024,303,5184.5% 2004 2 9,262 316,778 2 5,331 824,041,6008,788,398,1853.8% 2005 3 0,080 320,803 2 7,395 852,769,6419,227,051,0343.9% 2006 3 0,222 327,005 2 8,217 886,432,3439,627,412,7794.2% 2007 3 0,500 331,256 2 9,063 Notes: (1) Estimates from Metropolitan Council (2) The personal income is calculated by taking the per capita income of Anoka County and multiplying it by the population for both the City and County. (3) Information from U.S. Census Bureau 148 CITY OF ANDOVER, MINNESOTA PRINCIPAL EMPLOYERSTable 17 Previous Year and Ten Years Ago (1) 1997 2006 PercentagePercentage of Total Cityof Total City TaxpayerEmployeesRankEmploymentEmployeesRankEmployment Anoka Hennepin I.S.D. No. 1163933.0%26.8% 1 2 66 1 Anoka County Highway & Parks Department 35018.1%11.1% 2 1 10 4 Kottkes' Bus Service, Inc. 20010.3%19.2% 3 1 90 2 Target 1829.4% 4 - - - Columbia Park Medical Group - Andover 1155.9% 5 - - - Festival Foods 1025.3%12.1% 6 1 20 3 City of Andover 924.8% 7 - - - Meadow Creek Christian School 924.8%7.6% 8 7 5 6 Tanners Steakhouse & Bar 834.3% 9 - - - Farmstead at Andover 804.1% 1 0 - - - Merwin Drug Company -8.7% - - 8 6 5 POV's Sports Bar & Grill -5.5% - - 5 5 7 Ed Fields & Sons, Inc. -5.0% - - 5 0 8 City of Andover -4.0% - - 4 0 9 Total 1,935100.0%100.0% 9 92 Source : Minnesota Department of Employment and Economic Development (1) No updated information available for 2007. 149 CITY OF ANDOVER, MINNESOTA FULL TIME EQUIVALENT EMPLOYEESTable 18 CITY GOVERNMENT EMPLOYEES BY FUNCTION/PROGRAM Last Five Fiscal Years Function/Program20032004200520062007 Governmental Administration 1 .40 1 .34 1 .47 1 .30 1 .55 Human resources 0 .06 0 .06 0 .06 0 .07 0 .05 City clerk 1 .91 1 .84 1 .84 1 .84 1 .90 Elections 0 .03 0 .10 0 .10 0 .10 0 .10 Financial administration 3 .80 3 .72 2 .99 2 .85 2 .60 Information systems 1 .01 1 .01 0 .91 0 .91 0 .91 Planning and zoning 3 .57 3 .57 4 .57 4 .75 4 .75 Engineering 4 .69 4 .57 4 .67 4 .57 4 .78 EDA general 1 .38 1 .38 1 .21 0 .70 0 .70 LRRWMO 0 .31 0 .31 0 .21 0 .21 0 .21 Risk management 0 .13 0 .13 0 .13 0 .10 0 .10 Public Safety Fire 3 .16 3 .31 3 .25 3 .10 3 .10 Protective inspection 6 .56 5 .91 5 .58 6 .03 6 .05 Civil defense 0 .05 0 .05 0 .05 0 .05 0 .05 Public Works Streets & Highways 4 .61 5 .02 5 .35 6 .12 6 .20 Snow and ice 3.49 3 .48 3 .85 3 .92 3 .27 Street signs1.44 1 .26 1 .17 1 .20 1 .35 Tree preservation 0 .12 0 .12 - - - Weed control 0 .17 0 .17 - - - Forestry - 0 .10 0 .10 0 .10 - ROW management / utility 0 .70 0 .75 0 .85 0 .85 0 .60 Water 5 .46 4 .93 5 .04 5 .57 4 .78 Sewer 2 .83 2 .77 3 .15 2 .97 3 .18 Storm sewer 1 .24 1 .60 1 .60 2 .01 1 .95 Central equipment 2 .90 2 .90 2 .91 2 .92 2 .96 Park & Recreation Park & recreation 6 .00 6 .66 6 .85 7 .33 7 .05 Community center - - 2 .10 2 .12 2 .12 Recycling 1 .33 1 .21 1 .26 0 .93 0 .88 5 8.16 5 8.55 6 1.37 6 2.12 6 1.50 Source: City Finance Department Note : Employees are allocated to various departments based on the functions that they perform. 150 CITY OF ANDOVER, MINNESOTA OPERATING INDICATORS BY FUNCTION/PROGRAMTable 19 Last Five Years Function/Program20032004200520062007 General government n/a Registered votersn/a 16,094n/a 1 6,813 Voters registering election dayn/a n/a 2,000n/a 2,200 Number of precinctsn/an/an/a 1 0 1 0 Public safety Police Number of calls for services 1 2,375 12,675 1 2,861 11,516 1 2,150 Number of traffic citations 1,645 1,795 1 ,795 1 ,673 1,710 Number of patrol hours 28,776 30,856 30,856 3 0,856 30,240 Fire Fire responses 4 10 420 3 25 443 3 40 Emergency medical responses 5 90 580 5 94 645 5 08 Protective inspections Inspections 5,272 6 ,396 6,536 8 ,128 3,999 Residential permits 1 82 251 2 26 153 8 3 Other permits 1,140 1 ,162 2,473 2 ,481 1,471 Public works Streets and highways Asphalt streets maintained (miles) 1 76 176 1 78 187 1 98 Gravel roads maintained (miles) 8 8 8 8 7 Cul-de-sacs and dead ends maintained 3 09 310 3 20 329 3 30 Parks and recreation Number of City parks 5 8 58 5 8 63 6 5 Total acreage mowed 2 68 272 2 65 200 2 17 Ballfields maintained 25 2 9 26 24 2 7 Number of playgrounds 3 7 3 6 3 3 35 3 5 Soccer fields maintained 2 2 22 2 0 16 1 6 Trail maintained (miles) 2 3 24 2 6 23 2 6 Community center bookings (hrs) Fieldhousen/a n/a 1,405 7 ,450 8,514 Ice arenan/a n/a 2,002 2 ,405 2,497 Water New connections 2 00 220 2 47 197 6 3 Total customers 5,190 5 ,410 5,657 5 ,854 5,917 Annual consumption (thousands of gallons) 9 17,918 8 62,265 856,671 1,014,251 1 ,046,789 Sanitary Sewer New connections 1 39 198 2 29 129 1 20 Total customers 6,017 6 ,291 6,528 6 ,657 6,777 Storm Sewer Total customers 9 ,140 9 ,446 9,516 9 ,744 9,785 Storm sewer lines maintained (miles) 3 2 39 4 3 51 6 5 Source : Various City Departments 151 CITY OF ANDOVER, MINNESOTA CAPITAL ASSET STATISTICS BY FUNCTION/PROGRAMTable 20 Last Five Years Function/Program20032004200520062007 Public Safety Fire Stations 3 3 3 3 3 Fire vehicles 19 1 8 18 1 8 20 Protective inspections Vehicles 4 4 3 3 3 Public Works Streets and Highways Streets (miles) 184 1 84 186 1 87 198 Street lights 6 ,959 7,505 7 ,551 1,187 1 ,202 Traffic signals 16 1 8 20 2 2 22 Parks and Recreation Parks 58 5 8 58 6 3 65 Ball Fields 35 3 5 25 2 4 27 Soccer Fields 22 2 5 16 1 6 16 Playgrounds 37 3 6 33 3 5 35 Trails (miles) 23 2 4 26 2 3 26 Community centers - - 1 1 1 Water Water treatment plants 1 1 1 1 1 Storage facilities 3 3 3 3 2 Water main (miles) 1 1 79 1 07 108 Connections 5,160 5,300 5 ,450 5,854 5 ,917 Sanitary sewer Sewer main (miles)n/an/a 91 82 90 Connections 5 ,981 6,100 6 ,250 6,657 6 ,777 Number of lift stations 7 7 8 9 9 Storm sewer Storm sewer lines (miles) 32 3 9 43 5 1 65 152