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Home My WebLink About2010 CAFRCOMPREHENSIVE ANNUAL FINANCIAL REPORT FOR THE YEAR ENDED DECEMBER 31, 2010 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, 2010 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 1080 Schedule of Funding Progress - Other Post Employment Benefits PlanStatement 1182 Notes to Required Supplementary Information: Budgets83 Modified Approach for City Streets and Trails Infrastructure Capital Assets83 Combining and Individual Fund Statements and Schedules: Nonmajor Governmental Funds: Combining Balance Sheet - Nonmajor Governmental FundsStatement 1287 Combining Statement of Revenues, Expenditures and Changes in Fund Balances - Nonmajor Governmental FundsStatement 1388 CITY OF ANDOVER, MINNESOTA TABLE OF CONTENTS Page ReferenceNo. Nonmajor Special Revenue Funds: Subcombining Balance Sheet - Nonmajor Special Revenue FundsStatement 1490 Subcombining Statement of Revenues, Expenditures and Changes in Fund Balances - Nonmajor Special Revenue FundsStatement 1592 Nonmajor Debt Service Funds: Subcombining Balance Sheet - Nonmajor Debt Service FundsStatement 1696 Subcombining Statement of Revenues, Expenditures and Changes in Fund Balances - Nonmajor Debt Service FundsStatement 1798 Nonmajor Capital Projects Funds: Subcombining Balance Sheet - Nonmajor Capital Project FundsStatement 18101 Subcombining Statement of Revenues, Expenditures and Changes in Fund Balances - Nonmajor Capital Project FundsStatement 19102 Special Revenue Funds: Schedules of Revenues, Expenditures and Changes in Fund Balances - Budget and Actual: EDA GeneralStatement 20104 Community Development Block GrantStatement 21105 Community CenterStatement 22106 Drainage and MappingStatement 23107 LRRWMOStatement 24108 ForestryStatement 25109 Trail and TransportationStatement 26110 Right-of-Way Management/UtilityStatement 27111 Capital Equipment ReserveStatement 28112 Charitable GamblingStatement 29113 Construction Seal CoatingStatement 30114 Internal Service Funds: Combining Statement of Net Assets - Internal Service FundsStatement 31116 Combining Statement of Revenues, Expenses, and Changes in Fund Net Assets - Internal Service FundsStatement 32117 Combining Statement of Cash Flows - Internal Service FundsStatement 33118 Agency Funds: Combining Statement of Net Assets - Fiduciary FundsStatement 34120 Combining Statement of Changes in Assets and Liabilities - Fiduciary FundsStatement 35121 Other 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 2001 through 2010Table 6138 Property Tax Levies and Collections - Last Five Fiscal YearsTable 7139 Principal Taxpayers - Current Year and Ten 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 - Current Year and Ten 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 25, 2011 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, 2010, the table of contents, the public The Financial Section officials, organizational 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 Statistical Section supplemental information. 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 31,400. 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 y: Public Safet PoliceProtective inspectionAnimal control Fire protectionCivil defense Public Works: Streets and highwaysStreet signsTraffic signals Snow and ice removalCentral equipment maintenanceWater maintenance Street lighting Sanitation: Storm sewersSanitary 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 Moderate population growth is expected to continue in 2010 and 2011, with an estimated population of 32,000 by 2011. 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 2010. 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 86% of the total in 2010. They are general property taxes at 78%, and charges for services at 8%. 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 $590,000 in aid to Andover, that loss in aid was originally intended to be for two years (2003 & 2004) but that loss was extended to include years 2005 and 2006. The state allowed cities the ability to levy up to 60% of the lost 2003 aid in 2004. Again, in 2008, 2009 and 2010, the State of Minnesota significantly reduced MVHC to help deal with the state budget deficit. LGA, HACA and MVHC for 1998 through 2010 are as follows: YearLGAHACAMVHCTotal 1998$ 122,651 $ 3 78,975$ -$ 501,626 1999 111,145 462,796 - 573,941 2 490,237 2000119,75 - 609,989 2001 119,758 489,991 - 609,749 2002 119,827 683,581 4 -563,75 2003* - 65,632 65,632 - 2004* - 57,934 57,934 - 2005* - 13,179 13,179 - 2006 - * - 1,700 1,700 2007 - 410,519 -410,519 2008* - 4 198,214 -198,21 2009* - 54,629 54,629 - 2010 - * - 3,872 3,872 *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 were lifted from 2005 to 2008, but reinstated for 2009, 2010 and 2011. 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%1.701.65%1.00% % Over $500,0001.85%1.701.65%1.25% % Commercial / Industrial: Value to $150,0002.70%2.45%2.40%1.50% Value above $150,004.00%3.503.40%2.00% 0% Tax Capacity 199819992000 & 20012002 & 2003 Taxable Market Value: Residential Homestead: 100,000$ 1,175$ 1,163 $ $ 1 ,213$ 1,000 150,000 2 ,138 2,025 1,988 1,500 200,000 3 ,063 2,875 2,813 2,000 250,000 3 ,988 3,725 3,638 2,500 300,000 4 ,913 4,575 4,463 3,000 Commercial / Industrial: $ 550,000$ 20,050$ 17,675$ 17,200 $ 10,250 750,000 24,675 24,000 14,250 28,050 1,000,000 33,425 32,50 19,250 0 38,050 2,500,000 85,925 83,500 49,250 98,050 The City’s General Fund receives a substantial amount of revenue from licenses and permits. The past ten years are shown below: RevenuesChange 2001720,71$n/a 2 2002588,965 $(131,747) 2003551,385 (37,580) 2004674,008 122,623 2005724,43 6 50,428 2006598,09 4 (126,342) 2007475,893 (122,201) 2008525,339 49,446 2009291,903 (233,436) 2010329,901 37,998 The $131,747 decrease in revenue for 2002 is due to reclassification of plan check fees ($263,535), which were previously recorded as license and permit fee and are now recorded as a charges for services revenue. Revenue from residential building continued to modestly increase through 2002 but declined in 2003, as a reduced number of new residential lots were being added to the overall lot inventory. License and permit fees increased substantially in 2004 as the number of residential lots available and built on has increased and the value of new construction is on the rise. The decrease in 2006 and 2007 is largely due to a slowing economy and home building market. A slight increase in 2008 is primarily due to the commercial activity taking place but the decrease in 2009 is due to the continued downturn in the economy, especially the construction industry. In 2010, the home building market showed signs of improvement and accounted for the increase in permit revenue. 5 To the Honorable Mayor and City Council City of Andover, Minnesota The City’s General Fund also receives a considerable amount of revenue from charges for services. The past ten years are shown below: RevenuesChange 2001722,69$n/a 0 2002689,427 $ (33,263) 2003647,813 (41,614) 2004798,795 150,982 2005933,365 134,570 2006780,273 (153,092) 20071,121,642 341,369 2008772,43 0 (349,212) 2009701,289 (71,141) 2010755,18 4 53,895 The City analyzes user fees every year as part of the budget process and makes adjustments where appropriate. Revenue from charges for services totaled $1,121,642 in 2007 and this increase can be linked to the number of public improvement projects being finalized and assessed in 2007. 2008 proved to be better than expected due to some residential plat activity taking place but the decrease in 2009 was expected due to the struggling economy. In 2010, the home building market showed signs of improvement and accounted for the increase in plan review revenue. 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 FirType of Business / ProductEmployees m ISD No 11 Anoka-HennepinElementary and secondary education550 Anoka County Parks and Highway DepartmentsCounty government and services369 Kottkes' Bus Service, Inc.Bus transportation200 TargeRetail167 t Meadow Creek Christian SchoolPrivate education K-12127 Columbia Park Medical GroupMedical clinic116 Farmstead at AndoverSenior housing and assisted living facilities94 City of AndoveMunicipal government and service84 rs McDonald'sRestaurant75 MAJOR INITIATIVES FOR THE YEAR. The City has many accomplishments to report for 2010. The following list is a summary of some of the major initiatives completed throughout the year. 1)Ongoing implementation of a single-family rental housing license program to provide property owners/landlords with educational materials and checklists on how to inspect and maintain the exterior of the property, a list of potential ordinance violations that may occur with a rental property, and an exterior inspection of the building and grounds with city staff. This program was authorized by the Andover City Council in 2009 and there are 228 rental licenses issued as of November 2010. 2)Three street reconstruction projects were completed in 2010. The first was a Bunker Lake Boulevard frontage road reconstruction and realignment project using tax increment funds and special assessments. The second was a street 6 To the Honorable Mayor and City Council City of Andover, Minnesota reconstruction that took place in the south half of the Woodland Meadows development. The project was funded by tax levy and special assessments. The third project was a Community Development Block Grant (CDBG) project th reconstructing 138 Avenue and installing a city water main. In the projects, the existing bituminous was reclaimed, concrete curb was added in the development, storm sewer structures were replaced or added, and a new bituminous surface was laid. 3)In 2010, the City welcomed the new Anoka County Law Enforcement Center and Tri-County Forensic Laboratory. This project located all non-correctional staffing from the Sheriff’s department under one roof and is now providing forensic services to Anoka, Sherburne and Wright counties. 4)A Water Treatment Plant expansion consisting of plate settlers and a building expansion to house the equipment was completed and became fully operational in 2010. The plate settlers will improve the operations of the water treatment plant and make water more readily available for consumption during peak usage times. 5)The Sustainable Landscape Project consisted of beautifying main corridors through Andover continued in 2010. These roadway improvements have residential properties backing up to them with various types of fencing materials, colors and heights. With the help of city staff, Boy Scouts and residents, self-sustainable shrubs were planted along this corridor to provide a consistent backdrop as people traveled along this roadway through Andover. 6)The City of Andover was eligible for funding in 2009 under the Edward Byrne Memorial Justice Assistance Grant (JAG) Formula Program. Throughout 2010, the City utilized these funds to focus on “crime prevention” programs including expanding our Crime Watch program, acquiring administrative software to help with city code enforcement and for equipment to help with traffic control issues. 7)The City of Andover participated in the State of Minnesota Statewide Health Improvement Program (SHIP). Through this program, the City is making a commitment to support and encourage employees to be more physically active and to improve the overall health of the workforce. 8)In 2010, the City of Andover received The Most Prolific Recycling Program in 2009 award from the Anoka County Board of Commissioners. Andover residents had the highest recycling rate per person (250.25 pounds) for all materials of any Anoka County municipality. 9)As the City reaches the decertification dates of TIF District 1-1 and 1-2, City Administration continues to work with the Economic Development Authority (EDA) to assure that the decertification, district goals and final close out reports for the TIF Districts goes smoothly. Starting in 2009, a TIF Plan modification to address that fact that a number of years ago, in the late 1980s and throughout the 1990s, the budgets that were adopted for the TIF Districts were under the true “pooling” concept where the budget was not allocated by district but by project. Subsequent to the adoption of those budgets, the Office of the State Auditor (OSA) is requiring the allocation by district instead of by project. Since the new OSA requirement, there has been some confusion as to the most correct way to allocate the budgets. As a result, the City undertook a process for a formal adoption of a budget modification to allocate and confirm the budgets according to the new OSA requirement. Along with that and throughout 2010, Administration conducted a number of meetings with the EDA to layout projects that will help achieve the TIF District’s goals. 10)The City Council has adopted a goal to make a concerted effort toward promoting the usage of solar and wind power, including the identification of appropriate sites and installations. An ordinance to allow wind turbines in the City was adopted in early 2010, and staff is currently working on solar installation options on City facilities. 11)The successful hosting of the City’s Annual Business Appreciation Day to recognize and build awareness of the local business community and strengthen relationships with this important element of the Andover community. This event was coordinated through the Community Development Department. 12)The City Open Space Commission, appointed to assist in managing the successful $2,000,000 open space referendum ballot in 2006, updated a detailed natural amenity inventory, held informational meetings with residents and made recommendations to the City Council on land that should be purchased as permanent open space in the community. The first purchase took place in December 2009 and a second purchase in October 2010. 13)The City's Comprehensive Annual Financial Report (CAFR) for the year ended December 31, 2009 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 eighth consecutive year receiving the award and it is anticipated that the City’s CAFR for the year ended December 31, 2010 will also achieve this award. 7 To the Honorable Mayor and City Council City of Andover, Minnesota 14)For the ninth year in a row, the City of Andover was awarded the Government Finance Officers Association Distinguished Budget Presentation Award for the City's 2010 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. 15)The City continues to make significant progress after the implementation of new hardware and software to start the process of digital imaging documents retained by the City. The imaging project has helped the City reduce staffing through data storage retrieval efficiencies and eliminated the need for City Hall office expansion. 16)The City continues to utilize updates to our financial management software to improve reporting and operating efficiencies. These updates continue to yield reduced personnel costs and more timely reports. Residential Development th New residential development was limited to Woodland 5 Addition, a 12 single family lot project. It is important to note that the City continues to have a reasonable lot supply for a variety of housing options including single-family lots, townhomes and condominium units. Commercial Industrial Development New commercial construction did actually occur in Andover in 2010. The Kwik Trip convenience store/gas station and car wash was constructed in 2010 with a grand opening date scheduled for early January 2011. 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. RELEVANT FINANCIAL POLICIES The City has a policy regarding General Fund reserve balances. The City plans for a designated fund balance in the General Fund equivalent to 6-months of the current year’s budgeted expenditures to provide working capital between semi-annual property tax settlements. Since the property tax settlements are received by the City in July and December, the City needs sufficient cash reserves to avoid short-term borrowing to finance operations. The City also reserves fund balances for prepaid items, inventories and other legal obligations. The City may also designate a portion of fund balance for special purposes. The primary goal of the City’s investment policy is to ensure the safety of the principal invested. Cash temporarily idle during the year is invested in certificates of deposit, commercial paper, and obligations of the U.S. Treasury and government agencies. Cash balances from all City funds are pooled into an investment fund and investment income is distributed on a pro-rata basis at the end of each quarter. Extended maturities are utilized to take advantage of higher yields but staggered in a way to meet projected liquidity needs. Capital financing for major improvements is provided through improvement bonds, general obligation bonds, tax increment bonds, or revenue bonds. Depending on the project, special assessments may be levied upon properties to share in the cost of the improvement project. The special assessments are collected over a period of time and are used to help satisfy the improvement bond debt or reimburse the fund used to finance the project. The City Council has also adopted financial management policies in order to allow for the planning of adequate funding of services desired by the public, to manage City finances wisely, and to carefully account for public funds. These policies are reviewed each year when the annual budget is adopted. The financial management policies included: operating budget policies; revenue policies; accounting, auditing and financial reporting policies; investment policies; debt policies; capital improvement policies; and risk management policies. The City Council has adopted a comprehensive set of internal control procedures. 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: safeguarding assets against loss from unauthorized use or disposition, reliability of financial records, and convenience of access for preparing financial statements and maintaining 8 9 CITY OF ANDOVER, MINNESOTA ORGANIZATION December 31, 2010 OfficeNameTerm MayorMichael GamacheJanuary 4, 2011 Council MemberDon JacobsonJanuary 4, 2011 Council MemberMichael KnightJanuary 2, 2013 Council MemberSheri BukkilaJanuary 2, 2013 Council MemberJulie TrudeJanuary 4, 2011 City Administrator / City ClerkJames DickinsonAppointed Community Development DirectorWill NeumeisterAppointed Director of Public Works / City EngineerDavid BerkowitzAppointed Finance ManagerLee BrezinkaAppointed Building OfficialDon OlsonAppointed Fire ChiefDan WinkelAppointed 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, 2010 As management of the City of Andover, we offer readers of the City’s financial statements this narrative overview and analysis of the financial activities of the City for the fiscal year ended December 31, 2010. 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 exceeded its liabilities at the close of the most recent fiscal year by $155,695,405 (Net assets). Of this amount, $25,984,034 (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 $2,790,488, primarily due to the budget savings and the pay-down of additional debt. As of the close of the current fiscal year, the City’s governmental funds reported combined ending fund balances of $40,219,454. SpecialDebtCapital GeneralRevenueServiceProjectsTotals Reserved$206,666$ 73,830$ 741,57818,443,082$$19,465,156 Designated4,904,2391,554,981 14,775,282-21,234,502 Undesignated-(419,062)-(61,142)(480,204) $5,110,905$1,209,749$ 15,455,71818,443,082$ 40,219,454$ The City’s total long-term liabilities decreased by $5,424,981 during the current fiscal year, primarily due to the scheduled debt service payments made in 2010, the pay-down of additional debt and crossover refundings. BeginningEnding BalanceAdditionsReductionsBalance Governmental activities: Bonds payable$49,845,000$3,140,000$ 44,796,000(8,189,000)$ Other post employment benefits67,36143,917(11,895)99,383 Compensated absences541,606323,461(293,170)571,897 Total governmental activities50,453,9673,507,378(8,494,065)45,467,280 Business-type activities: Bonds payable15,330,000-(455,000)14,875,000 Other post employment benefits12,8307,750(3,042)17,538 Compensated absences120,54653,133(41,135)132,544 Total business-type activities15,463,37660,883(499,177)15,025,082 Total City long-term liabilities65,917,343$$3,568,261$ 60,492,362(8,993,242)$ Overview of the Financial Statements The discussion and analysis are intended to serve as an introduction to the City’s basic financial statements. The City’s basic financial statements comprise three components: 1) government-wide financial statements, 2) fund financial statements, and 3) notes to the financial statements. This report also contains other supplementary information in addition to the basic financial statements themselves. Government-wide financial statements . The government-wide financial statements are designed to provide readers with a broad overview of the City’s finances, in a manner similar to a private-sector business. The statement of net assets presents information on all of the City’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 is improving or deteriorating. 16 CITY OF ANDOVER, MINNESOTA MANAGEMENT’S DISCUSSION AND ANALYSIS December 31, 2010 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, revenues and expenses are reported in this statement for some items that will only result in cash flows in future fiscal periods (e.g. uncollected taxes and earned but unused vacation leave). Both of the government-wide financial statements distinguish functions of the City that are principally supported by taxes and intergovernmental revenues (governmental activities) from other functions that are intended to recover all or a significant portion of their costs through user fees and charges (business-type activities). The governmental activities of the City include general government, public safety, public works, sanitation, parks and recreation, recycling and economic development. The business-type activities of the City 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, like other state and local governments, uses fund accounting to ensure and demonstrate compliance with finance-related legal requirements. All of the funds of the City can be divided into three categories: governmental funds, proprietary funds, and fiduciary funds. Governmental funds . Governmental funds are used to account for essentially the same functions reported as governmental activities in the government-wide financial statements. However, unlike the government-wide financial statements, governmental fund financial statements focus on near-term inflows and outflows of spend-able resources, as well as on balances of spendable resources available at the end of the fiscal year. Such information may be useful in evaluating a government’s near-term 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 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 adopts an annual appropriated budget for its general and special revenue funds. A budgetary comparison statement has been provided for those funds to demonstrate compliance with this budget. 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 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 City. Fiduciary funds are not reflected in the government-wide financial statements because the resources of those funds are not available to support the City’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, 2010 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 78 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 85 through 121 of this report. Government-wide Financial Analysis As noted earlier, net assets may serve over time as a useful indicator of a government's financial position. In the case of the City, assets exceeded liabilities by $155,695,405 at the close of the most recent fiscal year. The largest portion of the City’s net assets ($123,346,657 or 79 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 uses these capital assets to provide services to citizens; consequently, these assets are not available for future spending. Although the City's investment in its capital assets is reported net of related debt, it should be noted that the resources needed to repay this debt must be provided from other sources, since the capital assets themselves cannot be used to liquidate these liabilities. CITY OF ANDOVER’S NET ASSETS Governmental ActivitiesBusiness-Type ActivitiesTotals 200920102009201020092010 Current and other assets47,775,309$$ 46,331,209$ 11,971,24612,286,615$ 60,061,924$$58,302,455 Capital assets115,419,872 115,137,60745,699,96244,445,050161,119,834159,582,657 Total assets163,195,181 161,468,81657,986,57756,416,296221,181,758217,885,112 Long-term liabilities outstanding50,453,967 45,467,28015,463,37615,025,08265,917,34360,492,362 Other liabilities1,651,643 1,359,003707,855338,3422,359,4981,697,345 Total liabilities52,105,610 46,826,28316,171,23115,363,42468,276,84162,189,707 Net assets: Invested in capital assets, net of related debt83,394,872 87,206,60736,939,96236,140,050120,334,834123,346,657 Restricted8,252,691 6,364,714 -8,252,6916,364,714 - Unrestricted19,442,008 21,071,2124,875,3844,912,82224,317,39225,984,034 Total net assets$ 114,642,533111,089,571$ 41,815,346$ 41,052,872$ 152,904,917$ 155,695,405$ A portion of the City's net assets represents resources that are subject to external restrictions on how they may be used. The remaining balance of unrestricted net assets ($25,984,034) may be used to meet the City's ongoing obligations to citizens and creditors. At the end of the current fiscal year, the City is able to report positive balances in all three categories of net assets, both for the City 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, 2010 Government-wide Activities Governmental activities increased the City's net assets by $3,552,962 and business-type activities decreased net assets by $762,474. Key elements of the activities are as follows: City of Andover's Changes in Net Assets Governmental ActivitiesBusiness-Type ActivitiesTotal 200920102009201020092010 Revenues: Program revenues: Charges for services2,923,000$ $2,955,592$ 4,421,065$4,380,245$ 7,344,065$7,335,837 Operating grants and contributions 966,6351,214,066 - 9,380 966,6351,223,446 Capital grants and contributions1,631,929 1,461,834 793,589 - 2,425,5181,461,834 General revenues: Property taxes10,175,51910,336,536 10,175,519- 10,336,536 - Tax increment 1,930,6692,074,589 - 1,930,6692,074,589 - Grants and contributions not restricted to specific programs 131,08484,875 - 131,08484,875 - Unrestricted investments earnings 1,032,5071,114,451 373,893317,796 1,406,4001,432,247 Total revenues18,791,34319,241,943 5,588,5474,707,421 43,621,83329,537,911 Expenses: General government 2,413,9162,398,007 - 2,413,9162,398,007 - 4,237,4014,157,050 - 4,237,4014,157,050 Public safety - Public works 3,776,3673,445,403 - 3,776,3673,445,403 - Parks and recreation 2,880,5953,447,730 - 2,880,5953,447,730 - Recycling 86,949108,785 - 86,949108,785 - Economic development481,632 654,961 - 481,632654,961 - Interest on long-term debt2,146,960 1,936,731 - 2,146,9601,936,731 - Water - - 2,594,7132,585,469 2,594,7132,585,469 Sewer - - 1,831,5051,915,072 1,831,5051,915,072 Storm sewer - - 536,619532,168 536,619532,168 Total expenses16,023,82016,148,667 4,962,8375,032,709 20,986,65721,181,376 Increase (decrease) in net assets before gain on the sale of capital assets and transfers 2,767,5233,093,276 625,710(325,288) 3,393,2332,767,988 Gain on the sale of capital assets 6,14422,500 - 6,14422,500 - Transfers 421,887437,186 (421,887)(437,186) - - Increase in net assets 3,195,5543,552,962 203,823(762,474) 3,399,3772,790,488 Net assets - beginning107,894,017111,089,57141,611,52341,815,346149,505,540152,904,917 Net assets - ending$ 114,642,533111,089,571$ 41,815,346$$41,052,872$ 155,695,405152,904,917$ 19 CITY OF ANDOVER, MINNESOTA MANAGEMENT’S DISCUSSION AND ANALYSIS December 31, 2010 Governmental Activities Following are specific graphs that provide comparisons of the governmental activities revenues and expenses: Governmental Activities - Revenues Grants and contributions Unrestricted investments Charges for services not restricted for specific earnings 15.3% programs 5.8% 0.4% Gain (loss) on the sale of capital assets Tax increment 0.1% 10.8% Capital grants and contributions 7.6% Operating grants and contributions 6.3% Property taxes 53.7% Governmental Activities - Expenses General government Interest on long-term 14.8% debt 12.0% Economic Recycling development 0.7% 4.1% Public safety Parks and recreation 25.7% 21.3% Public works 21.3% 20 CITY OF ANDOVER, MINNESOTA MANAGEMENT’S DISCUSSION AND ANALYSIS December 31, 2010 Business-Type Activities Business-type activities decreased net assets by $762,474. Below are graphs showing the business-type activities revenue and expense comparisons: Business-Type Activities - Revenues Unrestricted investments earnings 6.8% Operating grants and contributions 0.2% Charges for services 93.0% Business-Type Activities - Expenses Storm sewer 11% Water 51% Sewer 38% 21 CITY OF ANDOVER, MINNESOTA MANAGEMENT’S DISCUSSION AND ANALYSIS December 31, 2010 Financial Analysis of the Government's Funds Governmental Funds . The focus of the City’s governmental funds is to provide information on near-term inflows, outflows, and balances of spendable resources. Such information is useful in assessing the City’s financing requirements. In particular, 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's governmental funds reported combined ending fund balances of $40,219,454. Approximately 51 percent of this total amount ($20,754,298) constitutes unreserved fund balance. The remainder of the fund balance ($19,465,156) is reserved because it has already been committed 1) to provide for prepaid items ($101,000), 2) to provide for inventory ($121,870), 3) to provide for economic development ($6,783), 4) to pay debt service ($18,443,082) and 5) bond proceeds specified for a project ($792,421). Major Funds The general fund increased by $782,493 in 2010, which was a $223,582 change from the final budget. The final budget showed a decrease in fund balance of $55,500. The increase in fund balance is due to various departments under-spending and revenues exceeding budgets with an increase in the number of homes being built. The water and sewer trunk capital projects funds fluctuate based on development activity and whether there is any cost sharing for pipe over- sizing, extra depth, etc. In 2010, the water trunk fund was reimbursed for the refurbishing of a water tower. The sewer trunk fund continues to receive funds from the sewer enterprise fund to be set aside for future replacements. The road and bridge capital projects fund increased by $659,590 primarily due to the collection of state aid construction dollars for prior year projects. The tax increment capital projects fund decreased by $1,482,918 due to operating transfers for debt service payments ($2,020,816), project reimbursement ($124,238), and the use of pre-1997 tax increment to payoff a special assessment.. Nonmajor Funds The capital equipment reserve special revenue fund decreased by $165,133 due to the operating transfer of $242,000 to the water trunk capital projects fund for the reimbursement of the water tower refurbishing. The 2006B G.O. equipment certificates debt service fund decreased by $236,177 with the final payment being made. The 2001B G.O. state aid bonds debt service fund decreased by $209,451 with the final payment being made. The 2009A G.O. state aid refunding bonds debt service fund decreased by $688,323 due to the refunding of the 2001B state aid bonds on February 1, 2010. The 2005A G.O. improvement bonds debt service fund decreased by $681,707 due to its annual debt service obligations and the calling of additional debt. The fluctuation of fund balance for the equipment certificate capital projects funds depends on when the bonds are issued and when the purchases are actually made. The 2010A G.O. open space referendum bonds capital projects fund increased by $1,351,124 due the issuance of bonds in 2010. Proprietary funds . The City’s proprietary funds provide the same type of information found in the government-wide financial statements, but in more detail. The unrestricted net assets in the respective proprietary funds are enterprise funds of $4,878,447 (water $1,853,694, sewer $2,799,476 and storm sewer $225,277) and internal service funds of $413,815. The enterprise funds had a net decrease in net assets in 2010 of $795,689 (water ($223,499), sewer ($383,923) and storm sewer ($188,267)). Internal service funds had a net increase in net assets of $130,480. Capital Asset and Debt Administration Capital assets . The City’s investment in capital assets for its governmental and business type activities as of December 31, 2010, amounts to $159,582,657 (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, 2010 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 2010, 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, 2010, the City’s street and trail system was rated at an Overall Condition Index (OCI) of 83, 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 $1,457,082 on street and trail maintenance for the year ending December 31, 2010. These expenditures delayed deterioration; however, the overall condition of the system increased slightly (81 OCI to an 83 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 20041,000,000 1,847,06682 20051,000,000 1,655,71583 20061,150,000 1,228,98182 20071,150,000 1,256,43381 20081,150,000 2,244,71380 20091,150,000 1,666,21681 20101,150,000 1,457,08283 23 CITY OF ANDOVER, MINNESOTA MANAGEMENT’S DISCUSSION AND ANALYSIS December 31, 2010 Primary Government BeginningEnding BalanceAdditionsDeletionsBalance Governmental activities: Land and improvements$8,997,071$322,628$ -$ 9,319,699 Streets and trails79,547,692 79,547,692- - Construction in progress-51,002 - 51,002 Buildings and improvements26,657,459163,387 26,820,846- Furniture and equipment411,116 - 411,116 - Machinery and equipment6,763,730450,554(101,724) 7,112,560 Other park improvements5,127,386371,299 (29,482) 5,469,203 Total capital assets 127,504,4541,358,870(131,206)128,732,118 Less accumulated depreciation for: Buildings and improvements5,347,136896,994 - 6,244,130 Furniture and equipment203,50853,999 - 257,507 Machinery and equipment4,832,203412,871 (96,507) 5,148,567 Other park improvements1,701,735268,779 (26,207) 1,944,307 Total accumulated depreciation12,084,5821,632,643(122,714) 13,594,511 Governmental activities capital assets - net115,419,872(273,773) (8,492)115,137,607 Business-type activities: Land and improvements730,243 - 730,243 - Construction in progress776,911 -(776,911) - Buildings and improvements14,810,9831,035,882 15,846,865- Furniture and equipment61,390 - 61,390 - Machinery and equipment1,251,188 - 1,251,188 - Collection and distribution49,276,189101,153 49,377,342- Total capital assets being depreciated66,906,9041,137,035(776,911) 67,267,028 Less accumulated depreciation for: Buildings and improvements5,118,451538,662 - 5,657,113 Furniture and equipment25,7047,809 - 33,513 Machinery and equipment912,31874,539 - 986,857 Collection and distribution15,150,469994,026 16,144,495- Total accumulated depreciation21,206,9421,615,036 22,821,978- Business-type activities capital assets - net45,699,962(478,001)(776,911) 44,445,050 Total capital assets$161,119,834$(751,774)$(785,403)$159,582,657 Additional information on the City’s capital assets can be found in Note 5. Long-term debt . At the end of the current fiscal year, the City had total long-term debt outstanding of $60,375,441, a decrease of $5,461,711 from 2009. Revenue bonds ($35,090,000) were used to finance the construction of the community center and the refunding of portions of the community center bonds. General obligation revenue bonds ($14,875,000) were used to finance the construction of, and addition to, the water treatment plant and the refunding of portions of the water treatment plant bonds. Special assessment bonds ($600,000) financed improvement projects within the City and are assessed to the benefiting properties. Tax increment bonds ($1,735,000) financed the City’s economic development plan within tax increment districts. Certificates of indebtedness ($781,000) financed capital equipment purchases. Capital improvement bonds ($2,495,000) 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 24 CITY OF ANDOVER, MINNESOTA MANAGEMENT’S DISCUSSION AND ANALYSIS December 31, 2010 ($1,480,000) financed improvement projects within the City and are assessed to the benefiting properties. State aid bonds ($955,000) were used to finance Municipal State Aid (MSA) eligible road projects and the refunding of portions of the state aid bonds and the referendum bonds ($1,660,000) were used to finance land acquisitions for the preservation of open space. Additional long-term debt in the amount of $704,441 is for compensated absences. City of Andover’s Outstanding Debt GovernmentalBusiness-Type ActivitiesActivitiesTotal Bonds payable: Revenue bonds$ -35,090,000$ 35,090,000$ G.O. revenue bonds 14,875,000-14,875,000 Special assessment bonds 600,000 -600,000 Tax increment bonds1,735,000 -1,735,000 Certificates of indebtedness 781,000 -781,000 Capital improvement bonds2,495,000 -2,495,000 Permanent improvement revolving bonds1,480,000 -1,480,000 State aid bonds 955,000 -955,000 Referendum bonds1,660,000 -1,660,000 Total bonds payable44,796,00014,875,00059,671,000 Compensated absences 571,897 132,544704,441 Total$ 15,007,54445,367,897$ 60,375,441$ The City maintains an AA+ rating with a stable outlook from Standard and Poor’s. State statutes limit the amount of general obligation debt a Minnesota city may issue to 3% of total Estimated Taxable Market Value. The current debt limitation for the City is $81,315,444. Only $22,257,257 of the City's outstanding debt is counted within the statutory limitation. Additional information on the City’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, 2010 With Comparative Actual Amounts For The Year Ended December 31, 2009 Primary Government GovernmentBusiness-TypeTotals ActivitiesActivities20102009 Assets: Cash and investments 22,727,570$$4,188,237$26,915,807$26,746,280 Cash and investments with escrow agent17,238,1966,491,51023,729,70624,629,839 Accrued interest376,725124,452 501,177499,026 Due from other governmental units36,3455,587 41,93241,071 Accounts receivable - net218,3011,034,516 1,252,8171,225,888 Prepaid items102,75019,750 122,500135,304 Property taxes receivable: Unremitted107,367- 107,367139,326 Delinquent441,904- 441,904312,988 Special assessments receivable: Unremitted29,7591,778 31,5374,228 Delinquent146,27172,589 218,860202,999 Deferred3,187,639- 3,187,6394,393,638 Notes receivable1,515,512- 1,515,5121,525,773 Inventories - at cost202,87032,827 235,697205,564 Capital assets - net Nondepreciable88,918,393730,24389,648,63690,051,917 Depreciable26,219,21443,714,80769,934,02171,067,917 Total assets161,468,81656,416,296217,885,112221,181,758 Liabilities: Interfund payable34,375(34,375) -- Accounts payable205,03829,245 234,283223,094 Contracts payable40,23919,238 59,477537,025 Developer advances20,000- 20,00020,000 Deposits payable55,7392,234 57,97353,935 Due to other governmental units28,55524,119 52,674129,313 Salaries payable153,46227,287 180,749166,594 Unearned revenue22,581- 22,58159,227 Accrued interest payable799,014270,594 1,069,6081,170,310 Other post employment benefits: Due in more than one year99,38317,538 116,92180,191 Compensated absences: Due within one year85,78519,882 105,66766,215 Due in more than one year486,112112,662 598,774595,937 Bonds/notes payable: Due within one year4,100,000475,000 4,575,0007,164,000 Due in more than one year40,696,00014,400,00055,096,00058,011,000 Total liabilities46,826,28315,363,42462,189,70768,276,841 Net assets: Invested in capital assets, net of related debt87,206,60736,140,050123,346,657120,334,834 Restricted for: Debt service1,265,441- 1,265,4412,078,837 Capital improvements792,421-792,421427,017 Tax increment purposes4,306,852- 4,306,8525,746,837 Unrestricted21,071,2124,912,82225,984,03424,317,392 Total net assets$114,642,533$41,052,872$155,695,405$152,904,917 The accompanying notes are an integral part of these financial statements. 29 CITY OF ANDOVER, MINNESOTA STATEMENT OF ACTIVITIES For The Year Ended December 31, 2010 With Comparative Actual Amounts For The Year Ended December 31, 2009 Program Revenues ChargesOperatingCapital ForGrants andGrants and ExpensesServicesContributionsContributions Functions/Programs Primary government: Government activities: General government 2,398,007$ $454,419$9,439$- Public safety 4,157,050479,516311,944- Public works 3,445,403337,360641,834 1,186,558 Parks and recreation 3,447,7301,432,672 -174,123 Recycling108,78540,50457,536- Economic development654,961211,121145,561101,153 Interest on long-term debt 1,936,731-47,752- Total government activities 16,148,6672,955,5921,214,066 1,461,834 Business-type activities: Water 2,585,4692,077,305 -- Sewer 1,915,0721,964,117 -- Storm sewer532,168338,8239,380- Total business-type activities 5,032,7094,380,2459,380- Total primary government$ 21,181,376$7,335,837$1,223,446$ 1,461,834 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 ActivitiesActivities20102009 $(1,934,149)$-$(1,934,149)$(1,920,494) (3,365,590)-(3,365,590)(3,518,414) (1,279,651)-(1,279,651)(1,336,619) (1,840,935)-(1,840,935)(1,282,673) (10,745)- (10,745)(1,003) (197,126)- (197,126)(296,093) (1,888,979)-(1,888,979)(2,146,960) (10,517,175)-(10,517,175)(10,502,256) -(508,164) (508,164)(128,297) -49,045 49,045417,293 -(183,965) (183,965)(37,179) -(643,084) (643,084)251,817 (10,517,175)(643,084)(11,160,259)(10,250,439) General revenues: General property taxes10,336,536-10,336,53610,175,519 Tax increment collections2,074,589-2,074,5891,930,669 Grants and contributions not restricted to specific programs84,875- 84,875131,084 Unrestricted investment earnings1,114,451317,7961,432,2471,406,400 Gain on sale of capital assets22,500- 22,5006,144 Transfers437,186(437,186) -- Total general revenues, gain on sale of capital assets and transfers14,070,137(119,390)13,950,74713,649,816 Change in net assets3,552,962(762,474)2,790,4883,399,377 Net assets - beginning111,089,57141,815,346152,904,917149,505,540 Net assets - ending$114,642,533$41,052,872$155,695,405$152,904,917 31 CITY OF ANDOVER, MINNESOTA BALANCE SHEET GOVERNMENTAL FUNDS December 31, 2010 With Comparative Actual Amounts For The Year Ended December 31, 2009 2006 EDA Public 2007 EDA Public Facility Lease Facility Lease Revenue Revenue Road & Refunding BondsRefunding BondsWater TrunkSewer TrunkBridge GeneralDSDSCPCPCP FFFFF Assets: Cash and investments$4,391,570$413$413$2,872,670$3,491,132$3,850,678 Cash and investments with escrow agent-9,759,0596,704,233- - - Accrued interest13,225176,331121,22511,20414,28713,276 Due from other governmental units23,96912,376- - - - Accounts receivable - net73,133- - - - - Interfund receivable629,00062,000- - - - Prepaid items92,750- - - - - Property taxes receivable: Unremitted63,277-8,006 - - - Delinquent242,461-33,653 - - - Special assessments receivable: Unremitted41725,3648713,107 - - Delinquent14,530-8,921 - - - Deferred-455,58767,8051,037,350 - - Notes receivable--30,761 - - - Inventories - at cost113,916- - - - - Total assets5,658,2489,935,8036,825,8713,439,2013,574,0954,985,752 Liabilities and Fund Balances Liabilities: Interfund payable-7,0007,000- - - Accounts payable126,825230230-1,777 - Contracts payable19,546-14,253 - - - Developer advances-- - - - - Deposits payable12,835--5,7415,741 - Due to other governmental units6,4943003004,285 - - Salaries payable124,652- - - - - Deferred revenue256,991455,58767,8051,110,685 - - Total liabilities547,3437,2307,230461,62873,8461,131,000 Fund balances: Reserved for: Prepaid items92,750- - - - - Inventory113,916- - - - - Economic development-- - - - - Debt service-9,928,5736,818,641- - - Projects-- - - - - Unreserved reported in: Designated: General fund4,904,239- - - - - Special revenue funds---- - - Capital projects funds-2,977,5733,500,2493,854,752 - - Undesignated: Special revenue funds-- - - - - Capital projects funds-- - - - - Total fund balances5,110,9059,928,5736,818,6412,977,5733,500,2493,854,752 Total liabilities and fund balances$5,658,248$9,935,803$6,825,871$3,439,201$3,574,095$4,985,752 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 and other post employment benefits, 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 IncrementImprovementOtherIntraTotals ProjectsRevolvingGovernmentalActivityGovernmental Funds CPCPFundEliminations20102009 FFs $2,807,459$1,348,619$3,593,907$-$22,356,861$21,961,303 --774,90417,238,19618,137,575 - 8,1095,18912,415375,261372,956 - --36,34533,371 - - --145,168218,301235,237 - --(691,000)- - - --8,250101,000112,054 - 18,066-18,018107,367139,326 - 89,712-76,078441,904312,988 - --29,7591,026 - - -39,07383,747146,271132,568 - -1,290,572336,3253,187,6394,393,638 - 1,415,500-69,2511,515,5121,525,773 - --7,954121,870109,329 - 4,338,8462,683,4535,126,017(691,000)45,876,28647,467,144 --677,000(691,000)- - 3,677-44,917177,656159,962 - --6,44040,239203,439 - 20,000-20,00020,000 - - --31,42255,73951,701 - 8,317-3,37623,072100,294 - --20,567145,219138,480 - 1,386,2121,329,645587,9825,194,9076,305,193 - 1,418,2061,329,6451,371,704(691,000)5,656,8326,979,069 --8,250101,000112,054 - --7,954-121,870109,329 --6,783-6,7839,828 --1,695,86818,443,08220,305,482 - --792,421792,421427,017 - --4,904,2394,120,897 - - --1,554,9811,554,9811,691,625 - 2,920,6401,353,808168,26014,775,28214,839,789 - --(419,062)(419,062)(458,423) - --(61,142)(61,142)(669,523) - 2,920,6401,353,8083,754,31340,219,45440,488,075 - $4,338,846$2,683,453$5,126,017$(691,000)$45,876,286$47,467,144 $40,219,454$40,488,075 115,137,607115,419,872 5,172,3266,245,966 379,440282,175 (46,266,294)(51,346,517) $114,642,533$111,089,571 33 CITY OF ANDOVER, MINNESOTA STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE GOVERNMENTAL FUNDS For The Year Ended December 31, 2010 With Comparative Actual Amounts For The Year Ended December 31, 2009 2006 EDA Public 2007 EDA Public Facility Lease Facility Lease Revenue Revenue kSewer Trunk Refunding Bonds Refunding Bonds Water Trun GeneralDSFDSFCPFCPF Revenues: General property taxes$ 7,191,602$-$-$ -$- Tax increment collections--- -- Licenses and permits 329,901-- -- Intergovernmental 570,097-- 246,714- Special assessments--- 80,72620,803 Charges for services 755,184-- -- Fines 104,780-- -- Investment income 70,368423,075290,817 50,89274,872 Miscellaneous: Park dedication fees--- -- Connection charges--- 40,7667,320 Rent--- -- Other 136,684-- -- Total revenues 9,158,616423,075290,817 419,098102,995 Expenditures: Current: General government 2,224,867-- -- Public safety 3,920,073-- -- Public works 1,466,216-- 166,7817,191 Parks and recreation826,694 -- -- Recycling 109,034-- -- Economic development--- -- Unallocated 24,953-- -- Capital outlay: General government--- -- Public safety--- -- Public works--- -- - Parks and recreation1,216--- Debt service: Principal retirement--- -- Interest-424,228291,982 -- Paying agent fees-2,0002,000 -- Professional services-280280 -- Construction/acquisition costs--- 101,153- Total expenditures 8,573,053426,508294,262 267,9347,191 Revenues over (under) expenditures 585,563(3,433)(3,445) 151,16495,804 Other financing sources (uses): Transfers in 196,930-- 242,000400,000 Transfers out--- (89,191)(130,439) Bonds issued--- -- Refunding bonds issued--- -- Redemption of refunded bonds--- -- Bond premium--- -- Proceeds from the sale of capital assets--- -- Total other financing sources (uses) 196,930-- 152,809269,561 Net increase (decrease) in fund balance 782,493(3,433)(3,445)303,973365,365 9,932,0066,822,086 2,673,6003,134,884 Fund balance - January 14,328,412 Fund balance - December 31$ 5,110,905$9,928,573$6,818,641$ 2,977,573$3,500,249 The accompanying notes are an integral part of these financial statements. 34 Statement 4 xPermanent Ta Road &IncrementImprovementOtherIntraTotals BridgeProjectsRevolvingGovernmentalActivityGovernmental Funds CPFCPFCPFFundsEliminations20102009 $ 984,831$ -$ -$2,090,652$-$ 10,267,085$10,168,143 - 2,015,123 --- 2,015,1231,951,343 - - --- 329,901291,903 838,947 70,910 -262,752- 1,989,4201,654,614 408,865 1,097 1,182,61131,593- 1,725,6951,421,591 - - -849,497- 1,604,6811,579,659 - - --- 104,780110,779 71,595 18,898 18,40288,416- 1,107,3351,029,683 - - -32,649- 32,64941,216 - - --- 48,08620,119 - - -638,037- 638,037637,305 1,692 - -288,410(30,600) 396,186381,548 2,305,930 2,106,028 1,201,0134,282,006(30,600) 20,258,97819,287,903 - - -30,926- 2,255,7932,242,662 - - --- 3,920,0734,015,410 1,402,900- -161,356- 3,204,4443,545,132 - - -1,606,801- 2,433,4951,891,125 - - --- 109,03485,527 - 498,666 -152,311- 650,977477,648 - - --- 24,95319,540 - - -163,387- 163,38735,640 - - -435,103- 435,103299,319 - - --- -176,118 - - -725,175- 726,3911,008,867 - - -5,779,000- 5,779,0003,865,000 -- -1,314,057- 2,030,2672,178,233 - - -3,880- 7,8809,794 - - -21,499-22,05929,471 - --- 101,153- - 1,402,900 498,666 -10,393,495- 21,864,00919,879,486 903,030 1,607,362 1,201,013(6,111,489)(30,600) (1,605,031)(591,583) 254,677 - -5,144,721(5,610,798) 627,530587,530 (498,117) (3,105,780) (1,190,450)(716,612)5,641,398 (89,191)(165,643) - - -1,660,000- 1,660,000385,000 - - -1,480,000- 1,480,000955,000 - - -(2,416,834)- (2,416,834)- - - -31,688- 31,68818,781 - 15,500 -27,717- 43,21712,264 (243,440) (3,090,280) (1,190,450)5,210,68030,600 1,336,4101,792,932 659,590 (1,482,918) 10,563(900,809)- (268,621)1,201,349 3,195,162 4,403,5581,343,2454,655,122-40,488,07539,286,726 $ 3,854,752$ 2,920,640$ 1,353,808$3,754,313$-$ 40,219,454$40,488,075 35 - This page intentionally left blank - 36 CITY OF ANDOVER, MINNESOTA RECONCILIATION OF THE STATEMENT OF REVENUES, Statement 5 EXPENDITURES, AND CHANGES IN FUND BALANCES OF GOVERNMENTAL FUNDS For The Year Ended December 31, 2010 With Comparative Actual Amounts For The Year Ended December 31, 2009 20102009 Amounts reported for governmental activities in the statement of activities (page 35) are different because: Net changes in fund balances - total governmental funds (page 35)$ (268,621)$1,201,349 Governmental funds report capital outlays as expenditures. However, in the statement of activities the cost of those assets is allocated over their estimated useful lives and reported as depreciation expense. This is the amount by which capital outlays exceeded depreciation in the current period. (206,609)(101,524) The net effect of various miscellaneous transactions involving capital assets is to increase (decrease) net assets (i.e., sales, trade-ins, and donations). 25,497371,627 Revenues in the statement of activities that do not provide current financial resources are not reported as revenues in the funds. (1,073,640)(877,131) The issuance of long-term debt (e.g., bonds, leases) provides current financial resources to governmental funds, while the repayment of the principal of long-term debt consumes the current financial resources of governmental funds. Neither transaction, however, has any effect on net assets. This amount is the net effect of these differences in the treatment of long-term debt and related items. 5,049,0002,525,000 Vested post employment benefits are reported in the governmental funds when amounts are aid. The statement of activities reports the benefits earned during the years. This amount (32,022)(31,265) p is the net effect of employee benefits earned and paid during the year. Transfer out of governmental capital assets contributed to Enterprise Funds. (101,153)- Some expenses reported in the statement of activities do not require use of current financial resources and, therefore, are not reported as expenditures in governmental funds. 63,245(5,440) Internal service funds are used by management to charge the cost of equipment maintenance and insurance to individual funds. This amount is the portion of net revenue attributable to governmental activities. 97,265112,938 Change in net assets of governmental activities (page 31)$ 3,552,962$3,195,554 The accompanying notes are an integral part of these financial statements. 37 CITY OF ANDOVER, MINNESOTA STATEMENT OF NET ASSETS PROPRIETARY FUNDS December 31, 2010 With Comparative Actual Amounts For The Year Ended December 31, 2009 WaterSewerStorm Sewer Assets: Current assets: Cash and cash equivalents$ 1,815,413$ 2,216,663$ 156,161 Restricted assets: Cash and cash equivalents 6,491,510 - - Accrued interest 115,973 7,895 584 Due from other governmental units - 5,587 - Accounts receivable - net 348,187 586,187 100,142 Prepaid items 10,000 9,750 - Special assessments receivable: Unremitted 591 1,077 110 Delinquent 24,456 43,162 4,971 Inventories - at cost 32,827 - - Total current assets 8,838,957 2,870,321 261,968 Noncurrent assets: Capital assets: Land 730,243 - - Buildings and structures 15,846,865 - - Machinery and equipment 322,939 517,798 471,841 Distribution and collection system 15,707,302 23,734,262 9,935,778 Construction in progress - - - Total capital assets 32,607,349 24,252,060 10,407,619 Less: Allowance for depreciation (10,627,821) (8,751,257) (3,442,900) Total noncurrent assets 21,979,528 15,500,803 6,964,719 Total assets 30,818,485 18,371,124 7,226,687 Liabilities: Current liabilities: Accounts payable 25,924 1,638 1,683 Contracts payable 11,509 3,242 4,487 Deposits payable 2,234 - - Interest payable 270,594 -- Due to other governmental units 17,254 6,865 - Salaries payable 13,666 10,177 3,444 Bonds payable - due within one year 475,000 - - Compensated absences payable - due within one year 9,5346,2864,062 Total current liabilities 825,715 28,208 13,676 Noncurrent liabilities: Other post employment benefits - due in more than one year 10,523 7,015 - Bonds payable - due in more than one year 14,400,000 - - Compensated absences payable - due in more than one year 54,025 35,622 23,015 Total noncurrent liabilities 14,464,548 42,637 23,015 Total liabilities 15,290,263 70,845 36,691 Net assets: Invested in capital assets, net of related debt 13,674,528 15,500,803 6,964,719 Unrestricted 1,853,694 2,799,476 225,277 Total net assets$15,528,222$18,300,279$ 7,189,996 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 2010200920102009 $ 4,188,237$ 4,542,444$ 370,709$ 242,533 6,491,510 6,492,264 - - 124,452 125,253 1,464 817 5,587 7,700 - - 1,034,516 990,651 - - 19,750 21,500 1,750 1,750 1,778 3,202 - - 72,589 70,431 - - 32,827 33,170 81,000 63,065 11,971,246 12,286,615 454,923 308,165 730,243 730,243 - - 15,846,865 14,810,983 - - 1,312,578 1,312,578 - - 49,377,342 49,276,189 - - - 776,911 - - 67,267,028 66,906,904 - - (22,821,978) (21,206,942) - - 44,445,050 45,699,962 - - 56,416,296 57,986,577 454,923 308,165 29,245 47,466 27,382 15,666 19,238 333,586 - - 2,234 2,234 - - 270,594 277,760 -- 24,119 26,164 5,483 2,855 27,287 21,805 8,243 6,309 475,000 455,000 - - 19,882 12,054 - - 867,599 1,176,069 41,108 24,830 17,538 12,830 - - 14,400,000 14,875,000 - - 112,662 108,492 - - 14,530,200 14,996,322 - - 15,397,799 16,172,391 41,108 24,830 36,140,050 36,939,962 - - 4,878,447 4,874,224 413,815 283,335 $ 41,018,497$ 41,814,186$ 413,815$283,335 $ 41,018,497$ 41,814,186 34,375 1,160 $ 41,052,872$ 41,815,346 39 CITY OF ANDOVER, MINNESOTA STATEMENT OF REVENUES, EXPENSES AND CHANGES IN FUND NET ASSETS PROPRIETARY FUNDS For The Year Ended December 31, 2010 With Comparative Actual Amounts For The Year Ended December 31, 2009 WateSeweStorm Sewe rrr Operating revenues: User charges$2,039,496$1,953,178$338,823 Meters12,208- - Permit fees3,300- - Penalties7,2296,707- Other15,0724,2329,380 Total operating revenues2,077,3051,964,117348,203 Operating expenses: Personal services412,891293,059196,377 Supplies183,94116,54120,254 Other service charges502,338136,83478,422 Disposal charges989,972- - Depreciation869,242500,802244,992 Total operating expenses1,968,4121,937,208540,045 Operating income (loss)108,89326,909(191,842) Nonoperating revenues (expenses): Investment income278,37335,8483,575 Bond premiu- m - - Interest expense(650,859)- - Total nonoperating revenues (expenses)(372,486)35,8483,575 Income (loss) before contributions and transfers(263,593)62,757(188,267) Capital contributions101,153- - Transfers: Transfers in89,191- - Transfers out(150,250)(446,680)- Total transfers(61,059)(446,680)- Change in net assets(223,499)(383,923)(188,267) Net assets - January 115,751,72118,684,202 7,378,263 Net assets - December 31$15,528,222$18,300,279$ 7,189,996 Net changes in net assets reported above Amounts reported for business-type activities in the statement of activities 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 usiness-type activities. b Change in net assets of business-type activities The accompanying notes are an intregral part of these financial statements. 40 Statement 7 Totals Governmental Activities - Intra TotalsInternal Service Funds Activity Eliminations2010200920102009 $ -$ 4,331,497$4,377,504$1,004,447$ 961,722 - 12,20811,058 - - - 3,3002,350 - - - 13,93614,492 - - - 28,68415,66133,527 34,933 - 4,389,6254,421,0651,037,974 996,655 - 902,327927,437361,439 325,777 - 220,736217,036244,669 244,820 (30,600) 686,994687,070308,502 284,772 - 989,972893,462 - - - 1,615,0361,611,005 - - (30,600) 4,415,0654,336,010914,610 855,369 30,600 (25,440)85,055123,364 141,286 - 317,796373,8937,116 2,824 - -1,975 - - - (650,859)(659,974) - - - (333,063)(284,106)7,1162,824 30,600 (358,503)(199,051)130,480 144,110 - 101,153793,589 - - - 89,191165,643- - (30,600) (627,530)(587,530) - - (30,600) (538,339)(421,887) - - - (795,689)172,651130,480 144,110 - 41,814,18641,641,535283,335 139,225 $ -$ 41,018,497$41,814,186$413,815$ 283,335 $ (795,689)$172,651 33,21531,172 $ (762,474)$203,823 41 CITY OF ANDOVER, MINNESOTA STATEMENT OF CASH FLOWS PROPRIETARY FUNDS For The Year Ended December 31, 2010 With Comparative Actual Amounts For The Year Ended December 31, 2009 WaterSewerStorm Sewer Cash flows from operating activities: Receipts from customers and users$ 2,033,996$ 1,968,591$ 344,552 Payment to suppliers (1,016,170) (1,147,612) (97,041) Payment to employees (406,910) (286,163) (187,066) Net cash flows from operating activities 610,916 534,816 60,445 Cash flows from noncapital financing activities: Receipt of advances from other funds - - - Payment of advances to other funds - - - Transfers in 89,191 - - Transfers out (150,250) (446,680) - Net cash flows from noncapital financing activities (61,059) (446,680) - Cash flows from capital and related financing activities: Acquisition of capital assets (258,971) - - Interest paid on debt (658,025) - - Receipt of bonds - - - Receipt of bond premium - - - Payment of bonds (455,000) - - Net cash flows from capital and related financing activities (1,371,996) - - Cash flows from investing activities: Investment income 280,544 34,826 3,227 Net increase in cash and cash equivalents (541,595) 122,962 63,672 Cash and cash equivalents - January 1 8,848,518 2,093,701 92,489 Cash and cash equivalents - December 31$8,306,923$2,216,663$156,161 Reconciliation of operating income to net cash provided (used) by operating activities: Operating income (loss)$ 108,893$ 26,909$ (191,842) Adjustments to reconcile operating income (loss) to net cash flows from operating activities: Depreciation 869,242 500,802 244,992 Changes in assets and liabilities: Decrease (increase) in due from other governmental units - 2,113- Decrease (increase) in accounts receivable (41,800) 791 (2,856) Decrease (increase) in prepaid items - 1,750 - Decrease (increase) in special assessments (1,509) 1,570 (795) Decrease (increase) in inventory 343-- Increase (decrease) in accounts payable (14,974) (4,886) 1,639 Increase (decrease) in contracts payable (313,224) (1,120) (4) Increase (decrease) in deposits payable - - - Increase (decrease) in due to other governmental units (2,036) (9) - Increase (decrease) in salaries payable 3,0501,465 967 Increase (decrease) in other post employment benefits 2,504 2,204 - Increase (decrease) in compensated absences 427 3,227 8,344 Total adjustments 502,023 507,907 252,287 Net cash provided (used) by operating activities$610,916$ 534,816$60,445 Noncash investing, capital and financing activities: Assets contributed to the Enterprise Funds$101,153$ -$- The accompanying notes are an integral part of these financial statements. 42 Statement 8 Totals Governmental Activities - TotalsInternal Service Funds 2010200920102009 $ 4,347,139$ 4,448,850$ 1,037,974$ 996,655 (2,260,823) (1,482,554) (556,762) (531,046) (880,139) (906,688) (359,505) (325,606) 1,206,177 2,059,608 121,707 140,003 - - - (60,000) - - - 60,000 89,191 165,643 - - (596,930) (556,930) - - (507,739) (391,287) - - (258,971) (801,326) - - (658,025) (652,132) - - - 1,025,000 - - - 1,975 - - (455,000) (375,000) - - (1,371,996) (801,483) - - 318,597 374,920 6,469 3,120 (354,961) 1,241,758 128,176 143,123 11,034,708 9,792,950 242,533 99,410 $ 10,679,747$ 11,034,708$370,709$242,533 $ (56,040)$ 54,455$ 123,364$ 141,286 1,615,036 1,611,005 - - 2,113 (94) - - (43,865) 36,917 -- 1,750 (1,500) - - (734) (9,038) - - 343 (4,526) (17,935) 2,385 (18,221) 30,226 11,716 (6,594) (314,348) 319,797 - - - (1,450) - - (2,045) 3,067 2,628 2,755 5,482 1,076 1,934 171 4,708 6,460 - - 11,998 13,213 - - 1,262,217 2,005,153 (1,657) (1,283) $ 1,206,177$ 2,059,608$121,707$140,003 $ 101,153$ 793,589$-$- 43 CITY OF ANDOVER, MINNESOTA STATEMENT OF FIDUCIARY NET ASSETS Statement 9 FIDUCIARY FUNDS Agency Funds December 31, 2010 With Comparative Actual Amounts For The Year Ended December 31, 2009 20102009 Assets: Cash and investments 295,204$ 249,921$ Liabilities: Accounts payable375131 Due to other governments 46- Deposits payable294,783 249,790 Total liabilities$295,204$ 249,921 The accompanying notes are an integral part of these financial statements. 44 CITY OF ANDOVER, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2010 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 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 (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. 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 City considers all revenues, except reimbursement grants, to be available if they are 45 CITY OF ANDOVER, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2010 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 City. The City reports the following major governmental funds: General Fund Theis the City’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 City 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 City 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, 2010 subsequent private-sector guidance for their business-type activities and enterprise funds, subject to this same limitation. The City 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. 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 City’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, 2010 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: LRRWMO$ 39,00032,066$ 6,93$ 4 The expenditures over budget 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. Investments in 2a7, like external investment pools, are also stated at 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, 2010 are planned to be eliminated in 2011. 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. 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 48 CITY OF ANDOVER, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2010 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. 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. 49 CITY OF ANDOVER, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2010 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. Prepaid items are reported using the consumption method and recorded as expenditures/expenses at the time of consumption. L. CAPITAL ASSETS Capital assets, which include property, plant, equipment and infrastructure assets (e.g., roads, bridges, sidewalks, and similar items) and intangible assets such as easements and computer software, are reported in the applicable governmental or business- type activities columns in the government-wide financial statements. Capital assets are defined by the City as assets with an initial, individual cost of more than $5,000 (except for easements which is $10,000) 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, 2010, no interest was capitalized in connection with construction in progress. Accounting and Financial Reporting for Intangible Assets The City implemented GASB Statement No. 51. effective January 1, 2010 which required the City to capitalize and amortize intangible assets. Intangible assets include easements and computer software. Pursuant to GASB Statement 51, in the case of initial capitalization of intangible assets, the City chose to capitalize intangible assets retroactively to 1980, except for permanent easements and internally generated software. The City has already accounted for computer software at historical cost and therefore retroactive reporting was not necessary. The City does not have any temporary easements to record that meet the threshold of $10,000. Property, plant and equipment of the primary government, as well as the component units, are depreciated/amortized using the straight line method over the following estimated useful lives: 50 CITY OF ANDOVER, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2010 AssetsLife Buildins and imrovement10 - 30 ear gpsys Furniture and equipment ( including software)5 - 10 years Machinery and equipment5 - 10 years Other park improvements10 - 30 years Storm sewe50 years r Distribution and collection systems50 years Temporary easements5 - 15 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 2010 of the condition of the streets and trails constructed 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. An 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 - 10Excellent 0 71 - 85Very good 56 - 70Good 41 - 55Fair 26 - 40Poo r 11 - 25Very poo r 0 - 10Substandard 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. 51 CITY OF ANDOVER, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2010 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 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. RECLASSIFICATIONS Certain amounts presented in prior year data have been reclassified in order to be consistent with the current year’s presentation. T. COMPARATIVE TOTALS The basic financial statements and combining and individual fund financial statements and schedules include certain prior-year summarized comparative information in total but not at the level of detail required for a presentation in conformity with generally accepted accounting principles. Accordingly, such information should be read in conjunction with the government’s financial statements for the year ended December 31, 2009, from which the summarized information was derived. U. 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 and other post employment benefits, are not due and payable in the current period and therefore are not reported in the funds.” The details of this ($46,266,294) difference are as follows: 52 CITY OF ANDOVER, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2010 Bonds payable$(44,796,000) Accrued interest payable (799,014) Other post employment benefits (99,383) Compensated absences (571,897) Net adjustment to reduce fund balance - total governmental funds to arrive at net assets - governmental activities$(46,266,294) 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 $379,440 difference are as follows: Internal Service Funds net assets$ 413,815 Net revenue attributable to business-type activities (34,375) Net adjustment to increase fund balance - total governmental funds to arrive at net assets - governmental activitie$ 379,440 s 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 between net changes in fund balances – total governmental funds and changes in net assets of governmental activities 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 ($206,609) difference are as follows: Capital outlay$ 1,324,881 Construction/acquisition costs 101,153 Depreciation expense (1,632,643) Net adjustment to decrease net changes in fund balances - total governmental funds to arrive at changes in net assets of governmental activities$ (206,609) 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 $25,497 difference are as follows: In the statement of activities, only the gain on the sale of capital assets is reported. However, in the governmental funds, the proceeds from the sale increase financial resources. Thus, the change in net assets differs from the change in fund balance by the cost of the capital assets sold.$ (8,492) Donations of capital assets increase net assets in the statement of activities, but do not appear in the governmental funds because they are not financial resources. 33,989 Net adjustment to increase net changes in fund balances - total governmental funds to arrive at changes in net assets of governmental activities.$ 25,497 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 ($1,073,640) difference are as follows: 53 CITY OF ANDOVER, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2010 General property taxes deferred revenue: At December 31, 2009$ (282,740) At December 31, 2010 352,191 Tax increment taxes deferred revenue: (30,247) At December 31, 2009 At December 31, 201089,713 Special assessments deferred revenue: At December 31, 2009 (4,526,206) At December 31, 2010 3,333,910 Notes receivable deferred revenue: At December 31, 2009 (1,406,773) At December 31, 2010 1,396,512 Net adustments to decrease net chanes in fund balances - jg total governmental funds to arrive at changes in net assets of governmental activities$(1,073,640) 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 $5,049,000 difference are as follows: Debt issued or incurred: Issuance of referendum bonds$(1,660,000) Issuance of permanent improvement revolving refunding bonds(1,480,000) Principal repayments: Revenue bonds 405,000 Capital improvement bonds280,00 0 pecial assessment bonds 4,485,000 S Tax increment bonds 780,000 Certificates of indebtedness 639,000 State aid bonds 1,600,000 Net adjustment to increase net changes in fund balances - total governmental funds to arrive at changes in net assets of governmental activitie$ 5,049,00 s0 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 $63,245 difference are as follows: Compensated absences$ (30,291) Accrued interest 93,536 Net adjustment to decrease net changes in fund balances - total governmental funds to arrive at changes in net assets of governmental activities$ 63,245 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 $97,265 difference are as follows: 54 CITY OF ANDOVER, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2010 Internal Service Funds change in net assets$ 130,480 Net revenue attributable to business-type activities (33,215) justment to increase fund balance - total governmental Net ad funds to arrive at net assets - governmental activities97,265$ 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. 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. Custodial Credit Risk – Deposits : Custodial credit risk is the risk that in the event of a bank failure, the City’s deposits may not be returned to it. State statutes require that insurance, surety bonds or collateral protect all City deposits. The market value of collateral pledged must equal 110% of deposits not covered by insurance or bonds. As of December 31, 2010, the bank balance of the City’s deposits was covered by federal depository insurance or covered by perfected collateral pledged and held in the City’s name. The City has no additional deposit policies addressing custodial credit risk. 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 55 CITY OF ANDOVER, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2010 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 $10,000,000; a primary reporting dealer in U.S. government securities to the Federal Reserve Bank of New York; certain Minnesota securities broker-dealers; or, a bank qualified as a depositor. g)General obligation temporary bonds of the same governmental entity issued under section 429.091, subdivision 7; 469.178, subdivision 5; or 475.61, subdivision 6. As of December 31, 2010, the City had the following investments and maturities: Investment Maturities (in Years) CreditFairLess ThanMore Than Investment TypeRatingValue11 - 56 - 1010 Money market fundsN/A1,538,283$ $1,538,283$ - $ -$ - Minnesota Municipal Money Market FundN/A1,518,863 1,518,863 - - - Commercial paperN/A2,499,525 2,499,525 - - - Certificates of depositN/A3,544,038 2,296,271 1,247,767 - - Local governmentsA/A1/A21,035,723 624,358 411,365 - - AA1/AA2/AA35,208,910 1,646,004 2,267,352 536,368 759,186 AAA2,679,998 550,248 604,910 1,004,027 520,813 U.S. agenciesAAA28,653,13 2,507,4622 1,435,24123,949,220 761,209 FNMA REMICN/A 139,044139,044 - - - 4 62,448 U.S. agenciesN/A 188,42920,44 105,537 - Total investments 12,132,5147,005,945$$29,948,679$ 2,778,011$2,146,745 0 Deposits 3,934,772 Total cash and investment$50,940,717 s The following is a reconciliation of the City’s total cash and investment balances at December 31, 2010: Government-wide statement of net assets: Cash and investments$ 26,915,807 Cash and investments with escrow agent23,729,706 Fiduciary funds statement of net assets 295,204 Total$ 50,940,717 The Minnesota Municipal Money Market Fund is regulated by Minnesota Statutes and the Board of Directors of the League of Minnesota Cities and is an external investment pool not registered with the Securities Exchange Commission (SEC) that follows the same regulatory rules of the SEC under rule 2a7. The fail value of the position in the pool is the same as the value of the pool shares. 56 CITY OF ANDOVER, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2010 Custodial credit risk - investments – For investments in securities, custodial credit risk is the risk that in the event of a failure of the counterparty, the City will not be able to recover the value of its investment securities that are in the possession of an outside party. As of December 31, 2010, $250,000 of the City’s $47,005,945 investments was uninsured and unregistered, with securities held in the City’s name. 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. FNMA REMIC – The City invests in REMIC’s in accordance with State law and the City’s investment policy. These securities are based on cash flows from payments on underlying mortgages. Therefore, they are sensitive to prepayments by mortgages, which may result from a decline in interest rates. 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 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 61% of the City’s investments are in various holdings with U.S. agencies; Federal Home Loan Bank (5.4%), Federal Farm Credit Bank (0.9%), Federal National Mortgage Association (2.5%), Federal Home Loan Mortgage Corporation (3.6%) and U.S. Treasury (49.3%). 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. 2) Maximum Maturities - 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 statutes 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. 57 CITY OF ANDOVER, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2010 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, 2010 are as follows: DelinquentDelinquentSpecial PropertTaxAssessmenNote yt TaxeIncremenReceivableReceivableTota stl Major Funds: General Fund$ -109,107$ $ $ -$ -109,107 Water Trunk CPF - - 423,457 - 423,457 Sewer Trunk CPF - - 54,008 - 54,008 Road and Bridge CPF 15,144 - 879,420 2 2,951 917,515 Tax Increment Projects CPF - 1,415,500- 1,471,121 55,621 Permanent Imrovement Revolvin CPF-- pg -1,141,405 1,141,405 s31,953 Nonmajor Fund - 275,509 5 5,189 362,651 Total$ 156,204$ 55,621$ 1,493,6402,773,799$ $4,479,264 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$ 242,461$ - Road & Bridge CPF 33,653 - Nonmajor Funds 76,078 - Delinquent tax increment collections: Tax Increment Projects CPF 89,712 - Special assessments not yet due: General Fun14,529 d - Water Trunk CPF 455,587 - Sewer Trunk CPF 67,805 - Road & Bridge CPF 1,046,271 - Permanent Improvement Revolving CPF 1,329,645 - Nonmajor Funds 420,072 - Notes receivable not yet due: Road & Bridge CPF 30,761 - Tax Increment Projects CPF 1,296,500 - Nonmajor Funds 69,251 - Unearned construction seal coat fees: Nonmajor Funds - 22,581 Total$ 5,172,325$ 22,581 58 CITY OF ANDOVER, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2010 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 semi-annual payments to be made to the City through July 2014 and then was amended to July 1, 2016, the payoff date. As of December 31, 2010, the remaining balance due of $30,761 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 promissory notes for $1,624,000. The notes are for the purchase of land within Andover Station North. The notes beared an interest rate of 6% through December 31, 2008 and then was amended to 4.5% until December 31, 2012, the payoff date. As of December 31, 2010, the remaining balance due of $1,415,500 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, 2010, the remaining balance due of $43,921 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 monthly payments to be made to the City through August 2012. As of December 31, 2010, the remaining balance due of $2,929 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 2008. 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 84 equal monthly payments to be made to the City through September 2015. As of December 31, 2010, the remaining balance due of $13,972 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 September 2010. 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 60 equal monthly payments to be made to the City through September 2015. As of December 31, 2010, the remaining balance due of $8,459 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. Capital asset activity for the year ended December 31, 2010 was as follows: 59 CITY OF ANDOVER, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2010 BeginningEnding Primary Government BalanceAdditionsDeletionsBalance Governmental activities: Capital assets not being depreciated: Land and improvements$ 8,997,071$ 322,628$ -$ 9,319,699 Streets and trails 79,547,69 2 - -79,547,692 Construction in progress - 51,002 51,002 - Total capital assets not being depreciated 88,544,763 373,630 -88,918,393 Capital assets being depreciated: Buildings and improvements 26,657,459 163,387 -26,820,846 Furniture and equipment (including software) 411,116 411,116 - - Machinery and equipment 6,763,730450,554 (101,724) 7,112,560 Other park improvements 5,127,386 371,299 (29,482) 5,469,203 Total capital assets being depreciated 38,959,691 985,240 (131,206) 39,813,725 Less accumulated depreciation for: Buildings and improvements 5,347,13896,99 6,244,130 64 - Furniture and equipment 203,508 53,999 257,507 - Machinery and equipment 4,832,203 412,871 (96,507) 5,148,567 Other park improvements 1,701,735 268,779 (26,207) 1,944,307 Total accumulated depreciation 12,084,58 1,632,643 (122,714) 13,594,511 2 Total capital assets being depreciated - net 26,875,109 (647,403) (8,492) 26,219,214 Governmental activities capital assets - net115,419,87$ $ (273,773)$ (8,492)$115,137,607 2 60 CITY OF ANDOVER, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2010 BegnnngEnng iidi Primar Government BalanceAdditionsDeletionsBalance y Business-te activities: yp apta assets not eng eprecate: Cilbidid Land and improvements$ 730,243$ -$ 730,243 $ - onstructon n progress 77, 77, Cii6911(6911) - - Tota capta assets not eng eprecate ,57,5 77, 7, lilbidid1014(6911)30243 - ata assets enerecate: Cpilbigdpid Buildins and imrovements 14,810,9831,035,88 gp2 -15,846,865 Furnture an equpment ncung sotware , , idi(ildif)6139061390 - - Macnery an equpment ,5, ,5, hidi121188121188 - - oecton anstruton ,7,,5,77, Clliddiibi492618910113493342 - 1,137,035 Total capital assets being depreciated65,399,75 0 -66,536,785 Less accumulated depreciation for: ngs anmprovements 5,,55, 57, Bu ildidi11841386626113 -5, Furniture and equipment 25,70 7,809 33,513 4 - Macnery an equpment ,7,5 ,57 hidi9123184399868 - Collection and distribution 15,150,469 994,026 -16,144,495 Total accumulated depreciation 21,206,941,615,03 26 -22,821,978 Total capital assets being depreciated - net 44,192,808 (478,001) -43,714,807 Business-type activities capital assets - net$ 45,699,962$ (478,001)$ (776,911)$44,445,050 Depreciation/amortization expense was charged to functions/programs of the primary government as follows: overnmenta actvtes: Gliii General overnmen$ 96,402 gt Puc saety 5,5 blif2642 Public work 263,799 s Pars an recreaton ,, kdi1003033 Economic develomen 3,984 pt Total depreciation/amortization expense - governmental activitie$ 1,632,643 s Business-te activities: yp Wate , r$869242 Sewe 500,802 r torm sewe , Sr244992 Total depreciation/amortization expense - business-type activities1,615,036$ CONSTRUCTION COMMITMENTS At December 31, 2010, 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. 61 CITY OF ANDOVER, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2010 IssueMaturityInterestOriginalPayable DateDateRateIssue12/31/10 GOVERNMENTAL ACTIVITIES: Revenue Bonds: 2004 EDA Pub Fac Lease Rev Bonds4/23/20042/1/20142.125-5.400%19,580,000$ $18,225,000 2006 EDA Pub Fac Lease Rev Ref Bonds12/1/20062/1/20344.00-4.50%10,000,000 10,000,000 2007 EDA Pub Fac Lease Rev Ref Bonds1/1/20072/1/20344.00-4.50%6,865,000 6,865,000 Total revenue bonds 36,445,000 35,090,000 Special Assessment Bonds: 2005A G.O. Improvement Bonds4/28/20052/1/20112.95-3.65%3,560,000 600,000 Tax Increment Bonds: 2004B G.O. Tax Increment Refunding Bonds3/16/20042/1/20112.00-3.25%4,260,000 1,735,000 Certificates of Indebtedness: 2007A G.O. Equipment Certificates3/13/20072/1/20114.00%760,000 200,000 2008A G.O. Equipment Certificates9/23/20082/1/20123.50%630,000 326,000 2009A G.O. Equipment Certificates3/26/20092/1/20122.00-2.25%385,000 255,000 Total certificates of indebtedness 1,775,000 781,000 Capital Improvement Bonds: 2004A G.O. Capital Improvement Bonds3/16/20042/1/20172.00-3.75%3,890,000 2,495,000 Permanent Improvement Revolving (PIR) Bonds: 2010A G.O. PIR Refunding Bonds2/18/20102/1/20142.00%1,480,000 1,480,000 State Aid Bonds: 2009A G.O. State Aid Street Refunding Bonds3/26/20092/1/20152.25-2.80%955,000 955,000 Referendum Bonds: 2010A G.O. Open Space Referendum Bonds2/18/20102/1/20222.00-3.125%1,660,000 1,660,000 Total - bonded indebtedness 54,025,000 44,796,000 Compensated absences payable - 571,898 Total governmental activities indebtedness 54,025,000 45,367,898 BUSINESS-TYPE ACTIVITIES: General Obligation Revenue Bonds: 2002 G.O. Water Revenue Bonds5/9/20028/1/20122.30-5.00%9,780,000 7,340,000 2007B G.O. Water Revenue Refunding Bonds3/13/20072/1/20234.00-4.25%6,570,000 6,570,000 2009A G.O. Water Revenue Bonds3/26/20092/1/20242.00-4.25%1,025,000 965,000 Total general obligation revenue bonds 17,375,000 14,875,000 Compensated absences payable - 132,544 s 15,007,54417,375,000 Total business-type activities indebtednes Total City indebtedness$ 71,400,000$60,375,442 62 CITY OF ANDOVER, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2010 Annual debt service requirements to maturity for general obligation bonds are as follows: Governmental Activities Revenue BondsSpecial Assessment BondsTax Increment Bonds PrincipalInterestPrincipalInterestPrincipalInterest 2011$ 415,000$ 1,631,101$ 600,000$ 10,200$ 1,735,000$ 26,762 2012 1,613,666435,000 - - - - 2013 450,0001,594,74 4 - - - - 4 16,925,000 1,150,583 201 - - - - 2015 560,000 705,010 - - - - 2016-20203,165,000 3,162,579 - - - - 2021-20253,845,000 2,451,965 - - - - 2026-20304,725,000 1,550,451 - - - - 2031-20344,570,000 422,325 - - - - $ 35,090,00$ 14,282,42$ 600,000$ 10,200$ 1,735,000$ 26,76 Tota l042 Governmental Activities Permanent Improvement Certificates of IndebtednessCapital Improvement BondsRevolving Bonds PrincipalInterestPrincipalInterestPrincipalInterest 2011$ 485,000$ 16,941$ 295,000$ 80,143$ 355,000$ 26,050 2012 4,368296,000 315,000 365,000 18,850 70,993 2013 - 375,000 11,450 - 330,000 60,905 201- 385,00 3,850 40 - 355,000 49,596 2015 - - 380,000 37,000 - - 2016-2020 - - 820,000 30,925 - - $ 21,309781,000$ 2,495,000$ 329,562$ $ 1,480,000$ 60,20 Tota l0 Governmental ActivitiesBusiness-Type Activities State Aid BondsReferendum BondsG.O. Revenue Bonds PrincipalInterestPrincipalInterestPrincipalInterest $ 0$ 640,036 2011215,000$ 21,009$ 41,565475,00 $ $ - 2 16,115220,000 135,000 6,980,000 620,675 201 40,215 0 285,166 2013 230,000 10,765 135,000545,00 37,515 201 4,785230,000 140,000 565,00 263,80 406 34,765 2015 60,000 840 590,000 241,486 145,000 31,915 2016-2020 - 770,000 106,776 3,315,000 836,013 - 2021-2025 - 2,405,000 160,811 - 335,000 10,526 Tota 55,5,5,, ,77,75, ,7, l$9000$314$1660000$3032$148000$304993 It is not practical to determine the specific year for payment of long-term accrued compensated absences. 63 CITY OF ANDOVER, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2010 CHANGE IN LONG-TERM LIABILITIES Long-term liability activity for the year ended December 31, 2010, was as follows: BeginningEndingDue Within BalanceAdditionsReductionsBalanceOne Year Governmental activities: Bonds payable: Revenue bonds$35,495,000$ -$ (405,000)$35,090,000$ 415,000 Special assessment bonds 2,450,000 600,000 600,000 -(1,850,000) Tax increment bonds 2,515,000 (780,000) 1,735,000 1,735,000 - Certificates of indebtedness 1,420,000 (639,000) 781,000 485,000 - Capital improvement bonds 2,775,000 (280,000) 2,495,000 295,000 - Permanent improvement revolving bonds2,635,000 1,480,000 (2,635,000) 1,480,000 355,000 State aid bonds 2,555,000 955,000 215,000 -(1,600,000) Referendum bonds 1,660,000- 1,660,000- - Total bonds payable 49,845,000 3,140,000 (8,189,000) 44,796,000 4,100,000 Compensated absences 541,606 323,461 (293,170) 571,897 85,785 Total governmental activities long-term liabilities$ 3,463,46150,386,606$ $ 45,367,897(8,482,170)$$ 4,185,785 Business-type activities: Bonds payable: G.O. revenue bonds$15,330,000$ -$ (455,000)$14,875,000$ 475,000 Compensated absences 120,546 53,133 (41,135) 132,544 19,882 Total business-type activities long-term liabilities$ 53,13315,450,546$ $ (496,135)$15,007,544$ 494,882 For the governmental activities, bonds payable can be summarized in the following categories: Therevenue bonds 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. Thespecial assessment bonds 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. Thetax increment bonds 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 within 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. Thecertificates of indebtedness 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. Thecapital improvement bonds 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 bonds. 64 CITY OF ANDOVER, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2010 Thepermanent improvement revolving bonds 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. 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. Thereferendum bonds were used to finance various land acquisitions for open space preservation within the City. 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. 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 $21,350,254, payable through February 2014. For the current year, principal and interest paid and total net operating revenues, lease revenue and tax levy were $1,335,684 and $1,354,054, 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 $610,200, payable through February 2011. For the current year, principal and interest paid and total special assessment revenues were $1,902,690 and $28,030, respectively. In 2010, the debt service fund had sufficient funds to make its debt service payments. 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. All tax increment revenues are receipted in the Tax Increment Projects CPF and transferred over as needed to make the debt service payments. Total principal and interest remaining on the bonds is $1,761,762, payable through February 2011. For the current year, principal and interest paid and monies transferred from the Tax Increment Projects CPF were $590,813 and $585,000, respectively. 2007A G.O. Equipment Certificates. The City has pledged future property tax revenue to repay the $760,000 bonds issued in March 2007. Proceeds from the bonds were used to finance the purchase of capital equipment. Property taxes 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 $204,000, payable through February 2011. For the current year, principal and interest paid and total property tax revenues were $206,900 and $182,122, respectively. 2008A G.O. Equipment Certificates. The City has pledged future property tax revenue to repay the $630,000 bonds issued in September 2008. Proceeds from the bonds were used to finance the purchase of capital equipment. Property taxes 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 $337,515, payable through February 2012. For the current year, principal and interest paid and total property tax revenues were $167,105 and $162,446, respectively. 65 CITY OF ANDOVER, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2010 2009A G.O. Equipment Certificates. The City has pledged future property tax revenue to repay the $385,000 bonds issued in March 2009. Proceeds from the bonds were used to finance the purchase of capital equipment. Property taxes 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 $260,794, payable through February 2012. For the current year, principal and interest paid and total property tax revenues were $137,038 and $123,901, respectively. 2004A G.O. Capital Improvement Bonds. The City has pledged future property tax revenue to repay the $3,890,000 bonds issued in March 2004. Proceeds from the bonds were used to purchase the public works facility from the EDA and to finance the construction of a new fire station. Property taxes 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 $2,824,561, payable through February 2017. For the current year, principal and interest paid and total property tax revenues were $368,417 and $364,152, respectively. 2010A Permanent Improvement Revolving Refunding Bonds . The City has pledged future special assessment revenue to repay the $1,660,000 bonds issued in February 2010. Proceeds from the bonds refunded the Series 2006A Bonds. 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 $1,540,200, payable through February 2014. For the current year, principal and interest paid and monies transferred from the Permanent Improvement Revolving CPF were $13,402 and $20,000, respectively. 2009A State Aid Street Refunding Bonds . The City has pledged future municipal state aid (MSA) allotments to repay the $955,000 bonds issued in March 2009. Proceeds of the bonds refunded the Series 2001B Bonds. The bonds are payable solely from MSA allotments through 2015. Total principal and interest remaining on the bonds is $1,008,514, payable through February 2015. For the current year, principal and interest paid and MSA revenues were $23,427 and $262,752, respectively. 2010A G.O. Open Space Referendum Bonds. The City has pledged future property tax revenue to repay the $1,660,000 bonds issued in February 2010. Proceeds from the bonds were used to finance various land acquisitions for open space preservation within the City. Property taxes 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 $1,963,277, payable through February 2022. For the current year, principal and interest paid and total property tax revenues were $18,820 and $87,814, 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 $8,006,947. The principal and interest paid for the current year and total customer net revenues were $754,221 and $917,076, 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. 2009A G.O. Water Revenue Bonds. The City has pledged future water customer revenues, net of operating expenses, to repay the $1,025,000 bonds issued in March 2009. Proceeds of the bonds provided financing for the addition to the water treatment plant. The bonds are payable from water customer net revenues and are payable through 2024. The total principal and interest remaining on the bonds is $1,231,216. The principal and interest paid for the current y ear and total customer net revenues were $92,657 and $917,076, respectively. CURRENT REFUNDING On February 18, 2010, the City issued the $1,480,000 General Obligation Permanent Improvement Revolving (PIR) Refunding Bonds, Series 2010A with an average interest rate of 1.99% to advance refund the 2011 through 2014 maturities aggregating $1,480,000 in principal amount of the City’s $2,450,000 General Obligation Permanent Improvement Revolving Fund Bonds, Series 2006A with an average interest rate of 3.87%, dated May 10, 2006. Net proceeds of $1,486,833.75 were used to retire all outstanding principal of the refunded bonds on February 1, 2010. The City refunded the PIR bonds to reduce its total debt service payments over the four years by $70,713.19 and to obtain an economic gain (difference between the present value of the debt service payments on the old and new debt) of $67,991.32. 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 66 CITY OF ANDOVER, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2010 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 $9,759,059 at December 31, 2010. 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 $6,704,233 at December 31, 2010. Refunded Debt Service Commitment PaymentBondsRefunding BondsEscrow Account DateTotalSeries 2006Series 2007Series 2006Series 2007City 2011$ 1,329,891$ 424,227$ 291,983$ 424,227$ 291,983$ 1,329,891 2012 1,332,456 424,227 291,983 424,227 291,983 1,332,456 2013 1,328,534 424,227 291,983 424,227 291,983 1,328,534 4 424,22717,359,373 291,983 9,967,114 6,845,992 1,262,477 201 2015 - 752,527 512,483 1,265,010 - - 2016 753,827- 513,283 1,267,110 - - 2017 - 749,628 513,683 1,263,311 - - 2018 - 2022 - 3,748,675 2,568,704 - 6,317,379 - 2023 - 2027 - 3,729,195 2,563,655 - 6,292,850 - 2028 - 2032 - 3,693,314 2,565,020 - 6,258,334 - 2033 - 2034- 1,474,126 1,019,212 - 2,493,338 - $ 21,350,254$ 16,598,200$ 11,423,972$ 11,239,795$ 7,721,941$ 30,410,690 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 $6,491,510 at December 31, 2010. 67 CITY OF ANDOVER, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2010 RefundedRefundingDebt Service Commitment PaymentBondsBondsEscrow DateTotalTotalAccountCity 2010$ 754,221$ 266,146$ 266,146$ 754,221 2011 757,507 266,146 266,146 757,507 2012 266,1467,249,440 6,756,146 759,440 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 - $ 8,761,168$ 8,950,973$ 7,288,438$10,423,703 Note 7 LEGAL DEBT MARGIN The City is subject to a statutory limitation by the State of Minnesota for bonded indebtedness payable principally from property taxes. The City's legal debt margin for 2010 and 2009 is computed as follows: December 31, 20102009 Estimated taxable market value$ 2,982,595,6002,710,514,800$ Debt limit (3% of market value) 81,315,444 89,477,868 Amount of debt applicable to debt limit: Total bonded debt$ 59,671,00$ 65,175,00 00 Less: Nonapplicable debt G.O. water revenue bonds (14,875,000) (15,330,000) Special assessment bonds (600,000) (2,450,000) Tax increment bonds (1,735,000) (2,515,000) Permanent improvement revolving bonds (1,480,000) (2,635,000) State aid bonds (2,555,000)(955,000) Less: Cash and investments in related debt service funds (17,973,588)(17,768,743) Total debt applicable to debt limit 22,257,257 21,716,41 2 Legal debt margin$ 59,058,187$ 67,761,456 Note 8 DEFINED BENEFIT PENSION PLANS - STATEWIDE A. PLAN DESCRIPTION All full-time and certain part-time employees of the City are covered by defined benefit plans administered by the Public Employees Retirement Association of Minnesota (PERA). PERA administers the General Employees Retirement Fund (GERF) and the Public Employees Police and Fire Fund (PEPFF), which are cost-sharing, multiple-employer retirement plans. These plans are established and administered in accordance with Minnesota Statutes, Chapters 353 and 356. 68 CITY OF ANDOVER, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2010 GERF members belong to either the Coordinated Plan or the Basic Plan. Coordinated Plan members are covered by Social Security and Basic Plan members are not. All new members must participate in the Coordinated Plan. All police officers, 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 PERA’s Coordinated and Basic Plan members. The retiring member receives the higher of a step-rate benefit accrual formula (Method 1) or a level accrual formula (Method 2). Under Method 1, the annuity accrual rate for a Basic Plan member is 2.2% 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 GERF members hired prior to July 1, 1989 whose annuity is calculated using Method 1, a full annuity is available when age plus years of service equal 90. Normal retirement age is 55 for PEPFF members and 65 for Basic and Coordinated members hired prior to July 1, 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. There are different types of annuities available to members upon retirement. A single-life annuity is a lifetime annuity that ceases upon the death of the retiree – no survivor annuity is payable. There are also various types of joint and survivor annuity options available which will be payable over joint lives. Members may also leave their contributions in the fund upon termination of public service in order to qualify for a deferred annuity at retirement age. Refunds of contributions are available at any time to members who leave public service, but before retirement benefits begin. The benefit provisions stated in the previous paragraphs of this section are current provisions and apply to active plan participants. Vested, terminated employees who are entitled to benefits but are not receiving them yet are bound by the provisions in effect at the time they last terminated their public service. PERA issues a publicly available financial report that includes financial statements and required supplementary information for GERF and PEPFF. That report may be obtained on the internet at www.mnpera.org, by writing to PERA, 60 Empire Drive #200, St. Paul, Minnesota, 55103-2088 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. GERF Basic Plan members and Coordinated Plan members were required to contribute 9.10% and 6.00%, respectively, of their annual covered salary in 2010. PEPFF members are required to contribute 9.40% of their annual covered salary in 2010. In 2010, the City is required to contribute the following percentages of annual covered payroll: 11.78% for Basic Plan members, 7.00% for Coordinated Plan members, and 14.1% for PEPFF members. Employee contributions for the Coordinated Plan PERF members will increase to 7.25% effective January 1, 2011. The City’s contributions to the Public Employees Retirement Fund for the years ending December 31, 2010, 2009 and 2008 were $231,360, $231,302 and $225,073, respectively. The City’s contributions to the Public Employees Police and Fire Fund for the years ending December 31, 2010, 2009 and 2008 were $24,152, $24,464 and $21,367, 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 Minnesota Statutes October 9, 1979 and operates under the provisions of Section 424A. It is governed by a board of six 69 CITY OF ANDOVER, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2010 members elected by the members of the Association for three-year terms. The City’s Mayor, Finance Manager 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 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. 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 NW, 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 EndingCityStateTotal 12/31/200850,00$ 0$ 121,813$ 171,813 12/31/200950,00 0 103,492 153,492 12/31/201050,00 0 104,210 154,210 Note 9 OTHER POST EMPLOYMENT BENEFITS (OPEB) In 2008, the City prospectively implemented the requirement of a new accounting pronouncement, GASB Statement No. 45, Accounting and Financial Reporting by Employers for Post Employment Benefits Other than Pensions. A.PLAN DESCRIPTION In addition to providing the pension benefits described in Note 8, the City provides post employment health care benefits (as defined in paragraph B) for retired employees through a single employer defined benefit plan. The term plan refers to the City’s requirement by State Statute to provide retirees with access to health insurance. The OPEB plan is administered by the City. The authority to provide these benefits is established in Minnesota Statutes Sections 471.61 Subd. 2a, and 299A.465. The benefits, benefit levels, employee contributions and employer contributions are governed by the City and can be amended 70 CITY OF ANDOVER, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2010 by the City through its personnel manual and collective bargaining agreements with employee groups. The Plan is not accounted for as a trust fund, as an irrevocable trust has not been established to account for the plan. The Plan does not issue a separate report. B.BENEFITS PROVIDED Retirees The City is required by State Statute to allow retirees to continue participation in the City’s group health insurance plan if the individual terminates service with the City through service retirement or disability retirement. Employees who satisfy the rule of 90 or attain age 55 and have completed 10 years of service at termination can immediately commence medical benefits. Retirees may obtain dependent coverage while the participating retiree is under age 65. Covered spouses may continue coverage after the retiree’s death. The surviving spouse of an active employee may continue coverage in the group health insurance plan after the employee’s death. All health care coverage is provided through the City’s group health insurance plan. The retiree is required to pay 100% of their premium cost for the City-sponsored group health insurance plan. The premium is a blended rate determined by the entire active and retiree population. Since the projected claims costs for retirees exceed the blended premium paid by retirees, the retirees are receiving an implicit rate subsidy (benefit). The coverage levels are the same as those afforded to active employees. Upon a retiree reaching age 65 years of age, Medicare becomes the primary insurer and the City’s plan becomes secondary. C.PARTICIPANTS As of the actuarial valuation dated January 2008, participants consisted of: Retirees and beneficiaries currently purchasing health insurance through the City3 Active employees 52 Total 55 Participating employers 1 D.FUNDING POLICY The additional cost of using a blended rate for actives and retirees is currently funded on a pay-as-you-go basis. The City Council may change the funding policy at any time. E.ANNUAL OPEB COSTS AND NET OPEB OBLIGATION The City’s annual other post employment benefit (OPEB) cost is calculated based on the annual requirement contribution (ARC) of the employer, an amount actuarially determined in accordance with the parameters of GASB Statement No. 45. The ARC represents a level of funding that, if paid on an ongoing basis, is projected to cover normal costs each year and amortized any unfunded actuarial liabilities (or funding excess) over period not to exceed 30 years. The net OPEB obligation as of December 31, 2010, was calculated as follows: 71 CITY OF ANDOVER, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2010 Annual required contribution (ARC)$53,096 Amortization of net OPEB obligation(4,637) Interest on net OPEB obligation3,208 Annual OPEB cost51,667 Contributions made during the year(14,937) Increase (decrease) in net OPEB obligation36,730 Net OPEB obligation - beginning of year80,191 Net OPEB obligation - end of year$116,921 The City first had an actuarial valuation performed for the plan as of January 1, 2008 to determine the funded status of the plan as of that date as well as the employer’s annual required contribution (ARC) for the fiscal year ended December 31, 2008. The City’s annual OPEB cost (expense) of $53,096 was equal to the ARC for the fiscal year, as the transition liability was set at zero as of December 31, 2007. The City’s annual OPEB cost, the percentage of annual OPEB cost contributed to the plan and the net OPEB obligation for 2008, 2009 and 2010 are as follows: Percentage of AnnualEmployerAnnual OPEBNet OPEB Fiscal Year EndedOPEB CostContributionsCost ContributedObligation December 31, 200853,096$ $10,63020.0%$42,466 December 31, 200952,340 14,61527.9%80,191 December 31, 201051,667 14,93728.9%116,921 For the governmental activities, other post employment benefits are generally liquidated through the General Fund. F.FUNDED STATUS AND FUNDING PROGRESS The City currently has no assets that have been irrevocably deposited in a trust for future health benefits; therefore, the actuarial value of assets is zero. The funded status of the plan was as follows: Unfunded ActuarialUAAL as a ActuarialActuarialAccruedPercentage of ActuarialValue ofAccruedLiabilityFundCoveredCovered Valuation DateAssetsLiability *( UAAL )RatioPayrollPayroll ( a )( b )( b-a )( a/b )( c )(( b-a ) / c ) January 1, 2008$ 324,387-$$324,3870.00%5,400,000$6.01% *using the Projected Unit Credit actuarial method Note, the first OPEB actuarial valuation was conducted as of January 1, 2008. There is no data available prior to this date. G.ACTUARIAL METHODS AND ASSUMPTIONS Actuarial valuations of an ongoing plan involve estimates of the value of reported amounts and assumptions about the probability of occurrence of events for into the future. Examples include assumptions about future employment, mortality and the health care cost trend. Amounts determined regarding the funded status of the plan and the annual required contributions (ARC) of the employer are subject to continual revision as actual results are compared with past expectations and new estimates are made about the future. The schedule of funding progress, presented as required supplementary information 72 CITY OF ANDOVER, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2010 following the notes of the financial statements, presents multi-year trend information that shows whether the actuarial value of plan assets is increasing or decreasing over time relative to the actuarial accrued liabilities for benefits. Projections of benefits for financial reporting purposes are based on the substantive plan (the plan as understood by the employer and plan members) and include the types of benefits provided at the time of each valuation and the historical pattern of sharing of benefit cost between the employer and plan members to that point. The actuarial methods and assumptions used include techniques that are designed to reduce the effect of short-term volatility in actuarial accrued liabilities and the actuarial value of assets, consistent with the long-term perspective of the calculations. In the January 1, 2008 actuarial valuation, the Projected Unit Credit Actuarial cost method was used. The actuarial assumptions included a 4.0% investment rate of return (net of administrative expenses) and an initial annual health care cost trend of 10.0% reduced by 0.5% each year to arrive at an ultimate health care cost trend of 5.0%. The actuarial value of assets was $0. The plan’s unfunded actuarial accrued liability is being amortized as a level dollar amount over 30 years on a closed basis. The remaining amortization period at December 31, 2010 was 27 years. Note 10 INTERFUND RECEIVABLES/PAYABLES, LOANS AND TRANSFERS Individual fund interfund receivable and payable balances at December 31, 2010 are as follows: FundReceivablePayable Governmental Funds: Major Funds: General Fund$ - $ 6 29,000 2006 EDA Public Facility Lease Revenue Refunding Bonds DSF - 7 ,000 2007 EDA Public Facility Lease Revenue Refunding Bonds DSF - 7 ,000 Water Trunk CPF 62,000 - Nonmajor Governmental Funds - 677,000 Total governmental funds$ 691,000$ 691,000 Interfund receivables and payables are representative of lending/borrowing arrangements to cover deficit cash balances at the end of the fiscal year. Interfund transfers: FundTransfer InTransfer Out Governmental Funds: Major Funds: General Fund$ 196,930$ - Water Trunk CPF 242,000 89,191 Sewer Trunk CPF 400,000 130,439 Road & Bridge CPF 254,677 498,117 Tax Increment Projects CPF- 3 ,105,780 provement Revolving CPF- Permanent Im 1 ,190,450 Nonmajor Funds 5,144,721 716,612 Total governmental funds$6,238,328$5,730,589 73 CITY OF ANDOVER, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2010 FundTransfer InTransfer Out Proprietary Funds: Enterprise Funds: Water$ 89,191$ 150,250 Sewer - 4 46,680 Total proprietary funds 89,191 5 96,930 Total$ 6,327,5196,327,519$ 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 $960,726 to the Park Dedication CPF from the TIF Projects CPF for the payoff of special assessments relating to the Andover Station North Ball Field complex. 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$ 30,600 $ - Business-Type Activities - 30,600 Total$ 30,600$ 30,600 Note 11 TAX INCREMENT DISTRICTS The City 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 201 2 Oriinal net tax caacit:1$ 51,92 gpy4 Current net tax capacity: 2,003,001 Captured net tax capacity - retained by the Cit$ 1,851,077 y Total District Bonds issue$19,250,000 d Amount redeemed(17,515,000) Bons outstanng Decemer,,75, ddib312010$13000 2.Name of District:Andover Redevelopment District 1- 2 Te of District:Redeveloment ypp Authorizing Law:M.S. Section 472 Established:1986 Duration of District:Through 201 4 Oriinal net tax caacit:4$ ,542 gpy Current net tax capacity: 256,074 apture net tax capacty - retaney tet5,5 CdiidbhCiy$2132 74 CITY OF ANDOVER, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2010 3.Name of District:Tax Increment Financing District 1-3 (Farmstead Project) e of District:Redevelomen T yppt Authorizing Law:M.S. Section 469 Established:1997 Duration of District:Through 2025 Original net tax capacity:$ 7,31 4 Current net tax capacity: 161,502 apture net tax capacty - retaney tet5, CdiidbhCiy$14188 4.Name of District:Tax Increment Financin District 1- g4 Type of District:Redevelopmen t Authorizing Law:M.S. Section 469 Established:2005 Duration of District:Through 2031 Original net tax capacity:$ 67,162 Current net tax capacity: 94,831 apture net tax capacty - retaney tet7, CdiidbhCiy$2669 Note 12 DEFICIT FUND BALANCES The City has deficit fund balances at December 31, 2010 as follows: FundAmount Special Revenue Funds: Community Center$ 352,015 Capital Projects Funds: Storm Sewer Projec 61,142 t Note 13 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 2% 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. 75 CITY OF ANDOVER, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2010 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, 2010. 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 14 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, 2010. Future scheduled tax levies for all bonds outstanding at December 31, 2010 totaled $22,713,165. Note 15 DESIGNATIONS AND RESERVATIONS OF FUND EQUITY Fund equities are classified as follows to reflect limitations and restrictions of the respective funds: 76 CITY OF ANDOVER, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2010 20102009 Governmental Funds: Major Funds: General Fund Reserved for prepaid items$ 92,750$ 103,804 Reserved for inventor 113,916 103,711 y Designated for snow emergency 70,000 65,000 Designated for public safety 70,000 65,000 Designated for facility management 70,000 65,000 Designated for information technology70,00 0 65,000 Designated for market value homestead credit unallotment490,186 - Designated for working cash flow 4,134,053 3,860,897 2006 EDA Public Facility Lease Revenue Refunding Bonds DSF Reserved for debt service 9,928,573 9,932,006 2007 EDA Public Facility Lease Revenue Refunding Bonds DSF Reserved for debt service 6,818,641 6,822,086 Water Trunk CPF Designated for projects 2,977,573 2,673,600 Sewer Trunk CPF Designated for projects 3,500,249 3,134,884 Road & Bridge CPF 2 3,195,162 Designated for projects3,854,75 Tax Increment Projects CPF Designated for projects 2,920,640 4,403,558 Permanent Improvement Revolving CPF Designated for projects 1,353,808 1,343,245 Nonmajor Funds Reserved for prepaid items 8,250 8,250 4 5,618 Reserved for inventory7,95 Reserved for economic development 6,783 9,828 Reserved for debt service 1,695,868 3,551,390 Reserved for projects 792,421 427,017 Designated for working cash flow 537,052 507,253 Designated for projects 341,450 538,840 Designated for equipmen 844,739 734,87 t2 Total Governmental Funds$ 40,699,658$ 41,616,021 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, 2010, the following revenue bonds were outstanding: 77 CITY OF ANDOVER, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2010 Date ofOriginalOutstanding Project IssueIssueRetired12/31/2010 r7/15/19975,645,000$ $ (4,925,000)$ 720,000 Downtown Cente Presbyterian Homes of Andover, Inc.11/1/200313,145,000 (1,692,557) 11,452,443 Total$ (6,617,557)18,790,000$ $12,172,443 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: 2010 LeaseAnnual LeaseExpirationRenewal LocationLesseeAmountAdjustment FactorDateOptions rSprint Nextel$ Greater of CPI or 425,479%12/31/20123 - 5 year terms City Hall water towe rT-Mobile USA, Inc Greater of CPI or 420,780%12/31/20113 - 5 year terms City Hall water towe rClear Wireless LLC 3% annually9/30/20145 - 5 year terms4,800 City Hall water towe gency Siren PoleT-Mobile USA, Inc $1,000 annual increase6/17/20133 - 5 4,000year terms Emer rGreater Minneapolis YMCA635,000None8/1/2035N/A Andover YMCA Comm Ct rClear Wireless LLC 3% annuall5,845y7/31/20145 - 5 year terms Rose Park water towe 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 SUBSEQUENT EVENTS The City of Andover sold $265,000 of General Obligation Equipment Certificates, Series 2011 on April 1, 2011 to finance the purchase of public works equipment. The rates of the bonds per year are 2.00% with a true interest cost of 2.00%. Principal payments are due in 2012 – 2014. Note 19 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. 54Fund Balance and Government Fund Type Definitions. The provisions of this Statement are effective for financial statements for periods beginning after June 15, 2010. Statement No. 60Accounting and Financial Reporting for Service Concession Arrangements. The provisions of this Statement are effective for financial statements for periods beginning after December 15, 2011. Statement No. 61Financial Reporting Entity: Omnibus – an amendment of GASB Statements No. 14 and No. 34. The provisions of this Statement are effective for financial statements for periods beginning after June 15, 2012. Statement No. 62Codification of Accounting and Financial Reporting Guidance Contained in Pre-November 30, 1989 FASB and AICPA Pronouncements.The provisions of this Statement are effective for financial statements for periods beginning after December 15, 2011. The effect these standards may have on future financial statements is not determinable at this time. 78 REQUIRED SUPPLEMENTARY INFORMATION 79 CITY OF ANDOVER, MINNESOTA REQUIRED SUPPLEMENTARY INFORMATION Statement 10 BUDGETARY COMPARISON SCHEDULE - GENERAL FUND For The Year Ended December 31, 2010 With Comparative Actual Amounts For The Year Ended December 31, 2009 Variance with Final Budget - Budgeted AmountsPositive2009 OriginalFinalActual(Negative)Actual Revenues: General property taxes$ 7,308,495$7,308,495$7,191,602$ (116,893)$6,588,601 Licenses and permits 237,055237,055329,901 92,846291,903 Intergovernmental 567,498567,498570,097 2,599595,002 Charges for services 543,500543,500755,184 211,684701,289 Fines 100,750100,750104,780 4,030110,779 Investment income 65,00065,00070,368 5,36876,772 Miscellaneous 83,40083,400136,684 53,284130,523 Total revenues 8,905,6988,905,6989,158,616 252,9188,494,869 Expenditures: Current: General government: Mayor and City council 104,251104,251100,710 3,541105,319 Administration 130,997132,967131,218 1,749128,532 Newsletter 23,00023,00017,094 5,90622,405 Human resources 60,69160,74454,968 5,77654,625 Legal 178,500178,500172,775 5,725172,900 City clerk 95,82496,82895,166 1,66296,621 Elections 49,00649,12637,927 11,1996,139 Financial administration 198,836202,011 194,865 7,146210,204 Assessing 152,500152,500144,760 7,740120,113 Information systems 144,106150,812136,931 13,881122,614 Planning and zoning 319,556328,449327,566 883323,681 Engineering 383,083390,087389,037 1,050388,285 Facility management 556,457571,716421,850 149,866409,929 Total general government 2,396,8072,440,9912,224,867 216,1242,161,367 Public safety: Police 2,599,2462,599,2462,599,2462,545,642 - Fire protection1,063,9591,070,385967,716 102,669998,351 Protective inspection 339,931346,282330,709 15,573435,102 Civil defense 15,79415,90915,450 45914,935 Animal control9,9709,9706,952 3,01811,376 Total public safety 4,028,9004,041,7923,920,073 121,7194,005,406 Public works: Streets and highways 543,732556,452518,989 37,463567,090 Snow and ice removal 475,573489,381537,948 (48,567)462,849 Street signs 177,458195,562166,244 29,318159,213 Traffic signals 36,00036,00025,830 10,17026,090 Street lighting 236,400236,400217,205 19,195213,307 Total public works$ 1,469,163$1,513,795$1,466,216$ 47,579$1,428,549 (Continued) 80 CITY OF ANDOVER, MINNESOTA REQUIRED SUPPLEMENTARY INFORMATION Statement 10 BUDGETARY COMPARISON SCHEDULE - GENERAL FUND (Continued) For The Year Ended December 31, 2010 With Comparative Actual Amounts For The Year Ended December 31, 2009 Variance with Final Budget - Budgeted AmountsPositive2009 OriginalFinalActual(Negative)Actual Expenditures: Current: (continued) Parks and recreation$ 860,460$872,633$826,694$ 45,939$835,636 Recycling 117,298118,838109,034 9,80485,527 Unallocated 230,000170,07924,953 145,12619,540 Total current 9,102,6289,158,1288,571,837 586,2918,536,025 Capital outlay: Parks and recreation1,216 (1,216)2,397 - - Total expenditures 9,102,6289,158,1288,573,053 585,0758,538,422 Revenues over (under) expenditures (196,930)(252,430)585,563 837,993(43,553) Other financing sources (uses): Transfers in 196,930196,930196,930196,930 - Net increase (decrease) in fund balance$(55,500)$782,493$ 837,993$153,377 $ - Fund balance - January 14,328,4124,175,035 Fund balance - December 31$5,110,905$4,328,412 81 CITY OF ANDOVER, MINNESOTA REQUIRED SUPPLEMENTARY INFORMATION Statement 11 SCHEDULE OF FUNDING PROGRESS - OTHER POST EMPLOYMENT BENEFITS PLAN For The Year Ended December 31, 2010 Unfunded ActuarialUAAL as a ActuarialActuarialAccruedPercentage of ActuarialValue ofAccruedLiabilityFundCoveredCovered Valuation DateAssetsLiability( UAAL )RatioPayrollPayroll ( a )( b )( b-a )( a/b )( c )(( b-a ) / c ) January 1, 2008$ 324,387$324,3870.00%5,400,000$ 6.01% $ - The City implemented GASB Statement No. 45 for the year ended December 31, 2008. Information for prior years is not available. 82 CITY OF ANDOVER, MINNESOTA REQUIRED SUPPLEMENTARY INFORMATION NOTES TO REQUIRED SUPPLEMENTARY INFORMATION December 31, 2010 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: Public works: Snow and ice removal$ 489,381$ 537,948$ 48,567 Capital outlay: Parks and recreation- 1,2161,216 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 (1) 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. 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. In the fall of 2010, 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: 83 CITY OF ANDOVER, MINNESOTA REQUIRED SUPPLEMENTARY INFORMATION NOTES TO REQUIRED SUPPLEMENTARY INFORMATION December 31, 2010 ConditionRating Excellent86 - 100 Very Good71 - 85 Good56 - 70 Fai41 - 55 r Poo26 - 40 r Very Poo11 - 25 r Substandard0 - 10 As of December 31, 2010, the City’s street and trail system was rated at an OCI index of 83 on the average with detail condition as follows: % of Street Conditionand Trails Excellent to Good96.0% Fair3.3% Poor to Substandard0.7% 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 $1,457,082 on street and trail maintenance for the year ending December 31, 2010. 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$ 956,688$ 82 20041,000,000 1,847,066 82 20051,000,000 1,655,71583 20061,150,000 1,228,98182 20071,150,000 1,256,43381 20081,150,000 2,244,71380 20091,150,000 1,666,21681 20101,150,000 1,457,08283 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. 84 COMBINING AND INDIVIDUAL FUND STATEMENTS AND SCHEDULES 85 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. 86 CITY OF ANDOVER, MINNESOTA COMBINING BALANCE SHEETStatement 12 NONMAJOR GOVERNMENTAL FUNDS December 31, 2010 With Comparative Totals For December 31, 2009 Totals SpecialDebtCapitalNonmajor Governmental Funds RevenueServiceProjects20102009 Assets: Cash and investments 1,587,629$ $1,096,512$909,766$ 3,593,907$4,290,037 Cash and investments with escrow agent50,843 774,904 724,061 - 1,672,204 Accrued interest6,8471,1534,415 12,41515,510 Accounts receivable - net145,168 145,168 - - 160,788 Prepaid items8,250 8,2508,250 - - Property taxes receivable: Unremitted1,89415,670454 18,01823,876 Delinquent7,86966,3011,908 76,07867,304 Special assessments receivable: Delinquent83,747 83,74732,988 - - Deferred 336,325 - 336,325 - 393,935 Notes receivable69,251 69,25164,012 - - Inventories - at cost7,954 7,9545,618 - - Total assets 1,885,705 5,126,017 2,323,769 916,543 6,734,522 Liabilities and Fund Balance Liabilities: Interfund payable475,00062,000 677,000 140,000 1,336,000 Accounts payable45,8901,528(2,501) 44,91772,275 Contracts payable6,440 6,4403,428 - - Deposits payable31,422 31,42228,327 - - Due to other governmental units3,376 3,3763,358 - - Salaries payable20,567 20,56718,546 - - Deferred revenue99,7011,908 587,982 486,373 617,466 Total liabilities675,95667,847 1,371,704 627,901 2,079,400 Fund balance (deficit): Reserved73,8301,695,868741,578 2,511,276 4,002,103 Unreserved: Designated 1,554,981 1,723,241 - 168,260 1,780,965 Undesignated(419,062)(61,142) (480,204)(1,127,946) - Total fund balance 1,209,749 3,754,313 1,695,868 848,696 4,655,122 Total liabilities and fund balance$ 1,885,705$2,323,769$916,543$ 5,126,017$6,734,522 87 CITY OF ANDOVER, MINNESOTA COMBINING STATEMENT OF REVENUES, EXPENDITURES AND Statement 13 CHANGES IN FUND BALANCES NONMAJOR GOVERNMENTAL FUNDS For The Year Ended December 31, 2010 With Comparative Totals For The Year Ended December 31, 2009 Totals Special DebtCapitalNonmajor Governmental Funds RevenueServiceProjects20102009 Revenues: General property taxes$ 229,044$1,805,784$55,824$ 2,090,652$2,444,280 Intergovernmental262,752 262,752252,145 - - Special assessments31,593 31,59359,507 - - Charges for services 849,497 849,497878,370 - - Investment income 24,77934,68128,956 88,41672,094 Miscellaneous: Park dedication fees32,649 32,64941,216 - - Rent 638,037 638,037637,305 - - Other 177,827110,583 288,410244,398 - Total revenues 1,919,1842,134,810228,012 4,282,0064,629,315 Expenditures: Current: General government 28,9961,930 30,92681,295 - Public safety10,004 - - - - Public works 159,5931,763 161,356188,904 - Parks and recreation 882,364724,437 1,606,8011,055,489 - Economic development 152,311 152,311122,361 - - Capital outlay: General government 55,000108,387 163,38735,640 - Public safety 38,812396,291 435,103299,319 - Public works-138,766 - - - Parks and recreation 58,809666,366 725,1751,006,470 - Debt service: Principal retirement5,779,000 5,779,0003,865,000 - - Interest1,314,057 1,314,0571,462,022 - - Paying agent fees3,880 3,8805,794 - - Professional service21,499 21,49929,471 - - Total expenditures 1,375,8857,118,4361,899,174 10,393,4958,300,535 Revenues over (under) expenditures 543,299(4,983,626)(1,671,162) (6,111,489)(3,671,220) Other financing sources (uses): Transfers in4,110,8641,033,857 5,144,7212,750,141 - Transfers out (643,481)(73,131) (716,612)(699,541) - Bonds issued1,660,000 1,660,000385,000 - - Refunding bonds issued1,480,000 1,480,000955,000 - - Redemption of refunded bonds(2,416,834) (2,416,834) - - - Bond premium27,2054,483 31,68818,781 - Proceeds from sale of capital assets 27,717 27,71712,264 - - Total other financing sources (uses) (615,764) 3,128,1042,698,340 5,210,6803,421,645 Net increase (decrease) in fund balance (72,465) (1,855,522)1,027,178 (900,809)(249,575) Fund balance - January 1 1,282,2143,551,390(178,482) 4,655,1224,904,697 Fund balance - December 31$ 1,209,749$1,695,868$848,696$3,754,313$4,655,122 88 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 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 local non- profit organizations. 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. 89 CITY OF ANDOVER, MINNESOTA SUBCOMBINING BALANCE SHEET NONMAJOR SPECIAL REVENUE FUNDS December 31, 2010 With Comparative Totals For December 31, 2009 Drainag Communitye EDADevelopmenCommunitand ty Block GranCenteMappinLRRWM GeneraltrgO Assets: Cash and investments$458,203$6,783$23,069$92,178$13,376 Cash and investments with escrow agent50,843 - - - - Accrued interest1,963376 - - - Accounts receivable13,981125,269 - - - Prepaid items8,250 - - - - Property taxes receivable: Unremitted302 - - - - Delinquent1,178 - - - - Notes receivable69,251 - - - - Inventories - at cost7,954 - - - - Total assets474,14776,034215,38592,55414,856 Liabilities and Fund Balance Liabilities: Interfund payable475,000 - - - - Accounts payable3,83641,945109 - - Contracts payable - - - - - Deposits payable31,422 - - - - Due to other governmental units3,376 - - - - Salaries payable3,47515,657888 - - 69,2511,178 Deferred revenue - - - Total liabilities7,31169,251567,4002,175 - Fund balance (deficit): Reserved for: Prepaid items8,250 - - - - Inventory7,954 - - - - Economic development6,783 - - - - Projects--50,843 - - Unreserved: Designated for working capital466,83610,50012,681 - - Designated for projects82,054 - - - - Designated for equipment - - - - - Undesignated(419,062) - - - - Total fund balance (deficit)466,8366,783(352,015)92,55412,681 Total liabilities and fund balance$474,147$76,034$215,385$92,554$14,856 90 Statement 1 4 Right-of-WaCapitaTotals yl Trail andManagementEquipmenCharitablConstructioNonmajor Special Revenue Funds /ten ForestrTransportatioUtilitReservGamblinSeal Coatin20102009 ynyegg $5,744$71,268$51,711$839,144$2,577$23,576$1,587,629$1,806,828 50,84325,316 - - - - - - 2792264,0036,8476,479 - - - 5,918145,168160,788 - - - - - 8,2508,250 - - - - - - 1,5921,8942,056 - - - - - 6,6917,8696,740 - - - - - 69,25164,012 - - - - - - 7,9545,618 - - - - - - 5,74471,54757,855851,4302,57723,5761,885,7052,086,087 475,000550,000 - - - - - - 45,89070,235 - - - - - - 3,428 - - - - - - - --31,42228,327 - - - - 3,3763,358 - - - - - - 54720,56718,546 - - - - - 6,69122,58199,701129,979 - - - - 5476,69122,581675,956803,873 - - - 8,2508,250 - - - - - - 7,9545,618 - - - - - - 6,7839,828 - - - - - - 50,84325,316 - - - - - - 2,577537,052507,253 5,74438,714 - - - 71,54718,594995173,190449,500 - - - 844,739844,739734,872 - - - - - (419,062)(458,423) - - - - - - 5,74471,54757,308844,7392,5779951,209,7491,282,214 $5,744$71,547$57,855$851,430$2,577$23,576$1,885,705$2,086,087 91 CITY OF ANDOVER, MINNESOTA SUBCOMBINING STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES NONMAJOR SPECIAL REVENUE FUNDS For The Year Ended December 31, 2010 With Comparative Totals For The Year Ended December 31, 2009 Drainag Communitye EDADevelopmenCommunitand ty Block GranCenteMappinLRRWM GeneraltrgO Revenues: General property taxes$33,244 $ -$ -$ -$ - Intergovernmental - - - - - Charges for services199,403571,8018,770 - - Investment income9,30091(8,255)1,891125 Miscellaneous: Ren638,037 t - - - - 5465,932149,486 Other - - Total revenues209,2496,0231,351,06910,66133,369 Expenditures: Current: General government - - - - - Public works5,65339,000 - - - Parks and recreation882,364 - - - - Economic development143,2439,068 - - - Capital outlay: General government - - - - - Public safety - - - - - Parks and recreation - - - - - Total expenditures143,2439,068882,3645,65339,000 Revenues over (under) expenditures66,006(3,045)468,7055,008(5,631) Other financing sources (uses): Transfers out(401,481) - - - - Proceeds from sale of capital assets - - - - - Total financing sources (uses)(401,481) - - - - Net increase (decrease) in fund balance66,006(3,045)67,2245,008(5,631) Fund balance (deficit) - January 1400,8309,828(419,239)87,54618,312 $(352,015)$92,554$12,681 Fund balance (deficit) - December 31$466,836$6,783 92 Statement 15 Right-of-WaCapitaTotals yl Trail andManagementEquipmenCharitablConstructioNonmajor Special Revenue Funds /ten ForestrTransportatioUtilitReservGamblinSeal Coatin20102009 ynyegg $195,800$229,044$232,053 $ -$ -$ -$ -$ - 3,194 - - - - - - - 4,01619,13146,376849,497878,370 - - - 511,35576519,915(79)(380)24,77925,676 638,037637,305 - - - - - - 9,7562,6689,439177,827215,803 - - - 9,8075,37119,896218,3839,36045,9961,919,1841,992,401 16,61212,38428,99659,112 - - - - 9,89350,86554,182159,593187,811 - - - 882,364924,104 - - - - - - 152,311122,361 - - - - - - 55,00055,000 - - - - - - 38,81238,812 - - - - - - 58,809-58,80924,236 - - - - 9,893-50,865169,23312,38454,1821,375,8851,317,624 (86)5,371(30,969)49,150(3,024)(8,186)543,299674,777 (242,000)(643,481)(363,292) - - - - - 27,71727,71712,264 - - - - - (214,283)(615,764)(351,028) - - - - - (86)5,371(30,969)(165,133)(3,024)(8,186)(72,465)323,749 5,83066,17688,2771,009,8725,6019,1811,282,214958,465 $5,744$71,547$57,308$844,739$2,577$995$1,209,749$1,282,214 93 - This page intentionally left blank - 94 NONMAJOR DEBT SERVICE FUNDS The City's Debt Service Funds account for eight types of bonded indebtedness: Certificates of Indebtedness Capital Improvement Bonds Revenue Bonds Tax Increment Bonds Permanent Improvement Revolving Bonds State Aid Bonds Special Assessment Bonds Referendum Bonds Certificates of Indebtedness - (G.O. Equipment Certificates - 2006B, 2007A, 2008A and 2009A) are repaid primarily from general property taxes. Capital Improvement Bonds - (G.O. Capital Improvement Bonds 2004A) are repaid primarily from general property taxes - (EDA Public Facility Lease Revenue Bonds 2004) are repaid from annual lease payments from Revenue Bonds 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. Permanent Improvement Revolving (PIR) Bonds - (G.O. PIR Bonds of 2003A, 2006A and G.O. PIR Refunding Bonds of 2010A) are used to finance assessable improvements within the City and are repaid primarily from special assessments levied against benefited properties. State Aid Bonds - (2001B State Aid Bonds and 2009A State Aid Refunding Bonds) are used to finance MSA eligible cost for road construction and 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. Referendum Bonds – (Open Space Referendum Bonds of 2010A) are used to finance the purchase of land to remain as open space. 95 CITY OF ANDOVER, MINNESOTA SUBCOMBINING BALANCE SHEET NONMAJOR DEBT SERVICE FUNDS December 31, 2010 With Comparative Totals For December 31, 2009 EDA Public G.O.G.O.G.O.G.O. CapitalFacility LeaseG.O. TIF EquipmentEquipmentEquipmentImprovementRevenueRefunding CertificateCertificateCertificateBondsBondsBonds 2007A2008A2009A2004A20042004B Assets: Cash and investments $ 2 10,508$ 165,335$ 126,954$ 1,941$ 4,126$ 17,980 Cash and investments with escrow agent - - - - 724,061 - Accrued interest - 402 310 - - - Property taxes receivable: Unremitted 1 ,724 1,420 1,084 3,054 7,744 - Delinquent - 6,731 5,134 14,467 36,684 - Special assessments receivable: Delinquent - - - - - - Deferred - - - - - 12,057 Total assets 2 12,232 173,888 133,482 19,462 772,615 30,037 Liabilities and Fund Balance Liabilities: Interfund payable - - - - 140,000 - Accounts payable 2 30 - 77 224 230 230 Deferred revenue - 6,731 5,134 14,467 36,684 12,057 Total liabilities 2 30 6,731 5,211 14,691 176,914 12,287 Fund balance: Reserved for debt service 2 12,002 167,157 128,271 4,771 595,701 17,750 Total liabilities and fund balance $ 2 12,232$ 173,888$ 133,482$ 19,462$ 772,615$ 30,037 96 Statement 16 G.O.State AidG.O.Open Space PIR FundRefundingImprovementReferendumTotals Refunding BondsBondsBondsBondsNonmajor Debt Service Funds 2010A2009A2005A2010A20102009 9,964$227,132$71,700 $ $ 2 60,872$ 1,096,512$ 1 ,985,909 - - - - 724,061 1 ,646,888 144 7,261 - 2 97 - 1,153 644 21,332 - - - 15,670 3,285 58,983 - - - 66,301 83,747 32,988 - - - 83,747 - - 324,268 - 336,325 3 93,935 9,96475,773 2 61,169 635,147 2,323,769 4 ,147,296 - - - - 140,000 1 10,000 115230115 7 7 1,528 - 3,285 - - 408,015 486,373 4 85,906 1153,400 7 7 408,245 627,901 5 95,906 9,84972,373 2 61,092 226,902 1,695,868 3 ,551,390 $ 9,964$635,147$75,773 $ 2 61,169$ 2,323,769$ 4 ,147,296 97 CITY OF ANDOVER, MINNESOTA SUBCOMBINING STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES NONMAJOR DEBT SERVICE FUNDS For The Year Ended December 31, 2010 With Comparative Totals For The Year Ended December 31, 2009 EDA Public G.O.G.O.G.O.G.O.G.O. CapitalFacility LeaseG.O. TIF EquipmentEquipmentEquipmentEquipmentImprovementRevenueRefunding CertificateCertificateCertificateCertificateBondsBondsBonds 2006B2007A2008A2009A2004A20042003B Revenues: General property taxes $ - $ 1 82,122$ 1 62,446$ 1 23,901$ 3 64,152$ 8 85,349$ - Intergovernmental - - - - - - - Special assessments - - - - - - - Investment income (4,601) (126) (795) 1,011 704 3 2,794 99 Total revenues (126) 1 81,327 1 63,457 1 24,605 3 59,551 9 18,143 99 Expenditures: Debt service: Principal retirement 1 60,000 1 95,000 1 54,000 1 30,000 2 80,000 4 05,000 2 50,000 Interest 2,920 1 1,900 1 4,105 7,038 8 8,417 9 30,684 7,500 Paying agent fees - 431 - 72 - 2,000 - Professional services - 230 - 77 224 230 - Total expenditures1,337,914 257,500 1 62,920 2 07,561 1 68,105 1 37,187 3 68,641 Revenues over (under) expenditures (9,090) (163,046) (26,234) (4,648) (12,582) (419,771) (257,401) Other financing sources (uses): Transfers in - - - - - 4 01,481 2 44,770 Transfers out(73,131) - - - - - - Refunding bonds issued - - - - - - - Redemption of refunded bonds - - - - - - - Bond premium - - - - - - - Total other financing sources (uses) (73,131) - - - - 4 01,481 2 44,770 (9,090) Net increase (decrease) in fund balance (236,177) (26,234) (4,648) (12,582) (18,290) (12,631) Fund balance - January 1 2 36,177 2 38,236 1 71,805 1 40,853 13,861 6 13,991 12,631 Fund balance - December 31 $ - $ 212,002$ 167,157$ 128,271$ 4,771$ 5 95,701$ - 98 Statement 17 G.O. G.O. TIFG.O.G.O.PIR FundStateG.O.Open Space Totals RefundingPIR FundPIR FundRefundingStateAid RefundingImprovementReferendum Nonmajor Debt Service Funds BondsBondsBondsBondsAid BondsBondsBondsBonds 2004B2003A2006A2010A2001B2009A2005A2010A20102009 $1,805,784 $ -$ - $ - $ -$ - $ - $ -$ 8 7,814$ 2 ,156,485 - - - - - 2 62,752 - - 2 62,752 2 39,185 28,030 3,563 - - - - - - 31,593 59,507 2,539 1 5 - 82 2,966 43 2,599 (2,649) 34,681 38,989 30,569 3,578 - 82 2,966 43 2 65,351 85,165 2 ,134,810 2 ,494,166 530,000 8 20,000 3 35,000 - 6 70,000 - 1,850,000 - 5 ,779,000 3 ,865,000 52,690 60,813 1 0,660 3 4,070 13,402 3 7,611 2 3,427 18,820 1 ,314,057 1 ,462,022 402 805 - - - - 170 - 3,880 5,794 230 230 - - 20,086 - 77 115 21,499 29,471 33,4881,903,322 591,848 8 30,660 369,070 7 07,611 23,674 18,935 7 ,118,436 5 ,362,287 (1,872,753)(4,983,626)(2,868,121) (588,270) (830,660) (368,988) (30,522) (707,568) 2 41,677 66,230 585,000 8 14,826 3 55,624 20,000 4 98,117 - 1,191,046 - 4 ,110,864 2 ,413,892 (73,131) (336,249) - - - - - - - - - - - - 1,480,000 - - - 1 ,480,000 9 55,000 - - - - - (1,486,834) (930,000) - - (2,416,834) - - - 27,205 - - - - 27,205 14,642 1,191,046 585,000 8 14,826 3 55,624 40,371 4 98,117 (930,000) - 3 ,128,104 3 ,047,285 (681,707)(1,855,522)179,164 (3,270) (15,834) (13,364) 9,849 (209,451) (688,323) 66,230 908,609 21,020 1 5,834 1 3,364 -209,451 9 49,415 6,143 3 ,551,390 3 ,372,226 $226,902$1,695,868$3,551,390 $ 17,750$ - $ - $ 9,849$ -$ 261,092$ 7 2,373 99 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 2008A - 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 2009A financed through the issuance of capital notes. Open Space Referendum Bonds 2010A - This fund was established to account for the purchase of various land acquisitions for open space preservation within the City. 100 CITY OF ANDOVER, MINNESOTA SUBCOMBINING BALANCE SHEETStatement 18 NONMAJOR CAPITAL PROJECTS FUNDS December 31, 2010 Comparative Totals For December 31, 2009 Open Space StormReferendumTotals SewerParkBuildingBondsNonmajor Capital Projects Funds ProjectDedicationFun201020102009 dA Assets: Cash and investments 858$ 143,611$$26,895$738,402$909,766$497,300 Accrued interest-9582813,1764,4151,770 Property taxes receivable: Unremitted-454454488 - - Delinquent-1,9081,9081,581 - - Total assets858146,93127,176741,578916,543501,139 Liabilities and Fund Balance Liabilities: Interfund payables62,00062,000676,000 - - - Accounts payable-(2,538)37(2,501)2,040 - Contracts payable-6,0593816,440 - - Deferred revenue-1,9081,9081,581 - - Total liabilities62,0005,42941867,847679,621 - Fund balance (deficit): Reserved for projects-741,578741,578401,701 - - Unreserved: Designated for projects-141,50226,758168,26089,340 - Undesignated(61,142)(61,142)(669,523) - - - Total fund balance (deficit)(61,142)141,50226,758741,578848,696(178,482) Total liabilities and fund balance$858$146,931$27,176$741,578$916,543$501,139 101 CITY OF ANDOVER, MINNESOTA SUBCOMBINING STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES NONMAJOR CAPITAL PROJECTS FUNDS For The Year Ended December 31, 2010 With Comparative Totals For The Year Ended December 31, 2009 StormEquipment SewerParkBuildingCertificates ProjectDedicationFund2008 Revenues: General property taxes$55,824 $ -$ -$ - Intergovernmental - - - - Investment income(1,165)7,785(283)(176) Miscellaneous: Park dedication fees32,649 - - - Other5,300 - 105,283 - Total revenues(1,165)5,017(176) 201,541 Expenditures: Current: General government1,930 - - - Public safety - - - - Public works1,763 - - - Parks and recreation13,507 - 692,170 - Capital outlay: General government - - 108,387 - Public safety9,408 - - - Public works - - - - Parks and recreation2,157 - 341,581 - Total expenditures9,408 - 1,033,751 127,744 Revenues over (under) expenditures(1,165)(832,210)(122,727) (9,584) Other financing sources (uses): Transfers in73,131 - 960,726 - Bonds issued - - - - Bond premium - - - - Total other financing sources (uses)73,131 - 960,726 - Net increase (decrease) in fund balance(1,165)(49,596) (9,584) 128,516 Fund balance (deficit) - January 1(59,977)12,98676,3549,584 Fund balance (deficit) - December 31$(61,142)$141,502$26,758 $ - 102 Statement 19 Open Space EquipmentReferendumTotals CertificatesBondsNonmajor Capital Projects Funds 2009A2010A20102009 $ 55,824$55,742 $ -$ - 9,766 - - - (5,234) 28,029 28,9567,429 32,64941,216 - - 110,58328,595 - - (5,234) 28,029 228,012 142,748 1,93022,183 - - 10,004 - - - 1,7631,093 - - 18,760 724,437 - 131,385 108,38735,640 - - 386,883 396,291 - 299,319 - - - 138,766 322,628 666,366 - 982,234 386,883 341,388 1,899,174 1,620,624 (392,117) (313,359) (1,671,162)(1,477,876) - -1,033,857 336,249 1,660,000 -1,660,000 385,000 4,483 4,4834,139 - 2,698,340 -1,664,483 725,388 (392,117) 1,351,124 1,027,178(752,488) 392,117 (609,546) (178,482) 574,006 $ 741,578$ 848,696$(178,482) $ - 103 CITY OF ANDOVER, MINNESOTA SPECIAL REVENUE FUND - EDA GENERAL Statement 20 SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES - BUDGET AND ACTUAL For The Year Ended December 31, 2010 With Comparative Actual Amounts For The Year Ended December 31, 2009 Variance with Final Budget - Budgeted AmountsPositive2009 OriginalFinalActual(Negative)Actual Revenues: Charges for services$ 180,000$180,000$199,403$ 19,403$181,416 Investment income 6,0006,0009,300 3,3009,486 Miscellaneous546 5462,487 - - Total revenues 186,000186,000209,249 23,249193,389 Expenditures: Current: Economic development 171,075173,135143,243 29,892122,211 Net increase (decrease) in fund balance$ 14,925$12,86566,006$ 53,14171,178 Fund balance (deficit) - January 1400,830329,652 Fund balance (deficit) - December 31$466,836$400,830 104 CITY OF ANDOVER, MINNESOTA SPECIAL REVENUE FUND - COMMUNITY DEVELOPMENT BLOCK GRANT Statement 21 SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES - BUDGET AND ACTUAL For The Year Ended December 31, 2010 With Comparative Actual Amounts For The Year Ended December 31, 2009 Variance with Final Budget - Budgeted AmountsPositive2009 OriginalFinalActual(Negative)Actual Revenues: Intergovernmental$ 25,000$25,000$ (25,000) $ -$ - Investment income10010091 (9)243 Miscellaneous 4,0004,0005,932 1,9327,475 Total revenues 29,10029,1006,023 (23,077)7,718 Expenditures: Current: Economic development 25,00025,0009,068 15,932150 Net increase (decrease) in fund balance$ 4,100$4,100(3,045)$ (7,145)7,568 Fund balance (deficit) - January 19,8282,260 Fund balance (deficit) - December 31$6,783$9,828 105 CITY OF ANDOVER, MINNESOTA SPECIAL REVENUE FUND - COMMUNITY CENTER Statement 22 SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES - BUDGET AND ACTUAL For The Year Ended December 31, 2010 With Comparative Actual Amounts For The Year Ended December 31, 2009 Variance with Final Budget - Budgeted AmountsPositive2009 OriginalFinalActual(Negative)Actual Revenues: Charges for services$ 609,500$609,500$571,801$ (37,699)$610,099 Investment income(8,255) (8,255)(11,595) - - Miscellaneous: Rent 635,000635,000638,037 3,037637,305 Other 174,400174,400149,486 (24,914)186,805 Total revenues 1,418,9001,418,9001,351,069 (67,831)1,422,614 Expenditures: Current: Parks and recreation 988,032992,400882,364 110,036903,446 Revenue over (under) expenditures 430,868426,500468,705 42,205519,168 Other financing sources (uses) Transfers out (401,481)(401,481)(401,481)(353,892) - Net increase (decrease) in fund balance$ 29,387$25,01967,224$ 42,205165,276 Fund balance (deficit) - January 1(419,239)(584,515) Fund balance (deficit) - December 31$(352,015)$(419,239) 106 CITY OF ANDOVER, MINNESOTA SPECIAL REVENUE FUND - DRAINAGE AND MAPPING Statement 23 SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES - BUDGET AND ACTUAL For The Year Ended December 31, 2010 With Comparative Actual Amounts For The Year Ended December 31, 2009 Variance with Final Budget - Budgeted AmountsPositive2009 OriginalFinalActual(Negative)Actual Revenues: Charges for services$ 9,000$9,000$8,770$ (230)$12,226 Investment income 1,6001,6001,891 2912,102 Total Revenues 10,60010,60010,661 6114,328 Expenditures: Current: Public works 13,50013,5005,653 7,8475,827 Net increase (decrease) in fund balance$ (2,900)$(2,900)5,008$ 7,9088,501 Fund balance (deficit) - January 187,54679,045 Fund balance (deficit) - December 31$92,554$87,546 107 CITY OF ANDOVER, MINNESOTA SPECIAL REVENUE FUND - LRRWMOStatement 24 SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES - BUDGET AND ACTUAL For The Year Ended December 31, 2010 With Comparative Actual Amounts For The Year Ended December 31, 2009 Variance with Final Budget - Budgeted AmountsPositive2009 OriginalFinalActual(Negative)Actual Revenues: General property taxes$ 35,000$35,000$33,244$ (1,756)$33,421 Intergovernmental170 - - - - Investment income300300125 (175)395 Total revenues 35,30035,30033,369 (1,931)33,986 Expenditures: Current: Public works 31,62232,06639,000 (6,934)33,627 Net increase (decrease) in fund balance$ 3,678$3,234(5,631)$ (8,865)359 Fund balance (deficit) - January 118,31217,953 Fund balance (deficit) - December 31$12,681$18,312 108 CITY OF ANDOVER, MINNESOTA SPECIAL REVENUE FUND - FORESTRYStatement 25 SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES - BUDGET AND ACTUAL For The Year Ended December 31, 2010 With Comparative Actual Amounts For The Year Ended December 31, 2009 Variance with Final Budget - Budgeted AmountsPositive2009 OriginalFinalActual(Negative)Actual Revenues: Intergovernmental$ 12,500$12,500$ (12,500)$2,000 $ - Investment income10010051 (49)271 Miscellaneous9,756 9,7569,729 - - Total revenues 12,60012,6009,807 (2,793)12,000 Expenditures: Current: Public works 14,00014,0009,893 4,10712,488 Net increase (decrease) in fund balance$ (1,400)$(1,400)(86)$ 1,314(488) Fund balance (deficit) - January 15,8306,318 Fund balance (deficit) - December 31$5,744$5,830 109 CITY OF ANDOVER, MINNESOTA SPECIAL REVENUE FUND - TRAIL AND TRANSPORTATION Statement 26 SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES - BUDGET AND ACTUAL For The Year Ended December 31, 2010 With Comparative Actual Amounts For The Year Ended December 31, 2009 Variance with Final Budget - Budgeted AmountsPositive2009 OriginalFinalActual(Negative)Actual Revenues: Charges for services$ 16,775$16,775$4,016$ (12,759)$9,514 Investment income 1,2501,2501,355 1051,798 Net increase (decrease) in fund balance$ 18,025$18,0255,371$ (12,654)11,312 Fund balance (deficit) - January 166,17654,864 Fund balance (deficit) - December 31$71,547$66,176 110 CITY OF ANDOVER, MINNESOTA SPECIAL REVENUE FUND - RIGHT-OF-WAY MANAGEMENT/UTILITY Statement 27 SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES - BUDGET AND ACTUAL For The Year Ended December 31, 2010 With Comparative Actual Amounts For The Year Ended December 31, 2009 Variance with Final Budget - Budgeted AmountsPositive2009 OriginalFinalActual(Negative)Actual Revenues: Charges for services$ 30,000$30,000$19,131$ (10,869)$10,678 Investment income 2,5002,500765 (1,735)1,983 Total revenues 32,50032,50019,896 (12,604)12,661 Expenditures: Current: Public works 63,18064,26550,865 13,40062,298 Revenue over (under) expenditures (30,680)(31,765)(30,969) 796(49,637) Other financing sources (uses): Transfers out(9,400) - - - - Net increase (decrease) in fund balance$ (30,680)$(31,765)(30,969)$ 796(59,037) Fund balance (deficit) - January 188,277147,314 Fund balance (deficit) - December 31$57,308$88,277 111 CITY OF ANDOVER, MINNESOTA SPECIAL REVENUE FUND - CAPITAL EQUIPMENT RESERVE Statement 28 SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES - BUDGET AND ACTUAL For The Year Ended December 31, 2010 With Comparative Actual Amounts For The Year Ended December 31, 2009 Variance with Final Budget - Budgeted AmountsPositive2009 OriginalFinalActual(Negative)Actual Revenues: General property taxes$ 210,000$210,000$195,800$ (14,200)$198,632 Intergovernmental1,024 - - - - Investment income 15,00015,00019,915 4,91521,101 Miscellaneous2,668 2,66839 - - Total revenues 225,000225,000218,383 (6,617)220,796 Expenditures: Current: General government 33,00033,00016,612 16,38838,772 Public works10,651 - - - - Parks and recreation20,658 - - - - Capital outlay: General government55,00055,000 - - - Public safety 225,000148,50038,812 109,688 - Parks and recreation 53,50065,00058,809 6,19124,236 Total expenditures 311,500301,500169,233 132,26794,317 Revenues over (under) expenditures (86,500)(76,500)49,150 125,650126,479 Other financing sources (uses): Transfers out (242,000)(242,000)(242,000) - - Proceeds from the sale of capital assets27,717 27,71712,267 - - Total other finance sources (uses) (242,000)(242,000)(214,283) 27,71712,267 Net increase (decrease) in fund balance (328,500)$ $(318,500)(165,133)$ 153,367138,746 Fund balance (deficit) - January 11,009,872871,129 Fund balance (deficit) - December 31$844,739$1,009,875 112 CITY OF ANDOVER, MINNESOTA SPECIAL REVENUE FUND - CHARITABLE GAMBLING Statement 29 SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES - BUDGET AND ACTUAL For The Year Ended December 31, 2010 With Comparative Actual Amounts For The Year Ended December 31, 2009 Variance with Final Budget - Budgeted AmountsPositive2009 OriginalFinalActual(Negative)Actual Revenues: Investment income$200$200$(79)$ (279)$236 Miscellaneous 10,00010,0009,439 (561)9,268 Total revenues 10,20010,2009,360 (840)9,504 Expenditures: Current: General government 18,50018,50012,384 6,11620,340 Net increase (decrease) in fund balance$ (8,300)$(8,300)(3,024)$ 5,276(10,836) Fund balance (deficit) - January 15,60116,437 Fund balance (deficit) - December 31$2,577$5,601 113 CITY OF ANDOVER, MINNESOTA SPECIAL REVENUE FUND - CONSTRUCTION SEAL COATING Statement 30 SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES - BUDGET AND ACTUAL For The Year Ended December 31, 2010 With Comparative Actual Amounts For The Year Ended December 31, 2009 Variance with Final Budget - Budgeted AmountsPositive2009 OriginalFinalActual(Negative)Actual Revenues: Charges for services$ 86,000$86,000$46,376$ (39,624)$54,437 Investment income500500(380) (880)(344) Total revenues 86,50086,50045,996 (40,504)54,093 Expenditures: Current: Public works 86,00086,00054,182 31,81862,920 Net increase (decrease) in fund balance$500$500(8,186)$ (8,686)(8,827) Fund balance (deficit) - January 19,18118,008 Fund balance (deficit) - December 31$995$9,181 114 INTERNAL SERVICE FUNDS Internal Service Funds are used to account for the financing of goods or services provided by one department or agency to other departments or agencies of the government and to other government units, on a cost reimbursement basis. The City of Andover had the following Internal Service Funds during the year: Central Equipment Maintenance – This fund accounts for the maintenance of the equipment for the City. Risk Management – This fund accounts for the expenditures in payment of insurance deductibles, loss reduction, safety training and administrative expense. 115 CITY OF ANDOVER, MINNESOTA COMBINING STATEMENT OF NET ASSETS Statement 31 INTERNAL SERVICE FUNDS December 31, 2010 With Comparative Totals for December 31, 2009 Central EquipmentRiskTotals MaintenanceManagement20102009 Assets: Current assets: Cash and cash equivalents 164,734$ 205,975$$370,709$242,533 Accrued interest821643 1,464817 Prepaid items1,750 1,7501,750 - Inventories - at cost81,00081,00063,065 - Total assets248,305206,618454,923308,165 Liabilities: Current liabilities: Accounts payable26,67770527,38215,666 Due to other governmental units5,483 5,4832,855 - Salaries payable7,768475 8,2436,309 Total liabilities34,4456,66341,10824,830 Net assets: Unrestricted$213,860$199,955$413,815$283,335 116 CITY OF ANDOVER, MINNESOTA COMBINING STATEMENT OF REVENUES, EXPENSES AND Statement 32 CHANGES IN FUND NET ASSETS INTERNAL SERVICE FUNDS For The Year Ended December 31, 2010 With Comparative Totals For The Year Ended December 31, 2009 Central EquipmentRiskTotals MaintenanceManagement20102009 Operating revenues: User charges$679,226$325,221$1,004,447$961,722 Other42533,102 33,52734,933 Total operating revenues679,651358,3231,037,974996,655 Operating expenses: Personal services215,429146,010361,439325,777 Supplies242,8941,775244,669244,820 Other service charges98,551209,951308,502284,772 Total operating expenses556,874357,736914,610855,369 Operating income (loss)122,777587123,364141,286 Nonoperating revenues (expenses): Investment income5,1761,940 7,1162,824 Change in net assets127,9532,527130,480144,110 Net assets - January 185,907197,428283,335139,225 Net assets - December 31$213,860$199,955$413,815$283,335 117 CITY OF ANDOVER, MINNESOTA COMBINING STATEMENT OF CASH FLOWSStatement 33 INTERNAL SERVICE FUNDS For The Year Ended December 31, 2010 With Comparative Totals For The Year Ended December 31, 2009 Central Totals EquipmentRisk MaintenanceManagemen20102009 t Cash flows from operating activities: Receipts from customers and users$679,651$358,323$ 1,037,974$996,655 Payment to suppliers(347,248)(209,514) (556,762)(531,046) Payment to employees(213,565)(145,940) (359,505)(325,606) Net cash flows from operating activities118,8382,869 121,707140,003 Cash flows from noncapital financing activities: Receipt of advances from other funds-- -(60,000) Payment of advances to other funds-- -60,000 Net cash flows from noncapital financing activities-- - - Cash flows from investing activities: Investment income4,6001,869 6,4693,120 Net increase in cash and cash equivalents123,4384,738 128,176143,123 Cash and cash equivalents - January 141,296201,237 242,53399,410 Cash and cash equivalents - December 31$164,734$205,975$ 370,709$242,533 Reconciliation of operating income to net cash provided (used) by operating activities: Operating income (loss)$122,777$587$ 123,364$141,286 Adjustments to reconcile operating income (loss) to net cash flows from operating activities: Changes in assets and liabilities: Decrease (increase) in inventory(17,935)- (17,935)2,385 Increase (decrease) in accounts payable12,132(416) 11,716(6,594) Increase (decrease) in due to other governmental units-2,628 2,6282,755 Increase (decrease) in salaries payable1,86470 1,934171 Total adjustments(3,939)2,282 (1,657)(1,283) Net cash provided by operating activities$118,838$2,869$ 121,707$140,003 118 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 building and land development activities. 119 CITY OF ANDOVER, MINNESOTA COMBINING STATEMENT OF NET ASSETS Statement 34 FIDUCIARY FUNDS December 31, 2010 GeneralGeneral EscrowAgencyTotal Assets: Cash and investments 9,013$ 286,191$$ 295,204 Liabilities: Accounts payable 110 265375 Due to other governments-4646 Deposits payable8,903285,880 294,783 Total liabilities$9,013$286,191$ 295,204 120 CITY OF ANDOVER, MINNESOTA COMBINING STATEMENT OF CHANGES IN ASSETS AND LIABILITIES Statement 35 FIDUCIARY FUNDS For The Year Ended December 31, 2010 BalanceBalance January 1,December 31, 2010AdditionsDeletions2010 General Escrow Fund Assets: Cash and investments 16,498$ 32,682$$(40,167)$9,013 Liabilities: Accounts payable13120,995(21,016)110 Deposits payable16,36711,687(19,151)8,903 Total liabilities$16,498$32,682$(40,167)$9,013 General Agency Fund Assets: Cash and investments 233,423$ 1,066,283$$(1,013,515)$286,191 Liabilities: Accounts payable-450,450(450,185)265 Due to other governments-46 -46 Deposits payable233,423615,787(563,330)285,880 Total liabilities$233,423$1,066,283$(1,013,515)$286,191 Total Fiduciary Funds Assets: Cash and investments 249,921$ 1,098,965$$(1,053,682)$295,204 Liabilities: Accounts payable131471,445(471,201)375 Due to other governments-46 -46 Deposits payable249,790627,474(582,481)294,783 Total liabilities$249,921$1,098,965$(1,053,682)$295,204 121 - This page intentionally left blank - 122 OTHER FINANCIAL INFORMATION 123 CITY OF ANDOVER, MINNESOTA COMBINED SCHEDULE OF INDEBTEDNESS December 31, 2010 Authorize d IssueMaturityInterestand DateDateRateIssue GOVERNMENTAL ACTIVITIES: 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 revenue bonds36,445,000 Special Assessment Bonds: 2005A G.O. Improvement Bonds4/28/20052/1/20112.95-3.65%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 Bonds3/16/20042/1/20112.00-3.25%4,260,000 Total tax increment bonds5,790,000 Certificates of Indebtedness: 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 2008A G.O. Equipment Certificates9/23/20082/1/20123.50%630,000 2009A G.O. Equipment Certificates3/26/20092/1/20122.00-2.25%385,000 Total certificates of indebtedness2,235,000 Capital Improvement Bonds: 2004A G.O. Capital Improvement Bonds3/16/20042/1/20172.00-3.75%3,890,000 Permanent Improvement Revolving Bonds: 2003A Permanent Improvement Revolving Bonds6/1/20032/1/20102.00-2.60%4,580,000 2006A Permanent Improvement Revolving Bonds5/10/20062/1/20143.60-3.85%2,450,000 2010A Permanent Improvement Revolving Refunding Bonds 2/18/20102/1/20142.00%1,480,000 Total permanent improvement revolving bonds8,510,000 State Aid Bonds: 2001B State Aid Street Bonds6/5/20012/1/20102.90-5.00%2,755,000 2009A State Aid Street Refunding Bonds3/26/20092/1/20152.25-2.80%955,000 Total state aid bonds:3,710,000 Referendum Bonds: 2010A G.O. Open Space Referendum Bonds2/18/20102/1/20222.00 - 3.125%1,660,000 Total bonded indebtedness65,800,000 Compensated absences payable - Total governmental activities indebtedness65,800,000 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 2009A G.O. Water Revenue Bonds3/26/20092/1/20242.00-4.25%1,025,000 Total general obligation revenue bonds17,375,000 Compensated absences payable - Total business-type activities indebtedness17,375,000 Total City indebtedness$83,175,000 124 Exhibit 1 Principal Payments PriorCurrentOutstanding2011 Payment YearsYea12/31/10PrincipalInteresTotal rt $950,000$405,000$18,225,000$415,000$914,891$1,329,891 10,000,000424,227424,227 - - - 6,865,000291,982291,982 - - - 950,000405,00035,090,000415,0001,631,1002,046,100 1,110,0001,850,000600,000600,00010,200610,200 1,280,000250,000 - - - - 1,995,000530,0001,735,0001,735,00026,7621,761,762 3,275,000780,0001,735,0001,735,00026,7621,761,762 300,000160,000 - - - - 365,000195,000200,000200,0004,000204,000 150,000154,000326,000160,0008,610168,610 130,000255,000125,0004,331129,331 - 815,000639,000781,000485,00016,941501,941 1,115,000280,0002,495,000295,00080,142375,142 3,760,000820,000 - - - - 635,0001,815,000 - - - - 1,480,000355,00026,050381,050 - - 4,395,0002,635,0001,480,000355,00026,050381,050 1,155,0001,600,000-- - - 955,000215,00021,009236,009 - - 1,155,0001,600,000955,000215,00021,009236,009 1,660,00041,56541,565 - - - 12,815,0008,189,00044,796,0004,100,0001,853,7695,953,769 571,897 - - - - - 12,815,0008,189,00045,367,8974,100,0001,853,7695,953,769 2,045,000395,0007,340,000415,000342,507757,507 6,570,000266,146266,146 - - - 60,000965,00060,00031,38291,382 - 2,045,000455,00014,875,000475,000640,0351,115,035 132,544 - - - - - 2,045,000455,00015,007,544475,000640,0351,115,035 $14,860,000$8,644,000$60,375,441$4,575,000$2,493,804$7,068,804 125 CITY OF ANDOVER, MINNESOT A SCHEDULE OF TAX CAPACITY RATES AND LEVIESExhibit 2 Taxes Payable 20112010 Tax capacity values$26,225,722$28,726,619 Captured tax increment value(2,059,476)(2,284,466) Fiscal disparities - contribution(1,229,714)(1,179,032) Local taxable value22,936,53225,263,121 Fiscal disparities - distribution5,153,518 4,713,020 Adjusted tax capacit$28,090,050$29,976,141 y 20112010 dTax CapacityCertifiedTax Capacity Certifie LevyRateLevyRate General Revenue Levy: General Fund7,500,802$ 7,596,494$ Capital Equipment/Projects210,000 210,000 Parks Projects61,500 59,410 Road and Bridge1,064,959 1,003,056 Pedestrian Trail Maintenance54,926 51,773 Total General Revenue Levy8,892,18731.914% 8,920,73330.507% Debt Service Levy: 2004A G.O. Capital Improvement Bonds412,320 368,418 2004 EDA Public Facility Revenue Bonds960,858 934,203 2007A G.O. Equipment Certificate 208,000 - 2008A G.O. Equipment Certificate188,972 171,410 2009A G.O. Equipment Certificate142,783 130,738 2011 G.O. Equipment Certificate85,000 - Total Debt Service Levy1,789,9336.461% 1,812,7695.977% Lower Rum River Watershed 0.356%35,00035,000 0.330% Total10,717,12038.731%10,768,50236.814% Voter-Approved Open Space Referendum - MV139,1790.00567% 87,7970.00307% $10,856,299$10,856,299 126 CITY OF ANDOVER, MINNESOTA SCHEDULE OF DEFERRED TAX LEVIESExhibit 3 GENERAL OBLIGATION BONDS December 31, 2010 Tax Increment TaxesBondsCertificates of Indebtedness Payable2004B2008A2009ATotal 20111,761,762$ 168,905 $ $ 131,463$ 300,368 CapitalEDA Public Facility LeaseOpen Space ImprovementRevenueRefundingRefundingReferendumTotal TaxesBondsBondsBondsBondsBondsDeferred Tax Payable2004Aof 2004of 2006of 2007Total2010ALevies $694,891$3,173,729 2011$ 3 75,143$ 6 94,891$ -$ -$ 4 1,565 $1,258,664 2012 3 85,993 6 97,456 - - 697,456 1 75,215 $1,256,954 2013 3 90,905 6 93,534 - - 693,534 1 72,515 $1,206,839 2014 4 04,596 2 69,373 212,114 145,991 627,478 1 74,765 $1,223,926 2015 4 17,000 - 371,528 258,483 630,011 1 76,915 $1,229,103 2016 4 23,050 - 372,828 259,283 632,111 1 73,942 $1,233,444 2017 4 27,875 - 369,589 260,323 629,912 1 75,657 2018$805,678 - - 369,064 259,773 628,837 1 76,841 2019$810,318 - - 368,628 264,183 632,811 1 77,507 2020$803,566 - - 372,525 258,214 630,739 1 72,827 2021$801,447 - - 366,328 262,249 628,577 1 72,870 2022$798,722 - - 369,921 256,145 626,066 1 72,656 2023$623,254 - - 370,234 253,020 623,254 - 2024$629,630 - - 365,207 264,423 629,630 - 2025257,461$625,273 - - 367,812 625,273 - 2026$625,793 - - 364,346 261,447 625,793 - 2027$625,333 - - 363,444 261,889 625,333 - 2028$623,897 - - 359,127 264,770 623,897 - 2029$622,158 - - 362,690 259,468 622,158 - 2030$625,221 - - 363,030 262,191 625,221 - 2031$621,665 - - 359,379 262,286 621,665 - 2032$621,233 - - 362,592 258,641 621,233 - 2033$624,980 - - 362,313 262,667 624,980 - 2034$1,242,338 - - 563,660 391,111 954,771 2 87,567 $2,824,562$ 15,575,6315,484,018$$2,250,842$22,713,165 $ 2 ,355,254$ 7 ,736,359 127 CITY OF ANDOVER, MINNESOTA SCHEDULE OF FUND TRANSFERSExhibit 4 December 31, 2010 TransfeTransfe rr InOu t General Fund Water EF$150,250 n $ -General Fund Admin Allocatio Sewer EF46,680 n -General Fund Admin Allocatio Total General Fund196,930 - Special Revenue Funds (SRF) Community Center SR F 2004 EDA Public Facility Lease Revenue Bond DSF401,481Debt Service Allocatio n - Capital Equipment Reserve SRF Water Trunk CPF Water Tower Rehabilitatio242,000 n - Total Special Revenue Funds643,481 - Debt Service Funds (DSF) 2001B State Aid Bonds DSF Road and Bridge CPF498,117Debt Service Allocatio n 2003A PIR Bonds DSF PIR CPF814,826 n -Debt Service Allocatio 2003B G.O. TIF Refunding Bonds DSF TIF Projects CPF244,770 n -Debt Service Allocatio 2004 EDA Public Facility Lease Revenue Bonds DSF Community Center SR401,481 Fn -Debt Service Allocatio 2004B G.O. TIF Refunding Bonds DSF TIF Projects CPF585,000 n -Debt Service Allocatio 2005A G.O. Improvement Bonds DS F TIF Projects CPF1,191,046 n -Debt Service Allocatio 2006A PIR Bonds DSF PIR CPF355,624 n -Debt Service Allocatio 2006B G.O. Capital Note DSF Building CPF73,131Close Debt Service Fun d - 2010A PIR Refunding Bonds DSF PIR CPF20,000 n -Debt Service Allocatio Total Debt Service Funds 73,1314,110,864 Capital Projects Funds (CPF) Water Trunk CPF Capital Equipment Reserve SRF242,000 n -Water Tower Rehabilitatio Water EF89,191Debt Service Allocatio n - 242,00089,191 Sewer Trunk CPF Sewer EF400,000 e -Replacement Reserv Road and Bridge CPF130,439Project Reimbursemen t - $400,000$130,439 128 CITY OF ANDOVER, MINNESOTA SCHEDULE OF FUND TRANSFERSExhibit 4 December 31, 2010(Continued) Capital Projects Funds (CPF) (continued) Road and Bridge CPF Sewer Trunk CPF$130,439 t $ -Project Reimbursemen TIF Projects CPF124,238 t -Project Reimbursemen 2001B State Aid Bonds DSF498,117Debt Service Allocatio n - 254,677498,117 Park Dedication CPF TIF Projects CPF960,726 f -Special Assessment Payof Building CPF 2006B G.O. Capital Note DSF73,131 d -Close Debt Service Fun TIF Projects CPF 2003B G.O. TIF Refunding Bonds DSF Debt Service Allocatio244,770 n - 2004B G.O. TIF Refunding Bonds DSF Debt Service Allocatio585,000 n - 2005A G.O. Improvement Bonds DS1,191,046Debt Service Allocatio Fn - Road and Bridge CPF124,238Project Reimbursemen t - Park Dedication CPF960,726Special Assessment Payof f - 3,105,780 - PIR CPF 2003A PIR DSF814,826Debt Service Allocatio n - 2006A PIR DSF355,624Debt Service Allocatio n - 2010A PIR Refunding Bonds DSF Debt Service Allocatio20,000 n - 1,190,450 - Total Capital Projects Funds1,930,5345,013,977 Enterprise Funds Water EF Water Trunk CPF89,191 n -Debt Service Allocatio General Fun150,250General Fund Admin Allocatio dn - 89,191150,250 Sewer EF General Fun46,680General Fund Admin Allocatio dn - Sewer Trunk CPF400,000Replacement Reserv e - 446,680 - Total Enterprise Funds89,191596,930 Total All Funds$6,327,519$6,327,519 129 - This page intentionally left blank - 130 III.STATISTICAL SECTION This part of the City of Andover’s comprehensive annual financial report presents detailed information as a context for understanding what the information in the financial statements, note disclosures, and required supplementary information says about the City’s overall financial health. Contents Page Financial Trends 132 These tables contain trend information to help the reader understand how the City’s financial performance and well-being have changed over time. Revenue Capacity137 These tables contain information to help the reader assess the City’s most significant local revenue source, the property tax. Debt Capacity143 These tables present information to help the reader assess the affordability of the City’s current levels of outstanding debt and the City’s ability to issue additional debt in the future. 148 Demographic and Economic Information These tables offer demographic and economic indicators to help the reader understand the environment within which the City of Andover’s financial activities take place. Operating Information150 These tables contain service and infrastructure data to help the reader understand how the information in the City’s financial report relates to the services the City provides and the activities it performs. 131 CITY OF ANDOVER, MINNESOTA NET ASSETS BY COMPONENTTable 1 Last Five Fiscal Years (accrual basis of accounting) 20062007200820092010 Governmental Activities Invested in capital assets, net of related debt74,858,759$ $ 77,285,905$ 79,644,769$ 83,394,872$ 87,206,607 Restricted 5,441,376 7,763,716 8,345,185 8,252,691 6,364,714 Unrestricted 18,461,454 21,294,876 19,904,063 19,442,008 21,071,212 Total governmental activities net assets 98,761,589 106,344,497 107,894,017 111,089,571 114,642,533 Business-Type Activities Invested in capital assets, net of related debt38,419,302 38,580,630 37,606,052 36,939,962 36,140,050 Unrestricted 3,281,875 3,659,887 4,005,471 4,875,384 4,912,822 Total business-type activities net assets 41,701,177 42,240,517 41,611,523 41,815,346 41,052,872 Primary Government Invested in capital assets, net of related debt113,278,061 115,866,535 117,250,821 120,334,834 123,346,657 Restricted 5,441,376 7,763,716 8,345,185 8,252,691 6,364,714 Unrestricted 21,743,329 24,954,763 23,909,534 24,317,392 25,984,034 Total primary government net assets$ 140,462,766$ 148,585,014$ 149,505,540$ 152,904,917$ 155,695,405 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) 20062007200820092010 Expenses Governmental activities: General government$ 2,637,584$ 2,509,011$ 2,505,105$ 2,413,916$ 2,398,007 Public safety 3,443,285 3,851,086 4,035,884 4,237,401 4,157,050 Public works 3,031,459 3,783,509 5,144,197 3,776,367 3,445,403 Parks and recreation 2,442,305 2,954,753 2,963,218 2,880,595 3,447,730 Recycling 91,378 94,929 85,397 86,949 108,785 Economic development 626,103 2,265,605 540,285 481,632 654,961 Interest on long-term debt 1,668,444 2,303,567 2,219,130 2,146,960 1,936,731 Total governmental activities expenses 13,940,558 17,762,460 17,493,216 16,023,820 16,148,667 Business-type activities: Water 2,232,144 2,587,847 2,563,781 2,594,713 2,585,469 Sewer 1,585,548 1,631,224 1,794,891 1,831,505 1,915,072 Storm sewer 408,003 537,151 521,975 536,619 532,168 Total business-type activities expenses 4,225,695 4,756,222 4,880,647 4,962,837 5,032,709 Total primary government expenses 18,166,253 22,518,682 22,373,863 20,986,657 21,181,376 Program Revenues Governmental activities: Charges for services: General government 471,573 785,600 647,081 483,639 454,419 Public safety 804,447 662,299 721,289 412,113 479,516 Public works325,672 408,656 427,043 316,451 337,360 Parks and recreation 749,407 859,531 1,049,032 1,495,779 1,432,672 Recycling 35,379 33,15835,89729,479 40,504 Economic development 218,605 182,535 199,840 185,539 211,121 Operating grants and contributions 959,286 1,129,099 917,618 966,635 1,214,066 Capital grants and contributions 4,920,694 8,794,164 1,069,607 1,631,929 1,461,834 Total governmental activities program revenue8,485,063 12,855,042 5,067,407 5,521,564 5,631,492 Business-type activities: Charges for services: Water 1,768,388 2,025,452 1,987,432 2,127,676 2,077,305 Sewer 1,691,728 1,771,670 1,869,327 1,967,997 1,964,117 Storm sewer 287,397 288,372 297,125 325,392 338,823 Operating grants and contributions 9,380 - - - - Capital grants and contributions 2,761,282 158,113 142,133 793,589 - Total business-type activities program revenue6,508,795 4,243,607 4,296,017 5,214,654 4,389,625 Total primary government program revenues 14,993,858 17,098,649 9,363,424 10,736,218 10,021,117 Net (Expense)/Revenue Governmental activities (5,455,495) (4,907,418) (12,425,809) (10,502,256) (10,517,175) Business-type activities 2,283,100 (512,615) (584,630) 251,817 (643,084) Total primary government net expense$ (3,172,395)$ (5,420,033)$(13,010,439)$ (10,250,439)$ (11,160,259) 133 CITY OF ANDOVER, MINNESOTA CHANGES IN NET ASSETSTable 2 Last Five Fiscal Years(Continued) (accrual basis of accounting) 20062007200820092010 General Revenues and Other Changes in Net Assets Governmental activities: Taxes: General property taxes8,084,559$ 8,897,755$ 9,752,701$ 10,175,519$ 10,336,536$ Tax increment collections 1,562,131 1,661,204 1,783,270 1,930,669 2,074,589 Unrestricted grants and contributions 77,642 486,626 274,402 131,084 84,875 Unrestricted investment earnings 1,019,304 1,967,583 1,514,012 1,032,507 1,114,451 Gain on sale of capital assets 219,910 191,735 234,070 6,144 22,500 Transfers (704,042) (714,577) 416,874 421,887 437,186 Total governmental activities 10,259,504 12,490,326 13,975,329 13,697,810 14,070,137 Business-type activities: Unrestricted investment earnings 87,376 337,378 372,510 373,893 317,796 Gain on sale of capital assets 5,900 - - - - Transfers 704,042 714,577 (416,874) (421,887) (437,186) Total business-type activities 797,318 1,051,955 (44,364) (47,994) (119,390) Total primary government 11,056,822 13,542,281 13,930,965 13,649,816 13,950,747 Change in Net Assets Governmental activities 4,804,009 7,582,908 1,549,520 3,195,554 3,552,962 Business-type activities 3,080,418 539,340 (628,994) 203,823 (762,474) Total primary government$ 7,884,427$ 8,122,248$ 920,526$ 3,399,377$ 2,790,488 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) 20062007200820092010 General Fund Reserved$144,496$208,216$193,805$207,515$206,666 Unreserved3,248,3173,682,2443,981,2304,120,8974,904,239 Total general fund3,392,8133,890,4604,175,0354,328,4125,110,905 All Other Governmental Funds Reserved for: Special revenue funds46,84912,45717,20623,69622,987 (1)(2) 21,359,06220,132,60320,305,48218,443,082 Debt service funds11,342,527 Capital project funds633,078735,141604,494427,017792,421 Unreserved reported in: Designated: Special revenue funds1,569,7921,685,0451,540,7201,691,6251,554,981 Capital project funds14,433,93412,011,08313,483,42614,839,78914,775,282 Undesignated: Special revenue funds(323,404)(480,592)(599,461)(458,423)(419,062) Capital project funds(54,174)(55,945)(67,297)(669,523)(61,142) Total all other governmental funds27,648,60235,266,25135,111,69136,159,66335,108,549 Total governmental funds$31,041,415$39,156,711$39,286,726$40,488,075$40,219,454 (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 $19,580,000 Public Facility Lease Revenue Bonds, Series 2004. 135 CITY OF ANDOVER, MINNESOTA CHANGES IN FUND BALANCES - GOVERNMENTAL FUNDSTable 4 Last Five Fiscal Years (modified accrual basis of accounting) 20062007200820092010 Revenues General property taxes$ 8,057,592$ 8,833,249$ 9,695,103$ 10,168,143$ 10,267,085 Tax increment collections 1,546,394 1,659,222 1,762,119 1,951,343 2,015,123 Licenses and permits 598,094 475,893 525,339 291,903 329,901 Intergovernmental 2,661,726 1,644,914 1,175,205 1,654,614 1,989,420 Special assessments 1,289,590 3,342,039 1,638,006 1,421,591 1,725,695 Charges for services 1,770,156 2,035,735 1,724,052 1,579,659 1,604,681 Fines 91,490 101,445 104,930 110,779 104,780 Investment income 1,014,801 1,962,379 1,508,265 1,029,683 1,107,335 Miscellaneous: Park dedication fees 626,567 113,013 133,585 41,216 32,649 Connection charges 372,133 829,624 254,903 20,119 48,086 Other 395,789 621,798 800,857 1,018,853 1,034,223 Total revenues 18,424,332 21,619,311 19,322,364 19,287,903 20,258,978 Expenditures General government 2,343,332 2,399,297 2,366,574 2,242,662 2,255,793 Public safety 3,268,236 3,580,240 3,796,965 4,015,410 3,920,073 Public works 2,817,475 3,491,353 4,843,288 3,545,132 3,204,444 Parks and recreation 1,599,885 1,825,706 1,953,8221,891,125 2,433,495 Recycling 90,590 94,669 86,631 85,527 109,034 Economic development 626,103 2,265,605 538,293 477,648 650,977 Unallocated 8,454 6,915 17,999 19,54024,953 Capital outlay987,075 2,803,485 1,460,662 1,519,944 1,324,881 Debt service: Principal 5,254,000 3,275,000 3,460,000 3,865,000 5,779,000 Interest 1,683,599 2,089,857 2,253,223 2,178,233 2,030,267 Other 253,134 167,187 15,645 39,265 29,939 Construction/acquisition costs 4,579,910 360,742 - - 101,153 Total expenditures 23,511,793 22,360,056 20,793,102 19,879,486 21,864,009 Revenues over (under) expenditures (5,087,461) (740,745) (1,470,738) (591,583) (1,605,031) Other Financing Sources (Uses) Transfers in 522,000 578,925 580,343 587,530 627,530 Transfers out (167,424) (57,671) (163,469) (165,643) (89,191) Bonds issued 2,910,000 760,000 630,000 385,000 1,660,000 Refunding bonds issued 10,000,000 6,865,000 - 955,000 1,480,000 Payment to refunded bonds escrow agent - - - - (2,416,834) Bond premium - 3,401 - 18,781 31,688 Proceeds from the sale of capital assets603,959706,386553,87912,26443,217 Total other financing sources (uses)13,868,5358,856,0411,600,7531,792,9321,336,410 Net increase (decrease) in fund balances$8,781,074$8,115,296$130,015$1,201,349$(268,621) Debt service as a percentage of noncapital expenditures39.21%28.19%29.58%32.99%38.27% 136 CITY OF ANDOVER, MINNESOTA ASSESSED AND ESTIMATED ACTUAL VALUE OF TAXABLE PROPERTYTable 5 Last Ten Fiscal Years Real PropertyPersonal PropertyTotalTotalNet Tax Capacity TaxableNet TaxTaxableNet TaxTaxableNet TaxDirectas a Percentage YearMarket ValueCapacityMarket ValueCapacityMarket ValueCapacityTax Rateof Market Value 20011,354,146,000$$18,348,662$18,285,500$ 620,797$1,372,431,500$18,969,45922.736%1.38% 20021,539,835,500 15,336,075 17,999,800 1,557,835,300 15,695,61533.511%1.01% 359,540 20031,699,227,100 17,549,064 20,202,300 1,719,429,400 17,951,90433.376%1.04% 402,840 20041,945,523,200 20,142,088 20,761,100 1,966,284,300 20,556,10431.584%1.05% 414,016 20052,222,567,900 23,027,376 21,718,900 2,244,286,800 23,461,04531.414%1.05% 433,669 20062,521,587,700 26,204,279 22,003,500 2,543,591,200 26,643,63531.556%1.05% 439,356 20072,778,464,100 28,897,916 21,998,500 2,800,462,600 29,337,16231.003%1.05% 439,246 20082,948,801,500 30,749,076 20,837,800 2,969,639,300 31,165,07631.276%1.05% 416,000 20092,961,410,400 31,023,349 21,185,200 2,982,595,600 31,446,28032.181%1.05% 422,931 20102,685,802,600 28,233,178 24,712,000 2,710,514,600 28,726,61936.484%1.06% 493,441 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 2002 through 2011 Direct City GeneralDebtLower TaxesOperServiceRumOverlapping Governments PayableLevyLevyWatershedTotalSchoolCountyOtherTotalTotal 200229.863%3.263%0.385%33.511%29.070%37.976%3.745%70.791%104.302% 200328.899%4.138%0.339%33.376%27.802%37.714%3.755%69.271%102.647% 200426.651%4.547%0.394%31.592%21.218%35.340%3.482%60.040%91.632% 200524.182%6.895%0.338%31.415%21.492%33.080%4.021%58.593%90.008% 200624.790%6.757%0.347%31.894%20.046%32.096%3.755%55.897%87.791% 200724.948%6.055%0.324%31.327%19.337%30.675%3.671%53.683%85.010% 200824.962%6.333%0.308%31.603%16.962%31.041%4.604%52.607%84.210% 200925.755%6.426%0.303%32.484%18.247%32.051%3.251%53.549%86.033% 201030.507%5.977%0.330%36.814%20.236%35.273%3.436%58.945%95.759% 201131.914%6.461%0.356%38.731%24.023%39.884%4.872%68.779%107.510% Source : Anoka County Property Tax Division 138 CITY OF ANDOVER, MINNESOTA PROPERTY TAX LEVIES AND COLLECTIONSTable 7 Last Five Fiscal Years Collected Within the Fiscal Year of Levy TotalMarket ValueCollections InTotal Collections to Date TaxTaxHomesteadTotalPercentageSubsequentPercentage YearLevyLevyCreditCollectedof LevyYearsAmountof Levy 20068,550,919$ $ 7,977,278$ *7,978,9781,700$ 93.31%106,329$ $ 8,085,30794.55% 20079,316,427 8,738,606 410,519 9,149,12598.20%141,186 9,290,31199.72% 200810,153,718 9,554,131 *9,752,345198,214 96.05%158,525 9,910,87097.61% 200910,593,520 9,992,240 *10,046,86954,629 94.84%100,434 10,147,30395.79% 201010,856,299 10,125,752 *10,129,6573,905 93.31% Not Available * Included in the total tax levy is approximately $400,000 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. Information for years prior to 2006 is not available. 139 CITY OF ANDOVER, MINNESOTA PRINCIPAL TAXPAYERSTable 8 Current Year and Nine Years Ago 20102001 NetPercentage ofNetPercentage of TaxTotal CityTaxTotal City TaxpayersCapacityRankTax CapacityCapacityRankTax Capacity Connexus Energy$224,53210.78%$324,7691.71% 1 Target Corporation220,05220.77% - Minnegasco, Inc.171,91030.60%143,0850.75% 3 Andover Limited Partnership169,04640.59%257,6721.36% 2 Presbyterian Homes of Andover161,50250.56% - Andover Station LLC141,12460.49% - Great River Energy137,26470.48% - Fairbanks Properties LLC85,15880.30% - Columbia Park Properties78,38890.27%66,3640.35% 6 Rademacher Fam Ltd Partnership77,362100.27% - 116 LLC-131,7940.69% 4 Individual - Commercial/Industrial-87,6730.46% 5 Northern States Power-51,4730.27% 7 Health Partners-44,3220.23% 8 MN Interstate Pipeline-40,0520.21% 9 Minnesota Pipeline Company-38,9980.21% 10 Total$1,466,3385.10%$1,186,2026.25% Net Tax Capacity$28,726,619$18,969,459 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 Commercial / IndustrialResidential Commercial / YeaIndustrial (1)ResidentiaTotaPermitsValuPermitsValu rllee 2001$95,215,200$1,277,216,300$ 81,372,431,500 21,086,481$$43,378,128 2 85 2002107,671,6001,450,163,7001,557,835,30031,848,000 1910,616,851 2 18 2003127,728,4001,778,643,8001,906,372,2004,764,04628,973,300 13 1 82 2004144,629,1001,936,079,4002,080,708,50036,224,546 1619,926,817 2 51 2005168,684,2002,174,640,0002,343,324,2006,571,67134,309,393 20 2 26 2006191,931,8002,433,776,2002,625,708,00025,236,120 81,791,896 1 53 2007211,760,9002,663,389,9002,875,150,800 92,403,831 9 118,347,873 2008233,801,7002,813,037,2003,046,838,900 1116,878,603 4 911,116,400 2009248,129,5002,807,144,5003,055,274,000767,4309,246,347 11 4 7 2010229,977,8002,526,288,9002,756,266,7001,247,106 11 7 114,700,800 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 CollectionsAssessments CurrentCurrentPercent ofDelinquentTotalas a Percent ofOutstandingas a Percent of AssessmentsAssessmentsAssessmentsAssessmentAssessmentCurrentDelinquentCurrent YearDue (1)CollectedCollectedCollectionsCollectionsAssessments DueAssessmentsAssessments Due 94.95%$ 5,93396.32%$ 26,2646.08% 2001$ 432,207$ 4 10,380$ 4 16,313 93.38% 5,69495.11% 37,40411.37% 2002 328,831 3 07,051 3 12,745 98.03% 5,91799.14% 49,3299.25% 2003 533,340 5 22,851 5 28,768 98.39% 7,921102.51% 15,1577.88% 2004 192,373 1 89,279 1 97,200 98.34% 4,002100.58% 22,21712.45% 2005 178,434 1 75,471 1 79,473 85.41% 4,79087.53% 51,72122.95% 2006 225,365 1 92,477 1 97,267 87.14% 12,46094.75% 76,42046.65% 2007 163,817 1 42,750 1 55,210 90.20% 1,47990.60% 174,81047.74% 2008 366,203 3 30,304 3 31,783 104.16%36,693 115.65% 202,99963.55% 2009 319,448 3 32,739 3 69,432 96.54% 61,247115.36% 218,86067.27% 2010 325,361 3 14,097 3 75,344 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 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% 764.69 2007 30,263 2,875,150,800 40,880,000 (17,822,418) 23,057,5820.80% 761.91 2008 31,023 3,046,838,900 40,565,000 (17,939,959) 22,625,0410.74% 729.30 2009 31,298 3,055,274,000 39,690,000 (17,973,588) 21,716,4120.71% 693.86 2010 31,400 2,756,266,700 40,026,000 (17,768,743) 22,257,2570.81% 708.83 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, 2010 Gross General ObligationPercentageNet Amount Bonded DebtApplicableApplicable Outstandingto Cityto City Direct: City of Andover$ 40,026,000(1)100.0000%$ 40,026,000 Overlapping: Anoka County161,125,000(2)8.5787%13,822,350 ISD No. 11 Anoka-Hennepin135,011,165(2)12.4703%16,836,352 ISD No. 15 St. Francis44,585,000(2)6.4674%2,883,488 Metropolitan Council167,600,000(2)0.8436%1,413,839 Total Overlapping Debt34,956,029 Total Overlapping and Direct Debt$ 74,982,029 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 20062007200820092010 Estimated Taxable Market Value2,543,591,200$ $ 2,800,462,600$ 2,969,639,300$ 2,982,595,600$ 2,710,514,800 Debt limitation: Debt limit percent2%2%3%3%3% Debt limit in dollars 50,871,824 56,009,252 89,089,179 89,477,868 81,315,444 Debt applicable to limit: Total bonded debt 59,665,000 70,240,000 67,050,000 65,175,000 59,671,000 Less: Nonapplicable debt G.O. water revenue bonds (8,815,000) (15,040,000) (14,680,000) (15,330,000) (14,875,000) Special assessment bonds (3,560,000) (3,560,000) (3,015,000) (2,450,000) (600,000) Tax increment bonds (4,715,000) (4,010,000) (3,275,000) (2,515,000) (1,735,000) Permanent improvement revolving bonds (6,660,000) (4,835,000) (3,755,000) (2,635,000) (1,480,000) State aid bonds (2,065,000) (1,915,000) (1,760,000) (2,555,000) (955,000) Less: Cash and investments in related debt service funds (10,739,510) (17,822,418) (17,939,959) (17,973,588) (17,768,743) Total debt applicable to limitation 23,110,490 23,057,582 22,625,041 21,716,412 22,257,257 Legal debt margin$ 27,761,334$ 32,951,670$ 66,464,138$ 67,761,456$ 59,058,187 Total debt applicable to the limit as a percentage of debt limit45.43%41.17%25.40%24.27%27.37% 145 CITY OF ANDOVER, MINNESOTA PLEDGED-REVENUE COVERAGETable 14 Last Five Fiscal Years Water Revenue Bonds Water Enterprise Fund Less:Net FiscalOperatingOperatingTransfersAvailableDebt Service YearRevenuesExpenses (1)In (2)RevenuePrincipalInterestCoverage 2006$1,768,388$1,139,500$167,474$796,362$335,000$411,720 1.07 20072,025,4521,264,37057,671818,753345,000395,775 1.11 20081,987,4321,218,444163,469932,457360,000382,753 1.26 20092,127,6761,264,398165,6431,028,921375,000393,828 1.34 20102,077,3051,249,42089,191917,076455,000384,713 1.09 2004 EDA Public Facility Lease Revenue Bonds (3) Community Center Special Revenue FundDebt Service Less:NetGeneral FiscalOperatingOperatingAvailableProperty TaxDebt Service YearRevenueExpensesRevenueRevenuePrincipalInterestCoverage 2006$741,241$748,146$(6,905)$800,349$185,000$964,102 0.69 2007876,136799,90976,227844,123185,000959,731 0.80 2008998,287900,22898,059890,709190,000954,381 0.86 20091,422,614903,446519,168940,640390,000944,806 1.09 20101,351,069882,364468,705885,349405,000930,684 1.01 Special Assessment and Permanent Improvement Revolving Bonds Special FiscalAssessmentDebt Service YearRevenuePrincipalInterestCoverage 2006786,918$$1,765,000$289,1740.38 20072,966,3801,825,000314,1521.39 20081,184,9281,625,000243,3400.63 2009993,7031,685,000198,2320.53 20101,210,6413,005,000110,8220.39 Tax Increment Financing Bonds Tax FiscalIncrementDebt Service YearRevenuePrincipal (4)InterestCoverage 2006$1,414,254$2,350,000$193,0450.56 20071,474,219705,000120,5451.79 20081,614,651735,000105,0331.92 20091,790,279760,00087,6202.11 20101,849,644780,00068,3132.18 Notes:Details regarding the City's outstanding debt can be found in the notes to the financial statements. (1) Operating expenses includes transfers out because the administrative allocation and replacement reserve transfer is built into the user fees. Operating expenses does not include interest and depreciation. (2) The transfer in is included because a portion of the trunk connection charge associated with adding additional users to the water system is designated to compensate prior years capital investment in water utility infrastructure and the treatment plant. (3) Half of the facility financed by these bonds is leased to the Greater Minneapolis YMCA, their lease payments started in 2008. Future YMCA lease payments will significantly reduce the City's obligation on debt service payments. (4) Net of crossover refundings. 146 CITY OF ANDOVER, MINNESOTA OUTSTANDING DEBT BY TYPETable 15 Last Five Fiscal Years 20062007200820092010 City of Andover's Outstanding Debt Governmental activities Revenue bonds$ 29,395,000$36,075,000$ 35,885,000$ 35,495,000$ 35,090,000 Special assessment bonds 3,560,000 3,560,000 3,015,000 2,450,000 600,000 Tax increment bonds 4,715,000 4,010,000 3,275,000 2,515,000 1,735,000 Certificates of indebtedness 580,000 1,280,000 1,525,000 1,420,000 781,000 Capital improvement bonds 3,875,000 3,525,000 3,155,000 2,775,000 2,495,000 Permanent improvement revolving bonds 6,660,000 4,835,000 3,755,000 2,635,000 1,480,000 State aid bonds 2,065,000 1,915,000 1,760,000 2,555,000 955,000 Referendum bonds - - - 1,660,000 - Compensated absences 459,299 509,851 504,893 541,606 571,898 Total governmental activities 51,309,299 55,709,851 52,874,893 50,386,606 45,367,898 Business-type activities G.O. revenue bonds 8,815,000 15,040,000 14,680,000 15,330,000 14,875,000 Compensated absences 74,675 90,228 107,333 120,546 132,544 Total business-type activities 8,889,675 15,130,228 14,787,333 15,450,546 15,007,544 Total outstanding debt$ 60,198,974$70,840,079$ 67,662,226$ 65,837,152$ 60,375,442 Total outstanding debt as a percentage of personal income7.06%8.05%7.69%7.18%6.56% Total outstanding debt per capita$ 1,992$ 2,341$ 2,181$ 2,104$ 1,923 147 CITY OF ANDOVER, MINNESOT A DEMOGRAPHIC AND ECONOMIC STATISTICSTable 16 Last Nine Years City of AndoverAnoka County PersonalPersonalPer CapitaUnemployment YearPopulationIncome (2)Population (3)Income (2)Income (3)Percentage $ 714,994,816$7,650,898,5124.5% 2002 2 8,664 306,723$ 2 4,944 726,687,2297,808,491,4494.8% 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 7,395 852,774,1749,227,100,0854.0% 2006 3 0,222 327,005 2 8,217 879,549,0039,482,028,2654.6% 2007 3 0,263 326,252 2 9,064 880,029,4419,278,562,0305.5% 2008 3 1,023 327,090 2 8,367 917,375,6789,719,000,0028.5% 2009 3 1,298 331,582 2 9,311 920,930,6009,834,248,3327.1% (1) 2010 3 1,400 335,308 2 9,329 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 Current Year and Nine Years Ago 20102001 PercentagePercentage of Total Cityof Total City TaxpayerEmployeesRankEmploymentEmployeesRankEmployment 30.9%23.5% Anoka Hennepin I.S.D. No. 11550 (2) 1 3 08 1 Bunker Hills Regional Park/Activity Center 22712.7%3.1% 2 4 0 1 0 11.2%13.0% Kottkes' Bus Service, Inc. 200(1) 3 1 70 3 Target 167(3)9.4% 4 - Anoka County Highway Department 1428.0%7.6% 5 1 00 4 Meadow Creek Christian School 1277.1%6.2% 6 8 1 5 Columbia Park Medical Group - Andover 1166.5% 7 - Farmstead at Andover 945.3% 8 - City of Andover 844.7%5.0% 9 6 6 7 McDonald's 754.2%6.1% 1 0 8 0 6 Festival Foods13.8% - 1 80 2 Ace Solid Waste, Inc.3.8% - 5 0 8 POV's Sports Bar & Grill3.1% - 4 0 1 0 Larson Plumbing & Heathing3.3% - 4 3 9 Ed Fields & Sons, Inc.7.6% - 1 00 4 Riccar Heating & Air Conditioning3.8% - 5 0 8 Total 1,782100.0%100.0% 1 ,308 Source : Minnesota Department of Employment and Economic Development (1) Number of employees as of March, 2006. (2) Number of district employees that work in school buildings located within the City. (3) Number of employees as of January, 2009. 149 CITY OF ANDOVER, MINNESOTA FULL TIME EQUIVALENT EMPLOYEESTable 18 CITY GOVERNMENT EMPLOYEES BY FUNCTION/PROGRAM Last Five Fiscal Years Function/Program20062007200820092010 Governmental: Administration 1 .30 1 .45 1 .15 1 .15 1 .15 Human resources 0 .07 0 .02 0 .01 0 .02 0 .02 City clerk 1 .84 1 .91 1 .43 1 .29 1 .34 Elections 0 .10 0 .10 0 .08 0 .10 0 .10 Financial administration 2 .85 2 .35 1 .97 1 .85 1 .85 Information systems 0 .91 0 .91 0 .91 0 .91 0 .91 Planning and zoning 4 .75 4 .75 4 .25 3 .70 3 .70 Engineering 4 .57 4 .78 4 .41 4 .28 4 .33 Facility Management - - - 0 .33 0 .20 EDA general 0 .70 0 .70 0 .85 0 .90 0 .85 LRRWMO 0 .21 0 .21 0 .21 0 .20 0 .20 Risk management 0 .10 0 .10 0 .10 0 .10 0 .10 Public Safety: Fire 3 .10 3 .10 3 .10 3 .10 3 .10 Protective inspection 6 .03 6 .08 5 .78 3 .93 3 .93 Civil defense 0 .05 0 .05 0 .05 0 .05 0 .05 Public Works: Streets and highways 5.10 6 .12 6 .20 6 .00 5 .05 Snow and ice 3 .27 3 .49 3 .21 2 .45 2 .45 Street signs 1.31 1 .35 1 .44 1.41 1 .41 Forestry 0 .10 - - - - ROW management / utility 0 .85 0 .60 0 .65 0 .50 0 .20 Water 5 .57 4 .78 4 .84 4 .63 4 .63 Sewer 2 .97 3 .18 3 .24 3 .38 3 .38 Storm sewer 2 .01 1 .95 2 .20 2 .55 2 .55 Central equipment 2 .92 2 .96 2 .96 2 .87 2 .90 Park & Recreation: Park and recreation 7 .33 7 .05 6 .85 6 .66 6 .71 Community center 2 .12 2 .12 2 .23 2 .96 3 .11 Recycling 0 .93 0 .88 0 .86 1 .23 1 .23 6 2.12 6 1.16 5 8.75 5 5.50 5 5.50 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/Program20062007200820092010 General government: Registered voters 16,813n/a 1 7,830n/a 1 8,713 Voters registering election day 2,200n/a 2 ,727n/a 1 ,020 Number of precinctsn/an/a 10 1 0 1 0 Public safety: Police: Number of calls for services 11,516 12,150 11,617 11,075 11,441 Number of traffic citations 1,673 1,710 2,475 2,848 1,926 Number of patrol hours 30,856 30,240 30,240 30,240 30,240 Fire: Fire responses 443 366 326 305 323 Emergency medical responses 645 736 797 754 722 Protective inspections: Inspections 8,128 5,456 5,020 3,716 2,860 Residential permits 153 91 49 42 71 Other permits 2,481 2,095 1,862 1,543 1,773 Public works: Streets and highways: Asphalt streets maintained (miles) 187 189 189 189 190 Gravel roads maintained (miles) 8 8 8 8 8 Cul-de-sacs and dead ends maintained 329 330 336 338 338 Parks and recreation: Number of City parks 63 65 66 66 47 Total acreage mowed 200 297 297 293 293 Ballfields maintained 24 27 28 28 28 Number of playgrounds 35 37 37 37 38 Soccer fields maintained 16 16 19 19 19 Trail maintained (miles)3535 23 35 35 Community center bookings (hrs): Fieldhouse 7,450 8,514 8,282 9,718 11,099 Ice arena 2,405 2,497 2,393 2,640 2,583 Water: New connections 197 63 33 145 56 Total customers 5,854 5,917 5,950 6,095 6,151 Annual consumption (thousands of gallons) 1,014,251 1,046,789 993,626 1,000,971 905,561 Sanitary Sewer: New connections 129 120 23 183 75 Total customers 6,657 6,777 6,800 6,983 7,058 Storm Sewer: Total customers 9,744 9,785 9,800 9,950 10,042 Storm sewer lines maintained (miles) 51 65 66 69 69 Source: Various City Departments 151 CITY OF ANDOVER, MINNESOTA CAPITAL ASSET STATISTICS BY FUNCTION/PROGRAMTable 20 Last Five Years Function/Program20062007200820092010 Public Safety: Fire: Stations 3 3 3 3 3 Fire vehicles 18 2 0 20 2 1 22 Protective inspections: Vehicles 3 3 3 3 3 Public Works: Streets and Highways: Streets (miles) 187 1 89 189 1 89 190 Street lights 1 ,187 1,204 1 ,212 1,215 1 ,218 Traffic signals 22 2 2 23 2 3 24 Parks and Recreation: Parks 63 6 5 66 6 6 47 Ball fields 24 2 7 28 2 8 28 Soccer fields 16 1 6 19 1 9 19 Playgrounds 35 3 7 37 3 7 38 Trails (miles) 23 3 5 35 3 5 35 Community centers 1 1 1 1 1 Water: Water treatment plants 1 1 1 1 1 Storage facilities 3 3 3 3 2 Water main (miles) 107 1 08 108 1 08 108 Connections 5,854 5,917 5 ,950 6,095 6 ,151 Sanitary sewer: Sewer main (miles) 90 9 1 91 9 1 93 Connections 6,657 6,777 6 ,800 6,983 7 ,058 Number of lift stations 9 9 9 9 9 Storm sewer: Storm sewer lines (miles) 51 6 5 66 6 9 69 152