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Home My WebLink About2012 CAFRCOMPREHENSIVE ANNUAL FINANCIAL REPORT FOR THE YEAR ENDED DECEMBER 31, 2012 MINNESOTA - This page intentionally left blank - • J� S 1y- 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, 2012 Prepared By: Finance Department City of Andover CITY OF ANDOVER, MINNESOTA TABLE OF CONTENTS Page Reference No. I. INTRODUCTORY SECTION Letter of Transmittal 2 Organization 9 Organizational Chart 10 Certificate of Achievement 11 IL FINANCIAL SECTION Independent Auditor's Report 14 Management's Discussion and Analysis 17 Basic Financial Statements: Government -Wide Financial Statements: Statement of Net Position Statement 1 29 Statement of Activities Statement 2 30 Fund Financial Statements: Balance Sheet - Governmental Funds Statement 3 32 Statement of Revenues, Expenditures, and Changes in Fund Balances - Governmental Funds Statement 4 34 Reconciliation of the Statement of Revenues, Expenditures, and Changes in Fund Balances of Governmental Funds to the Statement of Activities Statement 5 37 Statement of Net Position - Proprietary Funds Statement 6 38 Statement of Revenues, Expenses, and Changes in Fund Net Position - Proprietary Funds Statement 7 40 Statement of Cash Flows - Proprietary Funds Statement 8 42 Statement of Fiduciary Net Position - Fiduciary Funds Statement 9 44 Notes to Financial Statements 45 Required Supplementary Information: Budgetary Comparison Schedule - General Fund Statement 10 80 Schedule of Funding Progress - Other Post Employment Benefits Plan Statement 11 82 Notes to Required Supplementary Information: Budgets 83 Modified Approach for City Streets and Trails Infrastructure Capital Assets 83 Combining and Individual Fund Statements and Schedules: Nonmajor Governmental Funds: Combining Balance Sheet - Nonmajor Governmental Funds Statement 12 87 Combining Statement of Revenues, Expenditures and Changes in Fund Balances - Nonmajor Governmental Funds Statement 13 88 CITY OF ANDOVER, MINNESOTA TABLE OF CONTENTS Page Reference No. Nonmajor Special Revenue Funds: Subcombining Balance Sheet - Nonmajor Special Revenue Funds Statement 14 90 Subcombining Statement of Revenues, Expenditures and Changes in Fund Balances - Nonmajor Special Revenue Funds Statement 15 92 Nonmajor Debt Service Funds: Subcombining Balance Sheet - Nonmajor Debt Service Funds Statement 16 96 Subcombining Statement of Revenues, Expenditures and Changes in Fund Balances - Nonmajor Debt Service Funds Statement 17 98 Nonmajor Capital Projects Funds: Subcombining Balance Sheet - Nonmajor Capital Project Funds Statement 18 102 Subcombining Statement of Revenues, Expenditures and Changes in Fund Balances - Nonmajor Capital Project Funds Statement 19 104 Special Revenue Funds: Table 1 124 Schedules of Revenues, Expenditures and Changes in Table 2 126 Fund Balances - Budget and Actual: Table 3 130 EDA General Statement 20 106 Community Development Block Grant Statement 21 107 Community Center Statement 22 108 Drainage and Mapping Statement 23 109 LRRWMO Statement 24 110 Forestry Statement 25 111 Right -of -Way Management/Utility Statement 26 112 Charitable Gambling Statement 27 113 Construction Seal Coating Statement 28 114 Internal Service Funds: Combining Statement of Net Position - Internal Service Funds Statement 29 116 Combining Statement of Revenues, Expenses, and Changes in Fund Net Position - Internal Service Funds Statement 30 117 Combining Statement of Cash Flows - Internal Service Funds Statement 31 118 Agency Funds: Combining Statement of Net Position - Fiduciary Funds Statement 32 120 Combining Statement of Changes in Assets and Liabilities - Fiduciary Funds Statement 33 121 III. STATISTICAL SECTION Net Position by Component - Last Ten Fiscal Years Table 1 124 Changes in Net Position - Last Ten Fiscal Years Table 2 126 Fund Balances - Governmental Funds - Last Ten Fiscal Years Table 3 130 Changes in Fund Balances - Governmental Funds - Last Ten Fiscal Years Table 4 132 Assessed and Estimated Actual Value of Taxable Property - Last Ten Fiscal Years Table 5 134 Property Tax Rates - Per $1,000 of Assessed Tax Capacity Value - Direct and Overlapping Governments - Years 2004 through 2013 Table 6 135 Property Tax Levies and Collections - Last Seven Fiscal Years Table 7 136 Principal Taxpayers - Current Year and Nine Years Ago Table 8 137 Estimated Market Values and New Construction - Last Ten Fiscal Years Table 9 138 Special Assessment Levies and Collections - Last Ten Fiscal Years Table 10 139 CITY OF ANDOVER, MINNESOTA TABLE OF CONTENTS IV. OTHER INFORMATION Combined Schedule of Indebtedness Exhibit 1 156 Schedule of Tax Capacity Rates and Levies Exhibit 2 158 Schedule of Deferred Tax Levies - General Obligation Bonds Exhibit 3 159 Schedule of Fund Transfers Exhibit 4 160 Page Reference No. Ratio of Net Bonded Debt to Assessed Value and Net Bonded Debt Per Capita - Last Ten Fiscal Years Table 11 140 Computation of Direct and Overlapping Debt Table 12 141 Computation of Legal Debt Margin - Last Ten Fiscal Years Table 13 142 Pledged - Revenue Coverage - Last Ten Fiscal Years Table 14 144 Outstanding Debt by Type - Last Ten Fiscal Years Table 15 146 Demographic and Economic Statitistics - Last Ten Years Table 16 148 Principal Employers - Current Year and Nine Years Ago Table 17 149 Full Time Equivalent Employees - City Government Employees by Function/Program - Last Ten Fiscal Years Table 18 150 Operating Indicators by Function/Program - Last Ten Years Table 19 152 Capital Asset Statistics by Function/Program - Last Ten Years Table 20 154 IV. OTHER INFORMATION Combined Schedule of Indebtedness Exhibit 1 156 Schedule of Tax Capacity Rates and Levies Exhibit 2 158 Schedule of Deferred Tax Levies - General Obligation Bonds Exhibit 3 159 Schedule of Fund Transfers Exhibit 4 160 I. INTRODUCTORY SECTION I 1685 CROSSTOWN BOULEVARD N.W.. ANDOVER, MINNESOTA 55304 . (763) 755 -5100 FAX (763) 755 -8923 . WWW.ANDOVERMN.GOV May 3, 2013 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 I1. Financial I11. Statistical The Introduction includes a list of the City's principal officials as of December 31, 2012, the table of contents, the public officials, organizational chart, and this Letter of Transmittal. The Financial Section includes: (1) independent auditor's report; (2) management's discussion and analysis; (3) government wide and fund financial statements; (4) notes to the financial statements; (5) required supplementary information; (6) the combining statements, individual fund statements; and, (7) the supplemental information. The Statistical Section 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 is 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. 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, research reveals that the name Andover first appeared in an article dated March 14, 1899 in the Anoka County Union Newspaper - 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 31,097. A 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 Protective inspection Animal control Fire protection Mayor and City c ouncil Financial administration Information systems Newsletter Elections Facility management City clerk Assessing Engineering Administration Legal Risk management Human resources Planning and zoning Public Safety Police Protective inspection Animal control Fire protection Civildefense Public Works: Streets and highways Street signs Traffic signals Snow and ice removal Central equipment maintenance Water maintenance Street lighting Sanitation: Storm sewers Sanitary 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 9 and 10 respectively. ECONOMIC CONDITION AND OUTLOOK Moderate population growth is expected to continue in 2012 and 2013, with an estimated population of 31,347 by 2013. 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 2012. 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 85% of the total in 2012. They are general property taxes at 75 %, and charges for services at 10 %. 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. To the Honorable Mayor and City Council City of Andover, Minnesota 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 through 2012, the State of Minnesota significantly reduced MVHC to help deal with the state budget deficit. LGA, HACA and MVHC for 1999 through 2012 are as follows: Year LGA HACA MVHC Total 1999 $ 111,145 $ 462,796 $ - $ 573,941 2000 119,752 490,237 - 609,989 2001 119,758 489,991 - 609,749 2002 119,827 - 563,754 683,581 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 * - - 198,214 198,214 2009 * - - 54,629 54,629 2010 * - - 3,872 3,872 2011 * - - 853 853 2012 * - - 4,266 4,266 *Due to the State Legislative actions to deal with the stle budget deficits, the City will not be receiving any LGA an d significan tly 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. The City's General Fund receives a substantial amount of revenue from licenses and permits. The past ten years are shown below: Revenues Change 2003 $ 551,385 n/a 2004 674,008 $ 122,623 2005 724,436 50,428 2006 598,094 (126,342) 2007 475,893 (122,201) 2008 525,339 49,446 2009 291,903 (233,436) 2010 329,901 37,998 2011 387,206 57,305 2012 449,826 62,620 Revenue from residential building continued to modestly increase through 2010, 2011 and 2012, but it is unlikely that those revenues will reach the levels of the early 2000's as a reduced number of new residential lots are being added to the overall lot inventory. 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 To the Honorable Mayor and City Council City of Andover, Minnesota economy, especially the construction industry. In 2010, 2011 and 2012, the home building market showed signs of improvement and some commercial activity taking place accounted for the increase in permit revenue. The City's General Fund also receives a considerable amount of revenue from charges for services. The past ten years are shown below: Revenues Change 2003 $ 647,813 n/a 2004 798,795 $ 150,982 2005 933,365 134,570 2006 780,273 (153,092) 2007 1,121,642 341,369 2008 772,430 (349,212) 2009 701,289 (71,141) 2010 755,184 53,895 2011 866,584 111,400 2012 973,605 107,021 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, 2011 and 2012, the home building market showed signs of improvement and some commercial activity taking place 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: Firm Anoka-Hennepin ISD No 11 Fairview- Andover Clinic Kottkes' Bus Service, Inc. YMCA Bunker Hills Regional P ark / Activity Center Anoka. County Sheriffs Office Target Meadow Creek Christian School Anoka. County Highway Department Andover County Market MAJOR INITIATIVES Number of Type of Business / Product Employees Elementary and secondary education 900 Healthcare 300 Bus transportation 190 Youth organization - fitness center 183 County government and services 180 County government and services 178 Retail 170 Private education K 12 127 County government and services 103 Retail 100 FOR THE YEAR. The City has many accomplishments to report for 2012. 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 close to 275 single family rental licenses issued throughout the City in 2012. To the Honorable Mayor and City Council City of Andover, Minnesota 2) Five street projects were completed in 2012. Two of the reconstruction projects, Johnson's Oakmount Terrace and Ivywood Estates, were funded primarily by tax levy and special assessments. The three other projects; South Coon Creek Drive, 147"' Avenue and 133rd Avenue; were funded by State Aid, tax levy, utility funds and assessments. The South Coon Creek Drive project included a new pedestrian lane connecting the east and west side of the City and a valuable water utility connection to provide better water pressure to the west side of the community. In all the projects, the existing bituminous was reclaimed, concrete curb was added or replaced in the development, storm sewer structures were replaced or added, and a new bituminous surface was laid. 3) The City completed the redevelopment of Hawkridge Park in partnership with the North Metro Soccer Association. The outcome is three irrigated soccer fields, a hockey rink and an expanded parking area. The North Metro Soccer Association contributed $100,000 towards this project, a grand opening was held with the Mayor making the ceremonial first kick. 4) The City completed the final touches to the newly developed hockey rinks and a warming house built in cooperation with the Andover Huskies Youth Hockey Association on the Public Work Campus. The facility played host to a very successful Winter Classic hockey tournament which is anticipated to be an annual event. 5) The permanent home for the Andover skate park facility at the Sunshine Park complex that was completed in 2011 and held a state qualifying skateboard competition during the 2012 Andover Family Fun Fest. 6) In 2012, the City welcomed the $10 million expansion of the Anoka County Highway Department Facility on Bunker Lake Boulevard. 7) The City welcomed the expansion of Dynamic Sealing Technologies Inc. (DSTI). The 49,000 sq. ft. expansion is expected to generate 50 new jobs for the community. In addition, DSTI acquired an adjacent parcel that will allow for the expansion of another 50,000 sq. ft. in the future. Governor Dayton was on hand for the January 2012 Grand Opening as were many other local and regional officials. DSTI is one of the fastest growing manufactures in the nation. 8) The City Economic Development Authority (EDA) acquired the Parkside at Andover Station residential development in late 2011. This development was sold to a developer originally in 2003 and when residential building stalled in 2009, it became a casualty of the poor townhome market. The EDA, after a brief marketing period, sold the model home in less than 30 days and has secured a purchased agreement with Capstone Homes to build single family homes on a significant portion of the site. The EDA is also pursuing a separate developer to construct an advanced/assisted living facility on another portion of the site. 9) The City of Andover EDA went through the public hearing process in 2011 to modify the City Development Plan to create redevelopment areas of the community and to facilitate the opportunity to acquire dilapidated and substandard multi - family homes within specified target areas. The EDA was successful in acquiring one 4 -plex property in November of 2011 to start the redevelopment process. The EDA was also successful in acquiring a very dated convenience store /gas station in December of 2012 to continue to add to the critical land mass necessary to start marketing for a redevelopment project. 10) The City purchased a 40 acre parcel from Legacy Christian Academy in 2012. The purpose of the purchase is to develop a park facility that will provide needed ball fields and community park amenities. It is anticipated that this new facility will start being developed in 2013. 11) The City secured a lease with Subway LLC in 2012 to operate out of the existing Andover Community Center concessions area in an effort to better utilize the space at the Andover Community Center. The City felt Subway's commitment to and promotion of healthy eating will be a great fit for the Andover Community Center and YMCA. 12) In 2012, the City of Andover received The Most Prolific Recycling Program in 2011 award from the Anoka County Board of Commissioners. Andover residents had the highest recycling rate per person for all materials of any Anoka County municipality. 13) The City Council adopted a goal to make a concerted effort toward promoting the City of Andover's image and livability. The EDA, as part of its community marketing efforts, installed a community monument entrance sign and two electronic reader boards in strategic locations in 2012. One electronic reader board was installed at the City Hall campus and the other reader board was installed at the high traffic intersection of Crosstown Boulevard and Bunker Lake Boulevard to display community events. The entrance monument was installed on Round Lake Boulevard at the southern Andover border with Coon Rapids. Two more monuments are to be installed in the future on the east and west borders along Bunker Lake Boulevard. To the Honorable Mayor and City Council City of Andover, Minnesota 14) The successful hosting of the City's Annual Business Appreciation Day to recognize and build awareness of the local business community and strengthens relationships with this important element of the Andover community. This event was coordinated through the Community Development Department. In 2012, the City Economic Development Authority (EDA) again helped add activity to the Andover Station Commercial area by holding four open air concerts titled "Music at the Station ". The music genre ranged from Jazz to Concertina, and Irish Folk. 15) The City Open Space Commission, appointed to assist in managing the successful $2,000,000 open space referendum ballot in 2006, continues to review and make 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 (Martins Meadows) and a second purchase in October 2010 (Northwoods Preserve). Throughout 2012, the Parks Department focused on creating nature trails, appropriate signage and accessibility to the open space parcels. 16) The City continues to make significant progress on the process of digitally 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. 17) 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 New residential development included the replatting of the Parkside at Andover Station into 36 single family lots and the development of Miller's Woods Third Addition (20 lots) and Woodland Estates 5t' Addition (13 lots). Construction also commenced on a new 70 unit senior housing facility known as Arbor Oaks located on the southwest corner of Hanson Boulevard NW and 155th Lane NW. Commercial Industrial Development New InstitutionaVcommercial /industrial construction did occur in 2012. The Anoka County Highway Department constructed a 125,000 square foot vehicle storage /garage addition including the remodeling of their office space. Elite Contracting built a small storage facility. 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, electronic reader boards, the City newsletter or the City's webpage (www.andovermn.gov). 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. II] no01XIVI8210Vry /1100610rolI V The City has a policy regarding General Fund reserve balances. The City plans for a unassigned 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 classifies fund balances for prepaid items, inventories and other legal obligations. The City may also classify 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. To the Honorable Mayor and City Council City of Andover, Minnesota 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 accountability for assets. The concept of reasonable assurance adopted by the City Council recognizes that the evaluation of cost and benefits requires estimates and judgments by management, and the cost of a control should not exceed the benefits likely to be derived. All internal controls are evaluated against the above criteria. It is our belief that the City's internal accounting controls adequately safeguard the City's assets and also provide reasonable assurance of properly recording financial transactions. OTHER INFORMATION AWARDS. The Government Finance Officers Association (GFOA) of the United States and Canada presented a Distinguished Budget Presentation Award to the City of Andover for its annual budget for the fiscal year beginning January 1, 2012. This is the eleventh year in a row the City of Andover has received this award. In order to receive this award, a governmental unit must publish a budget document that meets program criteria as a policy document, as an operations guide, as a financial plan and as a communications device. This award is valid for a period of one year only. We believe that the annual budget for the fiscal year beginning January 1, 2013 continues to conform to the program requirements and have submitted it to the GFOA to determine its eligibility for another award. The GFOA also presented the Certificate of Achievement for Excellence in Financial Reporting Award to the City of Andover for its 2011 Comprehensive Annual Financial Report. This is the tenth time the City of Andover has received this award. In order to receive this award, a government unit must publish an easily readable and efficiently organized comprehensive annual financial report whose contents conform to program standards. Such reports must satisfy both generally accepted accounting principles and applicable legal requirements. This award is valid for a period of one year only. We believe this report for 2012 continues to conform to the Certificate of Achievement Program requirements and have submitted it to the GFOA to determine its eligibility for another award. INDEPENDENT AUDIT. State statutes require an annual audit by independent certified public accountants. HLB Tautges Redpath, Ltd. was engaged by the City to render an opinion on the City's financial statements. The auditor's report on the basic financial statements and combining and individual fund statements and schedules is included in the financial section of this report. ACKNOWLEDGMENTS. The preparation of this report could not have been accomplished without the efficient services and dedication of the Finance Department staff and the consultation of the City's auditing firm. Staff members: Lee Brezinka, Melissa Knutson and Brenda Fildes have my sincere appreciation for their contribution to the preparation of this report. I also want to express our appreciation to the Mayor and members of the City Council for their interest and support in planning and conducting the financial operations of the City in a fiscally responsible manner. Respectfully submitted, James Dickinson City Administrator CITY OF ANDOVER, MINNESOTA ORGANIZATION December 31, 2012 Office Name Term Mayor Michael Gamache January 5, 2015 Council Member Tony Howard January 5, 2015 Council Member Michael Knight January 3, 2017 Council Member Sheri Bukkila January 3, 2017 Council Member Julie Trude January 5, 2015 City Administrator / City Clerk James Dickinson Community Development Director David Carlberg Director of Public Works / City Engineer David Berkowitz Finance Manager Lee Brezinka Building Official Don Olson Fire Chief Dan Winkel Appointed Appointed Appointed Appointed Appointed Appointed Attorney Hawkins & Baumgartner, P.A. Appointed Fiscal Consultants Ehlers & Associates, Inc. Appointed CITY OF ANDOVER Organizational Chart Itt City Council City Attorney City Administrator Advisory Boards Administrative Building Inspections Engineering Finance Fire Protection Public Works Police Protection Services Administration Financial Fire Protection 7PIamimng Streets /Highways Civil Defense Engineering Adm n strati on Human Resources Assessing Snow &Ice Protective Right -of- -Way Inspections Management Removal Newsletter Facilities Storm Sewer Drainage & Mapping Management Economic Unallocated Street Lighting Lower Rum River Development Watershed Mgmt Authority Organization Community Forestry Capital Equipment Signage Center Reserve Elections Debt Service Funds Traffic Signals Trail & Transportation Animal Control Unfinanced Projects Parks &Recreation Construction Seal Coating Information Water Trunk Tax Increment Recycling Systems Projects City Cleri Bu ld ng Fund Water Sto m Sewer Permanent Sewer Sewer Trunk Improvement Revolving Road &Bridge G.O. Capital Central Equipment Notes Risk Park Dedication Projects Management Itt Certificate of Achievement for Excellence in Financial Reporting Presented to City of Andover Minnesota For its Comprehensive Annual Financial Report for the Fiscal Year Ended December 31, 2011 A Certificate of Achievement for Excellence in Financial Reporting is presented by the Government Finance Officers Association of the United States and Canada to government units and public employee retirement systems whose comprehensive annual financial reports (CAFRs) achieve the highest standards in government accounting and financial reporting. President *e�w A0%5PAWj,,7- Executive Director A - This page intentionally left blank - IrA II. FINANCIAL SECTION 13 TAUTGES REDPATH, LTD. Certified Public Accountants INDEPENDENT AUDITOR'S REPORT To the Honorable Mayor and Members of the City Council City of Andover, Minnesota Report on the Financial Statements We have audited the accompanying financial statements of the governmental activities, the business - type activities, each major fund, and the aggregate remaining fund information of the City of Andover, Minnesota, as of and for the year ended December 31, 2012, and the related notes to the financial statements, which collectively comprise the City of Andover, Minnesota's basic financial statements as listed in the table of contents. Management's Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. Auditor's Responsibility Our responsibility is to express opinions on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity's preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. 4810 White Bear Parkway White Bear Lake, MN 55110 651.426.7000 651.426.5004 fax www.hlbtr.com Equal Opportunity Employer 100 - Percent Employee -Owned HLB Tautges Redpath is a member of HLB International, a world -wide network of independent accounting firms and business advisors. 14 We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions. Opinions In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities, the business -type activities, each major fund, and the aggregate remaining fund information of the City of Andover, Minnesota, as of December 31, 2012, and the respective changes in financial position, and, where applicable, cash flows thereof for the year then ended in accordance with accounting principles generally accepted in the United States of America. Report on Summarized Comparative Information We have previously audited the City of Andover, Minnesota's 2011 financial statements, and we expressed an unmodified audit opinion on the respective financial statements of the governmental activities, the business -type activities, each major fund, and the aggregate remaining fund information in our report dated April 19, 2012. In our opinion, the summarized comparative information presented herein as of and for the year ended December 31, 2011 is consistent, in all material respects, with the audited financial statements from which it has been derived. Other Matters Required Supplemental Information Accounting principles generally accepted in the United States of America require that the management's discussion and analysis, budgetary comparison information, OPEB Schedule of Funding Progress, and Notes to Required Supplementary Information on pages 17 through 26 and 80 through 84 be presented to supplement the basic financial statements. Such information, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board, who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management's responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance. I� Other Information Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the City of Andover, Minnesota's basic financial statements. The introductory section, combining and individual nonmajor fund financial statements and schedules, other financial information and statistical section, are presented for purposes of additional analysis and are not a required part of the basic financial statements. The combining and individual nonmajor fund financial statements and schedules are the responsibility of management and were derived from and relate directly to the underlying accounting and other records used to prepare the basic financial statements. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the basic financial statements or to the basic financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the combining and individual nonmajor fund financial statements and schedules are fairly stated in all material respects in relation to the basic financial statements as a whole. The introductory, other financial information and statistical sections have not been subjected to the auditing procedures applied in the audit of the basic financial statements and, accordingly, we do not express an opinion or provide any assurance on them. Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated May 3, 2013, on our consideration of the City of Andover, Minnesota's internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the City of Andover, Minnesota's internal control over financial reporting and compliance. "13 l ,JY HLB TAUTGES REDPATH, LTD. May 3, 2013 II: CITY OF ANDOVER, MINNESOTA MANAGEMENT'S DISCUSSION AND ANALYSIS December 31, 2012 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, 2012. 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 8 of this report. Financial Highlights The assets of the City exceeded its liabilities at the close of the most recent fiscal year by $160,350,413 (Net position). Of this amount, $31,374,041 (unrestricted net position) 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 position increased by $1,898,234, 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 $44,484,142. The City's total long -term liabilities decreased by $6,060,731 during the current fiscal year, primarily due to the scheduled debt service payments made in 2011. Beginning Special Debt Capital Balance General Revenue Service Projects Totals Nonspendable $ 160,177 $ 1,471 $ - $ - $ 161,648 Restricted - 8,217 19,019,418 2,280,288 21,307,923 Committed - 681,413 - - 681,413 Assigned - 1,738 - 16,418,490 16,420,228 Unassigned 6,227,664 (250,911) - (63,823) 5,912,930 - $ 6,387,841 $ 441,928 $ 19,019,418 $ 18,634,955 $ 44,484,142 The City's total long -term liabilities decreased by $6,060,731 during the current fiscal year, primarily due to the scheduled debt service payments made in 2011. 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 fmancial 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. 17 Beginning Ending Balance Additions Reductions Balance Governmental activities: Bonds payable $ 40,961,000 $ 19,470,000 $ (18,707,000) $ 41,724,000 Other post employment benefits 122,986 34,537 (14,987) 142,536 Compensated absences 584,313 331,417 (293,839) 621,891 Total governmental activities 41,668,299 19,835,954 (19,015,826) 42,488,427 Business -type activities: Bonds payable 14,400,000 - (6,980,000) 7,420,000 Other post employment benefits 23,426 2,113 (2,335) 23,204 Compensated absences 139,353 53,966 (45,397) 147,922 Total business -type activities 14,562,779 56,079 (7,027,732) 7,591,126 Total City long -term liabilities $ 56,231,078 $ 19,892,033 $ (26,043,558) $ 50,079,553 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 fmancial 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. 17 CITY OF ANDOVER, MINNESOTA MANAGEMENT'S DISCUSSION AND ANALYSIS December 31, 2012 The statement of net position presents information on all of the City's assets and liabilities, with the difference between the two reported as net position. Over time, increases or decreases in net position may serve as a useful indicator of whether the financial position of the City is improving or deteriorating. The statement of activities presents information showing how the City's net position changed during the most recent fiscal year. All changes in net position are reported as soon as the underlying event giving rise to the change occurs, regardless of the timing of related cash flows. Thus, revenues and expenses are reported in this statement for some items that will only result in cash flows in future fiscal periods (e.g. uncollected taxes and earned but unused vacation leave). Both of the government -wide financial statements distinguish functions of the City that are principally supported by taxes and intergovernmental revenues (governmental activities) from other functions that are intended to recover all or a significant portion of their costs through user fees and charges (business -type activities). The governmental activities of the City include general government, public safety, 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 position and the statement of revenues, expenses and changes in net position. 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 18 CITY OF ANDOVER, MINNESOTA MANAGEMENT'S DISCUSSION AND ANALYSIS December 31, 2012 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. 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 79 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 87 through 123 of this report. Government -wide Financial Analysis As noted earlier, net position may serve over time as a useful indicator of a government's financial position. In the case of the City, assets exceeded liabilities by $160,350,413 at the close of the most recent fiscal year. The largest portion of the City's net position ($124,515,352 or 77 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 POSITION A portion of the City's net position represents resources that are subject to external restrictions on how they may be used. The remaining balance of unrestricted net position ($31,374,041) 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 position, both for the City as a whole, as well as for its separate governmental and business -type activities. IM Governmental Activities Business -Type Activities Totals 2011 2012 2011 2012 2011 2012 Current and other assets $ 46,074,309 $ 49,878,693 $ 12,142,916 $ 6,112,776 $ 58,217,225 $ 55,991,469 Capital assets 114,242,421 113,388,446 43,861,319 42,342,691 158,103,740 155,731,137 Total assets 160,316,730 163,267,139 56,004,235 48,455,467 216,320,965 211,722,606 Long -term liabilities outstanding 41,668,299 42,488,427 14,562,779 7,591,126 56,231,078 50,079,553 Other liabilities 1,328,199 1,135,303 309,509 157,337 1,637,708 1,292,640 Total liabilities 42,996,498 43,623,730 14,872,288 7,748,463 57,868,786 51,372,193 Net position: Net invested in capital asset; 90,859,970 89,592,661 36,031,319 34,922,691 126,891,289 124,515,352 Restricted 3,107,253 4,461,020 - - 3,107,253 4,461,020 Unrestricted 23,353,009 25,589,728 5,100,628 5,784,313 28,453,637 31,374,041 Total net position $ 117,320,232 $ 119,643,409 $ 41,131,947 $ 40,707,004 $ 158,452,179 $ 160,350,413 A portion of the City's net position represents resources that are subject to external restrictions on how they may be used. The remaining balance of unrestricted net position ($31,374,041) 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 position, both for the City as a whole, as well as for its separate governmental and business -type activities. IM CITY OF ANDOVER, MINNESOTA MANAGEMENT'S DISCUSSION AND ANALYSIS December 31, 2012 Government -wide Activities Governmental activities increased the City's net position by $2,323,177 and business -type activities decreased net position by $424,943. Key elements of the activities are as follows: 2,453,801 Public safety 4,214,316 4,325,531 - City of Andover's Changes in Net Position 4,325,531 Public works 4,029,164 5,623,942 - - Governmental Activities Business -Type Activities Total 3,102,534 - 2011 2012 2011 2012 2011 2012 Revenues: - 109,293 94,319 Economic development 777,298 1,396,466 Program revenues: - 777,298 1,396,466 Interest on long -term debt 1,796,782 2,497,344 Charges for services $ 3,164,239 $ 3,312,966 $ 4,468,880 $ 5,014,999 $ 7,633,119 $ 8,327,965 Operating grants 2,782,948 2,655,926 2,782,948 Sewer - - and contributions 977,553 1,358,424 - - 977,553 1,358,424 Capital grants 531,103 614,958 531,103 Total expenses 16,279,345 19,493,937 and contributions 1,356,091 2,774,126 - - 1,356,091 2,774,126 General revenues: position before gain on the Property taxes 10,292,674 10,594,940 - - 10,292,674 10,594,940 Tax increment 2,005,056 2,033,932 - - 2,005,056 2,033,932 Grants and contributions 84,803 2,657,581 1,881,609 Gain on the sale of not restricted to capital assets 91,693 16,625 specific programs 86,802 14,360 - - 86,802 14,360 Unrestricted investments (509,746) - - Increase in net position 2,677,699 2,323,177 earnings 1,399,987 1,201,995 370,641 226,328 1,770,628 1,428,323 Total revenues 19,282,402 21,290,743 4,839,521 5,241,327 24,121,923 26,532,070 Expenses: General government 2,406,750 2,453,801 - - 2,406,750 2,453,801 Public safety 4,214,316 4,325,531 - - 4,214,316 4,325,531 Public works 4,029,164 5,623,942 - - 4,029,164 5,623,942 Parks and recreation 2,945,742 3,102,534 - - 2,945,742 3,102,534 Recycling 109,293 94,319 - - 109,293 94,319 Economic development 777,298 1,396,466 - - 777,298 1,396,466 Interest on long -term debt 1,796,782 2,497,344 - - 1,796,782 2,497,344 Water - - 2,655,926 2,782,948 2,655,926 2,782,948 Sewer - - 1,914,113 1,842,473 1,914,113 1,842,473 Storm sewer - - 614,958 531,103 614,958 531,103 Total expenses 16,279,345 19,493,937 5,184,997 5,156,524 21,464,342 24,650,461 Increase (decrease) in net position before gain on the sale of capital assets and transfers 3,003,057 1,796,806 (345,476) 84,803 2,657,581 1,881,609 Gain on the sale of capital assets 91,693 16,625 7,500 - 99,193 16,625 Transfers (417,051) 509,746 417,051 (509,746) - - Increase in net position 2,677,699 2,323,177 79,075 (424,943) 2,756,774 1,898,234 Net position - beginning 114,642,533 117,320,232 41,052,872 41,131,947 155,695,405 158,452,179 Netposition - ending $ 117,320,232 $ 119,643,409 $ 41,131,947 $ 40,707,004 $158,452,179 $ 160,350,413 M CITY OF ANDOVER, MINNESOTA MANAGEMENT'S DISCUSSION AND ANALYSIS December 31, 2012 Governmental Activities Following are specific graphs that provide comparisons of the governmental activities revenues and expenses: Governmental Activities - Revenues Grants and Unrestricted contributions not investments earnings Charges for services restricted for specific 5.6% 15.5% programs 0.1% Gain (loss) on the sale Tax increment of capital assets 9.5% 0.1% Capital grants and contributions 13.0% Property taxes Operating grants and 49.7% contributions 6.4% Governmental Activities - Expenses General government Interest on long -term 12.6% debt 12.8% Recycling 0.5% Economic development 7.2% Public safety 22.2% Parks and recreation 15.9% Public works 28.8% PAI CITY OF ANDOVER, MINNESOTA MANAGEMENT'S DISCUSSION AND ANALYSIS December 31, 2012 Business -Type Activities Business -type activities decreased net position by $424,943. Below are graphs showing the business -type activities revenue and expense comparisons: Business -Type Activities - Revenues Unrestricted investments earnings 4.3% Charges for services 95.7% Business -Type Activities - Expenses Storm sewer 10% Water 54 °0 Sewer 36% 0 CITY OF ANDOVER, MINNESOTA MANAGEMENT'S DISCUSSION AND ANALYSIS December 31, 2012 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 $44,484,142. Approximately 13.3 percent of this total amount ($5,912,930) constitutes unassigned fund balance. The remainder of the fund balance ($38,571,212) is not available for new spending because it is either 1) nonspendable ($161,648), 2) restricted ($21,307,923), 3) committed ($681,413) or 4) assigned ($16,420,228). Major Funds The general fund increased by $499,704 in 2012, which was a $1,114,204 change from the final budget. The final budget showed a decrease in fund balance of $614,500. 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 over what was budgeted and some commercial/industrial construction taking place. The 2006 and 2007 EDA public facility lease revenue refunding bonds debt service funds were advance refunded to reduce its total debt service payments over the last twenty two years of the bonds by $4,013,528 and to obtain an economic gain (difference between the present value of the debt service payments on the old and new debt) of $2,366,409. The amount of bonds defeased at December 31, 2012 was $16,865,000. 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. 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 $140,352 primarily due to the collection of state aid construction dollars for prior year projects. The tax increment capital projects fund increased by $382,591 due to the sales of land held for resale. Nonmajor Funds The 2008A G.O. equipment certificates debt service fund decreased by $176,711 with the final payment being made. The 2009A G.O. equipment certificates debt service fund decreased by $133,459 with the final payment being made. The 2012A G.O. equipment certificates debt service fund increased by $127,239 with the collection of tax levy for future debt service payments. The 2012B G.O. capital improvement refunding bonds debt service fund increased by $1,582,758 due to the issuance of bonds for the purpose of refunding the 2004A capital improvement bonds on February 1, 2013. The 2012C G.O. abatement bonds debt service fund increased by $358,131 due the issuance of bonds in 2012 for the defeasance of 2006 and 2007 EDA lease revenue refunding bonds. The building capital projects fund increased by $743,372 due to funding being set aside for future land purchases to expand city facilities. The capital equipment reserve capital projects fund increased by $383,649 due to monies being set aside for future expenditures, both planned and unforeseen. 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. 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 position in the respective proprietary funds are enterprise funds of $5,712,214 (water $2,121,235, sewer $3,281,238 and storm sewer $309,741) and internal service funds of $609,012. The enterprise funds had a net decrease in net position in 2012 of $442,455 (water $93,628, sewer $197,308 and storm sewer $151,519). Internal service funds had a net increase in net position of $93,114. 23 CITY OF ANDOVER, MINNESOTA MANAGEMENT'S DISCUSSION AND ANALYSIS December 31, 2012 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, 2012, amounts to $155,731,137 (net of accumulated depreciation). This investment in capital assets includes land, buildings, infrastructure, machinery and equipment. 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 2012, 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, 2012, 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 $3,894,784 on street and trail maintenance for the year ending December 31, 2012. These expenditures delayed deterioration and the overall condition of the system remained constant at 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. 24 Maintenance Actual OCI Year Estimate Expenditures Rating 2004 $1,000,000 $ 1,847,066 82 2005 1,000,000 1,655,715 83 2006 1,150,000 1,228,981 82 2007 1,150,000 1,256,433 81 2008 1,150,000 2,244,713 80 2009 1,150,000 1,666,216 81 2010 1,150,000 1,457,082 83 2011 1,150,000 1,770,980 83 2012 1,150,000 3,894,784 83 24 CITY OF ANDOVER, MINNESOTA MANAGEMENT'S DISCUSSION AND ANALYSIS December 31, 2012 Primary Government Governmental activities: Land and improvements Streets and trails Construction in progress Buildings and improvements Furniture and equipment Machinery and equipment Other park improvements Total capital assets Less accumulated depreciation for: Buildings and improvements Furniture and equipment Machinery and equipment Other park improvements Beginning Balance Additions Ending Deletions Balance $ 8,896,573 $ 306,268 $ - $ 9,202,841 79,922,680 - - 79,922,680 - 73,712 - 73,712 27,044,700 40,191 - 27,084,891 469,758 31,279 - 501,037 7,322,324 162,583 (178,071) 7,306,836 5,586,884 108,984 (8,500) 5,687,368 129,242,919 723,017 (186,571) 129,779,365 7,147,608 909,468 - 8,057,076 295,233 44,050 - 339,283 5,344,668 344,049 (178,071) 5,510,646 2,212,989 279,425 (8,500) 2,483,914 Total accumulated depreciation 15,000,498 1,576,992 Governmental activities capital assets - net Business -type activities: Land and improvements Buildings and improvements Furniture and equipment Machinery and equipment Collection and distribution Total capital assets being depreciated Less accumulated depreciation for: Buildings and improvements Furniture and equipment Machinery and equipment Collection and distribution 114,242,421 (853,975) 730,243 15,877,590 - 61,390 - 1,206,930 4,482 50,391,198 110,650 68,267,351 115,132 6,213,144 557,054 39,973 5,487 1,003,245 54,798 17,149,670 1,016,421 Total accumulated depreciation 24,406,032 1,633,760 Business -type activities capital assets - net Total capital assets 43,861,319 (1,518,628) (186,571) 16,390,919 113,388,446 - 730,243 - 15,877,590 - 61,390 - 1,211,412 - 50,501,848 68,382,483 - 6,770,198 - 45,460 - 1,058,043 - 18,166,091 - 26,039,792 - 42,342,691 $ 158,103,740 $ (2,372,603) $ - $ 155,731,137 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 $49,913,813, a decrease of $6,170,853 from 2011. Revenue bonds ($17,375,000) were used to finance the construction of the community center and the refunding of portions of the community center bonds. General obligation abatement bonds ($17,315,000) were used to refund the 2006 and 2007 EDA lease revenue refunding bonds. General obligation revenue bonds ($7,420,000) were used for an addition to the water treatment plant and the refunding of portions of the water treatment plant bonds. Certificates of indebtedness ($774,000) financed capital equipment purchases. Capital improvement bonds ($3,455,000) financed the construction of Fire Station #3 and the purchase of the Public Works building from the EDA, in addition to, the refunding of those same bonds. Permanent improvement revolving bonds ($760,000) financed improvement projects within the City and are assessed to the benefiting properties. State aid bonds ($520,000) were used to finance Municipal State Aid Q. CITY OF ANDOVER, MINNESOTA MANAGEMENT'S DISCUSSION AND ANALYSIS December 31, 2012 (MSA) eligible road projects and the refunding of portions of the state aid bonds and the referendum bonds ($1,525,000) were used to finance land acquisitions for the preservation of open space. Additional long -term debt in the amount of $769,813 is for compensated absences. City of Andover's Outstanding Debt Bonds payable: Revenue bonds Abatement bonds G.O. revenue bonds Certificates of indebtedness Capital improvement bonds Permanent improvement revolving bonds State aid bonds Referendum bonds Total bonds payable Compensated absences Total Governmental Business -Type Activities Activities Total $ 17,375,000 $ - $ 17,375,000 17,315,000 - 17,315,000 - 7,420,000 7,420,000 774,000 - 774,000 3,455,000 - 3,455,000 760,000 - 760,000 520,000 - 520,000 1,525,000 - 1,525,000 41,724,000 7,420,000 49,144,000 621,891 147,922 769,813 $ 42,345,891 $ 7,567,922 $ 49,913,813 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 $66,064,061. Only $21,946,321 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. W, BASIC FINANCIAL STATEMENTS 27 - This page intentionally left blank - 28 CITY OF ANDOVER, MINNESOTA STATEMENT OF NET POSITION December 31, 2012 With Comparative Actual Amounts For The Year Ended December 31, 2011 Statement 1 The accompanying notes are an integral part of these financial statements. Primary Government Government Business -Type Totals Activities Activities 2012 2011 Assets: Cash and investments $ 26,915,960 $ 4,862,440 $ 31,778,400 $ 27,282,020 Cash and investments with escrow agent 17,792,716 - 17,792,716 23,767,821 Accrued interest 422,190 19,533 441,723 544,354 Due from other governmental units 39,554 4,129 43,683 36,233 Accounts receivable - net 145,783 1,129,459 1,275,242 1,267,243 Prepaid items - - - 119,000 Property taxes receivable: Unremitted 72,354 - 72,354 88,786 Delinquent 437,960 - 437,960 482,867 Special assessments receivable: Unremitted 88,793 - 88,793 2,309 Delinquent 176,574 60,601 237,175 267,017 Deferred 2,207,758 - 2,207,758 2,519,409 Notes receivable - - - 84,192 Inventories - at cost 253,051 36,614 289,665 265,474 Land held for resale 1,326,000 - 1,326,000 1,490,500 Capital assets - net Nondepreciable 89,199,233 730,243 89,929,476 89,549,496 Depreciable 24,189,213 41,612,448 65,801,661 68,554,244 Total assets 163,267,139 48,455,467 211,722,606 216,320,965 Liabilities: Interfund payable 72,099 (72,099) - - Accounts payable 293,530 19,469 312,999 227,588 Contracts payable 88,475 24,129 112,604 92,012 Deposits payable 29,362 3,507 32,869 60,522 Due to other governmental units 26,961 28,785 55,746 62,736 Salaries payable 173,582 30,373 203,955 179,463 Unearned revenue 25,338 - 25,338 12,360 Accrued interest payable 425,956 123,173 549,129 1,003,027 Other post employment benefits: Due in more than one year 142,536 23,204 165,740 146,412 Compensated absences: Due within one year 93,284 22,189 115,473 108,550 Due in more than one year 528,607 125,733 654,340 615,116 Bonds /notes payable: Due within one year 3,589,000 545,000 4,134,000 8,822,000 Due in more than one year 38,135,000 6,875,000 45,010,000 46,539,000 Total liabilities 43,623,730 7,748,463 51,372,193 57,868,786 Net position: Net investment in capital assets 89,592,661 34,922,691 124,515,352 126,891,289 Restricted for: Debt service 1,787,057 - 1,787,057 608,515 Capital improvements 5,430 - 5,430 51,876 Tax increment purposes 2,660,316 - 2,660,316 2,446,862 Public services 8,217 - 8,217 - Unrestricted 25,589,728 5,784,313 31,374,041 28,453,637 Total net position $ 119,643,409 $ 40,707,004 $ 160,350,413 $ 158,452,179 The accompanying notes are an integral part of these financial statements. CITY OF ANDOVER, MINNESOTA STATEMENT OF ACTIVITIES For The Year Ended December 31, 2012 With Comparative Actual Amounts For The Year Ended December 31, 2011 Functions/Programs Primary government: Government activities: General government Public safety Public works Parks and recreation Recycling Economic development Interest on long -term debt Total government activities Business -type activities: Water Sewer Storm sewer Total business -type activities Total primary government Program Revenues Charges Operating Capital For Grants and Grants and Expenses $ 2,453,801 $ 690,875 4,325,531 607,715 5,623,942 308,583 3,102,534 1,495,872 94,319 39,530 1,396,466 170,391 2,497,344 - 19,493,937 3,312,966 2,782,948 2,572,560 1,842,473 2,063,177 531,103 379,262 5,156,524 5,014,999 $ 24,650,461 $ 8,327,965 The accompanying notes are an integral part of these financial statements. Kid $ 13,217 $ - 322,512 - 873,257 2,557,441 - 48,191 59,055 57,844 68,935 110,650 21,448 - 1,358,424 2,774,126 $ 1,358,424 $ 2,774,126 General revenues: General property taxes Tax increment collections Grants and contributions not restricted to specific programs Unrestricted investment earnings Gain on sale of capital assets Transfers Total general revenues, gain on sale of capital assets and transfers Change in net position Net position - beginning Net position - ending Statement 2 Net (Expense) Revenue and Changes in Net Position Primary Government Governmental Business -Type Totals Activities Activities 2012 2011 $ (1,749,709) $ - $ (1,749,709) $ (1,866,441) (3,395,304) - (3,395,304) (3,363,799) (1,884,661) - (1,884,661) (1,824,885) (1,558,471) - (1,558,471) (1,392,464) 62,110 - 62,110 (17,423) (1,046,490) - (1,046,490) (542,164) (2,475,896) - (2,475,896) (1,774,286) (12,048,421) - (12,048,421) (10,781,462) - (210,388) (210,388) (535,972) - 220,704 220,704 76,105 - (151,841) (151,841) (256,250) - (141,525) (141,525) (716,117) (12,048,421) (141,525) (12,189,946) (11,497,579) 10,594,940 - 2,033,932 - 14,360 - 1,201,995 226,328 16,625 - 509,746 (509,746) 14,371,598 (283,418) 2,323,177 (424,943) 117,320,232 41,131,947 $ 119,643,409 $ 40,707,004 MI 10,594,940 2,033,932 14,360 1,428,323 16,625 14,088,180 1,898,234 158,452,179 $ 160,350,413 10,292,674 2,005,056 86,802 1,770,628 99,193 14,254,353 2,756,774 155,695,405 $ 158,452,179 CITY OF ANDOVER, MINNESOTA BALANCESBEET GOVERNMENTAL FUNDS December 31, 2012 With Comparative Actual Amounts For The Year Ended December 31, 2011 Assets: Cash and investments Cash and investments with escrow agent Accrued interest Due from other governmental units Accounts receivable - net Interfund receivable Prepaid items Property taxes receivable: Unremitted Delinquent Special assessments receivable: Unremitted Delinquent Deferred Notes receivable Inventories - at cost Land held for resale Total assets Liabilities and Fund Balances Liabilities: Interfund payable Accounts payable Contracts payable Deposits payable Due to other governmental units Salaries payable Deferred revenue Total liabilities Fund balances: Nonspendable Restricted Committed Assigned Unassigned Total fund balances Total liabilities and fund balances 43,147 221,182 5,396 - - - 366,139 24,331 160,177 6,967,021 9,298,885 6,387,289 3,248,765 4,652,021 - 15,000 15,000 147,091 - - 33,147 - - 12,399 5,741 5,741 17,250 - 460 142,715 - - 226,578 366,139 24,331 579,180 15,000 15,000 371,880 30,532 160,177 - - - 9,283,885 6,372,289 - 2,876,885 4,621,489 6,227,664 - - - - 6,387,841 9,283,885 6,372,289 2,876,885 4,621,489 $ 6,967,021 $ 9,298,885 $ 6,387,289 $ 3,248,765 $ 4,652,021 Fund balance reported above Amounts reported for governmental activities in the statement of net position are different because: Capital assets used in governmental activities are not financial resources and, therefore, are not reported in the funds. 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 position 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 position of governmental activities The accompanying notes are an integral part of these financial statements. KY 2006 EDA Public 2007 EDA Public Facility Lease Facility Lease Revenue Revenue Refunding Bonds Refunding Bonds Water Trunk Sewer Trunk General DSF DSF CPF CPF $ 5,898,658 $ 1,903 $ 1,898 $ 2,868,185 $ 4,604,309 - 9,120,651 6,264,168 - - 22,469 176,331 121,223 14,441 23,381 39,554 - - - - 76,438 500,000 43,147 221,182 5,396 - - - 366,139 24,331 160,177 6,967,021 9,298,885 6,387,289 3,248,765 4,652,021 - 15,000 15,000 147,091 - - 33,147 - - 12,399 5,741 5,741 17,250 - 460 142,715 - - 226,578 366,139 24,331 579,180 15,000 15,000 371,880 30,532 160,177 - - - 9,283,885 6,372,289 - 2,876,885 4,621,489 6,227,664 - - - - 6,387,841 9,283,885 6,372,289 2,876,885 4,621,489 $ 6,967,021 $ 9,298,885 $ 6,387,289 $ 3,248,765 $ 4,652,021 Fund balance reported above Amounts reported for governmental activities in the statement of net position are different because: Capital assets used in governmental activities are not financial resources and, therefore, are not reported in the funds. 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 position 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 position of governmental activities The accompanying notes are an integral part of these financial statements. KY Statement 3 - Tax Permanent 470,000 (500,000) - - Road & Increment Improvement Other Infra Totals 186,835 Bridge Projects Revolving Governmental Activity Governmental Funds CPF CPF CPF Funds Eliminations 2012 2011 $ 4,702,490 $ 1,258,546 $ 971,665 $ 6,054,449 $ $ 26,362,103 $ 22,502,210 - - - 2,407,897 21,863 17,792,716 17,277,066 25,090 4,617 4,803 27,253 93,319 419,608 412,153 - - - - 650,099 39,554 27,009 5,298,950 69,282 145,720 186,936 - - 1,471 - (500,000) - - - - 4,440,106 - 21,307,923 - 99,250 6,351 10,291 681,413 12,565 681,413 72,354 88,786 32,559 116,238 - 67,981 16,420,228 437,960 482,867 1,477 - 87,316 - 5,912,930 88,793 1,510 4,790 - 166,388 44,484,142 176,574 217,843 975,180 6,435 835,673 $ (500,000) $ 49,230,788 2,207,758 2,519,409 - - - - - 84,192 - 1,471 161,648 139,465 - 1,326,000 - - - 1,326,000 1,490,500 5,747,937 2,722,127 2,065,845 8,640,898 (5001000) 49,230,788 45,529,196 - - 470,000 (500,000) - - 15,575 45,301 55,689 263,656 186,835 41,437 13,891 - 88,475 69,121 - - 5,481 29,362 56,802 2,870 2,619 3,747 26,946 36,977 - - - 21,863 164,578 142,044 1,012,529 1,448,673 1,002,060 93,319 4,173,629 4,807,171 1,072,411 1,510,484 1,002,060 650,099 (500,000) 4,746,646 5,298,950 - - - 1,471 161,648 238,715 1,211,643 4,440,106 21,307,923 19,741,214 - - - 681,413 681,413 650,766 4,675,526 1,063,785 3,182,543 16,420,228 14,451,306 - - - (314,734) 5,912,930 5,148,245 4,675,526 1,211,643 1,063,785 7,990,799 44,484,142 40,230,246 $ 5,747,937 $ 2,722,127 $ 2,065,845 $ 8,640,898 $ (500,000) $ 49,230,788 $ 45,529,196 $ 44,484,142 $ 40,230,246 113,388,446 114,242,421 4,148,291 4,794,811 536,913 461,311 (42,914,383) (42,408,557) $ 119,643,409 $ 117,320,232 33 CITY OF ANDOVER, MINNESOTA STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE GOVERNMENTAL FUNDS For The Year Ended December 31, 2012 With Comparative Actual Amounts For The Year Ended December 31, 2011 Revenues: General properly taxes Tax increment collections Licenses and permits Intergovernmental Special assessments Charges for services Fines Investment income Miscellaneous: Park dedication fees Connection charges Rent Other Total revenues Expenditures: Current: General government Public safety Public works Parks and recreation Recycling Economic development Unallocated Capital outlay: General government Public safety Public works Parks and recreation Recycling Economic development Debt service: Principal retirement Interest Paying agent fees Professional services Construction/acquisition costs Total expenditures Revenues over (under) expenditures Other financing sources (uses): Transfers in Transfers out Bonds issued Refunding bonds issued Redemption of refunded bonds Bond premium Proceeds from the sale of capital assets Total other financing sources (uses) Net increase (decrease) in fund balance Fund balance - January 1 Fund balance - December 31 2,223,768 4,088,073 - - 1,417,097 784 3,296 912,750 - - 94,328 63,371 58,314 424,228 2006 EDA Public 2007 EDA Public 2,220 8,857,701 426,448 294,203 784 3,296 Facility Lease Facility Lease 224,194 570,275 5,888,137 Revenue Revenue 2,652,691 4,051,214 $ 6,387,841 Refunding Bonds Refunding Bonds Water Trunk Sewer Trunk General DSF DSF CPF CPF $ 7,340,532 $ $ $ $ 449,826 653,720 - - - 59,440 23,659 973,605 - - 97,571 - - - 95,364 422,921 290,665 54,177 98,205 118,495 51,707 149,857 - - - - 9,760,475 422,921 290,665 232,112 173,571 2,223,768 4,088,073 - - 1,417,097 784 3,296 912,750 - - 94,328 63,371 58,314 424,228 291,983 2,220 2,220 8,857,701 426,448 294,203 784 3,296 902,774 (3,527) (3,538) 231,328 170,275 196,930 400,000 (600,000) (7,134) - (636,341) (437,974) (403,070) (636,341) (437,974) (7,134) 400,000 499,704 (639,868) (441,512) 224,194 570,275 5,888,137 9,923,753 6,813,801 2,652,691 4,051,214 $ 6,387,841 $ 9,283,885 $ 6,372,289 $ 2,876,885 $ 4,621,489 The accompanying notes are an integral part of these financial statements. 34 Statement 4 Min Tax Permanent Road & Increment Improvement Other Intra Totals Bridge Projects Revolving Governmental Activity Governmental Funds CPF CPF CPF Funds Eliminations 2012 2011 $ 1,080,564 $ - $ $ 2,217,021 $ $ 10,638,117 $ 10,279,967 - 2,035,663 - 2,035,663 1,976,800 - - - 449,826 387,206 2,406,863 181,497 - 251,448 3,493,528 1,876,685 437,682 3,563 268,116 - 792,460 891,942 - - - 900,716 1,874,321 1,732,791 - - - - 97,571 99,777 109,742 6,020 13,765 100,579 1,191,438 1,386,698 - - - 47,700 47,700 51,706 - 170,202 27,165 - - 639,983 639,983 641,859 285 345,324 181,031 (30,600) 645,897 332,992 4,035,136 2,572,067 281,881 4,338,478 (30,600) 22,076,706 19,685,588 - - - 56,605 2,280,373 2,298,571 - 4,000 4,092,073 3,965,541 3,894,784 99,963 5,415,924 3,788,636 - 1,088,874 2,001,624 1,926,220 - - 94,328 109,911 1,368,641 168,970 1,537,611 966,687 - - 63,371 30,631 23,077 23,077 45,072 23,600 23,600 5,645 - - 711,791 577,835 577,835 197,782 - 58,314 - 40,191 40,191 25,109 1,842,000 1,842,000 4,100,000 1,052,537 1,768,748 1,855,538 4,574 9,014 8,605 - 216,364 216,364 1,825 - 110,650 - 110,650 1,044,581 3,894,784 1,479,291 5,198,590 20,155,097 21,082,145 140,352 1,092,776 281,881 (860,112) (30,600) 1,921,609 (1,396,557) - - - 2,076,586 (2,045,986) 627,530 627,530 (710,185) (385,000) (381,401) 2,076,586 (7,134) - 585,000 - 585,000 265,000 18,885,000 18,885,000 - (16,833,583) (17,907,898) 133,164 133,164 - 16,625 16,625 514,819 - (710,185) (385,000) 4,481,391 30,600 2,332,287 1,407,349 140,352 382,591 (103,119) 3,621,279 - 4,253,896 10,792 4,535,174 829,052 1,166,904 4,369,520 40,230,246 40,219,454 $ 4,675,526 $ 1,211,643 $ 1,063,785 $ 7,990,799 $ $ 44,484,142 $ 40,230,246 Min - This page intentionally left blank - W, C1rfY OF ANDOVER, MINNESOTA RECONCILIATION OF THE STATEMENT OF REVENUES, Statement 5 EXPENDITURES, AND CHANGES IN FUND BALANCES OF GOVERNMENTAL FUNDS TO THE STATEMENT OF ACTIVITIES (646,520) (377,515) For The Year Ended December 31, 2012 With Comparative Actual Amounts For The Year Ended December 31, 2011 current financial resources of governmental funds. Neither transaction, however, has any 2012 2011 Amounts reported for governmental activities in the statement of activities (page 30) are different because: (763,000) 3,835,000 Net changes in fund balances - total governmental funds (page 35) $ 4,253,896 $ 10,792 Governmental funds report capital outlays as expenditures. However, in the statement of (19,550) (23,603) 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 (110,650) (1,044,581) in the current period. (743,325) 417,481 The net effect of various miscellaneous transactions involving capital assets is to increase (decrease) net position (i.e., sales, trade -ins, and donations). (268,086) Revenues in the statement of activities that do not provide current financial resources are not reported as revenues in the funds. (646,520) (377,515) 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 position. This amount is the net effect of these differences in the treatment of long -term debt and related items. (763,000) 3,835,000 Vested post employment benefits are reported in the governmental funds when amounts are paid. The statement of activities reports the benefits earned during the years. This amount (19,550) (23,603) is the net effect of employee benefits earned and paid during the year. Transfer out of governmental capital assets contributed to Enterprise Funds. (110,650) (1,044,581) 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. 276,724 46,340 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. 75,602 81,871 Change in net position of governmental activities (page 31) $ 2,323,177 $ 2,677,699 The accompanying notes are an integral part of these financial statements. 37 CITY OF ANDOVER, MINNESOTA STATEMENT OF NET POSITION PROPRIETARY FUNDS December 31, 2012 With Comparative Actual Amounts For The Year Ended December 31, 2011 Water Sewer Storm Sewer Assets: Current assets: Cash and cash equivalents $ 1,941,782 $ 2,692,353 $ 228,305 Restricted assets: Cash and cash equivalents - - - Accrued interest 6,393 12,196 944 Due from other governmental units - 4,129 - Accounts receivable - net 400,384 617,299 111,776 Prepaid items - - - Special assessments receivable: Unremitted - - - Delinquent 19,123 35,976 5,502 Inventories - at cost 36,614 - - Total current assets 2,404,296 3,361,953 346,527 Noncurrent assets: Capital assets: Land 730,243 - - Buildings and structures 15,877,590 - - Machinery and equipment 311,465 489,496 471,841 Distribution and collection system 16,262,382 24,081,473 10,157,993 Total capital assets 33,181,680 24,570,969 10,629,834 Less: Allowance for depreciation (12,385,619) (9,717,883) (3,936,290) Total noncurrent assets 20,796,061 14,853,086 6,693,544 Total assets 23,200,357 18,215,039 7,040,071 Liabilities: Current liabilities: Accounts payable 17,208 2,063 198 Contracts payable 14,751 3,953 5,425 Deposits payable 3,507 - - Interest payable 123,173 - Due to other governmental units 21,775 7,010 - Salaries payable 15,954 10,495 3,924 Bonds payable - due within one year 545,000 - - Compensated absences payable - due within one year 11,264 6,839 4,086 Total current liabilities 752,632 30,360 13,633 Noncurrent liabilities: Other post employment benefits - due in more than one year 11,602 11,602 - Bonds payable - due in more than one year 6,875,000 - - Compensated absences payable - due in more than one year 63,827 38,753 23,153 Total noncurrent liabilities 6,950,429 50,355 23,153 Total liabilities 7,703,061 80,715 36,786 Net position: Net investment in capital assets 13,376,061 14,853,086 6,693,544 Unrestricted 2,121,235 3,281,238 309,741 Total net position $ 15,497,296 $ 18,134,324 $ 7,003,285 Net position reported above Amounts reported for business -type activities in the statement of net position 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 position of business -type activities The accompanying notes are an integral part of these financial statements. 38 Statement 6 Totals Governmental Activities - Totals Internal Service Funds 2012 2011 2012 2011 $ 4,862,440 $ 4,328,154 $ 553,857 $ 451,656 - 6,490,755 - - 19,533 129,796 2,582 2,405 4,129 9,224 - - 1,129,459 1,078,796 63 1,511 - 18,000 1,750 - 799 - 60,601 49,174 - - 36,614 38,218 91,403 87,791 6,112,776 12,142,916 647,905 545,113 730,243 730,243 - - 15,877,590 15,877,590 1,272,802 1,268,320 50,501,848 50,391,198 68,382,483 68,267,351 (26,039,792) (24,406,032) 42,342,691 43,861,319 - - 48,455,467 56,004,235 647,905 545,113 19,469 20,118 29,874 20,635 24,129 22,891 - - 3,507 3,720 123,173 262,769 - 28,785 25,759 15 - 30,373 28,839 9,004 8,580 545,000 6,980,000 - - 22,189 20,903 796,625 7,364,999 38,893 29,215 23,204 23,426 - - 6,875,000 7,420,000 125,733 118,450 7,023,937 7,561,876 7,820,562 14,926,875 38,893 29,215 34,922,691 36,031,319 - - 5,712,214 5,046,041 609,012 515,898 $ 40,634,905 $ 41,077,360 $ 609,012 $ 515,898 $ 40,634,905 $ 41,077,360 72,099 54,587 $ 40,707,004 $ 41,131,947 KR, CITY OF ANDOVER, MINNESOTA STATEMENT OF REVENUES, EXPENSES AND CHANGES IN NET POSITION PROPRIETARY FUNDS For The Year Ended December 31, 2012 With Comparative Actual Amounts For The Year Ended December 31, 2011 Water Operating revenues User charges $ 2,529,084 Meters 16,598 Permit fees 3,850 Penalties 7,383 Other 15,645 Total operating revenues 2,572,560 Operating expenses: $ 15,497,296 Personal services 411,605 Supplies 189,971 Other service charges 840,591 Disposal charges - Depreciation 886,331 Total operating expenses 2,328,498 Operating income (loss) 244,062 Nonoperating revenues (expenses): Investment income 175,855 Gain on sale of capital assets - Interest expense (481,079) Total nonoperating revenues (expenses) (305,224) Income (loss) before contributions and transfers (61,162) Capital contributions 110,650 Transfers: Transfers in 7,134 Transfers out (150,250) Total transfers (143,116) Change in net position (93,628) Net position - January 1 15,590,924 Net position - December 31 $ 15,497,296 Sewer $ 2,056,625 6,370 182 Storm Sewer $ 378,103 1,159 2,063,177 379,262 299,050 28,590 149,594 881,028 501,253 1,859,515 203,662 45,710 194,289 22,493 72,586 246,176 535,544 (156,282) 4,763 45,710 4,763 249,372 (446,680) (446,680) (197,308) 18,331,632 $ 18,134,324 Net changes in net position 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 business -type activities. Change in net position of business -type activities The accompanying notes are an intregral part of these financial statements. 40 (151,519) (151,519) 7,154,804 $ 7,003,285 Statement 7 Totals Intra Governmental Activities - Activity Totals Internal Service Funds Eliminations 2012 2011 2012 2011 $ - $ 4,963,812 $ 4,419,449 $ 1,015,822 $ 1,005,389 - 16,598 12,168 - - - 3,850 2,900 - - - 14,912 14,477 - - - 15,827 19,886 76,985 39,501 5,014,999 4,468,880 1,092,807 1,044,890 904,944 901,049 370,216 349,297 241,054 209,406 327,740 298,789 (30,600) 1,032,171 833,711 312,294 308,010 881,028 1,000,520 - - 1,633,760 1,628,312 - - (30,600) 4,692,957 4,572,998 1,010,250 956,096 30,600 322,042 (104,118) 82,557 88,794 - 226,328 370,641 10,557 13,289 - 7,500 - - (481,079) (632,211) - - - (254,751) (254,070) 10,557 13,289 30,600 67,291 (358,188) 93,114 102,083 - 110,650 1,044,581 - - - 7,134 (30,600) (627,530) (30,600) (620,396) - (442,455) - 41,077,360 $ - $ 40,634,905 $ (442,455) 17,512 $ (424,943) (627,530) - (627,530) - 58,863 93,114 41,018,497 515,898 $ 41,077,360 $ 609,012 $ 58,863 20,212 $ 79,075 Ell 102,083 413,815 $ 515,898 CITY OF ANDOVER, MINNESOTA STATEMENT OF CASH FLOWS PROPRIETARY FUNDS For The Year Ended December 31, 2012 With Comparative Actual Amounts For The Year Ended December 31, 2011 Cash flows from operating activities: Receipts from customers and users Payment to suppliers Payment to employees Net cash flows from operating activities Cash flows from noncapital financing activities: Transfers in Transfers out Net cash flows from noncapital financing activities Cash flows from capital and related financing activities: Acquisition of capital assets Interest paid on debt Payment of bonds Proceeds from the sale of capital assets Net cash flows from capital and related financing activities Cash flows from investing activities: Investment income Net increase in cash and cash equivalents Cash and cash equivalents - January 1 Cash and cash equivalents - December 31 Reconciliation of operating income to net cash provided (used) by operating activities: Operating income (loss) Adjustments to reconcile operating income (loss) to net cash flows from operating activities: Depreciation Changes in assets and liabilities: Decrease (increase) in due from other governmental units Decrease (increase) in accounts receivable Decrease (increase) in prepaid items Decrease (increase) in special assessments Decrease (increase) in inventory Increase (decrease) in accounts payable Increase (decrease) in contracts payable Increase (decrease) in deposits payable Increase (decrease) in due to other governmental units Increase (decrease) in salaries payable Increase (decrease) in other post employment benefit; Increase (decrease) in compensated absences Total adjustments Net cash provided (used) by operating activities Noncash investing, capital and financing activities: Assets contributed to the Enterprise Funds The accompanying notes are an integral part of these financial statements. 42 Water Sewer Storm Sewer $ 2,551,954 $ 2,035,033 $ 371,816 (1,015,656) (1,051,249) (94,942) (405,159) (294,583) (195,321) 1,131,139 689,201 81,553 7,134 (150,250) (446,680) (143,116) (446,680) (4,482) (620,675) (6,980,000) (7,600,675) (4,482) - 286,720 45,390 4,481 (6,325,932) 283,429 86,034 8,267,714 2,408,924 142,271 $ 1,941,782 $ 2,692,353 $ 228,305 $ 244,062 $ 203,662 $ (156,282) 886,331 501,253 246,176 - 5,095 - (17,646) (26,029) (6,988) 8,250 9,750 - (2,960) (7,210) (458) 1,604 - - 249 (755) (143) 738 220 280 (213) - - 4,278 (1,252) 2,524 1,010 (2,000) (1,575) 1,353 - 5,497 2,104 968 887,077 485,539 237,835 $ 1,131,139 $ 689,201 $ 81,553 $ 110,650 $ $ Statement 8 Totals 7,134 (596,930) (596,930) (589,796) (596,930) (4,482) $ (134,718) Governmental Activities - Totals Internal Service Funds 2012 2011 2012 2011 $ 4,958,803 $ 4,445,357 $ 1,094,255 $ 1,043,379 (2,161,847) (2,080,226) (634,392) (625,820) (895,063) (886,800) (368,042) (348,960) 1,901,893 1,478,331 91,821 68,599 7,134 (596,930) (596,930) (589,796) (596,930) (4,482) $ (134,718) $ 82,557 $ 88,794 (620,675) (640,036) - - (6,980,000) (475,000) - (50,663) 7,500 1,448 (1,511) (7,605,157) (1,107,536) 1,750 - 336,591 365,297 10,380 12,348 (5,956,469) 139,162 102,201 80,947 10,818,909 10,679,747 451,656 370,709 $ 4,862,440 $ 10,818,909 $ 553,857 $ 451,656 $ 291,442 $ (134,718) $ 82,557 $ 88,794 1,633,760 1,628,312 - - 5,095 (3,637) - (50,663) (44,280) 1,448 (1,511) 18,000 1,750 1,750 (10,628) 24,394 - 1,604 (5,391) (3,612) (6,791) (649) (9,127) 9,239 (6,747) 1,238 3,653 - (213) 1,486 - 3,026 1,640 15 (5,483) 1,534 1,552 424 337 (222) 5,888 - - 8,569 6,809 - 1,610,451 1,613,049 9,264 (20,195) $ 1,901,893 $ 1,478,331 $ 91,821 $ 68,599 $ 110,650 $ 1,044,581 $ $ 43 CITY OF ANDOVER, MINNESOTA STATEMENT OF NET POSITION FIDUCIARY FUNDS Agency Funds December 31, 2012 With Comparative Actual Amounts For The Year Ended December 31, 2011 Assets: Cash and investments Liabilities: Accounts payable Deposits payable Total liabilities The accompanying notes are an integral part of these financial statements. 44 Statement 9 2012 2011 $ 321,891 $ 184,037 8,011 106 313,880 183,931 $ 321,891 $ 184,037 CITY OF ANDOVER, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2012 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 position and the statement of activities) report information on all of the nonfiduciary activities of the primary government and its component units. For the most part, the effect of interfund activity has been removed from these statements. Governmental activities, which normally are supported by taxes and intergovernmental revenues, are reported separately from business -type activities, which rely to a significant extent on fees and charges for support. The statement of activities demonstrates the degree to which the direct expenses of a given function or business -type activity are offset by program revenues. Direct expenses are those that are clearly identifiable with a specific function or business -type activity. Program revenues include 1) charges to customers or applicants who purchase, use, or directly benefit from goods, services, or privileges provided by a given function or 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 included among program revenues are reported instead as general revenues. Separate financial statements are provided for governmental funds, proprietary funds, and fiduciary funds, even though the latter are excluded from the government -wide financial statements. Major individual governmental funds and major individual enterprise funds are reported as separate columns in the fund financial statements. C. MEASUREMENT FOCUS, BASIS OF ACCOUNTING, AND FINANCIAL STATEMENT PRESENTATION The government -wide financial statements are reported using the economic resources measurement focus and the accrual basis of accounting, as are the Proprietary Fund financial statements. 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. Governmental fund financial statements are reported using the current financial resources measurement focus and the modified accrual basis of accounting. Revenues are recognized as soon as they are both measurable and available. Revenues are considered to be available when they are collectible within the current period or soon enough thereafter to pay liabilities of the current period. For this purpose, the City considers all revenues, except reimbursement grants, to be available if they are W CITY OF ANDOVER, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2012 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: The General Fund is 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. The 2006 EDA Public Facility Lease Revenue Refunding Bonds Debt Service Fund (DSF) was established to refund portions of debt associated with the construction of the Andover YMCA Community Center. The 2007 EDA Public Facility Lease Revenue Refunding Bonds DSF was established to refund portions of debt associated with the construction of the Andover YMCA Community Center. The Water Trunk Capital Projects Fund (CPF) 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. The Sewer Trunk CPF is used to account for sewer access fees and sanitary sewer improvements. The Road and Bridge CPF accounts for all road projects and the pavement management program, which includes annual seal coating, crack sealing and overlays for roads. The Tax Increment Projects CPF 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. The Permanent Improvement Revolving CPF serves as a long -term funding source for large capital improvement expenditures. The City reports the following major proprietary funds: The Water Fund accounts for the water service charges, which are used to finance the water system operating expenses. The Sewer Fund accounts for the sewer service charges, which are used to finance the sanitary sewer system operating expenses. The Storm Sewer Fund 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. The 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. It is used to account for the collection and distribution of funds relating to development activities and retiree insurance premiums. 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 Cf: CITY OF ANDOVER, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2012 other funds of the City. Elimination of these charges would distort the direct costs and program revenues reported for the various functions concerned. Amounts reported as program revenues 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. Internally dedicated resources are reported as general revenues rather than as program revenues. Likewise, general revenues include all taxes. Proprietary funds distinguish operating revenues and expenses from nonoperating items. Operating revenues and expenses generally result from providing services and producing and delivering goods in connection with a proprietary fund's principal ongoing operations. The principal operating revenues of the 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. 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: 47 CITY OF ANDOVER, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2012 Final Over Budget Actual Budget Special Revenue Funds: Community Development Block Grant $ 25,000 $ 26,674 $ 1,674 Community Center 1,008,833 1,011,186 2,353 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 20, 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, 2012 are planned to be eliminated in 2013. 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 mcollectible 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 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. 48 CITY OF ANDOVER, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2012 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. L 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. K�] �/ aA0 1u1a01MJIIN011 ► /11►[yI11MISKINIa851a011f.`.' 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. E1% CITY OF ANDOVER, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2012 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. IL 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. LAND HELD FOR RESALE Land held for resale represents various property purchases made by the City with the intent to sell in order to increase tax base or attract new business. These assets are stated at the lower of cost or net realizable value. M. 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, 2012, no interest was capitalized in connection with construction in progress. The City implemented GASB Statement No. 51. Accounting and Financial Reporting for Intangible Assets 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: 6 CITY OF ANDOVER, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2012 Assets Life Buildings and improvements 10 - 30years Furniture and equipment ( including software) 5 - 10 years Machinery and equipment 5 - 10 years Other park improvements 10 - 30 years Storm sewer 50 years Distribution and collection systems 50 years Temporary easements 5 - 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 2012 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: Range Description 86- 100 Excellent 71 -85 Very good 56-70 Good 41 -55 Fair 26-40 Poor 11-25 Very poor 0- 10 Substandard 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. N. 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. O. LONG -TERM OBLIGATIONS In the government -wide financial statements and proprietary fund types in the fund financial statements, long -term debt and other long -term obligations are reported as liabilities in the applicable governmental activities, business -type activities, or proprietary fund type statement of net position. 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. 611 CITY OF ANDOVER, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2012 P. FUND BALANCE CLASSIFICATIONS In the fund financial statements, governmental funds report fund balance in classifications that disclose constraints for which amounts in those funds can be spent. These classifications are as follows: Nonspendable — consists of amounts that are not in spendable form, such as prepaid items Restricted — consists of amounts related to externally imposed constraints established by creditors, grantors or contributors; or constraints imposed by state statutory provisions. Committed — consists of internally imposed constraints. These constraints are established by Resolution of the City Council. Assigned — consists of internally imposed constraints. These constraints reflect the specific purpose for which it is the City's intended use. These constraints are established by the City Council and/or management. Pursuant to City Council Resolution, the City's Administrator and Finance Director are authorized to establish assignments of fund balance. Unassigned— is the residual classification for the general fund and also reflects negative residual amounts in other funds When both restricted and unrestricted resources are available for use, it is the City's policy to first use restricted resources, and then use unrestricted resources as they are needed. When unrestricted resources are available for use, it is the City's policy to use resources in the following order: 1) committed, 2) assigned, and 3) unassigned. Q. 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. R. RESTRICTED ASSETS Certain assets in the water fund are restricted for future debt service payments. S. 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. T. RECLASSIFICATIONS Certain amounts presented in prior year data have been reclassified in order to be consistent with the current year's presentation. U. 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, 2011, from which the summarized information was derived. 6YA CITY OF ANDOVER, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2012 V. 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 POSITION The governmental fund balance sheet includes a reconciliation between fund balance — total governmental funds and net position — governmental activities as reported in the government -wide statement of net position. 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 ($42,914,383) difference are as follows: Bonds payable $ (41,724,000) Accrued interest payable (425,956) Other post employment benefits (142,5 36) Compensated absences (621,891) Net adjustment to reduce fund balance - total governmental funds to arrive at net position- governmental activities $ (42,914,383) 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 position along with a deduction of net revenue attributable to business -type activities." The details of this $536,913 difference are as follows: Internal Service Funds net position $ 609,012 Net revenue attributable to business -type activities (72,099) Net adjustment to increase fund balance - total governmental funds to arrive at net position- governmental activities $ 536,913 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 position 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 ($743,325) difference are as follows: Capital outlay $ 723,017 Construction /acquisition costs 110,650 Depreciation expense (1,576,992) Netadjustment to decrease net changes in fund balances- total governmental funds to arrive at changes in net position of governmental activities $ (743,325) 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 ($646,520) difference are as follows: 53 CITY OF ANDOVER, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2012 General property taxes deferred revenue: At December 31, 2011 $ (364,898) At December 31, 2012 321,721 Tax increment taxes deferred revenue At December 31, 2011 (117,969) At December 31, 2012 116,238 Special assessments deferred revenue: At December 31, 2011 (2,737,252) At December 31, 2012 2,384,332 Notes receivable deferred revenue: At December 31, 2011 (1,574,692) At December 31, 2012 1,326,000 Netadjustments to decrease net changes in fund balances - total governmental funds to arrive at changes in netposition of governmental activities $ (646,520) 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 position. The details of this ($763,000) difference are as follows: Debt issued or incurred: Issuance of certificate of indebtedness Issuance of abatement bonds Issuance of capital improvements refunding bonds Principal repayments: Revenue bonds Capital improvement bonds Special assessment bonds Referendum bonds Certificates of indebtedness State aid bonds Netadjustment to increase netchanges in fund balances - total governmental funds to arrive at changes in netposition of governmental activities $ (585,000) (17, 315, 000) (1,570,000) 17, 300, 000 315,000 365,000 135,000 372, 000 220,000_ $ (763,000) Another element of that reconciliation states that "Some expenses reported in the statement of activities do not require the use of current financial resources and therefore are not reported as expenditures in governmental funds." The details of this $276,724 difference are as follows: Compensated absences $ (37,578) Accrued interest 3 14,30 2 N et adju stment to decrease net changes in fund balan ces - total governmental funds to arrive at chan ges in netposition of governmental activities $ 276,724 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 $75,602 difference are as follows: 54 CITY OF ANDOVER, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2012 Internal S ervice Funds change in net position $ 93,114 Netrevenue attributable to business -type activities (17,512) Net adjustment to increase fund balance - total governmental funds to arrive at net position- governmental activities $ 75,602 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 t) 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, 2012, 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 610 CITY OF ANDOVER, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2012 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, 2012, the City had the following investments and maturities: Deposits 2,952,343 Total cash and investments $49,893,007 The following is a reconciliation of the City's total cash and investment balances at December 31, 2012: Government -wide statement of net position_ Cash and investments $ 31,778,400 Cash and investments with escrow agent 17,792,716 Fiduciary funds statement of net position 321,891 Total $ 49,893,007 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 fair value of the position in the pool is the same as the value of the pool shares. 6'S: Investment Maturities (in Years) Credit Fair Less Than More Than Investment Type Rating Value 1 1- 5 6-10 10 Money market funds N/A $ 5,457,852 $ 5,457,852 $ - $ - $ - Minnesota Municipal Money Market Fund N/A 309,964 309,964 - - - Certificates of deposit N/A 5,084,697 3,774,008 1,310,689 - - Local governments BB1B2 114,582 54,955 59,627 - - A/Al /A2 999,501 402,982 320,721 275,798 - AA1 /AA2/AA3 10,137,726 1,350,002 5,131,628 2,249,912 1,406,184 AAA 3,445,755 137,284 1,021,146 1,580,152 707,173 U.S. agencies AAA 21,307,918 2,609,407 16,626,446 905,640 1,166,425 FNMA REMIC N/A 47,142 - - 47,142 - U.S. agencies N/A 35,527 - 1,071 21,022 13,434 Total investments 46,940,664 $14,096,454 $24,471,328 $ 5,079,666 $ 3,293,216 Deposits 2,952,343 Total cash and investments $49,893,007 The following is a reconciliation of the City's total cash and investment balances at December 31, 2012: Government -wide statement of net position_ Cash and investments $ 31,778,400 Cash and investments with escrow agent 17,792,716 Fiduciary funds statement of net position 321,891 Total $ 49,893,007 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 fair value of the position in the pool is the same as the value of the pool shares. 6'S: CITY OF ANDOVER, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2012 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, 2012, $250,000 of the City's $46,940,664 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 150-1. 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 45% of the City's investments are in various holdings with U.S. agencies; Federal Home Loan Bank (0.4 %), Federal Farm Credit Bank (2.4 %), Federal National Mortgage Association (3.4 %), Federal Home Loan Mortgage Corporation (1.1 %) and U.S. Treasury (38.1 %). 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. 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. 57 CITY OF ANDOVER, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2012 Note 3 RECEIVABLES Significant receivables balances not expected to be collected within one year of December 31, 2012 are as follows: Delinquent Delinquent Special Property Tax Assessment Taxes Increment Receivable Total Maj or F ands General Fund $ 123,862 $ - $ 5,396 $ 129,258 Water Trunk CPF - - 345,135 345,135 Sewer Trunk CPF - - 11,745 11,745 Road and Bridge CPF 18,233 - 830,012 848,245 Tax Increment Projects CPF - 40,683 3,326 44,009 Permanent Improvement Revolving CPF - - 899,923 899,923 Nonmajor Funds 38,069 - - 38,069 Total $ 180,164 $ 40,683 $ 2,095,537 $ 2,316,384 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: Delinquent property taxes receivable: General Fund $ 221,182 $ - Road & Bridge CPF 32,559 - Nonmajor Funds 67,980 - Delinquent tax increment collections: Tax Increment Projects CPF 116,238 - Special assessments not yet due: General Fund 5,396 - Water Trunk CPF 366,139 - Sewer Trunk CPF 24,331 - Road & Bridge CPF 979,970 - Tax Increment Projects CPF 6,435 - Permanent Improvement Revolving CPF 1,002,061 - Land held for resale: Tax Increment Projects CPF 1,326,000 - Unearned construction seal coat fees. Nonmajor Funds - 25,338 Total $ 4,148,291 $ 25,338 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. In 2012, this loan was in default and later assessed to the benefitting properties. 58 CITY OF ANDOVER, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2012 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. In 2012, the revolving loan program was terminated and the loan was turned over to Anoka County. 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. In 2012, the revolving loan program was terminated and the loan was turned over to Anoka County. 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. In 2012, the revolving loan program was terminated and the loan was turned over to Anoka County. 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 position. 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, 2012 was as follows: 6VI Beginning Ending Primary Government Balance Additions Deletions Balance Governmental activities: Capital assetsnotbeing depreciated- Land and improvements $ 8,896,573 $ 306,268 $ - $ 9,202,841 Streets and trails 79,922,680 - - 79,922,680 Construction in progress - 73,712 - 73,712 Total capital assets not being depreciated 88,819,253 379,980 - 89,199,233 Capital assetsbeing depreciated- Buildings and improvements 27,044,700 40,191 - 27,084,891 Furniture and equipment (including software) 469,758 31,279 - 501,037 Machinery and equipment 7,322,324 162,583 (178,071) 7,306,836 Other park improvements 5,586,884 108,984 (8,500) 5,687,368 Total capital assets being depreciated 40,423,666 343,037 (186,571) 40,580,132 Less accumulated depreciation for: Buildings and improvements 7,147,608 909,468 - 8,057,076 Furniture and equipment 295,233 44,050 - 339,283 Machinery and equipment 5,344,668 344,049 (178,071) 5,510,646 Other park improvements 2,212,989 279,425 (8,500) 2,483,914 Total accumulated depreciation 15,000,498 1,576,992 (186,571) 16,390,919 Total capital assets being depreciated - net 25,423,168 (1,233,955) - 24,189,213 Governmental activities capital assets - net $ 114,242,421 $ (853,975) $ - $ 113,388,446 6VI CITY OF ANDOVER, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2012 Governmental activities: General government $ 86,345 Public safety 242,769 Public works 236,751 Parks and recreation 1,002,272 Economic development 8,855 Total depreciation /amortization expense - governmental activities $ 1,576,992 Business -type activities Water $ 886,331 Sewer 501,253 Storm sewer 246,176 Total depreciation /amortization expense - business -type activities $ 1,633,760 CONSTRUCTION COMMITMENTS At December 31, 2012, the City had the following construction project contracts in progress: Contract Remaining Project# Project Amount Commitment 07 -20 Parkside atAndover Station 3rd $ 313,551 $ 35,724 11 -10 So uth Coon Creek Drive 2,157,641 85,813 $ 2,471,192 $ 121,537 [xt Beginning Ending Primary Government Balance Additions Deletions Balance Business -type activities: Capital assetsnotbeing depreciated Land and improvements $ 730,243 $ - $ - $ 730,243 Capital assetsbeing depreciated- Buildings and improvements 15,877,590 - - 15,877,590 Furniture and equipment (including software) 61,390 - - 61,390 Machinery and equipment 1,206,930 4,482 - 1,211,412 Collection and distribution 50,391,198 110,650 - 50,501,848 Total capital assets being depreciated 67,537,108 115,132 - 67,652,240 Less accumulated depreciation for: Buildings and improvements 6,213,144 557,054 - 6,770,198 Furniture and equipment 39,973 5,487 - 45,460 Machinery and equipment 1,003,245 54,798 - 1,058,043 Collection and distribution 17,149,670 1,016,421 - 18,166,091 Total accumulated depreciation 24,406,032 1,633,760 - 26,039,792 Total capital assets being depreciated -net 43,131,076 (1,518,628) - 41,612,448 Business -type activities capital assets - net $ 43,861,319 $ (1,518,628) $ - $ 42,342,691 Depreciation/amortization expense was charged to functions /programs of the primary government as follows: Governmental activities: General government $ 86,345 Public safety 242,769 Public works 236,751 Parks and recreation 1,002,272 Economic development 8,855 Total depreciation /amortization expense - governmental activities $ 1,576,992 Business -type activities Water $ 886,331 Sewer 501,253 Storm sewer 246,176 Total depreciation /amortization expense - business -type activities $ 1,633,760 CONSTRUCTION COMMITMENTS At December 31, 2012, the City had the following construction project contracts in progress: Contract Remaining Project# Project Amount Commitment 07 -20 Parkside atAndover Station 3rd $ 313,551 $ 35,724 11 -10 So uth Coon Creek Drive 2,157,641 85,813 $ 2,471,192 $ 121,537 [xt CITY OF ANDOVER, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2012 Note 6 LONGTERM 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. Issue Maturity Interest Original Payable Date Date Rate Issue 12/31/12 GOVERNMENTAL ACTIVITIES: Revenue Bonds: 2004 EDA Pub Fac Lease RevBonds 4/23/2004 Abatement Bonds: 2012C G.O. AbatementBonds 12/27/2012 Certificates of Indebtedness: 2011A G.O. Equipment Certificates 3/12011 2012A G.O. Equipment Certificates 3/22/2012 Total c ertificates of indebtedness Capital Improvement Bonds. 2004A G.O. Capital Improvement Bonds 3/16/2004 2012B G.O. Capital Improvement Ref Bonds 3/22/2012 Total capital improvement bonds Permanent Improvement Revolving (PIR) Bonds: 2010A G.O. PIR Refunding Bonds 2/18/2010 State Aid Bonds: 2009A G.O. State Aid Street Refunding Bonds 3/26/2009 Referendum Bonds: 2010A G.O. Open Space Referendum Bonds 2/18 /2010 Total- bonded indebtedness Compensated absences payable Total governmental activities indebtedness BUSINESS -TYPE ACTIVITIES: General Obligation Revenue Bonds. 2007B G.O. Water Revenue Refunding Bonds 3/13/2007 2009A G.O. Water Revenue Bonds 3/26/2009 Total general obligation revenue bonds Compensated absences payable Total business -type activities indebtedness Total City indebtedness [.1311 2/1/2014 2.12 -5.40% $ 19,580,000 $ 17,375,000 2/1/2031 1.00 -3.00% 17.315.000 17.315.000 2/1/2014 2.00% 265,000 189,000 2/1/2017 2.00% 585,000 585,000 850,000 774,000 2/1/2013 2.00 -3.75% 3,890,000 1,885,000 2/1/2016 2.00% 1,570,000 1,570,000 5,460,000 3,455,000 2/1/2014 2.00% 1,480,000 760,000 2/1/2015 2.25 -2.80% 955,000 520,000 2/1/2022 2.00 -3.12% 1,660,000 1,525,000 47,300,000 41,724,000 - 621,891 47,300,000 42,345,891 2/1/2023 4.00 -4.25% 6,570,000 6,570,000 2/1/2024 2.00 -4.25% 1,025,000 850,000 7,595,000 7,420,000 - 147,922 $ 54,895,000 $ 49,913,813 CITY OF ANDOVER, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2012 Annual debt service requirements to maturity for general obligation bonds are as follows: Total $ 1,525,000 $ 221,497 $ 7,420,000 $ 1,787,281 It is not practical to determine the specific year for payment of long -term accrued compensated absences I Governmental Activities Revenue Bonds Abatement Bonds Certificates of Indebtedness Principal Interest Principal Interest Principal Interest 2013 $ 450,000 $ 878,534 $ 320,000 $ 230,520 $ 94,000 $ 18,732 2014 16,925,000 434,373 320,000 385,681 95,000 12,650 2015 - - 835,000 379,906 - 11,700 2016 - - 845,000 371,506 50,000 11,200 2017 - - 855,000 358,731 535,000 5,350 2018 -2022 - - 4,535,000 1,527,956 - - 2023 -2027 - - 5,035,000 1,010,163 - - 2028 -2032 - - 4,570,000 279,222 - - Total $ 17,375,000 $ 1,312,907 $ 17,315,000 $ 4,543,685 $ 774,000 $ 59,632 Governmental Activities Permanent Improvement Capital Improvement Bonds Revolving Bonds State Aid Bonds Principal Interest Principal Interest Principal Interest 2013 $ 1,985,000 $ 74,786 $ 375,000 $ 11,450 $ 230,000 $ 10,765 2014 500,000 24,400 385,000 3,850 230,000 4,785 2015 500,000 14,400 - - 60,000 840 2016 470,000 4,700 - - - - Total $ 3,455,000 $ 118,286 $ 760,000 $ 15,300 $ 520,000 $ 16,390 Government Activities Business -Type Activities Referendum Bonds G.O. Revenue Bonds Principal Interest Principal Interest 2013 $ 135,000 $ 37,515 $ 545,000 $ 285,166 2014 140,000 34,765 565,000 263,806 2015 145,000 31,915 590,000 241,486 2016 145,000 28,942 615,000 218,101 2017 150,000 25,657 635,000 193,751 2018 -2022 810,000 62,703 3,580,000 562,506 2023 -2027 - - 890,000 22,465 Total $ 1,525,000 $ 221,497 $ 7,420,000 $ 1,787,281 It is not practical to determine the specific year for payment of long -term accrued compensated absences I CITY OF ANDOVER, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2012 CHANGE IN LONG -TERM LIABILITIES Long -term liability activity for the year ended December 31, 2012, was as follows: Governmental activities: Bonds payable: Revenue bonds Abatement bonds Certificates of indebtedness Capital improvement bonds Permanent improvement revolving bonds State aid bonds Referendum bonds Total bonds payable Compensated absences Total governmental activities long -term liabilities Business -type activities: Bonds payable: G. 0. revenue bonds Compensated absences Total business -type activities long -term liabilities Bcginning Ending Due Within Balance Additions Reductions Balance One Year $ 34,675,000 $ - $ (17,300,000) $ 17,375,000 $ 450,000 - 17,315,000 - 17,315,000 320,000 561,000 585,000 (372,000) 774,000 94,000 2,200,000 1,570,000 (315,000) 3,455,000 1,985,000 1,125,000 - (365,000) 760,000 375,000 740,000 - (220,000) 520,000 230,000 1,660,000 - (135,000) 1,525,000 135,000 40,961,000 19,470,000 (18,707,000) 41,724,000 3,589,000 584,313 331,417 (293,839) 621,891 93,284 $ 41,545,313 $19,801,417 $ (19,000,839) $ 42,345,891 $ 3,682,284 $ 14,400,000 $ - $ (6,980,000) $ 7,420,000 $ 545,000 139,353 53,966 (45,397) 147,922 22,189 $ 14,539,353 $ 53,966 $ (7,025,397) $ 7,567,922 $ 567,189 For the governmental activities, bonds payable can be summarized in the following categories: The revenue 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. The abatement bonds are going to be used to purchase the 132,000 square foot building from the EDA. 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. The certificates 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. The capital 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. The permanent 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. The state 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. 63 CITY OF ANDOVER, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2012 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. The referendum 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 $18,687,907, payable through February 2014. For the current year, principal and interest paid and total net operating revenues, lease revenue and tax levy were $1,332,456 and $1,511,118, 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. The 2006 Series Refunding Bonds and the 2007 Series Refunding Bonds were refunded by the 2012C Series Abatement Bonds deeming the 2006 Series and 2007 Series defeased for financial reporting purposes. Future lease revenues, net operating revenues and, if necessary, debt service tax levy will be used to repay the Series 2012C Abatement Bonds through 2031. 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. For the current year, principal and interest paid were $168,905. In 2012, the debt service fund had sufficient funds to make its final debt service payment. 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. For the current year, principal and interest paid were $131,462. In 2012, the debt service fund had sufficient funds to make its final debt service payment. 2011A G.O. Equipment Certificates. The City has pledged future property tax revenue to repay the $265,000 bonds issued in March 2011. 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 $192,790, payable through February 2014. For the current year, principal and interest paid and total property tax revenues were $80,541 and $101,900, respectively. 2012A G.O. Equipment Certificates. The City has pledged future property tax revenue to repay the $585,000 bonds issued in March 2012. 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 $640,842, payable through February 2017. For the current year, total property tax revenues were $124,857. 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 $1,918,134, payable through February 2013. For the current year, principal and interest paid and total property tax revenues were $385,993 and $404,827, respectively. A portion of the Series 2004 Bonds were refunded by the 2012 Series Refunding Bonds of $1,570,000 with a crossover date of February 1, 2013. At which time, future property tax revenue to repay will be used to repay the Series 2012 Refunding Bonds through 2016. 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 64 CITY OF ANDOVER, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2012 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 $775,300, payable through February 2014. For the current year, principal and interest paid and monies transferred from the Permanent Improvement Revolving CPF were $383,850 and $385,000, 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 $536,390, payable through February 2015. For the current year, principal and interest paid and MSA revenues were $236,115 and $251,448, 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 fmance 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 $1,746,497, payable through February 2022. For the current year, principal and interest paid and total property tax revenues were $175,215 and $182,205, respectively. 2007E G. 0. Water Revenue Bonds. The City has pledged future water customer revenues, net of operating expenses, to repay the $6,570,000 bonds issued in March 2007. Proceeds of the bonds refunded the Series 2002 Bonds. The bonds are payable from water customer net revenues and are payable through 2023. The total principal and interest remaining on the bonds is $8,152,537. The principal and interest paid for the current year and total customer net revenues were $266,146 and $987,277, respectively. 2009A G. 0. 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 $1,054,745. The principal and interest paid for the current year and total customer net revenues were $85,089 and $987,277, respectively. ADVANCE CROSSOVER REFUNDING On December 1, 2006, the City issued $10,000,000 in Public Facility Lease Revenue Refunding Bonds, Series 2006 with an average interest rate of 4.29% to advance refund $9,755,000 of outstanding 2004 Series Bonds with an average interest rate of 5.17 %. The net proceeds of $9,782,338 were used to purchase U.S. Government Securities. Those securities were deposited in an irrevocable trust with an escrow agent to provide for the interest on the refunding bonds before the crossover date and called principal on the refunded bonds on February 1, 2014. The City advance refunded a portion of the 2004 Public Facilities Lease Revenue Bonds to reduce its total debt service payments over the last twenty years of the bond by $755,979 and to obtain an economic gain (difference between the present value of the debt service payments on the old and new debt) of $375,573. The City is responsible for the debt service of the refunded bonds until the crossover date. Assets held with the escrow agent total $9,120,651 at December 31, 2012. 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 until the crossover date. Assets held with the escrow agent total $6,264,168 at December 31, 2012. [sV CITY OF ANDOVER, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2012 Refunded Payment Bonds Refunding Bonds Date Total Series 2006 Series 2006 Debt Service Commiturnt Escrow Account Series 2006 Series 2007 City 2013 $ 1,328,534 Advanced Refunded in 2012 $ - $ - $ 1,328,534 2014 17,359,373 9,755,000 6,700,000 904,373 $ 18,687,907 $ 9,755,000 $ 6,700,000 $ 2,232,907 On March 22, 2012, the City issued $1,570,000 in Taxable General Obligation Capital Improvement Refunding Bonds, Series 2012B with an average interest rate of 0.95% to advance refund $1,555,000 of outstanding 2004A Series Bonds with an average interest rate of 3.59 %. The net proceeds of $1,580,037 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, 2013. The City advance refunded the 2004A General Obligation Capital Improvement Bonds to reduce its total debt service payments over the last five years of the bond by $73,089 and to obtain an economic gain (difference between the present value of the debt service payments on the old and new debt) of $60,582. 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 $1,580,037 at December 31, 2012. Refunded Payment Bonds Date Total 2013 $ 1,918,134 2014 - 2015 - 2016 - Refumding Bonds Total Debt Service Commitment Escrow Account City $ 141,652 $ 1,581,952 $ 477,834 524,400 - 524,400 514,400 - 514,400 474,700 - 474,700 $ 1,918,134 $ 1,655,152 $ 1,581,952 $ 1,991,334 ADVANCE REFUNDING On December 27, 2012, the City issued $17,315,000 in Taxable General Obligation Abatement Bonds, Series 2012C with an average interest rate of 2.56% to advance refund $10,000,000 of outstanding 2006 Series Bonds with an average interest rate of 4.29% and $6,865,000 of outstanding 2007 Series Bonds with an average interest rate of 4.31 %. The net proceeds of $16,833,582 were used to purchase U.S. Government Securities. Those securities were deposited in an irrevocable trust with an escrow agent to provide for payment of the principal and interest. The City advance refunded the 2006 and 2007 Public Facilities Lease Revenue Refunding Bonds to reduce its total debt service payments over the last twenty two years of the bonds by $4,013,528 and to obtain an economic gain (difference between the present value of the debt service payments on the old and new debt) of $2,366,409. The amount of bonds defeased at December 31, 2012 was $16,865,000. 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 2012 and 2011 is computed as follows: [SR CITY OF ANDOVER, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2012 December 31, Estimated taxable marketvalue $ 2,202,135,356 Debt limit (3% of market value) 66,064,061 Amount of debt applicable to debt limit: Total bonded debt $ 49,144, 000 Less: Nonapplicable debt G.O. water revenue bonds (7,420,000) Permanent improvement revolving bonds (760,000) State aidbonds (520,000) Less: Cash and investments inrelated debt service funds (18,497,679) Total debt applicable to debtlimit 21,946,321 Legal debt margin $ 44,117,740 Note 8 DEFINED BENEFIT PENSION PLANS - STATEWIDE A. PLAN DESCRIPTION $ 2,469,945, 000 74,098,350 $ 55,361,000 (14,400,000) (1,125,000) (740,000) (17,779,964) 21,316,036 $ 52,782,314 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. 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. 67 CITY OF ANDOVER, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2012 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.nmpera.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 6.25 %, respectively, of their annual covered salary in 2012. PEPFF members are required to contribute 9.60% of their annual covered salary in 2012. In 2012, the City was required to contribute the following percentages of annual covered payroll: 11.78% for Basic Plan members, 7.25% for Coordinated Plan members, and 14.4% for PEPFF members. The City's contributions to the Public Employees Retirement Fund for the years ending December 31, 2012, 2011 and 2010 were $245,654, $255,552 and $231,360, respectively. The City's contributions to the Public Employees Police and Fire Fund for the years ending December 31, 2012, 2011 and 2010 were $26,108, $27,004 and $24,152, respectively. The City's contributions were equal to the contractually required contributions for each year as set by state statute. C. DEFINED CONTRIBUTION LUMP SUM SERVICE PENSION PLAN — VOLUNTEER FIREFIGHTERS RELIEF ASSOCIATION PLAN DESCRIPTION Members of the City's volunteer fire department are members of the Andover Firefighters' Relief Association. The Association is the administrator of a single - employer defined contribution plan available to firefighters that was established October 9, 1979 and operates under the provisions of Minnesota Statutes Section 424A. It is governed by a board of six members elected by the members of the Association for three -year terms. The City's Mayor, 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. 68 CITY OF ANDOVER, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2012 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 Ending City State Total 12/312010 $ 50,000 $ 104,210 $ 154,210 12/312011 50,000 106,170 156,170 12/312012 50,000 107,440 157,440 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 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 2011, participants consisted of W, CITY OF ANDOVER, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2012 Retirees and beneficiaries currently purchasing health insurance through the City 2 Active employees 53 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, 2012, was calculated as follows: Annual required contribution (ARC) $ 39,261 Amortization of net OPEB obligation (8,467) Interest on net OPEB obligation 5,856 Annual OPEB cost 36,650 Contributions made during the year (17,322) Increase (decrease) in net OPEB obligation 19,328 Net OPEB obligation - beginning of year 146,412 Net OPEB obligation - end of year $ 165,740 The City had an actuarial valuation performed for the plan as of January 1, 2011 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, 2012. The City's annual OPEB cost (expense) of $39,261 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 2010, 2011 and 2012 are as follows: For the governmental activities, other post employment benefits are generally liquidated through the General Fund. rct Percentage of Annual Employer Annual OPEB Net OPEB Fiscal Year Ended OPEB Cost Contributions Cost Contributed Obligation December 31, 2010 $ 51,667 $ 14,937 28.9% $ 116,921 December 31, 2011 35,632 6,141 17.2% 146,412 December 31, 2012 36,650 17,322 47.3% 165,740 For the governmental activities, other post employment benefits are generally liquidated through the General Fund. rct CITY OF ANDOVER, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2012 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: 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 in 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 following the notes to 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. The plan's unfunded actuarial accrued liability is being amortized as a level dollar amount over 30 years on an open basis. The remaining amortized period at 12/31/2012 was 29 years. The actuarial value of assets was $0. In the January 1, 2011 actuarial valuation, the Projected Unit Credit Actuarial cost method was used. The following actuarial assumptions were used: 1. Discount rate — 4.0% 2. Inflation rate — 3.0% 3. Monthly rates — life expectancies were based on mortality tables at the National Center for Health Statistics 4. Retirement age — latest of age 62, plan eligibility or current age 5. Participation rate — 75% of future retirees employees expected to retire in the future will elect coverage at retirement and continue coverage to age 65; 100% of current retirees will continue their coverage until age 65 6. Spouse participation — spouse continue coverage until age 65 7. Health care cost rate —10% reduced by 0.5% each year to arrive at an ultimate health care cost trend 5.0 %. Note 10 INTERFUND RECEIVABLES/PAYABLES, LOANS AND TRANSFERS Individual fund interfund receivable and payable balances at December 31, 2012 are as follows: r`i Unfunded Actuarial UAAL as a Actuarial Actuarial Accrued Percentage of Actuarial Value of Accrued Liability Fund Covered Covered Valuation Date Assets Liability * (UAAL) Ratio Payroll Payroll (a) (b) (b -a) (a/b) (c) ((b -a) /c) January 1, 2011 $ - $ 273,046 $ 273,046 0.00% $ 5,298,367 5.15% *using the Projected Unit Credit actuarial method 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 in 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 following the notes to 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. The plan's unfunded actuarial accrued liability is being amortized as a level dollar amount over 30 years on an open basis. The remaining amortized period at 12/31/2012 was 29 years. The actuarial value of assets was $0. In the January 1, 2011 actuarial valuation, the Projected Unit Credit Actuarial cost method was used. The following actuarial assumptions were used: 1. Discount rate — 4.0% 2. Inflation rate — 3.0% 3. Monthly rates — life expectancies were based on mortality tables at the National Center for Health Statistics 4. Retirement age — latest of age 62, plan eligibility or current age 5. Participation rate — 75% of future retirees employees expected to retire in the future will elect coverage at retirement and continue coverage to age 65; 100% of current retirees will continue their coverage until age 65 6. Spouse participation — spouse continue coverage until age 65 7. Health care cost rate —10% reduced by 0.5% each year to arrive at an ultimate health care cost trend 5.0 %. Note 10 INTERFUND RECEIVABLES/PAYABLES, LOANS AND TRANSFERS Individual fund interfund receivable and payable balances at December 31, 2012 are as follows: r`i CITY OF ANDOVER, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2012 Fund Receivable Payable Governmental Funds: Major Funds. General Fund $ 500,000 $ - 2006 EDA Public Facility Lease Revenue Refunding Bonds DSF - 15,000 2007 EDA Public Facility Lease Revenue Refunding Bonds DSF - 15,000 Nonmajor Governmental Funds - 470,000 Total governmental funds $ 500,000 $ 500,000 Interfund receivables and payables are representative of lending/borrowing arrangements to cover deficit cash balances at the end of the fiscal year. The City made the following interfund transfers during the year: Transfer In Transfer Out Amount Purpose General Fund Water Fund $ 150,250 Admin allocation General Fund Sewer Fund 46,680 Admin allocation Sewer Trunk CPF Sewer Fund 400,000 Replacement reserve Water Fund Water Trunk Fund CPF 7,134 Debt service allocation Nonmajor Fund Permanent Improvement Revolving Fund CPF 385,000 Debt service allocation Nonmajor Fund Tax Increment Projects CPF 710,185 Future land purchase Nonmajor Fund General Fund 600,000 Park improvements Nonmajor Fund Nonmajor Fund 371,598 Debt service allocation Nonmajor Fund Nonmajor Fund 9,803 Close debt service fund $ 2,680,650 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 In Transfer 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: r` CITY OF ANDOVER, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2012 1. Name of District: Type of District: Authorizing Law. Established- Duration of District: Original net tax capacity: Current net tax capacity: Andover Redevelopment District 1 -1 Redevelopment M.S. Section 472 1986 Through 2012 $ 163,669 1,654,372 Captured net tax capacity - retained by the City $ 1,490,703 Total District Bonds issued $ 19,250,000 Amountredeemed (19,250,000) Bonds outstanding December 31, 2012 $ - 2. Name of District: Type of District: Authorizing Law. Established- Duration of District: Original net tax capacity: Current net tax capacity: Andover Redevelopment District 1 -2 Redevelopment M.S. Section 472 1986 Through 2014 $ 4,542 228,560 Capturednettaxcapacity - retainedbytheCity $ 224,018 3. Name of District: Type of District: Authorizing Law. Established- Duration of District: Original net tax capacity: Current net tax capacity: Tax Increment Financing District 1 -3 (Farmstead Project) Redevelopment M.S. Section 469 1997 Through 2025 $ 7,314 148,018 Captured net tax capacity - retained by the City $ 140,704 4. Name of District: Tax Increment Financing District 1 -4 Type of District: Redevelopment Authorizing Law. M.S. Section 469 Established 2005 Duration of District: Through 2031 Original net tax capacity: $ 66,986 Current net tax capacity: 83,073 Captured net tax capacity - retained by the City $ 16,087 Note 12 DEFICIT FUND BALANCES The City has deficit fund balances at December 31, 2012 as follows: Fund Amount Special Revenue Funds: Comrnunity Center $ 249,440 Capital Projects Funds: Storm Sewer Project 63,823 73 CITY OF ANDOVER, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2012 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. The City also has a $2,500 deductible per occurrence to further decrease the cost of coverage. Final premiums are determined after an audit of payroll subsequent to the close of the agreement year and are subject to revisions in rates, payrolls and experience modification. The amount of premium adjustment, if any, is considered immaterial and not recorded until received or paid. Property, casualty, and automobile insurance coverage are provided through a pooled self - insurance program through the LMCIT. The City pays an annual premium to the LMCIT. The LMCIT reinsures through commercial companies for claims in excess of various amounts. The City retains risk for the deductible portions. These deductibles are considered immaterial to the financial statements. The City continues to carry commercial insurance for all other risks of loss, including employee health and disability insurance. There were no significant reductions in insurance from the previous year or settlements in excess of insurance coverage for any of the past three fiscal years. B. LITIGATION The City attorney has indicated that existing and pending lawsuits, claims and other actions in which the City is a defendant are either covered by insurance; of an immaterial amount; or, in the judgment of the City attorney, remotely recoverable by plaintiffs. C. FEDERAL AND STATE FUNDS The City receives financial assistance from federal and state governmental agencies in the form of grants. The disbursement of funds received under these programs generally requires compliance with the terms and conditions specified in the grant agreements and are subject to audit by the grantor agencies. Any disallowed claims resulting from such audits could become a liability of the applicable fund. However, in the opinion of management, any such disallowed claims will not have a material effect on any of the financial statements of the individual fund types included herein or on the overall financial position of the City at December 31, 2012. 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: 74 CITY OF ANDOVER, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2012 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, 2012. Future scheduled tax levies for all bonds outstanding at December 31, 2012 totaled $30,015,926. Note 15 FUND BALANCE A. CLASSIFICATIONS At December 31, 2012, a summary of the governmental fund balance classifications are as follows: Nonspendable: Inventory Restricted for Debt service Tax increment Brblic services Equipment purchases Open spacerefererdum Total restricted Committed to Economic development CSty'smapping system Surface watermanagement Brblic right of waysm anagement Se al c oating new developments Total committed Assigned to: Water system Sanitary sewer system Street rehabilitation Developm ent purposes Forest msourcesprograms Brblic services Parkimprovements Facilitiesmanagement Pedestrian trails Capital improvements Total assigned Unassigned Total 2006 EDA 2007EDA 2 ,876,885 - - - - 4,621,489 - - - - 4 ,021,489 - - - - - 4 ,075,526 - - - Public Public - - 1,063,785 - 1 ,063,785 - - - - - - - - 1,130 1,130 F. Lease Fac Lease - - - - - - - - 198,388 19$388 Tax Permonent 1,558,764 Revenue Revenue Water Sewer Road& Increment Improvement Other RefB.& RefB.& Trunk Trunk Bridge Projects P -1ving Governmental General DST DST CPT CPF CPT CPF CPT Funds Total $ 160177 $ $ $ $ $ $ $ $ 1.471 $ 161,648 9,283,885 6,372,289 - 9.283.885 6.372.289 - - 1211,643 1211.643 3,363,244 19,019,418 - 1211,643 8,217 8,217 293,111 293,111 775,534 775,534 4.440.106 21307.923 513,254 513,254 106,061 106,061 3,735 3,735 57,047 57,047 1,316 1,316 681,413 681,413 - - - 2,876,885 - - - - - 2 ,876,885 - - - - 4,621,489 - - - - 4 ,021,489 - - - - - 4 ,075,526 - - - 4 ,075,526 - - - - - - - 1,063,785 - 1 ,063,785 - - - - - - - - 1,130 1,130 608 608 - - - - - - - - 198,388 19$388 - - - - - - - - 1,558,764 1,558,764 - - - - - - - - 87,664 87,664 1,335,989 1335,989 2.876885 4.621.489 4.675.526 1.063.785 3.182.543 16.420.228 6227.664 (314.734) 5912.930 $ 6387.841 _L9 _L6 _L2 _L4 _L46755 _L1_11 _L1 _L7 $ 44.484.142 B. MINIMUM UNASSIGNED FUND BALANCE POLICY The City Council has formally adopted a policy regarding the minimum unassigned fund balance for the General Fund. The most significant revenue source of the General Fund is property taxes. This revenue source is received in two installments W. CITY OF ANDOVER, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2012 during the year — July and December. As such, it is the City's goal to begin each fiscal year with sufficient working capital to fund operations between each semi - annual receipt of property taxes. The policy established a year -end targeted unassigned fund balance amount for cash -flow timing needs in the range of 51 -53% of the subsequent year's budgeted expenditures. At December 31, 2012, the unassigned fund balance of the General Fund targeted for cash -flow needs was 65% of the subsequent year's budgeted expenditures. 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, 2012, the following revenue bonds were outstanding Date of Original $ 27,559 Outstanding Project Issue Issue Retired 12/31/2012 Downtown Center 7/15/1997 $ 5,645,000 $ (5,645,000) $ - Presbyterian Homes of Andover, Inc. 11/1/2003 13,145,000 (2,329,554) 10,815,446 Total $ 18,790,000 L_(7,974,554) $ 10,815,446 Note 17 OPERATING LEASES The City received revenue from agreements for the lease of space for antennas placed on the water tower and an emergency siren pole. 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: Location Lessee 2012 Lease Annual Lease Expiration Renewal Amount AdjustmentFactor Date Options City Hall water tower Sprint Nextel $ 27,559 Greater of CPI or 4% 12/31/2012 3 - 5 year terms City Hall water tower T- Mobile USA, Inc 22,476 Greater of CPI or 4% 12/31/2016 3 - 5 year terms Emergency Siren Pole T- Mobile USA, Inc 6,000 $1,000 annual increase 6/17/2013 3 - 5 year terms Andover YMCA Comm Ctr Greater Minneapolis YMCA 635,000 None 8/12035 N/A Ro se P arkwater tower Clear Wireless LLC 15,013 3% annually 7/31/2014 5- 5 year terms Future minimum lease payments are unavailable at this time due to changing variables: CPI and the completion of the capital campaign for the community center. Note 18 RECENTLY ISSUED ACCOUNTING STANDARDS The Governmental Accounting Standards Boards (GASB) recently approved the following statements which were not implemented for these financial statements: Statement No. 61 Financial 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. 65 Items Previously Reported as Assets and Liabilities. The provisions of this Statement are effective for financial statements for periods beginning after December 15, 2012. rip, CITY OF ANDOVER, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2012 Statement No. 67 Financial Reporting for Pension Plans — an amendment of GASB Statement No. 25. The provisions of this Statement are effective for financial statements for periods beginning after June 15, 2013. Statement No. 68 Accounting and Financial Reporting of Pensions —an amendment of GASB Statement No. 27. The provisions of this Statement are effective for financial statements for periods beginning after June 15, 2014. The effect these standards may have on future financial statements is not determinable at this time. 77 - This page intentionally left blank - 78 REQUIRED SUPPLEMENTARY INFORMATION rit CITY OF ANDOVER, MINNESOTA REQUIRED SUPPLEMENTARY INFORMATION 2,694,135 2,694,135 2,693,896 Statement 10 BUDGETARY COMPARISON SCHEDULE - GENERAL FUND 1,081,933 1,071,933 1,016,835 55,098 For The Year Ended December 31, 2012 Protective inspection 363,834 363,834 354,752 9,082 With Comparative Actual Amounts For The Year Ended December 31, 2011 Civil defense 16,755 16,755 14,087 2,668 16,301 Animal control Variance with 9,950 8,503 1,447 11,087 Total public safety Final Budget - 4,156,607 4,088,073 Budgeted Amounts 3,960,220 2012 Positive 2011 Original Final Actual (Negative) Actual Revenues: 494 594,293 Snow and ice removal 488,172 488,172 General property taxes $ 7,398,782 $ 7,398,782 $ 7,340,532 $ (58,250) $ 7,115,936 Licenses and permits 250,155 250,155 449,826 199,671 387,206 Intergovernmental 566,103 566,103 653,720 87,617 566,706 Charges for services 601,150 601,150 973,605 372,455 866,584 Fines 100,750 100,750 97,571 (3,179) 99,777 Investment income 65,000 65,000 95,364 30,364 130,367 Miscellaneous 84,850 84,850 149,857 65,007 127,509 Total revenues 9,066,790 9,066,790 9,760,475 693,685 9,294,085 Expenditures: Current: General government: Mayor and City council 88,162 88,162 83,622 4,540 101,372 Administration 140,621 140,621 140,047 574 135,523 Newsletter 25,500 25,500 22,336 3,164 22,897 Human resources 15,429 15,429 12,485 2,944 31,854 Legal 178,300 178,300 170,930 7,370 171,062 City clerk 103,937 103,937 101,378 2,559 100,693 Elections 53,922 53,922 39,613 14,309 6,398 Financial administration 213,522 213,522 207,337 6,185 207,033 Assessing 152,500 152,500 143,338 9,162 143,693 Information systems 153,560 153,560 136,025 17,535 142,963 Planning and zoning 338,696 338,696 318,524 20,172 324,302 Engineering 419,688 419,688 427,339 (7,651) 413,819 Facility management 549,639 564,639 420,794 143,845 469,476 Total general government 2,433,476 2,448,476 2,223,768 224,708 2,271,085 Public safety Police 2,694,135 2,694,135 2,693,896 239 2,615,407 Fire protection 1,081,933 1,071,933 1,016,835 55,098 974,988 Protective inspection 363,834 363,834 354,752 9,082 342,437 Civil defense 16,755 16,755 14,087 2,668 16,301 Animal control 9,950 9,950 8,503 1,447 11,087 Total public safety 4,166,607 4,156,607 4,088,073 68,534 3,960,220 Public works: Streets and highways 571,625 571,125 570,631 494 594,293 Snow and ice removal 488,172 488,172 420,174 67,998 434,602 Street signs 196,631 196,631 170,200 26,431 167,908 Traffic signals 36,000 36,000 27,457 8,543 26,569 Street lighting 242,400 242,400 228,635 13,765 221,461 Total public works $ 1,534,828 $ 1,534,328 $ 1,417,097 $ 117,231 $ 1,444,833 (Continued) 80 CITY OF ANDOVER, MINNESOTA REQUIRED SUPPLEMENTARY INFORMATION BUDGETARY COMPARISON SCHEDULE - GENERAL FUND For The Year Ended December 31, 2012 With Comparative Actual Amounts For The Year Ended December 31, 2011 Expenditures: Current: (continued) Parks and recreation Recycling Unallocated Total current Capital outlay: Public works Recycling Total capital outlay Total expenditures Revenues over (under) expenditures Other financing sources (uses): Transfers in Transfers out Total other financing sources (uses) Net increase (decrease) in fund balance Fund balance - January 1 Fund balance - December 31 Statement 10 (Continued) 81 5,888,137 $ 6,387,841 5,110,905 $ 5,888,137 Variance with Final Budget - Budgeted Amounts 2012 Positive 2011 Original Final Actual (Negative) Actual $ 922,599 $ 932,599 $ 912,750 $ 19,849 $ 889,178 126,210 126,210 94,328 31,882 109,911 80,000 80,000 63,371 16,629 30,631 9,263,720 9,278,220 8,799,387 478,833 8,705,858 - - - - 7,925 - - 58,314 (58,314) - - - 58,314 (58,314) 7,925 9,263,720 9,278,220 8,857,701 420,519 8,713,783 (196,930) (211,430) 902,774 1,114,204 580,302 196,930 196,930 196,930 - 196,930 - (600,000) (600,000) - - 196,930 (403,070) (403,070) - 196,930 $ - $ (614,500) 499,704 $ 1,114,204 777,232 81 5,888,137 $ 6,387,841 5,110,905 $ 5,888,137 CITY OF ANDOVER, MINNESOTA REQUIRED SUPPLEMENTARY INFORMATION SCHEDULE OF FUNDING PROGRESS - OTHER POST EMPLOYMENT BENEFITS PLAN For The Year Ended December 31, 2012 Statement 11 The City implemented GASB Statement No. 45 for the year ended December 31, 2008. Information for prior years is not available. 82 Unfunded Actuarial UAAL as a Actuarial Actuarial Accrued Percentage of Actuarial Value of Accrued Liability Fund Covered Covered Valuation Date Assets Liability (UAAL) Ratio Payroll Payroll (a) (b) (b -a) (a/b) (c) ((b -a) /c) January 1, 2008 $ - $ 324,387 $ 324,387 0.00% $ 5,400,000 6.01% January 1, 2011 - 273,046 273,046 0.00% 5,298,367 5.15% 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, 2012 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. F inal Over Budget Actual Budget General Fund- Current: General government Engineering $ 419,688 $ 427,339 $ 7,651 Capital outlay: Recycling 58,314 58,314 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 2012, 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, 2012 Condition Rating Excellent 86-100 Actual Very Good 71-85 Estimate Good 56-70 2004 Fair 41 -55 Poor 26-40 1,655,715 Very Poor 11-25 1,150,000 Substandard 0-10 As of December 31, 2012, 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 Condition and Trails Excellentto Good 95.6% Fair 4.0% Poor to Substandard 0.4% 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 $3,894,784 on street and trail maintenance for the year ending December 31, 2012. 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. 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 Maintenance Actual OCI Year Estimate Expenditures Rating 2004 $1,000,000 $ 1,847,066 82 2005 1,000,000 1,655,715 83 2006 1,150,000 1,228,981 82 2007 1,150,000 1,256,433 81 2008 1,150,000 2,244,713 80 2009 1,150,000 1,666,216 81 2010 1,150,000 1,457,082 83 2011 1,150,000 1,770,980 83 2012 1,150,000 3,894,784 83 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. E:Z: CITY OF ANDOVER, MINNESOTA COMBINING BALANCE SHEET NONMAJOR GOVERNMENTAL FUNDS December 31, 2012 With Comparative Totals For December 31, 2011 Statement 12 Liabilities and Fund Balance Liabilities: 1,471 - - 1,471 Totals Interfund payable 350,000 55,000 Special Debt Capital Nonmajor Governmental Funds 51,038 - Revenue Service Projects 2012 2011 Assets: - 14,500 Deposits payable 5,481 - - Cash and investments $ 723,181 $ 1,097,650 $ 4,233,618 $ 6,054,449 $ 4,362,395 Cash and investments with escrow agent 101,590 2,306,307 - 2,407,897 815,853 Accrued interest 3,294 3,549 20,410 27,253 19,824 Accounts receivable - net 69,282 - - 69,282 111,624 Prepaid items - - - - 8,250 Property taxes receivable: Unremitted 227 10,738 1,600 12,565 13,858 Delinquent 1,187 58,595 8,199 67,981 77,158 Notes receivable - - - - 53,431 Inventories - at cost 1,471 - - 1,471 7,824 Total assets 900,232 3,476,839 4,263,827 8,640,898 5,470,217 Liabilities and Fund Balance Liabilities: 1,471 - - 1,471 16,074 Interfund payable 350,000 55,000 65,000 470,000 840,000 Accounts payable 51,038 - 4,651 55,689 44,282 Contracts payable - - - - 14,500 Deposits payable 5,481 - - 5,481 31,996 Due to other governmental units 3,397 - 350 3,747 7,836 Salaries payable 21,863 - - 21,863 19,134 Deferred revenue 26,525 58,595 8,199 93,319 142,949 Total liabilities 458,304 113,595 78,200 650,099 1,100,697 Fund balance (deficit) Nonspendable 1,471 - - 1,471 16,074 Restricted 8,217 3,363,244 1,068,645 4,440,106 2,174,608 Committed 681,413 - - 681,413 650,766 Assigned 1,738 - 3,180,805 3,182,543 2,045,323 Unassigned (250,911) - (63,823) (314,734) (517,251) Total fund balance 441,928 3,363,244 4,185,627 7,990,799 4,369,520 Total liabilities and fund balance $ 900,232 $ 3,476,839 $ 4,263,827 $ 8,640,898 $ 5,470,217 87 CITY OF ANDOVER, MINNESOTA COMBINING STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES NONMAJOR GOVERNMENTAL FUNDS For The Year Ended December 31, 2012 With Comparative Totals For The Year Ended December 31, 2011 Statement 13 Expenditures: Totals Current: Special Debt Capital Nonmajor Governmental Funds Revenue Service Projects 2012 2011 Revenues: Public safety - - 4,000 4,000 General property taxes $ 39,705 $ 1,905,219 $ 272,097 $ 2,217,021 $ 2,117,692 Intergovernmental - 251,448 - 251,448 258,116 Charges for services 900,716 - - 900,716 866,207 Investment income 3,913 2,095 94,571 100,579 110,153 Miscellaneous: General government - - 23,077 23,077 Park dedication fees - - 47,700 47,700 51,706 Rent 639,983 - - 639,983 641,859 Other 160,927 - 20,104 181,031 235,162 Total revenues 1,745,244 2,158,762 434,472 4,338,478 4,280,895 Expenditures: Current: General government 5,000 - 51,605 56,605 27,486 Public safety - - 4,000 4,000 5,321 Public works 93,076 - 6,887 99,963 114,838 Parks and recreation 1,004,025 - 84,849 1,088,874 1,037,042 Economic development 168,970 - - 168,970 156,645 Capital outlay: General government - - 23,077 23,077 45,072 Public safety - - 23,600 23,600 5,645 Public works - - - - 328,878 Parks and recreation 7,161 - 570,674 577,835 197,782 Economic development 40,191 - - 40,191 25,109 Debt service: Principal retirement - 1,842,000 - 1,842,000 4,100,000 Interest - 1,052,537 - 1,052,537 1,139,328 Paying agent fees - 4,574 - 4,574 3,253 Professional service - 216,364 - 216,364 - Total expenditures 1,318,423 3,115,475 764,692 5,198,590 7,186,399 Revenues over (under) expenditures 426,821 (956,713) (330,220) (860,112) (2,905,504) Other financing sources (uses): Transfers in - 766,401 1,310,185 2,076,586 3,639,347 Transfers out (371,598) (9,803) - (381,401) (383,636) Bonds issued - - 585,000 585,000 265,000 Refunding bonds issued - 18,885,000 - 18,885,000 - Redemption of refunded bonds - (16,833,583) - (16,833,583) - Bond premium - 102,759 30,405 133,164 - Proceeds from sale of capital assets - - 16,625 16,625 - Total other financing sources (uses) (371,598) 2,910,774 1,942,215 4,481,391 3,520,711 Net increase (decrease) in fund balance 55,223 1,954,061 1,611,995 3,621,279 615,207 Fund balance - January 1 386,705 1,409,183 2,573,632 4,369,520 3,754,313 Fund balance - December 31 $ 441,928 $ 3,363,244 $ 4,185,627 $ 7,990,799 $ 4,369,520 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. Community Development Block Grant - This fund accounts for the financial operations of a federal grant for rental 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 Mapper - 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). Fores - 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. Right -of -Way Management/Utility - This fund is used to account for activity associated with the management of the public right -of -ways. 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, 2012 With Comparative Totals For December 31, 2011 FIt Community Drainage EDA Development Community and General Block Grant Center Mapping Assets: Cash and investments $ 511,878 $ 480 $ 9,075 $ 105,787 Cash and investments with escrow agent - - 101,590 - Accrued interest 2,369 - - 524 Accounts receivable 14,124 - 52,644 - Prepaid items - - - - Property taxes receivable: Unremitted - - - - Delinquent - - - - Notes receivable - - - - Inventories - at cost - - 1,471 - Total assets 528,371 480 164,780 106,311 Liabilities and Fund Balance Liabilities: Interfund payable - - 350,000 - Accounts payable 11,437 - 39,523 - Contracts payable - - - - Deposits payable - - 5,481 - Due to other governmental units - 480 2,667 250 Salaries payable 3,680 - 16,549 - Deferred revenue - - - - Total liabilities 15,117 480 414,220 250 Fund balance (deficit): Nonspendable - - 1,471 - Restricted - - - - Committed 513,254 - - 106,061 Assigned - - - - Unassigned - - (250,911) - Total fund balance (deficit) 513,254 - (249,440) 106,061 Total liabilities and fund balance $ 528,371 $ 480 $ 164,780 $ 106,311 FIt Statement 14 Right -of -Way Totals Management/ Charitable Construction Nonmajor Special Revenue Funds LRRWMO Forestry Utility Gambling Seal Coating 2012 2011 $ 4,438 $ 1,130 $ 55,049 $ 8,825 $ 26,519 $ 723,181 $ 726,855 - - - - - 101,590 76,459 - - 266 - 135 3,294 3,697 - - 2,514 - - 69,282 111,624 - - - - - - 8,250 227 - - - - 227 229 1,187 - - - - 1,187 1,070 - - - - - - 53,431 - - - - - 1,471 7,824 5,852 1,130 57,829 8,825 26,654 900,232 989,439 - - - - - 350,000 425,000 78 - - - - 51,038 41,343 - - - - - - 14,500 - - - - - 5,481 31,996 - - - - - 3,397 3,900 852 - 782 - - 21,863 19,134 1,187 - - - 25,338 26,525 66,861 2,117 - 782 - 25,338 458,304 602,734 - - - - - 1,471 16,074 - - - 8,217 - 8,217 - 3,735 - 57,047 - 1,316 681,413 650,766 - 1,130 - 608 - 1,738 33,469 - - - - - (250,911) (313,604) 3,735 1,130 57,047 8,825 1,316 441,928 386,705 $ 5,852 $ 1,130 $ 57,829 $ 8,825 $ 26,654 $ 900,232 $ 989,439 0111 CITY OF ANDOVER, MINNESOTA SUBCOMBINING STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES NONMAJOR SPECIAL REVENUE FUNDS For The Year Ended December 31, 2012 With Comparative Totals For The Year Ended December 31, 2011 F:Y' Community Drainage EDA Development Community and General Block Grant Center Mapping Revenues: General property taxes - Intergovernmental - - - - Charges for services 190,538 - 658,931 12,248 Investment income 7,222 (517) (6,781) 2,026 Miscellaneous: Rent - - 639,983 - Other 509 1,951 138,741 - Total revenues 198,269 1,434 1,430,874 14,274 Expenditures: Current: General government - - - - Public works - - - 6,223 Parks and recreation - - 1,004,025 - Economic development 142,296 26,674 - - Capital outlay: Parks and recreation - - 7,161 - Economic development 40,191 - - - Total expenditures 182,487 26,674 1,011,186 6,223 Revenues over (under) expenditures 15,782 (25,240) 419,688 8,051 Other financing sources (uses): Transfers out - - (371,598) - Net increase (decrease) in fund balance 15,782 (25,240) 48,090 8,051 Fund balance (deficit) - January 1 497,472 25,240 (297,530) 98,010 Fund balance (deficit) - December 31 $ 513,254 $ - $ (249,440) $ 106,061 F:Y' Statement 15 Right -of -Way Totals Management/ Charitable Construction Nonmajor Special Revenue Funds LRRWMO Forestry Utility Gambling Seal Coating 2012 2011 $ 39,705 $ - $ - $ - $ - $ 39,705 $ 33,198 - - - - - - 10,299 - - 38,999 - - 900,716 866,207 (215) (25) 1,252 193 758 3,913 13,809 - - - - - 639,983 641,859 - 6,510 - 13,216 - 160,927 215,595 39,490 6,485 40,251 13,409 758 1,745,244 1,780,967 - - - 5,000 - 5,000 9,170 46,834 13,168 26,851 - - 93,076 93,893 - - - - - 1,004,025 991,098 - - - - - 168,970 156,645 - - - - - 7,161 36,176 - - - - - 40,191 25,109 46,834 13,168 26,851 5,000 - 1,318,423 1,312,091 (7,344) (6,683) 13,400 8,409 758 426,821 468,876 - - - - - (371,598) (375,634) (7,344) (6,683) 13,400 8,409 758 55,223 93,242 11,079 7,813 43,647 416 558 386,705 293,463 $ 3,735 $ 1,130 $ 57,047 $ 8,825 $ 1,316 $ 441,928 $ 386,705 0:x1 - This page intentionally left blank - OZ! 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 • Abatement Bonds • Permanent Improvement Revolving Bonds • State Aid Bonds • Referendum Bonds Certificates of Indebtedness - (G.O. Equipment Certificates - 2008A, 2009A, 2011A and 2012A) are repaid primarily from general property taxes. Capital Improvement Bonds - (G.O. Capital Improvement Bonds 2004A and Refunding 2012B) are repaid primarily from general property taxes Revenue Bonds - (EDA Public Facility Lease Revenue Bonds 2004) are repaid from annual lease payments from the YMCA, Community Center operations and general property tax. Abatement Bonds - (G.O. Abatement bonds of 2012C) are repaid from annual lease payments from the YMCA, Community Center operations and general property tax. Permanent Improvement Revolving (PIR) Bonds - (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 - (State Aid Refunding Bonds of 2009A) 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. Referendum Bonds — (Open Space Referendum Bonds of 2010A) are used to finance the purchase of land to remain as open space. 0-10 CITY OF ANDOVER, MINNESOTA SUBCOMBINING BALANCE SHEET NONMAJOR DEBT SERVICE FUNDS December 31, 2012 With Comparative Totals For December 31, 2011 OR G.O. Capital EDA Public G.O. G.O. G.O. Capital Improvement Facility Lease Equipment Equipment Improvement Refunding Revenue Certificate Certificate Bonds Bonds Bonds 2011A 2012A 2004A 2012B 2004 Assets: Cash and investments $ 101,230 $ 126,144 $ 34,548 $ 1,000 $ 3,317 Cash and investments with escrow agent - - - 1,580,037 726,270 Accrued interest 300 378 - 1,721 - Property taxes receivable: Unremitted 585 717 2,327 - 6,276 Delinquent 3,199 3,920 12,709 - 34,263 Total assets 105,314 131,159 49,584 1,582,758 770,126 Liabilities and Fund Balance Liabilities: Interfund payable - - - - 55,000 Deferred revenue 3,199 3,920 12,709 - 34,263 Total liabilities 3,199 3,920 12,709 - 89,263 Fund balance: Restricted 102,115 127,239 36,875 1,582,758 680,863 Total liabilities and fund balance $ 105,314 $ 131,159 $ 49,584 $ 1,582,758 $ 770,126 OR Statement 16 - - - - 55,000 200,000 - - - 4,504 58,595 67,036 - - - 4,504 113,595 267,036 358,131 9,877 285,418 179,968 3,363,244 1,409,183 $ 358,131 $ 9,877 $ 285,418 $ 184,472 $ 3,476,839 $ 1,676,219 O:fi G.O. G.O. PIR Fund State Aid Open Space Abatement Refunding Refunding Referendum Totals Bonds Bonds Bonds Bonds Nonmajor Debt Service Funds 2012C 2010A 2009A 2010A 2012 2011 $ 357,898 $ 9,877 $ 285,021 $ 178,615 $ 1,097,650 $ 856,453 - - - - 2,306,307 739,394 233 - 397 520 3,549 1,251 - - - 833 10,738 12,085 - - - 4,504 58,595 67,036 358,131 9,877 285,418 184,472 3,476,839 1,676,219 - - - - 55,000 200,000 - - - 4,504 58,595 67,036 - - - 4,504 113,595 267,036 358,131 9,877 285,418 179,968 3,363,244 1,409,183 $ 358,131 $ 9,877 $ 285,418 $ 184,472 $ 3,476,839 $ 1,676,219 O:fi CITY OF ANDOVER, MINNESOTA SUBCOMBINING STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES NONMAJOR DEBT SERVICE FUNDS For The Year Ended December 31, 2012 With Comparative Totals For The Year Ended December 31, 2011 G.O. Capital FI: G.O. G.O. G.O. G.O. G.O. Capital Improvement Equipment Equipment Equipment Equipment Improvement Refunding Certificate Certificate Certificate Certificate Bonds Bonds 2008A 2009A 2011A 2012A 2004A 2012B Revenues: General property taxes $ - $ - $ 101,900 $ 124,857 $ 404,827 $ - Intergovernmental - - - - - - Investment income - - 1,015 2,382 (5,258) 1,725 Total revenues - - 102,915 127,239 399,569 1,725 Expenditures: Debt service: Principal retirement 166,000 130,000 76,000 - 315,000 - Interest 2,905 1,462 4,541 - 70,993 - Paying agent fees - - 220 - 623 - Professional services - - - - - 32,669 Total expenditures 168,905 131,462 80,761 - 386,616 32,669 Revenues over (under) expenditures (168,905) (131,462) 22,154 127,239 12,953 (30,944) Other financing sources (uses): Transfers in - - - - 9,803 - Transfers out (7,806) (1,997) - - - - Refunding bonds issued - - - - - 1,570,000 Redemption of refunded bonds - - - - - - Bond premium - - - - - 43,702 Total other financing sources (uses) (7,806) (1,997) - - 9,803 1,613,702 Net increase (decrease) in fund balance (176,711) (133,459) 22,154 127,239 22,756 1,582,758 Fund balance - January 1 176,711 133,459 79,961 - 14,119 - Fund balance - December 31 $ - $ - $ 102,115 $ 127,239 $ 36,875 $ 1,582,758 FI: Statement 17 EDA Public - G.O. 220,000 135,000 1,842,000 Facility Lease G.O. PIR Fund 18,850 Open Space 40,215 Revenue Abatement Refunding State Referendum Totals Bonds Bonds Bonds Aid Bonds Bonds Nonmajor Debt Service Funds 2004 2012C 2010A 2009A 2010A 2012 2011 $ 1,091,430 $ - $ - $ - $ 182,205 $ 1,905,219 $ 1,831,213 - - - 251,448 - 251,448 242,496 (1,258) 1,352 303 1,285 549 2,095 13,844 1,090,172 1,352 303 252,733 182,754 2,158,762 2,087,553 435,000 - 365,000 220,000 135,000 1,842,000 4,100,000 897,456 - 18,850 16,115 40,215 1,052,537 1,139,328 2,220 - 433 645 433 4,574 3,253 - 183,695 - - - 216,364 - 1,334,676 183,695 384,283 236,760 175,648 3,115,475 5,242,581 (244,504) (182,343) (383,980) 15,973 7,106 (956,713) (3,155,028) 371,598 - 385,000 - - 766,401 2,876,345 - - - - - (9,803) (8,002) - 17,315,000 - - - 18,885,000 - - (16,833,583) - - - (16,833,583) - - 59,057 - - - 102,759 - 371,598 540,474 385,000 - - 2,910,774 2,868,343 127,094 358,131 1,020 15,973 7,106 1,954,061 (286,685) 553,769 - 8,857 269,445 172,862 1,409,183 1,695,868 $ 680,863 $ 358,131 $ 9,877 $ 285,418 $ 179,968 $ 3,363,244 $ 1,409,183 0-U, - This page intentionally left blank - 111h1 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. Park Dedication - This fund was established to account for contributions associated with land development to be 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. Trail and Transportation - This fund is used to account for contributions associated with land development to be used for constructing and upgrading the City's trail system. 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. Equipment Certificates 2012A - This fund was established to account for the purchase of capital equipment that was 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. INI CITY OF ANDOVER, MINNESOTA SUBCOMBINING BALANCE SHEET NONMAJOR CAPITAL PROJECTS FUNDS December 31, 2012 Comparative Totals For December 31, 2011 f[+YA Storm Sewer Park Building Trail & Project Dedication Fund Transportation Assets: Cash and investments $ 1,177 $ 197,160 $ 1,551,474 $ 87,239 Accrued interest - 865 8,094 425 Property taxes receivable: Unremitted - 363 - - Delinquent - 1,860 - - Total assets 1,177 200,248 1,559,568 87,664 Liabilities and Fund Balance Liabilities: Interfund payables 65,000 - - - Accounts payable - - 804 - Due to other government units - - - - Deferred revenue - 1,860 - - Total liabilities 65,000 1,860 804 - Fund balance (deficit): Restricted - - - - Assigned - 198,388 1,558,764 87,664 Unassigned (63,823) - - - Total fund balance (deficit) (63,823) 198,388 1,558,764 87,664 Total liabilities and fund balance $ 1,177 $ 200,248 $ 1,559,568 $ 87,664 f[+YA Statement 18 Open Space Capital Equipment Referendum Totals Equipment Certificates Bonds Nonmajor Capital Projects Funds $ 1,333,353 $ 291,624 $ 771,591 $ 4,233,618 5,596 1,487 3,943 20,410 1,237 - - 1,600 6,339 - - 8,199 1,346,525 293,111 775,534 4,263,827 $ 2,779,087 14,876 1,544 9,052 2,804,559 - - - 65,000 215,000 3,847 - - 4,651 2,939 350 - - 350 3,936 6,339 - - 8,199 9,052 10,536 - - 78,200 230,927 - 293,111 775,534 1,068,645 765,425 1,335,989 - - 3,180,805 2,011,854 - - - (63,823) (203,647) 1,335,989 293,111 775,534 4,185,627 2,573,632 $ 1,346,525 $ 293,111 $ 775,534 $ 4,263,827 $ 2,804,559 `11x1 CITY OF ANDOVER, MINNESOTA SUBCOMBINING STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES NONMAJOR CAPITAL PROJECTS FUNDS For The Year Ended December 31, 2012 With Comparative Totals For The Year Ended December 31, 2011 11111! Storm Sewer Park Building Trail & Project Dedication Fund Transportation Revenues: General property taxes $ - $ 61,722 $ - $ - Intergovernmental - - - - Investment income (1,363) 3,505 40,279 1,678 Miscellaneous: Park dedication fees - 47,700 - - Other - 491 - 12,693 Total revenues (1,363) 113,418 40,279 14,371 Expenditures: Current: General government - - 7,092 - Public safety - - - - Public works - - - - Parks and recreation - 36,957 - - Capital outlay: General government - - - - Public safety - - - - Public works - - - - Parks and recreation - 48,902 - - Total expenditures - 85,859 7,092 - Revenues over (under) expenditures (1,363) 27,559 33,187 14,371 Other financing sources (uses): Transfers in - - 710,185 - Bonds issued - - - - Bond premium - - - - Proceeds from sale of capital assets - - - - Total other financing sources (uses) - - 710,185 - Net increase (decrease) in fund balance (1,363) 27,559 743,372 14,371 Fund balance (deficit) - January 1 (62,460) 170,829 815,392 73,293 Fund balance (deficit) - December 31 $ (63,823) $ 198,388 $ 1,558,764 $ 87,664 11111! Statement 19 1[11.7 Open Space Capital Equipment Referendum Totals Equipment Certificates Bonds Nonmajor Capital Projects Funds Reserve 2012A 2010A 2012 2011 $ 210,375 $ - $ - $ 272,097 $ 253,281 - - - - 5,321 24,174 11,689 14,609 94,571 82,500 - - - 47,700 51,706 6,920 - - 20,104 19,567 241,469 11,689 14,609 434,472 412,375 44,513 - - 51,605 18,316 4,000 - - 4,000 5,321 - 6,887 - 6,887 20,945 36,505 6,887 4,500 84,849 45,944 23,077 - - 23,077 45,072 - 23,600 - 23,600 5,645 - - - - 328,878 366,350 155,422 - 570,674 161,606 474,445 192,796 4,500 764,692 631,727 (232,976) (181,107) 10,109 (330,220) (219,352) 600,000 - - 1,310,185 763,002 - 585,000 - 585,000 265,000 - 30,405 - 30,405 - 16,625 - - 16,625 - 616,625 615,405 - 1,942,215 1,028,002 383,649 434,298 10,109 1,611,995 808,650 952,340 (141,187) 765,425 2,573,632 1,764,982 $ 1,335,989 $ 293,111 $ 775,534 $ 4,185,627 $ 2,573,632 1[11.7 CITY OF ANDOVER, MINNESOTA SPECIAL REVENUE FUND - EDA GENERAL SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES - BUDGET AND ACTUAL For The Year Ended December 31, 2012 With Comparative Actual Amounts For The Year Ended December 31, 2011 Statement 20 Variance with Final Budget - Budgeted Amounts 2012 Positive 2011 Original Final Actual (Negative) Actual Revenues: Charges for services $ 175,000 $ 175,000 $ 190,538 $ 15,538 $ 199,030 Investment income 5,000 5,000 7,222 2,222 15,148 Miscellaneous - - 509 509 34,196 Total revenues 180,000 180,000 198,269 18,269 248,374 Expenditures: Current: Economic development 208,979 180,979 142,296 38,683 156,453 Capital outlay: Parks and recreation - - - - 36,176 Economic development - 56,000 40,191 15,809 25,109 Total expenditures 208,979 236,979 182,487 54,492 217,738 Net increase (decrease) in fund balance $ (28,979) $ (56,979) 15,782 $ 34,078 30,636 Fund balance (deficit) - January 1 497,472 466,836 Fund balance (deficit) - December 31 $ 513,254 $ 497,472 111A CITY OF ANDOVER, MINNESOTA SPECIAL REVENUE FUND - COMMUNITY DEVELOPMENT BLOCK GRANT SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES - BUDGET AND ACTUAL For The Year Ended December 31, 2012 With Comparative Actual Amounts For The Year Ended December 31, 2011 Revenues: Intergovernmental Investment income Miscellaneous Total revenues Expenditures: Current: Economic development Net increase (decrease) in fund balance Fund balance (deficit) - January 1 Fund balance (deficit) - December 31 Statement 21 Variance with Final Budget - Budgeted Amounts 2012 Positive 2011 Original Final Actual (Negative) Actual $ 25,000 $ 25,000 $ - $ (25,000) $ - 100 100 (517) (617) 921 4,000 4,000 1,951 (2,049) 17,728 29,100 29,100 1,434 (27,666) 18,649 25,000 25,000 26,674 (1,674) $ 4,100 $ 4,100 (25,240) $ (29,340) 25,240 f[Nrl 192 18,457 6,783 $ 25,240 CITY OF ANDOVER, MINNESOTA SPECIAL REVENUE FUND - COMMUNITY CENTER SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES - BUDGET AND ACTUAL For The Year Ended December 31, 2012 With Comparative Actual Amounts For The Year Ended December 31, 2011 Revenues: Charges for services Investment income Miscellaneous: Rent Other Total revenues Expenditures: Current: Parks and recreation Capital outlay: Parks and recreation Total expenditures Revenue over (under) expenditures Other financing sources (uses) Transfers out Net increase (decrease) in fund balance Fund balance (deficit) - January 1 Fund balance (deficit) - December 31 Statement 22 (371,598) (371,598) (371,598) $ 43,469 $ 43,469 48,090 (297,530) $ (249,440) I[*] $ 4,621 (369,034) 54,485 (352,015) $ (297,530) Variance with Final Budget - Budgeted Amounts 2012 Positive 2011 Original Final Actual (Negative) Actual $ 634,500 $ 634,500 $ 658,931 $ 24,431 $ 629,396 - - (6,781) (6,781) (7,228) 635,000 635,000 639,983 4,983 641,859 154,400 154,400 138,741 (15,659) 150,590 1,423,900 1,423,900 1,430,874 6,974 1,414,617 1,008,833 1,008,833 1,004,025 4,808 991,098 - - 7,161 (7,161) - 1,008,833 1,008,833 1,011,186 (2,353) 991,098 415,067 415,067 419,688 4,621 423,519 (371,598) (371,598) (371,598) $ 43,469 $ 43,469 48,090 (297,530) $ (249,440) I[*] $ 4,621 (369,034) 54,485 (352,015) $ (297,530) CITY OF ANDOVER, MINNESOTA SPECIAL REVENUE FUND - DRAINAGE AND MAPPING SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES - BUDGET AND ACTUAL For The Year Ended December 31, 2012 With Comparative Actual Amounts For The Year Ended December 31, 2011 Statement 23 1111] Variance with Final Budget - Budgeted Amounts 2012 Positive 2011 Original Final Actual (Negative) Actual Revenues: Charges for services $ 9,000 $ 9,000 $ 12,248 $ 3,248 $ 8,657 Investment income 1,200 1,200 2,026 826 3,126 Total Revenues 10,200 10,200 14,274 4,074 11,783 Expenditures: Current: Public works 10,500 10,500 6,223 4,277 6,327 Net increase (decrease) in fund balance $ (300) $ (300) 8,051 $ 8,351 5,456 Fund balance (deficit) - January 1 98,010 92,554 Fund balance (deficit) - December 31 $ 106,061 $ 98,010 1111] CITY OF ANDOVER, MINNESOTA SPECIAL REVENUE FUND - LRRWMO SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES - BUDGET AND ACTUAL For The Year Ended December 31, 2012 With Comparative Actual Amounts For The Year Ended December 31, 2011 Statement 24 Variance with Final Budget - Budgeted Amounts 2012 Positive 2011 Original Final Actual (Negative) Actual Revenues: General property taxes $ 40,000 $ 40,000 $ 39,705 $ (295) $ 33,198 Investment income 100 100 (215) (315) (96) Total revenues 40,100 40,100 39,490 (610) 33,102 Expenditures: Current: Public works 48,078 48,078 46,834 1,244 34,704 Net increase (decrease) in fund balance $ (7,978) $ (7,978) (7,344) $ 634 (1,602) Fund balance (deficit) - January 1 11,079 12,681 Fund balance (deficit) - December 31 $ 3,735 $ 11,079 ifiNl CITY OF ANDOVER, MINNESOTA SPECIAL REVENUE FUND - FORESTRY SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES - BUDGET AND ACTUAL For The Year Ended December 31, 2012 With Comparative Actual Amounts For The Year Ended December 31, 2011 Statement 25 Variance with Final Budget - Budgeted Amounts 2012 Positive 2011 Original Final Actual (Negative) Actual Revenues: Intergovernmental $ 12,500 $ 12,500 $ - $ (12,500) $ 10,299 Investment income 100 100 (25) (125) 270 Miscellaneous 10,000 10,000 6,510 (3,490) 6,137 Total revenues 22,600 22,600 6,485 (16,115) 16,706 Expenditures: Current: Public works 22,500 22,500 13,168 9,332 14,637 Net increase (decrease) in fund balance $ 100 $ 100 (6,683) $ (6,783) 2,069 Fund balance (deficit) - January 1 7,813 5,744 Fund balance (deficit) - December 31 $ 1,130 $ 7,813 iffl CITY OF ANDOVER, MINNESOTA SPECIAL REVENUE FUND - RIGHT -OF -WAY MANAGEMENT/UTILITY SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES - BUDGET AND ACTUAL For The Year Ended December 31, 2012 With Comparative Actual Amounts For The Year Ended December 31, 2011 Statement 26 Variance with Final Budget - Budgeted Amounts 2012 Positive 2011 Original Final Actual (Negative) Actual Revenues: Charges for services $ 10,000 $ 10,000 $ 38,999 $ 28,999 $ 19,303 Investment income 500 500 1,252 752 1,131 Total revenues 10,500 10,500 40,251 29,751 20,434 Expenditures: Current: Public works 28,397 28,397 26,851 1,546 27,495 Revenue over (under) expenditures (17,897) (17,897) 13,400 31,297 (7,061) Other financing sources (uses): Transfers out - - - - (6,600) Net increase (decrease) in fund balance $ (17,897) $ (17,897) 13,400 $ 31,297 (13,661) Fund balance (deficit) - January 1 43,647 57,308 Fund balance (deficit) - December 31 $ 57,047 $ 43,647 Ism CITY OF ANDOVER, MINNESOTA SPECIAL REVENUE FUND - CHARITABLE GAMBLING SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES - BUDGET AND ACTUAL For The Year Ended December 31, 2012 With Comparative Actual Amounts For The Year Ended December 31, 2011 Revenues: Investment income Miscellaneous Total revenues Expenditures: Current: General government Net increase (decrease) in fund balance Fund balance (deficit) - January 1 Fund balance (deficit) - December 31 Statement 27 Variance with Final Budget - Budgeted Amounts 2012 Positive 2011 Original Final Actual (Negative) Actual 193 $ 193 $ 65 7,000 7.000 13,216 6,216 6,944 7,000 7,000 13,409 6,409 7,009 9.500 9,500 5,000 4,500 9,170 $ (2,500) $ (2,500) 8,409 $ 10,909 (2,161) INN 416 $ 8,825 2,577 $ 416 CITY OF ANDOVER, MINNESOTA SPECIAL REVENUE FUND - CONSTRUCTION SEAL COATING SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES - BUDGET AND ACTUAL For The Year Ended December 31, 2012 With Comparative Actual Amounts For The Year Ended December 31, 2011 Budgeted Amounts Original Final Revenues: Charges for services $ 4,000 $ 4,000 $ Investment income 300 300 Total revenues 4,300 4,300 Expenditures: Current: Public works 4.000 4,000 Net increase (decrease) in fund balance $ 300 $ 300 Fund balance (deficit) - January 1 Fund balance (deficit) - December 31 INE11 Statement 28 Variance with Final Budget - 2012 Positive 2011 Actual (Negative) Actual - $ (4,000) $ 9,821 758 458 472 758 (3,542) 10,293 - 4,000 10,730 758 $ 458 (437) 558 995 $ 1,316 $ 558 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. 166'1 CITY OF ANDOVER, MINNESOTA COMBINING STATEMENT OF NET POSITION INTERNAL SERVICE FUNDS December 31, 2012 With Comparative Totals for December 31, 2011 Central Equipment Risk Maintenance Management Statement 29 Totals 2012 2011 Assets: Current assets: Cash and cash equivalents $ 282,515 $ 271,342 $ 553,857 $ 451,656 Accrued interest 1,575 1,007 2,582 2,405 Accounts receivable 63 - 63 1,511 Prepaid items - - - 1,750 Inventories - at cost 91,403 - 91,403 87,791 Total assets 375,556 272,349 647,905 545,113 Liabilities: Current liabilities: Accounts payable 21,872 8,002 29,874 20,635 Due to other governmental units 15 - 15 - Salaries payable 8,468 536 9,004 8,580 Total liabilities 30,355 8,538 38,893 29,215 Net position: Unrestricted $ 345,201 $ 263,811 $ 609,012 $ 515,898 INN CITY OF ANDOVER, MINNESOTA COMBINING STATEMENT OF REVENUES, EXPENSES AND CHANGES IN NET POSITION INTERNAL SERVICE FUNDS For The Year Ended December 31, 2012 With Comparative Totals For The Year Ended December 31, 2011 Central Equipment Risk Maintenance Management Operating revenues Statement 30 Totals 2012 2011 User charges $ 679,226 $ 336,596 $ 1,015,822 $ 1,005,389 Other 3,748 73,237 76,985 39,501 Total operating revenues 682,974 409,833 1,092,807 1,044,890 Operating expenses: Personal services 224,070 146,146 370,216 349,297 Supplies 308,254 19,486 327,740 298,789 Other service charges 99,117 213,177 312,294 308,010 Total operating expenses 631,441 378,809 1,010,250 956,096 Operating income (loss) 51,533 31,024 82,557 88,794 Nonoperating revenues (expenses): Investment income 6,699 3,858 10,557 13,289 Change in net position 58,232 34,882 93,114 102,083 Net position - January 1 286,969 228,929 515,898 413,815 Net position - December 31 $ 345,201 $ 263,811 $ 609,012 $ 515,898 ifir/ C1rfY OF ANDOVER, MINNESOTA COMBINING STATEMENT OF CASH FLOWS INTERNAL SERVICE FUNDS For The Year Ended December 31, 2012 With Comparative Totals For The Year Ended December 31, 2011 Cash flows from operating activities: Receipts from customers and users Payment to suppliers Payment to employees Net cash flows from operating activities Cash flows from investing activities: Investment income Net increase in cash and cash equivalents Cash and cash equivalents - January 1 Cash and cash equivalents - December 31 Reconciliation of operating income to net cash provided (used) by operating activities: Operating income (loss) Adjustments to reconcile operating income (loss) to net cash flows from operating activities: Changes in assets and liabilities: Decrease (increase) in prepaid items Decrease (increase) in accounts receivable Decrease (increase) in inventory Increase (decrease) in accounts payable Increase (decrease) in due to other governmental units Increase (decrease) in salaries payable Total adjustments Net cash provided by operating activities Central Equipment $ 684,422 (408,795) (221,945) 53,682 Risk Manaeement $ 409,833 (225,597) (146,097) 38,139 Totals 2012 $ 1,094,255 (634,392) (368,042) 91,821 Statement 31 2011 $ 1,043,379 (625,820) (348,960) 68,599 6,567 3,813 10,380 12,348 60,249 41,952 102,201 80,947 222,266 229,390 451,656 370,709 $ 282,515 $ 271,342 $ 553,857 $ 451,656 $ 51,533 $ 31,024 $ 82,557 $ 88,794 1,750 1,750 1,448 1,448 (1,511) (3,612) - (3,612) (6,791) 2,173 7,066 9,239 (6,747) 15 - 15 (5,483) 375 49 424 337 2,149 7,115 9,264 (20,195) $ 53,682 $ 38,139 $ 91,821 $ 68,599 IMPQ 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. INN CITY OF ANDOVER, MINNESOTA COMBINING STATEMENT OF NET POSITION FIDUCIARY FUNDS December 31, 2012 General Escrow Assets: Cash and investments $ 22,131 Liabilities: Accounts payable 26 Deposits payable 22,105 Total liabilities $ 22,131 W11 General Agency $ 299,760 7,985 291,775 $ 299,760 Statement 32 Total $ 321,891 8,011 313,880 $ 321.891 CITY OF ANDOVER, MINNESOTA COMBINING STATEMENT OF CHANGES IN ASSETS AND LIABILITIES Statement 33 FIDUCIARY FUNDS For The Year Ended December 31, 2012 General Escrow Fund Assets: Cash and investments Liabilities: Accounts payable Deposits payable Total liabilities General Agency Fund Assets: Cash and investments Liabilities: Accounts payable Deposits payable Total liabilities Total Fiduciary Funds Assets: Cash and investments Liabilities: Accounts payable Deposits payable Total liabilities Balance Balance January 1, December 31, $ 9,447 $ 52,286 $ (39,602) $ 22,131 106 19,552 9,341 32,734 $ 9,447 $ 52,286 (19,632) 26 (19,970) 22,105 $ (39,602) $ 22,131 $ 174,590 $ 1,669,622 $ (1,544,452) $ 299,760 - 717,709 (709,724) 7,985 174,590 951,913 (834,728) 291,775 $ 174,590 $ 1,669,622 $ (1,544,452) $ 299,760 $ 184,037 $ 1,721,908 $ (1,584,054) $ 321,891 106 737,261 (729,356) 8,011 183,931 984,647 (854,698) 313,880 $ 184,037 $ 1,721,908 $ (1,584,054) $ 321,891 IM - This page intentionally left blank - IMA 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 124 These tables contain trend information to help the reader understand how the City's financial performance and well -being have changed over time. Revenue Capacity 134 These tables contain information to help the reader assess the City's most significant local revenue source, the property tax. Debt Capacity 140 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. Demographic and Economic Information 148 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 Information 150 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. 123 CITY OF ANDOVER, MINNESOTA NET POSITION BY COMPONENT Last Ten Fiscal Years (accrual basis of accounting) Governmental Activities 95,320,925 87,342,022 103,240,249 102,468,182 Net investment in capital assets $ 61,941,541 $ 52,230,713 $ 67,652,236 $ 64,114,553 Restricted 4,277,835 17,182,422 6,565,168 14,838,788 Unrestricted 18,992,188 19,617,813 19,740,176 19,808,248 Total governmental activities net position 85,211,564 89,030,948 93,957,580 98,761,589 Business -Type Activities Net investment in capital assets 33,379,384 35,111,309 35,588,013 38,249,916 Restricted 437,077 - - - Unrestricted 2,898,244 3,197,522 3,032,746 3,451,261 Total business -type activities net position 36,714,705 38,308,831 38,620,759 41,701,177 Primary Government Net investment in capital assets 95,320,925 87,342,022 103,240,249 102,468,182 Restricted 4,714,912 17,182,422 6,565,168 14,838,788 Unrestricted 21,890,432 22,815,335 22,772,922 23,259,509 Total primary government net position $ 121,926,269 $ 127,339,779 $ 132,578,339 $ 140,566,479 Note: The City began to report accrual information when it implemented GASB 34 in 2002. 124 Table 1 $ 77,285,905 $ 79,644,769 $ 83,394,872 $ 87,206,607 $ 90,859,970 $ 89,592,661 7,763,716 8,345,185 8,252,691 6,364,714 3,107,253 4,461,020 21,294,876 19,904,063 19,442,008 21,071,212 23,353,009 25,589,728 106,344,497 107, 894,017 111,089,571 114,642,533 117,320,232 119,643,409 38,580,630 37,606,052 36,939,962 36,140,050 36,031,319 34,922,691 3,659,887 4,005,471 4,875,384 4,912,822 5,100,628 5,784,313 42,240,517 41,611,523 41,815,346 41,052,872 41,131,947 40,707,004 115, 866,53 5 117,250,821 120,334,834 123,346,657 126, 891,289 124, 515,3 52 7,763,716 8,345,185 8,252,691 6,364,714 3,107,253 4,461,020 24,954,763 23,909,534 24,317,392 25,984,034 28,453,637 31,374,041 $ 148,585,014 $ 149,505,540 $ 152,904,917 $ 155,695,405 $ 158,452,179 $ 160,350,413 INI CITY OF ANDOVER, MINNESOTA CHANGES IN NET POSITION Last Ten Fiscal Years (accrual basis of accounting) Business -type activities Water 2003 2004 2005 2006 Expenses 1,344,857 1,351,506 1,555,010 1,585,548 Governmental activities: 168,203 389,290 400,114 408,003 General government $ 2,431,252 $ 2,265,215 $ 2,432,433 $ 2,637,584 Public safety 2,766,694 3,138,069 3,353,798 3,443,285 Public works 3,361,255 5,268,813 3,937,423 3,031,459 Sanitation 160,548 26,843 - - Parks and recreation 802,131 2,028,177 1,575,582 2,442,305 Recycling 115,016 113,234 118,599 91,378 Economic development 470,172 941,624 459,635 626,103 Interest on long -term debt 1,255,888 1,708,303 1,797,469 1,668,444 Total governmental activities expenses 11,362,956 15,490,278 13,674,939 13,940,558 Business -type activities Water 1,737,596 1,956,995 2,160,502 2,232,144 Sewer 1,344,857 1,351,506 1,555,010 1,585,548 Storm sewer 168,203 389,290 400,114 408,003 Total business -type activities expenses 3,250,656 3,697,791 4,115,626 4,225,695 Total primary government expenses 14,613,612 19,188,069 17,790,565 18,166,253 Program Revenues Governmental activities: Charges for services: General government 593,568 814,518 709,538 471,573 Public safety 793,306 936,061 1,001,912 804,447 Public works 312,110 495,835 379,890 325,672 Parks and recreation - 29,683 461,679 749,407 Recycling 22,450 29,062 32,810 35,379 Economic development - - - 218,605 Operating grants and contributions 732,011 1,640,389 2,535,140 959,286 Capital grants and contributions 5,350,283 7,010,826 3,934,686 4,920,694 Total governmental activities program revenue 7,803,728 10,956,374 9,055,655 8,485,063 Business -type activities: Charges for services: Water 1,399,798 1,723,068 1,510,119 1,768,388 Sewer 1,309,584 1,361,839 1,550,745 1,691,728 Storm sewer 118,638 242,090 248,753 287,397 Operating grants and contributions - - - - Capital grants and contributions - 214,920 823,797 2,761,282 Total business -type activities program revenue 2,828,020 3,541,917 4,133,414 6,508,795 Total primary government program revenues 10,631,748 14,498,291 13,189,069 14,993,858 Nct (Expcnsc)/Rcvcnuc Governmental activities (3,559,228) (4,533,904) (4,619,284) (5,455,495) Business -type activities (422,636) (155,874) 17,788 2,283,100 Total primary government net expense $ (3,981,864) $ (4,689,778) $ (4,601,496) $ (3,172,395) IK -i Table 2 $ 2,509,011 $ 2,505,105 $ 2,413,916 $ 2,398,007 $ 2,406,750 $ 2,453,801 3,851,086 4,035,884 4,237,401 4,157,050 4,214,316 4,325,531 3,783,509 5,144,197 3,776,367 3,445,403 4,029,164 5,623,942 2,954,753 2,963,218 2,880,595 3,447,730 2,945,742 3,102,534 94,929 85,397 86,949 108,785 109,293 94,319 2,265,605 540,285 481,632 654,961 777,298 1,396,466 2,303,567 2,219,130 2,146,960 1,936,731 1,796,782 2,497,344 17,762,460 17,493,216 16,023, 820 16,148,667 16,279,345 19,493,937 12,855,042 5,067,407 5,521,564 5,631,492 5,497,883 7,445,516 2,587,847 2,563,781 2,594,713 2,585,469 2,655,926 2,782,948 1,631,224 1,794,891 1,831,505 1,915,072 1,914,113 1,842,473 537,151 521,975 536,619 532,168 614,958 531,103 4,756,222 4,880,647 4,962,837 5,032,709 5,184,997 5,156,524 22,518,682 22,373,863 20,986,657 21,181,376 21,464,342 24,650,461 785,600 647,081 483,639 454,419 532,764 690,875 662,299 721,289 412,113 479,516 540,089 607,715 408,656 427,043 316,451 337,360 309,066 308,583 8 59, 531 1,049, 032 1,495, 779 1,432,672 1,498, 847 1,495, 872 33,158 35,897 29,479 40,504 48,339 39,530 182,535 199,840 185,539 211,121 235,134 170,391 1,129,099 917,618 966,635 1,214,066 977,553 1,358,424 8,794,164 1,069,607 1,631,929 1,461,834 1,356,091 2,774,126 12,855,042 5,067,407 5,521,564 5,631,492 5,497,883 7,445,516 2,025,452 1,987,432 2,127,676 2,077,305 2,119,954 2,572,560 1,771,670 1,869,327 1,967,997 1,964,117 1,990,218 2,063,177 288,372 297,125 325,392 338,823 358,708 379,262 - - - 9,380 - - 158,113 142,133 793,589 - - - 4,243,607 4,296,017 5,214,654 4,389,625 4,468,880 5,014,999 17,098,649 9,363,424 10,736,218 10,021,117 9,966,763 12,460,515 (4,907,418) (12,425,809) (10,502,256) (10,517,175) (10,781,462) (12,048,421) (512,615) (584,630) 251,817 (643,084) (716,117) (141,525) $ (5,420,033) $ (13,010,439) $ (10,250,439) $ (11,160,259) $ (11,497,579) $ (12,189,946) IWA CITY OF ANDOVER, MINNESOTA CHANGES IN NET POSITION Last Ten Fiscal Years (accrual basis of accounting) General Revenues and Other Changes in Net Position Governmental activities: Taxes: General property taxes Tax increment collections Unrestricted grants and contributions Unrestricted investment earnings Gain on sale of capital assets Transfers Total governmental activities Business -type activities: Unrestricted investment earnings Gain on sale of capital assets Transfers Total business -type activities Total primary government Change in Net Position Governmental activities Business -type activities Total primary government $ 5,682,498 $ 6,260,772 $ 7,066,852 $ 8,084,559 1,140,040 1,186,396 1,285,195 1,562,131 158,694 141,870 86,906 77,642 568,042 681,563 690,648 1,019,304 591,063 1,817,938 251,504 219,910 (6,426,181) (1,735,251) (438,426) (704,042) 1,714,156 8,353,288 8,942,679 10,259,504 (94,931) 7,895 47,620 87,376 - 6,854 - 5,900 6,426,181 1,735,251 438,426 704,042 6,331,250 1,750,000 486,046 797,318 8,045,406 10,103,288 9,428,725 11,056,822 (1,845,072) 3,819,384 4,323,395 4,804,009 5,908,614 1,594,126 503,834 3,080,418 $ 4,063,542 $ 5,413,510 $ 4,827,229 $ 7,884,427 Note: The City began to report accrual information when it implemented GASB 34 in 2002. 128 Table 2 cont $ 8,897,755 $ 9,752,701 $ 10,175,519 $ 10,336,536 $ 10,292,674 $ 10,594,940 1,661,204 1,783,270 1,930,669 2,074,589 2,005,056 2,033,932 486,626 274,402 131,084 84,875 86,802 14,360 1,967,583 1,514,012 1,032,507 1,114,451 1,399,987 1,201,995 191,735 234,070 6,144 22,500 91,693 16,625 (714,577) 416,874 421,887 437,186 (417,051) 509,746 12,490,326 13,975,329 13,697,810 14,070,137 13,459,161 14,371,598 337,378 372,510 373,893 317,796 370,641 226,328 - - - - 7,500 - 714,577 (416,874) (421,887) (437,186) 417,051 (509,746) 1,051,955 (44,364) (47,994) (119,390) 795,192 (283,418) 13,542,281 13,930,965 13,649,816 13,950,747 14,254,353 14,088,180 7,582,908 1,549,520 3,195,554 3,552,962 2,677,699 2,323,177 539,340 (628,994) 203,823 (762,474) 79,075 (424,943) $ 8,122,248 $ 920,526 $ 3,399,377 $ 2,790,488 $ 2,756,774 $ 1,898,234 `M CITY OF ANDOVER, MINNESOTA FUND BALANCES - GOVERNMENTAL FUNDS Last Ten Fiscal Years (modified accrual basis of accounting) 2003 2004 2005 2006 Gcncral Fund Reserved $ 87,766 $ 85,586 $ 126,320 $ 144,496 Unreserved 2,505,261 3,216,979 3,076,157 3,248,317 Nonspendable - - - - Unassigned - - - - Total general fund 2,593,027 3,302,565 3,202,477 3,392,813 All Other Governmcntal Funds Reserved 2,176,704 13,263,819 3,267,027 12,022,454 (i) Unreserved reported in: Special revenue funds 1,225,626 1,951,529 1,264,369 1,246,388 Debt service funds (9,706) - - - Capital project funds 13,690,391 14,982,950 14,526,468 14,379,760 Nonspendable - - - - Restricted - - - - Committed - - - - Assigned - - - - Unassigned - - - - Total all other governmental funds 17,083,015 30,198,298 19,057,864 27,648,602 Total governmental funds $ 19,676,042 $ 33,500,863 $ 22,260,341 $ 31,041,415 Note: (1) 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. (z) 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. In 2011, the City adopted the provisions of Governmental Accounting Standards Board Statement No. 54, Fund Balance Reporting and Governmental Fund Type Definitions. 11911 Table 3 2007 2008 2009 2010 2011 2012 $ 208,216 $ 193,805 $ 207,515 $ 206,666 $ - $ - 3,682,244 3,981,230 4,120,897 4,904,239 - - - - - - 222,641 160,177 - - - - 5,665,496 6,227,664 3,890,460 4,175,035 4,328,412 5,110,905 5,888,137 6,387,841 22,106,660 (2) 20,754,303 20,756,195 19,258,490 - - 1,204,453 941,259 1,233,202 1,135,919 - - 11,955,138 13,416,129 14,170,266 14,714,140 - - - - - - 16,074 1,471 - - - - 19,741,214 21,307,923 - - - - 650,766 681,413 - - - - 14,451,306 16,420,228 - - - - (517,251) (314,734) 35,266,251 35,111,691 36,159,663 35,108,549 34,342,109 38,096,301 $ 39,156,711 $ 39,286,726 $ 40,488,075 $ 40,219,454 $ 40,230,246 $ 44,484,142 1191 CITY OF ANDOVER, MINNESOTA CHANGES IN FUND BALANCES - GOVERNMENTAL FUNDS Last Ten Fiscal Years (modified accrual basis of accounting) Other Financing Sources (Uses) Transfers in 2003 2004 2005 2006 Revenues (485,170) (739,438) - (167,424) General property taxes $ 5,671,277 $ 6,272,762 $ 7,033,613 $ 8,057,592 Tax increment collections 1,136,574 1,193,467 1,285,639 1,546,394 Licenses and permits 551,385 674,008 724,436 598,094 Intergovernmental 890,705 1,755,041 2,663,683 2,661,726 Special assessments 5,121,636 4,243,328 2,045,969 1,289,590 Charges for services 863,794 1,389,245 1,692,316 1,770,156 Fines 68,686 79,450 90,530 91,490 Investment income 563,824 678,308 684,173 1,014,801 Miscellaneous: Park dedication fees 357,483 842,042 286,316 626,567 Connection charges 1,044,752 1,720,520 1,311,426 372,133 Rent - - - - Other 392,752 658,037 578,389 395,789 Total revenues 16,662,868 19,506,208 18,396,490 18,424,332 Expenditures General government 2,181,354 2,171,248 2,349,965 2,343,332 Public safety 2,631,991 2,915,958 3,093,298 3,268,236 Public works 3,136,081 4,944,489 3,650,351 2,817,475 Sanitation 80,901 26,732 - - Parks and recreation 613,078 1,315,100 1,309,987 1,599,885 Recycling 114,784 114,052 116,506 90,590 Economic development 471,172 918,451 426,708 626,103 Unallocated 25,865 21,992 9,798 8,454 Capital outlay 2,610,333 1,420,387 1,616,709 987,075 Debt service: Principal retirement 6,124,000 6,839,000 8,487,000 5,254,000 Interest 1,276,057 1,063,363 2,042,003 1,683,599 Other 31,436 94,869 13,226 253,134 Construction/acquisition costs 3,513,115 12,154,653 11,146,387 4,579,910 Total expenditures 22,810,167 34,000,294 34,261,938 23,511,793 Revenues over (under) expenditures (6,147,299) (14,494,086) (15,865,448) (5,087,461) Other Financing Sources (Uses) Transfers in 1,328,909 1,076,000 224,000 522,000 Transfers out (485,170) (739,438) - (167,424) Bonds issued 6,904,000 21,280,000 4,210,000 2,910,000 Refunding bonds issued - 6,450,000 - 10,000,000 Payment to refunded bonds - (2,145,864) - - Bond premium 5,188 23,438 - - Bond discount (3,169) (497,883) (28,961) - Proceeds from the sale of capital assets 841,906 2,872,654 219,887 603,959 Total other financing sources (uses) 8,591,664 28,318,907 4,624,926 13,868,535 Net increase (decrease) in fund balance $ 2,444,365 $ 13,824,821 $ (11,240,522) $ 8,781,074 Debt service as a percentage of noncapital expenditures 44.35% 38.69% 48.97% 38.66% iBYa Table 4 2007 2008 2009 2010 2011 2012 $ 8,833,249 $ 9,695,103 $ 10,168,143 $ 10,267,085 $ 10,279,967 $ 10,638,117 1,659,222 1,762,119 1,951,343 2,015,123 1,976,800 2,035,663 475,893 525,339 291,903 329,901 387,206 449,826 1,644,914 1,175,205 1,654,614 1,989,420 1,876,685 3,493,528 3,342,039 1,638,006 1,421,591 1,725,695 891,942 792,460 2,03 5,73 5 1,724,052 1,579,659 1,604,681 1,732,791 1,874,321 101,445 104,930 110,779 104,780 99,777 97,571 1,962,379 1,508,265 1,029,683 1,107,335 1,386,698 1,191,438 113,013 133,585 41,216 32,649 51,706 47,700 829,624 254,903 20,119 48,086 27,165 170,202 - - 637,305 638,037 641,859 639,983 621,798 800,857 381,548 396,186 332,992 645,897 21,619,311 19,322,364 19,287,903 20,258,978 19,685,588 22,076,706 2,399,297 2,366,574 2,242,662 2,255,793 2,298,571 2,280,373 3,580,240 3,796,965 4,015,410 3,920,073 3,965,541 4,092,073 3,491,353 4,843,288 3,545,132 3,204,444 3,788,636 5,415,924 1,825,706 1,953,822 1,891,125 2,433,495 1,926,220 2,001,624 94,669 86,631 85,527 109,034 109,911 94,328 2,265,605 538,293 477,648 650,977 966,687 1,537,611 6,915 17,999 19,540 24,953 30,631 63,371 2,803,485 1,460,662 1,519,944 1,324,881 985,399 723,017 3,275,000 3,460,000 3,865,000 5,779,000 4,100,000 1,842,000 2,089,857 2,253,223 2,178,233 2,030,267 1,855,538 1,768,748 167,187 15,645 39,265 29,939 10,430 225,378 360,742 - - 101,153 1,044,581 110,650 22,360,056 20,793,102 19,879,486 21,864,009 21,082,145 20,155,097 (740,745) (1,470,738) (591,583) (1,605,031) (1,396,557) 1,921,609 578,925 580,343 587,530 627,530 627,530 627,530 (57,671) (163,469) (165,643) (89,191) - (7,134) 760,000 630,000 385,000 1,660,000 265,000 585,000 6,865,000 - 955,000 1,480,000 - 18,885,000 - - - (2,416,834) - (17,907,898) 3,401 - 18,781 31,688 - 133,164 706,386 553,879 12,264 43,217 514,819 16,625 8,856,041 1,600,753 1,792,932 1,336,410 1,407,349 2,332,287 $ 8,115,296 $ 130,015 $ 1,201,349 $ (268,621) $ 10,792 $ 4,253,896 27.95% 29.55% 32.92% 38.21% 31.26% 18.69% 133 CITY OF ANDOVER, MINNESOTA ASSESSED AND ESTIMATED ACTUAL VALUE OF TAXABLE PROPERTY Last Ten Fiscal Years Source: Anoka County Property Tax Division 134 Table 5 Net Tax Capacity as a Percentage 1.04% 1.05% 1.05% 1.05% 1.05% 1.05% 1.05% 1.06% 1.06% 1.06% Real Property Personal Property Total Total Taxable Net Tax Taxable Net Tax Taxable Net Tax Direct Year Market Value Capacity Market Value Capacity Market Value Capacity Tax Rate 2003 $ 1,699,227,100 $ 17,549,064 $ 20,202,300 $ 402,840 $ 1,719,429,400 $ 17,951,904 33.376% 2004 1,945,523,200 20,142,088 20,761,100 414,016 1,966,284,300 20,556,104 31.592% 2005 2,222,567,900 23,027,376 21,718,900 433,669 2,244,286,800 23,461,045 31.415% 2006 2,521,587,700 26,204,279 22,003,500 439,356 2,543,591,200 26,643,635 31.894% 2007 2,778,464,100 28,897,916 21,998,500 439,246 2,800,462,600 29,337,162 31.327% 2008 2,948,801,500 30,749,076 20,837,800 416,000 2,969,639,300 31,165,076 31.603% 2009 2,961,410,400 31,023,349 21,185,200 422,931 2,982,595,600 31,446,280 32.484% 2010 2,685,802,600 28,233,178 24,712,000 493,441 2,710,514,600 28,726,619 36.814% 2011 2,444,519,600 25,667,544 25,425,400 506,806 2,469,945,000 26,174,350 38.731% 2012 2,176,836,156 22,945,277 25,299,200 504,304 2,202,135,356 23,449,581 42.539% Source: Anoka County Property Tax Division 134 Table 5 Net Tax Capacity as a Percentage 1.04% 1.05% 1.05% 1.05% 1.05% 1.05% 1.05% 1.06% 1.06% 1.06% CITY OF ANDOVER, MINNESOTA PROPERTY TAX RATES - PER $1,000 OF ASSESSED TAX CAPACITY VALUE DIRECT AND OVERLAPPING GOVERNMENTS Years 2004 through 2013 Source: Anoka County Property Tax Division 181.7 Table 6 Overlapping Direct City General Debt Lower Total Taxes Oper Service Rum 60.040% Payable Levy Levy Watershed Total 90.008% 20.046% 32.096% 3.755% 2004 26.651% 4.547% 0.394% 31.592% 2005 24.182% 6.895% 0.338% 31.415% 2006 24.790% 6.757% 0.347% 31.894% 2007 24.948% 6.055% 0.324% 31.327% 2008 24.962% 6.333% 0.308% 31.603% 2009 25.755% 6.426% 0.303% 32.484% 2010 30.507% 5.977% 0.330% 36.814% 2011 31.914% 6.461% 0.356% 38.731% 2012 35.138% 6.952% 0.449% 42.539% 2013 33.676% 6.989% 0.449% 41.114% Source: Anoka County Property Tax Division 181.7 Table 6 Overlapping Governments School County Other Total Total 21.218% 35.340% 3.482% 60.040% 91.632% 21.492% 33.080% 4.021% 58.593% 90.008% 20.046% 32.096% 3.755% 55.897% 87.791% 19.337% 30.675% 3.671% 53.683% 85.010% 16.962% 31.041% 4.604% 52.607% 84.210% 18.247% 32.051% 3.251% 53.549% 86.033% 20.236% 35.273% 3.436% 58.945% 95.759% 24.023% 39.884% 4.872% 68.779% 107.510% 21.447% 41.056% 3.626% 66.129% 108.668% 26.751% 44.328% 3.912% 74.991% 116.105% CITY OF ANDOVER, MINNESOTA PROPERTY TAX LEVIES AND COLLECTIONS Last Seven Fiscal Years Table 7 * 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. 11GA Collected Within the Fiscal Year of Levy Total Market Value Collections In Total Collections to Date Tax Tax Homestead Total Percentage Subsequent Percentage Year Levy Levy Credit Collected of Levy Years Amount of Levy 2006 $ 8,550,919 $ 7,977,278 $ 1,700 * $ 7,978,978 93.31% $ 107,742 $ 8,086,720 94.57% 2007 9,316,427 8,738,606 410,519 9,149,125 98.20% 146,667 9,295,792 99.78% 2008 10,153,718 9,554,131 198,214 * 9,752,345 96.05% 177,031 9,929,376 97.79% 2009 10,593,520 9,992,240 54,629 * 10,046,869 94.84% 140,633 10,187,502 96.17% 2010 10,856,299 10,125,752 3,905 * 10,129,657 93.31% 142,303 10,271,960 94.62% 2011 10,856,299 10,119,681 853 * 10,120,534 93.22% 93,920 10,214,454 94.09% 2012 10,631,299 10,460,838 2,354 * 10,463,192 98.42% r 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. 11GA CITY OF ANDOVER, MINNESOTA PRINCIPAL TAXPAYERS Current Year and Nine Years Ago 2012 2004 116 LLC United Power Association Individual - Commercial/Industrial Health Partners Total $ 1,397,178 5.96% Net Tax Capacity $ 23,449,581 Source: Anoka County Property Tax Division IBY/ Net Tax Capacity Rank $ 203,310 120,358 145,242 139,824 102,024 57,714 139,346 83,742 54,810 29,232 $ 1,075,602 $ 20,556,104 1 5 2 3 6 8 4 7 9 10 Table 8 Percentage of Total City Tax Capacity 0.99% 0.59% 0.71% 0.28% 0.68% 0.41% 0.27% 0.14% 4.06% Net Percentage of Tax Total City Taxpayers Capacity Rank Tax Capacity Connexus Energy $ 210,348 1 0.90% Minnegasco, Inc. 202,794 2 0.86% Target Corporation 186,590 3 0.80% Great River Energy 164,328 4 0.70% Andover Limited Partnership 155,320 5 0.66% Presbyterian Homes of Andover 148,018 6 0.63% Andover Station LLC 113,130 7 0.48% Fairbanks Properties LLC 77,342 8 0.33% Columbia Park Properties 72,036 9 0.31% Maxwell Kearns Inc. 67,272 10 0.29% 116 LLC United Power Association Individual - Commercial/Industrial Health Partners Total $ 1,397,178 5.96% Net Tax Capacity $ 23,449,581 Source: Anoka County Property Tax Division IBY/ Net Tax Capacity Rank $ 203,310 120,358 145,242 139,824 102,024 57,714 139,346 83,742 54,810 29,232 $ 1,075,602 $ 20,556,104 1 5 2 3 6 8 4 7 9 10 Table 8 Percentage of Total City Tax Capacity 0.99% 0.59% 0.71% 0.28% 0.68% 0.41% 0.27% 0.14% 4.06% CITY OF ANDOVER, MINNESOTA ESTIMATED MARKET VALUES AND NEW CONSTRUCTION Last Ten Fiscal Years Table 9 New Construction Estimated Market Values Commercial / Industrial Commercial / Permits Value Year Industrial (1) Residential Total 2003 $ 127,728,400 $ 1,778,643,800 $ 1,906,372,200 2004 144,629,100 1,936,079,400 2,080,708,500 2005 168,684,200 2,174,640,000 2,343,324,200 2006 191,931,800 2,433,776,200 2,625,708,000 2007 211,760,900 2,663,389,900 2,875,150,800 2008 233,801,700 2,813,037,200 3,046,838,900 2009 248,129,500 2,807,144,500 3,055,274,000 2010 229,977,800 2,526,288,900 2,756,266,700 2011 199,728,200 2,305,897,900 2,505,626,100 2012 192,112,500 2,206,195,400 2,398,307,900 Table 9 Note: (1) Also includes agricultural, public utility, railroad operating property, and personal property. 138 New Construction Commercial / Industrial Residential Permits Value Permits Value 13 $ 4,764,046 182 $ 28,973,300 16 19,926,817 251 36,224,546 20 6,571,671 226 34,309,393 8 1,791,896 153 25,236,120 9 2,403,831 91 18,347,873 11 16,878,603 49 11,116,400 11 767,430 47 9,246,347 11 1,247,106 71 14,700,800 24 11,461,453 58 11,803,000 25 5,042,964 81 15,243,007 Note: (1) Also includes agricultural, public utility, railroad operating property, and personal property. 138 CTIYY OF ANDOVER, MINNESOTA SPECIAL ASSESSMENT LEVIES AND COLLECTIONS Last Ten Fiscal Years Note: (1) Only includes assessments certified to Anoka County. 1191] Table 10 Current Current Percent of Delinquent Collections Assessments Assessments Assessments Assessment Year Due (1) Collected Collected Collections Current Collections Assessments Due 2003 $ 533,340 $ 522,851 98.03% $ 5,917 2004 192,373 189,279 98.39% 7,921 2005 178,434 175,471 98.34% 4,002 2006 225,365 192,477 85.41% 4,790 2007 163,817 142,750 87.14% 12,460 2008 366,203 330,304 90.20% 1,479 2009 319,448 332,739 104.16% 36,693 2010 325,361 314,097 96.54% 61,247 2011 308,794 304,164 98.50% 5,112 2012 348,129 376,601 108.18% 25,087 Note: (1) Only includes assessments certified to Anoka County. 1191] Table 10 Total Delinquent Collections Assessments Total as a Percent of Outstanding as a Percent of Assessment Current Delinquent Current Collections Assessments Due Assessments Assessments Due $ 528,768 99.14% $ 49,329 9.25% 197,200 102.51% 15,157 7.88% 179,473 100.58% 22,217 12.45% 197,267 87.53% 51,721 22.95% 155,210 94.75% 76,420 46.65% 331,783 90.60% 174,810 47.74% 369,432 115.65% 202,999 63.55% 375,344 115.36% 218,860 67.27% 309,276 100.16% 267,016 86.47% 401,688 115.38% 237,175 68.13% CITY OF ANDOVER, MINNESOTA RATIO OF NET BONDED DEBT TO ASSESSED VALUE AND NET BONDED DEBT PER CAPITA Last Ten Fiscal Years Table 11 Percentage Net Bonded of Estimated General Bonded Debt Outstanding (2) Per Capita 0.19% $ 125.13 Gross Less Debt Net Fiscal 0.88% Estimated Bonded Service Bonded Year Population (1) Market Value Debt Fund Debt 2003 28,939 $ 1,906,372,200 $ 3,710,000 $ (88,875) $ 3,621,125 2004 29,262 2,080,708,500 24,236,000 (815,322) 23,420,678 2005 30,080 2,343,324,500 24,389,000 (1,041,140) 23,347,860 2006 30,222 2,625,708,000 33,850,000 (10,739,510) 23,110,490 2007 30,263 2,875,150,800 40,880,000 (17,822,418) 23,057,582 2008 31,023 3,046,838,900 40,565,000 (17,939,959) 22,625,041 2009 31,298 3,055,274,000 39,690,000 (17,973,588) 21,716,412 2010 30,598 2,756,266,700 40,026,000 (17,768,743) 22,257,257 2011 30,847 2,505,626,100 39,096,000 (17,779,964) 21,316,036 2012 31,097 2,398,307,900 40,444,000 (18,497,679) 21,946,321 Table 11 Percentage Net Bonded of Estimated Debt Market Value Per Capita 0.19% $ 125.13 1.13% 800.38 1.00% 776.19 0.88% 764.69 0.80% 761.91 0.74% 729.30 0.71% 693.86 0.81% 727.41 0.85% 691.02 0.92% 705.74 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. 140 CITY OF ANDOVER, MINNESOTA COMPUTATION OF DIRECT AND OVERLAPPING DEBT December 31, 2012 Table 12 Notes: (1) Only includes debt supported by tax levy. (2) Information obtained from Anoka County. (3) Overlapping governments are those that coincide with the geographical boundaries of the city. MS Gross General Obligation Percentage Net Amount Bonded Debt Applicable Applicable Outstanding to City (3) to City Direct: City of Andover $ 40,444,000 (1) 100.0000% $ 40,444,000 Overlapping: Anoka County 145,370,000 (2) 8.6348% 12,552,451 ISD No. 11 Anoka - Hennepin 102,510,572 (2) 12.5829% 12,898,787 ISD No. 15 St. Francis 36,435,000 (2) 6.4038% 2,333,214 Metropolitan Council 226,580,000 (2) 0.8139% 1,844,080 Total overlapping debt 29,628,532 Total overlapping and direct debt $ 70,072,532 Notes: (1) Only includes debt supported by tax levy. (2) Information obtained from Anoka County. (3) Overlapping governments are those that coincide with the geographical boundaries of the city. MS CITY OF ANDOVER, MINNESOTA COMPUTATION OF LEGAL DEBT MARGIN Last Ten Fiscal Years `EPA 2003 2004 2005 2006 Estimated Taxable Market Value $ 1,719,429,400 $ 2,080,708,500 $ 2,343,324,200 $ 2,625,708,000 Debt limitation: Debt limit percent 2% 2% 2% 2% Debt limit in dollars 34,388,588 41,614,170 46,866,484 52,514,160 Debt applicable to limit: Total bonded debt 38,405,000 56,941,000 52,344,000 59,665,000 Less: Nonapplicable debt G.O. water revenue bonds (9,780,000) (9,470,000) (9,150,000) (8,815,000) Special assessment bonds (1,255,000) - (3,560,000) (3,560,000) Tax increment bonds (9,815,000) (13,215,000) (7,065,000) (4,715,000) Permanent improvement revolving bonds (11,375,000) (7,680,000) (5,975,000) (6,660,000) State aid bonds (2,470,000) (2,340,000) (2,205,000) (2,065,000) Less: Cash and investments in (88,875) (815,322) (1,041,140) (10,739,510) Total debt applicable to limitation 3,621,125 23,420,678 23,347,860 23,110,490 Legal debt margin $ 30,767,463 $ 18,193,492 $ 23,518,624 $ 29,403,670 Total debt applicable to the limit as a percentage of debt limit 10.53% 56.28% 49.82% 44.01% `EPA Table 13 2007 2008 2009 2010 2011 2012 $ 2,800,462,600 $ 2,969,639,300 $ 2,982,595,600 $ 2,710,514,800 $ 2,469,945,000 $ 2,202,135,356 2% 3% 3% 3% 3% 3% 56,009,252 89,089,179 89,477,868 81,315,444 74,098,350 66,064,061 70,240,000 67,050,000 65,175,000 59,671,000 55,361,000 49,144,000 (15,040,000) (14,680,000) (15,330,000) (14,875,000) (14,400,000) (7,420,000) (3,560,000) (3,015,000) (2,450,000) (600,000) - - (4,010,000) (3,275,000) (2,515,000) (1,735,000) - - (4,835,000) (3,755,000) (2,635,000) (1,480,000) (1,125,000) (760,000) (1,915,000) (1,760,000) (2,555,000) (955,000) (740,000) (520,000) (17,822,418) (17,939,959) (17,973,588) (17,768,743) (17,779,964) (18,497,679) 23,057,582 22,625,041 21,716,412 22,257,257 21,316,036 21,946,321 $ 32,951,670 $ 66,464,138 $ 67,761,456 $ 59,058,187 $ 52,782,314 $ 44,117,740 41.17% 25.40% 24.27% 27.37% 28.77% 33.22% 143 CITY OF ANDOVER, MINNESOTA PLEDGED - REVENUE COVERAGE Last Ten Fiscal Years Table 14 Water Revenue Bonds Principal Interest Coverage $ 3,070,000 $ 426,375 1.46 Water Enterprise Fund 283,657 1.70 1,705,000 192,153 Fiscal Operating Less: Operating Transfers Net Available Debt Service 1.39 1,625,000 Year Revenues Expenses (1) In (2) Revenue Principal Interest Coverage 2003 $ 1,904,968 $ 1,339,225 $ 505,170 $ 565,743 $ $ 216,501 2.61 2004 2,462,506 1,492,307 739,438 970,199 310,000 429,438 1.31 2005 1,510,119 1,111,874 - 398,245 320,000 421,393 0.54 2006 1,935,812 1,139,500 167,424 796,312 335,000 411,720 1.07 2007 2,025,452 1,264,370 57,671 818,753 345,000 395,775 1.11 2008 1,987,432 1,218,444 163,469 932,457 360,000 382,753 1.26 2009 2,127,676 1,264,398 165,643 1,028,921 375,000 393,828 1.34 2010 2,077,305 1,249,420 89,191 917,076 455,000 384,713 1.09 2011 2,119,954 1,318,848 - 801,106 475,000 366,065 0.95 2012 2,572,560 1,592,417 7,134 987,277 6,980,000 214,933 0.14 2004 EDA Public Facility Lease Revenue Bonds (3) Community Center Special Revenue Fund Debt Service Fiscal Operating Less: Operating Net Available General Property Debt Service Year Revenue Expenses Revenue Tax Revenue Principal Interest Coverage 2005 $ 522,839 $ 589,900 $ (67,061) $ 748,376 $ $ 1,194,167 (0.06) 2006 741,241 748,146 (6,905) 800,349 185,000 964,102 (0.01) 2007 876,136 799,909 76,227 844,123 185,000 959,731 0.80 2008 998,287 900,228 98,059 890,709 190,000 954,381 0.86 2009 1,422,614 903,446 519,168 940,640 390,000 944,806 1.09 2010 1,351,069 882,364 468,705 885,349 405,000 930,684 1.01 2011 1,414,617 991,098 423,519 908,894 415,000 914,891 1.00 2012 1,430,874 1,011,186 419,688 1,091,430 435,000 897,456 1.13 Special Assessment and Permanent Improvement Revolving Bonds Fiscal Special Assessment Year Revenue 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Notes $ 5,121,636 4,243,328 2,045,969 1,289,590 2,966,380 1,184,928 993,703 1,210,641 552,356 268,116 Debt Service Principal Interest Coverage $ 3,070,000 $ 426,375 1.46 2,210,000 283,657 1.70 1,705,000 192,153 1.08 1,765,000 289,174 0.63 1,825,000 314,152 1.39 1,625,000 243,340 0.63 1,685,000 198,232 0.53 3,005,000 110,822 0.39 955,000 36,250 0.56 365,000 18,850 0.70 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. 144 - This page intentionally left blank - 1[67 CITY OF ANDOVER, MINNESOTA OUTSTANDING DEBT BY TYPE Last Ten Fiscal Years City of Andover's Outstanding Debt Governmental activities Revenue bonds Abatement bonds Special assessment bonds Tax increment bonds Certificates of indebtedness Capital improvement bonds Permanent improvement revolving bonds State aid bonds Referendum bonds Total governmental activities Business -type activities G.O. revenue bonds Total outstanding debt Total outstanding debt as a percentage of personal income Total outstanding debt per capita 2003 2004 2005 2006 $ 2,045,000 $ 19,580,000 $ 19,580,000 $ 29,395,000 1,255,000 - 3,560,000 3,560,000 9,815,000 13,215,000 7,065,000 4,715,000 1,665,000 766,000 699,000 580,000 - 31890,000 4,110,000 3,875,000 11,375,000 7,680,000 5,975,000 6,660,000 2,470,000 2,340,000 2,205,000 2,065,000 28,625,000 47,471,000 43,194,000 50,850,000 9,780,000 9,470,000 9,150,000 8,815,000 $ 38,405,000 $ 56,941,000 $ 52,344,000 $ 59,665,000 5.28% 7.68% 6.35% 6.98% $ 1,327 $ 1,946 $ 1,740 $ 1,969 IEW Table 15 2007 2008 2009 2010 2011 2012 $ 36,075,000 $ 35,885,000 $ 35,495,000 $ 35,090,000 $ 34,675,000 $ 17,375,000 - - - - - 17,315,000 3,560,000 3,015,000 2,450,000 600,000 - - 4,010,000 3,275,000 2,515,000 1,735,000 - - 1,280,000 1,525,000 1,420,000 781,000 561,000 774,000 3,525,000 3,155,000 2,775,000 2,495,000 2,200,000 3,455,000 4,835,000 3,755,000 2,635,000 1,480,000 1,125,000 760,000 1,915,000 1,760,000 2,555,000 955,000 740,000 520,000 - - - 1,660,000 1,660,000 1,525,000 55,200,000 52,370,000 49,845,000 44,796,000 40,961,000 41,724,000 15,040,000 14,680,000 15,330,000 14,875,000 14,400,000 7,420,000 $ 70,240,000 $ 67,050,000 $ 65,175,000 $ 59,671,000 $ 55,361,000 $ 49,144,000 7.99% 7.62% 7.10% 6.65% 6.17% 5.43% $ 2,321 $ 2,161 $ 2,082 $ 1,950 $ 1,795 $ 1,580 i[fl CITY OF ANDOVER, MINNESOTA DEMOGRAPHIC AND ECONOMIC STATISTICS Table 16 Last Ten Years 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 Anoka County Personal Personal Per Capita Unemployment Year Population Income (2) Population (3) Income (2) Income (3) Percentage 2003 28,939 $ 726,687,229 310,959 $ 7,808,491,449 $ 25,111 4.8% 2004 29,262 741,235,722 316,778 8,024,303,518 25,331 4.5% 2005 30,080 824,041,600 320,803 8,788,398,185 27,395 3.8% 2006 30,222 852,774,174 327,005 9,227,100,085 28,217 4.0% 2007 30,263 879,549,003 326,252 9,482,028,265 29,064 4.6% 2008 31,023 880,029,441 327,090 9,278,562,030 28,367 5.5% 2009 31,298 917,375,678 331,582 9,719,000,002 29,311 8.5% 2010 30,598 897,408,742 335,308 9,834,248,332 29,329 7.1% 2011 30,847 896,999,913 330,844 9,620,612,676 29,079 5.8% 2012 31,097 (1) 929,613,718 336,414 10,056,760,116 29,894 5.9% 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 EMPLOYERS Current Year and Nine Years Ago 2012 Source: Minnesota Department of Employment and Economic Development (1) Number of district employees that work in school buildings located within the City. IE14 2004 Rank 1 4 2 3 9 5 6 7 8 10 10 Table 17 Percentage of Total City Employment 32.0% 10.4% 13.1% 11.5% 3.9% 6.3% 5.5% 5.1% 4.9% 3.7% 3.7% 100.0% Percentage of Total City Taxpayer Employees Rank Employment Employees Anoka Hennepin I.S.D. No. 11 900 (1) 1 37.0% 612 Fairview Andover Clinic 300 2 12.3% Kottkes' Bus Service, Inc. 190 3 7.8% 200 YMCA 183 4 7.5% Bunker Hills Regional Park/Activity Center 180 5 7.4% 250 Anoka County Sheriffs Office 178 6 7.3% Target 170 7 7.0% 220 Meadow Creek Christian School 127 8 5.2% 74 Anoka County Highway Department 103 9 4.2% 121 Andover County Market 100 10 4.1% Festival Foods - 105 Columbia Park Medical Group - Andover 98 Farmstead at Andover 94 Ed Fields & Sons, Inc. 70 McDonald's - 70 Total 2,431 100.0% 1,914 Source: Minnesota Department of Employment and Economic Development (1) Number of district employees that work in school buildings located within the City. IE14 2004 Rank 1 4 2 3 9 5 6 7 8 10 10 Table 17 Percentage of Total City Employment 32.0% 10.4% 13.1% 11.5% 3.9% 6.3% 5.5% 5.1% 4.9% 3.7% 3.7% 100.0% CITY OF ANDOVER, XHNNESOTA FULL TIME EQUIVALENT EMPLOYEES Table 18 CITY GOVERNMENT EMPLOYEES BY FUNCTION/PROGRAM Last Ten Fiscal Years Function/Program 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Governmental: Administration 1.40 1.34 1.47 1.30 1.45 1.15 1.15 1.15 1.15 1.15 Human resources 0.06 0.06 0.06 0.07 0.02 0.01 0.02 0.02 0.02 0.02 City clerk 1.91 1.84 1.84 1.84 1.91 1.43 1.29 1.34 1.34 1.34 Elections 0.03 0.10 0.10 0.10 0.10 0.08 0.10 0.10 0.10 0.10 Financial administration 3.80 3.72 2.99 3.95 2.35 1.97 1.85 1.85 1.85 1.85 Information systems 1.01 1.01 0.91 0.91 0.91 0.91 0.91 0.91 0.91 0.91 Planning and zoning 3.57 3.57 4.57 4.75 4.75 4.25 3.70 3.70 3.70 3.70 Engineering 4.69 4.57 4.67 4.57 4.78 4.41 4.28 4.33 4.33 4.33 Facility Management - - - - - - 0.33 0.20 0.20 0.22 EDA general 1.38 1.38 1.21 0.70 0.70 0.85 0.90 0.85 0.85 0.85 LRRWMO 0.31 0.31 0.21 0.21 0.21 0.21 0.20 0.20 0.20 0.20 Risk management 0.13 0.13 0.13 0.18 0.10 0.10 0.10 0.10 0.10 0.10 Public Safety: Fire 3.16 3.31 3.25 3.10 3.10 3.10 3.10 3.10 3.10 3.10 Protective inspection 6.56 5.91 5.58 6.03 6.08 5.78 3.93 3.93 3.93 3.93 Civil defense 0.05 0.05 0.05 0.05 0.05 0.05 0.05 0.05 0.05 0.05 Public Works: Streets and highways 4.61 5.02 5.35 6.12 6.20 6.00 5.05 5.10 5.10 5.10 Snow and ice 3.48 3.85 3.92 3.27 3.49 3.21 2.45 2.45 2.45 2.55 Street signs 1.26 1.17 1.20 1.35 1.44 1.41 1.31 1.41 1.41 1.41 Forestry - 0.10 0.10 0.10 - - - - - - ROW management / utility 0.70 0.75 0.85 0.85 0.60 0.65 0.50 0.20 0.20 0.20 Water 5.46 4.93 5.04 5.57 4.78 4.84 4.63 4.63 4.63 4.63 Sewer 2.83 2.77 3.15 2.97 3.18 3.24 3.38 3.38 3.38 3.38 Storm sewer 1.24 1.60 1.60 2.01 1.95 2.20 2.55 2.55 2.55 2.55 Central equipment 2.90 2.90 2.91 2.92 2.96 2.96 2.87 2.90 2.90 2.90 Park & Recreation: Park and recreation 6.00 6.66 6.85 7.33 7.05 6.85 6.66 6.71 6.70 7.60 Community center - - 2.10 2.12 2.12 2.23 2.96 3.11 3.12 3.10 Recycling 1.33 1.21 1.26 0.93 0.88 0.86 1.23 1.23 1.23 1.23 58.16 58.55 61.37 63.30 61.16 58.75 55.50 55.50 55.50 56.50 Source: City Finance Department Note: Employees are allocated to various departments based on the functions that they perform. M11 - This page intentionally left blank - IN CITY OF ANDOVER, MINNESOTA OPERATING INDICATORS BY FUNCTION/PROGRAM Last Ten Years Function/Program 2003 2004 2005 2006 2007 General government: Registered voters n/a 16,094 n/a 17,500 n/a Number of precincts n/a 10 n/a 10 n/a Public safety: Police: Number of calls for services 12,375 12,675 12,861 14,500 12,150 Number of traffic citations 1,645 1,795 1,795 1,850 1,710 Number of patrol hours 28,776 30,856 30,856 30,858 30,240 Fire: Fire responses 410 420 325 460 366 Emergency medical responses 590 580 594 690 736 Protective inspections: Inspections 5,272 6,396 6,536 8,117 5,456 Residential permits 182 251 226 153 91 Other permits 1,140 1,162 2,473 3,128 2,095 Public works: Streets and highways: Asphalt streets maintained (miles) 176 176 178 182 189 Gravel roads maintained (miles) 8 8 8 7 8 Cul -de -sacs and dead ends maintained 309 310 320 324 330 Parks and recreation: Number of City parks 58 58 58 63 65 Total acreage mowed 268 272 265 273 297 Ballfields maintained 29 26 25 25 27 Number of playgrounds 37 36 33 36 37 Soccer fields maintained 22 22 20 19 16 Trail maintained (miles) 23 24 26 29 35 Community center bookings (hrs): Fieldhouse n/a n/a 1,405 7,450 8,514 Ice arena n/a n/a 2,002 2,405 2,497 Water: New connections 200 220 247 197 63 Total customers 5,190 5,410 5,657 5,854 5,917 Annual consumption (thousands of gallons) 917,918 862,265 856,671 911,712 1,046,789 Sanitary Sewer: New connections 139 198 229 186 120 Total customers 6,017 6,291 6,528 6,717 6,777 Storm Sewer: Total customers 9,140 9,446 9,516 9,744 9,785 Storm sewer lines maintained (miles) 32 39 43 47 65 Source: Various City Departments W% Table 19 2008 2009 2010 2011 2012 17,830 n/a 18,713 n/a 18,366 10 n/a 10 n/a 10 11,617 11,075 11,441 11,650 9,915 2,475 2,848 1,926 2,000 2,202 30,240 30,240 30,240 29,200 29,200 326 305 323 265 300 797 754 722 764 855 5,020 3,716 2,860 3,074 3,878 49 42 71 58 81 1,862 1,543 1,773 1,755 1,714 189 189 190 191 191 8 8 8 7 7 336 338 338 338 338 66 66 47 50 50 297 293 293 302 302 28 28 28 28 28 37 37 38 38 38 19 19 19 21 21 35 35 35 35 35 8,282 9,718 11,099 11,461 11,426 2,393 2,640 2,583 2,575 2,805 33 145 56 78 38 5,950 6,095 6,151 6,229 6,267 993,626 1,000,971 905,561 854,672 1,050,378 23 183 75 77 38 6,800 6,983 7,058 7,135 7,173 9,800 9,950 10,042 10,126 10,164 66 69 69 69 69 153 CITY OF ANDOVER, XHNNESOTA CAPITAL ASSET STATISTICS BY FUNCTION/PROGRAM Last Ten Years Table 20 Function/Program 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Public Safety: Fire : Stations 3 3 3 3 3 3 3 3 3 3 Fire vehicles 19 18 18 18 20 20 21 22 21 21 Protective inspections: Vehicles 4 4 3 3 3 3 3 3 4 4 Streets (miles) 184 184 186 189 189 189 189 190 191 191 Street lights 6,959 7,505 7,551 8,101 1,204 1,212 1,215 1,218 1,225 1,225 Traffic signals 16 18 20 20 22 23 23 24 24 24 Parks and Recreation: Parks 58 58 58 63 65 66 66 47 50 50 Ball fields 35 35 25 28 27 28 28 28 28 28 Soccer fields 22 25 16 16 16 19 19 19 21 21 Playgrounds 37 36 33 36 37 37 37 38 38 38 Trails (miles) 23 24 26 29 35 35 35 35 35 35 Community centers - - 1 1 1 1 1 1 1 1 Water: Water treatment plants 1 1 1 1 1 1 1 1 1 1 Storage facilities 3 3 3 3 3 3 3 2 2 2 Water main (miles) 1 1 79 84 108 108 108 108 109 111 Connections 5,160 5,300 5,450 5,760 5,917 5,950 6,095 6,151 6,229 6,267 Sanitary sewer: Sewer main (miles) n/a n/a 82 87 91 91 91 93 93 93 Connections 5,981 6,100 6,250 6,560 6,777 6,800 6,983 7,058 7,135 7,173 Number of lift stations 7 7 8 9 9 9 9 9 9 9 Storm sewer: Storm sewer lines (miles) 32 39 43 47 65 66 69 69 69 69 154 IV. OTHER FINANCIAL INFORMATION Wil CITY OF ANDOVER, MINNESOTA COMBINED SCHEDULE OF INDEBTEDNESS December 31, 2012 I&T-i Authorized Issue Maturity Interest and Date Date Rate Issue GOVERNMENTAL ACTIVITIES: Revenue Bonds: 2004 EDA Pub Fac Lease Revenue Bonds 4/23/2004 2/1/2014 2.21 -5.40% $ 19,580,000 2006 EDA Pub Fac Lease Revenue Refunding Bonds 12/1/2006 2/1/2012 4.00 -4.50% 10,000,000 2007 EDA Pub Fac Lease Revenue Refunding Bonds 1/1/2007 2/1/2012 4.00 -4.50% 6,865,000 Total revenue bonds 36,445,000 Abatement Bonds: 2012C G.O. Abatement Bonds 12/27/2012 2/1/2031 1.00 -3.00% 17,315,000 Certificates of Indebtedness: 2008A G.O. Equipment Certificates 9/23/2008 2/1/2012 3.50% 630,000 2009A G.O. Equipment Certificates 3/26/2009 2/1/2012 2.00 -2.25% 385,000 2011A G.O. Equipment Certificates 3/1/2011 2/1/2014 2.00% 265,000 2012A G.O. Equipment Certificates 3/22/2012 2/1/2017 2.00% 585,000 Total certificates of indebtedness 1,865,000 Capital Improvement Bonds: 2004A G.O. Capital Improvement Bonds 3/16/2004 2/1/2013 2.00 -3.75% 3,890,000 2012B G.O. Capital Improvement Refunding Bonds 3/22/2012 2/1/2016 2.00% 1,570,000 Total capital improvement bonds 5,460,000 Permanent Improvement Revolving Bonds: 2010A Permanent Improvement Revolving Refunding Bond, 2/18/2010 2/1/2014 2.00% 1,480,000 State Aid Bonds: 2009A State Aid Street Refunding Bonds 3/26/2009 2/1/2015 2.25 -2.80% 955,000 Referendum Bonds: 2010A G.O. Open Space Referendum Bonds 2/18/2010 2/1/2022 2.00-3.12% 1,660,000 Total bonded indebtedness 65,180,000 Compensated absences payable - Total governmental activities indebtedness 65,180,000 BUSINESS -TYPE ACTIVITIES: General Obligation Revenue Bonds: 2002 G.O. Water Revenue Bonds 5/9/2002 8/1/2012 2.30 -5.00% 9,780,000 2007B G.O. Water Revenue Refunding Bonds 3/13/2007 2/1/2023 4.00 -4.25% 6,570,000 2009A G.O. Water Revenue Bonds 3/26/2009 2/1/2024 2.00 -4.25% 1,025,000 Total general obligation revenue bonds 17,375,000 Compensated absences payable - Total business -type activities indebtedness 17,375,000 Total City indebtedness $ 82,555,000 I&T-i Exhibit 1 Principal Payments Prior Current Outstanding 2013 Payment Years Year 12/31/12 Principal Interest Total $ 1,770,000 $ 435,000 $ 17,375,000 $ 450,000 $ 878,534 $ 1,328,534 - 10,000,000 - - - - - 6,865,000 - - - - 1,770,000 17,300,000 17,375,000 450,000 878,534 1,328,534 - - 17,315,000 320,000 230,520 550,520 464,000 166,000 - - - - 255,000 130,000 - - - - - 76,000 189,000 94,000 2,840 96,840 - - 585,000 - 15,892 15,892 719.000 372,000 774,000 94,000 18,732 112,732 1,690,000 315,000 1,885,000 1,885,000 33,134 1,918,134 - - 1,570,000 100,000 41,652 141,652 1,690,000 315,000 3,455,000 1,985,000 74,786 2,059,786 355,000 365,000 760,000 375,000 11,450 386,450 215,000 220,000 520.000 230,000 10,765 240,765 - 135,000 1,525,000 135,000 37,515 172,515 4,749,000 18,707,000 41,724,000 3,589,000 1,262,302 4,851,302 - - 621,891 - - - 4,749,000 18,707,000 42,345,891 3,589,000 1,262,302 4,851,302 2,855,000 6,925,000 - - - - - - 6,570,000 485,000 256,446 741,446 120,000 55,000 850,000 60,000 28,720 88,720 2,975,000 6,980,000 7,420,000 545,000 285,166 830,166 - - 147,922 - - - 2,975,000 6,980,000 7,567,922 545,000 285,166 830,166 $ 7,724,000 $ 25,687,000 $ 49,913,813 $ 4,134,000 $ 1,547,468 $ 5,681,468 IM CITY OF ANDOVER, MINNESOTA SCHEDULE OF TAX CAPACITY RATES AND LEVIES Tax capacity values Captured tax increment value Fiscal disparities - contribution Local taxable value Fiscal disparities - distribution Adjusted tax capacity General Revenue Levy: General Fund Capital Equipment/Projects Parks Projects Road and Bridge Pedestrian Trail Maintenance Total General Revenue Levy Debt Service Levy: 2004A G.O. Capital Improvement Bonds 2004 EDA Public Facility Revenue Bonds 2011A G.O. Equipment Certificate 2012A G.O. Equipment Certificate 2012B G.O. Capital Improv Refund Bonds 2012C G.O. Abatement Bonds Total Debt Service Levy Lower Rum River Watershed Total Voter - Approved Open Space Referendum - MV Exhibit 2 Taxes Payable $ 22,598,689 (336,580) (1,077,179) 21,184,930 4,256,749 $ 25,441,679 2013 Certified Tax Capacity Levy Rate $ 7,332,857 210,000 61,500 967,197 58,271 8,629,825 381,290 452,082 101,745 125,000 138,339 578,045 1,776,501 40,000 10,446,326 $ 10,631,299 158 33.676% 6.989% 0.449% 41.114% 0.00814% $ 23,449,581 (1,871,779) (1,091,258) 20,486,544 4,649,558 $ 25,136,102 2012 Certified Tax Capacity Levy Rate $ 7,332,857 210,000 61,500 1,022,817 56,574 8,683,748 405,292 1,092,684 102,017 125,000 1,724,993 40,000 10,448,741 $ 10,631,299 35.138% 6.952% 0.449% 42.539% 0.00778% CITY OF ANDOVER, MINNESOTA SCHEDULE OF DEFERRED TAX LEVIES GENERAL OBLIGATION BONDS December 31, 2012 Taxes Payable 2013 2014 2015 2016 Taxes Payable 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 Certificates of Indebtedness Capital Improvement Bonds Refunding Exhibit 3 $ 101,745 $ 10,545 $ 112,290 $ 381,291 $ 105,000 $ 486,291 - 24,570 24,570 - 555,870 555,870 - 64,785 64,785 - 545,370 545,370 - 572,985 572,985 - 503,370 503,370 $ 101,745 $ 672,885 $ 774,630 $ 381,291 $ 1,709,610 $ 2,090,901 EDA Public Open Space Facility Lease Abatement Referendum Total Revenue Bonds Bonds Bonds Deferred Tax 2004 2012C 2010A Levies $ 1,394,961 $ 374,723 $ 182,558 $ 2,550,823 949,592 742,645 184,973 2,457,650 - 1,280,035 187,283 2,077,473 - 1,281,768 184,238 2,542,361 - 1,283,395 186,291 1,469,686 - 1,281,190 187,840 1,469,030 - 1,278,670 188,777 1,467,447 - 1,286,335 183,989 1,470,324 - 1,282,975 184,199 1,467,174 - 1,284,550 184,078 1,468,628 - 1,280,455 - 1,280,455 - 1,285,285 - 1,285,285 - 1,283,015 - 1,283,015 - 1,282,883 - 1,282,883 - 1,280,744 - 1,280,744 - 1,281,781 - 1,281,781 - 1,291,027 - 1,291,027 - 1,292,340 - 1,292,340 - 1,297,800 - 1,297,800 $ 2,344,553 $ 22,951,616 $ 1,854,226 $ 30,015,926 I CITY OF ANDOVER, MINNESOTA SCHEDULE OF FUND TRANSFERS December 31, 2012 General Fund Water EF Sewer EF Capital Equipment Reserve CPF Total General Fund Special Revenue Funds (SRF) Community Center SIZE 2004 EDA Public Facility Lease Revenue Bond DSF Debt Service Funds (DSF) 2004 EDA Public Facility Lease Revenue Bonds DSF Community Center SIZE 2004A G.O. Improvement Bonds DSF 2008A G.O. Capital Note DSF 2009A G.O. Capital Note DSF 2008A G.O. Capital Note DSF 2004A G.O. Improvement Bonds DSF 2009A G.O. Capital Note DSF 2004A G.O. Improvement Bonds DSF 2010A PIR Refunding Bonds DSF PIR CPF Total Debt Service Funds Capital Proiects Funds (CPF) Water Trunk CPF Water EF Sewer Trunk CPF Sewer EF Building CPF TIF Projects CPF Capital Equipment Reserve CPF General Fund TIF Projects CPF Building CPF PIR CPF 2010A PIR Refunding Bonds DSF Total Capital Projects Funds Enterprise Funds Water EF Water Trunk CPF General Fund Sewer EF General Fund Sewer Trunk CPF Total Enterprise Funds Total All Funds Transfer Transfer In Out $ 150,250 $ 46,680 - - 600,000 196,930 600,000 Exhibit 4 General Fund Admin Allocation General Fund Admin Allocation Park Improvements 371,598 Debt Service Allocation 371,598 7,806 1,997 9,803 - - 7,806 - 1,997 385,000 - 766,401 9,803 - 7,134 400,000 - 710,185 600,000 - - 710,185 - 385,000 1,710,185 1,102,319 7,134 - - 150,250 7,134 150,250 - 46,680 400,000 - 446,680 7,134 596,930 $ 2,680,650 $ 2,680,650 160 Debt Service Allocation Close Debt Service Fund Close Debt Service Fund Close Debt Service Fund Close Debt Service Fund Debt Service Allocation Debt Service Allocation Replacement Reserve Future Land Purchases Park Improvements Future Land Purchases Debt Service Allocation Debt Service Allocation General Fund Admin Allocation General Fund Admin Allocation Replacement Reserve