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CC - May 1, 2012
%XAbq^ -� 1685 CROSSTOWN BOULEVARD N.W. • ANDOVER, MINNESOTA 55304 • (763) 755 -5100 FAX (763) 755 -8923 • WWW.ANDOVERMN.GOV Regular City Council Meeting — Tuesday, May 1, 2012 Call to Order — 7:00 p.m. Pledge of Allegiance Resident Forum Agenda Approval 1. Approval of Minutes (4/12/12 Board of Review; 4/17/12 Regular) Consent Items 2. Approve Payment of Claims — Finance 3. Award Bid/11- 43/140t" Lane NW Water Main Improvements -Engineering 4. Award Bid/11- 40/133d Avenue NW Reconstruction -Engineering 5. Accept Feasibility Report/Order Public Hearing/11- 47/174"' Ave. NW, Heather St. NW & 173rd Ln. NW — Engineering 6. Approve Feasibility Report/Waive Public Hearing/l 1 -10 /South Coon Creek Drive NW Reconstruction/WM Improvements — Engineering 7. Approve Easements /11 -10 /South Coon Creek Drive NW Reconstruction — Engineering 8. Approve No Parking Resolution/l0- 27/Bunker Lake Blvd. NW (7`h Ave. NW to 38"' Ave.) - Engineering 9. Consider Approval Outdoor Event /Extension of Liquor License/Beef O'Brady's — Administration 10. Consider Approval /Extension of Liquor License for New Addition and Patio Area/Beef O'Brady's — Administration 11. Approve Temporary 3.2% Malt Liquor License /Andover Lions/Fun Fest — Administration Discussion Items 12. Public Hearing: Modification to the Development Program for Development District No. l and the establishment of Tax Increment Financing District No. 1 -5. Adopt resolution approving Program Modification and T1F Plan — Planning 13. Approve resolution for Interfund Loan in connection with TIF District No. 1 -5. — Administration 14. Approve Development Agreement — Arbor Oaks Senior Living, LLC - Planning 15. 2011 Audit Presentation/HLB Tautges Redpath— Administration Staff Items 16. Schedule May EDA Meeting — Administration 17. Administrator's Report —Administration Mayor /Council Input Closed Session: Property Acquisition Negotiations (PID#29- 32 -24 -44 -0022) Property Acquisition Negotiations (PID#s 17- 32 -24 -13 -0003 & 17- 32 -24 -12 -0007) Adjournment 1685 CROSSTOWN BOULEVARD N.W. • ANDOVER, MINNESOTA 55304 • (763) 755 -5100 FAX (763) 755 -8923 • WWW.CI.ANDOVER.MN.US TO: Mayor and City Council CC: Jim Dickinson, City Administrator FROM: Michelle Hartner, Deputy City Clerk SUBJECT: Approval of Minutes DATE: May 1, 2012 INTRODUCTION The following minutes were provided by TimeSaver, reviewed by Administration and submitted for City Council approval: April 12, 2012 April 17, 2012 DISCUSSION The minutes are attached for your review. ACTION REQUIRED Board of Review Regular The City Council is requested to approve the above minutes. Respectfully submitted, Michelle Hartner Deputy City Clerk Attach: Minutes 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 ANDOVER BOARD OF REVIEW APRIL 12, 2012 — MINUTES The Annual Board of Review was called to order by Mayor Mike Gamache at 7:00 p.m., Thursday, April 12, 2012, at the Andover City Hall, 1685 Crosstown Boulevard NW, Andover, Minnesota. Councilmembers present: Mike Knight, Sheri Bukkila, J.uh Appointed Board Member: Jim Dickinson Also Present: Jason Dagastino, Anoka County John Leone, Anoka County Com Mike Sutherland, Anoka County Mayor Gamache noted that official notices of residents and is posted outside the Council Ch and advised that they would only review =asses: and Tony Howard tial Assessor Mr. Dagastino reported that evaluation notices were sent outin.March and he received 18 calls, which is very low compared to past years when well over 100 calls were received. He stated that of the 18 calls he received, nine reviews were conducted. He believed that the reason for the decrease in calls is because most properties have continued to decrease in value and he believed people are seeing what they are expecting. He reported that iri 2012 there were 156 residential sales, with a few more foreclosure sales than the--- previous year. He stated that overall the value of property within Andover decreased 3.6 percent, compared to a decrease of 4.8 percent the Councilmember Trude discussed the - purchase of new construction homes and compared that to the value that someone could obtain by purchasing a previously owned home in this market. that she was pleased to see all the information included in the packet. Mr. Leone discussed some of the commercial transactions that had taken place in the past year in Andover and other vacant commercial properties in neighboring cities. Councilmember Trude noted that Mr. Dickinson was appointed as the sixth member of the Board of Review. There were no comments made from the public. ADJO URN BOARD OF REVIEW 1 2 3 4 5 6 7 8 9 10 11 Andover Board of Review Meeting Minutes —April 12, 2012 Page 2 Motion by Councilmember Bukkila, Seconded by Councilmember Trude, to close the Board of Review meeting. Motion carried unanimously. The meeting adjourned at 7:18 p.m. Respectfully submitted, Amanda Staple TimeSaver Off Site Secretarial, Inc. 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 REGULAR ANDOVER CITY COUNCIL MEETING —APRIL 17, 2012 MINUTES The Regular Bi- Monthly Meeting of the Andover City Gamache, April 17, 2012, 7:04 p.m., at the Andover i Andover, Minnesota. Councilmembers present: Mike Knight, Shen Bukkila, Julie Councilmember absent: None Also present: City Administrator, Jim Dickinsot City Engineer/Public Works Direc City A Others PLEDGE OFALLEGIANCE PROCLAMATION — ARBOR DAY Mayor and Mi UM `as called to order by Mayor Mike 1685 Crosstown Boulevard NW, Tony Howard r, David David C April 27, 2012 is Ardor Day in Andover Mr. Curtis Jones, 1801 139th Avenue NW, Andover, spoke on behalf of his neighborhood and expressed concerns about the future identity of the City of Andover if Wal -Mart is allowed to build a facility in the City. He stated this would be a short-term fix to increasing the City's property tax base but the Council needs to also consider long -term impacts such as pollution, traffic, pedestrian safety and the fallout to surrounding businesses. He asked what things the Council would be discussing in regard to this application. Mayor Gamache stated the process would be for the City to review the plan submitted by Wal- Mart to be sure it meets the City's codes and ordinances. Wal -Mart does have a purchase agreement with the current owner of the property. This is a private sale and the City does not own any property in the project area. The property was zoned several years ago as general business and this would allow constructing a Wal -Mart on the property. At this time the City is reviewing how the plan submitted fits with the ordinances. Staff will bring any issues or concerns they find to Wal -Mart and have them address these concerns. Once the plan has been through this process the plan will be brought to the Planning Commission. The plan may be Regular Andover City Council Meeting Minutes —April 17, 2012 Page 2 brought to the June Planning Commission meeting. At this time one of the issues Wal -Mart needs to look at is in regard to the wetlands. 4 Community Development Director Carlberg clarified the wetlands will need to be delineated in 5 the area and this vegetation will need to grow in order to do this. Until this is done and they 6 make contact with the watershed district the City is not sure what the impacts will be. This will 7 need to be worked through before staff can determine if the plan should move forward. The June 8 Planning Commission meeting would be the earliest this is expected to happen. There will be a 9 public hearing notice sign posted on Bunker Lake Boulevard. The date and time for the public 10 hearing regarding this matter will be published and posted at City Hall. 11 12 Mayor Gamache stated one of the concerns brought up was in reference to traffic. He clarified 13 when Anoka County reconstructed Bunker Lake Boulevard the road was widened in order to 14 accommodate additional traffic in this area because the area is designed and zoned for 15 commercial and general business. Signal lights were also installed at Jay Street and Quinn Street 16 to allow for commercial development along this section. At this time it is unknown what impacts 17 there will be on the side roads but there will be a traffic study done. He stated it is expected this 18 would be a facility that would be used more locally since there are plans to build another Wal- 19 Mart along Highway 65 in Blaine near the current Lowes location. He stated because the 20 property is currently zoned general business there would not be a need for the City to consider 21 rezoning. 22 23 Mr. Jones stated it appeared there was no real way for the residents to provide a unified front on 24 what they want to be as a City. He clarified the City needs to build around traffic studies, public 25 safety, pollution and watershed studies because these are the items that will likely make or break 26 this particular project. 27 28 Mayor Gamache stated this is correct. There would be an opportunity to speak on this project at 29 the public hearing in front of the Planning Commission. As a City, the ordinances need to be 30 followed. If Wal -Mart requests a PUD there will be more the Council can request from the 31 developer but as long as the plan meets all the ordinances and the traffic and water studies are 32 favorable this would be difficult for the City to just deny the project. 33 34 AGENDA APPROVAL 35 36 Mayor Gamache stated updated Resolutions for Items 12 and 13 were provided as supplemental 37 information. 38 39 Motion by Councilmember Bukkila, Seconded by Councilmember Knight, to approve the Agenda as 40 presented. Motion carried unanimously. 41 42 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 Regular Andover City Council Meeting Minutes —April 17, 2012 Page 3 APPROVAL OF MINUTES April 3, 2012 Regular City Council Meeting Motion by Councilmember Trude, Seconded by Councilmember Bukkila to approve the April 3, 2012 Regular City Council Meeting minutes as presented. The motion carried unanimously. April 3, 2012 Closed City Council Meeting Motion by Councilmember Trude, Seconded by Councilmember Howard to approve the April 3, 2012 Closed City Council Meeting minutes as presented. The motion carried unanimously. CONSENT ITEMS Item 2 Approve Payment of Claims. Item 3 Approve Grant Agreement/12- 19/Martin's Meadow Improvements. Item 4 Accept Donation/Sophie's Park. (See Resolution R038 -12) Item 5 Accept Plan for Dugouts /Sunshine Park Ball Fields. Item 6 Approve Easements /11 -10 /South Coon Creek Drive NW Reconstruction. Item 7 Accept 2012 -2014 DNR Forest Bonding Grant/12 -24. Item 8 Award Bid /12 -2a, 12 -2b, 12 -2c (2012 Street Reconstruction), 12 -8 (2012 Curb, Sidewalk & Pedestrian Ramp Repairs) and 12 -13 (Sunshine Park Parking Lot Expansion West Side Phase 3). (See Resolution R039 -12) Item 9 Outdoor Event Date Change /Tanners Station. Motion by Councilmember Knight, Seconded by Councilmember Bukkila, for approval of the Consent Agenda as presented. Motion carried unanimously. ANOKA COUNTYSHERIFFS OFFICE MONTHLY REPORT Lieutenant Orlando, Anoka County Sheriff's Office, provided the City Council and residents with an update on law enforcement activities within the City for March 2012 including seven (7) DWI arrests, one (1) domestic assault and a vehicle theft. She stated there had been a residential burglary that was still under investigation and vehicle theft from a storage area that was still under investigation. She reminded residents to be sure to keep cars, windows and doors locked because this is the number one reason for thefts. CONSIDER CONDITIONAL USE PERMIT — COMMERCL4L ANIMAL TRAINING FACILITY— 3131161sT AVENUE NW 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 Regular Andover City Council Meeting Minutes —April 17, 2012 Page 4 Community Development Director Carlberg stated the applicant is seeking a conditional use permit for commercial animal training. Commercial animal training is permitted as a conditional use in General Business zoned districts. The proposed building to host the commercial animal training will require no physical changes to the interior or exterior and all training will take place indoors and there will be no outdoor space used. The facility would be used to host up to ten (10) dogs and their owners specializing in a variety of obedience -based classes. The applicant stated the days of operation at the facility would be Saturday and Sunday along with two weeknights, depending on the needs of the clients. The rural location of the proposed facility makes additional traffic associated with this business easily handled by both 16151 Avenue NW and Round Lake Boulevard NW. The Planning Commission recommended approval of the proposed conditional use permit with four conditions listed in the Resolution with a 7 -0 vote. Councilmember Trude stated in the last "Whereas" clause in the Resolution, the words "lot split" should be replaced with Conditional Use Permit. She asked the applicant if there would be a pet sanitation area provided and maintained for clients. Ms. Joann Neve, 5701 Ambassador Boulevard NW, St. Francis, stated there would be an area provided for client's dogs and equipment would be provided for them to clean up the area. Councilmember Knight asked if there would be any other animals larger than a dog at the facility. Ms. Neve stated she would only be providing dog training at the facility. Councilmember Trude complimented the applicant on the proposed project and wished her success. Motion by Councilmember Bukkila, Seconded by Councilmember Knight, to approve the resolution approving the Conditional Use Permit for commercial animal training on the property located at 3131 — 161" Avenue NW with the conditions listed and the amendment to the last "Whereas" clause: changing the words "lot split" to "conditional use permit ". Councilmember Trude asked if the dumpster is enclosed on this property. She stated she would like to have this included on all applications that come forward. Community Development Director Carlberg stated the dumpsters are located behind the facility but staff can review this with the property owner. He clarified with this particular application it would not be the applicants responsibility to cover these. The motion was called to a vote. The motion carried unanimously. (See Resolution R040 -12) Regular Andover City Council Meeting Minutes —April 17, 2012 Page -5 CONSIDER CONDITIONAL USE PERMIT —TEMPORARY STORAGE OF FILL —16563 HANSONBOULEVARD NW 4 Community Development Director Carlberg stated the applicant is requesting temporary storage 5 of approximately 7,000 cubic -yards of fill material at 16563 Hanson Boulevard NW. He 6 provided a map showing the location of the fill storage areas. City Code 12 -12 requires a 7 conditional use permit for stockpiling more than 400 cubic -yards of material on a property. The 8 applicant has an agreement with North Pine Aggregate Inc. to receive some of the material that 9 will be removed from Hanson Boulevard as part of this year's reconstruction project. The 10 material will be hauled to the subject property as the tire chips are removed from the site. It is 11 the applicants' intent to use the material to improve a farm road on their property as well as for 12 sale as part of the existing sod operation. A permit from the Lower Rum River Watershed 13 Management Organization is also required for the stockpile due to the fact that a portion of the 14 area of the property where the material will be stored is within the floodplain. The Planning 15 Commission unanimously recommended approval of the proposed conditional use permit with 16 the nine (9) conditions listed in the resolution. He clarified the request is for the storage of sand 17 material and this has been clarified in the resolution. He also stated there is a temporary berm in 18 place to accommodate the existing operation that moves tire chips over the Koch pipeline. This 19 pipeline will still be crossed during the Hanson Boulevard project. Staff would recommend 20 including condition 10 to require the applicant to contact Koch Industries and obtain written 21 approval to use this berm to move the materials related to this request. Staff also recommends 22 adding condition 11: requiring the applicant to contact Koch Industries and obtain written 23 permission to cross the pipeline when moving the materials in the future. Koch Industries is 24 aware that the applicant does cross this pipeline and they have imposed weight restrictions. 25 26 Mayor Gamache clarified the original request had been to store the material for two (2) years but 27 this was changed to one (1) year after the Planning Commission meeting. He asked if this would 28 be sufficient time for the applicant to complete the project he would be using the fill for. 29 30 Mr. Dennis Kuiken, 16563 Hanson Boulevard NW, Andover, stated one (1) year would be 31 sufficient. He stated he would be using this fill to construct a road for access to the 40 -acre 32 parcel he owns, which is currently land locked. He currently has an agreement with Koch 33 Industries that allows him to cross over the pipeline with a maximum weight of 80,000 pounds, 34 without building up the road. His truck is able to haul approximately 60,000 pounds. This is an 35 agreement that has been in place for several years. He clarified the temporary berm that is in 36 place for the Hanson Boulevard project would be removed when the project is complete. He 37 would not be utilizing this berm. He also clarified the fill will be stored where he currently 38 stores black dirt. 39 40 Councilmember Howard stated he is concerned there will be several trucks going over the 41 pipeline to haul the fill material onto to the property and he would like to be sure Koch Industries 42 is aware of this and the necessary precautions are taken. 43 Regular Andover City Council Meeting Minutes —April 17, 2012 Page 6 Community Development Director Carlberg stated these concerns are addressed with Conditions 10 and 11. 4 Councilmember Trade stated Koch Industries was misspelled in Condition 11. Councilmember Howard asked who would be taking the berm down after the fill was moved. 8 Mr. Kuiken stated the berm that is currently in place would be removed by North Pine Aggregate 9 when the Hanson Boulevard project is complete. The tire chips will be removed and as they are 10 being hauled off the property the fill will be hauled onto the property. 11 12 Councilmember Trade clarified the application was for the storage of clean fill and sand only. 13 14 Councilmember Trade stated in the last "Whereas" clause the word "he" should be replaced with 15 "the ". She complimented staff on looking at the issues and explaining things clearly for the 16 Council 17 18 Motion by Councilmember Knight, Seconded by Councilmember Howard, to approve the resolution 19 approving the Conditional Use Permit for a request to stockpile fill at 16563 Hanson Boulevard NW 20 with the eleven (11) conditions provided and the spelling correction to Koch Industries in condition 21 11 and changing the word "he" to "the" in the last "Whereas" clause. The motion carried 22 unanimously. (See Resolution R041 -12) 23 24 CONSIDER CONDITIONAL USE PERMIT — USED VEHICLE SALES /PARKING LOT 25 EXPANSION— 3138162"'D LANE NW 26 27 Community Development Director Carlberg stated the applicant had received approval of a 28 conditional use permit for one (1) used vehicle sales dealer license on the property located at 29 3138 162nd Lane NW. The applicant is seeking to amend the permit to expand the parking area 30 and ultimately allow additional used vehicle sales dealers. The proposed parking addition would 31 provide additional parking to satisfy the five (5) stall minimum that the state requires for up to 32 five (5) total vehicle sales dealers. Council approval is required for each dealer license. The site 33 does not currently satisfy a number of state requirements for each potential vehicle sale business. 34 The Planning Commission unanimously recommended approval of the proposed conditional use 35 permit subject to the six (6) conditions listed in the resolution. He pointed out for the site plan 36 review, condition 4 requires one additional parking stall be striped to meet the 35 parking space 37 requirements for five (5) used vehicle licenses. The parking area adjacent to the proposed drive 38 would be eliminated. He also stated the current drive access is closer than the 10 -foot 39 requirement and this is being moved to the west in order to comply with the 10 -foot requirement. 40 He stated staff would recommend adding condition 7: this resolution and conditions take the 41 conditions forward and supersedes the resolution that was approved in July 2011. 42 43 Councilmember Trade stated the Planning Commission had done a good job with the request. 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 Regular Andover City Council Meeting Minutes —April 17, 2012 Page 7 She stated the City had not required the 10 -foot by 18 -foot parking stalls to be striped for the other car dealership in Andover. She suggested the City allow flexibility on the area designated as a display area. Community Development Director Carlberg stated this request would require approval of a variance utilizing the Interim Performance Standards because this would not meet the intent of the code. This could be included in the resolution. Councilmember Trude stated the employee and customer parking standards would need to be met but the area that would be used to display cars should not have to have full parking stalls. Mr. Jason Hemp, Xcel Properties LLC, Ham Lake, stated there would be ten (10) stalls in the back that would be used for employees. Councilmember Howard stated if the stalls are striped and the dealerships are no longer in business, the facility would have parking stalls that did not meet the City's code. Councilmember Trude pointed out other car dealerships did not have cars displayed in striped parking lots. Mayor Gamache stated this is the only area the City has car dealerships. Councilmember Trude suggested adding a definition for car display areas to the City's ordinances and this would allow the City to not require striping in these areas. Mayor Gamache stated the stripes could be added but the dealerships could park the cars where they needed to. Community Development Director Carlberg clarified for the City's needs it would just need to identify the space is there. He will need to verify this through state licensing requirements as well. Councilmember Bukkila stated how the vehicles are parked in the show area is not something the City will monitor. Mr. Hemp stated a potential problem with not having the lot striped would be the State requires this amount for all parking spaces, this is what is being set by the striping. Community Development Director Carlberg stated as part of this approval the Council could clarify ten (10) spaces for customer and employee parking would have to be striped and identified at the 10 -foot by 18 -foot requirement. This will allow the vehicle display area to not be striped. Regular Andover City Council Meeting Minutes —April 17, 2012 Page 8 Councilmember Trade suggested a deadline be added to condition 6. She asked the applicant if 120 days from completion of the parking lot would be acceptable. 4 Mr. Hemp stated this would be acceptable. 6 Councilmember Trade stated the third "Whereas" clause should be changed to: "Whereas the 7 applicant has requested an amendment to the approved conditional use permit for the parking 8 expansion to allow in certain instances the display of more vehicles for sale and the ability to 9 seek additional vehicle sales licenses to be issued for the subject property' 10 11 Councilmember Trade suggested adding condition 8: Any exterior dumpsters and trash storage 12 shall be enclosed according to city code. 13 14 Motion by Councilmember Knight, Seconded by Councilmember Trade, to approve the resolution 15 approving the Conditional Use Permit for parking expansion for used vehicle sales on the property 16 located at 3138 162hhd Lane NW with the eight (8) conditions and the amendment allowing ten (10) 17 spaces for customer and employee parking to be striped according to code and the remaining lot to 18 remain unstriped, and the amendment to the third "Whereas" clause: Whereas the applicant has 19 requested an amendment to the approved conditional use permit for the parking expansion to allow 20 in certain instances the display of more vehicles for sale and the ability to seek additional vehicle 21 sales licenses to be issued for the subject property. The motion carried unanimously. (See Resolution 22 R042 -12) 23 24 ADMINISTRATOR'S REPORT 25 26 City Administrator Dickinson updated the City Council and the residents regarding 27 administration and city department activities, legislative activities, development and CIP 28 projects, and upcoming meetings and community events. Updates were provided on the Trident 29 Development, the Wal -Mart proposal, the Parkside at Andover Station and platting activities. He 30 also stated the Hawkridge Park Grand Opening is scheduled on April 21", the next City Council 31 workshop is April 24th, and the next EDA and City Council meetings are May I'`. He clarified 32 there would be document shredding available at the April 28th Recycling Day event. He sated the 33 City Wide Garage Sale is scheduled for May 17th to May 19d'. The audit has been completed and 34 a presentation will be made to the Council in May. He stated he would be chairing the meeting 35 for the Connect Anoka County Governance Group and they will be addressing fiber usage. He 36 also met with the Director of EMS Service for Allina to discuss ambulance service in Andover. 37 Allina will have an open house for their new base in Mounds View on April 24th. 38 39 Councilmember Trade asked about the grants the City had received, identified in the Consent 40 Agenda. 41 42 City Administrator Dickinson stated the City had received a grant from Great River Greening for 43 Martin Meadows. These funds will be used for slope stabilization, buckthorn treatment, and Regular Andover City Council Meeting Minutes —April 17, 2012 Page 9 1 prairie restoration. The DNR Forestry grant received by the City will be used for planting trees 2 in the City. The City also will have dugout enclosures at Sunshine Park donated by the Andover 3 Athletic Association. The City received donations for Sophie's Park. There will be a "Little 4 Free Library" and basketball hoop added to this park. 5 6 Councilmember Trude stated she would like to see a book mobile come to the Community 7 Center. 8 9 City Administrator Dickinson stated this service is no longer provided. 10 11 Councilmember Howard asked if there would be a group responsible for planting trees as part of 12 the DNR Forestry grant or if this would be done by staff. 13 14 City Administrator Dickinson stated staff maybe working with groups and potential Eagle Scout 15 projects. 16 17 Councilmember Trude suggested some of the DNR Forestry grant be used at Lions Park. She 18 also suggested the downed trees be removed and the screening improved. 19 20 MAYORICOUNCIL INPUT 21 22 (Resident Letter) Mayor Gamache stated he had received a letter from a resident in regard to the 23 number of pets residents are allowed to have. 24 25 City Administrator Dickinson clarified residents can have up to three (3) dogs and/or cats and 26 this does not include rats or other types of small animals. Also chickens are not allowed in the 27 urban areas of the City. 28 29 (Annual Business Development Day Golf Tournament) Mayor Gamache stated the 10'h Annual 30 Business Development Day Golf Tournament would be at the Refuge Golf Course on June 13, 31 2012. 32 33 ADJOURNMENT 34 35 Motion by Councilmember Bukkila, Seconded by Councilmember Knight, to adjourn. Motion 36 carried unanimously. The meeting adjourned at 8:19 p.m. 37 38 Respectfully submitted, 39 40 Tina Borg, Recording Secretary 41 42 43 44 1 Regular Andover City Council Meeting Minutes —April 17, 2012 Page 10 REGULAR ANDOVER CITY COUNCIL MEETING MINUTES —APRIL 17, 2012 TABLE OF CONTENTS PLEDGE OF ALLEGIANCE .......................................................................... ............................... 1 PROCLAMATION — ARBOR DAY ............................................................... ............................... 1 RESIDENT FORUM ....................................................................................... ............................... 1 AGENDA APPROVAL ................................................................................... ............................... 2 APPROVAL OF MINUTES ............................................................................ ............................... 3 CONSENTITEMS .......................................................................................... ............................... 3 Item 2 Approve Payment of Claims .......................................................... ............................... 3 Item 3 Approve Grant Agreement/12- 19/Martin's Meadow Improvements ........................... 3 Item 4 Accept Donation/Sophie's Park (See Resolution R038- 12) .......... ............................... 3 Item 5 Accept Plan for Dugouts /Sunshine Park Ball Fields ..................... ............................... 3 Item 6 Approve Easements /11 -10 /South Coon Creek Drive NW Reconstruction .................. 3 Item 7 Accept 2012 -2014 DNR Forest Bonding Grant/ 12- 24 .................. ............................... 3 Item 8 Award Bid /12 -2a, 12 -2b, 12 -2c (2012 Street Reconstruction), 12 -8 (2012 Curb, Sidewalk & Pedestrian Ramp Repairs) and 12 -13 (Sunshine Park Parking Lot Expansion West Side Phase 3) (See Resolution R039- 12) .................................... ............................... 3 Item 9 Outdoor Event Date Change /Tanners Station ................................ ............................... 3 ANOKA COUNTY SHERIFF'S OFFICE MONTHLY REPORT ................. ............................... 3 CONSIDER CONDITIONAL USE PERMIT — COMMERCIAL ANIMAL TRAINING FACILITY — 3131 161sT AVENUE NW (See Resolution R040 -12) ......... ............................... 3 CONSIDER CONDITIONAL USE PERMIT — TEMPORARY STORAGE OF FILL — 16563 HANSON BOULEVARD NW (See Resolution R041 -12) ........................ ............................... 5 CONSIDER CONDITIONAL USE PERMIT — USED VEHICLE SALES/PARKING LOT EXPANSION — 3138 162ND LANE NW (See Resolution R042- 12) .......... ............................... 6 ADMINISTRATOR'S REPORT ..................................................................... ............................... 8 MAYOR/COUNCIL INPUT ........................................................................... ............................... 9 (Resident Letter) .......................................................................................... ............................... 9 (Annual Business Development Day Golf Tournament) ............................. ............................... 9 ADJOURNMENT............................................................................................ ............................... 9 0 ' 1 y� � 1685 CROSSTOWN BOULEVARD N.W. o ANDOVER, MINNESOTA 55304 0 (763) 755 -5100 FAX (763) 755 -8923 = WWW.CI.ANDOVER.MN.US TO: Mayor and Councilmembers CC: Jim Dickinson, City Administrator / Finance Director FROM: Lee Brezinka, Assistant Finance Director SUBJECT: Payment of Claims DATE: May 1, 2012 INTRODUCTION Attached are disbursement edit lists for claims related to the on going business of the City of Andover. DISCUSSION Claims totaling $93,658.67 on disbursement edit list #1- 2 from 04/20/12 have been issued and released. Claims totaling $254,902.00 on disbursement edit list #3 dated 05/01/12 will be issued and released upon approval. BUDGET IMPACT The edit lists consist of routine payments with expenses being charged to various department budgets and projects. ACTION REQUESTED The Andover City Council is requested to approve total claims in the amount of $348,560.67. Please note that Council Meeting minutes will be used as documented approval. 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Y U U U U F O U G 4 0 w 4- ,� Ao Cd U .rrte� a � U 5_ C rn nl O N N w a V K Gl N iy d z U a+ A A R a( G O O N 0 4 G I N G U IK 0 7 Al ro W x Q U � U O C �O U C' O N N V] N xd U p U o IV 0 N O Cl Cl T O O O O O O O O Q a v '? +U+ C O U _sr 1 T+ N U Q ° U U L. c ti 0 z A W U Q N O O U N C V' � O QCJ G x , � O � O U � m 0 N O O O O O O N N O O C\ CT O O N N N G\ m cn U i yU 0 � V ro' O U U C. r U C sr w c o � � U C 7 ^ 1 bn N r 0 U O 7 rn O N Im N U U U � U V 0 F 0 F0- ro C, Z N O N N d 0 a w 0 0 a U U U U 0 U TO: CC: FROM: C I T Y O F ND OVE JEW- 1685 CROSSTOWN BOULEVARD N.W. • ANDOVER, MINNESOTA FAX (763) 755 -8923 • WWW.ANDOVERMN Mayor and Council Members Jim Dickinson, City Administrator SUBJECT: DATE 0 55304 • (763) 755 -5100 GOV David D. Berkowitz, Director of Public Works /City Engineer Award Bid/11- 43/140th Lane NW Water Main Improvements - Engineering May 1, 2012 INTRODUCTION The City Council is requested to accept bids and award the bid for Project 11 -43, 140th Lane NW Water Main Improvements. DISCUSSION The project includes construction of water main and services for properties located along 140th Lane NW between Raven Street NW and Nightingale Street NW and five properties located along Raven Street north of 140th Lane NW. Reconstruction of the roadway would be required as a part of this project. A portion of the funding ($153,285.75) for the project has been secured through a Community Development Block Grant (CDBG). There is a fund balance of $53,285.75 from the 2010 CDBG Water Main Construction Project for 138th Avenue NW and $100,000 available from the 2011 Water Connection Assistance Program. Anoka County approved the balance to be transferred to this project and the deadline to expend the $53,285.75 has been extended to June 30, 2012. The $100,000 from the Water Connection Assistance Program has an expenditure deadline of December 31, 2012. The bid opening was held on April 24, 2012. The three lowest bids received are as follows: Contractor County Line Excavating S.R. Weidema Inc. Douglas -Kerr Underground. Engineer's Estimate Bid Amount $241,935.50 $260,107.00 $279,117.20 $254,717.50 Please refer to the attached bid tabulation for a breakdown of bids and unit prices. BUDGETIMPACT This project will be funded through CDBG and Tax Increment Financing. Based upon the total feasibility cost estimate of $293,400, a budget gap of $140,114.25 remains after applying the CDBG funds. The City Council and Andover Economic Authority authorized staff to fund the shortfall through Tax Increment Financing. Mayor and Council Members May 1, 2012 Page 2 of 2 ACTION REQUIRED The City Council is requested to approve the resolution accepting bids and awarding the contract to County Line Excavating in the amount of $241,935.50 for Projects 11 -43, 140th Lane NW Water Main Improvements. Respectfully submitted, David D. Berkowitz Attachments: Resolution, cation Map & Bid Tabulation CITY OF ANDOVER COUNTY OF ANOKA STATE OF MINNESOTA RES. NO. MOTION by Council member to adopt the following: A RESOLUTION ACCEPTING BIDS AND AWARDING CONTRACT FOR THE IMPROVEMENT OF PROJECT NO. 11-43,140 TH LANE NW WATER MAIN IMPROVEMENTS. WHEREAS, pursuant to advertisement for bids as set out in Council Resolution No. 031 -12 dated March 20 , 2012, bids were received, opened and tabulated according to law with results as follows: County Line Excavating $241,935.50 S.R. Weidema Inc. $260,107.00 Douglas -Kerr Underground. $279,117.20 NOW, THEREFORE, BE IT RESOLVED by the City Council of the City of Andover to hereby accept the bids as shown to indicate County Line Excavating as being the apparent low bidder. BE IT FURTHER RESOLVED TO HEREBY direct the Mayor and City Clerk to enter into a contract with .County Line Excavating in the amount of $241,935.50 for construction of the improvements; and direct the City Clerk to return to all bidders the deposits made with their bids, except that the deposit of the successful bidder and the next two lowest bidders shall be retained until the contract has been executed and bond requirements met. MOTION seconded by Council member and adopted by the City Council at a regular meeting this 1 st day of May , 2012, with Council members of the resolution, and Council members voting in favor voting against, whereupon said resolution was declared passed. 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O � m muEEEN xOam U ~ c E> c q o2 c='5 om Ia m 20 C5 i K 0 m W W W W .0> W W m N N W fm U m m m mv b b f L' N N m C V W 0 r2� O 0 0 N M 0 0 aa N 0 0 W r 0 0 W W 0 0 O N M d N W W W 0 N N N M N N P N N N m W N �O y � H 1685 CROSSTOWN BOULEVARD N.W.. ANDOVER, MINNESOTA 55304 • (763) 755 -5100 FAX (763) 755 -8923 • WWW.ANDOVERMN.GOV TO: Mayor and Council Members CC IaZiN"i Jim Dickinson, City Administra David D. Berkowitz, Director o ;ineer SUBJECT: Award Bid/11- 40/133`d Avenue NW Reconstruction - Engineering DATE: May 1, 2012 INTRODUCTION The bid opening for 133`d Avenue NW Reconstruction, Project 11 -40 is scheduled for Friday, April 27, 2012. The bid results will be provided to the City Council as supplemental information at the meeting. Respectfully submitted, David D. Berkowitz ANDOVE •�.)..� 1685 CROSSTOWN BOULEVARD N.W.. ANDOVER, MINNESOTA 55304 • (763) 755 -5100 FAX (763) 755 -8923 • WWW.ANDOVERMN.GOV TO: Mayor and Council Members CC: Jim Dickinson, City Administrato FROM: David D. Berkowitz, Director of Public orks /City Engineer SUBJECT: Accept Feasibility Report /Order Public Hearing/11- 47/174'h Ave. NW, Heather St. NW & 173rd Ln. NW - Engineering DATE: May 1, 2012 INTRODUCTION The City Council is requested to accept the feasibility report and order public hearing for Project 11 -47, 174`h Avenue NW, Heather Street NW & 173rd Lane NW for gravel road paving. DISCUSSION A petition was received from the neighborhood fronting the existing gravel roads on 174`h Avenue NW, Heather Street NW, and 173rd Lane NW. The petition was accepted by the City Council at the January 3, 2012 City Council meeting. The petition was signed by ten of the sixteen affected properties in the neighborhood, all in favor of the improvements if the costs were determined to be feasible. There are six properties that did not sign the petition or were unavailable. There were no signatures from the affected residents objecting to the project. A neighborhood meeting was held on April 3, 2012 to discuss the petition, estimated costs for the improvements, answer questions, and provide a potential project schedule moving forward. The total estimated cost to pave the existing gravel roadways is $304,260.00. This estimated cost includes construction costs, contingencies, and indirect costs. The proposed project depending on City Council direction would be funded 100% by the property owners or through the City's Road and Bridge Fund (50 %) and special assessments (50 %) based on requirements set forth in the City's Assessment Manual (Policies and Procedures Guide). If 50150 split the City's share of the project costs is estimated at $152,130.00. The total estimated assessment amount is $152,130.00. The estimated assessment rate per unit is $9,510.00. If 100% assessed the assessment rate per unit would be $19,020.00. At the Public Hearing the City Council will need to determine if the project will move forward as a petition project with less than 100% signed or a City initiated project that will qualify for the 50150 cost split. Mayor and Council Members May 1, 2012 Page 2 of 2 BUDGET IMPACT The paving of the existing gravel surface would either be funded 100% by assessments or funded 50% from the City's Road & Bridge Fund and 50% assessed to the benefitting properties based on the City's Assessment Manual (Policies and Procedures Guide) and based on City Council direction. ACTION REQUIRED The City Council is requested to accept the feasibility report and order the public hearing for Project 11 -47, 170 Avenue NW, Heather Street NW & 173`d Lane NW. Respectfully submitted, David D. Berkowitz CS Attachments: Resolution, E -Mail from Resident, Information Meeting Sign in Sheet& Feasibility Report 's CITY OF ANDOVER COUNTY OF ANOKA STATE OF MINNESOTA RES. NO. MOTION by Councilmember to adopt the following: A RESOLUTION ACCEPTING FEASIBILITY REPORT AND CALLING PUBLIC HEARING ON IMPROVEMENT FOR 174TH AVENUE NW, HEATHER STREET NW & 173RD LANE NW, PROJECT NO. 11 -47. WHEREAS, pursuant to Resolution No. 001 -12, adopted the 3`d day of January , 2012 a Feasibility Report has been prepared by the City Engineer for the improvements: and WHEREAS, such report was received by the City Council on the 1 st day of May, 2012; and WHEREAS, such reports declared the proposed assessments to be feasible for an estimated total project cost of $304,260.00. NOW, THEREFORE, BE IT RESOLVED by the City Council of the City of Andover that: 1. The City Council hereby accepts the Feasibility Reports for Project No. 11 -47 for the improvements. 2. The Council will consider the improvements in accordance with the reports and the assessment of abutting property for all or a portion of the improvement pursuant to Minnesota Statutes Chapter 429 at an estimated total cost of the improvement of $304,260.00. 3. A public hearing shall be held on such proposed improvement on the 5th day of June , 2012 in the Council Chambers of the City Hall at 7:00 PM and the Clerk shall give mailed and published notice of such hearing and improvement as required by law. MOTION seconded by Councilmember and adopted by the City Council at a regular meeting this 1 st day of May , 2012, with Councilmembers voting in favor of the resolution, and Councilmembers voting against, whereupon said resolution was declared passed. ATTEST: Michelle Hartner— Deputy City Clerk CITY OF ANDOVER Michael R. Gamache - Mayor i - q7 Dave Berkowitz From: Aaron Van Wechel [airon82496 @yahoo.com] Sent: Friday, April 13, 2012 8:44 AM To: Dave Berkowitz Subject: 173rd LN NW Paving Project Good Morning Dave, Hopefully this isn't too late to be of use for you. Just wanted to send you an email to let you know that we are in support of the paving project, as long as the city council is willing to do the 50% split. We aren't really in support of the project at the 100% assessed amount, since we don't see how just paving the road is going to add approximately $20,000 to the property value. We're not sure that it would even add $10,000 to the value, but we find that to be an acceptable price to pay for the paving of the road. We would like to see the road paved, even though the widening of the existing road will shrink our lot size somewhat. Aaron and Jessica Van Wechel 0 0 M r vU) o � M z 0w V) z 0 zz �a -U W >� 0> 0 z Q M � N m z^ o� IZ' M Q > LLI �X 0 LL m z 0 r 0 U LO 00 co ti t nq r W � N � = T �w0 E ? d N Q ~ d O Q. La cno� N O 1 a r ti T v 1 J Q W ,S 1. 1 2 y("l^ MI � v C� fl r Ivy M V \ I l O h i �1 v C� fl r Ivy M V \ I l h M May 2012 Feasibility Report 174th Avenue NW/ Heather Street NW / 173rd Lane NW Gravel Road Paving City Project No. 11 -47 Prepared by. Engineering Department City of Andover 1685 Crosstown Boulevard NW Andover, MN 55304 WT Y NDOVE • 1685 CROSSTOWN BOULEVARD N.W. • ANDOVER, MINNESOTA 55304 • (763) 755 -5100 FAX (763) 755 -8923 • WWW.ANDOVERMN.GOV May 1, 2012 Honorable Mayor and City Council City of Andover 1685 Crosstown Boulevard NW Andover, MN 55304 Re: 174th Avenue NW / Heather Street NW / 173rd Lane NW Street Improvements (City Project No. 11 -47) - Feasibility Report Dear Mayor and City Council: With your authorization, we are pleased to submit this feasibility report addressing the proposed project costs and estimated assessments for the 174th Avenue NW / Heather Street NW / 173rd Lane NW Street Improvements (City Project 11 -47). In 2011 the City Council revised the policy on cost sharing for gravel road paving from assessing 100% of the total project costs to the benefiting properties, to a potential 50150 cost sharing split between the City and benefiting properties. A petition has been submitted by the neighborhood to explore paving the gravel roads. A neighborhood informational meeting was held on April 3, 2012 to discuss the potential project, answer questions, and receive comments from the residents impacted by this potential project. The total estimated cost to pave the existing gravel roadways is $304,260.00. This estimated cost includes construction costs, contingencies, and indirect costs. The proposed project depending on City Council direction would be funded 100% by the property owners or through the City's Road and Bridge Fund (50 %) and special assessments (50 %) based on requirements set forth in the City's Assessment Manual (Policies and Procedures Guide). If 50150 split the City's share of the project costs is estimated at $152,130.00. The total estimated assessment amount is $152,130.00. The estimated assessment rate per unit is $9,510.00. If 100% assessed the assessment rate per unit would be $19,020.00. We recommend that the City Council review this report and, if acceptable, proceed with project implementation as directed by the City Council. Sincerely, City of Andover Engineering Department David D. Berkowitz, P.E. Director of Public Works /City Engineer FEASIBILITY REPORT 174" AVENUE NW / HEATHER STREET NW / 173`d LANE NW STREET IMPROVEMENTS CITY PROJECT NO. 11 -47 CITY OF ANDOVER, MINNESOTA I hereby certify that this Feasibility Report was prepared by me or under my direct supervision and that I am a duly Licensed Professional Engineer under the laws of the State of Minnesota. David D. Berkowitz, P.E. Date License No. 26757 174" AVENUE NW / HEATHER STREET NW / 173`d LANE NW STREET IMPROVEMENTS TABLE OF CONTENTS Overview Page No 1.0 INTRODUCTION 2.0 PROJECT HISTORY 3.0 IMPROVEMENTS 4.0 RIGHT -OF -WAY / EASEMENT 5.0 PERMITS 6.0 ESTIMATED PROJECT COSTS 7.0 FUNDING/ ASSESSMENTS 8.0 PROPOSED PROJECT SCHEDULE 9.0 CONCLUSIONS & RECOMMENDATIONS APPENDIX Exhibit 1: Project Location Map Exhibit 2: Neighborhood Petition Exhibit 3: Preliminary Cost Estimate Exhibit 4: Preliminary Assessment Worksheet Exhibit 5: Proposed List of Assessed Properties 1 1 2 2 3 3 3 4 5 174" AVENUE NW / HEATHER STREET NW / 173rd LANE NW STREET IMPROVEMENTS CITY PROJECT 11 -47 1.0 INTRODUCTION At the March 1, 2011 City Council meeting, the City Council revised a policy on funding road improvements for existing gravel roadways. The policy is included in the "Assessment Manual - Policies and Procedures Guide ". The policy allows for up to a 50% cost participation by the City if the project is initiated by a neighborhood petition signed by all affected properties. Should the City Council decide to initiate the project by a 4/5 council vote, all benefitting properties shall be assessed 50% of the total improvement costs. For a project initiated by petition, the City Council uses the following criteria to determine the cost sharing percentage the City will agree to: • Role street serves to the surrounding area/community • Budget impact to the Road and Bridge Fund • No more than one mile of improvement for any given year • Other similar projects planned in the general vicinity of such project for that construction season Since this policy was revised, the existing neighborhood in this location has submitted a petition from a majority of the affected properties to study the feasibility of paving their existing gravel roadways. A Project Location Map is attached in the Appendix as Exhibit 1. 2.0 PROJECT HISTORY Since the gravel road paving assessment policy was revised, a petition was received from the neighborhood fronting the existing gravel roads on 174 "' Avenue NW, Heather Street NW, and 173`d Lane NW. The petition was accepted by the City Council at the January 3, 2012 City Council meeting. The petition was signed by ten of the sixteen affected properties in the neighborhood, all in favor of the improvements if the costs were determined to be feasible. There are six properties that did not sign the petition or were unavailable. There were no signatures from the affected residents objecting to the project. A neighborhood meeting was held on April 3, 2012 to discuss the petition, estimated costs for the improvements, answer questions, and provide a potential project schedule moving forward. A copy of the neighborhood petition is included in the Appendix as Exhibit 2. 3.0 IMPROVEMENTS The existing gravel roadways in this area are approximately 18' wide. Drainage in the neighborhood flows down the gravel roadway to existing low areas where the water ponds. There are no existing ditches or curb and gutter in this neighborhood. There are steep banks and trees / vegetation adjacent to the roadway in several locations. Proposed improvements would include widening the roadway corridor to have a 22' wide paved surface, plus B612 concrete curb and gutter on the vast majority of the area (25.33' wide from back of curb to back of curb). For emergency access and a minimum allowed paved drive lane of 11', a 22' wide paved surface is recommended in neighborhoods. The proposed width of 25.33' back to back is the minimum acceptable width for improvements to existing City streets. This width balances the necessity for a navigable surface while also minimizing the widening in the neighborhood and associated costs. A standard street section in a rural setting in the City is typically 26.66' bib (reconstruction areas) or 31' b/b (new construction). The proposed improvements would consist of widening the roadway corridor approximately 7.33' along the entire project, or a little under four feet on each side of roadway. A five -foot wide boulevard area would also be graded and cleared to allow for snow storage, signage, and private utilities. The roadway section would consist of 5" of aggregate base and 3" of bituminous, meeting the design standards for the City of Andover. The existing gravel on the roadway would be re -used as much as possible, but the majority of the proposed section would be imported. The roadway profile would likely rise by the section depth in most areas. There is the potential to use reclaimed aggregate base that could be stockpiled from other 2012 construction projects in the City, which could help save some costs over purchasing virgin aggregate base material. B612 concrete curb and gutter is proposed for the area. This type of curb and gutter is narrower than the standard surmountable curb and gutter used in other areas of the City, which will help minimize the impacts to the boulevards. Drainage would be handled via the proposed curb and gutter, and would flow to existing low points. Curb and gutter would result in less impact to the neighborhood than construction of standard ditch sections. An existing drainage problem at 3054 -1741h Avenue would be improved by doing some minor grading to allow water currently standing on or near this residents' driveway to flow to a lower ponding/wetland area south of the home. All disturbed areas would be restored with seed. 4.0 RIGHT -OF WAY / EASEMENT All work will take place within the existing right of way and drainage and utility easements. G 5.0 PERMITS The City of Andover Engineering Department will obtain any necessary permits for the project. Permits will be required from the Minnesota Pollution Control Agency (NPDES Storm Water Permit), the Anoka County Highway Department, and the Lower Rum River Watershed Management Organization. 6.0 ESTIMATED PROJECT COSTS The total estimated project cost is $304,260.00. This estimated cost includes construction costs, contingencies, and indirect costs. These costs are estimated based upon preliminary design. The final cost would be based upon final design, actual work completed by the contractor, and unit bid prices for the project. A detailed Preliminary Cost Estimate is included in the Appendix as Exhibit 3. 7.0 FUNDING / ASSESSMENTS The City has an approved policy for dealing with assessments for roadway improvement projects (Assessment Manual - Policies and Procedures Guide). The current policy states that improvements to existing gravel roads may be initiated by the City Council or upon petition of all property owners abutting the existing gravel road. If the City Council initiates the project to improve the existing gravel roads, all properties benefitting from said improvement shall be assessed for 50% of the total project costs. If improvements are initiated by neighborhood petition, the City Council will determine whether the City will participate in a 50% cost share of the project with the neighborhood. Said determination shall be based upon consideration of the following: • Role street serves to the surrounding area/community. • Budget impact to the Road & Bridge Fund. • No more than one mile of improvement for any given year. • Other similar projects are planned in the general vicinity of such project for that construction season. At this point for the project to move forward, based upon current policy and the lack of a petition signed by all affected residents in the neighborhood, the City Council would need to initiate the project. This would require a 4/5 City Council vote at the time of the public hearing with the City Council identifying the cost split. Should the project proceed, it is proposed to be funded by 100% special assessment or combination of special assessments and City funds. For projects that include special assessments, the City is required to follow the process outlined in Minnesota Statutes Chapter 429. The Andover Assessment manual lists four methods of assessments. They are: area, unit, front footage (short side) and variable costs. For this project the per unit method would be used to assess each property for their individual benefit. A unit is defined as a parcel or lot that cannot be further subdivided. If an existing lot can be subdivided into two or more buildable lots fronting the improvements, the total number of buildable lots is used to determine the estimated assessment amounts. To calculate the estimated assessment rate per unit, fifty - percent (50 %) of the total project costs would be divided by the number of existing or potentially buildable parcels in the area. There are a total of 16 existing units /parcels fronting along the proposed improvements that are proposed to be assessed with this project (none can subdivide based upon current zoning requirements). The total estimated assessment amount is $152,130.00. The estimated assessment rate is $9,510.00 / unit' The remaining fifty - percent (50 %) of the total project costs are proposed to be funded through the City's Road and Bridge Fund as designated by the City Council. The City costs are estimated at $152,130.00 for the proposed improvements. If the City Council does not initiate the project than the assessment rate is $19,020.00 /unit A detailed Preliminary Assessment Worksheet and a proposed list of assessed properties are included in the Appendix as Exhibits 4 and 5. 8.0 PROPOSED PROJECT SCHEDULE If the project is initiated by the City Council, the proposed project schedule would be as follows: City Council received petition / ordered feasibility report City Council receives feasibility report / Orders Public Hearing City Council holds Public Hearing / Authorize plans and specs City Council approves plans and specifications and authorizes Advertisement for Bids Advertise in the Anoka Union and Quest CDN Receive bids City Council awards contract rd 1/3/12 5/1/12 6/5/12 8/21/12 8/24, 31, 9/7/12 9/14/12 9/18/12 Contractor begins construction 9/24/12 Project Substantial Completion (first lift of bituminous) 11/9/12 Project Final Completion (final bituminous lift, restoration) spring 2013 The actual project construction and completion dates could vary depending upon weather and bidding climate. Due to the late timeframe associated with this project, there is the potential that only a portion of the project may be completed in 2012. The goal would be to get the first lift of bituminous paved by the end of the construction season. If satisfactory bids are not received in late summer, the project could be re -bid early in the spring of 2013 with construction taking place in 2013. Once the project was been completed, actual quantities would be determined and an assessment worksheet would be prepared. The City Council would then declare costs and order the assessment roll. The Council would then receive the assessment roll and order a public hearing, referred to as the "Assessment Hearing ". At the Assessment Hearing the assessment rates per unit would be officially approved based upon actual costs. Prior to Assessment Hearing, options for payment of the assessments would be explained to the affected parties, which include: 1. Payment in full, interest free, within 30 days of the Assessment Hearing. 2. Have assessment placed on tax roll and spread out over 10 years at an interest rate to be approved by the City Council. Assessment paid with property tax payments. 9.0 CONCLUSIONS & RECOMMENDATIONS 9.1 Conclusions As a result of this study, we conclude that: 1. A petition has been submitted, signed by ten of the sixteen affected properties adjacent to the gravel segments of roadway along 174th Avenue NW, Heather Street NW, and 173`a Lane NW. 2. As the petition has not been signed by all affected residents, per City policy, the City Council would need to initiate the project. Many of the residents have indicated that if the 50/50 cost split is not approved that the assessment cost of $19,020.00 would not be feasible. 3. Should the project be initiated, the total estimated cost for the proposed improvements for City Project 11 -47 is $304,260.00. These estimated costs include construction costs, contingencies and indirect costs. The estimated assessment per unit is S9,510.00 based upon a 50/50 cost split with the City. 4. The project is cost - effective and feasible from an engineering perspective. The City Council shall determine the economic feasibility. 9.2 Recommendations The City Council reviews this report in detail. The City Council at the public hearing shall determine if the project should be initiated, which would require a 4/5 council vote as the current petition is not signed by all affected residents. If the project is initiated, a public hearing shall be held by the City Council to determine if the project is to be carried forward as presented. APPENDIX Exhibit 1: Project Location Map Exhibit 2: Neighborhood Petition Exhibit 3: Preliminary Cost Estimate Exhibit 4: Preliminary Assessment Worksheet Exhibit 5: Proposed List of Assessed Properties A q T 1' O F DOVE 174th Ave. NW, Heather St. NW & 173rd Ln. NW - Gravel Road Paving ' -.. a. 3157 -* 3095 _ .$ �4 x,17510+ '+ •wt 32071) 17(% uv d •., � `3156 � .. 3092 A -AL 17441 •'�"��^' -' ,'.. f .7 n r17303 -+.+ ti sq k r -'* 2968 •^ Ev:/ i 17285 • x•4� - 0 ti' a `Ry 17247.1 ° •, `r- - 'A •Inn! .. - ..�- � R^^. - .31./ _ .r .. �} Y Legend Neighborhood Parcels ° 0 125 250 500 Feet 1685 CROSSTOWN BOULEVARD N.W. * ANDOVER, MINNESOTA 55304 9 (763) 755-5100 FAX (763) 755-8923 • WWW.ANDOVERMN.GOV Date: - M Andover City Council Members: We, the undersigned, owners of real property in the following described area: �''i a_ou�r�/ 14(f"(11M �w/ 193T-A Do hereby petition that said portion '4)9- L of 4��Y y ,, () CL it by construction and that the cost of said improvement be assessed against the benefiting property, as authorized by Chapter 429, Laws of Minnesota. SIGNATURE OF OWNER ADDRESS s- LEGAL DESCRIPTION YES NO This petition was circulated by: Z, K i i/ Address: G.'DATAI TAFFT.�,OtIDAA'FOR.1,15'neigbbOr .cd petftimdoc E-)(*l 1 JR jr 17 -�WLA j 'j, 44- IN' U� 17 -7) (31j-j This petition was circulated by: Z, K i i/ Address: G.'DATAI TAFFT.�,OtIDAA'FOR.1,15'neigbbOr .cd petftimdoc E-)(*l 1 JR jr 17 Heather Street / 173rd Lane / 174th Avenue Street Improvements Feasibility Cost Estimate STREETS ;O - 1 Mobilization LS 1 $7,000.00 $7,000.00 2 Traffic Control LS 1 $1,750.00 $1,750.00 3 Sawcut & Remove Bituminous Pavement SY 130 $5.00 $650.00 4 Tree Clearing / Grubbing LS 1 $2,000.00 $2,000.00 5 Remove /Saiva a /Install Mailbox Each 16 $80.00 $1,280.00 6 Fine Grade & Reshape Sub rade STA. 29 $175.00 $5,075.00 7 Common Excavation (LV) - Curb CY 670 $7.50 $5,025.00 8 Common Excavation (LV) - Ditch CY 110 $9.00 $990.00 9 Common Excavation (LV) - Pond CY 410 $8.00 $3,280.00 10 Sub grade Excavation (LV) CY 300 $7.50 $2,250.00 11 Select Topsoil Borrow - Pulverized (LV) CY 500 $14.00 $7,000.00 12 Haul & Place Agg. Base Class 7 (LV) CY 1,580 $10.00 $15,800.00 13 Bituminous Wear Course TN 1,430 $72.00 $102,960.00 14 Bituminous Driveway Patch TN 56 $95.00 $5,320.00 15 Bituminous Tack Coat Gal 360 $3.00 $1,080.00 16 B612 Concrete Curb and Gutter LF 4,300 $8.50 $36,550.00 17 Concrete S illwa y Each 8 $850.00 $6,800.00 18 Silt Fence LF 600 $2.75 $1,650.00 19 Ditch Check, Type Straw Bioroll LF 150 $3.00 $450.00 20 Ri Ra , Class III CY 10 $80.00 $800.00 rosion ontro an et at. w ee Estimated Construction Cost $211,485.00 15% Contingency $31,722.75 Total Estimated Street Reconstruction 243,210.00 SUMMARY OF PROJECT COSTS Streets Estimated Construction Cost $243,210.00 Indirect Costs $ 61,050.00 TOTAL ESTIMATED PROJECT COST $304,260.00 Note: Totals are rounded to the nearest $10 for simplicity. Actual amounts will be used for the final assessments calculations. Excavate 6' wide x 4" deep along each edge entire width to get curb in. Blade 2" of existing gravel over excavated area to set up base for curb. Construct curb, contractor then to haul in 5" of reclaim from stockpile and pave. In general, raising roadway 6" from existing (8" section, minus cut of 2" existing gravel that is winged out). At lower areas may need to excavate existing roadway 6" to better match yards. Preliminary Cost Estimate Exhibit 3 PRELIMINARY ANDOVER ASSESSMENT WORKSHEET Project Name: Heather Street/173rd Lane/ Project No.: 11 -47 174th Avenue Feasibility Report Date: 5/1/12 Amount: $ 243,210.00 Contract Award Date: Amount: $ - Estimated Construction Cost Amount: $ 243,210.00 Estimated Expenses Engineering (Includes Surveying, Inspection & Staking): $ 36,500.00 Consulting Costs $ 1,000.00 Aerial Mapping (1% of street) $ 2,430.00 Drainage Plan (0.3% of street/storm) $ 730.00 Administration (3 %) $ 7,300.00 Assessing (1 %) $ 2,430.00 Bonding (0.5 %) $ - Recording Fees / Legal & Easement $ - Advertising $ 500.00 Permit and Review Fees $ 1,500.00 Street Signs (Materials and Labor) $ 1,500.00 Material Testing $ 1,500.00 Construction Interest $ 2,500.00 City Costs $ 3,160.00 Total Estimated Expenses $ 61,050.00 Expenses Multiplier 25.10% Total Estimated Project Cost Amount: $ 304,260.00 Feasibility Assessment Rate Per Unit (100 %) $ 304,260.00 / 16 Units= $ 19,020.00 Feasibility Assessment Rate Per Unit (50 %) $ 152,130.00 / 16 Units= $ 9,510.00 Total Estimated Assessments (50 %) Total Estimated City Costs (50 %) $152,130.00 $152,130.00 Preliminary Assessment Worksheet Exhibit 4 CC Cd G cQ C N d L z Z d C m J L Cl) h z Z N L d S R d 2 z Z m c C Q L V h r- I L r C1 U '8 d C oa T T W Y +1s Proposed List of Assessed Properties Exhibit 5 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 y o 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 o N LO 0 l(i t0 LO IO t0 IO 0� N O O N N N W W W W O W O) fA O O) O m m fA Cn tT N Q fA EA fH 64 fA 69 fA H3 EA EA EA 64 fA EA 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 O O O O O y 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 c N N N N N N N N N N N N N N N N N N 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 o v of m m of of rn rn of rn of rn m rn rn rn rn a N C 7 U 0 MMMmmmminMlnMMmmmM 0 0 0 0 0 0 In o In 0 0 0 0 0 0 L y �n M LLi In lA In In In In In In uJ In In Z ICJ o Z In m In LO In LO In In Lr) In LL) In Z Z Z Z Z Z Z Z 2 Z Z Z Z Z Z O N N .. ` ` •U 'U N 0 N 0 m 0 m 0 m 0 N 0 N 0 C O O C N O N O N O N O pJ N N O uvvavvv �Ly v LL v-ova Ev C QaaQa C C C C C Qav�QinQQaQ�¢ C C C C C C m C D Z Z3: Z Z Z Z Z Z Z Z��� Z� Z Z Z Z v> �J >> L N > N > m N > Q Q J a Q Q Q Q Q y t O L L L L L L m C m N r n r r N N rr , tI>o MO � to � V � V O (J N (O an (p O (vE p M 00 o I>n r M M Cl) M M h M M M M M M M M � L N U v C O CD c 0 > o N CD �J 3 vi U m Y Y W N C N >� > O N N m 0 C O' m C F 0 d F O E N C CD m N `m E S L `m Y E Y°¢ Ip o= W w 06 3 U D g m Q m o 0 2 N ej$ O W c c 06 m.6 m U m 'O 0 C N C C C o o W m ` c c U' U 22 m2 ca 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 O M O M O M O O O O O O M O O O O O M O V O 4 Q M M m C? M M M M m M M M C? M M m V 7 V It d' V V d' 7 7 V' V V C V V EL N N N N N N N N N N N N N N N N N N N N N N N N N N N N N N N N M M M m M M M M M M M M M M M M J V 414 4 V a V V 7 7 4 7 V 4 V 7 Q O o 0 0 0 0 0 0 0 0 0 0 0 0 0 0 O Proposed List of Assessed Properties Exhibit 5 LNDO 1685 CROSSTOWN BOULEVARD N.W. • ANDOVER, MINNESOTA 55304 • (763) 755 -5100 FAX (763) 755 -8923 • WWW.ANDOVERMN.GOV TO: Mayor and Council Members CC: Jim Dickinson, City Administrato FROM: David D. Berkowitz, Director of Public Works /City Engineer SUBJECT: Accept Feasibility Report/Waive Public Hearing/11 -10 /South Coon Creek Drive NW Reconstruction/WM - Engineering DATE: May 1, 2012 INTRODUCTION This item is in regards to approving the resolution accepting the feasibility report and waiving public hearing for Project 11 -10, South Coon Creek Drive NW Reconstruction for water main improvements. DISCUSSION As part of the South Coon Creek Drive NW reconstruction project property owners were given the option to petition for the construction of a water service to their property. The City Council accepted the attached petitions at the March 20, 2012 regular scheduled City Council meeting. Feasibility Report The cost to install the water service to each property is estimated at $1,500 per service. The cost will vary for each property but will not exceed that amount. The water lateral, water area and water connection fee will be assessed at the time the property owner petitions to hook up the service. BUDGET IMPACT The $1,500 charge will be assessed to each property as part of the South Coon Creek Drive NW reconstruction project. ACTION REQUIRED It is recommended to approve the resolution accepting the feasibility report and waiving the public hearing for Project 11 -10, South Coon Creek Drive NW Reconstruction for water main improvements. Respectfully submitted, David D. Berkowitz Attachments: Resolution & Petitions/Waivers CITY OF ANDOVER COUNTY OF ANOKA STATE OF MINNESOTA RES. NO. MOTION by Councilmember to adopt the following: A RESOLUTION ACCEPTING FEASIBILITY STUDY AND WAIVING PUBLIC HEARING FOR THE IMPROVEMENT OF WATER MAIN FOR PROJECT NO. 11 -10, SOUTH COON CREEK DRIVE NW RECONSTRUCTION. WHEREAS, the City Council did on the 20th day of March , 2012 order the preparation of a feasibility study for the improvement; and WHEREAS, such feasibility study was prepared by City Engineer and presented to the Council on the 1St day of May 2012 ; and WHEREAS, the property owners have waived the right to a Public Hearing; and WHEREAS, the City Council has reviewed the feasibility study and declares the improvement feasible, for an estimated cost of $ 1,500.00 per lot . NOW, THEREFORE, BE IT RESOLVED by the City Council of the City of Andover to hereby receive the feasibility report with an estimated cost per lot of $ 1,500.00 , waives the Public Hearing and order improvements. MOTION seconded by Councilmember City Council at a regular meeting this 1St Councilmembers in favor of the resolution, and Councilmembers and adopted by the day of May , 2012 , with voting voting against, whereupon said resolution was declared passed. ATTEST: Michelle Hartner — Deputy City Clerk CITY OF ANDOVER Michael R. Gamache - Mayor * South Coon Creek Drive Reconstruction City Project #11 -10 Date Andover City Engineer 1685 Crosstown Boulevard NW Andover, MN 55304 Re: Municipal Improvements Dear City Engineer: I/we do hereby petition for improvements of a water main service stub with the costs of the improvement to be assessed against my /our benefiting property. Said petition is unanimous and the public hearing may be waived. If I /we elect not to pay the assessment off before certification to the County, we would like it assessed over a 10 -year period. Sincerely, 4V Property Owner e� � A) y,3 X "vt,\- Address'a City, State, Zip Phone (Home) X63 - 5 .- -7ggy(N) (Work) J�,pie cc) (Lti6lar..c�nsa -7 to-6 _3 _ S`013Lf ZUJ) 7 J HAEngineering \City Projects \Open City Projects \11 -10 S Coon Creek Dr NW Reconstruction\Word Documents \Correspondance\PETITION SINGLE.doc * South Coon Creek Drive Reconstruction City Project #11 -10 Date �' �& ff Andover City Engineer 1685 Crosstown Boulevard NW Andover, MN 55304 Re: Municipal Improvements Dear City Engineer: RECEIVED FEB 2 1 2012 CITY OF ANDOVER I /we do hereby petition for improvements of a water main service stub with the costs of the improvement to be assessed against my /our benefiting property. Said petition is unanimous and the public hearing may be waived. If I /we elect not to pay the assessment off before certification to the County, we would like it assessed over a 10 -year period. Sincerely, le Property Owner Address City, State, Zip Phone (Home) (Work) z G� �Cj�vTbat /C �:Z`d�1h X03 HAEngineering \City Projects \Open City Projects\11 -10 S Coon Creek Dr NW Reconstruction \Word Documents \Correspondance \PETITION SINGLE.doc * South Coon Creek Drive Reconstruction City Project #11 -10 Date 12- 0- t v Andover City Engineer 1685 Crosstown Boulevard NW Andover, MN 55304 Re: Municipal Improvements Dear City Engineer: Uwe do hereby petition for improvements of a water main service stub with the costs of the improvement to be assessed against my /our benefiting property. Said petition is unanimous and the public hearing may be waived. If Uwe elect not to pay the assessment off before certification to the County, we would like it assessed over a 10 -year period. Sincerely, Property Owner YCAYLL- P200SW Address 252_,- S. CGO9N CY kCV-- W-AVe, City, State, Zip Phone (Home) Awoovvia.- 11Knt 1 5 93o-4 (Work) 741 KkEngineering \City Projects \Open City Projects \11 -10 S Coon Creek Dr NW Reconstruction \Word Documents\Correspondance \PETITION SINGI-E.doc * South Coon Creek Drive Reconstruction City Project #11 -10 Date Andover City Engineer 1685 Crosstown Boulevard NW Andover, MN 55304 Re: Municipal Improvements Dear City Engineer: I /we do hereby petition for improvements of a wate main s the costs of the improvement to be assessed against my o en pe. Said petition is unanimous and the public hearing may be waived. If I /we elect not to pay the assessment off before certification to the County, we would like it assessed over a 10 -year period. Sincerely, 'ToVY\ &-w'A Lt � (f Ie Ai( ['�"J z � q$ s . c,(3o e. C��:L ►� V �w Property Ow er �'f ` Nk N Address City, State, Zip Phone (Home) (01Z-310- (P20 2- - br-vi cc! l (Work) `I63 - 57b. (I ILA b,6 C'G~C LA)Orl/-- HAEngineering\City Projects\Open City Projects \11 -10 S Coon Creek Dr NW Reconstruction\Word Documents \Correspondance \PETITION SINGLE.doc * South Coon Creek Drive Reconstruction City Project #11 -10 Date ;2-11 • Andover City Engineer 1685 Crosstown Boulevard NW Andover, MN 55304 Re: Municipal Improvements Dear City Engineer: RECEIVED FEB Z 1 2012 CITY OF ANDOVER I /we do hereby petition for improvements of a water main service stub with the costs of the improvement to be assessed against my /our benefiting property. Said petition is unanimous and the public hearing may be waived. If I /we elect not to pay the assessment off before certification to the County, we would like it assessed over a 10 -year period. Sincerely, Property Owner Z-a lCe J All' d Address A190 90u.7-7.1 2-0'5)'4 :i Kiz- �✓� City, State, Zip Aq- etc, /'Y?W .5-7-T3o4- Phone (Home) J(, 3- 7673-IJ -4 O (Work) HAEngineering \City Projects \Open City Projects \11 -10 S Coon Creek Dr NW Reconstruction \Word Documents \Correspondance \PETITION SINGLE.doc * South Coon Creek Drive Reconstruction City Project #11 -10 Date 3-13-1A Andover City Engineer 1685 Crosstown Boulevard NW Andover, MN 55304 Re: Municipal Improvements Dear City Engineer: Uwe do hereby petition for improvements of a water main service stub with the costs of the improvement to be assessed against my /our benefiting property. Said petition is unanimous and the public hearing may be waived. If I /we elect not to pay the assessment off before certification to the County, we would like it assessed over a 10 -year period. Sincerely, Property Owner J e f¢ a C U Address a. S a y s 0V+k Cooti (�V'Z-ek D•r. City, State, Zip YAK * & c+)t-r j M ►%J 1 S 93 o Phone (Home) ("i 4,a) 56 r- 8 g �3 (Work) K \Engineering\City Projects \0pen City Projects \11 -10 S Coon Creek Dr NW Reconstruction\Word Documents \Correspondance \PETITION SINGLE.doc * South Coon Creek Drive Reconstruction City Project #11 -10 Date J— at) — / L Andover City Engineer 1685 Crosstown Boulevard NW Andover, MN 55304 Re: Municipal Improvements Dear City Engineer: I/we do hereby petition for improvements of a water main service stub with the costs of the improvement to be assessed against my /our benefiting property. Said petition is unanimous and the public hearing may be waived. If I /we elect not to pay the assessment off before certification to the County, we would like. it assessed over a 10 -year period. Sin rely, Property Owner �l ( fiOsal'e' itsemai'IC Address �C/ City, State, Zip �Q ff/?" z; Phone (Home) (Work) HAEngineering \City Projects \Open City Projects\11 -10 S Coon Creek Dr NW Reconstruction \Word Documents \Correspondance \PETITION SINGLE.doc Mar 071208:16a PSG South Coon Creek Drive Reconstruction City Project #11 -10 Date 3- _ Andover City Engineer 1685 Crosstown Boulevard NW Andover, MN 55304 Re: Municipal Improvements Dear City Engineer: 7637556777 p.1 I/we do hereby petition for improvements of a water main service stub with the costs of the improvement to be assessed against my /our benefiting property. Said petition is unanimous and the public hearing may be waived. If I /we elect not to pay the assessment off before certification to the County, we would like it assessed over a 10 -year period. Sitcerely, Property Owner Address City, State, Zip Phone (Home) (Work) 3 6.6 0 34 r `7(o '� - 7(o --? - -? 5 a a H:\Engineering \City Projects \Open City Projects\11 -10 S Coon Creek DrNw Reconstructiontword Documents \CorrespondancelPETITION SINGLE.doc * South Coon Creek Drive Reconstruction City Project #11 -10 Date .1—/7 - -/2, RECEIVED FEB 2 1 2012 Andover City Engineer 1685 Crosstown Boulevard NW CITY OF ANDOVER Andover, MN 55304 Re: Municipal Improvements Dear City Engineer: I /we do hereby petition for improvements of a water main service stub with the costs of the improvement to be assessed against my /our benefiting property. Said petition is unanimous and the public hearing may be waived. If I /we elect not to pay the assessment off before certification to the County, we would like it assessed over a 10 -year period. Sincerely, Property Owner Address City, State, Zip Phone (Home) (Work) Ile I/e'r- HAEngineering \City Projects \Open City Projects \11 -10 S Coon Creek Dr NW ReconstructionMord Documents \Correspondance \PETITION SINGLE.doc w * South Coon Creek Drive Reconstruction City Project #11 -10 Date 3 .S' I -), Andover City Engineer 1685 Crosstown Boulevard NW Andover, MN 55304 Re: Municipal Improvements Dear City Engineer: I /we do hereby petition for improvements of a water main service stub with the costs of the improvement to be assessed against my /our benefiting property. Said petition is unanimous and the public hearing may be waived. If I /we elect not to pay the assessment off before certification to the County, we would like it assessed over a 10 -year period. Sincerely, � +� r Property Owner ' ar I `Z U16 4 �► ���T>1 i' ` � � Address jgli, q WtId City, State, Zip 6 V .2. r� J"C) >V $S 3 0 Phone (Home) (Work) P1b#- Z9- 32- Zy- yl -OoD3 HAEngineering \City Projects \Open City Projects \11 -10 S Coon Creek Dr NW Reconstruction\Word Documents \Correspondance \PETITION SINGLE.doc • 7' NDOVE 1685 CROSSTOWN BOULEVARD N.W. • ANDOVER, MINNESOTA 55304 • (763) 755 -5100 FAX (763) 755 -8923 • WWW.ANDOVERMN.GOV TO: Mayor and Council Members CC: Jim Dickinson, City Administrat FROM: David D. Berkowitz, Director of Public orks /City Engineer SUBJECT: Approve Easements /11 -10 /South Coon Creek Drive NW Reconstruction - Engineering DATE: May 1, 2012 INTRODUCTION The City Council is requested to approve the attached easements for Project 11 -10, South Coon Creek Drive NW Reconstruction. DISCUSSION For the reconstruction of South Coon Creek Drive NW permanent and temporary easements are needed to meet the goals and design standards that have been determined for this project. Staff has worked with the property owners to secure the needed easements and continue to work with additional property owners to secure the final needed easements before construction begins. Attached are the easement documents for approval. BUDGET IMPACT The temporary easements will be at no cost to the City. The permanent easements have been negotiated at $1.00 per square foot for a value of $797.00. The cost will be funded through the project budget. ACTION REQUIRED The City Council is requested to approve the attached easements for Project 11 -10, South Coon Creek Drive NW Reconstruction. Respectfully submitted, David D. Berkowitz Attachments: Easement Documents `/ PERMANENT ROADWAY, DRAINAGE AND UTILITY EASEMENT/TEMPORARY SLOPE AND CONSTRUCTION EASEMENT KNOW ALL MEN BY THESE PRESENT, for valuable consideration, Terry Kleeberger and Maria Kleeberger, husband and wife as joint tenants,(collectively referred to herein as "Grantor "), hereby grant, sell, and convey to the CITY OF ANDOVER, a Minnesota municipal corporation, Grantee, a permanent easement for roadway, drainage and utility purposes, along with a temporary easement for slope and construction purposes, including, without limitation, the construction, maintenance, repair and replacement thereof, and uses incident thereto, in, under and upon the real property, in Anoka County, Minnesota described as follows: That part of Government Lot 4, Section .29, Township 32,_ Range 24, Anoka County, Minnesota, described as follows: Commencing at the Southeast corner of said Government Lot 4, thence Northerly along the East line of said Government Lot 4 a distance of 598.25 feet to apoint lying and being in the approximate centerline of a town road known as South Coon Creek Drive (Formerly Andover Road), thence Northwesterly along the centerline of said road at an internal angle of 132 degrees 05 minutes a distance of 629.7 feet to the actual point of beginning; thence continuing along said road a distance of 77.80 feet; thence Northeasterly and parallel with the centerline of Round Lake Boulevard a distance of 199.56 feet; thence Southeasterly at right angles a distance of 77.80 feet, thence Southwesterly at right angles and parallel with the centerline of Round Lake Boulevard a distance of 199.32 feet, more or less, to the actual point of beginning, Anoka County, Minnesota. Said easements are described as follows: See attached EXHIBIT A Further, the right -is. hereby granted to the Grantee to remove or otherwise dispose of all earth or other material excavated from said easement areas, as the Grantee may find necessary and to remove trees, brush, undergrowth and other obstructions interfering with the location, construction and maintenance of the easements. AD 112 - Easement - 293224420065.doex Grantors covenant that they are the owners of the easement area and have the right, title, and capacity to grant the easement described above. TO HAVE AND TO HOLD THE SAME, together with all the hereditaments and appurtenances thereunto belonging or in anyway appertaining to the said Grantee, forever, for said drainage and utility purposes. IN WITNESS WHEREOF, the parties have hereunto set their hands this 3_day of &ri ( 2012. Total Consideration: J74 7.Oy State Deed Tax Due: STATE OF MINNESOTA ) ) ss. COUNTY OF ANOKA ) By:� /�' Terry Kle ber er io . as Kleebe r BRENDA L FILDES Notary Public Minnesota ion Ex !res ,ia�.;;a 31, 2016 The foregoing instrument was acknowledged before me this 3 day of A '/ , 2012, by Terry Kleenberger and Maria Kleenberger, husband and wife as joint tenants, who has caused these presents to be executed or have set their hand the day and ear first above written. OFFICIAL SEAL Notary blic KATHY M FERGUSON / y NOTARY PUBLIC, STATE OF ILLINOIS MY COMMISSION EXPIRES 6/i612014 NOTICE IS HEREBY GIVEN that the City of Andover, County of Anoka, State of Minnesota, has accepted on 2012, the above described easement in this document. Dated: , 2012. THIS INSTRUMENT WAS DRAFTED BY: Hakanson Anderson 3601 Thurston Avenue Anoka, MN 55303 Telephone: 763-427-5860 AD 112 - Easement - 293224420065.docx CITY OF ANDOVER EXHIBIT A A permanent easement for roadway, drainage and utility purposes over under and across that part of the above described property lying northeasterly of "Line C" and southwesterly of a line 53.00 feet northeasterly of and parallel with the southwesterly line of said property. "Line C" is described as commencing at the intersection of South Coon Creek Drive and Round Lake Boulevard (CSAH No. 9); thence southeasterly along the centerline of South Coon Creek Drive and the southwesterly line of the property and its extension a distance of 217.80 feet; thence northeasterly at right angles a distance of 42.00 feet to the point of beginning of said "Line C "; thence northwesterly to a point on the centerline of Round Lake Boulevard of distant 46.00 feet northeasterly from the intersection of South Coon Creek Drive and Round Lake Boulevard and said "Line C" there terminating. Together with a temporary easement for construction and slope purposes over, under and across the above property which lies southwesterly of a line 58.00 feet northeasterly of and parallel with the southwesterly line of said property and which lies northeasterly of a line 53.00 feet northeasterly of and parallel with said southeasterly line. Said temporary easement to expire 7/0 i 3 AD 112 - EXHIBIT A - 293224420065 s 9 N_ 0 a s °a m 8 gg N a is N� N Z O p Zy Easement Exhibit hP `1'� ^PP l /h 0. \ . PERMANENT EASEMENT DESCRIP71ON P SfP„/ L That part of Government Lot 4, Section 29, Township 32, Range 24, Anoka County, Minnesota, described os follows: Commencing at the Southeast corner of said Government Lot 4, thence Northerly along the East line of said Government Lot 4 a distance of 598.25 feet to a point lying and being in the approximate centerline of a town rood known as South Coon Creek Drive (Formerly Andover Road), thence Northwesterly along the centerline of said rood at an internal angle of 132 degrees 05 minutes a distance of 629.7 feet to the actual point of beginning; thence continuing along said road a distance of 77.60 feet; thence Northeasterly and parallel with the centerline of Round Lake Boulevard o distance of 199.55 feet; thence Southeasterly at right angles a distance of 77.80 feet, thence Southwesterly at right angles and parallel with the centerline of Round Lake Boulevard a distance of 199.32 feet, more or less, to the actual point of beginning, Anoka County, Minnesota. A permanent easement for roadway, drainage and utility purposes over under and across that part of the above described property lying northeasterly of 'Line C" and southwesterly of a line 53.00 feet northeasterly of and parallel with the southwesterly line of said property. 'Line C" is described as commencing at the Intersection of South Coon Creek Drive and Round Lake Boulevard (CSAH No. 9); thence southeasterly along the centerline of South Coon Creek Drive and the southwesterly line of the property and its extension a distance of 217.80 feet; thence northeasterly at right angles a distance of 42.00 feet to the point of beginning of said 'Line C'; thence northwesterly to a point on the centerline of Round Lake Boulevard of distant 46.00 feet northeasterly from the intersection of South Coon Creek Drive and Round Lake Boulevard and said 'Line C" there terminating. Area of Permanent Easement 797 sq. ft. = 0.018 acres Property Owner: Terry & Maria Kleeberger 3467 South Coon Creek Drive NW Andover MN 55304 PID No.: 29- 32 -24 -42 -0065 Denotes 1t l - - - - -- Easement Scale 1 ° =50' I hereby certify that this survey, plan or report was prepared by me or under my direct supervision and that I am a duly Professional Vinderson akan$on Licensed Land Surveyor under the lows of the State of Minnesota. � 03/07/12 cwa rss�n..� °na L° "e svN•gor. Chorles R. Christopherson, MN License No. 18420 Date �;� Th;`rt0 "�;"`' �' °" ""°fO10 ss�os Easement Exhibit SHEET for or Port of Government Lot 4 03/07/12 1 FLE ND. AD112 SHEETS i a N O a P T 8 N E $ 6Y O q .. O N� M1 t 1 X90 Temporary Slope /Construction Easement Exhibit SO 0 311611 ' S i ' c, CP i ois f o \\�•\�OP S`�rPP� X rf Gfh O sa \ • 6^1 r G 7P Sf y That port of Government Lot 4, Section 29, Township 32, Range 24, Anoka County, Minnesota, described as follows: Commencing at the Southeast corner of said Government Lot 4, thence Northerly along the East line of said Government Lot 4 a distance of 598.25 feet to a point lying and being in the approximate centerline of a town road known as South Coon Creek Drive (Formerly Andover Rood), thence Northwesterly along the centerline of said road at on internal angle of 132 degrees 05 minutes a distance of 629.7 feet to the actual point of beginning; thence continuing along said rood a distance of 77.BD feet; thence Northeasterly and parallel with the centerline of Round Lake Boulevard a distance of 199.56 feet; thence Southeasterly at right angles o distance of 77.80 feet, thence Southwesterly at right angles and parallel with the centerline of Round Lake Boulevard o distance of 199.32 feet, more or less, to the actual point of beginning, Anoka County, Minnesota. A temporary easement for construction and slope purposes over, under and across the above property which lies southwesterly of a line 58.00 feet northeasterly of and parallel with the southwesterly line of said property and which lies northeasterly of a line 53.00 feet northeasterly of and parallel with said southeasterly line. Area of Temporary Easement 388 sq. ft. = 0.009 acres Property Owner: Terry & Maria Kleeberger 3467 South Coon Creek Drive NW Andover MN 55304 PID No.: 29- 32 -24 -42 -0065 --------- 1I i Denotes 1 Easement Scale 1" = 50' 1 hereby certify that this survey, plan or report was prepared by me or under my direct supervision and that I am a duly Professional Hakanson Licensed Land Surveyor under the lows of the State of Minnesota. IIIAnderson 03/07/12 cmi Enginsen and Wnd S.,,.,., MN License No. 18420 Dote 13eai moor ,w.., w,wm. w�mo ss3o3 ]63- 42] -ee6a r5x ]63-52] -0520 Temporary Slope /Construction Easement Exhibit -FEET for Port of Government Lot 4 1685 CROSSTOWN BOULEVARD N.W. • ANDOVER, MINNESOTA 55304 • (763) 755 -5100 FAX (763) 755 -8923 • WWW.ANDOVERMN.GOV TO: Mayor and Council Members CC: Jim Dickinson, City Administr FROM: David D. Berkowitz, Director of Pub ' Works /City Engineer SUBJECT: Approve No Parking Resolution/10- 27/Bunker Lake Blvd. NW (7`h Ave. NW to 38`h Ave.) - Engineering DATE: May 1, 2012 INTRODUCTION This item is in regard to approving a resolution designating no parking for Project 10 -27, Bunker Lake Boulevard NW (7`h Avenue NW to 38`h Avenue). DISCUSSION Bunker Lake Boulevard NW from 38`h Avenue NW to 7`h Avenue NW is scheduled for reconstruction beginning in 2012. The project will be bid this summer with construction activity beginning late summer to early fall. The majority of the construction will be in 2013 with the road being closed to through traffic during the 2013 construction season. This project includes the reconstruction of this segment of County Road 116 in the cities of Andover and Anoka to a four -lane divided roadway, construction of a separate pedestrian / bicycle trail along the north side and reconstruction of the intersection at 7`h Avenue; which will include a new traffic signal, center medians, and channelization. This road segment is a designated County State Aid Highway and state aid funds along with federal funds will be utilized to finance this project. With reconstruction of this roadway, State Aid requires that parking be restricted along this segment. When restricting parking along a County roadway, it is the County's policy to require the municipality in which the roadway is located to approve a No Parking resolution. ACTION REQUIRED The City Council is requested to approve the resolution designating no parking for Project 10 -27, Along Bunker Lake Boulevard NW within the City limits from Round Lake Boulevard NW to 7`h Avenue NW and along 7`h Avenue NW within the City limits from 41s` Avenue NW to 145`h Avenue NW. � vz (D Res)pectfullyssubmitted, !✓s David D. Berkowitz Attachments: Resolution & 's Location Map CITY OF ANDOVER COUNTY OF ANOKA STATE OF MINNESOTA RES. NO. A RESOLUTION ESTABLISHING PARKING RESTRICTIONS ON COUNTY STATE AID HIGHWAY 116 (BUNKER LAKE BOULEVARD) AND COUNTY STATE AID HIGHWAY 7 (7TH AVENUE) THIS RESOLUTION passed this 1St day of May, 2012, by the City of Andover, Minnesota, Anoka County, Minnesota. The Municipal Corporation shall hereinafter be called the "City'; and WHEREAS, the Anoka County Highway Department applied for and received Federal Funds for upgrading County State Aid Highway 116 (Bunker Lake Boulevard) and County State Aid Highway 7 (7th Avenue); and WHEREAS, the State will require that parking be restricted along these segments as part of the plan review process; and WHEREAS, when restricting parking along a County roadway, it is the County's policy to require the municipality in which the roadway is located to submit a No Parking resolution. NOW, THEREFORE, BE IT RESOLVED, that the City shall restrict parking of motor vehicles in the area described as: Along Bunker Lake Boulevard NW within the City limits from Round Lake Boulevard NW to 7th Avenue NW and along 7th Avenue NW within the City limits from 41St Avenue NW to 145th Avenue NW. Adopted by the City Council of the City of Andover this 16t day of May 2012. ATTEST: Michael R. Gamache - Mayor Michelle Hartner— Deputy City Clerk w F L�Fi ^ n.l r No Parking (Location Map) iE- 4 145THAVE . . Tr r _ " 143RD AVE V> mrr ii W. c) Project Extent `:r '_ Zp r COUNT,Y,RD,116 !� 1421:DL1 { f 3 AVE 41ST AVE (Anoka)�/t1WSST, VE„hA�ndx_ over r �r ' tea!' �:{ ��!` I ` 7 I !. � ` , � .•! r��)`I _I r . �a �. �ei.r� �, ir. r 'I 1�r1 I- r / 1 � 1�• , 'a•'i i F a -�•_> I .1,� -� 'L .� ���`Ir Project Extent `:r '_ Zp r ,y , , ` { No Parking Limits 3 City Limit r f I _ ' f BUNKER>LrAKEIBLVD 44' - '' tV ✓.�, a :� � �� il'- 0 2,000 T Fa 1� , s A C I T Y O F ND OVE 1685 CROSSTOWN BOULEVARD N.W. • ANDOVER, MINNESOTA 55304 • (763) 755 -5100 FAX (763) 755 -8923 • WWW.CI.ANDOVER.MN.US TO: Mayor and City Council CC: Jim Dickinson, City Administrator FROM: Michelle Hartner, Deputy City Clerk SUBJECT: Consider Approval /Extension of Liquor License /Beef O'Brady's DATE: May 1, 2012 INTRODUCTION Tony Zeece, of Beef O'Brady's, 15190 Bluebird Street has submitted a request for an extension of their liquor license. DISCUSSION Beef O'Brady's is planning to hold an outdoor event Saturday, June 23, 2012 and would like Council to approve an extension of their liquor license to include a portion of the parking lot in front of the patio area. Tom Roberts, Stonewood Properties, Inc. the owner of Clocktower Commons leasing to Beef O'Brady's has given approval for Beef O'Brady's to hold their outdoor event. The Sheriff's Office received one complaint during Beef O'Brady's 2011 event. ACTION REQUIRED Council is requested to consider the extension of liquor license request submitted by Beef O'Brady's for June 23, 2012. W Respectfully submitted, "1 ► 1 Michelle Hartner Deputy City Clerk Attach: Outdoor Event Application Email from Tom Roberts, Stonewood Properties, Inc. F s xe , 1685 CROSSTOWN BOULEVARD N.W.. ANDOVER, MINNESOTA 55304 a (763) 755 -5100 FAX (763) 755 -8923 • WWW.ANDOVERMN -GOV OUTDOOR EVENTS ARE PERMITTED ON WEEKENDS (FRIDAYS AND SATURDAYS) IN JUNE, JULY AND AUGUST. ESTABLISHMENTS ARE ALLOWED ONE EVENT WEEKEND PER CALENDAR YEAR. EVENT MUST END AT MIDNIGHT. Commercial Outdoor Event Annlication Name of Business Owner: IdIn'J -FcC e ec Name of Business: e e.� f G t g T a Address of Business: X5790 �C/6j%d Phone Number of Business: 2. Date(s) of Outdoor Event: 3. Time of (3- '1311- -d-7a ® &%23// z 0 4. Location of Tent and /or Band: S e e- & /lac 4,/ (Provide a sketch on the back of this form detailing where the tent, stage and /or band will be located on the property, indicating lot boundary lines and building locations.) Extension of Liquor License: Yes `° No 6. Please provide verification from your Insurance Company indicating your liability insurance provides coverage outside of the premise. Applicant of this application will comply with Andover City Code 5 -6, Noise Control. The business is required to provide security for the outdoor event. Dated: G% Z �[�2, 0xvAer's Sigia. to oe Approved: Denied: City Clerk Council action: Approved Denied Date: PROVIDE A SKETCH DETAILING WHERE THE TENT, STAGE AND /OR BAND WILL BE LOCATED ON THE PROPERTY, INDICATING LOT BOUNDARY LINES AND BUILDING LOCATIONS. -��' j I ! wt P-- � lrG7 "-a , NT Michelle Hartner From: _._.... v _... -- Sent: Friday, April 13, 2012 8:06 AM To: Tony and Matt Zeece Cc: Michelle Hartner Subject: Re: Outdoor Event The outdoor event is fine with me. Good Luck Tom Roberts Stonewood Properties, Inc 11015 Bell Oaks Estate Rd Eden Prairie, MN 55347 952 - 934 -1423 office 952 - 934 -4697 fax From: "Tony and Matt Zeece " To: "Tom Roberts" --`� Cc: "Michelle Hartner" <MHartner(aD-ci.andover.mn.us> Sent: Thursday, April 12, 2012 3:50:40 PM Subject: Fw: Outdoor Event Tom, Can you please indicate your approval of our Andover Football Association tent party to be held on June 23rd, 2012 and forward to Michelle Hartner at the City ( I've CC'd her here). Thanks. Tony Zeece - - - -- Forwarded Message - - - -- From: Michelle Hartner <M.Hartner(a andovermn.gov> To: Tony and Matt Zeece <' Sent: Thursday, April 12, 2012 1:23 PM Subject: Outdoor Event Hi Tony, I also need a letter from the building owner approving your outdoor event. Thank you, Michelle Hartner City of Andover 1 1685 CROSSTOWN BOULEVARD N.W. • ANDOVER, MINNESOTA 55304 • (763) 755 -5100 FAX (763) 755 -8923 • WWW.CI.ANDOVER.MN.US TO: CC: FROM: SUBJECT: DATE: Mayor and City Cou Jim Dickinson, City I Michelle Hartner, Deputy City Clerk Consider Approval /Extension of Liquor License for New Addition and Patio Area/Beef O'Brady's May 1, 2012 INTRODUCTION Tony and Matt Zeece, Beef O'Brady's 15190 Bluebird Street NW, Suite 114, has submitted a request for an extension of their liquor license to include their new construction addition and outdoor patio area. DISCUSSION Tony and Matt Zeece, Beef O'Brady's has submitted a request for an extension of their liquor license to include their new construction addition and outdoor patio area. Attached are Mr. Zeece's request and a drawing of the addition and patio area. ACTION REQUIRED Council is requested to approve an extension to Beef O'Brady's liquor license to include the new addition and outdoor patio area. Respectfully submitted, Michelle Hartner Deputy City Clerk Attach: Request and Drawing 4/12/2012 City Council City of Andover 1685 Crosstown Blvd NW Andover, MN 55304 Dear Mr. Mayor and Council Members, Beef '0' Brady's located at 15190 Bluebird St. NW, Suite #114, would like to request an extension of our liquor license to encompass the area included in our 400 sq. foot expansion and the new patio area adjacent to it. The attached plans show the area to be covered by the license. Sincerely, Tony Zeece and Matt Zeece Owners Beef '0' Brady's 15190 Bluebirds St. NW, #114 Andover, MN 55304 763- 434 -2700 MOWNi s v ,. 1685 CROSSTOWN BOULEVARD N.W.. ANDOVER, MINNESOTA 55304 • (763) 755 -5100 FAX (763) 755 -8923 • WWW.CI.ANDOVER.MN.US TO: Mayor and City Council CC: Jim Dickinson, City Administra FROM: Michelle Harmer, Deputy City l ...n SUBJECT: Approve Temporary 3.2% Malt Liquor License /Andover Lions/Fun Fest DATE: May 1, 2012 INTRODUCTION The Andover Lions have applied for a 3.2% malt liquor license for the Fun Fest. DISCUSSION Each year the Lions Club sells 3.2% malt liquor during the Fun Fest, which will be held on July 13, and 14, 2012. They will be selling on Friday, July 13th from 6:00 p.m. until 11:00 p.m. and on Saturday, July 14th from 10:00 a.m. until midnight. ACTION REQUIRED The City Council is requested to approve a temporary 3.2% malt liquor license for the Andover Lions Club for July 13 and 14, 2012. �Respectfully submitted, Michelle Hartner Deputy City Clerk Attach: Application 0 N661W I 1685 CROSSTOWN BOULEVARD N.W. • ANDOVER, MINNESOTA 55304 • (763) 755 -5100 FAX (763) 755.8923 • WWW.ANDOVERMN.GOV -r`e�.t WA 1&, COMBINATION APPLICATION FOR RETAILERS (ON -SALE) (OFF -SALE) 3.2 % MALT LIQUOR LICENSE To the City f A over, County of Anoka I, a a r � rUeo 6 e , of the City of �n aver County of Ad ! i hereby make application for the following license(s): (Off -Sale) (On -Sale) established pursuant to an Ordinance passed by the Andover City Council. For the past five years my residence has been as follows:_ j f I was born at _ ( onth, day, year) (city, vmage, or I am the �12e,?S �/ urer' of d"i`nwfnlP r' //0 n S (Title, Officer) (Name of Organization) located at the following address Z(, / fS'_�1/Prd" e\, S * Gy The date the organization was incorporated q y (f The name and address of the officers are as follows: �lPr &sZarf ' .Seeref��% n // Name of Business: �`7rj p�0v 2 ✓ i O tiS Business Address: 1 /(/ �� �✓ o�•'n S /l/�iV /7`I�GfOv�r, �'//J,,fo 5/ Store Manager: Store Phone Number: a P(e - q 7 Aa I agree, as part of this application, to furnish a list of all other persons, firms, or corporations having an interest in the licensed organization. I will notify the City of Andover of any change in legal ownership or beneficial interest in such organization. I am am not k engaged in the retail sale of intoxicating liquor. I have have not_ had an application for licenses rejected previously. I have have not,/ _ been convicted of a felony or of violating any national or state liquor law or local ordinance relating to the manufacture, sale or transportation of intoxicating liquor. Gambling or gambling devices will not be permitted on the licensed premises. I have no intention or agreement to transfer this license to another person. I agree to waive my constitutional rights against search and'seizure and will freely permit peace officers to inspect my premises and agree to the forfeiture of my license if found to have violated the provisions of the ordinance providing for the granting of this license. I hereby solemnly swear that the foregoing statements are true and correct to the best of my knowledge. Si nature of Applicant Date CITY OF ANDOVER DOVE 1685 CROSSTOWN BOULEVARD N.W. • ANDOVER, MINNESOTA 55304 •x,763) 755 -5100 FAX (763) 755 -8923 • WWW.CLANDOVER.MN.0 TO: Mayor and Councilmembers Jim Dickinson, City Admini; FROM: David L. Carlberg, Community Development Director SUBJECT: Public Hearing: Modification to the Development Program for Development District No. 1 and the establishment of Tax Increment Financing District No. 1 -5 DATE: May 1, 2012 INTRODUCTION The City Council is requested to consider the Modification to the Development Program for Development District No. 1 and the establishment. of Tax Increment Financing District No. 1 -5 and to conduct a public hearing accordingly. DISCUSSION TIF District 1 -5 is being created for the development of a 70 unit senior housing project to be known as Arbor Oaks located on the southwest corner of Hanson Boulevard NW and 155th Lane NW. TIF District 1 -5 is a Housing District and through its creation will insure an affordable housing component throughout the life of the district for twenty percent (20 %) of the units. ACTION REQUESTED Upon holding the public hearing, the City Council is requested to approve the attached resolution approving the Program Modification and TIF Plan. e_ s tl y submitted, David L. Carlberg r Attachments: Resolution TIF District Overview — TIF 1 -5 Program Modification and TIF Plan Council member RESOLUTION NO. CITY OF ANDOVER ANOKA COUNTY STATE OF MINNESOTA introduced the following resolution and moved its adoption: RESOLUTION ADOPTING A MODIFICATION TO THE DEVELOPMENT PROGRAM FOR DEVELOPMENT DISTRICT NO. 1 AND ESTABLISHING TAX INCREMENT FINANCING DISTRICT NO. 1 -5 THEREIN AND ADOPTING A TAX INCREMENT FINANCING PLAN THEREFOR. BE IT RESOLVED by the City Council (the "Council ") of the City of Andover, Minnesota (the "City "), as follows: Section 1. Recitals. 1.01. The Andover Economic Development Authority of the City of Andover (the "EDA ") and the City of Andover have heretofore established Development District No. 1 and adopted a Development Program therefor. It has been proposed by the EDA and the City that the City adopt a Modification to the Development Program for Development District No. 1 (the "Development Program Modification ") and establish Tax Increment Financing District No. 1 -5 (the "District ") therein and adopt a Tax Increment Financing Plan (the "TIF Plan ") therefor (the Development Program Modification and the TIF Plan are referred to collectively herein as the "Program Modification and TIF Plan "); all pursuant to and in conformity with applicable law, including Minnesota Statutes, Sections 469.090 to 469.1082 and Sections 469.174 to 469.1799, all inclusive, as amended, (the "Act ") all as reflected in the Program Modification and TIF Plan, and presented for the Council's consideration. 1.02. The EDA and City have investigated the facts relating to the Program Modification and TIF Plan and have caused the Program Modification and TIF Plan to be prepared. 1.03. The EDA and City have performed all actions required by law to be performed prior to the establishment of the District and the adoption and approval of the proposed Program Modification and TIF Plan, including, but not limited to, notification of Anoka County and Independent School District No. 11 having taxing jurisdiction over the property to be included in the District, a review of and written comment on the Program Modification and TIF Plan by the City Planning Commission on April 10, 2012, approval of the Program Modification and TIF Plan by the EDA on May 1, 2012, and the holding of a public hearing on May 1, 2012 upon published notice as required by law. 1.04. Certain written reports (the "Reports ") relating to the Program Modification and TIF Plan and to the activities contemplated therein have heretofore been prepared by staff and consultants and submitted to the Council and/or made a part of the City files and proceedings on the Program Modification and TIF Plan. The Reports include data, information and/or substantiation constituting or relating to the basis for the other findings and determinations made in this resolution. The Council hereby confirms, ratifies and adopts the Reports, which are hereby incorporated into and made as fully a part of this resolution to the same extent as if set forth in full herein. 1.05. The City is not modifying the boundaries of Development District No. 1, but is however, modifying the Development Program therefor. Section 2. Findings for the Adoption and Approval of the Development Program Modification. 2.01. The Council approves the Development Program Modification, and specifically finds that: (a) the land within the Project area would not be available for redevelopment without the financial aid to be sought under this Development Program; (b) the Development Program, as modified, will afford maximum opportunity, consistent with the needs of the City as a whole, for the development of the Project by private enterprise; and (c) that the Development Program, as modified, conforms to the general plan for the development of the City as a whole. Section 3. Findings for the Establishment of Tax Increment Financing District No 1 -5 3.01. The Council hereby finds that Tax Increment Financing District No. 1 -5 is in the public interest and is a "housing district" under Minnesota Statutes, Section 469.174, Subd. 11 of the Act. 3.02. The Council further finds that the proposed development would not occur solely through private investment within the reasonably foreseeable future, that the Program Modification and TIF Plan conform to the general plan for the development or redevelopment of the City as a whole; and that the Program Modification and TIF Plan will afford maximum opportunity consistent with the sound needs of the City as a whole, for the development or redevelopment of the District by private enterprise. 3.03. The Council further finds, declares and determines that the City made the above findings stated in this Section and has set forth the reasons and supporting facts for each determination in writing, attached hereto as Exhibit A. Section 4. Public Purpose. 4.01. The adoption of the Program Modification and TIF Plan conforms in all respects to the requirements of the Act and will help fulfill a need to develop an area of the City which is already built up, to provide housing opportunities, to improve the tax base and to improve the general economy of the State and thereby serves a public purpose. For the reasons described in Exhibit A, the City believes these benefits directly derive from the tax increment assistance provided under the TIF Plan. A private developer will receive only the assistance needed to make this development financially feasible. As such, any private benefits received by a developer are incidental and do not outweigh the primary public benefits. Section 5. Approval and Adoption of the Program Modification and TIF Plan. 5.01. The Program Modification and TIF Plan, as presented to the Council on this date, including without limitation the findings and statements of objectives contained therein, are hereby approved, ratified, established, and adopted and shall be placed on file in the office of the City Administrator. 5.02. The staff of the City, the City's advisors and legal counsel are authorized and directed to proceed with the implementation of the Program Modification and TIF Plan and to negotiate, draft, prepare and present to this Council for its consideration all further plans, resolutions, documents and contracts necessary for this purpose. 5.03 The Auditor of Anoka County is requested to certify the original net tax capacity of the District, as described in the Program Modification and TIF Plan, and to certify in each year thereafter the amount by which the original net tax capacity has increased or decreased; and the City of Andover is authorized and directed to forthwith transmit this request to the County Auditor in such form and content as the Auditor may specify, together with a list of all properties within the District, for which building permits have been issued during the 18 months immediately preceding the adoption of this resolution. 5.04. The City Administrator is further authorized and directed to file a copy of the Program Modification and TIF Plan with the Commissioner of the Minnesota Department of Revenue and the Office of the State Auditor pursuant to Minnesota Statutes 469.175, Subd. 4a. The motion for the adoption of the foregoing resolution was duly seconded by Council member , and upon a vote being taken thereon, the following voted in favor thereof: and the following voted against the same: Dated: May 1, 2012 Mike Gamache, Mayor (Seal) ATTEST: Jim Dickinson, City Administrator EXHIBIT A RESOLUTION NO. The reasons and facts supporting the findings for the adoption of the Tax Increment Financing Plan for Tax Increment Financing District No. 1 -5, as required pursuant to Minnesota Statutes, Section 469.175, Subdivision 3 are as follows: 1. Finding that Tax Increment Financing District No. 1 -5 is a housing district as defined in M.S., Section 469.174, Subd. 11. TIF District No. 1 -5 consists of 2 parcels. The development will consist of senior rental housing. All or a portion of which will receive tax increment assistance and will meet income restrictions described in M.S. 469.1761. At least 20 percent of the units/homes receiving assistance will have incomes at or below 50 percent of statewide median income. Appendix E of the TIF Plan contains background for the above finding. 2. Finding that the proposed development, in the opinion of the City Council, would not reasonably be expected to occur solely through private investment within the reasonably foreseeable future. The proposed development, in the opinion of the City, would not reasonably be expected to occur solely through private investment within the reasonably foreseeable future: This finding is supported by the fact that the development proposed in this plan is an affordable, senior rental housing project that meets the City's objectives for development and redevelopment. The cost of land acquisition, site and public improvements and construction costs makes this housing development infeasible without City assistance. There are no price reductions provided by land sellers or construction contractors for affordable housing developments since they view all projects as market rate projects. With decreased rental income from the affordable units, there is less cash flow available to service the operating and debt expenses for the project and in return, less than market rate investment returns to the developer. The development needs some assistance to make up this short fall and thus this project is feasible only through assistance, in part, from tax increment financing. The developer was asked for and provided a letter and a proforma as justification that the developer would not have gone forward without tax increment assistance (see attachment in Appendix F of the TIF Plan). The increased market value of the site that could reasonably be expected to occur without the use of tax increment financing would be less than the increase in market value estimated to result from the proposed development after subtracting the present value of the projected tax increments for the maximum duration of the TIF District permitted by the TIF Plan: This finding is justified on the grounds that the cost of land acquisition, and site and public improvements add to the total development cost. Historically, site development costs in this area have made development infeasible without tax increment assistance. In addition, the sale price of the land is at the higher end, even for market rate developments, which means that even a market rate development would require assistance. Therefore, the City reasonably determines that no other development of similar scope is anticipated on this site without substantially similar assistance being provided to the development. 3. Finding that the TIF Plan for Tax Increment Financing District No. 1 -5 conforms to the general plan for the development or redevelopment of the municipality as a whole. The Planning Commission reviewed the TIF Plan and found that the TIF Plan conforms to the general development plan of the City. 4. Finding that the TIF Plan for Tax Increment Financing District No. 1 -5 will afford maximum opportunity, consistent with the sound needs of the City as a whole, for the development or redevelopment of Development District No. 1 by private enterprise. Through the implementation of the TIF Plan, the EDA or City will provide an impetus for residential development, which is desirable or necessary for increased population and an increased need for life -cycle housing within the City. Tax Increment Financing District Overview City of Andover Tax Increment Financing District No. 1 -5 The following summary contains an overview of the basic elements of the Tax Increment Financing Plan for Tax Increment Financing District No. 1 -5. More detailed information on each of these topics can be found in the complete Tax Increment Financing Plan. Proposed action: Establishment of Tax Increment Financing District No. 1 -5 (the "District ") and the adoption of a Tax Increment Financing Plan (the "TIF Plan "). Modification to the Redevelopment Plan for Redevelopment Project No. 1 includes the establishment of Tax Increment Financing District No. 1 -5, which represents a continuation of the goals and objectives set forth in the Redevelopment Plan for Redevelopment Project No. 1. Type of TIF District: A housing district Parcel Numbers: 22- 32 -24 -11 -0024 22- 32 -24 -11 -0025 Proposed The District is being created to facilitate the construction of a 70 unit senior Development: rental housing development with services, in the City. Please see Appendix A of the TIF Plan for a more detailed project description Maximum duration: The duration of the District will be 25 years from the date of receipt of the first increment (26 years of increment). The EDA or City elects to receive the first tax increment in 2014. It is estimated that the District, including any modifications of the TIF Plan for subsequent phases or other changes, would terminate after December 31, 2039, or when the TIF Plan is satisfied. Estimated annual tax Up to $140,198 increment: EHLERS LEADERS IN PUBLIC FINANCE Authorized uses: The TIF Plan contains a budget that authorizes the maximum amount that may be expended: Land/Building Acquisition ..................... ............................... $200,000 Site Improvements/ Preparation .............. ............................... $300,000 Affordable Housing Activities ............... ............................... $500,000 Other Qualifying Improvements ............ ............................... $295,686 Administrative Costs (up to 10%) .......... ............................... $248,716 PROJECT COSTS TOTAL ................ ............................... $1,544,402 Interest................................................. ............................... 1 191 472 PROJECT COSTS TOTAL ............. ............................... $2,735,874 See Subsection 2 -10, on page 2 -5 and 2 -6 of the TIF Plan for the full budget authorization. Norm of financing: The project is proposed to be financed by a pay -as- you -go note. Administrative fee: Up to 10% of annual increment, if costs are justified. Interfund Loan If the City wants to pay for administrative expenditures from a tax increment Requirement: fund, it is recommended that a resolution authorizing a loan from another fund be passed PRIOR to the issuance of the check. 4 Year Activity Rule After four years from the date of certification of the District one of the (¢ 469.176 Subd. 6) following activities must have been commenced on each parcel in the District: • Demolition • Rehabilitation • Renovation • Other site preparation (not including utility services such as sewer and water) If the activity has not been started by approximately April 2015, no additional tax increment may be taken from that parcel until the commencement of a qualifying activity. The reasons and facts supporting the findings for the adoption of the TIF Plan for the District, as required pursuant to M.S., Section 469.175, Subd. 3, are included in Exhibit A of the City resolution. Page 2 EHLERS LEADERS IN PUBLIC FINANCE PF As of April 25, 2012 Draft for Public Hearing Modification to the Development Program for Development District No. 1 and the Tax Increment Financing Plan for the establishment of Tax Increment Financing District No. 1 -5 (a housing district) within Development District No. 1 Andover Economic Development Authority City of Andover Anoka County State of Minnesota Public Hearing: May 1, 2012 Adopted: Prepared by: EHLERS & ASSOCIATES, INC. 3060 Centre Pointe Drive, Roseville, Minnesota 55113 -1105 651 - 697 -8500 fax: 651 - 697 -8555 www.ehlers- inc.com Table of Contents (for reference purposes only) Section 1 - Modification to the Development Program for Development District No. 1 Foreword.............................. ............................... 1-1 Section 2 - Tax Increment Financing Plan for Tax Increment Financing District No. 1 -5 Subsection 2 -1. Foreword ................ ............................... 2 -1 Subsection 2 -2. Statutory Authority ......... ............................... 2 -1 Subsection 2 -3. Statement of Objectives .... ............................... 2 -1 Subsection 2 -4. Development Program Overview ............................ 2 -1 Subsection 2 -5. Description of Property in the District and Property To Be Acquired 2 -2 Subsection 2 -6. Classification of the District .. ............................... 2 -2 Subsection 2 -7. Duration and First Year of Tax Increment of the District ........... 2 -3 Subsection 2 -8. Original Tax Capacity, Tax Rate and Estimated Captured Net Tax Capacity Value /Increment and Notification of Prior Planned Improvements .... 2 -3 Subsection 2 -9. Sources of Revenue /Bonds to be Issued ...................... 2 -4 Subsection 2 -10. Uses of Funds ............ ............................... 2 -5 Subsection 2 -11. Fiscal Disparities Election ... ............................... 2 -6 Subsection 2 -12. Business Subsidies ........ ............................... 2 -6 Subsection 2 -13. County Road Costs ........ ............................... 2 -7 Subsection 2 -14. Estimated Impact on Other Taxing Jurisdictions ................. 2 -7 Subsection 2 -15. Supporting Documentation .. ............................... 2 -9 Subsection 2 -16. Definition of Tax Increment Revenues ........................ 2 -9 Subsection 2 -17. Modifications to the District .. ............................... 2 -9 Subsection 2 -18. Administrative Expenses ... ............................... 2 -10 Subsection 2 -19. Limitation of Increment .... ............................... 2 -11 Subsection 2 -20. Use of Tax Increment ..... ............................... 2 -11 Subsection 2 -21. Excess Increments ....... ............................... 2 -12 Subsection 2 -22. Requirements for Agreements with the Developer .............. 2 -12 Subsection 2 -23. Assessment Agreements .. ............................... 2 -13 Subsection 2 -24. Administration of the District ............................... 2 -13 Subsection 2 -25. Annual Disclosure Requirements ........................... 2 -13 Subsection 2 -26. Reasonable Expectations .. ............................... 2 -13 Subsection 2 -27. Other Limitations on the Use of Tax Increment ................. 2 -13 Subsection 2 -28. Summary ............... ............................... 2 -14 Appendix A Project Description ....................... ............................... A -1 Appendix B Map of the Development District No. 1 and the District .......................... B -1 Appendix C Description of Property to be Included in the District ............................ C -1 Appendix D Estimated Cash Flow for the District ......... ............................... D -1 Appendix E Housing Qualifications for the District ......... ............................... E -1 Section 1- Modification to the Development Program for Development District No. 1 Foreword The following text represents a Modification to the Development Program for Development District No. 1. This modification represents a continuation of the goals and objectives set forth in the Development Program for Development District No. 1. Generally, the substantive changes include the establishment of Tax Increment Financing District No. 1 -5. For further information, a review of the Development Program for Development District No. 1, adopted September 2, 1986, is recommended. It is available from the City Administrator at the City of Andover. Other relevant information is contained in the Tax Increment Financing Plans for the Tax Increment Financing Districts located within Development District No. 1. Andover EDA Modification to the Development Program for Development District No. 1 1 -1 Section 2 - Tax Increment Financing Plan for Tax Increment Financing District No. 1 -5 Subsection 2 -1. Foreword The Andover Economic Development Authority (the "EDA "), the City of Andover (the "City "), staff and consultants have prepared the following information to expedite the establishment of Tax Increment Financing District No. 1-5 (the "District "), a housing tax increment financing district, located in Development District No. 1. Subsection 2 -2. Statutory Authority Within the City, there exist areas where public involvement is necessary to cause development or redevelopment to occur. To this end, the EDA and City have certain statutory powers pursuant to Minnesota Statutes ( "M.S.'), Sections 469.090 to 469.1082, inclusive, as amended, and M.S., Sections 469.174 to 469.1799, inclusive, as amended (the "Tax Increment Financing Act" or "TIF Act "), to assist in financing public costs related to this project. This section contains the Tax Increment Financing Plan (the "TIF Plan ") for the District. Other relevant information is contained in the Modification to the Development Program for Development District No. 1. Subsection 2 -3. Statement of Objectives The District currently consists of two parcels of land and adjacent and internal rights -of -way. The District is being created to facilitate the construction of a 70 unit senior rental housing development with services in the City. Please see Appendix A for further District information. The EDA has designated Arbor Oaks Senior Living, LLC. as the developer. This TIF Plan is expected to achieve many of the objectives outlined in the Development Program for Development District No. 1. The activities contemplated in the Modification to the Development Program and the TIF Plan do not preclude the undertaking of other qualified development or redevelopment activities. These activities are anticipated to occur over the life of Development District No. 1 and the District. Subsection 2 -4. Development Program Overview 1. Property to be Acquired - Selected property located within the District may be acquired by the EDA or City and is further described in this TIF Plan. 2. Relocation - Relocation services, to the extent required by law, are available pursuant to M.S., Chapter 117 and other relevant state and federal laws. 3. Upon approval of a developer's plan relating to the project and completion of the necessary legal requirements, the EDA or City may sell to a developer selected properties that it may acquire within the District or may lease land or facilities to a developer. 4. The EDA or City may perform orprovide for some or all necessary acquisition, construction, relocation, demolition, and required utilities and public street work within the District. Andover EDA Tax Increment Financing Plan for Tax Increment Financing District No. 1 -5 2 -1 Subsection 2 -5. Description of Property in the District and Property To Be Acquired The District encompasses all property and adjacent rights -of -way and abutting roadways identified by the parcels listed in Appendix C of this TIF Plan. Please also see the map in Appendix B for further information on the location of the District. Subsection 2 -6. Classification of the District The EDA and City, in determining the need to create a tax increment financing district in accordance with M.S., Sections 469.174 to 469.1799, as amended, inclusive, find that the District, to be established, is a housing district pursuant to M.S., Section 469.174, Subd. 11 and M.S., Section 469.1761 as defined below: M.S., Section 469.174, Subd. H: "Housing district" means a type of tax incrementfinancing district which consists of a project, or a portion of a project, intended for occupancy, in part, by persons or families of low and moderate income, as defined in chapter 462A, Title II of the National Housing Act of 1934, the National Housing Act of 1959, the United States Housing Act of 193 7, as amended, Title V of th e Housing Act of 1949, as amended, any other similar present or future federal, state, or municipal legislation, or the regulations promulgated under any of those acts, and that satisfies the requirements of M.S., Section 469.1761. Housing project means a project, or portion of a project, that meets all the qualifications of a housing district under this subdivision, whether or not actually established as a housing district. M.S., Section 469.1761: Subd. 1. Requirement imposed. (a) In order for a tax increment financing district to qualify as a housing district: (1) the income limitations provided in this section must be satisfied; and (2) no more than 20 percent of the square footage of buildings that receive assistance from tax increments may consist of commercial, retail, or other nonresidential uses. (b) The requirements imposed by this section apply to property receiving assistance financed with tax increments, including interest reduction, land transfers at less than the Authority's cost of acquisition, utility service or connections, roads, parking facilities, or other subsidies. The provisions of this section do not apply to districts located within a targeted area as defined in Section 462C.02 Subd 9, clause (e). (c) Forpurposes of the requirements ofparagraph (a), the authority may elect to treat an addition to an existing structure as a separate building if (1) construction of the addition begins more than three years after construction of the existing structure was completed; and (2) for an addition that does not meet the requirements ofparagraph (a), clause (2), if it is treated as a separate building, the addition was not contemplated by the tax increment financing plan which includes the existing structure. Andover EDA Tax Increment Financing Plan for Tax Increment Financing District No. 1 -5 2 -2 Subd. 2. Owner occupied housing. For owner occupied residential property, 95 percent of the housing units must be initially purchased and occupied by individuals whose family income is less than or equal to the income requirements for qualified mortgage bond projects under section 1430 of the Internal Revenue Code. Subd. 3. Rental property. For residential rental property, the property must satisfy the income requirements for a qualified residential rental project as defined in section 142(d) of the Internal Revenue Code. The requirements of this subdivision apply for the duration of the tax increment financing district. Subd. 4. Noncompliance; enforcement. Failure to comply with the requirements of this section is subject to M.S., Section 469.1771. In meeting the statutory criteria the EDA and City rely on the following facts and findings: • The District consists of two parcels. • The development will consist of 70 units of senior rental housing • 20% of the units will be occupied by person with incomes less than 50% of median income Pursuant to M.S., Section 469.176, Subd. 7, the District does not contain any parcel or part of a parcel that qualified under the provisions of M.S., Sections 273.111 or 273.112 or Chapter 473H for taxes payable in any of the five calendar years before the filing of the request for certification of the District. Subsection 2 -7. Duration and First Year of Tax Increment of the District Pursuant to M.S., Section 469.175, Subd. 1, and Section 469.176, Subd. 1, the duration and first year of tax increment of the District must be indicated within the TIF Plan. Pursuant to M.S., Section 469.176, Subd. lb., the duration of the District will be 25 years after receipt of the first increment by the EDA or City (a total of 26 years of tax increment). The EDA or City elects to receive the first tax increment in 2014, which is no later than four years following the year of approval of the District. Thus, it is estimated that the District, including any modifications of the TIF Plan for subsequent phases or other changes, would terminate after 2039, or when the TIF Plan is satisfied. The EDA or City reserves the right to decertify the District prior to the legally required date. Subsection 2 -8. Original Tax Capacity, Tax Rate and Estimated Captured Net Tax Capacity Value /Increment and Notification of Prior Planned Improvements Pursuant to M.S., Section 469.174, Subd. 7 andM S., Section 469.177, Subd. 1, the Original Net Tax Capacity (ONTO) as certified for the District will be based on the market values placed on the property by the assessor in 2011 for taxes payable 2012. Pursuant to M.S., Section 469.177, Subds. 1 and 2, the County Auditor shall certify in each year (beginning in the payment year 2014) the amount by which the original value has increased or decreased as a result of. I. Change in tax exempt status of property; 2. Reduction or enlargement of the geographic boundaries of the district; 3. Change due to adjustments, negotiated or court - ordered abatements; 4. Change in the use of the property and classification; 5. Change in state law governing class rates; or Andover EDA Tax Increment Financing Plan for Tax Increment Financing District No. 1 -5 2 -3 6. Change in previously issued building permits. In any year in which the current Net Tax Capacity (NTC) value of the District declines below the ONTO, no value will be captured and no tax increment will be payable to the EDA or City. The original local tax rate for the District will be the local tax rate for taxes payable 2012, assuming the request for certification is made before June 30, 2012. The ONTC and the Original Local Tax Rate for the District appear in the table below. Pursuant to M.S., Section 469.174 Subd. 4 and M.S., Section 469.177, Subd. 1, 2, and 4, the estimated Captured Net Tax Capacity (CTC) of the District, within the Development District No. 1, upon completion of the projects within the District, will annually approximate tax increment revenues as shown in the table below. The EDA and City request 100 percent of the available increase in tax capacity for repayment of its obligations and current expenditures, beginning in the tax year payable 2014. The Project Tax Capacity (PTC) listed is an estimate of values when the projects within the District are completed. Project Estimated Tax Capacity upon Completion (PTC) $1331402 Original Estimated Net Tax Capacity (ONTC) $6,139 Estimated Captured Tax Capacity (CTC) $127,263 Original Local Tax Rate 1.10164 Pay 2012 Estimated Annual Tax Increment (CTC x Local Tax Rate) $140,198 Percent Retained by the EDA 100% Tax capacity includes a 3% inflation factor for the duration of the District. The tax capacity included in this chart is the estimated tax capacity of the District in year 25. The tax capacity of the District in year one is estimated to be $32,813. Pursuant to M.S., Section 469.177, Subd. 4, the FDA shall, after a due and diligent search, accompany its request for certification to the County Auditor or its notice of the District enlargement pursuant to M.S., Section 469.175, Subd. 4, with a listing of all properties within the District or area of enlargement for which building permits have been issued during the eighteen (18) months immediately preceding approval of the TIF Plan by the municipality pursuant to M.S., Section 469.175, Subd. 3. The County Auditor shall increase the original net tax capacity of the District by the net tax capacity of improvements for which a building permit was issued. The City has reviewed the area to be included in the District and found no parcels for which building permits have been issued during the 18 months immediately preceding approval of the TIF Plan by the City and EDA. Subsection 2 -9. Sources of Revenue /Bonds to be Issued The costs outlined in the Uses of Funds will be financed primarily through the annual collection of tax increments. The EDA or City reserves the right to incur bonds or other indebtedness as a result of the TIF Plan. As presently proposed, the projects within the District will be financed by a pay -as- you -go note. Any refunding amounts will be deemed a budgeted cost without a formal TIF Plan Modification. This provision does not obligate the EDA or City to incur debt. The EDA or City will issue bonds or incur other debt only upon the determination that such action is in the best interest of the City. Andover EDA Tax Increment Financing Plan for Tax Increment Financing District No. 1 -5 2-4 The total estimated tax increment revenues for the District are shown in the table below: SOURCES OF FUNDS TOTAL Tax Increment $2,487,159 Interest $248,715 TOTAL $2,73274 The EDA or City may issue bonds (as defined in the TIF Act) secured in whole or in part with tax increments from the District in a maximum principal amount of $1,544,402. Such bonds may be in the form of pay -as- you-go notes, revenue bonds or notes, general obligation bonds, or interfund loans. This estimate of total bonded indebtedness is a cumulative statement of authority under this TIF Plan as of the date of approval. Subsection 2 -10. Uses of Funds Currently under consideration for the District is a proposal to facilitate the construction of 70 unit senior rental housing development with services. The EDA and City have determined that it will be necessary to provide assistance to the project(s) for certain District costs, as described. The EDA has studied the feasibility of the development or redevelopment of property in and around the District. To facilitate the establishment and development or redevelopment of the District, this TIF Plan authorizes the use of tax increment financing to pay for the cost of certain eligible expenses. The estimate of public costs and uses of funds associated with the District is outlined in the following table. USES OF TAX INCREMENT FUNDS TOTAL Land/Building Acquisition $200,000 Site Improvements/Preparation $300,000 Affordable Housing Activities $500,000 Other Qualifying Improvements $295,686 Administrative Costs (up to 10 %) $248,716 PROJECT COST TOTAL $1,544,402 Interest 1 191 472 PROJECT AND INTEREST COSTS TOTAL $2,735,874 The total project cost, including financing costs (interest) listed in the table above does not exceed the total projected tax increments for the District as shown in table in Subsection 2 -9. Estimated costs associated with the District are subject to change among categories without a modification to this TIF Plan. The cost of all activities to be considered for tax increment financing will not exceed, without formal modification, the budget above pursuant to the applicable statutory requirements. The EDA may expend funds for qualified housing activities outside of the District boundaries. Andover EDA Tax Increment Financing Plan for Tax Increment Financing District No. 1 -5 2 -5 Subsection 2 -11. Fiscal Disparities Election Pursuant to M.S., Section 469.177, Subd. 3, the EDA or City may elect one of two methods to calculate fiscal disparities. If the calculations pursuant to M.S., Section 469.177, Subd. 3, clause a, (outside the District) are followed, the following method of computation shall apply: (1) The original net tax capacity and the current net tax capacity shall be determined before the application of the fiscal disparity provisions of Chapter 276,4 or 473F. Where the original net tax capacity is equal to or greater than the current net tax capacity, there is no captured net tax capacity and no tax increment determination. Where the original net tax capacity is less than the current net tax capacity, the difference between the original net tax capacity and the current net tax capacity is the captured net tax capacity. This amount less any portion thereof which the authority has designated, in its tax increment financing plan, to share with the local taxing districts is the retained captured net tax capacity of the authority. (2) The county auditorshall exclude the retained captured net tax capacity of the authority from the net tax capacity of the local taxing districts in determining local taxing district tax rates. The local tax rates so determined are to be extended against the retained captured net tax capacity of the authority as well as the net tax capacity of the local taxing districts. The tax generated by the extension of the lesser of (A) the local taxing district tax rates or (B) the original local tax rate to the retained captured net tax capacity of the authority is the tax increment of the authority. The EDA will choose to calculate fiscal disparities by clause a. According to M.S., Section 469.177, Subd. 3: (c) The method of computation of tax increment applied to a district pursuant to paragraph (a) or (b) shall remain the same for the duration of the district, except that the governing body may elect to change its election from the method of computation in paragraph (a) to the method in paragraph (b). Subsection 2 -12. Business Subsidies Pursuant to M.S. , Section 116J.993, Subd. 3, the following forms of financial assistance are not considered a business subsidy: (1) A business subsidy of less than $150,000; (2) Assistance that is generally available to all businesses or to a general class of similar businesses, such as a line of business, size, location, or similar general criteria; (3) Public improvements to buildings or lands owned by the state or local government that serve a public purpose and do not principally benefit a single business or defined group of businesses at the time the improvements are made; (4) Redevelopment property polluted by contaminants as defined in M.S., Section 116J.552, Subd. 3; (5) Assistance provided for the sole purpose of renovating old or decaying building stock or bringing it up to code and assistance provided for designated historic preservation districts, provided that the assistance is equal to or less than 50% of the total cost; (6) Assistance to provide job readiness and training services if the sole purpose of the assistance is to provide those services; (7) Assistance for housing; (8) Assistance for pollution control or abatement, including assistance for a tax increment financing Andover EDA Tax Increment Financing Plan for Tax Increment Financing District No. 1 -5 2.6 hazardous substance subdistrict as defined under M.S., Section 469.174, Subd. 23; (9) Assistance for energy conservation; (10) Tax reductions resulting from conformity with federal tax law; (11) Workers' compensation and unemployment compensation; (12) Benefits derived from regulation; (13) Indirect benefits derived from assistance to educational institutions; (14) Funds from bonds allocated under chapter 474A, bonds issued to refund outstanding bonds, and bonds issued for the benefit of an organization described in section 501 (c) (3) of the Internal Revenue Code of 1986, as amended through December 31, 1999; (15) Assistance for a collaboration between a Minnesota higher education institution and a business; (16) Assistance for a tax increment financing soils condition district as defined under M.S., Section 469.174, Subd. 19; (17) Redevelopment when the recipient's investment in the purchase of the site and in site preparation is 70 percent or more of the assessor's current year's estimated market value; (18) General changes in tax increment financing law and other general tax law changes of a principally technical nature; (19) Federal assistance until the assistance has been repaid to, and reinvested by, the state or local government agency; (20) Funds from dock and wharf bonds issued by a seaway port authority; (21) Business loans and loan guarantees of $150,000 or less; (22) Federal loan funds provided through the United States Department of Commerce, Economic Development Administration; and (23) Property tax abatements granted under M.S., Section 469.1813 to property that is subject to valuation under Minnesota Rules, chapter 8100. The EDA will comply with M.S., Sections 116J.993 to 116J.995 to the extent the tax increment assistance under this TIF Plan does not fall under any of the above exemptions. Subsection 2 -13. County Road Costs Pursuant to M.S., Section 469.175, Subd. ]a, the county board may require the EDA or City to pay for all or part of the cost of county road improvements if the proposed development to be assisted by tax increment will, in the judgment of the county, substantially increase the use of county roads requiring construction of road improvements or other road costs and if the road improvements are not scheduled within the next five years under a capital improvement plan or within five years under another county plan. If the county elects to use increments to improve county roads, it must notify the EDA or City within forty - five days of receipt of this TIF Plan. In the opinion of the EDA and City and consultants, the proposed development outlined in this TIF Plan will have little or no impact upon county roads, therefore the TIF Plan was not forwarded to the county 45 days prior to the public hearing. The EDA and City are aware that the county could claim that tax increment should be used for county roads, even after the public hearing. Subsection 2 -14. Estimated Impact on Other Taxing Jurisdictions The estimated impact on other taxing jurisdictions assumes that the redevelopment contemplated by the TIF Plan would occur without the creation of the District. However, the EDA or City has determined that such development or redevelopment would not occur "but for" tax increment financing and that, therefore, the fiscal impact on other taxing jurisdictions is $0. The estimated fiscal impact of the District would be as follows if the "but for" test was not met: Andover EDA Tax Increment Financing Plan for Tax Increment Financing District No. 1 -5 2-7 IMPACT ON TAX BASE 2011/Pay 2012 Estimated Captured Pay 2012 Total Net Tax Capacity (CTC) Percent of CTC Tax Capacity Upon Completion to Entity Total Anoka County 237,432,514 127,263 0.0536% City of Andover 20,486,814 127,263 0.6212% ISD No. 11 29,720,536 127,263 0.4282% IMPACT ON TAX RATES Pay 2012 Percent Potential Extension Rates of Total CTC Taxes Anoka County 0.411460 37.35% 127,263 52,364 City of Andover 0.420910 38.21% 127,263 53,566 ISD No. 11 0.233250 21.17% 127,263 29,684 Other Total 0.036020 1.101640 100.00% 127.263 4,584 140,198 The estimates listed above display the captured tax capacity when all construction is completed. The tax rate used for calculations is the actual Pay 2012 rate. The total net capacity for the entities listed above are based on actual Pay 2012 figures. Pursuant to M.S. Section 469.175 Subd. 2(b): (1) Estimate of total tax increment. It is estimated that the total amount of tax increment that will be generated over the life of the District is $2,487,159; (2) Probable impact of the District on city provided services and ability to issue debt An impact of the District on police protection is expected. The City does track all calls for service including property - type calls and crimes. With any addition of new residents or businesses, police calls for service will be increased. New developments add an increase in traffic, and additional overall demands to the call load. The City does not expect that the proposed development, in and of itself, will necessitate new capital investment in vehicles or require that the City hire additional officers. The probable impact of the District on fire protection is not expected to be significant. Typically new buildings generate few calls, if any, and are of superior construction. The impact of the District on public infrastructure is expected to be minimal. The development is not expected to significantly impact any traffic movements in the area. The current infrastructure for sanitary sewer, storm sewer and water will be able to handle the additional volume generated from the proposed development. Based on the development plans, there are no additional costs associated with street maintenance, sweeping, plowing, lighting and sidewalks. The development in the District is expected to contribute an estimated $56,000 in sanitary sewer (SAC) and $79,400 in water (WAC) connection fees. Andover EDA Tax Increment Financing Plan for Tax Increment Financing District No. 1 -5 2_8 The probable impact of any District general obligation tax increment bonds on the ability to issue debt for general fund purposes is expected to be minimal. It is not anticipated that there will be any general obligation debt issued in relation to this project, therefore there will be no impact on the City's ability to issue future debt or on the City's debt limit. (3) Estimated amount of tax increment attributable to school district levies. It is estimated that the amount of tax increments over the life of the District that would be attributable to school district levies, assuming the school district's share of the total local tax rate for all taxing jurisdictions remained the same, is $526,532; (4) Estimated amount of tax increment attributable to county levies. It is estimated that the amount of tax increments over the life of the District that would be attributable to county levies, assuming the county's share of the total local tax rate for all taxing jurisdictions remained the same, is $928,954; (5) Additional information requested by the county or school district. The City is not aware of any standard questions in a county or school district written policy regarding tax increment districts and impact on county or school district services. The county or school district must request additional information pursuant to M.S. Section 469.175 Subd. 2(b) within 15 days after receipt of the tax increment financing plan. No requests for additional information from the county or school district regarding the proposed development for the District have been received. Subsection 2 -15. Supporting Documentation Pursuant to M.S. Section 469.175, Subd. 1 (a), clause 7 the TIF Plan must contain identification and description of studies and analyses used to make the findings are required in the resolution approving the District. Following is a list of reports and studies on file at the City that support the EDA and City's findings: Comprehensive Housing Needs Assessment for Anoka County, Maxfield Research, February 2011; Initial Demand Assessment for Senior Housing in Andover, MN, Everest Real Estate Advisors, December 2011; Gap analysis, Ehlers, April 2012. Subsection 2 -16. Definition of Tax Increment Revenues Pursuant to M.S., Section 469.174, Subd. 25, tax increment revenues derived from a tax increment financing district include all of the following potential revenue sources: 1. Taxes paid by the captured net tax capacity, but excluding any excess taxes, as computed underM S., Section 469.177; 2. The proceeds from the sale or lease of property, tangible or intangible, to the extent the property was purchased by the Authority with tax increments; 3. Principal and interest received on loans or other advances made by the Authority with tax increments; 4. Interest or other investment earnings on or from tax increments; 5. Repayments or return of tax increments made to the Authority under agreements for districts for which the request for certification was made after August 1, 1993; and 6. The market value homestead credit paid to the Authority under M.S., Section 273.1384. Andover EDA Tax Increment Financing Plan for Tax Increment Financing District No. 1 -5 2 -9 Subsection 2 -17. Modifications to the District In accordance with M.S., Section 469.175, Subd. 4, any: 1. Reduction or enlargement of the geographic area of the District, if the reduction does not meet the requirements of M.S., Section 469.175, Subd. 4(e); 2. Increase in amount of bonded indebtedness to be incurred; 3. A determination to capitalize interest on debt if that determination was not apart of the original TIF Plan; 4. Increase in the portion of the captured net tax capacity to be retained by the EDA or City; 5. Increase in the estimate of the cost of the District, including administrative expenses, that will be paid or financed with tax increment from the District; or 6. Designation of additional property to be acquired by the EDA or City, shall be approved upon the notice and after the discussion, public hearing and findings required for approval of the original TIF Plan. Pursuant to M.S. Section 469.175 Subd. 4()9, the geographic area of the District may be reduced, but shall not be enlarged after five years following the date of certification of the original net tax capacity by the county auditor. If a housing district is enlarged, the reasons and supporting facts for the determination that the addition to the district meets the criteria of M.S., Section 469.174, Subd. 11 must be documented. The requirements of this paragraph do not apply if (1) the only modification is elimination of parcel(s) from the District and (2) (A) the current net tax capacity of the parcel(s) eliminated from the District equals or exceeds the net tax capacity of those parcel(s) in the District's original net tax capacity or (B) the EDA agrees that, notwithstanding M.S., Section 469.177, Subd. 1, the original net tax capacity will be reduced by no more than the current net tax capacity of the parcel(s) eliminated from the District. The EDA or City must notify the County Auditor of any modification to the District. Modifications to the District in the form of a budget modification or an expansion of the boundaries will be recorded in the TIF Plan. Subsection 2 -18. Administrative Expenses In accordance with M.S., Section 469.174, Subd. 14, administrative expenses means all expenditures of the EDA or City, other than: 1. Amounts paid for the purchase of land; 2. Amounts paid to contractors or others providing materials and services, including architectural and engineering services, directly connected with the physical development of the real property in the District; 3. Relocation benefits paid to or services provided for persons residing or businesses located in the District; or 4. Amounts used to pay principal or interest on, fund a reserve for, or sell at a discount bonds issued pursuant to M.S., Section 469.178; or 5. Amounts used to pay other financial obligations to the extent those obligations were used to finance costs described in clauses (1) to (3). For districts for which the request for certification were made before August 1, 1979, or after June 30, 1982, and before August 1, 2001, administrative expenses also include amounts paid for services provided by bond counsel, fiscal consultants, and planning or economic development consultants. Pursuant to M.S., Section 469.176, Subd. 3, tax increment may be used to pay any authorized and documented administrative Andover EDA Tax Increment Financing Plan for Tax Increment Financing District No. 1 -5 2 -10 expenses for the District up to but not to exceed 10 percent of the total estimated tax increment expenditures authorized by the TIF Plan or the total tax increments, as defined by M.S., Section 469.174, Subd. 25, clause (1), from the District, whichever is less. For districts for which certification was requested after July 31, 2001, no tax increment may be used to pay any administrative expenses for District costs which exceed ten percent of total estimated tax increment expenditures authorized by the TIF Plan or the total tax increments, as defined in M.S., Section 469.174, Subd. 25, clause (1), from the District, whichever is less. Pursuant to M.S., Section 469.176, Subd. 4h, tax increments may be used to pay for the County's actual administrative expenses incurred in connection with the District and are not subject to the percentage limits of M.S., Section 469.176, Subd. 3. The county may require payment of those expenses by February 15 of the year following the year the expenses were incurred. Pursuant to M.S., Section 469. 177, Subd. 11, the County Treasurer shall deduct an amount (currently .36 percent) of any increment distributed to the EDA or City and the County Treasurer shall pay the amount deducted to the State Commissioner of Management and Budget for deposit in the state general fund to be appropriated to the State Auditor for the cost of financial reporting of tax increment financing information and the cost of examining and auditing authorities' use of tax increment financing. This amount may be adjusted annually by the Commissioner of Revenue. Subsection 2 -19. Limitation of Increment The tax increment pledged to the payment of bonds and interest thereon may be discharged and the District may be terminated if sufficient funds have been irrevocably deposited in the debt service fund or other escrow account held in trust for all outstanding bonds to provide for the payment of the bonds at maturity or redemption date. Pursuant to M.S., Section 469.176, Subd. 6: if, after four years from the date of certification of the original net tax capacity of the tax incrementfinancingdistrietpursuanttoMS, Section 469.177, no demolition, rehabilitation or renovation of property or other site preparation, including qualified improvement of a street adjacent to a parcel but not installation of utility service including sewer or water systems, has been commenced on a parcel located within a tax incrementfinancing district by the authority or by the owner ofthe parcel in accordance with the tax incrementfinancing plan, no additional tax increment may be taken from that parcel and the original net tax capacity of that parcel shall be excluded from the original net tax capacity of the tax increment financing district. If the authority or the owner of the parcel subsequently commences demolition, rehabilitation or renovation or other sitepreparation on thatparcel including qualified improvement of a street adjacent to that parcel, in accordance with the tax incrementfinancingplan, the authority shall certify to the county auditor that the activity has commenced and the county auditor shall certify the net tax capacity thereof as most recently certified by the commissioner of revenue and add it to the original net tax capacity of the tax incrementfinancing district. The county auditormust enforce theprovisions ofthis subdivision. The authority must submit to the county auditor evidence that the required activity has taken place for each parcel in the district. The evidence for a parcel must be submitted by February I of the fifth year following the year- in which the parcel was certified as included in the district. For purposes of this subdivision, qualified improvements of a street are limited to (1) construction or opening of a new street, (2) relocation of a street, and (3) substantial reconstruction or rebuilding of an existing street. Andover EDA Tax Increment Financing Plan for Tax Increment Financing District No. 1 -5 2 -11 The EDA or City or a property owner must improve parcels within the District by approximately May 2016 and report such actions to the County Auditor. Subsection 2 -20. Use of Tax Increment The EDA or City hereby determines that it will use 100 percent of the captured net tax capacity of taxable property located in the District for the following purposes: 1. To pay the principal of and interest on bonds issued to finance a project; 2. To finance, or otherwise pay the cost of redevelopment of Development District No. 1 pursuant to M.S., Sections 469.090 to 469.1082; 3. To pay for project costs as identified in the budget set forth in the TIF Plan; 4. To finance, or otherwise pay for other purposes as provided in M.S., Section 469.176, Subd. 4; 5. To pay principal and interest on any loans, advances or other payments made to or on behalf of the EDA or City or for the benefit of Development District No. 1 by a developer; 6. To finance or otherwise pay premiums and other costs for insurance or other security guaranteeing the payment when due of principal of and interest on bonds pursuant to the TIF Plan or pursuant to M.S., Chapter 4620 M.S., Sections 469.152 through 469.165, and /or M.S., Sections 469.178; and 7. To accumulate or maintain a reserve securing the payment when due of the principal and interest on the tax increment bonds or bonds issued pursuant to M.S., Chapter 462C, M.S., Sections 469.152 through 469.165, and/or M.S., Sections 469.178. Revenues derived from tax increment from a housing district must be used solely to finance the cost of housing projects as defined in M.S., Sections 469.174, Subd 11 and 469.1761. The cost of public improvements directly related to the housing projects and the allocated administrative expenses of the EDA or City may be included in the cost of a housing project. These revenues shall not be used to circumvent any levy limitations applicable to the City nor for other purposes prohibited by M.S., Section 469.176, Subd. 4. Tax increments generated in the District will be paid by Anoka County to the EDA for the Tax Increment Fund of said District. The EDA or City will pay to the developer(s) annually an amount not to exceed an amount as specified in a developer's agreement to reimburse the costs of land acquisition, public improvements, demolition and relocation, site preparation, and administration. Remaining increment funds will be used for EDA or City administration (up to 10 percent) and for the costs of public improvement activities outside the District. Subsection 2 -21. Excess Increments Excess increments, as defined in M.S., Section 469.176, Subd. 2, shall be used only to do one or more of the following: 1. Prepay any outstanding bonds; 2. Discharge the pledge of tax increment for any outstanding bonds; 3. Pay into an escrow account dedicated to the payment of any outstanding bonds; or 4. Return the excess to the County Auditor for redistribution to the respective taxing jurisdictions in proportion to their local tax rates. The EDA or City must spend or return the excess increments under paragraph (c) within nine months after the end of the year. In addition, the EDA or City may, subject to the limitations set forth herein, choose to modify the TIF Plan in order to finance additional public costs in Development District No. 1 or the District. Andover EDA Tax Increment Financing Plan for Tax Increment Financing District No. 1 -5 2.12 Subsection 2 -22. Requirements for Agreements with the Developer The EDA or City will review any proposal for private development to determine its conformance with the Development Program and with applicable municipal ordinances and codes. To facilitate this effort, the following documents may be requested for review and approval: site plan, construction, mechanical, and electrical system drawings, landscaping plan, grading and storm drainage plan, signage system plan, and any other drawings or narrative deemed necessary by the EDA or City to demonstrate the conformance of the development with City plans and ordinances. The EDA or City may also use the Agreements to address other issues related to the development. Pursuant to M.S., Section 469.176, Subd. 5, no more than 10 percent, by acreage, of the property to be acquired in the District as set forth in the TIF Plan shall at any time be owned by the EDA or City as a result of acquisition with the proceeds of bonds issued pursuant to M.S., Section 469.178 to which tax increments from property acquired is pledged, unless prior to acquisition in excess of 10 percent of the acreage, the EDA or City concluded an agreement for the development of the property acquired and which provides recourse for the EDA or City should the development not be completed. Subsection 2 -23. Assessment Agreements Pursuant to M.S. Section 469.177, Subd. 8, the EDA or City may enter into a written assessment agreement in recordable form with the developer of property within the District which establishes a minimum market value of the land and completed improvements for the duration of the District. The assessment agreement shall be presented to the County Assessor who shall review the plans and specifications for the improvements to be constructed, review the market value previously assigned to the land upon which the improvements are to be constructed and, so long as the minimum market value contained in the assessment agreement appears, in the judgment of the assessor, to be a reasonable estimate, the County Assessor shall also certify the minimum market value agreement. Subsection 2 -24. Administration of the District Administration of the District will be handled by the City Administrator. Subsection 2 -25. Annual Disclosure Requirements Pursuant to M.S., Section 469.175, Subds. 5, 6, and 6b the EDA or City must undertake financial reporting for all tax increment financing districts to the Office of the State Auditor, County Board and County Auditor on or before August 1 of each year. M.S., Section 469.175, Subd. 5 also provides that an annual statement shall be published in a newspaper of general circulation in the City on or before August 15. If the City fails to make a disclosure or submit a report containing the information required by M.S., Section 469.175 Subd. 5 and Subd. 6, the OSA will direct the County Auditor to withhold the distribution of tax increment from the District. Subsection 2 -26. Reasonable Expectations As required by the TIF Act, in establishing the District, the determination has been made that the anticipated development would not reasonably be expected to occur solely through private investment within the reasonably foreseeable future. In making said determination, reliance has been placed upon written representation made by the developer to such effects and upon EDA and City staff awareness of the feasibility of developing the project site(s) within the District. Andover EDA Tax Increment Financing Plan for Tax Increment Financing District No. 1 -5 2 -13 Subsection 2-27. Other Limitations on the Use of Tax Increment 1. General Limitations. All revenue derived from tax increment shall be used in accordance with the TIF Plan. The revenues shall be used to finance, or otherwise pay the cost of redevelopment of the the Development District No. 1 pursuant to M.S., Sections 469.090 to 469.1082. Tax increments may not be used to circumvent existing levy limit law. No tax increment may be used for the acquisition, construction, renovation, operation, or maintenance of a building to be used primarily and regularly for conducting the business of a municipality, county, school district, or any other local unit of government or the state or federal government. This provision does not prohibit the use of revenues derived from tax increments for the construction or renovation of a parking structure. 2. Housing District Exceptions to Restriction on Pooling; Five Year Limit. Pursuant to M.S., Section 469.1763, (1) At least 80% of the tax increment derived from the District must be expended on Public Costs incurred within said district, and up to 20% of said tax increments may be spent on Public Costs incurred outside of the District but within the Development District No. 1; provided that in the case of a housing district, a housing project, as defined in M.S., Section 469.174, Subd. 11, is deemed to be an activity in the District, even if the expenditure occurred after five years. Subsection 2 -28. Summary The City and EDA is establishing the District to provide an impetus for residential development and to provide safe and decent life cycle housing in the City. The TIF Plan for the District was prepared by Ehlers & Associates, Inc., 3060 Centre Pointe Drive, Roseville, Minnesota 55113 -1105, telephone (651) 697 -8500. Andover EDA Tax Increment Financing Plan for Tax Increment Financing District No. 1 -5 2 -14 Appendix A Project Description Arbor Oaks Senior Living, LLC is proposing to construct a 70 -unit senior rental housing development with services (assisted living). The current proposal contemplates a mix of independent living apartments (8), assisted living apartments (48) and memory support studio units (14). The apartment units offer a variety of 1 and 2 bedroom floor plans that also include a complete kitchen with appliances. Apartment units range in size from 599 sq /ft to 880 sq /ft and the memory support studio units are approximately 380 sq /ft. 20% of the units will be affordable to persons at or below 50% of the area median income. Construction is expected to commence in 2012 and the facility will be open in late 2013. The project will be financed with a pay- as -you- go note. Appendix A -1 Appendix B Map of the Development District No. 1 and the District Appendix B -1 Appendix C Description of Property to be Included in the District The District encompasses all property and adjacent rights -of -way and abutting roadways identified by the parcels listed below. 22- 32 -24 -11 -0024 1640 155' Lane NW Grey Oaks Inc. 22- 32 -24 -11 -0025 1 1678 155` Lane NW I Grey Oaks Inc. Appendix C -1 Appendix D Estimated Cash Flow for the District Appendix D -1 d m w a N C O n E J N N Q m J m m m w w @ w C C C C N N"LLN N N N O O O O N N N N w w w w aaaa ovooe ��oino orno �OI�p O O ^ N o s o 0 0 o e 'g 0 Oo0� u� Oi0 0.O YJOONI2 ON ONO C Q E Z m a 0 c o m m E a C - O C m m - CZ y= V J N 0 N if X m5 c d m y O 6Y U Ln C H �VJ � Z• N LL E6 m LL O N J #�> 1p Chi oOOWOU� _ CCW OboE YOtidw O C d C '� J _. u E U m ti 0. W m a x o c r° `� O °@ a 0 Q F Z 0 q > W 0 N N 0 N N T c o in c a d° E Z d 0 0 m N% N g y V i U V X O d �OULL W � =LLILF V }CLL =1L Ii. 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PAUL - BLOOMINGTON MSA MEDIAN INCOME: $82,700 No. of Persons 50% of Median Income 60% of Median Income 1- person $28,950 $34,740 2- person $33,100 $39,720 3- person $37,250 $44,700 IL 4- erson $41,350 $49,620 Source: Department of Housing and Urban Development and Minnesota Housing Finance Agency The two options for income limits on a standard housing district are 20% of the units at 50% of median income or 40% of the units at 60% of median income. The developer has selected 20% of the units to be affordable at 50% of median income. ** *PLEASE NOTE: THESE NUMBERS ARE ADJUSTED ANNUALLY. ALL INCOME FIGURES REPORTED ON THIS PAGE ARE FOR 2011. Appendix E -1 Appendix F Findings for the District The reasons and facts supporting the findings for the adoption of the Tax Increment Financing Plan for Tax Increment Financing District No. 1 -5, as required pursuant to Minnesota Statutes, Section 469.175, Subdivision 3 are as follows: Finding that Tax Increment Financing District No. 1 -5 is a housing district as defined in M.S., Section 469.174, Subd. IL. TIF District No. 1 -5 consists of 2 parcels. The development will consist of senior rental housing. All or a portion of which will receive tax increment assistance and will meet income restrictions described in M.S. 469.1761. At least 20 percent of the units/homes receiving assistance will have incomes at or below 50 percent of statewide median income. Appendix E of the TIF Plan contains background for the above finding. 2. Finding that the proposed development, in the opinion of the City Council, would not reasonably be expected to occur solely through private investment within the reasonably foreseeable future. The proposed development, in the opinion of the City, would not reasonably be expected to occur solely through private investment within the reasonablyforeseeablefuture: This finding is supported by the fact that the development proposed in this plan is an affordable, senior rental housing project that meets the City's objectives for development and redevelopment. The cost of land acquisition, site and public improvements and construction costs makes this housing development infeasible without City assistance. There are no price reductions provided by land sellers or construction contractors for affordable housing developments since they view all projects as market rate projects. With decreased rental income from the affordable units, there is less cash flow available to service the operating and debt expenses for the project and in return, less than market rate investment returns to the developer. The development needs some assistance to make up this short fall and thus this project is feasible only through assistance, in part, from tax increment financing. The developer was asked for and provided a letter and a proforma as justification that the developer would not have gone forward without tax increment assistance (see attachment in Appendix F of the TIF Plan). The increased market value of the site that could reasonably be expected to occur without the use of tax increment financing would be less than the increase in market value estimated to result from the proposed development after subtracting the present value of the projected tax increments for the maximum duration of the TIF District permitted by the TIF Plan: This finding is justified on the grounds that the cost of land acquisition, and site and public improvements add to the total development cost. Historically, site development costs in this area have made development infeasible without tax increment assistance. In addition, the sale price of the land is at the higher end, even for market rate developments, which means that even a market rate development would require assistance. Therefore, the City reasonably determines that no other development of similar scope is anticipated on this site without substantially similar assistance being provided to the development. Finding that the TIFPlan for Tax Increment Financing District No.1 -5 conforms to the general plan for the development or redevelopment of the municipality as a whole. The Planning Commission reviewed the TIF Plan and found that the TIF Plan conforms to the general development plan of the City. Appendix F -1 Appendix 4• Finding that the TIF Plan for Tax Increment Financing District No. 1 -S will afford maximum opportunity, consistent with the sound needs of the City as a whole, for the development or redevelopment of Development District No. I by private enterprise. Through the implementation of the TIF plan, the EDA or City will provide an impetus for residential development, which is desirable or necessary for increased population and an increased need for life - cycle housing within the City. F -2 L C I T Y • F 03 ^' yp 1685 CROSSTOWN BOULEVARD N.W. • ANDOVER, MINNESOTA 55304 • (763) 755 -5100 FAX (763) 755 -8923 • WWW.CI. ANDOVER. MN.US TO: Mayor and Councilmembers Jim Dickinson, City Administrator FROM: David L. Carlberg, Community Develo ent Director SUBJECT: Approve Internal Loan — Tax Increment Financing District No. 1 -5 DATE: May 1, 2012 INTRODUCTION The City Council is requested to review and approve an Internal Loan for Tax Increment Financing District No. 1 -5. DISCUSSION The attached resolution approving a $25,000 internal loan is recommended by the City's Fiscal Advisor (Ehlers and Associates) to comply with the State Auditor requirements for newly created TIF districts that may expend dollars before the tax increment is generated from the district and received. ACTION REQUESTED Review and approve the attached resolution approving the internal loan for TIF District 1 -5. Respectfully submitted, David L. Carlberg Attachments: Resolution Council member CITY OF ANDOVER ANOKA COUNTY STATE OF MINNESOTA introduced the following resolution and moved its adoption: RESOLUTION NO. RESOLUTION AUTHORIZING AN INTERFUND LOAN FOR ADVANCE OF CERTAIN COSTS IN CONNECTION WITH TAX INCREMENT FINANCING DISTRICT NO. 1-5. BE IT RESOLVED by the City Council (the "Council ") of the City of Andover, Minnesota (the "City "), as follows: Section 1. Background. 1.01. The City has heretofore approved the establishment of Tax Increment Financing District No. 1 -5 (the "TIF District ") within Development District No. 1 (the "Project "), and has adopted a Tax Increment Financing Plan (the "TIF Plan") for the purpose of financing certain improvements within the Project. 1.02. The City has determined to pay for certain costs identified in the TIF Plan consisting of administrative costs (collectively, the "Qualified Costs "), which costs may be financed on a temporary basis from City funds available for such purposes. 1.03. Under Minnesota Statutes, Section 469.178, Subd. 7, the City is authorized to advance or loan money from the City's general fund or any other fund from which such advances may be legally authorized, in order to finance the Qualified Costs. 1.04. The City intends to reimburse itself for the Qualified Costs from tax increments derived from the TIF District in accordance with the terms of this resolution (which terms are referred to collectively as the " Interfund Loan "). Section 2. Terms of Interfund Loan. 2.01. The City hereby authorizes the advance of up to $25,000 from the General fund or so much thereof as may be paid as Qualified Costs. The City shall reimburse itself for such advances together with interest at the rate stated below. Interest accrues on the principal amount from the date of each advance. The maximum rate of interest permitted to be charged is limited to the greater of the rates specified under Minnesota Statutes, Section 270C.40 or Section 549.09 as of the date the loan or advance is authorized, unless the written agreement states that the maximum interest rate will fluctuate as the interest rates specified under Minnesota Statutes, Section 270C.40 or Section 549.09 are from time to time adjusted. The interest rate shall be 4% and will not fluctuate. 2.02. Principal and interest ( "Payments ") on the Interfund Loan shall be paid semi - annually on each August 1 and February 1 (each a "Payment Date "), commencing on the first Payment Date on which the Authority has Available Tax Increment (defined below), or on any other dates determined by the City Administrator, through the date of last receipt of tax increment from the TIF District. 2.03. Payments on this Interfund Loan are payable solely from "Available Tax Increment," which shall mean, on each Payment Date, tax increment available after other obligations have been paid, or as determined by the City Administrator, generated in the preceding six (6) months with respect to the property within the TIF District and remitted to the City by Anoka County, all in accordance with Minnesota Statutes, Sections 469.174 to 469.1799, all inclusive, as amended. Payments on this Interfund Loan may be subordinated to any outstanding or future bonds, notes or contracts secured in whole or in part with Available Tax Increment, and are on parity with any other outstanding or future interfund loans secured in whole or in part with Available Tax Increment. 2.04. The principal sum and all accrued interest payable under this Interfund Loan are pre - payable in whole or in part at any time by the City without premium or penalty. No partial prepayment shall affect the amount or timing of any other regular payment otherwise required to be made under this Interfund Loan. 2.05. This Interfund Loan is evidence of an internal borrowing by the City in accordance with Minnesota Statutes, Section 469.178, Subd. 7, and is a limited obligation payable solely from Available Tax Increment pledged to the payment hereof under this resolution. This Interfund Loan and the interest hereon shall not be deemed to constitute a general obligation of the State of Minnesota or any political subdivision thereof, including, without limitation, the City. Neither the State of Minnesota, nor any political subdivision thereof shall be obligated to pay the principal of or interest on this Interfund Loan or other costs incident hereto except out of Available Tax Increment, and neither the full faith and credit nor the taxing power of the State of Minnesota or any political subdivision thereof is pledged to the payment of the principal of or interest on this Interfund Loan or other costs incident hereto. The City shall have no obligation to pay any principal amount of the Interfund Loan or accrued interest thereon, which may remain unpaid after the final Payment Date. 2.06. The City may amend the terms of this Interfund Loan at any time by resolution of the City Council, including a determination to forgive the outstanding principal amount and accrued interest to the extent permissible under law. Section 3. Effective Date. This resolution is effective upon the date of its approval. The motion for the adoption of the foregoing resolution was duly seconded by Council member and upon a vote being taken thereon, the following voted in favor thereof: and the following voted against the same: Dated: May 1, 2012 Mayor (Seal) ATTEST: City Clerk 1 ANLD6 06 VVE9 i0!1 1685 CROSSTOWN BOULEVARD N.W. • ANDOVER, MINNESOTA 55304 • (763) 755 -5100 FAX (763) 755 -8923 • WWW. ANDOVER. MN. US TO: Mayor and Council members Jim Dickinson, City Administrato FROM: David L. Carlberg, Community Development Director SUBJECT: Consider Development Agreement with Arbor Oaks Senior Living, LLC DATE: May 1, 2012 INTRODUCTION The City Council is requested to consider the Development Agreement with Arbor Oaks Senior Living, LLC. DISCUSSION The Agreement coincides with the creation of TIF District 1 -5 and the development of the 70 unit senior housing project to be known as Arbor Oaks. The Agreement lays out the terms of providing assistance and the type of financing involved. The Agreement also serves as the construction agreement spelling out the process for the approval of the construction plans, defining the minimum improvements to be constructed, as well as the schedule for construction of the improvements. ACTION REQUESTED Review Development Agreement and approve the attached resolution Respectfully submitted, David L. Carlberg Attachments: Resolution Development Agreement EXTRACT OF MINUTES OF MEETING OF THE CITY COUNCIL OF THE CITY OF ANDOVER, MINNESOTA HELD: May 1, 2012 Pursuant to due call and notice thereof, a meeting of the City Council of the City of Andover, Anoka County, Minnesota, was duly called and held at the City Hall in said City on Monday, the 15t day of May, 2012, at 7:00 o'clock p.m. The following members were present: and the following were absent: Member introduced the following resolution and moved its adoption: RESOLUTION AUTHORIZING EXECUTION OF A DEVELOPMENT AGREEMENT A. WHEREAS, [Trident Development LLC] (the "Developer ") has requested the City of Andover, Minnesota (the "City ") to assist with the financing of certain costs incurred in connection with the construction of an approximately 70 -unit senior rental housing development by the Developer (the "Project "). B. WHEREAS, the Developer and the City have determined to enter into a Development Agreement providing for the City's tax increment financing assistance for the Project (the "Development Agreement "). NOW, THEREFORE, BE IT RESOLVED by the City Council of the City of Andover, Minnesota, as follows: 1. The City Council hereby approves the Development Agreement in substantially the form submitted, and the Mayor and City Administrator are hereby authorized and directed to execute the Development Agreement on behalf of the City. 2. The approval hereby given to the Development Agreement includes approval of such additional details therein as may be necessary and appropriate and such modifications thereof, deletions therefrom and additions thereto as may be necessary and appropriate and approved by the City officials authorized by this resolution to execute the Development Agreement. The execution of the Development Agreement by the appropriate officer or officers of the City shall be conclusive evidence of the approval of the Development Agreement in accordance with the terms hereof. 4613514v1 The motion for adoption of the foregoing resolution was duly seconded by member and, after full discussion thereof, and upon a vote being taken thereof, the following voted in favor thereof: and the following voted against same: Adopted this 1St day of May, 2012. Attest: City Administrator PA 4613514v1 Mayor STATE OF MINNESOTA COUNTY OF ANOKA CITY OF ANDOVER I, the undersigned, being the duly qualified and acting Administrator of the City of Andover, Minnesota, DO HEREBY CERTIFY that I have carefully compared the attached and foregoing extract of minutes with the original minutes of a meeting of the City Council of the City held on the date therein indicated, which are on file and of record in my office, and the same is a full, true and complete transcript therefrom insofar as the same relates to a Resolution Authorizing Execution of a Development Agreement. WITNESS my hand as such Administrator of the City Council of the City of Andover, Minnesota this day of May, 2012. 3 4613514v1 City Administrator DEVELOPMENT AGREEMENT BY AND BETWEEN THE CITY OF ANDOVER, MINNESOTA I: co ARBOR OAKS SENIOR LIVING, LLC This document drafted by: BRIGGS AND MORGAN Professional Association 2200 First National Bank Building St. Paul, Minnesota 55101 4609895v2 TABLE OF CONTENTS Page ARTICLEI DEFINITIONS .................................................................. ............................... 2 Section1.1 Definitions ............................................................. ............................... 2 ARTICLE II REPRESENTATIONS AND WARRANTIES ................. ............................... 4 Section 2.1 Representations and Warranties of the City .......... ............................... 4 Section 2.2 Representations and Warranties of the Developer ............................... 4 ARTICLE III UNDERTAKINGS BY DEVELOPER AND CITY ........ ............................... 6 Section 3.1 Project, Development Property, Site Improvements; Legal and Administrative Expenses ...................................... ............................... 6 Section 3.2 Reimbursement: TIF Note .................................... ............................... 6 Section 3.3 Compliance with Low and Moderate Income Requirements .............. 7 Section 3.4 Replacement Reserve ............................................ ............................... 8 ARTICLE IV EVENTS OF DEFAULT .................................................. ............................... 9 Section 4.1 Events of Default Defined .................................... ............................... 9 Section 4.2 Remedies on Default ............................................. ............................... 9 Section 4.3 No Remedy Exclusive ........................................... .............................10 Section4.4 No Implied Waiver ............................................. ............................... 10 Section 4.5 Agreement to Pay Attorney's Fees and Expenses .............................. 10 Section 4.6 Indemnification of City ....................................... ............................... 10 ARTICLE V DEVELOPER'S OPTION TO TERMINATE AGREEMENT ..................... 12 Section 5.1 The Developer's Option to Terminate ................. ............................... 12 Section 5.2 Effect of Termination .......................................... ............................... 12 ARTICLE VI ADDITIONAL PROVISIONS ....................................... ............................... 13 Section 6.1 Restrictions on Use ............................................. ............................... 13 Section 6.2 Conflicts of Interest ............................................. ............................... 13 Section 6.3 Titles of Articles and Sections ............................ ............................... 13 Section 6.4 Notices and Demands ......................................... ............................... 13 Section6.5 Counterparts ........................................................ ............................... 14 Section 6.6 Law Governing ................................................... ............................... 14 Section6.7 Expiration ............................................................ ............................... 14 Section 6.8 Provisions Surviving Rescission or Expiration ... ............................... 14 Section6.9 Assignment ......................................................... ............................... 14 EXHIBIT A DESCRIPTION OF DEVELOPMENT PROPERTY ........... ............................... A -1 EXHIBITB FORM OF TIF NOTE ............................................................ ............................... B -1 EXHIBITC SITE IMPROVEMENTS ....................................................... ............................... C -1 EXHIBIT D COMPLIANCE CERTIFICATE ........................................... ............................... D -1 4609895v2 DEVELOPMENT AGREEMENT THIS AGREEMENT, made as of the I" day of May, 2012, by and between the City of Andover, Minnesota (the "City "), a municipal corporation organized and existing under the laws of the State of Minnesota and Arbor Oaks Senior Living, LLC, a Minnesota limited liability company, together with any successors and assigns, as provided herein (the "Developer "), WITNESSETH: WHEREAS, pursuant to Minnesota Statutes, Section 469.124 through 469.134, the City has heretofore established Development District No. 1 (the "Development District ") and has adopted a development program therefor (the "Development Program "); and WHEREAS, pursuant to the provisions of Minnesota Statutes, Section 469.174 through 469.1799, as amended, (hereinafter the "Tax Increment Act "), the City has heretofore created, within the Development District, Tax Increment Financing District No. 1 -5 (the "Tax Increment District ") and adopted a tax increment financing plan, dated May 1, 2012, (the "Tax Increment Plan ") therefor which provides for the use of tax increment financing in connection with certain development within the Development District; and WHEREAS, in order to achieve the objectives of the Development Program and particularly to make the land in the Development District available for development by private enterprise in conformance with the Development Program, the City has determined to assist the Developer with the financing of certain costs of a Project (as hereinafter defined) to be constructed within the Tax Increment District as more particularly set forth in this Agreement; and WHEREAS, the City believes that the development and construction of the Project, and fulfillment of this Agreement are vital and are in the best interests of the City, the health, safety, morals and welfare of residents of the City, and in accordance with the public purpose and provisions of the applicable state and local laws and requirements under which the Project has been undertaken and is being assisted. NOW, THEREFORE, in consideration of the premises and the mutual obligations of the parties hereto, each of them does hereby covenant and agree with the other as follows: 4609895v2 ARTICLE I DEFINITIONS Section 1.1 Definitions. All capitalized terms used and not otherwise defined herein shall have the following meanings unless a different meaning clearly appears from the context: Agreement means this Agreement, as the same may be from time to time modified, amended or supplemented; Business Day means any day except a Saturday, Sunday or a legal holiday or a day on which banking institutions in the City are authorized by law or executive order to close; City means the City of Andover, Minnesota; Compliance Certificate means the Compliance Certificate in substantially the form attached hereto as Exhibit D; Count means Anoka County, Minnesota, in which the Development Property is located; Developer means Arbor Oaks Senior Living, LLC, its successors and assigns; Development District means Development District No. 1, including the real property described in the Development Program; Development Pro g am means the development program approved in connection with the Development District; Development Property means the real property described in Exhibit A attached to this Agreement; Event of Default means any of the events described in Section 4.1 hereof, Legal and Administrative Expenses means the fees and expenses incurred by the City in connection with the adoption and administration of the Tax Increment Financing Plan, the preparation of this Agreement and the issuance of the TIF Note; Note Payment Date means August 1, 2014, and each August 1 and February 1 of each year thereafter to and including February 1, 2029; provided, that if any such Note Payment Date should not be a Business Day, the Note Payment Date shall be the next succeeding Business Day; Prime Rate means the rate of interest from time to time publicly announced by U.S. Bank National Association in Minneapolis, Minnesota, as its "reference rate" or any successor rate, which rate shall change as and when that prime rate or successor rate changes; Project means an approximately 70 -unit senior rental housing development to be located on the Development Property; 2 4609895v2 Site Improvements means the site improvements undertaken or to be undertaken on the Development Property, more particularly described on Exhibit C attached hereto; State means the State of Minnesota; Tax Increments means 90% of the tax increments derived from the Development Property which have been received and retained by the City in accordance with the provisions of Minnesota Statutes, Section 469.177; Tax Increment Act means Minnesota Statutes, Sections 469.174 through 469.1799, as amended; Tax Increment District means Tax Increment Financing District No. 1 -5 located within the Development District, a description of which is set forth in the Tax Increment Financing Plan, which was qualified as a housing district under the Tax Increment Act; Tax Increment Financing Plan means the tax increment financing plan approved for the Tax Increment District by the City Council on May 1, 2012; Termination Date means the earlier of (i) February 1, 2029, (ii) the date the TIF Note is paid in full, (iii) the date on which the Tax Increment District expires or is otherwise terminated, or (iv) the date this Agreement is terminated or rescinded in accordance with its terms; TIF Note means the Tax Increment Revenue Note ([Trident Development] Project) to be executed by the City and delivered to the Developer pursuant to Article III hereof, a copy of which is attached hereto as Exhibit B. Unavoidable Delays means delays, outside the control of the party claiming its occurrence, which are the direct result of strikes, other labor troubles, unusually severe or prolonged bad weather, acts of God, fire or other casualty to the Project, litigation commenced by third parties which, by injunction or other similar judicial action or by the exercise of reasonable discretion, directly results in delays, or acts of any federal, state or local governmental unit (other than the City) which directly result in delays. 3 4609895v2 ARTICLE II REPRESENTATIONS AND WARRANTIES Section 2.1 Representations and Warranties of the City. The City makes the following representations and warranties: (1) The City is a municipal corporation and has the power to enter into this Agreement and carry out its obligations hereunder. (2) Based on the representation of the Developer set forth in Section 3.3 below, the Tax Increment District is a "housing district" within the meaning of Minnesota Statutes, Section 469.174, Subdivision 11, and was created, adopted and approved in accordance with the terms of the Tax Increment Act. (3) The development of the Project, contemplated by this Agreement is in conformance with the development objectives set forth in the Development Program. (4) To finance certain costs within the Tax Increment District, the City proposes, subject to the further provisions of this Agreement, to apply Tax Increments to reimburse the Developer for a portion of the costs of the Development Property and the construction of certain Site Improvements incurred in connection with the Project as further provided in this Agreement. (5) The City makes no representation or warranty, either expressed or implied, as to the Development Property or its condition or the soil conditions thereon, or that the Development Property shall be suitable for the Developer' purposes or needs. Section 2.2 Representations and Warranties of the Developer. The Developer makes the following representations and warranties: (1) The Developer is a Minnesota limited liability company, has power to enter into this Agreement and to perform its obligations hereunder and, by doing so, is not in violation of any provisions of its organizational documents or the laws of the State. (2) The Developer shall cause the Project to be constructed in accordance with the terms of this Agreement, the Development Program, and all applicable local, state and federal laws and regulations (including, but not limited to, environmental, zoning, energy conservation, building code and public health laws and regulations). (3) The construction of the Project would not be undertaken by the Developer, and in the opinion of the Developer would not have been or be economically feasible within the reasonably foreseeable future, without the assistance and benefit to the Developer provided for in this Agreement. (4) The Developer will use its best efforts to obtain, or cause to be obtained, in a timely manner, all required permits, licenses and approvals, and will meet, in a timely manner, all requirements of all applicable local, state, and federal laws and regulations which must be obtained or met before the balance of the Project may be lawfully constructed. El 4609895v2 (5) Neither the execution and delivery of this Agreement, the consummation of the transactions contemplated hereby, nor the fulfillment of or compliance with the terms and conditions of this Agreement is prevented, limited by or conflicts with or results in a breach of, the terms, conditions or provision of any contractual restriction, evidence of indebtedness, agreement or instrument of whatever nature to which the Developer is now a party or by which it is bound, or constitutes a default under any of the foregoing. (6) The Developer will cooperate fully with the City with respect to any litigation commenced with respect to the Project. (7) The Developer will cooperate fully with the City in resolution of any traffic, parking, trash removal or public safety problems which may arise in connection with the construction and operation of the Project. (8) The construction of the Project shall commence no later than September 30, 2012 and barring Unavoidable Delays, the Project will be substantially completed by December 31, 2013. (9) The Developer will not seek a reduction in the market value as determined by the Anoka County Assessor of the Project or other facilities that it constructs on the Development Property, pursuant to the provisions of this Agreement, for so long as the TIF Note remains outstanding. b] 4609895v2 ARTICLE III UNDERTAKINGS BY DEVELOPER AND CITY Section 3.1 Project Development Property Site Improvements, Legal and Administrative Expenses. (1) The parties agree that the acquisition of the Development Property and the installation of the Site Improvements are essential to the successful completion of the Project. The costs of the Site Improvements shall be paid by the Developer. The City shall reimburse the Developer for up to $540,000 of the costs of acquisition of the Development Property and the Site Improvements actually incurred and paid by the Developer (the "Reimbursement Amount ") as further provided in Section 3.2. (2) Upon execution of this Agreement, the Developer shall reimburse the City for its actual out of pocket Legal and Administrative Expenses incurred in connection with the adoption of the Tax Increment Financing Plan and the preparation of this Agreement. Section 3.2 Reimbursement: TIF Note. The City shall reimburse the payments made by the Developer under Section 3.1 for costs of acquisition of the Development Property and the construction of the Site Improvements through the issuance of the City's TIF Note in substantially the form attached to this Agreement as Exhibit B, subject to the following conditions:: (1) The TIF Note shall be dated, issued and delivered when the Developer shall have demonstrated in writing to the reasonable satisfaction of the City that the construction of the Site Improvements and the Project has been completed and that the Developer has incurred and paid all costs of acquisition of the Development Property and the construction of Site Improvements, as described in and limited by Section 3.1 and shall have submitted paid invoices for the costs of construction of the Site Improvements in an amount not less than the Reimbursement Amount. (2) The unpaid principal amount of the TIF Note shall bear simple, non - compounding interest from the date of issuance of the TIF Note, at 5.00% per annum. Interest shall be computed on the basis of a 360 day year consisting of twelve (12) 30 -day months. The principal amount of the TIF Note and the interest thereon shall be payable solely from the Tax Increments. (3) The payment dates of the TIF Note shall be the Note Payment Dates. On each Note Payment Date and subject to the provisions of the TIF Note, the City shall pay, against the principal and interest outstanding on the TIF Note, the Tax Increments received by the City during the preceding six months. All such payments shall be applied first,to accrued interest and then to reduce the principal of the TIF Note. (4) The TIF Note shall be a special and limited obligation of the City and not a general obligation of the City, and only Tax Increments shall be used to pay the principal of and interest on the TIF Note. If, on any Note Payment Date, the Tax Increments for the payment of the accrued and unpaid interest on the TIF Note are insufficient for such purposes, the difference shall be carried forward, without interest accruing thereon, and shall be paid if and to the extent that on a future Note Payment Date there are Tax Increments in excess of the amounts needed to pay the accrued interest then due on the TIF Note G9 4609895v2 (5) The City's obligation to make payments on the TIF Note on any Note Payment Date or any date thereafter shall be conditioned upon the requirement that there shall not at that time be an Event of Default that has occurred and is continuing under this Agreement. (6) The TIF Note shall be governed by and payable pursuant to the additional terms thereof, as set forth in Exhibit B. In the event of any conflict between the terms of the TIF Note and the terms of this Section 3.2, the terms of the TIF Note shall govern. The issuance of the TIF Note pursuant and subject to the terms of this Agreement, and the taking by the City of such additional actions as bond counsel for the TIF Note may require in connection therewith, are hereby authorized and approved by the City. Section 3.3 Compliance with Low and Moderate Income Requirements. (1) The City and the Developer understand and agree that the Tax Increment District will constitute a "housing district" under Section 469.174, Subd. 11 of the Tax Increment Act. Accordingly, in compliance with Section 469.1761, Subd. 3 of the Tax Increment Act, the Developer agrees that the Project must satisfy, or be treated as satisfying, the income requirements for a qualified residential rental project as defined in Section 142(d) of the Internal Revenue Code. The parties further agree that no more than 20% of the square footage of the Project (which is the only building receiving assistance from Tax Increments) may consist of commercial, retail, or other nonresidential uses. The Developer must meet the above requirements as follows: (A) At least 20% of the residential units in the Project must be occupied or available for occupancy by persons whose incomes do not exceed 50% of the County median income; and (B) The limits described in clause (A) must be satisfied through the Termination Date. Income for occupants of units described in clause (A) shall be adjusted for family size in accordance with Section 142(d) of the Internal Revenue Code and related regulations. (2) On or before each January 1 and July 1, commencing on July 1, 2014, the Developer or an agent of the Developer must deliver or cause to be delivered to the City a Compliance Certificate executed by the Developer covering the preceding six 6 months together with written evidence satisfactory to the City of compliance with the covenants in this Section. This evidence must include a statement of the household income of each of qualifying renter, a written determination that each qualifying renter's household income falls within the qualifying limits of this Section (and Section 142(d) of the Internal Revenue Code), and certification that the income documentation is correct and accurate (and that the determination of qualification was made in compliance with Section 142(d) of the Internal Revenue Code). The City may review, upon request, all documentation supporting the Developer submissions and statements. In determining compliance with this Section, the Developer must use the County median incomes for the year in which the payment is due on the TIF Note, as promulgated by the Minnesota Housing Finance Agency based on the area median incomes established by the United States Department of Housing and Urban Development. 7 4609895v2 Section 3.4 Replacement Reserve. (1) Commencing in , 201_, Developer shall make deposits to a replacement reserve account in an amount equal to $500 per unit per year. Such deposits shall continue until the TIF Note has terminated by maturity or otherwise. The Development may use amounts on hand in such replacement reserve account to pay the cost of capital expenditures related to the Project, including the cost of replacement, repair, reconstruction, or restoration of the Project. All income realized from the investment of the replacement reserve account shall be credited as received to such account and may be applied against the required deposit. (2) On or before April 1 of each year, commencing April 1, 2015, Developer shall deliver to the City a copy of its annual financial statements as prepared by Developer's certified public accountant, and including income statements and balance sheet, which shall include evidence of the deposits to the replacement reserve account. In the event that the Developer has failed to make the required annual deposit, as shown on the annual financial statements, Developer shall have 60 days from the date the financial statements are delivered to the City to make such deposit and shall provide the City with written evidence that such deposit has been made within such 60 -day period. 0 4609895v2 ARTICLE IV EVENTS OF DEFAULT Section 4.1 Events of Default Defined. The following shall be "Events of Default" under this Agreement and the term "Event of Default" shall mean whenever it is used in this Agreement any one or more of the following events: (1) Failure by the Developer to timely pay any ad valorem real property taxes assessed, special assessments or other City charges with respect to the Development Property when due and payable. (2) Failure by the Developer to cause the construction of the Project to be completed pursuant to the terms, conditions and limitations of this Agreement. (3) Failure of the Developer to observe or perform any other covenant, condition, obligation or agreement on its part to be observed or performed under this Agreement. (4) The holder of any mortgage on the Development Property or any improvements thereon, or any portion thereof, commences foreclosure proceedings as a result of any default under the applicable mortgage documents. (5) If the Developer shall: (A) file any petition in bankruptcy or for any reorganization, arrangement, composition, readjustment, liquidation, dissolution, or similar relief under the United States Bankruptcy Act of 1978, as amended or under any similar federal or state law; or (B) make an assignment for the benefit of its creditors; or (C) admit in writing its inability to pay its debts generally as they become due; or (D) be adjudicated as bankrupt or insolvent; or if a petition or answer proposing the adjudication of the Developer as bankrupt or its reorganization under any present or future federal bankruptcy act or any similar federal or state law shall be filed in any court and such petition or answer shall not be discharged or denied within sixty (60) days after the filing thereof; or a receiver, trustee or liquidator of the Developer, or of the Project, or part thereof, shall be appointed in any proceeding brought against the Developer, and shall not be discharged within sixty (60) days after such appointment, or if the Developer, shall consent to or acquiesce in such appointment. Section 4.2 Remedies on Default. Whenever any Event of Default referred to in Section 4.1 occurs and is continuing, the City, as specified below, may take any one or more of the following actions after the giving of thirty (30) days' written notice to the Developer, but only if the Event of Default has not been cured within said thirty (30) days: 0 4609895v2 (1) The City may suspend its performance under this Agreement and the TIF Note until it receives assurances from the Developer, deemed adequate by the City, that the Developer will cure its default and continue its performance under this Agreement. (2) The City may cancel and terminate the Agreement and the TIF Note. (3) The City may take any action, including legal or administrative action, in law or equity, which may appear necessary or desirable to enforce performance and observance of any obligation, agreement, or covenant of the Developer under this Agreement. Section 4.3 No Remedy Exclusive. No remedy herein conferred upon or reserved to the City is intended to be exclusive of any other available remedy or remedies, but each and every such remedy shall be cumulative and shall be in addition to every other remedy given under this Agreement or now or hereafter existing at law or in equity or by statute. No delay or omission to exercise any right or power accruing upon any default shall impair any such right or power or shall be construed to be a waiver thereof, but any such right and power may be exercised from time to time and as often as may be deemed expedient. Section 4.4 No Implied Waiver. In the event any agreement contained in this Agreement should be breached by any party and thereafter waived by any other party, such waiver shall be limited to the particular breach so waived and shall not be deemed to waive any other concurrent, previous or subsequent breach hereunder. Section 4.5 Agreement to Pay Attorney's Fees and Expenses. Whenever any Event of Default occurs and the City shall employ attorneys or incur other expenses for the collection of payments due or to become due or for the enforcement or performance or observance of any obligation or agreement on the part of the Developer herein contained, the Developer agrees that it shall, on demand therefor, pay to the City the fees of such attorneys and such other reasonable expenses so incurred by the City. Section 4.6 Indemnification of City. (1) The Developer releases from and covenants and agrees that the City, its governing body members, officers, agents, including the independent contractors, consultants and legal counsel, servants and employees thereof (hereinafter, for purposes of this Section, collectively the "Indemnified Parties ") shall not be liable for and agrees to indemnify and hold harmless the Indemnified Parties against any loss or damage to property or any injury to or death of any person occurring at or about or resulting from any defect in the Project, provided that the foregoing indemnification shall not be effective for any actions of the Indemnified Parties that are not contemplated by this Agreement. (2) Except for any willful misrepresentation or any willful or wanton misconduct of the Indemnified Parties, the Developer agrees to protect and defend the Indemnified Parties, now and forever, and further agrees to hold the aforesaid harmless from any claim, demand, suit, action or other proceeding whatsoever by any person or entity whatsoever arising or purportedly arising from the actions or inactions of the Developer (or other persons acting on its behalf or under its direction or control) under this Agreement, or the transactions contemplated hereby or the acquisition, construction, installation, ownership, and operation of the Project; provided, that 10 4609895v2 this indemnification shall not apply to the warranties made or obligations undertaken by the City in this Agreement or to any actions undertaken by the City which are not contemplated by this Agreement but shall, in any event and without regard to any fault on the part of the City, apply to any pecuniary loss or penalty (including interest thereon from the date the loss is incurred or penalty is paid by the City at a rate equal to the Prime Rate) as a result of the Developer operating the Project so that the Tax Increment District does not qualify or ceases to qualify as a "housing district" under Section 469.174, Subdivision 11, of the Act or to violate limitations as to the use of Tax Increments as set forth in Section 469.176, Subdivision 4d. (3) All covenants, stipulations, promises, agreements and obligations of the City contained herein shall be deemed to be the covenants, stipulations, promises, agreements and obligations of the City and not of any governing body member, officer, agent, servant or employee of the City. 11 4609895v2 ARTICLE V DEVELOPER'S OPTION TO TERMINATE AGREEMENT Section 5.1 The Developer's Option to Terminate. This Agreement may be terminated by Developer, if (i) the Developer is in compliance with all material terms of this Agreement and no Event of Default has occurred; and (ii) the City fails to comply with any material term of this Agreement, and, after written notice by the Developer of such failure, the City has failed to cure such noncompliance within ninety (90) days of receipt of such notice, or, if such noncompliance cannot reasonably be cured by the City within ninety (90) days, of receipt of such notice, the City has not provided assurances, reasonably satisfactory to the Developer, that such noncompliance will be cured as soon as reasonably possible. Section 5.2 Effect of Termination. If this Agreement is terminated pursuant to this Article V, this Agreement shall be from such date forward null and void and of no further effect; provided, however, the termination of this Agreement shall not affect the rights of either party to institute any action, claim or demand for damages suffered as a result of breach or default of the terms of this Agreement by the other party, or to recover amounts which had accrued and become due and payable as of the date of such termination. Upon termination of this Agreement pursuant to this Article V, the Developer shall be free to proceed with the Project at its own expense and without regard to the provisions of this Agreement; provided, however, that the City shall have no further obligations to the Developer with respect to reimbursement of the expenses set forth in Section 3.2, or to make any further payments on the TIF Note. 12 4609895v2 ARTICLE VI ADDITIONAL PROVISIONS Section 6.1 Restrictions on Use. The Developer agrees for itself, its successors and assigns and every successor in interest to the Development Property, or any part thereof, that during the term of this Agreement the Developer and such successors and assigns shall operate, or cause to be operated, the Project as a senior rental housing facility and shall devote the Development Property to, and in accordance with, the uses specified in this Agreement. Section 6.2 Conflicts of Interest. No member of the governing body or other official of the City shall have any financial interest, direct or indirect, in this Agreement, the Development Property or the Project, or any contract, agreement or other transaction contemplated to occur or be undertaken thereunder or with respect thereto, nor shall any such member of the governing body or other official participate in any decision relating to the Agreement which affects his or her personal interests or the interests of any corporation, partnership or association in which he or she is directly or indirectly interested. No member, official or employee of the City shall be personally liable to the City in the event of any default or breach by the Developer or successor or on any obligations under the terms of this Agreement. Section 6.3 Titles of Articles and Sections. Any titles of the several parts, articles and sections of the Agreement are inserted for convenience of reference only and shall be disregarded in construing or interpreting any of its provisions. Section 6.4 Notices and Demands. Except as otherwise expressly provided in this Agreement, a notice, demand or other communication under this Agreement by any party to any other shall be sufficiently given or delivered if it is dispatched by registered or certified mail, postage prepaid, return receipt requested, or delivered personally, and (1) in the case of the Developer is addressed to or delivered personally to: Arbor Oaks Senior Living, LLC Attention: Roger D. Fink 3601 18th Street South, Suite 103 St. Cloud, Minnesota 56301 (2) in the case of the City is addressed to or delivered personally to the City at: City of Andover, Minnesota Attention: City Administrator 1685 Crosstown Boulevard NW Andover, Minnesota 55304 13 460989542 with a copy to: Briggs and Morgan, P.A. Attention: Mary Ippel W2200 First National Bank Building 332 Minnesota Street St. Paul, MN 55101 or at such other address with respect to any such party as that party may, from time to time, designate in writing and forward to the other, as provided in this Section. Section 6.5 CountMarts. This Agreement may be executed in any number of counterparts, each of which shall constitute one and the same instrument. Section 6.6 Law Governing. This Agreement will be governed and construed in accordance with the laws of the State. Section 6.7 Expiration. This Agreement shall expire on the Termination Date. Section 6.8 Provisions Surviving Rescission or Expiration. Sections 4.5 and 4.6 shall survive any rescission, termination or expiration of this Agreement with respect to or arising out of any event, occurrence or circumstance existing prior to the date thereof. Section 6.9 Assign ent. The Developer shall not assign its interest in this Agreement or the TIF Note without the consent of the City pursuant to action by the City Council, which consent shall not be unreasonably withheld. 14 4609895v2 IN WITNESS WHEREOF, the City has caused this Agreement to be duly executed in its name and on its behalf and its seal to be hereunto duly affixed, and the Developer has caused this Agreement to be duly executed on its behalf, on or as of the date first above written. CITY OF ANDOVER, MINNESOTA By Its Mayor By Its City Administrator This is a signature page to the Development Agreement by and between the City of Andover and Arbor Oaks Senior Living, LLC. S -1 4609895v2 ARBOR OAKS SENIOR LIVING, LLC By Its This is a signature page to the Development Agreement by and between the City of Andover and Arbor Oaks Senior Living, LLC. S -2 4609895v2 EXHIBIT A DESCRIPTION OF DEVELOPMENT PROPERTY Parcel Identification Numbers: 22- 32 -24 -11 -0024 22- 32 -24 -11 -0025 A -1 4609895v2 No. R -1 EXHIBIT B FORM OF TIF NOTE UNITED STATES OF AMERICA STATE OF MINNESOTA COUNTY OF ANOKA CITY OF ANDOVER TAX INCREMENT REVENUE NOTE (ARBOR OAKS SENIOR LIVING PROJECT) $540,000 The City of Andover, Minnesota (the "City "), hereby acknowledges itself to be indebted and, for value received, hereby promises to pay the amounts hereinafter described (the "Payment Amounts ") to Arbor Oaks Senior Living, LLC, or its registered assigns (the "Registered Owner "), but only in the manner, at the times, from the sources of revenue, and to the extent hereinafter provided. The principal amount of this Note shall equal from time to time the principal amount stated above, as reduced to the extent that such principal installments shall have been paid in whole or in part pursuant to the terms hereof; provided that the sum of the principal amount listed above shall in no event exceed $540,000 as provided in that certain Development Agreement, dated as of May 1, 2012, as the same may be amended from time to time (the "Development Agreement "), by and between the City and Arbor Oaks Senior Living, LLC The unpaid principal amount hereof shall bear interest from the date of this Note at the simple, non- compounding interest at a rate of five and zero hundredths percent (5.00 %) per annum. Interest shall be computed on the basis of a 360 day year consisting of twelve (12) 30 -day months. The amounts due under this Note shall be payable on August 1, 2014, and on each August 1 and February 1 thereafter to and including February 1, 2029, or, if the first should not be a Business Day (as defined in the Development Agreement) the next succeeding Business Day (the "Payment Dates "). On each Payment Date the City shall pay by check or draft mailed to the person that was the Registered Owner of this Note at the close of the last business day of the City preceding such Payment Date an amount equal to the Tax Increments (hereinafter defined) received by the City during the six month period preceding such Payment Date. All payments made by the Authority under this Note shall first be applied to accrued interest and then to principal. This Note is prepayable by the Authority, in whole or in part, on any date. The Payment Amounts due hereon shall be payable solely from 90% of the tax increments (the "Tax Increments ") from the Development Property (as defined in the Development Agreement) within the City's Tax Increment Financing District Tax Increment Financing District No. 1 -5 (the "Tax Increment District ") within its Development District No. 1 which are paid to the City and which the City is entitled to retain pursuant to the provisions of Minnesota Statutes, Sections 469.174 through 469.1799, as the same may be amended or supplemented from time to time (the "Tax Increment Act "). This Note shall terminate and be of 4609895v2 no further force and effect following the termination of the Tax Increment District, on any date upon which the City shall have terminated the Development Agreement under Section 4.2(2) thereof or the Developer shall have terminated the Development Agreement under Article V thereof, or on the date that all principal and interest payable hereunder shall have been paid in full, whichever occurs earliest. The City makes no representation or covenant, expressed or implied, that the Tax Increments will be sufficient to pay, in whole or in part, the amounts which are or may become due and payable hereunder. The City's payment obligations hereunder shall be further conditioned on the fact that no Event of Default under the Development Agreement shall have occurred and be continuing at the time payment is otherwise due hereunder, but such unpaid amounts shall become payable, without interest accruing thereon in the meantime, if said Event of Default shall thereafter have been cured; and, further, if pursuant to the occurrence of an Event of Default under the Development Agreement the City elects to cancel and rescind the Development Agreement, the City shall have no further debt or obligation under this Note whatsoever. Reference is hereby made to all of the provisions of the Development Agreement, including without limitation Section 3.2 thereof, for a fuller statement of the rights and obligations of the City to pay the principal of this Note, and said provisions are hereby incorporated into this Note as though set out in full herein. This Note is a special, limited revenue obligation and not a general obligation of the City and is payable by the City only from the sources and subject to the qualifications stated or referenced herein. This Note is not a general obligation of the City of Andover, Minnesota, and neither the full faith and credit nor the taxing powers of the City are pledged to the payment of the principal of this Note and no property or other asset of the City, save and except the above - referenced Tax Increments, is or shall be a source of payment of the City's obligations hereunder. This Note is issued by the City in aid of financing a project pursuant to and in full conformity with the Constitution and laws of the State of Minnesota, including the Tax Increment Act. This Note may be assigned only with the consent of the City. In order to assign the Note, the assignee shall surrender the same to the City either in exchange for a new fully registered note or for transfer of this Note on the registration records for the Note maintained by the City. Each permitted assignee shall take this Note subject to the foregoing conditions and subject to all provisions stated or referenced herein. IT IS HEREBY CERTIFIED AND RECITED that all acts, conditions, and things required by the Constitution and laws of the State of Minnesota to be done, to have happened, and to be performed precedent to and in the issuance of this Note have been done, have happened, and have been performed in regular and due form, time, and manner as required by law; and that this Note, together with all other indebtedness of the City outstanding on the date hereof and on the date of its actual issuance and delivery, does not cause the indebtedness of the City to exceed any constitutional, statutory or charter limitation thereon. B -2 4609895v2 IN WITNESS WHEREOF, City of Andover, Minnesota, by its City Council, has caused this Note to be executed by the manual signatures of its Mayor and City Administrator and has caused this Note to be issued on and dated , 20_. Mayor Administrator ff-M 4609895v2 CERTIFICATION OF REGISTRATION It is hereby certified that the foregoing Note, as originally issued on , 20_, was on said date registered in the name of Arbor Oaks Senior Living, LLC, and that, at the request of the Registered Owner of this Note, the undersigned has this day registered the Note in the name of such Registered Owner, as indicated in the registration blank below, on the books kept by the undersigned for such purposes. NAME AND ADDRESS OF REGISTERED OWNERS Arbor Oaks Senior Living, LLC 3601 18`h Street South, Suite 103 St. Cloud, Minnesota 56301 DATE OF REGISTRATION B -4 4609895v2 20 20 20 20 SIGNATURE OF CITY ADMINISTRATOR EXHIBIT C SITE IMPROVEMENTS Landscaping, including irrigation Foundations and Footings Grading/earthwork Engineering Survey Environmental Testing Soil Borings Site Preparation Onsite Utilities Storm Water/Ponding Outdoor Lighting Onsite Road, Curb, Gutter, Driveway, Sidewalk and Streetscape Improvements Parking C -1 4609895v2 EXHIBIT D COMPLIANCE CERTIFICATE The undersigned Arbor Oaks Senior Living, LLC, does hereby certify that as of the date of this Certificate not less than 20% of the residential units in the Arbor Oaks Senior Living Project located at in Andover, Minnesota (the "Project ") are occupied by individuals whose income is 50% or less of the Anoka County median income. Dated this day of 20 ARBOR OAKS SENIOR LIVING, LLC IIn Its 4609895v2 D -1 cis;_ 1685 CROSSTOWN BOULEVARD N.W. • ANDOVER, MINNESOTA 55304 • (763) 755 -5100 FAX (763) 755 -8923 • WWW.CI.ANDOVER.MN.US TO: Mayor and Councilmembers CC: Jim Dickinson, City Administrator / Finance FROM: Lee Brezinka, Assistant Finance Director SUBJECT: 2011 Audit Presentation — HLB Tautges Redpath DATE: May 1, 2012 INTRODUCTION Peggy Moeller, CPA, an Audit Partner with the City's auditing firm, HLB Tautges Redpath, will be providing a presentation to the City Council related to the City of Andover Comprehensive Annual Financial Report (CAFR) as of December 31, 2011 and the corresponding Management Report. A December 31, 2011 CAFR, the corresponding Management Report, a report on internal controls and a legal compliance report will be handed out prior to the meeting and will be the basis of Ms. Moeller's presentation. DISCUSSION The City is required to have an independent audit conducted annually. The 2011 Audit was conducted throughout the months of January, February, March and April. The Finance Staff was very involved in the audit process and enjoyed our excellent working relationship with HLB Tautges Redpath. Ms. Moeller's presentation will touch on the highlights of the City's finances and provide suggestions for improvement on reporting and internal controls. Of significant importance to the Council is that the City received an "unqualified opinion ". BUDGETIMPACT No budget impact; the presentation, financial report, corresponding management report, report on internal controls, independent auditor's report, report on legal compliance and a communication with those charged with governance are provided as informational. ACTION REQUIRED The Andover City Council is requested to receive a presentation from HLB Tautges Redpath and receive the City of Andover CAFR as of December 31, 2011, the corresponding Management Report, report on internal controls, independent auditor's report, report on legal compliance and a communication with those charged with governance. Respectfully submitted, Lee Brezinka 9 C I T Y 0 UNDOVE -oi'.y.^,^. 1685 CROSSTOWN BOULEVARD N.W. • ANDOVER, MINNESOTA 55304 • (763) 755 -5100 FAX (763) 755 -8923 • WWW.CI.ANDOVER.MN.US TO: Mayor and Council Members FROM: Jim Dickinson, City Administrator SUBJECT: Schedule May EDA meeting DATE: May 1, 2012 INTRODUCTION The Council is requested to schedule an Economic Development Authority (EDA) meeting at 6:00 pm before the May 15, 2012 City Council meeting. DISCUSSION Tentative agenda items for an EDA meeting have been identified as follows: 1. Approve Meeting Minutes 2. Parkside at Andover Station Update 3. Trident Development (Arbor Oaks) Update 4. Redevelopment Discussion 5. Other Business Other items may be added upon request, or the meeting will be cancelled if no new information comes forward on the identified agenda items. ACTION REQUIRED Schedule an EDA meeting at 6:00 pm before the May 15, 2012 City Council meeting. ed, C I T Y 0 F 1(p 11 r,' �+ T TV NDO , ������� 1685 CROSSTOWN BOULEVARD N.W. • ANDOVER, MINNESOTA 55304 • (763) 755 -5100 FAX (763) 755 -8923 • WWW.CI.ANDOVER.MN.US TO: FROM: SUBJECT: DATE: Mayor and Councilmembers Jim Dickinson, City Administrator Administrator's Report May 1, 2012 The City Administrator will give a brief verbal update on various items of interest to the City Council and to the residents at the meeting. Listed below are a few areas of interest: 1. Administration & City Department Activities 2. Legislative Updates 3. Update on Development /CIP Projects - Trident Development/Arbor Oaks - Wal -Mart proposal - Parkside at Andover Station - Platting activity 4. Meeting reminders /Community Events Upon receipt of the meeting packet, if a member of the Council would like an update on a particular item, please notify me so an adequate update can be made. 1685 CROSSTOWN BOULEVARD N.W. • ANDOVER, MINNESOTA 55304 • (763) 755 -5100 FAX (763) 755 -8923 • WWW.ANDOVERMN.GOV TO: Mayor & Council Members FROM: Jim Dickinson, City Administrator SUBJECT: Supplemental Agenda Item for May 1, 2012 City Council Meeting DATE: May 1, 2012 The City Council is requested to receive the following supplemental information. Consent Items Item #4. Award Bid /11- 40/133`d Avenue NW Reconstruction (Supplemental) - Engineering Discussion Items Item #14. Approve Development Agreement — Arbor Oaks Senior Living, LLC — Planning Remove item from agenda. submitted, City Administrator 1685 CROSSTOWN BOULEVARD N.W. • ANDOVER, MINNESOTA 55304 a (763) 755 -5100 FAX (763) 755 -8923 • WWW.ANDOVERMN.GOV TO: Mayor and Council Members CC: Jim Dickinson, City Administrator FROM: David D. Berkowitz, Director of Public Works /City Engineer SUBJECT: Award Bid /11- 40/133rd Avenue NW Reconstruction (Supplemental) - Engineering DATE: May 1, 2012 INTRODUCTION The City Council is requested to accept bids and award the bid for Project 11 -40, 133rd Avenue NW Reconstruction. DISCUSSION The reconstruction of 133rd Avenue NW between Hanson Boulevard and Crosstown Boulevard includes reclaiming the existing bituminous and repaving the roadway. The majority of the existing concrete curb and gutter will remain in place. Deteriorated storm sewer structures will be replaced. This is a joint project with the City of Coon Rapids. The City of Andover Engineering Department has prepared the plans and specifications and administered the bids. Andover staff will also be inspecting the work during construction. All project related costs will be split evenly with the City of Coon Rapids. Two properties within Andover and three properties in Coon Rapids that front 133rd Avenue will be assessed. The assessment rate for the two properties in Andover will be $1,500.00 per lot. The bid opening was held on April 27, 2012. The three lowest bids received are as follows: Contractor Bid Amount Rum River Contracting Co. $608,897.80 North Valley, Inc. $670,170.07 Knife River Corp. $713,585.85 Engineer's Estimate $700,410.00 Please refer to the attached bid tabulation for a breakdown of bids and unit prices. BUDGET IMPACT The project costs will be funded through the City's Road and Bridge Fund, Municipal State Aid Funds and special assessments to properties fronting along the improvements. Project costs will be split with the City of Coon Rapids. Mayor and Council Members May 1, 2012 Page 2 of 2 ACTION REQUIRED The City Council is requested to approve the resolution accepting bids and awarding the contract to Rum River Contracting in the amount of $608,897.80 for Projects 11 -40, 133rd Avenue NW Reconstruction. Respectfully submitted, David D. Berkowitz Attachments: Resolution & Bid Tabulation CITY OF ANDOVER COUNTY OF ANOKA STATE OF MINNESOTA RES. NO. MOTION by Council member to adopt the following: A RESOLUTION ACCEPTING BIDS AND AWARDING CONTRACT FOR THE IMPROVEMENT OF PROJECT NO. 11 -40, 133RD AVENUE NW RECONSTRUCTION. WHEREAS, pursuant to advertisement for bids as set out in Council Resolution No. 037 -12 dated April 3, 2012, bids were received, opened and tabulated according to law with results as follows: Rum River Contracting Co. $608,897.80 North Valley, Inc. $670,170.07 Knife River Corp. $713,585.85 NOW, THEREFORE, BE IT RESOLVED by the City Council of the City of Andover to hereby accept the bids as shown to indicate Rum River Contracting Co. as being the apparent low bidder. BE IT FURTHER RESOLVED TO HEREBY direct the Mayor and City Clerk to enter into a contract with .Rum River Contracting Co. in the amount of $608,897.80 for construction of the improvements; and direct the City Clerk to return to all bidders the deposits made with their bids, except that the deposit of the successful bidder and the next two lowest bidders shall be retained until the contract has been executed and bond requirements met. MOTION seconded by Council member and adopted by the City Council at a regular meeting this 1St day of May , 2012 , with Council members of the resolution, and Council members voting in favor voting against, whereupon said resolution was declared passed. ATTEST: Michelle Hartner — Deputy City Clerk CITY OF ANDOVER Michael R. 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SUBJECT: Approve Development Agreement — Arbor Oaks Senior Living, LLC - Planning (Supplemental) DATE: May 1, 2012 The City Council is requested to remove this item from the agenda. The developer has requested additional time to have their legal counsel review the agreement. Staff will schedule this item on a future Council agenda upon the completion of the review. 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, 2011 Prepared By: Finance Department City of Andover CITY OF ANDOVER, MINNESOTA TABLE OF CONTENTS Page Reference No. L 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 16 Basic Financial Statements: Government -Wide Financial Statements: Statement of Net Assets 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 Statement 5 37 Statement of Net Assets - Proprietary Funds Statement 6 38 Statement of Revenues, Expenses, and Changes in Fund Net Assets - Proprietary Funds Statement 7 40 Statement of Cash Flows - Proprietary Funds Statement 8 42 Statement of Fiduciary Net Assets - Fiduciary Funds Statement 9 44 Notes to Financial Statements 45 Required Supplementary Information: Budgetary Comparison Schedule - General Fund Statement 10 82 Schedule of Funding Progress - Other Post Employment Benefits Plan Statement 11 84 Notes to Required Supplementary Information: Budgets 85 Modified Approach for City Streets and Trails Infrastructure Capital Assets 85 Combining and Individual Fund Statements and Schedules: Nonmaj or Governmental Funds: Combining Balance Sheet - Nonmajor Governmental Funds Statement 12 89 Combining Statement of Revenues, Expenditures and Changes in Fund Balances - Nonmaj or Governmental Funds Statement 13 90 CITY OF ANDOVER, MINNESOTA TABLE OF CONTENTS Page Reference No. Nonmajor Special Revenue Funds: Subcombining Balance Sheet - Nonmajor Special Revenue Funds Statement 14 92 Subcombining Statement of Revenues, Expenditures and Changes in Fund Balances - Nonmajor Special Revenue Funds Statement 15 94 Nonmajor Debt Service Funds: Subcombining Balance Sheet - Nonmajor Debt Service Funds Statement 16 98 Subcombining Statement of Revenues, Expenditures and Changes in Fund Balances - Nonmajor Debt Service Funds Statement 17 100 Nonmajor Capital Projects Funds: Subcombining Balance Sheet - Nonmajor Capital Project Funds Statement 18 104 Subcombining Statement of Revenues, Expenditures and Changes in Fund Balances - Nonmajor Capital Project Funds Statement 19 106 Special Revenue Funds: Table 1 126 Schedules of Revenues, Expenditures and Changes in Table 2 128 Fund Balances - Budget and Actual: Table 3 132 EDA General Statement 20 108 Community Development Block Grant Statement 21 109 Community Center Statement 22 110 Drainage and Mapping Statement 23 111 LRRWMO Statement 24 112 Forestry Statement 25 113 Right -of -Way Management/Utility Statement 26 114 Charitable Gambling Statement 27 115 Construction Seal Coating Statement 28 116 Internal Service Funds: Combining Statement of Net Assets - Internal Service Funds Statement 29 118 Combining Statement of Revenues, Expenses, and Changes in Fund Net Assets - Internal Service Funds Statement 30 119 Combining Statement of Cash Flows - Internal Service Funds Statement 31 120 Agency Funds: Combining Statement of Net Assets - Fiduciary Funds Statement 32 122 Combining Statement of Changes in Assets and Liabilities - Fiduciary Funds Statement 33 123 III. STATISTICAL SECTION Net Assets by Component - Last Ten Fiscal Years Table 1 126 Changes in Net Assets - Last Ten Fiscal Years Table 2 128 Fund Balances - Governmental Funds - Last Ten Fiscal Years Table 3 132 Changes in Fund Balances - Governmental Funds - Last Ten Fiscal Years Table 4 134 Assessed and Estimated Actual Value of Taxable Property - Last Ten Fiscal Years Table 5 136 Property Tax Rates - Per $1,000 of Assessed Tax Capacity Value - Years 2003 through 2012 Table 6 137 Property Tax Levies and Collections - Last Six Fiscal Years Table 7 138 Principal Taxpayers - Current Year and Ten Years Ago Table 8 139 Estimated Market Values and New Construction - Last Ten Fiscal Years Table 9 140 Special Assessment Levies and Collections - Last Ten Fiscal Years Table 10 141 Ratio of Net Bonded Debt to Assessed Value and Net Bonded Debt Per Capita - Last Ten Fiscal Years Table 11 142 CITY OF ANDOVER, MINNESOTA TABLE OF CONTENTS Page Reference No. Computation of Direct and Overlapping Debt Table 12 143 Computation of Legal Debt Margin - Last Ten Fiscal Years Table 13 144 Pledged- Revenue Coverage - Last Ten Fiscal Years Table 14 146 Outstanding Debt by Type - Last Ten Fiscal Years Table 15 148 Demographic and Economic Statitistics - Last Ten Years Table 16 150 Principal Employers - Current Year and Ten Years Ago Table 17 151 Full Time Equivalent Employees - City Government Employees by Function / Program - Last Ten Fiscal Years Table 18 152 Operating Indicators by Function / Program - Last Ten Years Table 19 154 Capital Asset Statistics by Function / Program - Last Ten Years Table 20 156 IV. OTHER INFORMATION Combined Schedule of Indebtedness Exhibit 1 158 Schedule of Tax Capacity Rates and Levies Exhibit 2 160 Schedule of Deferred Tax Levies - General Obligation Bonds Exhibit 3 161 Schedule of Fund Transfers Exhibit 4 162 I. INTRODUCTORY SECTION 1685 CROSSTOWN BOULEVARD N.W.. ANDOVER, MINNESOTA 55304 . (763) 755 -5100 FAX (763) 755 -8923 . WWW.CI.ANDOVER.MN.US April 27, 2012 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: L Introductory 11. Financial III. Statistical The Introduction includes a list of the City's principal officials as of December 31, 2011, 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 30,850. 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 council 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 2011 and 2012, with an estimated population of 31,100 by 2012. 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 2011. 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 2011. They are general property taxes at 76 %, and charges for services at 9 %. 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, 2009, 2010 and 2011, the State of Minnesota significantly reduced MVHC to help deal with the state budget deficit. LGA, HACA and MVHC for 1998 through 2011 are as follows: Year LGA HACA MVHC Total 1998 $ 122,651 $ 378,975 $ - $ 501,626 1999 111,145 462,796 - 573,941 2000 119,752 490,37 - 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 * - - 198,14 198,214 2009 * - - 54,629 54,629 2010 * - - 3,872 3,872 2011 * - - 853 853 *Due to the State Legislative actions to deal with the state budget deficits, the City will not be receiving any LGA and significantly reduced MVHC. For 1998 through 2000, cities with populations over 2,500 were under levy limit restrictions imposed by the State. Levy limits severely curb the ability of cities to generate additional tax revenue needed to respond to an increasing demand for services. For 1999 and 2000, the levy limit formula was modified to allow for increases based on commercial and industrial growth. This was a favorable change for Andover, as the City experienced a surge in commercial growth during the past few years. Levy limits were lifted for 2001 but were reinstated for 2002 - 2004. The 2004 levy limits were so severe that the State did not allow cities the ability to capture residential and commercial market value growth. Levy limits were lifted from 2005 to 2008, but reinstated for 2009, 2010 and 2011. The City's General Fund receives a substantial amount of revenue from licenses and permits. The past ten years are shown below: Revenues Change 2002 $ 588,965 n/a 2003 551,385 $ (37,580) 2004 674,008 122,623 2005 724,436 50,428 2006 598,094 (126,342) 2007 475,893 (122,01) 2008 525,339 49,446 2009 291,903 (233,436) 2010 329,901 37,998 2011 387,206 57,305 Revenue from residential building continued to modestly increase through 2010 and 2011, 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 economy, To the Honorable Mayor and City Council City of Andover, Minnesota especially the construction industry. In 2010 and 2011, 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 2002 $ 689,427 n/a 2003 647,813 $ (41,614) 2004 798,795 150,982 2005 933,365 134,570 2006 780,273 (153,092) 2007 1,121,642 341,369 2008 772,430 (349,12) 2009 701,289 (71,141) 2010 755,184 53,895 2011 866,584 111,400 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 and 2011, 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- HennepinISD No 11 Fairview- Andover Clinic Anoka County Sherriffs Office Kottkes' Bus Service, Inc. Bunker Hills Regional P ark / Activity Center Target Meadow Creek Christian School Anoka County Highway Department Andover County Market Presbyterian Homes MAJOR INITIATIVES Number of Type of Business / Product Employees Elementary and secondary education 906 Medical clinic 300 County government and services 250 Bus transportation 225 County governmentand services 180 Retail 170 Private education K -12 127 County government and services 103 Retail 100 Senior housing and assisted living facilities 90 FOR THE YEAR. The City has many accomplishments to report for 2011. 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 263 rental licenses issued in 2011. To the Honorable Mayor and City Council City of Andover, Minnesota 2) Four street projects were completed in 2011. Three reconstruction projects (Rolling Forest, Genthon Pond, Crosstown Drive and Flintwood Street were funded by tax levy and special assessments. The Flintwood Street project did come to fruition after an Assessment Policy change where the City would contribute up to 50% of the cost to convert a gravel road to a paved road surface. The Crosstown Drive project was assessed at 15 % of total project cost, due primarily to the heavy traffic volumes on the street and the remaining projects were assessed at the standard 25 %. In the all the projects (except the Flintwood project), the existing bituminous was reclaimed, concrete curb was added in the development, storm sewer structures were replaced or added, and a new bituminous surface was laid. 3) The City redeveloped 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. 4) The City developed two hockey rinks and a warming house in cooperation with the Andover Huskies Youth Hockey Association on the Public Work Campus. 5) The City found a permanent home for a skate park facility at the Sunshine Park complex in 2011. The mobile skate park had been searching for a permanent home for close to ten years. 6) In 2011, the City welcomed the start of a $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) in 2011. The 43,000 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. 8) The City Economic Development Authority (EDA) acquired the Parkside at Andover Station residential development. 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 is in the process of remarketing the site for single family homes and is seeing renewed interest in the Parkside at Andover Station development. 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. 10) In 2011, the City of Andover received The Most Prolific Recycling Program in 2010 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. 11) The City Council adopted a goal to make a concerted effort toward promoting the City of Andover's image and livability. The City is pursuing community monument entrance signs and electronic reader boards in strategic locations. One electronic reader board was installed at the City Hall campus to display community events. 12) 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 2011, the City Economic Development Authority (EDA) 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, Blue Grass and Irish Folk. 13) The City Open Space Commission, appointed to assist in managing the successful $2,000,000 open space referendum ballot in 2006, continues to update a detailed natural amenity inventory, hold informational meetings with residents and made recommendations to the City Council on land that should be purchased as permanent open space in the community. The first purchase took place in December 2009 (Martins Meadows) and a second purchase in October 2010 (Northwoods Preserve), throughout 2011 the Parks Department focused on creating nature trails, appropriate signage and accessibility to the open space parcels. 14) The City continues to make significant progress after the implementation of new hardware and software to start the process of digital imaging documents retained by the City. The imaging project has helped the City reduce staffing through data storage retrieval efficiencies and eliminated the need for City Hall office expansion. To the Honorable Mayor and City Council City of Andover, Minnesota 15) 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 was limited to a replat of a residential project (Woodland Crossings 3 d Addition) creating five single family urban lots from six detached townhome units. The City currently has a supply of 86 single family urban lots and 40 single family rural lots. There exists a reasonable lot supply for a variety of housing options including single family, townhomes and condominium units. Commercial Industrial Development New commercial / industrial construction did occur in Andover in 2011. Dynamic Sealing Technologies, Inc. add a 43,000 square foot addition to their current 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.ci.andover.mn.us). It is important to the City that our residents are informed and have the ability to participate in the activities of their City. The City did conduct a community survey in 2006, with the help of a polling firm, to secure opinions and suggestions from the public. RELEVANT FINANCIAL POLICIES The City has a policy regarding General Fund reserve balances. The City plans for a 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. 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. To the Honorable Mayor and City Council City of Andover, Minnesota �71Y0 Nu /_74 0[1]91 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, 2011. This is the tenth 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, 2012 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 2010 Comprehensive Annual Financial Report. This is the ninth 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 2011 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. F1LB 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, 2011 Office Mayor Council Member Council Member Council Member Council Member Name Michael Gamache Tony Howard Michael Knight Sheri Bukkila Julie Trude 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 Tenn January 7, 2013 November 6, 2012 January 7, 2013 January 7, 2013 January 5, 2015 Appointed Appointed Appointed Appointed Appointed Appointed Attorney Hawkins & Baumgartner, P.A. Appointed Fiscal Consultants Ehlers & Associates, Inc. Appointed CITY OF ANDOVER Organizational Chart City Council ry ------ City Attorney City Administrator Adviso Boards Administrative Building Inspections Engineering Finance Fire Protection Planning Public Works Police Protection Services Admwstiat on Civil Defense Engi eermg Financial Fire Protection Planning & Zoning Streets /Fhghways Services Administration Services Human ResourcesProtecfive Right -of- -Way Assessing Snow &Ice Inspections Management Removal Newsletter Facilrties Storm Sewer =Mapping Management Economic Lower Rum River Unallocated Street Lighting Development Watershed Mgmt Authority Organization Capital Equipment Signage =ente Reserve Elections De bt Service Funds Traffic Signals FTraT ortation An mal Control Const action Unfinanced Projec s Parks & Recreation Seal Coating ... t ............................. ........................ Information Water Trunk Tax Increment Recycling Systems Projects City Clerk ....................... ..............................� Sto m Sewer ....................... ..............................� Bu ld ng Fund t....................... ..............................: Water Sewer Trunk =PermaSewer Road &Bridge Central Equipment =OCapitI LP Dedication Risk Projects Management Itt ju U N U NK ^ ri r-) IT lr�;� �AF:� - This page intentionally left blank - IvA 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 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, 2011, which collectively comprise the City of Andover, Minnesota's basic financial statements as listed in the table of contents. These financial statements are the responsibility of the City of Andover, Minnesota's management. Our responsibility is to express opinions on these financial statements based on our audit. The prior year partial comparative information has been derived from the City of Andover, Minnesota's 2010 financial statements and, in our report dated April 25, 2011, we expressed unqualified opinions on the respective financial statements of the governmental activities, the business -type activities, each major fund, and the aggregate remaining fund information. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and the significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our 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, 2011, and the respective changes in financial position, and cash flows, where applicable, thereof, for the year then ended in conformity with accounting principles generally accepted in the United States of America. As discussed in Note 20 to the financial statements, the City adopted the provisions of Governmental Accounting Standards Board Statement No. 54, Fund Balance Reporting and Governmental Fund Type Definitions, for the year ended December 31, 2011. Adoption of the provisions of this statement results in changes to classifications of the components of fund balance and the reclassification of the Trail and Transportation Fund and the Capital Equipment Reserve Fund. In accordance with Government Auditing Standards, we have also issued our report dated April 19, 2012 on our consideration of the City of Andover, Minnesota's internal control over 14 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 Aedpath, Ltd, is a member of HLB International, a world -wide network of independent accounting firms and business advisors. financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts and grant agreements, and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing and not to provide an opinion on the internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards and should be considered in assessing the results of our audit. 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 16 through 25 and 82 through 86 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. Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the City of Andover, Minnesota's financial statements as a whole. 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 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 financial statements. The information has been subjected to the auditing procedures applied in the audit of the financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the financial statements or to the financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the information is fairly stated in all material respects in relation to the 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. A(OV13 -�� /Q .faj�f,*� - HLB TAUTGES REDPATH, LTD. April 19, 2012 15 CITY OF ANDOVER, MINNESOTA MANAGEMENT'S DISCUSSION AND ANALYSIS December 31, 2011 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, 2011. 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 Hi2hli2hts The assets of the City exceeded its liabilities at the close of the most recent fiscal year by $158,452,179 (Net assets). Of this amount, $28,453,637 (unrestricted net assets) may be used to meet the government's ongoing obligations to citizens and creditors in accordance with the City's fund designations and fiscal policies. The City's total net assets increased by $2,756,774, primarily due to the budget savings and the pay -down of additional debt. As of the close of the current fiscal year, the City's governmental funds reported combined ending fund balances of $40,230,246. The City's total long -term liabilities decreased by $4,261,314 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 $ 222,641 $ 16,074 $ - $ - $ 238,715 Restricted - - 18,146,737 1,594,477 19,741,214 Committed - 650,766 - - 650,766 Assigned - 33,469 - 14,417,837 14,451,306 Unassigned 5,665,496 (313,604) - (203,647) 5,148,245 - $ 5,888,137 $ 386,705 $ 18,146,737 $ 15,808,667 $ 40,230,246 The City's total long -term liabilities decreased by $4,261,314 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 financial statements. The government -wide financial statements are designed to provide readers with a broad overview of the City's finances, in a manner similar to a private- sector business. I1: Beginning Ending Balance Additions Reductions Balance Governmental activities: Bonds payable $ 44,796,000 $ 265,000 $ (4,100,000) $ 40,961,000 Other post employment benefits 99,383 28,761 (5,158) 122,986 Compensated absences 571,897 326,825 (314,409) 584,313 Total governmental activities 45,467,280 620,586 (4,419,567) 41,668,299 Business -type activities: Bonds payable 14,875,000 - (475,000) 14,400,000 Other post employment benefits 17,538 6,871 (983) 23,426 Compensated absences 132,544 47,823 (41,014) 139,353 Total business -type activities 15,025,082 54,694 (516,997) 14,562,779 Total City long -term liabilities $ 60,492,362 $ 675,280 $ (4,936,564) $ 56,231,078 Overview of the Financial Statements The discussion and analysis are intended to serve as an introduction to the City's basic financial statements. The City's basic financial statements comprise three components: 1) government -wide financial statements, 2) fund financial statements, and 3) notes to the financial statements. This report also contains other supplementary information in addition to the basic financial statements themselves. Government -wide financial statements. The government -wide financial statements are designed to provide readers with a broad overview of the City's finances, in a manner similar to a private- sector business. I1: CITY OF ANDOVER, MINNESOTA MANAGEMENT'S DISCUSSION AND ANALYSIS December 31, 2011 The statement of net assets presents information on all of the City's assets and liabilities, with the difference between the two reported as net assets. Over time, increases or decreases in net assets may serve as a useful indicator of whether the financial position of the City is improving or deteriorating. The statement of activities presents information showing how the City's net assets changed during the most recent fiscal year. All changes in net assets are reported as soon as the underlying event giving rise to the change occurs, regardless of the timing of related cash flows. Thus, revenues and expenses are reported in this statement for some items that will only result in cash flows in future fiscal periods (e.g. uncollected taxes and earned but unused vacation leave). Both of the government -wide financial statements distinguish functions of the City that are principally supported by taxes and intergovernmental revenues (governmental activities) from other functions that are intended to recover all or a significant portion of their costs through user fees and charges (business -type activities). The governmental activities of the City include general government, public safety, public works, sanitation, parks and recreation, recycling and economic development. The business -type activities of the City include water, sewer and storm sewer. The government -wide financial statements can be found on pages 29 through 31 of this report. Fund Financial statements. A fund is a grouping of related accounts that is used to maintain control over resources that have been segregated for specific activities or objectives. The City, like other state and local governments, uses fund accounting to ensure and demonstrate compliance with finance- related legal requirements. All of the funds of the City can be divided into three categories: governmental funds, proprietary funds, and fiduciary funds. Governmental funds. Governmental funds are used to account for essentially the same functions reported as governmental activities in the government -wide financial statements. However, unlike the government -wide financial statements, governmental fund financial statements focus on near -term inflows and outflows of spend -able resources, as well as on balances of spendable resources available at the end of the fiscal year. Such information may be useful in evaluating a government's near -term financial requirements. Because the focus of governmental funds is narrower than that of the government -wide financial statements, it is useful to compare the information presented for governmental funds with similar information presented for governmental activities in the government -wide financial statement. By doing so, readers may better understand the long -term impact of the City's near -term financial decisions. Both the governmental fund balance sheet and governmental fund statement of revenues, expenditures, and change in fund balances provide a reconciliation to facilitate this comparison between governmental funds and governmental activities. The City maintains eight individual major governmental funds. Information is presented separately in the governmental fund balance sheet and in the governmental fund statement of revenues, expenditures, and changes in fund balances for the following major funds: General Fund, 2006 Economic Development Authority (EDA) Public Facility Lease Revenue Refunding Bonds Debt Service Fund, 2007 EDA Public Facility Lease Revenue Refunding Bonds Debt Service Fund and the following capital projects funds (CPF): Water Trunk, Sewer Trunk, Road and Bridge, Tax Increment Projects and Permanent Improvement Revolving. Data from the other governmental funds are combined into a single, aggregated presentation. Individual fund data for each of these non- major governmental funds is provided in the form of combining statements elsewhere in this report. The City adopts an annual appropriated budget for its general and special revenue funds. A budgetary comparison statement has been provided for those funds to demonstrate compliance with this budget. The basic governmental fund financial statements can be found on pages 32 through 37 of this report. Proprietary funds. When the City charges customers for the services it provided — whether to outside customers or to other departments of the City — these services are generally reported in proprietary funds. Proprietary funds are reported in the same way that all activities are reported in the statement of net assets and the statement of revenues, expenses and changes in net assets. The enterprise funds are the same as the business -type activities reported in the government -wide statements but provide more detail and additional information, such as cash flows, for proprietary funds. The City uses enterprise funds to account for its water, sanitary sewer and storm sewer operations. Internal service funds are used to report activities that provide supplies and services for the City's other departments, such as the equipment maintenance and insurance funds. The internal service funds are reported with governmental activities in the government -wide financial statements. The basic proprietary fund financial statements can be found on pages 38 through 43 of this report 17 CITY OF ANDOVER, MINNESOTA MANAGEMENT'S DISCUSSION AND ANALYSIS December 31, 2011 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 assets may serve over time as a useful indicator of a government's financial position. In the case of the City, assets exceeded liabilities by $158,452,179 at the close of the most recent fiscal year. The largest portion of the City's net assets ($126,177,740 or 80 percent) reflects its investment in capital assets (e.g. land, buildings, machinery, and equipment) less any related debt used to acquire those assets that is still outstanding. It does not include any refunding debt that has not met the refunding date of the original issue. The City uses these capital assets to provide services to citizens; consequently, these assets are not available for future spending. Although the City's investment in its capital assets is reported net of related debt, it should be noted that the resources needed to repay this debt must be provided from other sources, since the capital assets themselves cannot be used to liquidate these liabilities. CITY OF ANDOVER'S NET ASSETS Governmental Activities Business -Type Activities Totals 15,025,082 2010 2011 2010 2011 2010 2011 Current and other assets $ 46,331,209 $ 46,074,309 $ 11,971,246 $ 12,142,916 $ 58,302,455 $ 58,217,225 Capital assets 115,137,607 114,242,421 44,445,050 43,861,319 159,582,657 158,103,740 Total assets 161,468,816 160,316,730 56,416,296 56,004,235 217,885,112 216,320,965 Long -term liabilities outstanding 45,467,280 41,668,299 15,025,082 14,562,779 60,492,362 56,231,078 Other liabilities 1,359,003 1,328,199 338,342 309,509 1,697,345 1,637,708 Total liabilities 46,826,283 42,996,498 15,363,424 14,872,288 62,189,707 57,868,786 Net assets: Invested in capital assets, net of related debt 87,206,607 90,859,970 36,140,050 36,031,319 123,346,657 126,891,289 Restricted 6,364,714 3,107,253 - - 6,364,714 3,107,253 Unrestricted 21,071,212 23,353,009 4,912,822 5,100,628 25,984,034 28,453,637 Total net assets $ 114,642,533 $117,320,232 $ 41,052,872 $ 41,131,947 $ 155,695,405 $ 158,452,179 A portion of the City's net assets represents resources that are subject to external restrictions on how they may be used. The remaining balance of unrestricted net assets ($28,453,637) may be used to meet the City's ongoing obligations to citizens and creditors. At the end of the current fiscal year, the City is able to report positive balances in all three categories of net assets, both for the City as a whole, as well as for its separate governmental and business -type activities. 18 CITY OF ANDOVER, MINNESOTA MANAGEMENT'S DISCUSSION AND ANALYSIS December 31, 2011 Government -wide Activities Governmental activities increased the City's net assets by $2,677,699 and business -type activities increased net assets by $79,075. Key elements of the activities are as follows: City of Andover's Changes in Net Assets Governmental Activities Business -Type Activities Total IR, 2010 2011 2010 2011 2010 2011 Revenues: Program revenues: Charges for services $ 2,955,592 $ 3,164,239 $ 4,380,245 $ 4,468,880 $ 7,335,837 $ 7,633,119 Operating grants and contributions 1,214,066 977,553 9,380 - 1,223,446 977,553 Capital grants and contributions 1,461,834 1,356,091 - - 1,461,834 1,356,091 General revenues: Property taxes 10,336,536 10,292,674 - - 10,336,536 10,292,674 Tax increment 2,074,589 2,005,056 - - 2,074,589 2,005,056 Grants and contributions not restricted to specific programs 84,875 86,802 - - 84,875 86,802 Unrestricted investments earnings 1,114,451 1,399,987 317,796 370,641 1,432,247 1,770,628 Total revenues 19,241,943 19,282,402 4,707,421 4,839,521 23,949,364 24,121,923 Expenses: General government 2,398,007 2,406,750 - - 2,398,007 2,406,750 Public safety 4,157,050 4,214,316 - - 4,157,050 4,214,316 Public works 3,445,403 4,029,164 - - 3,445,403 4,029,164 Parks and recreation 3,447,730 2,945,742 - - 3,447,730 2,945,742 Recycling 108,785 109,293 - - 108,785 109,293 Economic development 654,961 777,298 - - 654,961 777,298 Interest on long -term debt 1,936,731 1,796,782 - - 1,936,731 1,796,782 Water - - 2,585,469 2,655,926 2,585,469 2,655,926 Sewer - - 1,915,072 1,914,113 1,915,072 1,914,113 Storm sewer - - 532,168 614,958 532,168 614,958 Total expenses 16,148,667 16,279,345 5,032,709 5,184,997 21,181,376 21,464,342 Increase (decrease) in net assets before gain on the sale of capital assets and transfers 3,093,276 3,003,057 (325,288) (345,476) 2,767,988 2,657,581 Gain on the sale of capital assets 22,500 91,693 - 7,500 22,500 99,193 Transfers 437,186 (417,051) (437,186) 417,051 - - Increase in net assets 3,552,962 2,677,699 (762,474) 79,075 2,790,488 2,756,774 Net assets - beginning 111,089,571 114,642,533 41,815,346 41,052,872 152,904,917 155,695,405 Net assets - ending $ 114,642,533 $117,320,232 $ 41,052,872 $ 41,131,947 $155,695,405 $ 158,452,179 IR, CITY OF ANDOVER, MINNESOTA MANAGEMENT'S DISCUSSION AND ANALYSIS December 31, 2011 Governmental Activities Following are specific graphs that provide comparisons of the governmental activities revenues and expenses: Governmental Activities - Revenues Grants and Unrestricted Charges for services contributions not investments earnings 16.3% restricted for specific 7.2 % programs 0.4% Gain (loss) on the sale Tax increment of capital assets 10.3% 0.5% Capital grants and contributions 7.0% Operating grants and contributions 5.0% Property taxes 53.3% Governmental Activities - Expenses Public works 24.7% 01 CITY OF ANDOVER, MINNESOTA MANAGEMENT'S DISCUSSION AND ANALYSIS December 31, 2011 Business -Type Activities Business -type activities increased net assets by $79,075. Below are graphs showing the business -type activities revenue and expense comparisons: PAI CITY OF ANDOVER, MINNESOTA MANAGEMENT'S DISCUSSION AND ANALYSIS December 31, 2011 Financial Analvsis of the Government's Funds Governmental Funds. The focus of the City's governmental funds is to provide information on near -term inflows, outflows, and balances of spendable resources. Such information is useful in assessing the City's financing requirements. In particular, unreserved fund balance may serve as a useful measure of a government's net resources available for spending at the end of the fiscal year. At the end of the current fiscal year, the City's governmental funds reported combined ending fund balances of $40,230,246. Approximately 12.8 percent of this total amount ($5,148,245) constitutes unassigned fund balance. The remainder of the fund balance ($35,082,001) is not available for new spending because it is either 1) nonspendable ($238,715), 2) restricted ($19,741,214), 3) committed ($650,766) or 4) assigned ($14,451,306). Major Funds The general fund increased by $777,232 in 2011, which was a $844,193 change from the final budget. The final budget showed a decrease in fund balance of $66,961. 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 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 $680,422 primarily due to the collection of state aid construction dollars for prior year projects. The tax increment capital projects fund decreased by $2,091,588 due to operating transfers for debt service payments ($1,744,013) and future land purchases ($755,000). Additionally, a developer defaulted on their loan agreement with the City EDA and subsequently, the City EDA negotiated with the lending institution that financed the infrastructure improvements to take the land back with the improvements for $1,388,845. Nonmajor Funds The 2007A G.O. equipment certificates debt service fund decreased by $212,002 with the final payment being made. The 2004B G.O. tax increment refunding bonds debt service fund decreased by $17,750 with the final payment being made. The 2005A G.O. improvement bonds debt service fund decreased by $226,902 with the final payment being made. The capital equipment reserve capital projects fund increased by $107,601 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 assets in the respective proprietary funds are enterprise funds of $5,046,041 (water $1,849,182, sewer $2,981,775 and storm sewer $215,084) and internal service funds of $515,898. The enterprise funds had a net increase in net assets in 2011 of $58,863 (water $62,702, sewer $31,353 and storm sewer ($35,192)). Internal service funds had a net increase in net assets of $102,083. 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, 2011, amounts to $158,103,740 (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: 0 CITY OF ANDOVER, MINNESOTA MANAGEMENT'S DISCUSSION AND ANALYSIS December 31, 2011 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 2011, 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, 2011, the City's street and trail system was rated at an Overall Condition Index (OCI) of 83, which is higher than the City's policy level. The City's streets and trails are constantly deteriorating resulting from the following factors: (1) traffic using the system; (2) the sun's ultra- violet rays drying out and breaking down the top layer of pavement; (3) utility company /private development trenching operations; (4) water damage from natural precipitation; and (5) frost heave. The City is continuously taking actions to prolong the life of the system through short-term maintenance activities such as pothole patching, crack sealing, seal coating and overlaying. The City expended $1,770,980 on street and trail maintenance for the year ending December 31, 2011. 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. 23 Maintenance Actual OCI Year Estimate Expenditures Rating 2003 $ 950,000 $ 956,688 82 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 23 CITY OF ANDOVER, MINNESOTA MANAGEMENT'S DISCUSSION AND ANALYSIS December 31, 2011 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 730,243 Ending Balance Additions Deletions Balance - Buildings and improvements 15,846,865 $ 9,319,699 $ - $ (423,126) $ 8,896,573 79,547,692 374,988 79,922,680 51,002 2,940 (53,942) - 26,820,846 223,854 49,377,342 27,044,700 411,116 58,642 Total capital assets 469,758 7,112,560 399,776 (190,012) 7,322,324 5,469,203 134,181 (16,500) 5,586,884 128,732,118 1,194,381 (683,580) 129,242,919 Buildings and improvements 5,657,113 556,031 6,244,130 903,478 Furniture and equipment 7,147,608 257,507 37,726 39,973 295,233 5,148,567 386,113 (190,012) 5,344,668 1,944,307 285,182 (16,500) 2,212,989 Total accumulated depreciation 13,594,511 1,612,499 (206,512) 15,000,498 Governmental activities capital assets - net 115,137,607 (418,118) (477,068) 114,242,421 Business -type activities: Land and improvements 730,243 730,243 Construction in progress - - - Buildings and improvements 15,846,865 30,725 15,877,590 Furniture and equipment 61,390 - 61,390 Machinery and equipment 1,251,188 - (44,258) 1,206,930 Collection and distribution 49,377,342 1,013,856 50,391,198 Total capital assets being depreciated 67,267,028 1,044,581 (44,258) 68,267,351 Less accumulated depreciation for: Buildings and improvements 5,657,113 556,031 6,213,144 Furniture and equipment 33,513 6,460 39,973 Machinery and equipment 986,857 60,646 (44,258) 1,003,245 Collection and distribution 16,144,495 1,005,175 17,149,670 Total accumulated depreciation 22,821,978 1,628,312 (44,258) 24,406,032 Business -type activities capital assets - net 44,445,050 (583,731) 43,861,319 Total capital assets $ 159,582,657 $ (1,001,849) $ (477,068) $ 158,103,740 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 $56,084,666, a decrease of $4,290,775 from 2010. Revenue bonds ($34,675,000) were used to finance the construction of the community center and the refunding of portions of the community center bonds. General obligation revenue bonds ($14,400,000) were used to finance the construction of, and addition to, the water treatment plant and the refunding of portions of the water treatment plant bonds. Certificates of indebtedness ($561,000) financed capital equipment purchases. Capital improvement bonds ($2,200,000) financed the construction of Fire Station #3, the purchase of the Public Works building from the EDA and some improvements done at the Public Works building and City Hall. Permanent improvement revolving bonds ($1,125,000) financed improvement projects within the City and are assessed to the benefiting properties. 24 CITY OF ANDOVER, MINNESOTA MANAGEMENT'S DISCUSSION AND ANALYSIS December 31, 2011 State aid bonds ($740,000) were used to finance Municipal State Aid (MSA) eligible road projects and the refunding of portions of the state aid bonds and the referendum bonds ($1,660,000) were used to finance land acquisitions for the preservation of open space. Additional long -term debt in the amount of $723,666 is for compensated absences. City of Andover's Outstanding Debt Bonds payable: Revenue 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 A rti viii ec Artivitie TM l $ 34,675,000 $ - $ 34,675,000 - 14,400,000 14,400,000 561,000 - 561,000 2,200,000 2,200,000 1,125,000 1,125,000 740,000 740,000 1,660,000 - 1,660,000 40,961,000 14,400,000 55,361,000 584,313 139,353 723,666 $ 41,545,313 $ 14,539,353 $ 56,084,666 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 $74,098,350. Only $21,316,036 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. - This page intentionally left blank - W, BASIC FINANCIAL STATEMENTS 27 - This page intentionally left blank - 28 CITY OF ANDOVER, MINNESOTA STATEMENT OF NET ASSETS December 31, 2011 With Comparative Actual Amounts For The Year Ended December 31, 2010 Statement 1 The accompanying notes are an integral part of these financial statements 0% Primary Government Government Business -Type Totals Activities Activities 2011 2010 Assets: Cash and investments $ 22,953,866 $ 4,328,154 $ 27,282,020 $ 26,915,807 Cash and investments with escrow agent 17,277,066 6,490,755 23,767,821 23,729,706 Accrued interest 414,558 129,796 544,354 501,177 Due from other governmental units 27,009 9,224 36,233 41,932 Accounts receivable - net 188,447 1,078,796 1,267,243 1,252,817 Prepaid items 101,000 18,000 119,000 122,500 Property taxes receivable: Unremitted 88,786 - 88,786 107,367 Delinquent 482,867 - 482,867 441,904 Special assessments receivable: Unremitted 1,510 799 2,309 31,537 Delinquent 217,843 49,174 267,017 218,860 Deferred 2,519,409 - 2,519,409 3,187,639 Notes receivable 84,192 - 84,192 1,515,512 Inventories - at cost 227,256 38,218 265,474 235,697 Land held for resale 1,490,500 - 1,490,500 - Capital assets - net Nondepreciable 88,819,253 730,243 89,549,496 89,648,636 Depreciable 25,423,168 43,131,076 68,554,244 69,934,021 Total assets 160,316,730 56,004,235 216,320,965 217,885,112 Liabilities: Interfund payable 54,587 (54,587) - - Accounts payable 207,470 20,118 227,588 234,283 Contracts payable 69,121 22,891 92,012 59,477 Developer advances - - - 20,000 Deposits payable 56,802 3,720 60,522 57,973 Due to other governmental units 36,977 25,759 62,736 52,674 Salaries payable 150,624 28,839 179,463 180,749 Unearned revenue 12,360 - 12,360 22,581 Accrued interest payable 740,258 262,769 1,003,027 1,069,608 Other post employment benefits: Due in more than one year 122,986 23,426 146,412 116,921 Compensated absences: Due within one year 87,647 20,903 108,550 105,667 Due in more than one year 496,666 118,450 615,116 598,774 Bonds /notes payable: Due within one year 1,842,000 6,980,000 8,822,000 4,575,000 Due in more than one year 39,119,000 7,420,000 46,539,000 55,096,000 Total liabilities 42,996,498 14,872,288 57,868,786 62,189,707 Net assets: Invested in capital assets, net of related debt 90,859,970 36,031,319 126,891,289 123,346,657 Restricted for: Debt service 608,515 - 608,515 1,265,441 Capital improvements 51,876 - 51,876 792,421 Tax increment purposes 2,446,862 - 2,446,862 4,306,852 Unrestricted 23,353,009 5,100,628 28,453,637 25,984,034 Total net assets $ 117,320,232 $ 41,131,947 $ 158,452,179 $ 155,695,405 The accompanying notes are an integral part of these financial statements 0% CITY OF ANDOVER, MINNESOTA STATEMENT OF ACTIVITIES For The Year Ended December 31, 2011 With Comparative Actual Amounts For The Year Ended December 31, 2010 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 $ 2,406,750 $ 532,764 4,214,316 540,089 4,029,164 309,066 2,945,742 1,498,847 109,293 48,339 777,298 235,134 1,796,782 - 16,279,345 3,164,239 2,655,926 2,119,954 1,914,113 1,990,218 614,958 358,708 5,184,997 4,468,880 $ 21,464,342 $ 7,633,119 The accompanying notes are an integral part of these financial statements. Kid $ 7,545 $ - 310,428 - 593,553 1,301,660 - 54,431 43,531 - 22,496 - 977,553 1,356,091 $ 977,553 $ 1,356,091 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 assets Net assets - beginning Net assets - ending Statement 2 Net (Expense) Revenue and Changes in Net Assets Primary Government Governmental Business -Type Totals Activities Activities 2011 2010 $ (1,866,441) $ - $ (1,866,441) $ (1,934,149) (3,363,799) - (3,363,799) (3,365,590) (1,824,885) - (1,824,885) (1,279,651) (1,392,464) - (1,392,464) (1,840,935) (17,423) - (17,423) (10,745) (542,164) - (542,164) (197,126) (1,774,286) - (1,774,286) (1,888,979) (10,781,462) - (10,781,462) (10,517,175) - (535,972) (535,972) (508,164) - 76,105 76,105 49,045 - (256,250) (256,250) (183,965) - (716,117) (716,117) (643,084) (10,781,462) (716,117) (11,497,579) (11,160,259) 10,292,674 - 2,005,056 - 86,802 - 1,399,987 370,641 91,693 7,500 (417,051) 417,051 13,459,161 795,192 2,677,699 79,075 114,642,533 41,052,872 $ 117,320,232 $ 41,131,947 MI 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 10,336,536 2,074,589 84,875 1,432,247 22,500 13,950,747 2,790,488 152,904,917 $ 155,695,405 CITY OF ANDOVER, MINNESOTA BALANCESHEET GOVERNMENTAL FUNDS December 31, 2011 Liabilities and Fund Balances Liabilities: 2006 FDA Public 2007 FDA Public Interfund payable - Facility Lease Facility Lease - Accounts payable 122,171 Revenue Revenue 16,806 Contracts payable 18,001 Refunding Bonds Refunding Bonds Water Trunk Deposits payable General DSF DSF CPF Assets: 18,775 226 Cash and investments $ 5,140,136 $ 396 $ 391 $ 2,480,592 Cash and investments with escrow agent - 9,758,026 6,703,187 - Accrued interest 21,475 176,331 121,223 14,985 Due from other governmental units 27,009 - - - Accounts receivable - net 75,312 - - - Interfund receivable 647,000 9,923,753 6,813,801 215,000 Prepaid items 91,000 - - - Property taxes receivable: - 2,652,691 Unremitted 49,604 - - - Delinquent 250,344 9,923,753 6,813,801 2,652,691 Special assessments receivable: $ 6,442,883 $ 9,934,753 $ 6,824,801 $ 3,124,937 Unremitted 141 - Delinquent 9,221 6,561 Deferred - 407,799 Notes receivable - - Inventories - at cost 131,641 Land held for resale - - - Total assets 6,442,883 9,934,753 6,824,801 3,124,937 Liabilities and Fund Balances Liabilities: Interfund payable - 11,000 11,000 - Accounts payable 122,171 - - 16,806 Contracts payable 18,001 35,113 Deposits payable 13,324 5,741 Due to other governmental units 18,775 226 Salaries payable 122,910 - Deferred revenue 259,565 - - 414,360 Total liabilities 554,746 11,000 11,000 472,246 Fund balances: Nonspendable 222,641 - - - Restricted - 9,923,753 6,813,801 Committed - - - Assigned - 2,652,691 Unassigned 5,665,496 - - - Total fund balances 5,888,137 9,923,753 6,813,801 2,652,691 Total liabilities and fund balances $ 6,442,883 $ 9,934,753 $ 6,824,801 $ 3,124,937 Fund balance reported above Amounts reported for governmental activities in the statement of net assets are different because: Capital assets used in governmental activities are not financial resources and, therefore, are not reported in the funds. Other long -term assets are not available to pay for current - period expenditures and, therefore, are deferred in the funds. Internal service funds are used by management to charge the cost of equipment maintenance and insurance to individual funds. The assets and liabilities are included in the governmental activities statement of net assets along with a deduction of net revenue attributable to business -type activities. Long -term liabilities, including bonds payable and other post employment benefits, are not due and payable in the current period and, therefore, are not reported in the funds. Net assets of governmental activities The accompanying notes are an integral part of these financial statements. 32 Statement 3 461,311 (42,408,557) $ 117,320,232 33 Tax Permanent 840,000 (862,000) - Road & Increment Improvement Other Intra 186,835 Sewer Trunk Bridge Projects Revolving Governmental Activity Governmental CPF CPF CPF CPF Funds Eliminations Funds $ 4,034,729 $ 4,505,496 $ 816,042 $ 1,162,033 $ 4,362,395 $ $ 22,502,210 - - - - 815,853 17,277,066 22,453 22,828 7,261 5,773 19,824 412,153 - - - - - (862,000) 27,009 - - - - 111,624 186,936 829,052 - (862,000) - - - - - 8,250 99,250 4,051,214 6,383 18,941 1,166,904 13,858 88,786 - 37,396 117,969 - 77,158 482,867 - 1,369 - - - 1,510 38 5,335 - 196,688 $ 5,470,217 $ (862,000) 217,843 45,897 1,007,029 9,341 1,049,343 - 2,519,409 - 30,761 - - 53,431 84,192 - - 7,824 139,465 - - 1,490,500 - - 1,490,500 4,103,117 5,616,597 2,460,054 2,413,837 5,470,217 (862,000) 45,529,196 461,311 (42,408,557) $ 117,320,232 33 - 840,000 (862,000) - 3,576 44,282 186,835 - 1,507 14,500 69,121 5,741 - - - 31,996 56,802 227 902 8,109 902 7,836 36,977 - - - - 19,134 142,044 45,935 1,080,521 1,617,810 1,246,031 142,949 4,807,171 51,903 1,081,423 1,631,002 1,246,933 1,100,697 (862,000) 5,298,950 - - - - 16,074 238,715 829,052 2,174,608 19,741,214 - - - - 650,766 650,766 4,051,214 4,535,174 1,166,904 2,045,323 14,451,306 - - - - (517,251) 5,148,245 4,051,214 4,535,174 829,052 1,166,904 4,369,520 40,230,246 $ 4,103,117 $ 5,616,597 $ 2,460,054 $ 2,413,837 $ 5,470,217 $ (862,000) $ 45,529,196 $ 40,230,246 114,242,421 4,794, 811 461,311 (42,408,557) $ 117,320,232 33 CITY OF ANDOVER, MINNESOTA STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE GOVERNMENTALFUNDS For The Year Ended December 31, 2011 With Comparative Actual Amounts For The Year Ended December 31, 2010 The accompanying notes are an integral part of these financial statements. 34 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 Revenues: General property taxes $ 7,115,936 $ $ $ $ Tax increment collections - Licenses and permits 387,206 Intergovernmental 566,706 Special assessments - 47,742 24,871 Charges for services 866,584 - - Fines 99,777 - - - - Investment income 130,367 422,993 290,734 88,543 136,253 Miscellaneous: Park dedication fees - - - - - Connection charges 24,239 2,926 Rent - - - Other 127,509 - - - - Total revenues 9,294,085 422,993 290,734 160,524 164,050 Expenditures: Current: General government 2,271,085 - - - - Public safety 3,960,220 - - Public works 1,444,833 454,681 13,085 Parks and recreation 889,178 - - Recycling 109,911 Economic development - Unallocated 30,631 Capital outlay: General government - Public safety - Public works 7,925 Parks and recreation - Economic development Debt service: Principal retirement - - Interest 424,227 291,983 Paying agent fees 2,676 2,676 Professional services 910 915 - Construction/acquisition costs - - - 30,725 - Total expenditures 8,713,783 427,813 295,574 485,406 13,085 Revenues over (under) expenditures 580,302 (4,820) (4,840) (324,882) 150,965 Other financing sources (uses): Transfers in 196,930 400,000 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) 196,930 400,000 Net increase (decrease) in fund balance 777,232 (4,820) (4,840) (324,882) 550,965 Fund balance - January 1 5,110,905 9,928,573 6,818,641 2,977,573 3,500,249 Fund balance - December 31 $ 5,888,137 $ 9,923,753 $ 6,813,801 $ 2,652,691 $ 4,051,214 The accompanying notes are an integral part of these financial statements. 34 2,434,072 2,091,492 577,343 1,760,250 949 810,042 374,988 - Tax Permanent Road & Increment Improvement Bridge Projects Revolving CPF CPF CPF $ 1,046,339 $ $ - 1,976,800 1,976,800 976,007 75,856 (763,298) 263,410 3,563 552,356 147,395 35,273 24,987 2,434,072 2,091,492 577,343 1,760,250 949 810,042 374,988 - 1,013,856 - 1,760,250 2,198,886 949 673,822 (107,394) 576,394 6,600 2010 - - (2,499,013) (763,298) - 514,819 1,976,800 6,600 (1,984,194) (763,298) 680,422 (2,091,588) (186,904) 3,854,752 2,920,640 1,353,808 $ 4,535,174 $ 829,052 $ 1,166,904 Statement 4 Other Intra Totals Governmental Activity Governmental Funds Funds Eliminations 2011 2010 $ 2,117,692 $ $ 10,279,967 $ 10,267,085 - 1,976,800 2,015,123 - 387,206 329,901 258,116 1,876,685 1,989,420 - 891,942 1,725,695 866,207 1,732,791 1,604,681 - 99,777 104,780 110,153 1,386,698 1,107,335 51,706 51,706 32,649 - 27,165 48,086 641,859 641,859 638,037 235,162 (30,600) 332,992 396,186 4,280,895 (30,600) 19,685,588 20,258,978 27,486 2,298,571 2,255,793 5,321 3,965,541 3,920,073 114,838 3,788,636 3,204,444 1,037,042 1,926,220 2,433,495 - 109,911 109,034 156,645 966,687 650,977 - 30,631 24,953 45,072 45,072 163,387 5,645 5,645 435,103 328,878 711,791 - 197,782 197,782 726,391 25,109 25,109 - 4,100,000 4,100,000 5,779,000 1,139,328 1,855,538 2,030,267 3,253 8,605 7,880 - 1,825 22,059 1,044,581 101,153 7,186,399 21,082,145 21,864,009 (2,905,504) (30,600) (1,396,557) (1,605,031) 3,639,347 (3,615,347) 627,530 627,530 (383,636) 3,645,947 - (89,191) 265,000 - 265,000 1,660,000 - - 1,480,000 (2,416,834) - 31,688 514,819 43,217 3,520,711 30,600 1,407,349 1,336,410 615,207 - 10,792 (268,621) 3,754,313 40,219,454 40,488,075 $ 4,369,520 $ $ 40,230,246 $ 40,219,454 Min - This page intentionally left blank - W, CITY OF ANDOVER, MINNESOTA RECONCILIATION OF THE STATEMENT OF REVENUES, Statement 5 EXPENDITURES, AND CHANGES IN FUND BALANCES OF GOVERNMENTAL FUNDS For The Year Ended December 31, 2011 With Comparative Actual Amounts For The Year Ended December 31, 2010 2011 2010 Amounts reported for governmental activities in the statement of activities (page 35) are different because: Net changes in fund balances - total governmental funds (page 35) $ 10,792 $ (268,621) Governmental funds report capital outlays as expenditures. However, in the statement of activities the cost of those assets is allocated over their estimated useful lives and reported as depreciation expense. This is the amount by which capital outlays exceeded depreciation in the current period. 417,481 (206,609) The net effect of various miscellaneous transactions involving capital assets is to increase (decrease) net assets (i.e., sales, trade -ins, and donations). (268,086) 25,497 Revenues in the statement of activities that do not provide current financial resources are not reported as revenues in the funds. (377,515) (1,073,640) The issuance of long -term debt (e.g., bonds, leases) provides current financial resources to governmental funds, while the repayment of the principal of long -term debt consumes the current financial resources of governmental funds. Neither transaction, however, has any effect on net assets. This amount is the net effect of these differences in the treatment of long -term debt and related items. 3,835,000 5,049,000 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 (23,603) (32,022) is the net effect of employee benefits earned and paid during the year. Transfer out of governmental capital assets contributed to Enterprise Funds. (1,044,581) (101,153) Some expenses reported in the statement of activities do not require use of current financial resources and, therefore, are not reported as expenditures in governmental funds. 46,340 63,245 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. 81,871 97,265 Change in net assets of governmental activities (page 31) $ 2,677,699 $ 3,552,962 The accompanying notes are an integral part of these financial statements. 37 CITY OF ANDOVER, MINNESOTA STATEMENT OF NET ASSETS PROPRIETARY FUNDS December 31, 2011 With Comparative Actual Amounts For The Year Ended December 31, 2010 Noncurrent assets: Water Sewer Storm Sewer Assets: Current assets: 730,243 Cash and cash equivalents S 1,776,959 S 2,408,924 S 142,271 Restricted assets: 311,465 485,014 471,841 Cash and cash equivalents 6,490,755 - - Accrued interest 117,258 11,876 662 Due from other governmental units - 9,224 - Accounts receivable - net 382,738 591,270 104,788 Prepaid items 8,250 9,750 - Special assessments receivable: Unremitted 282 461 56 Delinquent 15,881 28,305 4,988 Inventories - at cost 38,218 - - Total current assets 8,830,341 3,059,810 252,765 Noncurrent assets: Capital assets: Land 730,243 Buildings and structures 15,877,590 - - Machinery and equipment 311,465 485,014 471,841 Distribution and collection system 16,151,732 24,081,473 10,157,993 Total capital assets 33,071,030 24,566,487 10,629,834 Less: Allowance for depreciation (11,499,288) (9,216,630) (3,690,114) Total noncurrent assets 21,571,742 15,349,857 6,939,720 Total assets 30,402,083 18,409,667 7,192,485 Liabilities: Current liabilities: Accounts payable 16,959 2,818 341 Contracts payable 14,013 3,733 5,145 Deposits payable 3,720 - - Interest payable 262,769 - Due to other governmental units 17,497 8,262 - Salaries payable 13,430 9,485 5,924 Bonds payable - due within one year 6,980,000 - - Compensated absences payable - due within one year 10,439 6,523 3,941 Total current liabilities 7,318,827 30,821 15,351 Noncurrent liabilities: Other post employment benefits - due in more than one year 13,177 10,249 - Bonds payable - due in more than one year 7,420,000 - - Compensated absences payable - due in more than one year 59,155 36,965 22,330 Total noncurrent liabilities 7,492,332 47,214 22,330 Total liabilities 14,811,159 78,035 37,681 Net assets: Invested in capital assets, net of related debt 13,741,742 15,349,857 6,939,720 Unrestricted 1,849,182 2,981,775 215,084 Total net assets S 15,590,924 S 18,331,632 S 7,154,804 Net assets reported above Amounts reported for business -type activities in the statement of net assets are different because: Internal service funds are used by management to charge the cost of equipment maintenance and insurance to individual funds. This amount is the portion of net revenue attributable to business -type activities. Net assets of business -type activities The accompanying notes are an integral part of these financial statements. 38 Statement 6 Totals Governmental Activities - Totals Internal Service Funds 2011 2010 2011 2010 $ 4,328,154 $ 4,188,237 $ 451,656 $ 370,709 6,490,755 6,491,510 - - 129,796 124,452 2,405 1,464 9,224 5,587 - - 1,078,796 1,034,516 1,511 - 18,000 19,750 1,750 1,750 799 1,778 - - 49,174 72,589 - - 38,218 32,827 87,791 81,000 12,142,916 11,971,246 545,113 454,923 730,243 730,243 - - 15, 877, 5 90 15, 846, 865 1,268,320 1,312,578 50,391,198 49,377,342 68,267,351 67,267,028 (24,406,032) (22,821,978) 43,861,319 44,445,050 56,004,235 56,416,296 545,113 454,923 20,118 29,245 20,635 27,382 22,891 19,238 - - 3,720 2,234 262,769 270,594 - 25,759 24,119 - 5,483 28,839 27,287 8,580 8,243 6,980,000 475,000 - - 20,903 19,882 7,364,999 867,599 29,215 41,108 23,426 17,538 - - 7,420,000 14,400,000 118,450 112,662 7,561,876 14,530,200 14,926,875 15,397,799 29,215 41,108 36,031,319 36,140,050 - - 5,046,041 4,878,447 515,898 413,815 $ 41,077,360 $ 41,018,497 $ 515,898 $ 413,815 S 41,077,360 S 41,018,497 54,587 34,375 $ 41,131,947 $ 41,052,872 KR, CITY OF ANDOVER, MINNESOTA STATEMENT OF REVENUES, EXPENSES AND CHANGES IN FUND NET ASSETS PROPRIETARY FUNDS For The Year Ended December 31, 2011 With Comparative Actual Amounts For The Year Ended December 31, 2010 Water Operating revenues User charges $ 2,078,600 Meters 12,168 Permit fees 2,900 Penalties 7,007 Other 19,279 Total operating revenues 2,119,954 Operating expenses Personal services 398,141 Supplies 173,596 Other service charges 596,861 Disposal charges - Depreciation 882,941 Total operating expenses 2,051,539 Operating income (loss) 68,415 Nonoperating revenues (expenses): Investment income 299,593 Gain on sale of capital assets 2,000 Interest expense (632,211) Total nonoperating revenues (expenses) (330,618) Income (loss) before contributions and transfers (262,203) Capital contributions 475,155 Transfers: Transfers in Transfers out (150,250) Total transfers (150,250) Change in net assets 62,702 Net assets - January 1 15,528,222 Net assets - December 31 $ 15,590,924 Sewer $ 1,983,263 6,593 362 Storm Sewer $ 357,586 877 245 1,990,218 358,708 284,493 16,938 131,944 1,000,520 498,157 1,932,052 58,166 67,156 5,500 218,415 18,872 135,506 247,214 620,007 (261,299) 3,892 72,656 3,892 130,822 347,211 (446,680) (446,680) 31,353 18,300,279 $ 18,331,632 Net changes in net assets reported above Amounts reported for business -type activities in the statement of activities are different because: Internal service funds are used by management to charge the cost of equipment maintenance and insurance to individual funds. This amount is the portion of net revenue attributable to business -type activities. Change in net assets of business -type activities The accompanying notes are an intregral part of these financial statements. 40 (257,407) 222,215 (35,192) 7,189,996 $ 7,154,804 Statement 7 Totals Intra Governmental Activities - Activity Totals Internal Service Funds Eliminations 2011 2010 2011 2010 $ $ 4,419,449 $ 4,331,497 $ 1,005,389 $ 1,004,447 12,168 12,208 - - 2,900 3,300 14,477 13,936 - - 19,886 28,684 39,501 33,527 4,468,880 4,389,625 1,044,890 1,037,974 901,049 902,327 349,297 361,439 209,406 220,736 298,789 244,669 (30,600) 833,711 686,994 308,010 308,502 1,000,520 989,972 - - 1,628,312 1,615,036 - - (30,600) 4,572,998 4,415,065 956,096 914,610 30,600 (104,118) (25,440) 88,794 123,364 - 370,641 317,796 13,289 7,116 7,500 - - - (632,211) (650,859) - - (254,070) (333,063) 13,289 7,116 30,600 (358188) - 1,044,581 (30,600) (627,530) (30,600) (627,530) 58,863 41,018,497 $ $ 41,077,360 (358,503) 102,083 101,153 - 89,191 (627,530) (538,339) - (795,689) 102,083 41,814,186 413,815 $ 41,018,497 $ 515,898 $ 58,863 $ (795,689) 20,212 33,215 $ 79,075 $ (762,474) Ell 130,480 130,480 283,335 $ 413,815 CITY OF ANDOVER, MINNESOTA STATEMENT OF CASH FLOWS PROPRIETARY FUNDS For The Year Ended December 31, 2011 With Comparative Actual Amounts For The Year Ended December 31, 2010 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 assete 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 $ 2,094,287 $ 1,996,971 $ 354,099 (778,830) (1,146,334) (155,062) (389,688) (280,371) (216,741) 925,769 570,266 (17,704) (150,250) (446,680) $ (150,250) (446,680) (640,036) (475,000) - 2,000 5,500 (1,113,036) 5,500 298,308 63,175 3,814 (39,209) 192,261 (13,890) 8,306,923 2,216,663 156,161 $ 8,267,714 $ 2,408,924 $ 142,271 $ 68,415 $ 58,166 $ (261,299) 882,941 498,157 247,214 - (3,637) - (34,551) (5,083) (4,646) 1,750 - 8,884 15,473 37 (5,391) - (8,965) 1,180 (1,342) 2,504 491 658 1,486 - - 243 1,397 - (236) (692) 2,480 2,654 3,234 - 6,035 1,580 (806) 857,354 512,100 243,595 $ 925,769 $ 570,266 $ (17,704) $ 475,155 $ 347,211 $ 222,215 Statement 8 Totals 89,191 (596,930) (596,930) (596,930) (507,739) (258,971) Governmental Activities - Totals Internal Service Funds 2011 2010 2011 2010 $ 4,445,357 $ 4,347,139 $ 1,043,379 $ 1,037,974 (2,080,226) (2,260,823) (625,820) (556,762) (886,800) (880,139) (348,960) (359,505) 1,478,331 1,206,177 68,599 121,707 89,191 (596,930) (596,930) (596,930) (507,739) $ (134,718) (258,971) $ 88,794 $ 123,364 (640,036) (658,025) - - (475,000) (455,000) 7,500 (43,865) (1,511) (1,107,536) (1,371,996) - 365,297 318,597 12,348 6,469 139,162 (354,961) 80,947 128,176 10,679,747 11,034,708 370,709 242,533 $ 10,818,909 $ 10,679,747 $ 451,656 $ 370,709 $ (134,718) $ (56,040) $ 88,794 $ 123,364 1,628,312 1,615,036 - - (3,637) 2,113 (44,280) (43,865) (1,511) 1,750 1,750 24,394 (734) (5,391) 343 (6,791) (17,935) (9,127) (18,221) (6,747) 11,716 3,653 (314,348) - 1,486 - 1,640 (2,045) (5,483) 2,628 1,552 5,482 337 1,934 5,888 4,708 - - 6,809 11,998 1,613,049 1,262,217 (20,195) (1,657) $ 1,478,331 $ 1,206,177 $ 68,599 $ 121,707 $ 1,044,581 $ 101,153 $ - $ - 43 CITY OF ANDOVER, MINNESOTA STATEMENT OF FIDUCIARY NET ASSETS FIDUCIARY FUNDS Agency Funds December 31, 2011 With Comparative Actual Amounts For The Year Ended December 31, 2010 Assets: Cash and investments Liabilities: Accounts payable Due to other governments Deposits payable Total liabilities The accompanying notes are an integral part of these financial statements. 44 Statement 9 2011 2010 $ 184,037 $ 295,204 106 375 - 46 183,931 294,783 $ 184,037 $ 295,204 CITY OF ANDOVER, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2011 Note 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The City of Andover was incorporated in 1974 and operates under the State of Minnesota Statutory Plan A form of government. The governing body consists of a five - member City council elected by voters of the City. The financial statements of the City have been prepared in conformity with generally accepted accounting principles as applied to governmental units by the Governmental Accounting Standards Board (GASB). The following is a summary of the significant accounting policies. A. FINANCIAL REPORTING ENTITY As required by generally accepted accounting principles, the financial statements of the reporting entity include those of the City (the primary government) and its component units. The component units discussed below are included in the City's reporting entity because of the significance of their operational or financial relationships with the City. COMPONENT UNITS In conformity with generally accepted accounting principles, the financial statements of the component units have been included in the financial reporting entity as blended component units. The Andover Economic Development Authority (EDA) is an entity legally separate from the City. However, for financial reporting purposes, the EDA is reported as if it were part of the City's operations because the members of the City Council serve as EDA Board Members and its purpose is to promote development within the City. The activity of the EDA is reported in the EDA General Special Revenue Fund. Separate financial statements are not prepared for the EDA. B. GOVERNMENT -WIDE AND FUND FINANCIAL STATEMENTS The government -wide financial statements (i.e., the statement of net assets and the statement of changes in net assets) report information on all of the nonfiduciary activities of the primary government and its component units. For the most part, the 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, 2011 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, 2011 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, 2011 F inal Over Budget Actual Budget Special Revenue Funds: LRRWMO $ 34,588 $ 34,704 $ 116 Forestry 12,500 14,637 2,137 The expenditures over budget were funded by greater than anticipated revenues and/or available fund balance. F. CASH AND INVESTMENTS Cash balances from all funds are combined and invested to the extent available in authorized investments. Earnings from such investments are allocated to the individual funds on the basis of applicable cash balance participation of each fund. The City provides temporary advances to funds that have insufficient cash balances by means of an advance from another fund shown as interfund receivables in the advancing fund, and an interfund payable in the fund with the deficit, until adequate resources are received. These interfund balances are eliminated on the government -wide financial statements. Investments are stated at fair value, based upon quoted market prices. Short-term investments, such as commercial paper and banker's acceptances, are reported as amortized cost. Investments in 2a7, like external investment pools, are also stated at amortized cost. For purposes of the Statement of Cash Flows of Proprietary Fund Types, cash equivalents are defined as short-term, highly liquid investments that are both: a. readily convertible to known amounts of cash, or b. so near their maturity that they present insignificant risk of changes in value because of changes in interest rates. The City's policy considers cash equivalents to be those that meet the above criteria and have original maturities of three months or less. G. RECEIVABLES AND PAYABLES During the course of operations, numerous transactions occur between individual funds for goods provided or services rendered. Short-term interfund loans are classified as "interfund receivables /payables." All short-term interfund receivables and payables at December 31, 2011 are planned to be eliminated in 2012. Long -term interfund loans are classified as " interfund loan receivable /payable." Any residual balances outstanding between the governmental activities and business -type activities are reported in the government -wide financial statements as "internal balances." Interfund loan receivables, as reported in the fund financial statements, are offset by a fund balance reserve account in applicable governmental funds to indicate that they are not available for appropriation and are not expendable available financial resources. Property taxes and special assessments receivable have been reported net of estimated uncollectible accounts. (See Note 1 H and I). Because utility bills are considered liens on property, no estimated uncollectible amounts are established. Uncollectible amounts are not material for other receivables and have not been reported. H. PROPERTY TAX REVENUE RECOGNITION The City levies its property tax for the subsequent year during the month of December and it is certified to Anoka County. December 30th is the last day the City can certify a tax levy to the County Auditor for collection the following year. Such 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, 2011 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. KOMaI aIO INaII T11111001a%NR41011 i. *1 II_r111► IaaIIC 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, 2011 GOVERNMENTAL FUND FINANCIAL STATEMENTS The City recognizes revenue from special assessments when it becomes measurable and available to finance expenditures of the current fiscal period. In practice, current and delinquent special assessments received by the City are recognized as revenue for the current year. Special assessments that are collected by the County by December 31 (remitted to the City the following January) and are also recognized as revenue for the current year. All remaining delinquent, deferred and special deferred assessments receivable in governmental funding are completely offset by deferred revenues. J. INVENTORIES Inventories of the Governmental Funds and the Proprietary Funds are stated at cost, which approximates market, using the first -in, first -out (FIFO) method. Inventories of Governmental Funds are recorded as expenditures when consumed rather than when purchased. K PREPAID ITEMS Certain payments to vendors reflect costs applicable to future accounting periods and are recorded as prepaid items in both government -wide and fund financial statements. Prepaid items are reported using the consumption method and recorded as expenditures /expenses at the time of consumption. L. 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. ML CAPITAL ASSETS Capital assets, which include property, plant, equipment and infrastructure assets (e.g., roads, bridges, sidewalks, and similar items) and intangible assets such as easements and computer software, are reported in the applicable governmental or business- type activities columns in the government -wide financial statements. Capital assets are defined by the City as assets with an initial, individual cost of more than $5,000 (except for easements which is $10,000) and an estimated useful life in excess of one year. Such assets are recorded at historical cost or estimated historical cost if purchased or constructed. Donated capital assets are recorded at estimated fair market value at the date of donation. The City has chosen the modified approach for reporting street and trail system capital assets. The costs of normal maintenance and repairs that do not add to the value of the asset or materially extend assets lives are not capitalized. Major outlays for capital assets and improvements are capitalized as projects are constructed. Interest incurred during the construction phase of capital assets of business -type activities is included as part of the capitalized value of the assets constructed. For the year ended December 31, 2010, no interest was capitalized in connection with construction in progress. 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, 2011 Assets Life Buildings and improvements 10 - 30 years 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 2011 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 anew 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 assets. Bond premiums and discounts, as well as issuance costs, are immaterial and are expensed in the year of bond issuance. In the fund financial statements, governmental fund types recognize bond premiums and discounts, as well as bond issuance costs, during the current period. The face amount of debt issued is reported as other financing sources. Premiums received on debt issuances are reported as other financing sources while discounts on debt issuances are reported as other financing uses. Issuance costs, whether or not withheld from the actual debt proceeds received, are reported as debt service expenditures. 611 CITY OF ANDOVER, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2011 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 Comparative total data for the prior year have been presented only for enterprise funds in the fund financial statements in order to provide an understanding of the changes in the financial position and operations of these funds. 6YA CITY OF ANDOVER, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2011 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 ASSETS The governmental fund balance sheet includes a reconciliation between fund balance — total governmental funds and net assets — governmental activities as reported in the government -wide statement of net assets. One element of that reconciliation explains that "long -term liabilities, including bonds payable and other post employment benefits, are not due and payable in the current period and therefore are not reported in the funds." The details of this ($42,408,557) difference are as follows: Bonds payable $(40,961,000) Accrued interest payable (74058) Other post employment benefits (122,986) Compensated absences (584,313) Netadjustment to reduce fund balance - total governmental funds to arrive at net assets - governmental activities S (42,408,557) Another element of that reconciliation states that "internal service funds are used by management to charge the cost of equipment maintenance and insurance to individual funds. The assets and liabilities are included in the governmental statement of net assets along with a deduction of net revenue attributable to business -type activities." The details of this $461,311 difference are as follows: Internal Service Funds net assets $ 515,898 Net revenue attributable to business -type activities (54,587) Net adjustment to increase fund balance - total governmental funds to arrive at net assets - governmental activities $ 461,311 2. EXPLANATION OF CERTAIN DIFFERENCES BETWEEN THE GOVERNMENTAL FUND STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES AND THE GOVERNMENT -WIDE STATEMENT OF ACTIVITIES The governmental fund statement of revenues, expenditures, and changes in fund balances includes a reconciliation between net changes in fund balances — total governmental funds and changes in net assets of governmental activities as reported in the government -wide statement of activities. One element of that reconciliation explains that "Governmental Funds report capital outlays as expenditures. However, in the statement of activities the cost of those assets is allocated over their estimated useful lives and reported as depreciation expense." The details of this $417,481 difference are as follows: Capital outlay $ 985,399 Construction /acquisition costs 1,044,581 Depreciation expense (1,612,499) Netadjustment to decrease net changes in fund balances- total governmental funds to arrive at changes in net assets of governmental activities $ 417,481 Another element of that reconciliation states that "The net effect of various miscellaneous transactions involving capital assets (i.e., sales, trade -ins, and donations) is to increase (decrease) net assets." The details of this ($268,086) difference are as follows: 53 CITY OF ANDOVER, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2011 In the statement of activities, only the gain on the sale of capital assets is reported. However, in the governmental funds, the proceeds from the sale increase financial resources. Thus, the change in net assets differs from the change in fund balance by the cost of the capital assets sold. $ (423,126) Donations of capital assets increase net assets in the statement of activities, but do notappear in the governmental funds because they are notfinancial resources. 15 5, 040 Netadjustment to increase netchanges in fund balances - total governmental fundsto arrive at changes in netassets of governmental activities. $ (268,086) 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 ($377,515) difference are as follows: General property taxes deferred revenue: At December 31, 2010 $ (352,191) At December 31, 2011 364,898 Tax increment taxes deferred revenue: At December 31, 2010 (89,713) At December 31, 2011 117,969 Special assessments deferred revenue: At December 31, 2010 (3,333,910) At December 31, 2011 2,737,52 Notes receivable deferred revenue: At December 31, 2010 (1,396,512) At December 31, 2011 1,574,692 Net adjustments to decrease net changes in fund balances- total governmental funds to arrive at changes innet assets of governmental activities $ (377,515) Another element of that reconciliation states "the issuance of long -term debt (e.g., bonds, leases) provides current financial resources to governmental funds, while the repayment of the long -term debt consumes the current financial resources of governmental funds." Neither transaction, however, has any effect on net assets. The details of this $3,835,000 difference are as follows: Debt issued or incurred: Issuance of equipment certificates $ (265,000) Principal repayments: Revenue bonds 415,000 Capital improvement bonds 29 5, 000 Special assessment bonds 955,000 Tax incrementbonds 1,735,000 Certificates of indebtedness 48 5,00 0 State aid bonds 215,000 Netadjustment to increase net changes in fund balances - total governmental funds to arrive at changes innet assets of governmental activities $ 3,835,000 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 $46,340 difference are as follows: 54 CITY OF ANDOVER, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2011 Compensated absences S (12,416) Accrued interest 58,756 Netadjustment to decrease net changes in fund balances - total governmental funds to arrive at changes in net assets of governmental activities S 46,340 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 $81,871 difference are as follows: Internal Service Funds change in net assets S 102,083 Netrevenue attributable to business -type activities (2012) Net adjustment to increase fund balance - total governmental funds to arrive at net assets - governmental activities S 81,871 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, 2011, 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. 6V CITY OF ANDOVER, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2011 b) Shares of investment companies registered under the Federal Investment Company Act of 1940 and whose only investments are in securities described in (a) above, general obligation tax- exempt securities, or repurchase or reverse repurchase agreements. c) Obligations of the State of Minnesota or any of its municipalities as follows: 1) any security which is a general obligation of any state or local government with taxing powers which is rated "A" or better by a national bond rating service; 2) any security which is a revenue obligation of any state or local government with taxing powers which is rated "AA" or better by a national bond rating service; and 3) a general obligation of the Minnesota housing finance agency which is a moral obligation of the State of Minnesota and is rated "A" or better by a national bond rating agency. d) Bankers acceptance of United States banks eligible for purchase by the Federal Reserve System. e) Commercial paper issued by United States corporations or their Canadian subsidiaries, of the highest quality, and maturing in 270 days or less. t) 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 475.6 1, subdivision 6. As of December 31, 2011, the City had the following investments and maturities: Credit Investment Type Rating Money market funds N/A Minnesota Municipal Money Market Fund N/A Certificates of deposit N/A Local governments A/Al /A2 AAl /AA2 /AA3 AAA U.S. agencies AAA FNMA REMIC N/A U.S. agencies N/A Total investments 18,560,217 Deposits 1,058,468 Total cash and investments - InvestmentMaturities (in Years) Fair Less Than More Than Value 1 1- 5 6-10 10 $ 4,152,331 $ 4,152,331 $ 1,049,783 1,049,783 - $ - $ - 3,347,477 973,440 2,374,037 645,146 8,974,198 2,899,395 26, 783, 869 89,177 66,423 48,007,799 $51,233,878 15,001 397,571 - 232,574 2,316,470 4,000,104 1,428,075 129,549 331,358 485,611 1,577,882 504,544 6,502,525 18,560,217 662,659 1,058,468 - - 89,177 - 2,827 37,752 25,844 $15,340,908 $25,820,367 $ 3,795,545 $ 3,050,979 The following is a reconciliation of the City's total cash and investment balances at December 31, 2011: 6'S: CITY OF ANDOVER, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2011 Government -wide statement of net assets: Cash and investments $ 2782,020 Cash and investments with escrow agent 23,767,821 Fiduciary funds statement of net assets 184,037 Total $ 5133,878 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. 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, 2011, $250,000 of the City's $48,007,799 investments was uninsured and unregistered, with securities held in the City's name. Interest rate risk - The City has a formal investment policy that states the City will minimize the risk that the market value of securities in the portfolio will fall due to the changes in general interest rates, by: 1) Structuring the investment portfolio so that securities mature to meet cash requirements for ongoing operations, thereby avoiding the need to sell securities on the open market prior to maturity. 2) Investing operating funds primarily in shorter -term securities, money market mutual funds or similar investment pools. FNMA REMIC — The City invests in REMIC's in accordance with State law and the City's investment policy. These securities are based on cash flows from payments on underlying mortgages. Therefore, they are sensitive to prepayments by mortgages, which may result from a decline in interest rates. Credit Risk - The City has a formal investment policy that states the City will minimize the credit risk, the risk of loss due to the failure of the security issuer or backer, by: 1) Limiting investments to the safest types of securities. 2) Pre - qualifying the financial institutions, broker /dealers, intermediaries and advisers with which the City will do business. A list will be maintained of financial institutions authorized to provide investment services. In addition, a list also will be maintained of approved security broker /dealers selected by creditworthiness. These may include "primary" dealers or regional dealers that qualify under Securities and Exchange Commission (SEC) Rule 15C3 -1. All financial institutions and broker /dealers who desire to become qualified for investment transactions must supply: audited financial statements, proof of National Association of Securities Dealers (NASD) certification, proof of state registration, completed broker /dealer questionnaire, and certification of having read and understood and agreeing to comply with the City's investment policy. An annual review of the financial condition and registration of qualified financial institutions and broker /dealers will be conducted by the City Administrator. Concentration of Credit Risk - More than 56% of the City's investments are in various holdings with U.S. agencies; Federal Home Loan Bank (2.1 %), Federal Farm Credit Bank (1.3 %), Federal National Mortgage Association (4.1 %), Federal Home Loan Mortgage Corporation (0.3 %) and U.S. Treasury (48.3 %). The City's policy on concentration of investments is as follows: 1) Diversification - The investments shall be diversified by: a) investments to avoid over concentration in securities from a specific issuer or business sector (excluding U.S. Treasury securities), b) limiting investment in securities that have higher credit risks, c) investing in securities with varying maturities, and d) continuously investing a portion of the portfolio in readily available funds such as local government investment pools (LGIPs), money market funds or overnight repurchase agreements to ensure that appropriate liquidity is maintained in order to meet ongoing obligations. 57 CITY OF ANDOVER, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2011 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. Note 3 RECEIVABLES Significant receivables balances not expected to be collected within one year of December 31, 2011 are as follows: 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: 58 Delinquent Delinquent Special Property Tax Assessment Note Taxes Increment Receivable Receivable Total Maj or Funds: General Fund $ 152,710 $ - $ 9,221 $ - $ 161,931 Water Trunk CPF - - 379,711 - 379,711 Sewer Trunk CPF - - 32,457 - 32,457 Road and Bridge CPF 22,812 - 861,019 22,392 906,223 Tax Increment Projects CPF - 37,750 6,435 - 44,185 Permanent Improvement Revolving CPF - - 1,142,813 - 1,142,813 Nonmajor Funds 44,478 - - 50,275 94,753 Total $ 220,000 $ 37,750 $ 2,431,656 $ 72,667 $ 2,762,073 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: 58 CITY OF ANDOVER, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2011 Unavailable Unearned Delinquent property taxes receivable General Fund $ 250,344 Road & Bridge CPF 37,396 Nonmajor Funds 77,158 Delinquent tax increment collections: Tax Increment Projects CPF 117,969 Special assessments not yet due General Fund 9,221 Water Trunk CPF 414,360 Sewer Trunk CPF 45,935 Road & Bridge CPF 1,012,364 Tax Increment Projects CPF 9,341 Permanent Improvement Revolving CPF 1 ,246,031 Notes receivable not et due: Road & Bridge CPF 30,761 Nonmajor Funds 53,431 Land held for resale: Tax Increment Projects CPF 1,490,500 - Unearned construction seal coat fees: Nonmajor Funds - 12,360 Total $ 4,794,811 $ 12,360 Note 4 LOANS RECEIVABLE As part of a development agreement entered into with a private developer in June 2006, the City received a promissory note for $50,000. The note is for intersection improvements on Hanson Blvd. The note bears an interest rate of 5.5% and calls for semi - annual payments to be made to the City through July 2014 and then was amended to July 1, 2016, the payoff date. As of December 31, 2011, the remaining balance due of $30,761 is offset by deferred revenue, as it is not available to finance current activities. As part of a rental rehabilitation revolving loan program, the City entered into a loan agreement with a property owner in October 2006. The loan is for the rehabilitation of a rental property located within the City. The loan bears an interest rate of 3.0 % and calls for 180 equal monthly payments to be made to the City through November 2021. As of December 31, 2011, the remaining balance due of $45,239 is offset by deferred revenue, as it is not available to finance current activities. As part of a housing rehabilitation revolving loan program, the City entered into a loan agreement with a property owner in July 2007. The loan is for the rehabilitation of a property located within the City. The loan bears an interest rate of 3.0 % and calls for 57 equal monthly payments to be made to the City through August 2012. As of December 31, 2011, the remaining balance due of $1,422 is offset by deferred revenue, as it is not available to finance current activities. As part of a housing rehabilitation revolving loan program, the City entered into a loan agreement with a property owner in September 2010. The loan is for the rehabilitation of a property located within the City. The loan bears an interest rate of 3.0 % and calls for 60 equal monthly payments to be made to the City through September 2015. As of December 31, 2011, the remaining balance due of $6,770 is offset by deferred revenue, as it is not available to finance current activities. Note 5 CAPITAL ASSETS In accordance with GASB Statement No. 34, the City has reported all capital assets including infrastructure in the government -wide statement of net assets. The City elected to use the modified approach as defined by GASB Statement No. 34 for infrastructure reporting 6VI CITY OF ANDOVER, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2011 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, 2011 was as follows: Primary Government Governmental activities: Capital assetsnotbeing depreciated Land and improvements Streets and trails Construction in progress Total capital assets not being depreciated Capital assets being depreciated Beginning Ending Balance Additions Deletions Balance $ 9,319,699 $ - $ (423,126) $ 8,896,573 79,547,692 374,988 - 79,922,680 51,002 2,940 (53,942) - 88,918,393 377,928 (477,068) 88,819,53 Buildings and improvements 26,820,846 223,854 - 27,044,700 Furniture and equipment (including software) 411,116 58,642 - 469,758 Machinery and equipment 7,112,560 399,776 (190,012) 7,322,324 Other park improvements 5,469,203 134,181 (16,500) 5,586,884 Total capital assets being depreciated 39,813,725 816,453 (206,512) 40,423,666 Less accumulated depreciation for: Buildings and improvements 6,244,130 903,478 - 7,147,608 Furniture and equipment 257,507 37,726 - 295,233 Machinery and equipment 5,148,567 386,113 (190,012) 5,344,668 Other park improvements 1,944,307 285,182 (16,500) 2,12,989 Total accumulateddepreciation 13,594,511 1,612,499 (206,512) 15,000,498 Total capital assets being depreciated - net 26,219,214 (796,046) - 25,423,168 Governmental activities capital assets - net $ 115,137,607 $ (418,118) $ (477,068) $ 114,242,421 [xt CITY OF ANDOVER, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2011 Primary Government Business -type activities: Capital assetsnotbeing depreciated: Land and improvements Capital assets being depreciated: Buildings and improvements Furniture and equipment (including software) Machinery and equipment Collection and distribution Total capital assets being depreciated Less accumulated depreciation for: Beginning $ 730,243 $ - 15,846,865 30,725 61,390 - 1,251,188 - 49,377,342 1,013,856 �� 1; 21-, 741; 1 nnn G41 Ending Deletions Balance $ - $ 730,243 - 15,877,590 - 61,390 (44,258) 1,06,930 - 1 50,391,198 (44,258) 67,537,108 Buildings and improvements 5,657,113 556,031 - 6,13,144 Furniture and equipment 33,513 6,460 - 39,973 Machinery and equipment 986,857 60,646 (44,258) 1,003,245 Collection and distribution 16,144,495 1,005,175 - 17,149,670 Total accumulated depreciation 22,821,978 1,628,312 (44,258) 24,406,032 Total capital assets being depreciated - net 43,714,807 (583,731) - 43,131,076 Business -type activities capital assets - net $ 44,445,050 L_( 3731 $ - $ 43,861,319 Depreciation/amortization expense was charged to functions /programs of the primary government as follows: Governmental activities: General government $ 78,771 Public safety 267,684 Public works 247,793 Parks and recreation 1,013,640 Economic development 4,611 Total depreciation /amortization expense- governmental activities $ 1,612,499 Business -type activities Water $ 882,941 Sewer 498,157 Storm sewer 247,14 Total depreciation /amortization expense - business -type activities $ 1,628,312 CONSTRUCTION COMMITMENTS At December 31, 2011, the City had no construction project contracts in progress. Note 6 LONG -TERM DEBT The City issues general obligation bonds and equipment certificates to provide funds for the acquisition and construction of major capital facilities. The reporting entity's long -term debt is segregated between the amounts to be repaid from governmental activities and amounts to be repaid from business -type activities. [.1311 CITY OF ANDOVER, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2011 Certificates of Indebtedness 2008A G.O. Equipment Certificates Issue Maturity Interest Original Payable 2009A G.O. Equipment Certificates Date Date Rate Issue 12/31/11 GOVERNMENTAL ACTIVITIES: 3/1/2011 2/1/2014 2.00% 265,000 265,000 Revenue Bonds: 1,280,000 561,000 2004 EDA Pub Fac Lease Rev Bonds 4/23/2004 2/1/2014 2.125 - 5.400% $19,580,000 $17,810,000 2006 EDA Pub Fac Lease Rev Ref Bonds 12/1/2006 2/1/2034 4.00 -4.50% 10,000,000 10,000,000 2007 EDA PubFac Lease Rev Ref Bonds 1/1/2007 2/1/2034 4.00 -4.50% 6,865,000 6,865,000 Total revenue bonds 2/18/2010 2/1/2014 2.00% 36,445,000 34,675,000 Certificates of Indebtedness 2008A G.O. Equipment Certificates 9/23/2008 2/1/2012 3.50% 630,000 166,000 2009A G.O. Equipment Certificates 3/26/2009 2/1/2012 2.00 -2.25% 385,000 130,000 2011A G.O. Equipment Certificates 3/1/2011 2/1/2014 2.00% 265,000 265,000 Total certificates of indebtedness 1,280,000 561,000 Capital Improvement Bonds: 2004A G.O. Capital Improvement Bonds 3/16/2004 2/1/2017 2.00 -3.75% 3,890,000 2,00,000 Permanent Improvement Revolving (PIR) Bonds: 2010A G.O. PIR Refunding Bonds 2/18/2010 2/1/2014 2.00% 1,480,000 1,125,000 State Aid Bonds: 2009A G.O. State Aid Street Refunding Bonds 3/26/2009 2/1/2015 2.25 -2.80% 955,000 740,000 Referendum Bonds: 20 10A G.O. Open Space Referendum Bonds 2/18/2010 2/1/2022 2.00 - 3.125% 1,660,000 1,660,000 Total - bonded indebtedness 45,710,000 40,961,000 Compensated absencespayable Total governmental activities indebtedness BUSINESS -TYPE ACTIVITIES: General Obligation Revenue Bonds: 2002 G.O. Water Revenue Bonds 5/9/2002 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 absencespayable Total business -type activities indebtedness Total City indebtedness I - 584,313 45,710,000 41,545,313 8/1/2012 2.30 -5.00% 9,780,000 6,925,000 2/1/2023 4.00 -4.25% 6,570,000 6,570,000 2/1/2024 2.00 -4.25% 1,025,000 905,000 17, 375, 000 14,400,000 - 139,353 17,375,000 14,539,353 $ 63,085,000 $ 56,084,666 CITY OF ANDOVER, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2011 Annual debt service requirements to maturity for general obligation bonds are as follows: Total $14,400,000 $ 2,407,956 It is not practical to determine the specific year for payment of long -term accrued compensated absences 63 GovernmentalActivities Revenue Bonds CerificatesofIndebtedness Capital Improvement Bonds Principal Interest Principal Interest Principal Interest 2012 $ 435,000 $ 1,613,666 $ 372,000 $ 8,907 $ 315,000 $ 70,993 2013 450,000 1,594,744 94,000 2,840 330,000 60,905 2014 16,925,000 1,150,583 95,000 950 355,000 49,596 2015 560,000 705,010 - - 380,000 37,000 2016 585,000 682,110 - - 400,000 23,050 2017 -2021 3,290,000 3,032,854 - - 420,000 7,875 2022 -2026 4,005,000 2,289,043 - - - - 2027 -2031 4,925,000 1,342,564 - - - - 2032 -2034 3,500,000 240,750 - - - - Total $34,675,000 $12,651,324 $ 561,000 $ 12,697 $ 2,00,000 $ 249,419 GovernmentalActivities Permanent Improvement Revolving Bonds State AidBonds Referendum Bonds Principal Interest Principal Interest Principal Interest 2012 $ 365,000 $ 18,850 $ 220,000 $ 16,115 $ 135,000 $ 40,15 2013 375,000 11,450 230,000 10,765 135,000 37,515 2014 385,000 3,850 230,000 4,785 140,000 34,765 2015 - - 60,000 840 145,000 31,915 2016 - - - - 145,000 28,942 2017 -2021 - - 790,000 85,704 2022 -2026 - - - - 170,000 2,656 Total 1,125,000 34,150 740,000 32,505 1,660,000 261,712 Business -Type Activities G.O. Revenue Bonds Principal Interest 2012 $ 6,980,000 $ 620,675 2013 545,000 285,166 2014 565,000 263,806 2015 590,000 241,486 2016 615,000 218,101 2017 -2021 3,440,000 702,618 2022 -2026 1,665,000 76,104 Total $14,400,000 $ 2,407,956 It is not practical to determine the specific year for payment of long -term accrued compensated absences 63 CITY OF ANDOVER, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2011 CHANGE IN LONG -TERM LIABILITIES Long -term liability activity for the year ended December 31, 2011, was as follows: Beginning Ending Due Within Balance Additions Reductions Balance One Year Governmental activities: Bondspayable: Revenue bonds $35,090,000 $ - $ (415,000) $ 34,675,000 $ 435,000 Special assessment bonds 600,000 - (600,000) - - Tax increment bonds 1,735,000 - (1,735,000) - - Certificates ofindebtedness 781,000 265,000 (485,000) 561,000 372,000 Capital improvement bonds 2,495,000 - (295,000) 2,00,000 315,000 Permanent improvement rev olving bonds 1,480,000 - (355,000) 1,125,000 365,000 State aid bonds 955,000 - (215,000) 740,000 220,000 Referendum bonds 1,660,000 - - 1,660,000 135,000 Total bonds payable 44,796,000 265,000 (4,100,000) 40,961,000 1,842,000 Compensated absences 571,897 326,825 (314,409) 584,313 87,647 Total governmental activities long -term liabilities $45,367,897 $ 591,825 $ (4,414,409) $ 41,545,313 $ 1,929,647 Business -type activities: Bondspayable: G.O. revenue bonds $14,875,000 $ - $ (475,000) $ 14,400,000 $ 6,980,000 Compensated absences 132,544 47,823 (41,014) 139,353 20,903 Total business -type activities long -term liabilities $15,007,544 $ 4 7,82 3 $ (516,014) $ 14,539,353 $ 7,000,903 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 special assessment bonds are used to finance assessable improvements within the City, including but not limited to sanitary sewer and water line connections, storm sewer, streets, sidewalks and curb & gutter. The bonds are payable primarily from special assessments levied against properties benefited by the improvements. In addition, the bonds are general obligations of the City for which its full faith, credit and taxing powers are pledged without limitation as to rate or amount. The tax increment bonds are used to finance land acquisition and other public costs to facilitate development in the City's tax increment districts. The bonds are payable from tax increment revenues generated by existing and new development within the district. In addition, the bonds are general obligations of the City for which its full faith, credit and taxing powers are pledged without limitation as to rate or amount. 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. 64 CITY OF ANDOVER, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2011 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. 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 $20,020,363, payable through February 2014. For the current year, principal and interest paid and total net operating revenues, lease revenue and tax levy were $1,329,891 and $1,332,413, respectively. A portion of the Series 2004 Bonds were refunded by the 2006 Series Refunding Bonds of $10,000,000 and the 2007 Series Refunding Bonds of $6,865,000, both with a crossover date of February 1, 2014. At which time, future lease revenues, net operating revenues and, if necessary, debt service tax levy will be used to repay the Series 2006 and Series 2007 Refunding Bonds through 2034. 2005A G.O. Improvement Bonds. The City has pledged future special assessment revenue to repay the $3,560,000 bonds issued in April 2005. Proceeds from the bonds provided financing for the construction of Jay Street located in Andover Station North. Special assessments were projected to produce 100% of the debt service requirements over the life of the bonds. For the current year, principal and interest paid and monies transferred from the PIR CPF were $610,200 and $383,298, respectively. In 2011, the debt service fund had sufficient funds to make its final debt service payment. 2004E G.O. Tax Increment Refunding Bonds. The City has pledged future tax increment revenue to repay the $4,260,000 bonds issued in March 2004. Proceeds from the bonds refunded the Series 1995D Bonds. Incremental property taxes were projected to produce 100% of the debt service requirements over the life of the bond issue. All tax increment revenues are receipted in the Tax Increment Projects CPF and transferred over as needed to make the debt service payments. For the current year, principal and interest paid and monies transferred from the Tax Increment Projects CPF were $1,761,763 and $1,744,013, respectively. In 2011, the debt service fund had made its final debt service payment. 2007A G.O. Equipment Certificates. The City has pledged future property tax revenue to repay the $760,000 bonds issued in March 2007. Proceeds from the bonds were used to finance the purchase of capital equipment. Property taxes were projected to produce 100% of the debt service requirements over the life of the bonds. For the current year, principal and interest paid was $204,000. In 2011, the debt service fund had sufficient funds to make its final debt service payment. 2008A G.O. Equipment Certificates. The City has pledged future property tax revenue to repay the $630,000 bonds issued in September 2008. Proceeds from the bonds were used to finance the purchase of capital equipment. Property taxes were projected to produce 100% of the debt service requirements over the life of the bonds. Total principal and interest remaining on the bonds is $168,905, payable through February 2012. For the current year, principal and interest paid and total property tax revenues were $168,610 and $178,752, respectively. 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 [sV CITY OF ANDOVER, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2011 100% of the debt service requirements over the life of the bonds. Total principal and interest remaining on the bonds is $131,462, payable through February 2012. For the current year, principal and interest paid and total property tax revenues were $129,331 and $135,061, respectively. 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 $273,330, payable through February 2014. For the current year, principal and interest paid was $1,766. 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 FDA and to finance the construction of a new fire station. Property taxes were projected to produce 100% of the debt service requirements over the life of the bonds. Total principal and interest remaining on the bonds is $2,449,419, payable through February 2017. For the current year, principal and interest paid and total property tax revenues were $375,143 and $390,022, respectively. 2010A Permanent Improvement Revolving Refunding Bonds. The City has pledged future special assessment revenue to repay the $1,660,000 bonds issued in February 2010. Proceeds from the bonds refunded the Series 2006A Bonds. Special assessments were projected to produce 100% of the debt service requirements over the life of the bonds. All revenues from the special assessments are paid into the Permanent Improvement Revolving CPF and used to pay debt service as needed. Total principal and interest remaining on the bonds is $1,159,150, payable through February 2014. For the current year, principal and interest paid and monies transferred from the Permanent Improvement Revolving CPF were $381,050 and $380,000, 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 $772,505, payable through February 2015. For the current year, principal and interest paid and MSA revenues were $236,009 and $242,496, respectively. 2010A G.O. Open Space Referendum Bonds. The City has pledged future property tax revenue to repay the $1,660,000 bonds issued in February 2010. Proceeds from the bonds were used to finance various land acquisitions for open space preservation within the City. Property taxes were projected to produce 100% of the debt service requirements over the life of the bonds. Total principal and interest remaining on the bonds is $1,921,712, payable through February 2022. For the current year, principal and interest paid and total property tax revenues were $41,565 and $138,081, respectively. 2002 G.O. Water Revenue Bonds. The City has pledged future water customer revenues, net of operating expenses, to repay the $9,780,000 bonds issued in May 2002. Proceeds of the bonds provided financing for the construction of a water treatment plant. The bonds are payable from water customer net revenues and are payable through 2012. The total principal and interest remaining on the bonds is $7,249,440. The principal and interest paid for the current year and total customer net revenues were $757,507 and $801,106, respectively. A portion of the Series 2002 Bonds were refunded by the 2007 Series Refunding Bonds of $6,570,000 with a crossover date of August 1, 2012. At which time, future water customer revenues, net of operating expenses, will be used to repay the Series 2007 Refunding Bonds through 2023. 2009A G.O. Water Revenue Bonds. The City has pledged future water customer revenues, net of operating expenses, to repay the $1,025,000 bonds issued in March 2009. Proceeds of the bonds provided financing for the addition to the water treatment plant. The bonds are payable from water customer net revenues and are payable through 2024. The total principal and interest remaining on the bonds is $1,139,834. The principal and interest paid for the current year and total customer net revenues were $91,382 and $801,106, 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. [SR CITY OF ANDOVER, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2011 The City is responsible for the debt service of the refunded bonds and the debt service of the refunding bonds after the crossover date. The debt service of the refunding bonds before the crossover date is payable from the escrow account. Assets held with the escrow agent total $9,758,026 at December 31, 2011. On January 1, 2007, the City issued $6,865,000 in Public Facility Lease Revenue Refunding Bonds, Series 2007 with an average interest rate of 4.31% to advance refund $6,700,000 of outstanding 2004 Series Bonds with an average interest rate of 5.17 %. The net proceeds of $6,710,306 were used to purchase U.S. Government Securities. Those securities were deposited in an irrevocable trust with an escrow agent to provide for the interest on the refunding bonds before the crossover date and called principal on the refunded bonds on February 1, 2014. The City advance refunded a portion of the 2004 Public Facilities Lease Revenue Bonds to reduce its total debt service payments over the last twenty years of the bond by $517,163 and to obtain an economic gain (difference between the present value of the debt service payments on the old and new debt) of $250,417. The City is responsible for the debt service of the refunded bonds and the debt service of the refunding bonds after the crossover date. The debt service of the refunding bonds before the crossover date is payable from the escrow account. Assets held with the escrow agent total $6,703,187 at December 31, 2011. Refunded Debt Service Commitment Payment Bonds Refmding Bonds Escrow Account Date Total Series 2006 Series 2007 Series 2006 Series 2007 City 2012 $ 1,332,456 $ 42427 $ 291,983 $ 42427 $ 291,983 $ 1,332,456 2013 1,328,534 42427 291,983 42427 291,983 1,328,534 2014 17,359,373 42427 291,983 9,967,114 6,845,992 1,22b2,477 2015 - 752,527 512,483 - - 165,010 2016 - 753,827 513,283 - - 1 X67,110 2017 - 749,628 513,683 - - 163,311 2018-2022 - 3,748,675 2,568,704 - - 6,317,379 2023-2027 - 3,729,195 2,563,655 - - 6,92,850 2028 -2032 - 3,693,314 2,565,020 - - 658,334 2033-2034 - 1,474,126 1,019,212 - - 2,493,338 $ 20,020,363 $ 16,173,973 $ 11,131,989 $ 10,815,568 $ 7,429,958 $ 29,080,799 On March 13, 2007, the City issued $6,570,000 in General Obligation Water Revenue Refunding Bonds, Series 2007B with an average interest rate of 4.07% to advance refund $6,490,000 of outstanding 2002 Series Bonds with an average interest rate of 4.90 %. The net proceeds of $6,491,509 were used to purchase U.S. Government Securities. Those securities were deposited in an irrevocable trust with an escrow agent to provide for the interest on the refunding bonds before the crossover date and called principal on the refunded bonds on August 1, 2012. The City advance refunded the 2002 General Obligation Water Revenue Bonds to reduce its total debt service payments over the last ten years of the bond by $265,904 and to obtain an economic gain (difference between the present value of the debt service payments on the old and new debt) of $164,664. The City is responsible for the debt service of the refunded bonds and the debt service of the refunding bonds after the crossover date. The debt service of the refunding bonds before the crossover date is payable from the escrow account. Assets held with the escrow agent total $6,490,755 at December 31, 2011. 67 CITY OF ANDOVER, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2011 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 2011 and 2010 is computed as follows: Estimated taxable market value Debt limit (3% of market value) Amount of debtapplicable to debt limit: Total bonded debt Less: Nonapplicable debt G.O. water revenue bonds Special assessment bonds Tax increment bonds Permanent improvement revolving bonds State aidbonds Less: Cash and investments inrelated debt service funds Total debt applicable to debtlimit Legal debt margin December 31, �m i �nin $2,469,945,000 $2,710,514,800 74,098,350 81,315,444 $ 55,361,000 (14,400,000) (1,125, 000) (740,000) $ 59,671,000 (14,875,000) (600, 000) (1,735,000) (1,480, 000) (955,000) (17,779,964) (17,768,743) 21,316,036 2257,257 $ 52,782,314 $ 59,058,187 Note 8 DEFINED BENEFIT PENSION PLANS - STATEWIDE A. PLAN DESCRIPTION All full -time and certain part-time employees of the City are covered by defined benefit plans administered by the Public Employees Retirement Association of Minnesota (PERA). PERA administers the General Employees Retirement Fund (GERF) and the Public Employees Police and Fire Fund (PEPFF), which are cost - sharing, multiple- employer retirement plans. These plans are established and administered in accordance with Minnesota Statutes, Chapters 353 and 356. 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. 68 Refunded Refunding Debt Service Commitment Payment Bonds Bonds Escrow Date Total Total Account City 2012 $ 7,49,440 $ 266,146 $ 6,756,146 $ 759,440 2013 - 741,446 - 741,446 2014 - 741,646 - 741,646 2015 - 741,046 - 741,046 2016 - 744,546 - 744,546 2017 - 742,146 - 742,146 2018-2022 - 3,701,299 - 3,701,99 2023 - 740,406 - 740,406 $ 749,440 $ 8,418,681 $ 6,756,146 $ 8,911,975 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 2011 and 2010 is computed as follows: Estimated taxable market value Debt limit (3% of market value) Amount of debtapplicable to debt limit: Total bonded debt Less: Nonapplicable debt G.O. water revenue bonds Special assessment bonds Tax increment bonds Permanent improvement revolving bonds State aidbonds Less: Cash and investments inrelated debt service funds Total debt applicable to debtlimit Legal debt margin December 31, �m i �nin $2,469,945,000 $2,710,514,800 74,098,350 81,315,444 $ 55,361,000 (14,400,000) (1,125, 000) (740,000) $ 59,671,000 (14,875,000) (600, 000) (1,735,000) (1,480, 000) (955,000) (17,779,964) (17,768,743) 21,316,036 2257,257 $ 52,782,314 $ 59,058,187 Note 8 DEFINED BENEFIT PENSION PLANS - STATEWIDE A. PLAN DESCRIPTION All full -time and certain part-time employees of the City are covered by defined benefit plans administered by the Public Employees Retirement Association of Minnesota (PERA). PERA administers the General Employees Retirement Fund (GERF) and the Public Employees Police and Fire Fund (PEPFF), which are cost - sharing, multiple- employer retirement plans. These plans are established and administered in accordance with Minnesota Statutes, Chapters 353 and 356. 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. 68 CITY OF ANDOVER, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2011 PERA provides retirement benefits as well as disability benefits to members, and benefits to survivors upon death of eligible members. Benefits are established by State Statute, and vest after three years of credited service. The defined retirement benefits are based on a member's highest average salary for any five successive years of allowable service, age, and years of credit at termination of service. Two methods are used to compute benefits for PERA's Coordinated and Basic Plan members. The retiring member receives the higher of a step -rate benefit accrual formula (Method 1) or a level accrual formula (Method 2). Under Method 1, the annuity accrual rate for a Basic Plan member is 2.2% of average salary for each of the first 10 years of service and 2.7% for each remaining year. The annuity accrual rate for a Coordinated Plan member is 1.2% of average salary for each of the first 10 years and 1.7% for each remaining year. Under Method 2, the annuity accrual rate is 2.7% of average salary for Basic Plan members and 1.7% for Coordinated Plan members for each year of service. For PEPFF members, the annuity accrual rate is 3.0% for each year of service. For all PEPFF and GERF members hired prior to July 1, 1989 whose annuity is calculated using Method 1, a full annuity is available when age plus years of service equal 90. Normal retirement age is 55 for PEPFF members and 65 for Basic and Coordinated members hired prior to July 1, 1989. Normal retirement age is the age for unreduced Social Security benefits capped at 66 for Coordinated members hired on or after July 1, 1989. A reduced retirement annuity is also available to eligible members seeking early retirement. There are different types of annuities available to members upon retirement. A single -life annuity is a lifetime annuity that ceases upon the death of the retiree — no survivor annuity is payable. There are also various types of joint and survivor annuity options available which will be payable over joint lives. Members may also leave their contributions in the fund upon termination of public service in order to qualify for a deferred annuity at retirement age. Refunds of contributions are available at any time to members who leave public service, but before retirement benefits begin. The benefit provisions stated in the previous paragraphs of this section are current provisions and apply to active plan participants. Vested, terminated employees who are entitled to benefits but are not receiving them yet are bound by the provisions in effect at the time they last terminated their public service. PERA issues a publicly available financial report that includes financial statements and required supplementary information for GERF and PEPFF. That report may be obtained on the internet at www.mnpera.org, by writing to PERA, 60 Empire Drive #200, St. Paul, Minnesota, 55103 -2088 or by calling (651) 296 -7460 or 1- 800 - 652 -9026. B. FUNDING POLICY Minnesota Statutes Chapter 353 sets the rates for employer and employee contributions. These statutes are established and amended by the state legislature. The City makes annual contributions to the pension plans equal to the amount required by state statutes. GERF Basic Plan members and Coordinated Plan members were required to contribute 9.10% and 6.25 %, respectively, of their annual covered salary in 2011. PEPFF members are required to contribute 9.60% of their annual covered salary in 201 L In 2011, 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, 2011, 2010 and 2009 were $255,552, $231,360 and $231,302, respectively. The City's contributions to the Public Employees Police and Fire Fund for the years ending December 31, 2011, 2010 and 2009 were $27,004, $24,152 and $24,464, 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. W, CITY OF ANDOVER, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2011 1. Twenty -Year Service Pension — In order to be entitled to a pension benefit, a firefighter must have completed a minimum of five years of service with the Department and five years membership in the Association and attain the age of 50 years. The firefighter will then be 40% vested. This percentage increases 4% per year until the twentieth year when 100% vesting will occur. Because this is a defined contribution plan, the amount of the retirement benefit is not predetermined, but rather is based on the individual member's allocable portion of contributions made during the participation period. 2. Deferred Pension — If the retired or terminated member has not attained age 50 and is otherwise eligible for the pension benefit, the balance of the member's account will be credited with earned interest at the rate permitted by Minnesota Statutes Section 424.A02, Subd.7. 3. Disability Benefit — If a member of the Association becomes totally and permanently disabled due to injury, disability, sickness or dismemberment as a result of performance of duty, a disability payment will be made after one hundred days of disability. 4. Death Benefit — In the event of death of an active member or deferred pensioner, the member's individual account balance will be paid to the surviving spouse, surviving children or the estate of the member after approval by the Board. The Association issues a publicly available financial report that includes financial statements and required supplementary information. That report may be obtained by writing to Andover Firefighters' Relief Association, 13875 Crosstown Boulevard NW, Andover, Minnesota 55304. FUNDING POLICY The State of Minnesota contributes amortization aid, or two percent fire aid, in accordance with state statute requirements. Plan members are not required to contribute to the plan. The state legislature may amend contribution requirements of the City and State. The City is allowed to make voluntary contributions of other public funds pursuant to Minnesota Statutes Chapter 69. The City receives the State aid contribution and is required by state statutes to pass this through as payment to the Association. This transaction is recorded as revenue and expenditure in the City's financial statements. Contributions for the last three years are as follows: Year Ending City State Total 12/31/2009 $ 50,000 $ 103,492 $ 153,492 12/31/2010 50,000 104,210 154.10 12/31/2011 50,000 106,170 156,170 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. rct CITY OF ANDOVER, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2011 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 Retirees and beneficiaries currently purchasing health insurance through the City Active employees Total 53 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, 2011, was calculated as follows: r`i CITY OF ANDOVER, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2011 Annual required contribution (ARC) $ 37,717 Amortization of net OPEB obligation (6,762) Interest on net OPEB obligation 4,677 Annual OPEB cost 35,632 Contributions made during the year (6,141) Increase (decrease) in net OPEB obligation 29,491 Net OPEB obligation - beginning of year 116,921 Net OPEB obligation - end of year $ 146,412 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, 2011. The City's annual OPEB cost (expense) of $37,717 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 2009, 2010 and 2011 are as follows: Annual Employer Fiscal Year Ended OPEB Cost Contributions December 31, 2009 $ 52,340 $ 14,615 December 31, 2010 51,667 14,937 December 31, 2011 35,632 6,141 Percentage of Annual OPEB Net OPEB Cost Contributed Obligation 27.9% $ 80,191 28.9% 116,921 17.2% 146,412 For the governmental activities, other post employment benefits are generally liquidated through the General Fund. F. FUNDED STATUS AND FUNDING PROGRESS The City currently has no assets that have been irrevocably deposited in a trust for future health benefits, therefore, the actuarial value of assets is zero. The funded status of the plan was as follows: G. ACTUARIAL METHODS AND ASSUMPTIONS UAAL as a Percentage of Fund Covered Covered Ratio Payroll Payroll (a /b) ( c ) ((b -a) /c) 0.00% $ 5,298,367 5.15% Actuarial valuations of an ongoing plan involve estimates of the value of reported amounts and assumptions about the probability of occurrence of events for into the future. Examples include assumptions about future employment, mortality and the health care cost trend. Amounts determined regarding the funded status of the plan and the annual required contributions (ARC) of the employer are subject to continual revision as actual results are compared with past expectations and new estimates are made about the future. The schedule of funding progress, presented as required supplementary information following the notes of the financial statements, presents multi -year trend information that shows whether the actuarial value of plan assets is increasing or decreasing over time relative to the actuarial accrued liabilities for benefits. r` Unfunded Actuarial Actuarial Actuarial Accrued Actuarial Value of Accrued Liability Valuation Date Assets Liability * (UAAL ) (a) ( b ) (b -a) January 1, 2011 $ $ 273,046 $ 273,046 *using the Projected Unit Credit actuarial method G. ACTUARIAL METHODS AND ASSUMPTIONS UAAL as a Percentage of Fund Covered Covered Ratio Payroll Payroll (a /b) ( c ) ((b -a) /c) 0.00% $ 5,298,367 5.15% Actuarial valuations of an ongoing plan involve estimates of the value of reported amounts and assumptions about the probability of occurrence of events for into the future. Examples include assumptions about future employment, mortality and the health care cost trend. Amounts determined regarding the funded status of the plan and the annual required contributions (ARC) of the employer are subject to continual revision as actual results are compared with past expectations and new estimates are made about the future. The schedule of funding progress, presented as required supplementary information following the notes of the financial statements, presents multi -year trend information that shows whether the actuarial value of plan assets is increasing or decreasing over time relative to the actuarial accrued liabilities for benefits. r` CITY OF ANDOVER, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2011 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 12/31/2011 was 30 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, 2011 are as follows: Fund Governmental Funds: Major Funds: General Fund 2006 FDA Public Facility Lease Revenue Refunding BondsDSF 2007 FDA Public Facility Lease Revenue Refunding BondsDSF Water Trunk CPF Nonmajor Governmental Funds Total governmental funds Receivable Payable $ 647,000 $ - - 11,000 - 11,000 215,000 - - 840,000 $ 862,000 $ 862,000 Interfund receivables and payables are representative of lending/borrowing arrangements to cover deficit cash balances at the end of the fiscal year. Interfund transfers: 73 CITY OF ANDOVER, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2011 Fund Transfer In Transfer Out Governmental Funds: Major Funds: M.S. Section 472 General Fund $ 196,930 $ Sewer Trunk CPF 400,000 Durati on ofDistrict Road & Bridge CPF 6,600 Tax Increment P roj ects CPF - 2,499,013 Permanent Improvement Revolving CPF - 763,298 Nonmajor Funds 3,639,347 383,636 Total governmental funds $ 4,242,877 $ 3,645,947 Proprietary Funds: Enterprise Funds: Water $ $ 150,250 Sewer 446,680 Total p rop riet ary fu nd s 596,930 Total $442,877 $442,877 Interfund transfers allow the City to allocate financial resources to the funds that receive benefit from services provided by another fund. Most of the City's interfund transfers fall under that category. Non - routine transfers include a one -time transfer of $755,000 to the Building CPF from the TIF Projects CPF for future land purchases. 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 1. Name of Di strict: Andover Redevelopment District I -1 Type of District: Redevelopment Authorizing Law: M.S. Section 472 Established: 1986 Durati on ofDistrict Through 2012 Original net tax capacity: $ 152,140 Current net tax capacity: 1,784,718 Captured nettax capacity - retained by the City $ 1,632,578 Total District Bonds issued $ 19,250,000 Amountredeemed (19,250,000) Bonds outstanding December 31, 2011 $ 74 CITY OF ANDOVER, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2011 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 $ 4,542 234,858 Captured nettax capacity - retained by the City $ 230,316 3. Name of District: Tax Increment Financing District 1 -3 Authorizing Law. (Farmstead Project) Type of District: Redevelopment Authorizing Law. M.S. Section 469 Established: 1997 Duration of District: Through 2025 Original net tax capacity: $ 7,314 Current net tax capacity: 151,809 Captured net tax capacity -retained by the City $ 144,495 Name of District: Tax Increment Financing District 1 -4 Type of District: Redevelopment Authorizing Law. M.S. Section 469 Established: 2005 Duration of District: Through 2031 Original net tax capacity: $ 67,010 Current net tax capacity: 87,178 Captured net tax capacity -retained by the City $ 20,168 Note 12 DEFICIT FUND BALANCES The City has deficit fund balances at December 31, 2011 as follows: Fund Amount Special Revenue Funds: Community Center $ 297,530 Capital P rcj ects Funds: Storm Sewer Project 62,460 Equipment Cert 2012A 141,187 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 W. CITY OF ANDOVER, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2011 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, 2011. D. TAX INCREMENT DISTRICTS The City's tax increment districts are subject to review by the State of Minnesota Office of the State Auditor (OSA). Any disallowed claims or misuse of tax increments could become a liability of the applicable fund. Management has indicated that they are not aware of any instances of noncompliance that would have a material effect on the financial statements. E. PAY -AS- YOU -GO TAX INCREMENT The City has one tax increment pay -as- you -go agreement. The agreement is not a general obligation of the City and is payable solely from tax increments. Accordingly, this agreement is not reflected in the financial statements of the City. Details of the pay -as- you -go are as follows: TIF District #1 -3, Farmstead Project: The pay -as- you -go agreement for TIF District #1 -3 provides for the payment of 90% of all tax increment received and will be completed February 1, 2015. Note 14 DEFERRED AD VALOREM TAX LEVIES - BONDED DEBT General Obligation bond issues sold by the City are financed by ad valorem tax levies and special assessment bond issues sold by the City are partially financed by ad valorem tax levies in addition to special assessments levied against the benefiting properties. When a bond issue to be financed partially or completely by ad valorem tax levies is sold, specific annual amounts of such tax levies are stated in the bond resolution and the County Auditor is notified and instructed to levy these taxes over the appropriate years. The future tax levies are subject to cancellation when and if the City has provided alternative sources of financing. The City Council is required to levy any additional taxes found necessary for full payment of principal and interest. rip, CITY OF ANDOVER, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2011 These future scheduled tax levies are not shown as assets in the accompanying financial statements at December 31, 2011. Future scheduled tax levies for all bonds outstanding at December 31, 2011 totaled $19,446,549. Note 15 FUND BALANCE A. CLASSIFICATIONS At December 31, 2011, a summary of the governmental fund balance classifications are as follows: 2006 EDA 2007 EDA Public Public Fac Lease Fac Leas; Tax Permanent Revenue Revenue Water Sewer Road & Increment Improvement Other RefBouds RefBonds Trunk Trunk Bridge Projects Revolvng Governmental General DST DST CPF CPF CPF CPF CPF Funds Total Nonspendable: Preps sl items $ 91,000 $ - $ - $ - $ - $ - $ - $ - $ 8,250 $ 99,250 Inventory 131641 - - - - - - - 7 824 139465 Total nonspendable 222,641 16,074 23$715 Resricte dfor Debt service - 9923,753 6,813,801 - - - - - 1,409,183 18,146,737 Tax ins errent - - - - - - 829,052 - - 829,052 Open ,space referendum 765,425 765,425 Total restricted 9923,753 6,813,801 829,052 2,174,608 19,741,214 Corranitted to: Economic development - - - - - - - - 497,472 497,472 (Itysmapprig system - - - - - - - - 98,010 98,010 Surfac e water management - - - - - - - - 11,079 11,079 Public tight ofways man age=nt - - - - - - - - 43,647 43,647 Seal coatingrum developments 558 558 Total committed 650,766 650,766 Assgned to: Water system - - - 2,652,691 - - - - - 2,652,691 Sanitary sewer system - - - - 4,051,214 - - - - 4,051,214 Street rehabiliation - - - - - 4,535,174 - - - 4,535,174 Developmentpurposes - - - - - - - 1,166904 - 1,166,904 Comnarnity development - - - - - - - - 25,240 25,240 Forest resources prcgrams - - - - - - - - 7,813 7,813 Cbmnrwnity services - - - - - - - - 416 416 Panic improvements - - - - - - - - 170,829 170,829 Facilities m anagement - - - - - - - - 815,392 815,392 Pedestrian tr ails - - - - - - - - 73,293 73,293 Capital improvements 952,340 952,340 Total assigned - - - 2652691 4051214 4535174 - 1.166904 2045323 14451306 Unassigned 5,665,496 (517,251) 5,148,245 Total $ 5,888,137 $ 9923,753 $ 6,813,801 $ 2,652,691 $ 4,051,214 $ 4,535,174 $ 829,052 $ 1,166904 $ 4369,520 $ 40,230,246 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 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, 2011, the unassigned fund balance of the General Fund targeted for cash -flow needs was 53% 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. 77 CITY OF ANDOVER, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2011 As of December 31, 2011, the following revenue bonds were outstanding Date of Original 2011 Outstanding Project Issue Issue Retired 12/31/2011 Downtown Center 7/15/1997 S 5,645,000 S (5,490,000) S 155,000 Presbyterian Homes of Andover, Inc. 11/1/2003 13,145,000 (2,000,698) 11,144,302 Total S 18,790,000 $ (7,490,698) S 11,229 9,302 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: Future minimum lease payments are unavailable at this time due to changing variables: CPI and the completion of the capital campaign for the community center. Note 18 SUBSEQUENT EVENTS The City of Andover sold $585,000 of General Obligation Equipment Certificates, Series 2012A on March 22, 2012 to finance the purchase of public safety and public works equipment. The rates of the bonds per year are 2.00% with a true interest cost of 0.88 %. Principal payments are due in 2016 — 2017. The City of Andover sold $1,570,000 of Taxable General Obligation Capital Improvement Refunding Bonds, Series 2012B on March 22, 2012 to refund the General Obligation Capital Improvement Bonds, Series 2004A. The rates of the bonds per year are 2.00% with a true interest cost of 0.95 %. Principal payments are due in 2013 — 2016. Note 19 RECENTLY ISSUED ACCOUNTING STANDARDS The Governmental Accounting Standards Boards (GASB) recently approved the following statements which were not implemented for these financial statements: Statement No. 60 Accounting and Financial Reporting for Service Concession Arrangements. The provisions of this Statement are effective for financial statements for periods beginning after December 15, 2011. Statement No. 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. 63 Financial Reporting of Deferred Outflows of Resources, Deferred Inflows of Resources, and Net Position. The provisions of this Statement are effective for financial statements for periods beginning after December 15, 2011. 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. 78 2011 Lease Annual Lease Expiration Renewal Location Lessee Amount Adj ustment Factor Date Options City Hall water tower Sprint Nextel $ 26,499 Greater of CPI or 4% 12/31/2012 3- 5 year tams City Hall water tower T- Mobile USA, Inc 21,611 Greater of CPI or 4% 12/31/2011 3 - 5 year tams Emergency Siren Pole T- Mobile USA, Inc 5,000 $1,000 annual increase 6/17/2013 3 - 5 year tams Andover YMCA Comm Ctr Greater Minneapolis YMCA 635,000 None 8/1/2035 N/A Ro se P ark water tower Clear Wireles s LLC 14,575 3% annually 7/31/2014 5- 5 year tams Future minimum lease payments are unavailable at this time due to changing variables: CPI and the completion of the capital campaign for the community center. Note 18 SUBSEQUENT EVENTS The City of Andover sold $585,000 of General Obligation Equipment Certificates, Series 2012A on March 22, 2012 to finance the purchase of public safety and public works equipment. The rates of the bonds per year are 2.00% with a true interest cost of 0.88 %. Principal payments are due in 2016 — 2017. The City of Andover sold $1,570,000 of Taxable General Obligation Capital Improvement Refunding Bonds, Series 2012B on March 22, 2012 to refund the General Obligation Capital Improvement Bonds, Series 2004A. The rates of the bonds per year are 2.00% with a true interest cost of 0.95 %. Principal payments are due in 2013 — 2016. Note 19 RECENTLY ISSUED ACCOUNTING STANDARDS The Governmental Accounting Standards Boards (GASB) recently approved the following statements which were not implemented for these financial statements: Statement No. 60 Accounting and Financial Reporting for Service Concession Arrangements. The provisions of this Statement are effective for financial statements for periods beginning after December 15, 2011. Statement No. 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. 63 Financial Reporting of Deferred Outflows of Resources, Deferred Inflows of Resources, and Net Position. The provisions of this Statement are effective for financial statements for periods beginning after December 15, 2011. 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. 78 CITY OF ANDOVER, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2011 Statement No. 66 Technical Corrections — 2012. The provisions of this Statement are effective for financial statements for periods beginning after December 15, 2012. The effect these standards may have on future financial statements is not determinable at this time Note 20 ACCOUNTING CHANGE. IMPLEMENTATION OF GASB 54 The City adopted the provisions of Governmental Accounting Standards Board Statement No.54, Fund Balance Reporting and Governmental Fund Type Definitions for the year ended December 31, 2011. Changes to the reporting of the fund balance of the governmental funds are reflected in the financial statements and related disclosures in Note I.P. and Note 15. The implementation of GASB Statement 54 also resulted in the reclassification of the Trail & Transportation and Capital Equipment Reserve Funds. These funds had been presented as nonmajor special revenue funds and have been reclassified as nonmajor capital projects funds. N!, - This page intentionally left blank - 80 REQUIRED SUPPLEMENTARY INFORMATION 81 CITY OF ANDOVER, MINNESOTA REQUIRED SUPPLEMENTARY INFORMATION 2,615,407 2,615,407 2,615,407 Statement 10 BUDGETARY COMPARISON SCHEDULE - GENERAL FUND 1,077,084 1,077,084 974,988 102,096 For The Year Ended December 31, 2011 Protective inspection 363,789 363,789 342,437 21,352 With Comparative Actual Amounts For The Year Ended December 31, 2010 Civil defense 16,463 16,463 16,301 162 15,450 Animal control Variance with 9,970 11,087 (1,117) 6,952 Total public safety Final Budget - 4,082,713 3,960,220 Budgeted Amounts 3,920,073 Public works: Positive 2010 Original Final Actual (Negative) Actual Revenues: (16,243) 518,989 Snow and ice removal 489,315 489,315 General property taxes $ 7,217,219 $ 7,217,219 $ 7,115,936 $ (101,283) $ 7,191,602 Licenses and permits 250,080 250,080 387,206 137,126 329,901 Intergovernmental 558,215 558,215 566,706 8,491 570,097 Charges for services 580,200 580,200 866,584 286,384 755,184 Fines 105,750 105,750 99,777 (5,973) 104,780 Investment income 65,000 65,000 130,367 65,367 70,368 Miscellaneous 84,900 84,900 127,509 42,609 136,684 Total revenues 8,861,364 8,861,364 9,294,085 432,721 9,158,616 Expenditures: Current: General government: Mayor and City council 106,956 106,956 101,372 5,584 100,710 Administration 138,157 138,157 135,523 2,634 131,218 Newsletter 27,500 27,500 22,897 4,603 17,094 Human resources 36,221 36,221 31,854 4,367 54,968 Legal 178,300 178,300 171,062 7,238 172,775 City clerk 103,333 103,333 100,693 2,640 95,166 Elections 6,750 6,750 6,398 352 37,927 Financial administration 212,967 212,967 207,033 5,934 194,865 Assessing 152,500 152,500 143,693 8,807 144,760 Information systems 149,871 154,871 142,963 11,908 136,931 Planning and zoning 355,258 355,258 324,302 30,956 327,566 Engineering 413,408 414,408 413,819 589 389,037 Facility management 543,739 528,739 469,476 59,263 421,850 Total general government 2,424,960 2,415,960 2,271,085 144,875 2,224,867 Public safety Police 2,615,407 2,615,407 2,615,407 - 2,599,246 Fire protection 1,077,084 1,077,084 974,988 102,096 967,716 Protective inspection 363,789 363,789 342,437 21,352 330,709 Civil defense 16,463 16,463 16,301 162 15,450 Animal control 9,970 9,970 11,087 (1,117) 6,952 Total public safety 4,082,713 4,082,713 3,960,220 122,493 3,920,073 Public works: Streets and highways 578,050 578,050 594,293 (16,243) 518,989 Snow and ice removal 489,315 489,315 434,602 54,713 537,948 Street signs 196,712 196,712 167,908 28,804 166,244 Traffic signals 36,000 36,000 26,569 9,431 25,830 Street lighting 242,400 242,400 221,461 20,939 217,205 Total public works $ 1,542,477 $ 1,542,477 $ 1,444,833 $ 97,644 $ 1,466,216 (Continued) 82 CITY OF ANDOVER, MINNESOTA REQUIRED SUPPLEMENTARY INFORMATION Statement 10 BUDGETARY COMPARISON SCHEDULE - GENERAL FUND (Continued) For The Year Ended December 31, 2011 With Comparative Actual Amounts For The Year Ended December 31, 2010 Variance with Final Budget - Budgeted Amounts Positive 2010 Original Final Actual (Negative) Actual Expenditures: Current: (continued) Parks and recreation $ 908,832 $ 916,832 $ 889,178 $ 27,654 $ 826,694 Recycling 122,273 122,273 109,911 12,362 109,034 Unallocated 45,000 45,000 30,631 14,369 24,953 Total current 9,126,255 9,125,255 8,705,858 419,397 8,571,837 Capital outlay: Public works - - 7,925 (7,925) - Parks and recreation - 1,216 Total capital outlay - - 7,925 (7,925) 1,216 Total expenditures 9,126,255 9,125,255 8,713,783 411,472 8,573,053 Revenues over (under) expenditures (264,891) (263,891) 580,302 844,193 585,563 Other financing sources (uses): Transfers in 196,930 196,930 196,930 - 196,930 Net increase (decrease) in fund balance $ (67,961) $ (66,961) $ 777,232 $ 844,193 $ 782,493 Fund balance - January 1 5,110,905 4,328,412 Fund balance - December 31 $ 5,888,137 $ 5,110,905 83 CITY OF ANDOVER, MINNESOTA REQUIRED SUPPLEMENTARY INFORMATION SCHEDULE OF FUNDING PROGRESS - OTHER POST EMPLOYMENT BENEFITS PLAN For The Year Ended December 31, 2011 Statement 11 The City implemented GASB Statement No. 45 for the year ended December 31, 2008. Information for prior years is not available. 84 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. 84 CITY OF ANDOVER, MINNESOTA REQUIRED SUPPLEMENTARY INFORMATION NOTES TO REQUIRED SUPPLEMENTARY INFORMATION December 31, 2011 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. Final Over Budget Actual Budget General Fund Currant: Public safety: Animal control $ 9,970 $ 11,087 $ 1,117 Public works: Streets and highways 578,050 594,293 16,243 Capital outlay: Public works - 7,925 7,925 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 2011, 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: 85 CITY OF ANDOVER, MINNESOTA REQUIRED SUPPLEMENTARY INFORMATION NOTES TO REQUIRED SUPPLEMENTARY INFORMATION December 31, 2011 Condition Rating Excellent 86-100 Actual Very Good 71-85 Estimate Good 56-70 2003 Fair 41 -55 Poor 26-40 1,847,066 Very Poor 11-25 1,000,000 Substandard 0-10 As of December 31, 2011, 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 95.7% Fair 3.9% 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 $1,770,980 on street and trail maintenance for the year ending December 31, 2011. 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. E:Z: Maintenance Actual OCI Year Estimate Expenditures Rating 2003 $ 950,000 $ 956,688 82 2004 1,000,000 1,847,066 82 2005 1,000,000 1,655,715 83 2006 1,150,000 1 X228,981 82 2007 1,150,000 1,56,433 81 2008 1,150,000 2,44,713 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 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. E:Z: COMBINING AND INDIVIDUAL FUND STATEMENTS AND SCHEDULES 87 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. 88 CITY OF ANDOVER, MINNESOTA COMBINING BALANCE SHEET Statement 12 NONMAJOR GOVERNMENTAL FUNDS December 31, 2011 Fund balance (deficit) Nonspendable 16,074 - - 16,074 Nonmaj or - 1,409,183 Special Debt Capital Governmental - Revenue Service Projects Funds Assets: Unassigned (313,604) - (203,647) (517,251) Cash and investments $ 726,855 $ 856,453 $ 2,779,087 $ 4,362,395 Cash and investments with escrow agent 76,459 739,394 - 815,853 Accrued interest 3,697 1,251 14,876 19,824 Accounts receivable - net 111,624 - - 111,624 Prepaid items 8,250 - - 8,250 Property taxes receivable: Unremitted 229 12,085 1,544 13,858 Delinquent 1,070 67,036 9,052 77,158 Notes receivable 53,431 - - 53,431 Inventories - at cost 7,824 - - 7,824 Total assets 989,439 1,676,219 2,804,559 5,470,217 Liabilities and Fund Balance Liabilities: Interfund payable 425,000 200,000 215,000 840,000 Accounts payable 41,343 - 2,939 44,282 Contracts payable 14,500 - - 14,500 Deposits payable 31,996 - - 31,996 Due to other governmental units 3,900 - 3,936 7,836 Salaries payable 19,134 - - 19,134 Deferred revenue 66,861 67,036 9,052 142,949 Total liabilities 602,734 267,036 230,927 1,100,697 Fund balance (deficit) Nonspendable 16,074 - - 16,074 Restricted - 1,409,183 765,425 2,174,608 Committed 650,766 - - 650,766 Assigned 33,469 - 2,011,854 2,045,323 Unassigned (313,604) - (203,647) (517,251) Total fund balance 386,705 1,409,183 2,573,632 4,369,520 Total liabilities and fund balance $ 989,439 $ 1,676,219 $ 2,804,559 $ 5,470,217 89 CITY OF ANDOVER, MINNESOTA COMBINING STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES NONMAJOR GOVERNMENTAL FUNDS For The Year Ended December 31, 2011 With Comparative Totals For The Year Ended December 31, 2010 Statement 13 Expenditures: Totals Current: Special Debt Capital Nonma_j or Governmental Funds Revenue Service Projects 2011 2010 Revenues: Public safety - - 5,321 5,321 General property taxes $ 33,198 $ 1,831,213 $ 253,281 $ 2,117,692 $ 2,090,652 Intergovernmental 10,299 242,496 5,321 258,116 262,752 Special assessments - - - - 31,593 Charges for services 866,207 - - 866,207 849,497 Investment income 13,809 13,844 82,500 110,153 88,416 Miscellaneous: Public safety - - 5,645 5,645 Park dedication fees - - 51,706 51,706 32,649 Rent 641,859 - - 641,859 638,037 Other 215,595 - 19,567 235,162 288,410 Total revenues 1,780,967 2,087,553 412,375 4,280,895 4,282,006 Expenditures: Current: General government 9,170 - 18,316 27,486 30,926 Public safety - - 5,321 5,321 - Public works 93,893 - 20,945 114,838 161,356 Parks and recreation 991,098 - 45,944 1,037,042 1,606,801 Economic development 156,645 - - 156,645 152,311 Capital outlay: General government - - 45,072 45,072 163,387 Public safety - - 5,645 5,645 435,103 Public works - - 328,878 328,878 - Parks and recreation 36,176 - 161,606 197,782 725,175 Economic development 25,109 - - 25,109 - Debt service: Principal retirement - 4,100,000 - 4,100,000 5,779,000 Interest - 1,139,328 - 1,139,328 1,314,057 Paying agent fees - 3,253 - 3,253 3,880 Professional service - - - - 21,499 Total expenditures 1,312,091 5,242,581 631,727 7,186,399 10,393,495 Revenues over (under) expenditures 468,876 (3,155,028) (219,352) (2,905,504) (6,111,489) Other financing sources (uses): Transfers in - 2,876,345 763,002 3,639,347 5,144,721 Transfers out (375,634) (8,002) - (383,636) (716,612) Bonds issued - - 265,000 265,000 1,660,000 Refunding bonds issued - - - - 1,480,000 Redemption of refunded bonds - - - - (2,416,834) Bond premium - - - - 31,688 Proceeds from sale of capital assets - - - - 27,717 Total other financing sources (uses) (375,634) 2,868,343 1,028,002 3,520,711 5,210,680 Net increase (decrease) in fund balance 93,242 (286,685) 808,650 615,207 (900,809) Fund balance - January 1 293,463 1,695,868 1,764,982 3,754,313 4,655,122 Fund balance - December 31 $ 386,705 $ 1,409,183 $ 2,573,632 $ 4,369,520 $ 3,754,313 FIt 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. 0111 CITY OF ANDOVER, MINNESOTA SUBCOMBINING BALANCE SHEET NONMAJOR SPECIAL REVENUE FUNDS December 31, 2011 O:Y' Community Drainage EDA Development Community and General Block Grant Center Mapping Assets: Cash and investments $ 504,148 $ 25,112 $ 23,576 $ 97,467 Cash and investments with escrow agent - - 76,459 - Accrued interest 2,802 128 - 543 Accounts receivable 9,971 - 101,153 - Prepaid items - - 8,250 - Property taxes receivable: Unremitted - - - - Delinquent - - - - Notes receivable - 53,431 - - Inventories - at cost - - 7,824 - Total assets 516,921 78,671 217,262 98,010 Liabilities and Fund Balance Liabilities: Interfund payable - - 425,000 - Accounts payable 1,592 - 39,605 - Contracts payable 14,500 - - - Deposits payable - - 31,996 - Due to other governmental units - - 3,900 - Salaries payable 3,357 - 14,291 - Deferred revenue - 53,431 - - Total liabilities 19,449 53,431 514,792 - Fund balance (deficit): Nonspendable - - 16,074 - Committed 497,472 - - 98,010 Assigned - 25,240 - - Unassigned - - (313,604) - Total fund balance (deficit) 497,472 25,240 (297,530) 98,010 Total liabilities and fund balance $ 516,921 $ 78,671 $ 217,262 $ 98,010 O:Y' Statement 14 Nonmaj or Right -of -Way Special Management/ Charitable Construction Revenue LRRWMO Forestry Utility Gambling Seal Coating Funds $ 11,770 $ 7,813 $ 43,635 $ 416 $ 12,918 $ 726,855 - - - - - 76,459 - - 224 - - 3,697 - - 500 - - 111,624 - - - - - 8,250 229 - - - - 229 1,070 - - - - 1,070 - - - - - 53,431 - - - - - 7,824 13,069 7,813 44,359 416 12,918 989,439 425,000 146 - - - - 41,343 - - - - - 14,500 - - - - - 31,996 - - - - - 3,900 774 - 712 - - 19,134 1,070 - - - 12,360 66,861 1,990 - 712 - 12,360 602,734 - - - - - 16,074 11,079 - 43,647 - 558 650,766 - 7,813 - 416 - 33,469 - - - - - (313,604) 11,079 7,813 43,647 416 558 386,705 $ 13,069 $ 7,813 $ 44,359 $ 416 $ 12,918 $ 989,439 0:x1 CITY OF ANDOVER, MINNESOTA SUBCOMBINING STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES NONMAJOR SPECIAL REVENUE FUNDS For The Year Ended December 31, 2011 With Comparative Totals For The Year Ended December 31, 2010 OZ! Community Drainage EDA Development Community and General Block Grant Center Mapping Revenues: General property taxes - Intergovernmental - - - - Charges for services 199,030 - 629,396 8,657 Investment income 15,148 921 (7,228) 3,126 Miscellaneous: Rent - - 641,859 - Other 34,196 17,728 150,590 - Total revenues 248,374 18,649 1,414,617 11,783 Expenditures: Current: General government - - - - Public works - - - 6,327 Parks and recreation - - 991,098 - Economic development 156,453 192 - - Capital outlay: Parks and recreation 36,176 - - - Economic development 25,109 - - - Total expenditures 217,738 192 991,098 6,327 Revenues over (under) expenditures 30,636 18,457 423,519 5,456 Other financing sources (uses): Transfers out - - (369,034) - Net increase (decrease) in fund balance 30,636 18,457 54,485 5,456 Fund balance (deficit) - January 1 466,836 6,783 (352,015) 92,554 Fund balance (deficit) - December 31 $ 497,472 $ 25,240 $ (297,530) $ 98,010 OZ! Statement 15 0-10 Right -of -Way Totals Management/ Charitable Construction Nonmajor Special Revenue Funds LRRWMO Forestry Utility Gambling Seal Coating 2011 2010 $ 33,198 $ - $ - $ - $ - $ 33,198 $ 33,244 - 10,299 - - - 10,299 - - - 19,303 - 9,821 866,207 845,481 (96) 270 1,131 65 472 13,809 3,509 - - - - - 641,859 638,037 - 6,137 - 6,944 - 215,595 175,159 33,102 16,706 20,434 7,009 10,293 1,780,967 1,695,430 - - - 9,170 - 9,170 12,384 34,704 14,637 27,495 - 10,730 93,893 159,593 - - - - - 991,098 882,364 - - - - - 156,645 152,311 - - - - - 36,176 - - - - - - 25,109 - 34,704 14,637 27,495 9,170 10,730 1,312,091 1,206,652 (1,602) 2,069 (7,061) (2,161) (437) 468,876 488,778 - - (6,600) - - (375,634) (401,481) (1,602) 2,069 (13,661) (2,161) (437) 93,242 87,297 12,681 5,744 57,308 2,577 995 293,463 206,166 $ 11,079 $ 7,813 $ 43,647 $ 416 $ 558 $ 386,705 $ 293,463 0-10 - This page intentionally left blank - OR NONMAJOR DEBT SERVICE FUNDS The City's Debt Service Funds account for eight types of bonded indebtedness: • Certificates of Indebtedness • Capital Improvement Bonds • Revenue Bonds • Tax Increment Bonds • Permanent Improvement Revolving Bonds • State Aid Bonds • Special Assessment Bonds • Referendum Bonds Certificates of Indebtedness - (G.O. Equipment Certificates - 2007A, 2008A, 2009A and 2011A) are repaid primarily from general property taxes. Capital Improvement Bonds - (G.O. Capital Improvement Bonds 2004A) 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. Tax Increment Bonds - (Tax Increment Refunding Bonds of 2004B) are repaid primarily from tax increments. 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 - (2009A State Aid Refunding Bonds) are used to finance MSA eligible cost for road construction and improvements. These bonds are repaid from a portion of state aid allotments received by the City. Special Assessment Bonds - (G.O. Improvement Bonds 2005A) are used to finance assessable improvements within the City and are repaid primarily from special assessments levied against benefited properties. Referendum Bonds — (Open Space Referendum Bonds of 2010A) are used to finance the purchase of land to remain as open space. O:fi CITY OF ANDOVER, MINNESOTA SUBCOMBINING BALANCE SHEET NONMAJOR DEBT SERVICE FUNDS December 31, 2011 Liabilities and Fund Balance Liabilities: Interfund payable - - - - 200,000 Deferred revenue EDA Public 17,758 G.O. G.O. G.O. G.O. Capital Facility Lease Fund balance: Equipment Equipment Equipment Improvement Revenue 14,119 Certificate Certificate Certificate Bonds Bonds 2008A 2009A 2011A 2004A 2004 Assets: Cash and investments $ 175,510 $ 132,552 $ 79,221 $ 11,499 $ 8,270 Cash and investments with escrow agent - - - - 739,394 Accrued interest - - 200 - - Property taxes receivable: Unremitted 1,201 907 540 2,620 6,105 Delinquent - - 3,661 17,758 41,375 Total assets 176,711 133,459 83,622 31,877 795,144 Liabilities and Fund Balance Liabilities: Interfund payable - - - - 200,000 Deferred revenue - - 3,661 17,758 41,375 Total liabilities - - 3,661 17,758 241,375 Fund balance: Restricted 176,711 133,459 79,961 14,119 553,769 Total liabilities and fund balance $ 176,711 $ 133,459 $ 83,622 $ 31,877 $ 795,144 FI: Statement 16 G.O. State Aid Open Space Nonmajor PIR Fund Refunding Referendum Debt kefunding Bonds Bonds Bonds Service 2010A 2009A 2010A Funds $ 8,857 $ 269,026 $ 171,518 $ 856,453 - - - 739,394 - 419 632 1,251 - - 712 12,085 - - 4,242 67,036 8,857 269,445 177,104 1,676,219 - - - 200,000 - - 4,242 67,036 - - 4,242 267,036 8,857 269,445 172,862 1,409,183 $ 8,857 $ 269,445 $ 177,104 $ 1,676,219 OR, CITY OF ANDOVER, MINNESOTA SUBCOMBINING STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES NONMAJOR DEBT SERVICE FUNDS For The Year Ended December 31, 2011 With Comparative Totals For The Year Ended December 31, 2010 Total expenditures 204,000 168,610 129,396 1,766 375,546 EDA Public Revenues over (under) expenditures G.O. G.O. G.O. G.O. G.O. Capital Facility Lease Other financing sources (uses): Equipment Equipment Equipment Equipment Improvement Revenue Transfers in Certificate Certificate Certificate Certificate Bonds Bonds Transfers out 2007A 2008A 2009A 2011A 2004A 2004 Revenues: - - - - - - General property taxes $ - $ 178,752 $ 135,061 $ 80,403 $ 390,022 $ 908,894 Intergovernmental - - - - - - Special assessments - - - - - - Investment income - (588) (477) 1,324 (5,128) 12,031 Total revenues - 178,164 134,584 81,727 384,894 920,925 Expenditures: $ - $ 176,711 $ 133,459 $ 79,961 $ 14,119 $ 553,769 Debt service: Principal retirement 200,000 160,000 125,000 - 295,000 415,000 Interest 4,000 8,610 4,331 1,766 80,143 914,891 Paying agent fees - - 65 - 403 2,000 Professional services - - - - - - Total expenditures 204,000 168,610 129,396 1,766 375,546 1,331,891 Revenues over (under) expenditures (204,000) 9,554 5,188 79,961 9,348 (410,966) Other financing sources (uses): Transfers in - - - - - 369,034 Transfers out (8,002) - - - - - Refunding bonds issued - - - - - - Redemption of refunded bonds - - - - - - Bond premium - - - - - - Total other financing sources (uses) (8,002) - - - - 369,034 Net increase (decrease) in fund balance (212,002) 9,554 5,188 79,961 9,348 (41,932) Fund balance - January 1 212,002 167,157 128,271 - 4,771 595,701 Fund balance - December 31 $ - $ 176,711 $ 133,459 $ 79,961 $ 14,119 $ 553,769 f[+hl Statement 17 11+11 G.O. G.O.TIF PIR Fund G.O. Open Space Refunding Refunding State Improvement Referendum Totals Bonds Bonds Aid Bonds Bonds Bonds Nonmajor Debt Service Funds 2004B 2010A 2009A 2005A 2010A 2011 2010 11+11 138,081 $ 1,831,213 $ 1,805,784 - - 242,496 - - 242,496 262,752 - - - - - - 31,593 - 270 2,226 - 4,186 13,844 34,681 - 270 244,722 - 142,267 2,087,553 2,134,810 1,735,000 355,000 215,000 600,000 - 4,100,000 5,779,000 26,763 26,050 21,009 10,200 41,565 1,139,328 1,314,057 - 212 360 - 213 3,253 3,880 - - - - - - 21,499 1,761,763 381,262 236,369 610,200 41,778 5,242,581 7,118,436 (1,761,763) (380,992) 8,353 (610,200) 100,489 (3,155,028) (4,983,626) 1,744,013 380,000 - 383,298 - 2,876,345 4,110,864 - - - - - (8,002) (73,131) - - - - - - 1,480,000 - - - - - - (2,416,834) - - - - - - 27,205 1,744,013 380,000 - 383,298 - 2,868,343 3,128,104 (17,750) (992) 8,353 (226,902) 100,489 (286,685) (1,855,522) 17,750 9,849 261,092 226,902 72,373 1,695,868 3,551,390 $ - $ 8,857 $ 269,445 $ - $ 172,862 $ 1,409,183 $ 1,695,868 11+11 - This page intentionally left blank - 1[NYA 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 2011A - This fund was established to account for the purchase of capital equipment that was financed through the issuance of capital notes. 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. `11x3 CITY OF ANDOVER, MINNESOTA SUBCOMBINING BALANCE SHEET NONMAJOR CAPITAL PROJECTS FUNDS December 31, 2011 Liabilities and Fund Balance Liabilities: Interfund payables Storm - - - Accounts payable - 2,005 - - Sewer Park Building Trail & - Project Dedication Fund Transportation Assets: Restricted - Cash and investments $ 2,540 $ 171,717 $ 810,879 $ 72,884 Accrued interest - 866 4,513 409 Property taxes receivable: $ 2,540 $ 174,980 $ 815,392 $ 73,293 Unremitted - 349 - - Delinquent - 2,048 - - Total assets 2,540 174,980 815,392 73,293 Liabilities and Fund Balance Liabilities: Interfund payables 65,000 - - - Accounts payable - 2,005 - - Due to other government units - 98 - - Deferred revenue - 2,048 - - Total liabilities 65,000 4,151 - - Fund balance (deficit): Restricted - - - - Assigned - 170,829 815,392 73,293 Unassigned (62,460) - - - Total fund balance (deficit) (62,460) 170,829 815,392 73,293 Total liabilities and fund balance $ 2,540 $ 174,980 $ 815,392 $ 73,293 11111! Statement 18 Open Space Nonmajor Capital Equipment Referendum Capital Equipment Certificates Bonds Projects $ 950,314 $ 9,561 $ 761,192 $ 2,779,087 4,855 - 4,233 14,876 1,195 - - 1,544 7,004 - - 9,052 963,368 9,561 765,425 2,804,559 - 150,000 - 215,000 186 748 - 2,939 3,838 - - 3,936 7,004 - - 9,052 11,028 150,748 - 230,927 - - 765,425 765,425 952,340 - - 2,011,854 - (141,187) - (203,647) 952,340 (141,187) 765,425 2,573,632 $ 963,368 $ 9,561 $ 765,425 $ 2,804,559 1[11'1 CITY OF ANDOVER, MINNESOTA SUBCOMBINING STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES NONMAJOR CAPITAL PROJECTS FUNDS For The Year Ended December 31, 2011 With Comparative Totals For The Year Ended December 31, 2010 Expenditures: Storm Current: Sewer Park Building Trail & General government Project Dedication Fund Transportation Revenues: - - - - General property taxes $ - $ 57,300 - - Intergovernmental - - - - Charges for services - - - - Investment income (1,318) 3,945 28,798 2,417 Miscellaneous: - - - - Park dedication fees - 51,706 - - Other - 7,487 - - Total revenues (1,318) 120,438 28,798 2,417 Expenditures: Current: General government - - 3,166 - Public safety - - - - Public works - - - 671 Parks and recreation - 43,308 - - Capital outlay: General government - - - - Public safety - - - - Public works - - - - Parks and recreation - 47,803 - - Total expenditures - 91,111 3,166 671 Revenues over (under) expenditures (1,318) 29,327 25,632 1,746 Other financing sources (uses): Transfers in - - 763,002 - Transfers out - - - - Bonds issued - - - - Bond premium - - - - Proceeds from sale of capital assets - - - - Total other financing sources (uses) - - 763,002 - Net increase (decrease) in fund balance (1,318) 29,327 788,634 1,746 Fund balance (deficit) - January 1 (61,142) 141,502 26,758 71,547 Fund balance (deficit) - December 31 $ (62,460) $ 170,829 $ 815,392 $ 73,293 111A Statement 19 f[Nrl Open Space Capital Equipment Equipment Referendum Totals Equipment Certificates Certificates Bonds Nonmajor Capital Projects Funds Reserve 2011A 2012A 2010A 2011 2010 $ 195,981 $ - $ - $ - $ 253,281 $ 251,624 5,321 - - - 5,321 - - - - - - 4,016 25,151 (41) (299) 23,847 82,500 50,226 - - - - 51,706 32,649 12,080 - - - 19,567 113,251 238,533 (41) (299) 23,847 412,375 451,766 15,150 - - - 18,316 18,542 5,321 - - - 5,321 - 15,954 3,975 345 - 20,945 1,763 2,636 - - - 45,944 724,437 45,072 - - - 45,072 163,387 3,894 1,751 - - 5,645 435,103 - 188,335 140,543 - 328,878 - 42,905 70,898 - - 161,606 725,175 130,932 264,959 140,888 - 631,727 2,068,407 107,601 (265,000) (141,187) 23,847 (219,352) (1,616,641) - - - - 763,002 1,033,857 - - - - - (242,000) - 265,000 - - 265,000 1,660,000 - - - - - 4,483 - - - - - 27,717 - 265,000 - - 1,028,002 2,484,057 107,601 - (141,187) 23,847 808,650 867,416 844,739 - - 741,578 1,764,982 897,566 $ 952,340 $ - $ (141,187) $ 765,425 $ 2,573,632 $ 1,764,982 f[Nrl 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, 2011 With Comparative Actual Amounts For The Year Ended December 31, 2010 Statement 20 Variance with Final Budget - Budgeted Amounts Positive 2010 Original Final Actual (Negative) Actual Revenues: Charges for services $ 165,400 $ 165,400 $ 199,030 $ 33,630 $ 199,403 Investment income 6,000 6,000 15,148 9,148 9,300 Miscellaneous - 35,000 34,196 (804) 546 Total revenues 171,400 206,400 248,374 41,974 209,249 Expenditures: Current: Economic development 224,218 199,109 156,453 42,656 143,243 Capital outlay: Parks and recreation - 35,000 36,176 (1,176) - Economic development - 25,109 25,109 - - Total expenditures 224,218 259,218 217,738 41,480 143,243 Net increase (decrease) in fund balance $ (52,818) $ (52,818) 30,636 $ 41,974 66,006 Fund balance (deficit) - January 1 466,836 400,830 Fund balance (deficit) - December 31 $ 497,472 $ 466,836 I[*] 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, 2011 With Comparative Actual Amounts For The Year Ended December 31, 2010 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 Positive 2010 Original Final Actual (Negative) Actual $ 25,000 $ 25,000 $ - $ (25,000) $ - 100 100 921 821 91 4,000 4,000 17,728 13,728 5,932 29,100 29,100 18,649 (10,451) 6,023 25,000 25,000 $ 4,100 $ 4,100 I[$k] 192 24,808 9,068 18,457 $ 14,357 (3,045) 6,783 9,828 $ 25,240 $ 6,783 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, 2011 With Comparative Actual Amounts For The Year Ended December 31, 2010 Revenues: Charges for services Investment income Miscellaneous: Rent Other Total revenues Expenditures: Current: Parks and recreation 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 (369,034 ) (369,034 ) (369,034 $ 11,527 $ 11,527 54,485 (352,015 $ (297,530 ifiNl $ 42,958 (401,481 67,224 (419,239 $ (352,015) Variance with Final Budget - Budgeted Amounts Positive 2010 Original Final Actual (Negative) Actual $ 615,500 $ 615,500 $ 629,396 $ 13,896 $ 571,801 - - (7,228) (7,228) (8,255) 635,000 635,000 641,859 6,859 638,037 154,400 154,400 150,590 (3,810) 149,486 1,404,900 1,404,900 1,414,617 9,717 1,351,069 1,024,339 1,024,339 991,098 33,241 882,364 380,561 380,561 423,519 42,958 468,705 (369,034 ) (369,034 ) (369,034 $ 11,527 $ 11,527 54,485 (352,015 $ (297,530 ifiNl $ 42,958 (401,481 67,224 (419,239 $ (352,015) 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, 2011 With Comparative Actual Amounts For The Year Ended December 31, 2010 Revenues: Charges for services Investment income Total Revenues Expenditures: Current: Public works Net increase (decrease) in fund balance Fund balance (deficit) - January 1 Fund balance (deficit) - December 31 Statement 23 iffl 92,554 $ 98,010 87,546 $ 92,554 Variance with Final Budget - Budgeted Amounts Positive 2010 Original Final Actual (Negative) Actual $ 9,000 $ 9,000 $ 8,657 $ (343) $ 8,770 1,600 1,600 3,126 1,526 1,891 10,600 10,600 11,783 1,183 10,661 10,500 10,500 6,327 4,173 5,653 $ 100 $ 100 5,456 $ 5,356 5,008 iffl 92,554 $ 98,010 87,546 $ 92,554 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, 2011 With Comparative Actual Amounts For The Year Ended December 31, 2010 Statement 24 Variance with Final Budget - Budgeted Amounts Positive 2010 Original Final Actual (Negative) Actual Revenues: General property taxes $ 35,000 $ 35,000 $ 33,198 $ (1,802) $ 33,244 Investment income 300 300 (96) (396) 125 Total revenues 35,300 35,300 33,102 (2,198) 33,369 Expenditures: Current: Public works 34,588 34,588 34,704 (116) 39,000 Net increase (decrease) in fund balance $ 712 $ 712 (1,602) $ (2,314) (5,631) Fund balance (deficit) - January 1 12,681 18,312 Fund balance (deficit) - December 31 $ 11,079 $ 12,681 Ism 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, 2011 With Comparative Actual Amounts For The Year Ended December 31, 2010 Statement 25 Variance with Final Budget - Budgeted Amounts Positive 2010 Original Final Actual (Negative) Actual Revenues: Intergovernmental $ 12,500 $ 12,500 $ 10,299 $ (2,201) $ - Investment income 100 100 270 170 51 Miscellaneous - - 6,137 6,137 9,756 Total revenues 12,600 12,600 16,706 4,106 9,807 Expenditures: Current: Public works 12,500 12,500 14,637 (2,137) 9,893 Net increase (decrease) in fund balance $ 100 $ 100 2,069 $ 1,969 (86) Fund balance (deficit) - January 1 5,744 5,830 Fund balance (deficit) - December 31 $ 7,813 $ 5,744 INN CITY OF ANDOVER, MINNESOTA SPECIAL REVENUE FUND - RIGHT -OF -WAY MANAGEMENTIUTILITY SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES - BUDGET AND ACTUAL For The Year Ended December 31, 2011 With Comparative Actual Amounts For The Year Ended December 31, 2010 Revenues: Charges for services Investment income Total revenues Expenditures: Current: Public works 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 26 (6,600) (6,600) (6,600) - $ (26,214) $ (26,214) (13,661) $ 12,553 57,308 $ 43,647 INE11 (30,969) 88,277 $ 57,308 Variance with Final Budget - Budgeted Amounts Positive 2010 Original Final Actual (Negative) Actual $ 10,000 $ 10,000 $ 19,303 $ 9,303 $ 19,131 2,500 2,500 1,131 (1,369) 765 12,500 12,500 20,434 7,934 19,896 32,114 32,114 27,495 4,619 50,865 (19,614) (19,614) (7,061) 12,553 (30,969) (6,600) (6,600) (6,600) - $ (26,214) $ (26,214) (13,661) $ 12,553 57,308 $ 43,647 INE11 (30,969) 88,277 $ 57,308 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, 2011 With Comparative Actual Amounts For The Year Ended December 31, 2010 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 Positive 2010 Original Final Actual (Negative) Actual 65 $ 65 $ (79) 9,500 9,500 6,944 (2,556) 9,439 9,500 9,500 7,009 (2,491) 9,360 9,500 9,500 9,170 330 (2,161) $ (2,161) 2,577 $ 416 166'1 12,384 (3,024) 5,601 $ 2,577 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, 2011 With Comparative Actual Amounts For The Year Ended December 31, 2010 Revenues: Charges for services Investment income Total revenues Budgeted Amounts Original Final $ 19,000 $ 19,000 $ 400 400 19,400 19,400 Statement 28 Variance with Final Budget - Positive 2010 Actual (Negative) Actual 9,821 $ (9,179) $ 46,376 472 72 (380) 10,293 (9,107) 45,996 Expenditures: Current: Public works 19,000 19,000 10,730 8,270 54,182 Net increase (decrease) in fund balance $ 400 $ 400 (437) $ (837) (8,186) Fund balance (deficit) - January 1 995 9,181 Fund balance (deficit) - December 31 $ 558 $ 995 INN 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. IMIFA CITY OF ANDOVER, MINNESOTA COMBINING STATEMENT OF NET ASSETS INTERNAL SERVICE FUNDS December 31, 2011 With Comparative Totals for December 31, 2010 Central Equipment Risk Maintenance Management Statement 29 Totals 2011 2010 Assets: Current assets: Cash and cash equivalents $ 222,266 $ 229,390 $ 451,656 $ 370,709 Accrued interest 1,443 962 2,405 1,464 Accounts receivable 1,511 - 1,511 - Prepaid items 1,750 - 1,750 1,750 Inventories - at cost 87,791 - 87,791 81,000 Total assets 314,761 230,352 545,113 454,923 Liabilities: Current liabilities: Accounts payable 19,699 936 20,635 27,382 Due to other governmental units - - - 5,483 Salaries payable 8,093 487 8,580 8,243 Total liabilities 27,792 1,423 29,215 41,108 Net assets: Unrestricted $ 286,969 $ 228,929 $ 515,898 $ 413,815 IMPQ CITY OF ANDOVER, MINNESOTA COMBINING STATEMENT OF REVENUES, EXPENSES AND CHANGES IN FUND NET ASSETS INTERNAL SERVICE FUNDS For The Year Ended December 31, 2011 With Comparative Totals For The Year Ended December 31, 2010 Central Equipment Risk Maintenance Management Operating revenues Statement 30 Totals 2011 2010 User charges $ 680,440 $ 324,949 $ 1,005,389 $ 1,004,447 Other - 39,501 39,501 33,527 Total operating revenues 680,440 364,450 1,044,890 1,037,974 Operating expenses: Personal services 221,514 127,783 349,297 361,439 Supplies 298,789 - 298,789 244,669 Other service charges 95,769 212,241 308,010 308,502 Total operating expenses 616,072 340,024 956,096 914,610 Operating income (loss) 64,368 24,426 88,794 123,364 Nonoperating revenues (expenses): Investment income 8,741 4,548 13,289 7,116 Change in net assets 73,109 28,974 102,083 130,480 Net assets - January 1 213,860 199,955 413,815 283,335 Net assets - December 31 $ 286,969 $ 228,929 $ 515,898 $ 413,815 INN CITY OF ANDOVER, MINNESOTA COMBINING STATEMENT OF CASH FLOWS INTERNAL SERVICE FUNDS For The Year Ended December 31, 2011 With Comparative Totals For The Year Ended December 31, 2010 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 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 Risk Maintenance Management Statement 31 Totals 2011 2010 $ 678,929 $ 364,450 $ 1,043,379 $ 1,037,974 (408,327) (217,493) (625,820) (556,762) (221,189) (127,771) (348,960) (359,505) 49,413 19,186 68,599 121,707 8,119 4,229 12,348 6,469 57,532 23,415 80,947 128,176 164,734 205,975 370,709 242,533 $ 222,266 $ 229,390 $ 451,656 $ 370,709 $ 64,368 $ 24,426 $ 88,794 $ 123,364 (1,511) (1,511) (6,791) - (6,791) (17,935) (6,978) 231 (6,747) 11,716 - (5,483) (5,483) 2,628 325 12 337 1,934 (14,955) (5,240) (20,195) (1,657) $ 49,413 $ 19,186 $ 68,599 $ 121,707 IKII 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. IN CITY OF ANDOVER, MINNESOTA COMBINING STATEMENT OF NET ASSETS FIDUCIARY FUNDS December 31, 2011 General Escrow Assets: Cash and investments $ 9,447 Liabilities: Accounts payable 106 Deposits payable 9,341 Total liabilities $ 9,447 IWA General Agency $ 174,589 174,589 $ 174,589 Statement 32 Total $ 184,036 106 183,930 $ 184,036 CITY OF ANDOVER, MINNESOTA COMBINING STATEMENT OF CHANGES IN ASSETS AND LIABILITIES Statement 33 FIDUCIARY FUNDS For The Year Ended December 31, 2011 General Escrow Fund Assets: Cash and investments Liabilities: Accounts payable Deposits payable Total liabilities General Agencv Fund Assets: Cash and investments Liabilities: Accounts payable Due to other governments Deposits payable Total liabilities Total Fiduciary Funds Assets: Cash and investments Liabilities: Accounts payable Due to other governments Deposits payable Total liabilities Balance Balance January 1, December 31, $ 9,013 $ 41,912 $ (41,478) $ 9,447 110 20,291 (20,295) 106 8,903 21,621 (21,183) 9,341 $ 9,013 $ 41,912 $ (41,478) $ 9,447 $ 286,191 $ 583,122 $ (694,723) $ 174,590 265 245,007 46 - 285,880 338,115 $ 286,191 $ 583,122 (245,272) - (46) - (449,405) 174,590 $ (694,723) $ 174,590 $ 295,204 $ 625,034 $ (736,201) $ 184,037 375 265,298 46 - 294,783 359,736 $ 295,204 $ 625,034 123 (265,567) 106 (46) - (470,588) 183,931 $ (736,201) $ 184,037 - This page intentionally left blank - 124 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 126 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 136 These tables contain information to help the reader assess the City's most significant local revenue source, the property tax. Debt Capacity 142 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. Demog=liic and Economic Information 150 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 152 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. INA CITY OF ANDOVER, MINNESOTA NET ASSETS BY COMPONENT Last Ten Fiscal Years (accrual basis of accounting) Governmental Activities Invested in capital assets, net of related debt Restricted Unrestricted Total governmental activities net assets Business -Type Activities Invested in capital assets, net of related debt Restricted Unrestricted Total business -type activities net assets Primary Government $ 64,911,479 $ 61,941,541 $ 52,230,713 $ 67,652,236 5,882,451 4,277,835 17,182,422 6,565,168 16,262,706 18,992,188 19,617,813 19,740,176 87,056,636 85,211,564 89,030,948 93,957,580 23,170,434 33,379,384 35,111,309 35,588,013 4,337,170 437,077 - - 3,298,487 2,898,244 3,197,522 3,032,746 30,806,091 36,714,705 38,308,831 38,620,759 Invested in capital assets, net of related debt 88,081,913 95,320,925 87,342,022 103,240,249 Restricted 10,219,621 4,714,912 17,182,422 6,565,168 Unrestricted 19,561,193 21,890,432 22,815,335 22,772,922 Total primary government net assets $ 117,862,727 $ 121,926,269 $ 127,339,779 $ 132,578,339 Note: The City began to report accrual information when it implemented GASB 34 in 2002 W-i Table 1 $ 64,114,553 $ 77,285,905 $ 79,644,769 $ 83,394,872 $ 87,206,607 $ 90,859,970 14,838,788 7,763,716 8,345,185 8,252,691 6,364,714 3,107,253 19,808,248 21,294,876 19,904,063 19,442,008 21,071,212 23,353,009 98,761,589 106,344,497 107,894,017 111,089,571 114,642,533 117,320,232 38,249,916 38,580,630 37,606,052 36,939,962 36,140,050 36,031,319 3,451,261 3,659,887 4,005,471 4,875,384 4,912,822 5,100,628 41,701,177 42,240,517 41,611,523 41,815,346 41,052,872 41,131,947 102,468,182 115,866,535 117,250,821 120,334,834 123,346,657 126,891,289 14,838,788 7,763,716 8,345,185 8,252,691 6,364,714 3,107,253 23,259,509 24,954,763 23,909,534 24,317,392 25,984,034 28,453,637 $ 140,566,479 $ 148,585,014 $ 149,505,540 $ 152,904,917 $ 155,695,405 $ 158,452,179 IWA CITY OF ANDOVER, MINNESOTA CHANGES IN NET ASSETS Last Ten Fiscal Years (accrual basis of accounting) Expenses Governmental activities: General government Public safety Public works Sanitation Parks and recreation Recycling Economic development Unallocated Interest on long -term debt Total governmental activities expenses Business -type activities: Water Sewer Storm sewer Total business -type activities expenses Total primary government expenses Program Revenues Governmental activities: Charges for services: General government Public safety Public works Parks and recreation Recycling Economic development Operating grants and contributions Capital grants and contributions $ 2,355,954 $ 2,431,252 $ 2,265,215 $ 2,432,433 2,474,284 2,766,694 3,138,069 3,353,798 4,819,429 3,361,255 5,268,813 3,937,423 264,671 160,548 26,843 - 856,806 802,131 2,028,177 1,575,582 116,344 115,016 113,234 118,599 720,460 470,172 941,624 459,635 30,614 - - - 1,667,943 1,255,888 1,708,303 1,797,469 13,306,505 11,362,956 15,490,278 13,674,939 1,526,526 1,737,596 1,956,995 2,160,502 1,206,865 1,344,857 1,351,506 1,555,010 - 168,203 389,290 400,114 2,733,391 3,250,656 3,697,791 4,115,626 16,039,896 14,613,612 19,188,069 17,790,565 536,000 593,568 814,518 709,538 876,631 793,306 936,061 1,001,912 358,194 312,110 495,835 379,890 - - 29,683 461,679 30,947 22,450 29,062 32,810 946,495 732,011 1,640,389 2,535,140 5,849,683 5,350,283 7,010,826 3,934,686 Total governmental activities program revenue 8,597,950 7,803,728 10,956,374 9,055,655 Business -type activities: Charges for services: Water Sewer Storm sewer Operating grants and contributions Capital grants and contributions Total business -type activities program revenue Total primary government program revenues Net (Expense)/Revenue Governmental activities Business -type activities Total primary government net expense 1,128,182 1,399,798 1,723,068 1,510,119 1,249,932 1,309,584 1,361,839 1,550,745 - 118,638 242,090 248,753 373,550 - 214,920 823,797 2,751,664 2,828,020 3,541,917 4,133,414 11,349,614 10,631,748 14,498,291 13,189,069 (4,708,555) (3,559,228) (4,533,904) (4,619,284) 18,273 (422,636) (155,874) 17,788 $ (4,690,282) $ (3,981,864) $ (4,689,778) $ (4,601,496) 128 Table 2 $ 2,637,584 $ 2,509,011 $ 2,505,105 $ 2,413,916 $ 2,398,007 $ 2,406,750 3,443,285 3,851,086 4,035,884 4,237,401 4,157,050 4,214,316 3,031,459 3,783,509 5,144,197 3,776,367 3,445,403 4,029,164 2,442,305 2,954,753 2,963,218 2,880,595 3,447,730 2,945,742 91,378 94,929 85,397 86,949 108,785 109,293 626,103 2,265,605 540,285 481,632 654,961 777,298 1,668,444 2,303,567 2,219,130 2,146,960 1,936,731 1,796,782 13,940,558 17,762,460 17,493,216 16,023,820 16,148,667 16,279,345 2,232,144 2,587,847 2,563,781 2,594,713 2,585,469 2,655,926 1,585,548 1,631,224 1,794,891 1,831,505 1,915,072 1,914,113 408,003 537,151 521,975 536,619 532,168 614,958 4,225,695 4,756,222 4,880,647 4,962,837 5,032,709 5,184,997 18,166,253 22,518,682 22,373,863 20,986,657 21,181,376 21,464,342 471,573 785,600 647,081 483,639 454,419 532,764 804,447 662,299 721,289 412,113 479,516 540,089 325,672 408,656 427,043 316,451 337,360 309,066 749,407 859,531 1,049,032 1,495,779 1,432,672 1,498,847 35,379 33,158 35,897 29,479 40,504 48,339 218,605 182,535 199,840 185,539 211,121 235,134 959,286 1,129,099 917,618 966,635 1,214,066 977,553 4,920,694 8,794,164 1,069,607 1,631,929 1,461,834 1,356,091 8,485,063 12,855,042 5,067,407 5,521,564 5,631,492 5,497,883 1,768,388 2,025,452 1,987,432 2,127,676 2,077,305 2,119,954 1,691,728 1,771,670 1,869,327 1,967,997 1,964,117 1,990,218 287,397 288,372 297,125 325,392 338,823 358,708 - - - - 9,380 - 2,761,282 158,113 142,133 793,589 - - 6,508,795 4,243,607 4,296,017 5,214,654 4,389,625 4,468,880 14,993,858 17,098,649 9,363,424 10,736,218 10,021,117 9,966,763 (5,455,495) (4,907,418) (12,425,809) (10,502,256) (10,517,175) (10,781,462) 2,283,100 (512,615) (584,630) 251,817 (643,084) (716,117) $ (3,172,395) $ (5,420,033) $ (13,010,439) $ (10,250,439) $ (11,160,259) $ (11,497,579) 129 CITY OF ANDOVER, MINNESOTA CHANGES IN NET ASSETS Last Ten Fiscal Years (accrual basis of accounting) General Revenues and Other Changes in Net Assets 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 Assets Governmental activities Business -type activities Total primary government $ 5,076,374 $ 5,682,498 $ 6,260,772 $ 7,066,852 842,607 1,140,040 1,186,396 1,285,195 763,049 158,694 141,870 86,906 821,002 568,042 681,563 690,648 1,316,054 591,063 1,817,938 251,504 770,062 (6,426,181) (1,735,251) (438,426) 9,589,148 1,714,156 8,353,288 8,942,679 458,311 (94,931) 7,895 47,620 - - 6,854 - (770,062) 6,426,181 1,735,251 438,426 (311,751) 6,331,250 1,750,000 486,046 9,277,397 8,045,406 10,103,288 9,428,725 4,880,593 (1,845,072) 3,819,384 4,323,395 (293,478) 5,908,614 1,594,126 503,834 $ 4,587,115 $ 4,063,542 $ 5,413,510 $ 4,827,229 Note: The City began to report accrual information when it implemented GASB 34 in 2002. 11611] Table 2 cont $ 8,084,559 $ 8,897,755 $ 9,752,701 $ 10,175,519 $ 10,336,536 $ 10,292,674 1,562,131 1,661,204 1,783,270 1,930,669 2,074,589 2,005,056 77,642 486,626 274,402 131,084 84,875 86,802 1,019,304 1,967,583 1,514,012 1,032,507 1,114,451 1,399,987 219,910 191,735 234,070 6,144 22,500 91,693 (704,042) (714,577) 416,874 421,887 437,186 (417,051) 10,259,504 12,490,326 13,975,329 13,697,810 14,070,137 13,459,161 87,376 337,378 372,510 373,893 317,796 370,641 5,900 - - - - 7,500 704,042 714,577 (416,874) (421,887) (437,186) 417,051 797,318 1,051,955 (44,364) (47,994) (119,390) 795,192 11,056,822 13,542,281 13,930,965 13,649,816 13,950,747 14,254,353 4,804,009 7,582,908 1,549,520 3,195,554 3,552,962 2,677,699 3,080,418 539,340 (628,994) 203,823 (762,474) 79,075 $ 7,884,427 $ 8,122,248 $ 920,526 $ 3,399,377 $ 2,790,488 $ 2,756,774 1191 CITY OF ANDOVER, MINNESOTA FUND BALANCES - GOVERNMENTAL FUNDS Last Ten Fiscal Years (modified accrual basis of accounting) 2002 2003 2004 2005 General Fund Reserved $ 72,327 $ 87,766 $ 85,586 $ 126,320 Unreserved 2,742,645 2,505,261 3,216,979 3,076,157 Nonspendable - - - - Unassigned - - - - Total general fund 2,814,972 2,593,027 3,302,565 3,202,477 All Other Governmental Funds Reserved 2,564,689 2,176,704 13,263,819 3,267,027 Unreserved reported in: Special revenue funds - 1,225,626 1,951,529 1,264,369 Debt service funds 1,082,162 (9,706) - - Capital project funds 10,769,854 13,690,391 14,982,950 14,526,468 Nonspendable - - - - Restricted - - - - Committed - - - - Assigned - - - - Unassigned - - - - Total all other governmental funds 14,416,705 17,083,015 30,198,298 19,057,864 Total governmental funds $ 17,231,677 $ 19,676,042 $ 33,500,863 $ 22,260,341 Note: In 2006, the EDA issued $10,000,000 of Public Facility Lease Revenue Refunding Bonds to refund a portion of the 2004 EDA's $19,580,000 Public Facility Lease Revenue Bonds, Series 2004. 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. 1BYa Table 3 2006 2007 2008 2009 2010 2011 $ 144,496 $ 208,216 $ 193,805 $ 207,515 $ 206,666 $ - 3,248,317 3,682,244 3,981,230 4,120,897 4,904,239 - - - - - - 222,641 - - - - - 5,665,496 3,392,813 3,890,460 4,175,035 4,328,412 5,110,905 5,888,137 12,022,454 �'� 22,106,660 ��� 20,754,303 20,756,195 19,258,490 - 1,246,388 1,204,453 941,259 1,233,202 1,135,919 - 14,379,760 11,955,138 13,416,129 14,170,266 14,714,140 - - - - - - 16,074 - - - - - 19,741,214 - - - - - 650,766 - - - - - 14,451,306 - - - - - (517,251) 27,648,602 35,266,251 35,111,691 36,159,663 35,108,549 34,342,109 $ 31,041,415 $ 39,156,711 $ 39,286,726 $ 40,488,075 $ 40,219,454 $ 40,230,246 133 CITY OF ANDOVER, MINNESOTA CHANGES IN FUND BALANCES - GOVERNMENTAL FUNDS Last Ten Fiscal Years (modified accrual basis of accounting) Total revenues 2002 2003 2004 2005 Revenues General property taxes $ 5,060,053 $ 5,671,277 $ 6,272,762 $ 7,033,613 Tax increment collections 878,567 1,136,574 1,193,467 1,285,639 Licenses and permits 588,965 551,385 674,008 724,436 Intergovernmental 1,764,078 890,705 1,755,041 2,663,683 Special assessments 4,183,796 5,121,636 4,243,328 2,045,969 Charges for services 870,941 863,794 1,389,245 1,692,316 Fines 73,475 68,686 79,450 90,530 Investment income 812,896 563,824 678,308 684,173 Miscellaneous: 1,965,273 2,610,333 1,420,387 1,616,709 Park dedication fees 280,312 357,483 842,042 286,316 Connection charges 1,281,670 1,044,752 1,720,520 1,311,426 Rent - - - - Other 338,905 392,752 658,037 578,389 Total revenues 16,133,658 16,662,868 19,506,208 18,396,490 Expenditures General government 2,173,992 2,181,354 2,171,248 2,349,965 Public safety 2,352,909 2,631,991 2,915,958 3,093,298 Public works 4,603,715 3,136,081 4,944,489 3,650,351 Sanitation 110,213 80,901 26,732 - Parks and recreation 689,161 613,078 1,315,100 1,309,987 Recycling 116,005 114,784 114,052 116,506 Economic development 720,960 471,172 918,451 426,708 Unallocated 30,614 25,865 21,992 9,798 Capital outlay 1,965,273 2,610,333 1,420,387 1,616,709 Debt service: Principal 7,070,000 6,124,000 6,839,000 8,487,000 Interest 1,768,509 1,276,057 1,063,363 2,042,003 Other 28,265 31,436 94,869 13,226 Construction/acquisition costs 758,953 3,513,115 12,154,653 11,146,387 Total expenditures 22,388,569 22,810,167 34,000,294 34,261,938 Revenues over (under) expenditures (6,254,911) (6,147,299) (14,494,086) (15,865,448) Other Financing Sources (Uses) Transfers in 754,062 1,328,909 1,076,000 224,000 Transfers out - (485,170) (739,438) - Bonds issued - 6,904,000 21,280,000 4,210,000 Refunding bonds issued - - 6,450,000 - Payment to refunded bonds escrow agent - - (2,145,864) - Bond premium - 5,188 23,438 - Bond discount - (3,169) (497,883) (28,961) Proceeds from the sale of capital assets 2,139,961 841,906 2,872,654 219,887 Total other financing sources (uses) Net increase (decrease) in fund balances Debt service as a percentage of noncapital expenditures 2,894,023 8,591,664 28,318,907 4,624,926 $ (3,360,888) $ 2,444,365 $ 13,824,821 $ (11,240,522) 44.95% 44.35% 38.69% 48.97% 134 Table 4 2006 2007 2008 2009 2010 2011 $ 8,057,592 $ 8,833,249 $ 9,695,103 $ 10,168,143 $ 10,267,085 $ 10,279,967 1,546,394 1,659,222 1,762,119 1,951,343 2,015,123 1,976,800 598,094 475,893 525,339 291,903 329,901 387,206 2,661,726 1,644,914 1,175,205 1,654,614 1,989,420 1,876,685 1,289,590 3,342,039 1,638,006 1,421,591 1,725,695 891,942 1,770,156 2,035,735 1,724,052 1,579,659 1,604,681 1,732,791 91,490 101,445 104,930 110,779 104,780 99,777 1,014,801 1,962,379 1,508,265 1,029,683 1,107,335 1,386,698 626,567 113,013 133,585 41,216 32,649 51,706 372,133 829,624 254,903 20,119 48,086 27,165 - - - 637,305 638,037 641,859 395,789 621,798 800,857 381,548 396,186 332,992 18,424,332 21,619,311 19,322,364 19,287,903 20,258,978 19,685,588 2,343,332 2,399,297 2,366,574 2,242,662 2,255,793 2,298,571 3,268,236 3,580,240 3,796,965 4,015,410 3,920,073 3,965,541 2,817,475 3,491,353 4,843,288 3,545,132 3,204,444 3,788,636 1,599,885 1,825,706 1,953,822 1,891,125 2,433,495 1,926,220 90,590 94,669 86,631 85,527 109,034 109,911 626,103 2,265,605 538,293 477,648 650,977 966,687 8,454 6,915 17,999 19,540 24,953 30,631 987,075 2,803,485 1,460,662 1,519,944 1,324,881 985,399 5,254,000 3,275,000 3,460,000 3,865,000 5,779,000 4,100,000 1,683,599 2,089,857 2,253,223 2,178,233 2,030,267 1,855,538 253,134 167,187 15,645 39,265 29,939 10,430 4,579,910 360,742 - - 101,153 1,044,581 23,511,793 22,360,056 20,793,102 19,879,486 21,864,009 21,082,145 (5,087,461) (740,745) (1,470,738) (591,583) (1,605,031) (1,396,557) 522,000 578,925 580,343 587,530 627,530 627,530 (167,424) (57,671) (163,469) (165,643) (89,191) - 2,910,000 760,000 630,000 385,000 1,660,000 265,000 10,000,000 6,865,000 - 955,000 1,480,000 - - - - - (2,416,834) - - 3,401 - 18,781 31,688 - 603,959 706,386 553,879 12,264 43,217 514,819 13,868,535 8,856,041 1,600,753 1,792,932 1,336,410 1,407,349 $ 8,781,074 $ 8,115,296 $ 130,015 $ 1,201,349 $ (268,621) $ 10,792 38.66% 27.95% 29.55% 32.92% 38.21% 31.26% 1191'1 CITY OF ANDOVER, MINNESOTA ASSESSED AND ESTIMATED ACTUAL VALUE OF TAXABLE PROPERTY Last Ten Fiscal Years Source: Anoka County Property Tax Division 11GA Table 5 Net Tax Capacity as a Percentage 1.01% 1.04% 1.05% 1.05% 1.05% 1.05% 1.05% 1.05% 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 2002 $ 1,539,835,500 $ 15,336,075 $ 17,999,800 $ 359,540 $ 1,557,835,300 $ 15,695,615 33.511% 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% Source: Anoka County Property Tax Division 11GA Table 5 Net Tax Capacity as a Percentage 1.01% 1.04% 1.05% 1.05% 1.05% 1.05% 1.05% 1.05% 1.06% 1.06% CITY OF ANDOVER, MINNESOTA PROPERTY TAX RATES - PER $1,000 OF ASSESSED TAX CAPACITY VALUE DIRECT AND OVERLAPPING GOVERNMENTS Years 2003 through 2012 Source: Anoka County Property Tax Division IBY/ Table 6 Overlapping Direct City General Debt Lower Total Taxes Oper Service Rum 69.271% Payable Levy Levy Watershed Total 91.632% 21.492% 33.080% 4.021% 2003 28.899% 4.138% 0.339% 33.376% 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% Source: Anoka County Property Tax Division IBY/ Table 6 Overlapping Governments School County Other Total Total 27.802% 37.714% 3.755% 69.271% 102.647% 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% CITY OF ANDOVER, MINNESOTA PROPERTY TAX LEVIES AND COLLECTIONS Last Six 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. 138 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% $ 106,700 $ 8,085,678 94.56% 2007 9,316,427 8,738,606 410,519 9,149,125 98.20% 143,847 9,292,972 99.75% 2008 10,153,718 9,554,131 198,214 * 9,752,345 96.05% 168,706 9,921,051 97.71% 2009 10,593,520 9,992,240 54,629 * 10,046,869 94.84% 124,901 10,171,770 96.02% 2010 10,856,299 10,125,752 3,905 * 10,129,657 93.31% 110,306 10,239,963 94.32% 2011 10,856,299 10,119,681 853 * 10,120,534 93.22% 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. 138 CITY OF ANDOVER, MINNESOTA PRINCIPAL TAXPAYERS Current Year and Ten Years Ago 2011 2001 Total $ 1,400,117 5.35% Net Tax Capacity $ 26,174,350 Source: Anoka County Property Tax Division 1191] Net Tax Capacity Rank $ 324,769 143,085 257,672 66,364 131,794 87,673 51,473 44,322 40,052 38,998 $ 1,186,202 $ 18,969,459 1 3 2 6 4 5 7 8 9 10 Table 8 Percentage of Total City Tax Capacity 1.71% 0.75% 1.36% 0.35% 0.69% 0.46% 0.27% 0.23% 0.21% 0.21% 6.25% Net Percentage of Tax Total City Taxpayers Capacity Rank Tax Capacity Connexus Energy $ 217,170 1 0.83% Minnegasco, Inc. 201,860 2 0.77% Target Corporation 191,460 3 0.73% Andover Limited Partnership 159,028 4 0.61% Great River Energy 153,136 5 0.59% Presbyterian Homes of Andover 151,809 6 0.58% Andover Station LLC 104,250 7 0.40% Fairbanks Properties LLC 79,260 8 0.30% Columbia Park Properties 73,606 9 0.28% Maxwell Kearns Inc. 68,538 10 0.26% 116 LLC - Individual - Commercial /Industrial Northern States Power Health Partners MN Interstate Pipeline Minnesota Pipeline Company Total $ 1,400,117 5.35% Net Tax Capacity $ 26,174,350 Source: Anoka County Property Tax Division 1191] Net Tax Capacity Rank $ 324,769 143,085 257,672 66,364 131,794 87,673 51,473 44,322 40,052 38,998 $ 1,186,202 $ 18,969,459 1 3 2 6 4 5 7 8 9 10 Table 8 Percentage of Total City Tax Capacity 1.71% 0.75% 1.36% 0.35% 0.69% 0.46% 0.27% 0.23% 0.21% 0.21% 6.25% CITY OF ANDOVER, MINNESOTA ESTIMATED MARKET VALUES AND NEW CONSTRUCTION Last Ten Fiscal Years Estimated Market Values New Construction Commercial / Commercial / Industrial Residential Year Industrial (1) Residential Total Permits Value 2002 $ 107,671,600 $ 1,450,163,700 $ 1,557,835,300 19 $ 10,616,851 2003 127,728,400 1,778,643,800 1,906,372,200 13 4,764,046 2004 144,629,100 1,936,079,400 2,080,708,500 16 19,926,817 2005 168,684,200 2,174,640,000 2,343,324,200 20 6,571,671 2006 191,931,800 2,433,776,200 2,625,708,000 8 1,791,896 2007 211,760,900 2,663,389,900 2,875,150,800 9 2,403,831 2008 233,801,700 2,813,037,200 3,046,838,900 11 16,878,603 2009 248,129,500 2,807,144,500 3,055,274,000 11 767,430 2010 229,977,800 2,526,288,900 2,756,266,700 11 1,247,106 2011 199,728,200 2,305,897,900 2,505,626,100 24 11,461,453 Note: (1) Also includes agricultural, public utility, railroad operating property, and personal property 140 Table 9 Permits Value 218 $ 31,848,000 182 28,973,300 251 36,224,546 226 34,309,393 153 25,236,120 91 18,347,873 49 11,116,400 47 9,246,347 71 14,700,800 58 11,803,000 CITY OF ANDOVER, MINNESOTA SPECIAL ASSESSMENT LEVIES AND COLLECTIONS Last Ten Fiscal Years Table 10 Note: (1) Only includes assessments certified to Anoka County. IES Total Delinquent Collections Assessments Current Current Percent of Delinquent Total as a Percent of Outstanding as a Percent of Assessments Assessments Assessments Assessment Assessment Current Delinquent Current Year Due (1) Collected Collected Collections Collections Assessments Due Assessments Assessments Due 2002 $ 328,831 $ 307,051 93.38% $ 5,694 $ 312,745 95.11% $ 37,404 11.37% 2003 533,340 522,851 98.03% 5,917 528,768 99.14% 49,329 9.25% 2004 192,373 189,279 98.39% 7,921 197,200 102.51% 15,157 7.88% 2005 178,434 175,471 98.34% 4,002 179,473 100.58% 22,217 12.45% 2006 225,365 192,477 85.41% 4,790 197,267 87.53% 51,721 22.95% 2007 163,817 142,750 87.14% 12,460 155,210 94.75% 76,420 46.65% 2008 366,203 330,304 90.20% 1,479 331,783 90.60% 174,810 47.74% 2009 319,448 332,739 104.16% 36,693 369,432 115.65% 202,999 63.55% 2010 325,361 314,097 96.54% 61,247 375,344 115.36% 218,860 67.27% 2011 348,129 304,164 87.37% 5,112 309,276 88.84% 267,016 76.70% Note: (1) Only includes assessments certified to Anoka County. IES CITY OF ANDOVER, MINNESOTA RATIO OF NET BONDED DEBT TO ASSESSED VALUE AND NET BONDED DEBT PER CAPITA Last Ten Fiscal Years Table 11 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. `EPA General Bonded Debt Outstanding (2) Gross Less Debt Net Percentage Net Bonded Fiscal Estimated Bonded Service Bonded of Estimated Debt Year Population (1) Market Value Debt Fund Debt Market Value Per Capita 2002 28,664 $ 1,557,835,300 $ 3,680,000 $ (112,848) $ 3,567,152 0.23% $ 124.45 2003 28,939 1,906,372,200 3,710,000 (88,875) 3,621,125 0.19% 125.13 2004 29,262 2,080,708,500 24,236,000 (815,322) 23,420,678 * 1.13% 800.38 2005 30,080 2,343,324,500 24,389,000 (1,041,140) 23,347,860 1.00% 776.19 2006 30,222 2,625,708,000 33,850,000 (10,739,510) 23,110,490 0.88% 764.69 2007 30,263 2,875,150,800 40,880,000 (17,822,418) 23,057,582 0.80% 761.91 2008 31,023 3,046,838,900 40,565,000 (17,939,959) 22,625,041 0.74% 729.30 2009 31,298 3,055,274,000 39,690,000 (17,973,588) 21,716,412 0.71% 693.86 2010 30,598 2,756,266,700 40,026,000 (17,768,743) 22,257,257 0.81% 727.41 2011 30,850 2,505,626,100 39,096,000 (17,779,964) 21,316,036 0.85% 690.96 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. `EPA CITY OF ANDOVER, MINNESOTA COMPUTATION OF DIRECT AND OVERLAPPING DEBT December 31, 2011 Table 12 Notes: (1) Only includes debt supported by tax levy. (2) Information obtained from Anoka County. 143 Gross General Obligation Percentage Net Amount Bonded Debt Applicable Applicable Outstanding to City to City Direct: City of Andover $ 39,096,000 (1) 100.0000% $ 39,096,000 Overlapping: Anoka County 145,945,000 (2) 8.7473% 12,766,238 ISD No. 11 Anoka - Hennepin 102,510,572 (2) 12.6498% 12,967,400 ISD No. 15 St. Francis 36,810,000 (2) 6.4470% 2,373,146 Metropolitan Council 168,665,000 (2) 0.8474% 1,429,220 Total Overlapping Debt 29,536,004 Total Overlapping and Direct Debt $ 68,632,004 Notes: (1) Only includes debt supported by tax levy. (2) Information obtained from Anoka County. 143 CITY OF ANDOVER, MINNESOTA COMPUTATION OF LEGAL DEBT MARGIN Last Ten Fiscal Years 144 2002 2003 2004 2005 Estimated Taxable Market Value $ 1,497,078,400 $ 1,719,429,400 $ 2,080,708,500 $ 2,343,324,200 Debt limitation: Debt limit percent 2% 2% 2% 2% Debt limit in dollars 29,941,568 34,388,588 41,614,170 46,866,484 Debt applicable to limit: Total bonded debt 37,625,000 38,405,000 56,941,000 52,344,000 Less: Nonapplicable debt G.O. water revenue bonds (9,780,000) (9,780,000) (9,470,000) (9,150,000) Special assessment bonds (2,795,000) (1,255,000) - (3,560,000) Tax increment bonds (10,450,000) (9,815,000) (13,215,000) (7,065,000) Permanent improvement revolving bonds (8,325,000) (11,375,000) (7,680,000) (5,975,000) State aid bonds (2,595,000) (2,470,000) (2,340,000) (2,205,000) Less: Cash and investments in (112,848) (88,875) (815,322) (1,041,140) Total debt applicable to limitation 3,567,152 3,621,125 23,420,678 23,347,860 Legal debt margin $ 26,374,416 $ 30,767,463 $ 18,193,492 $ 23,518,624 Total debt applicable to the limit as a percentage of debt limit 11.91% 10.53% 56.28% 49.82% 144 Table 13 2006 2007 2008 2009 2010 2011 $ 2,625,708,000 $ 2,800,462,600 $ 2,969,639,300 $ 2,982,595,600 $ 2,710,514,800 $ 2,469,945,000 2% 2% 3% 3% 3% 3% 52,514,160 56,009,252 89,089,179 89,477,868 81,315,444 74,098,350 59,665,000 70,240,000 67,050,000 65,175,000 59,671,000 55,361,000 (8,815,000) (15,040,000) (14,680,000) (15,330,000) (14,875,000) (14,400,000) (3,560,000) (3,560,000) (3,015,000) (2,450,000) (600,000) - (4,715,000) (4,010,000) (3,275,000) (2,515,000) (1,735,000) - (6,660,000) (4,835,000) (3,755,000) (2,635,000) (1,480,000) (1,125,000) (2,065,000) (1,915,000) (1,760,000) (2,555,000) (955,000) (740,000) (10,739,510) (17,822,418) (17,939,959) (17,973,588) (17,768,743) (17,779,964) 23,110,490 23,057,582 22,625,041 21,716,412 22,257,257 21,316,036 $ 29,403,670 $ 32,951,670 $ 66,464,138 $ 67,761,456 $ 59,058,187 $ 52,782,314 44.01% 41.17% 25.40% 24.27% 27.37% 28.77% IE61 CITY OF ANDOVER, MINNESOTA PLEDGED - REVENUE COVERAGE Last Ten Fiscal Years Table 14 Water Revenue Bonds Water Enterprise Fund Fiscal Operating Less: Operating Transfers Net Available Debt Service 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 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 Special Assessment and Permanent Improvement Revolvina Bonds Fiscal Special Assessment Debt Service Year Revenue Principal Interest Coverage 2002 $ 4,183,796 $ 3,697,500 $ 830,264 0.92 2003 5,121,636 3,070,000 426,375 1.46 2004 4,243,328 2,210,000 283,657 1.70 2005 2,045,969 1,705,000 192,153 1.08 2006 1,289,590 1,765,000 289,174 0.63 2007 2,966,380 1,825,000 314,152 1.39 2008 1,184,928 1,625,000 243,340 0.63 2009 993,703 1,685,000 198,232 0.53 2010 1,210,641 3,005,000 110,822 0.39 2011 552,356 955,000 36,250 0.56 Tax Increment Financina Bonds Fiscal Tax Increment Debt Service Year Revenue Principal (4) Interest Coverage 2002 $ 732,555 $ 590,000 $ 598,203 0.62 2003 991,980 2,165,000 565,473 0.36 2004 1,072,852 675,000 450,139 0.95 2005 1,160,190 1,975,000 419,220 0.48 2006 1,414,254 2,350,000 193,045 0.56 2007 1,474,219 705,000 120,545 1.79 2008 1,614,651 735,000 105,033 1.92 2009 1,790,279 760,000 87,620 2.11 2010 1,849,644 780,000 68,313 2.18 2011 1,808,563 1,735,000 26,763 1.03 Notes: Details regarding the City's outstanding debt can be found in the notes to the financial statements. (1) Operating expenses includes transfers out because the administrative allocation and replacement reserve transfer is built into the user fees. Operating expenses does not include interest and depreciation. (2) The transfer in is included because a portion of the trunk connection charge associated with adding additional users to the water system is designated to compensate prior years capital investment in water utility infrastructure and the treatment plant. (3) Half of the facility financed by these bonds is leased to the Greater Minneapolis YMCA, their lease payments started in 2008. Future YMCA lease payments will significantly reduce the City's obligation on debt service payments. (4) Net of crossover refundings. 146 - This page intentionally left blank - i[fl CITY OF ANDOVER, MINNESOTA OUTSTANDING DEBT BY TYPE Last Ten Fiscal Years City of Andover's Outstanding Debt Governmental activities Revenue bonds Special assessment bonds Tax increment bonds Certificates of indebtedness Capital improvement bonds Permanent improvement revolving bonds State aid bonds Referendum bonds Compensated absences Total governmental activities Business -type activities G.O. revenue bonds Compensated absences Total business -type activities Total outstanding debt Total outstanding debt as a percentage of personal income Total outstanding debt per capita 2002 2003 2004 2005 $ 2,115,000 $ 2,045,000 $ 19,580,000 $ 19,580,000 2,795,000 1,255,000 - 3,560,000 10,450,000 9,815,000 13,215,000 7,065,000 1,565,000 1,665,000 766,000 699,000 - 3,890,000 4,110,000 8,325,000 11,375,000 7,680,000 5,975,000 2,595,000 2,470,000 2,340,000 2,205,000 314,213 347,534 359,355 410,402 28,159,213 28,972,534 47,830,355 43,604,402 9,780,000 9,780,000 9,470,000 9,150,000 48,630 58,967 65,234 66,816 9,828,630 9,838,967 9,535,234 9,216,816 $ 37,987,843 $ 38,811,501 $ 57,365,589 $ 52,821,218 5.31% 5.34% 7.74% 6.41% $ 1,325 $ 1,341 $ 1,960 $ 1,756 148 Table 15 2006 2007 2008 2009 2010 2011 $ 29,395,000 $ 36,075,000 $ 35,885,000 $ 35,495,000 $ 35,090,000 $ 34,675,000 3,560,000 3,560,000 3,015,000 2,450,000 600,000 - 4,715,000 4,010,000 3,275,000 2,515,000 1,735,000 - 580,000 1,280,000 1,525,000 1,420,000 781,000 561,000 3,875,000 3,525,000 3,155,000 2,775,000 2,495,000 2,200,000 6,660,000 4,835,000 3,755,000 2,635,000 1,480,000 1,125,000 2,065,000 1,915,000 1,760,000 2,555,000 955,000 740,000 - - - - 1,660,000 1,660,000 459,299 509,851 504,893 541,606 571,898 584,313 51,309,299 55,709,851 52,874,893 50,386,606 45,367,898 41,545,313 8,815,000 15,040,000 14,680,000 15,330,000 14,875,000 14,400,000 74,675 90,228 107,333 120,546 132,544 139,353 8,889,675 15,130,228 14,787,333 15,450,546 15,007,544 14,539,353 $ 60,198,974 $ 70,840,079 $ 67,662,226 $ 65,837,152 $ 60,375,442 $ 56,084,666 7.04% 8.05% 7.69% 7.18% 6.73% 6.25% $ 1,987 $ 2,341 $ 2,181 $ 2,104 $ 1,973 $ 1,818 IE14 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 W111 City of Andover Anoka County Personal Personal Per Capita Unemployment Year Population Income (2) Population (3) Income (2) Income (3) Percentage 2002 28,664 $ 714,994,816 306,723 $ 7,650,898,512 $ 24,944 4.5% 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 30,850 (1) 897,087,150 330,844 9,620,612,676 29,079 5.8% 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 W111 CITY OF ANDOVER, MINNESOTA PRINCIPAL EMPLOYERS Current Year and Ten Years Ago Taxnaver Anoka Hennepin I.S.D. No. 11 Fairview Andover Clinic Anoka County Sheriffs Office Kottkes' Bus Service, Inc. Bunker Hills Regional Park/Activity Center Target Meadow Creek Christian School Anoka County Highway Department Andover County Market Presbyterian Homes Festival Foods Ed Fields & Sons, Inc. McDonald's City of Andover Ace Solid Waste, Inc. Riccar Heating & Air Conditioning Larson Plumbing & Heathing POV's Sports Bar & Grill 2011 2001 Total 2,451 100.0% Source: Minnesota Department of Employment and Economic Development (1) Number of district employees that work in school buildings located within the City. IW Employees 308 170 40 81 100 180 100 80 66 50 50 43 40 1,308 Rank 1 3 10 5 4 2 4 6 7 8 8 9 10 Table 17 Percentage of Total City Employment 23.5% 13.0% 3.1% 6.2% 7.6% 13.8% 7.6% 6.1% 5.0% 3.8% 3.8% 3.3% 3.1% 100.0% Percentage of Total City Employees Rank Employment 906 (1) 1 37.0% 300 2 12.2% 250 3 10.2% 225 4 9.2% 180 5 7.3% 170 6 6.9% 127 7 5.2% 103 8 4.2% 100 9 4.1% 90 10 3.7% Total 2,451 100.0% Source: Minnesota Department of Employment and Economic Development (1) Number of district employees that work in school buildings located within the City. IW Employees 308 170 40 81 100 180 100 80 66 50 50 43 40 1,308 Rank 1 3 10 5 4 2 4 6 7 8 8 9 10 Table 17 Percentage of Total City Employment 23.5% 13.0% 3.1% 6.2% 7.6% 13.8% 7.6% 6.1% 5.0% 3.8% 3.8% 3.3% 3.1% 100.0% CITY OF ANDOVER, MINNESOTA FULL TIME EQUIVALENT EMPLOYEES Table 18 CITY GOVERNMENT EMPLOYEES BY FUNCTION/PROGRAM Last Ten Fiscal Years Function/Program 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Governmental: Administration 1.40 1.40 1.34 1.47 1.30 1.45 1.15 1.15 1.15 1.15 Human resources 0.01 0.06 0.06 0.06 0.07 0.02 0.01 0.02 0.02 0.02 City clerk 1.91 1.91 1.84 1.84 1.84 1.91 1.43 1.29 1.34 1.34 Elections 0.03 0.03 0.10 0.10 0.10 0.10 0.08 0.10 0.10 0.10 Financial administration 3.95 3.80 3.72 2.99 3.95 2.35 1.97 1.85 1.85 1.85 Information systems 1.01 1.01 1.01 0.91 0.91 0.91 0.91 0.91 0.91 0.91 Planning and zoning 3.57 3.57 3.57 4.57 4.75 4.75 4.25 3.70 3.70 3.70 Engineering 5.05 4.69 4.57 4.67 4.57 4.78 4.41 4.28 4.33 4.33 Facility Management - - - - - - - 0.33 0.20 0.20 EDA general 1.38 1.38 1.38 1.21 0.70 0.70 0.85 0.90 0.85 0.85 LRRWMO 0.31 0.31 0.31 0.21 0.21 0.21 0.21 0.20 0.20 0.20 Risk management 0.12 0.13 0.13 0.13 0.18 0.10 0.10 0.10 0.10 0.10 Public Safety: Fire 3.16 3.16 3.31 3.25 3.10 3.10 3.10 3.10 3.10 3.10 Protective inspection 6.43 6.56 5.91 5.58 6.03 6.08 5.78 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 5.42 4.61 5.02 5.35 6.12 6.20 6.00 5.05 5.10 5.10 Snow and ice 2.85 3.48 3.85 3.92 3.27 3.49 3.21 2.45 2.45 2.45 Street signs 1.22 1.26 1.17 1.20 1.35 1.44 1.41 1.31 1.41 1.41 Forestry - - 0.10 0.10 0.10 - - - - - ROW management/ utility 0.70 0.70 0.75 0.85 0.85 0.60 0.65 0.50 0.20 0.20 Water 5.87 5.46 4.93 5.04 5.57 4.78 4.84 4.63 4.63 4.63 Sewer 2.69 2.83 2.77 3.15 2.97 3.18 3.24 3.38 3.38 3.38 Storm sewer 0.75 1.24 1.60 1.60 2.01 1.95 2.20 2.55 2.55 2.55 Central equipment 2.94 2.90 2.90 2.91 2.92 2.96 2.96 2.87 2.90 2.90 Park & Recreation: Park and recreation 5.90 6.00 6.66 6.85 7.33 7.05 6.85 6.66 6.71 6.70 Community center - - - 2.10 2.12 2.12 2.23 2.96 3.11 3.12 Recycling 1.31 1.33 1.21 1.26 0.93 0.88 0.86 1.23 1.23 1.23 58.32 58.16 58.55 61.37 63.30 61.16 58.75 55.50 55.50 55.50 Source: City Finance Department Note: Employees are allocated to various departments based on the functions that they perform. IM - This page intentionally left blank - 153 CITY OF ANDOVER, MINNESOTA OPERATING INDICATORS BY FUNCTION/PROGRAM Last Ten Years Function/Program 2002 2003 2004 2005 2006 General government: Registered voters 15,500 n/a 16,094 n/a 17,500 Voters registering election day 2,035 n/a 2,000 n/a 2,200 Number of precincts 10 n/a 10 n/a 10 Public safety: Police: Number of calls for services 12,000 12,375 12,675 12,861 14,500 Number of traffic citations 1,500 1,645 1,795 1,795 1,850 Number of patrol hours 26,280 28,776 30,856 30,856 30,858 Fire: Fire responses 425 410 420 325 460 Emergency medical responses 550 590 580 594 690 Protective inspections: Inspections 6,629 5,272 6,396 6,536 8,117 Residential permits 218 182 251 226 153 Other permits 1,234 1,140 1,162 2,473 3,128 Public works: Streets and highways: Asphalt streets maintained (miles) 175 176 176 178 182 Gravel roads maintained (miles) 7 8 8 8 7 Cul -de -sacs and dead ends maintained 306 309 310 320 324 Parks and recreation: Number of City parks 58 58 58 58 63 Total acreage mowed 255 268 272 265 273 Ballfields maintained 24 29 26 25 25 Number of playgrounds 36 37 36 33 36 Soccer fields maintained 18 22 22 20 19 Trail maintained (miles) 20 23 24 26 29 Community center bookings (hrs): Fieldhouse n/a n/a n/a 1,405 7,450 Ice arena n/a n/a n/a 2,002 2,405 Water: New connections 248 200 220 247 197 Total customers 4,990 5,190 5,410 5,657 5,854 Annual consumption (thousands of gallons) 741,776 917,918 862,265 856,671 911,712 Sanitary Sewer: New connections 253 139 198 229 186 Total customers 5,895 6,017 6,291 6,528 6,717 Storm Sewer: Total customers n/a 9,140 9,446 9,516 9,744 Storm sewer lines maintained (miles) 30 32 39 43 47 Source: Various City Departments 154 Table 19 2007 2008 2009 2010 2011 n/a 17,830 n/a 18,713 n/a n/a 2,727 n/a 1,020 n/a n/a 10 n/a 10 n/a 12,150 11,617 11,075 11,441 11,650 1,710 2,475 2,848 1,926 2,000 30,240 30,240 30,240 30,240 29,200 366 326 305 323 265 736 797 754 722 764 5,456 5,020 3,716 2,860 3,074 91 49 42 71 58 2,095 1,862 1,543 1,773 1,755 189 189 189 190 191 8 8 8 8 7 330 336 338 338 338 65 66 66 47 50 297 297 293 293 302 27 28 28 28 28 37 37 37 38 38 16 19 19 19 21 35 35 35 35 35 8,514 8,282 9,718 11,099 11,461 2,497 2,393 2,640 2,583 2,575 63 33 145 56 78 5,917 5,950 6,095 6,151 6,229 1,046,789 993,626 1,000,971 905,561 854,672 120 23 183 75 77 6,777 6,800 6,983 7,058 7,135 9,785 9,800 9,950 10,042 10,126 65 66 69 69 69 M-1 CITY OF ANDOVER, MINNESOTA CAPITAL ASSET STATISTICS BY FUNCTION/PROGRAM Table 20 Last Ten Years Function/Program 2002 2003 2004 2005 Public Safety: Fire: Stations 3 3 3 3 Fire vehicles 19 19 18 18 Protective inspections: Vehicles 4 4 4 3 Public Works: Streets and Highways: 2006 2007 2008 2009 2010 2011 3 3 3 3 3 3 18 20 20 21 22 21 3 3 3 3 3 4 Streets (miles) 182 184 184 186 189 189 189 189 190 191 Streetlights 6,795 6,959 7,505 7,551 8,101 1,204 1,212 1,215 1,218 1,225 Traffic signals 15 16 18 20 20 22 23 23 24 24 Parks and Recreation: Parks 58 58 58 58 63 65 66 66 47 50 Ball fields 31 35 35 25 28 27 28 28 28 28 Soccer fields 19 22 25 16 16 16 19 19 19 21 Playgrounds 36 37 36 33 36 37 37 37 38 38 Trails (miles) 20 23 24 26 29 35 35 35 35 35 Community centers - - - 1 1 1 1 1 1 1 Water: Water treatment plants - 1 1 1 1 1 1 1 1 1 Storage facilities 2 3 3 3 3 3 3 3 2 2 Water main (miles) n/a 1 1 79 84 108 108 108 108 109 Connections 4,983 5,160 5,300 5,450 5,760 5,917 5,950 6,095 6,151 6,229 Sanitary sewer: Sewer main (miles) n/a n/a n/a 82 87 91 91 91 93 93 Connections 5,824 5,981 6,100 6,250 6,560 6,777 6,800 6,983 7,058 7,135 Number of lift stations 4 7 7 8 9 9 9 9 9 9 Storm sewer: Storm sewer lines (miles) 30 32 39 43 47 65 66 69 69 69 M-i IV. OTHER FINANCIAL INFORMATION WrA CITY OF ANDOVER, MINNESOTA COMBINED SCHEDULE OF INDEBTEDNESS December 31, 2011 158 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 2.215 - 5.400% $ 19,580,000 2006 EDA Pub Fac Lease Revenue Refunding Bonds 12/1/2006 2/1/2034 4.00 -4.50% 10,000,000 2007 EDA Pub Fac Lease Revenue Refunding Bonds 1/1/2007 2/1/2034 4.00 -4.50% 6,865,000 Total revenue bonds 36,445,000 Special Assessment Bonds: 2005A G.O. Improvement Bonds 4/28/2005 2/1/2011 2.95 -3.65% 3,560,000 Tax Increment Bonds: 2004B G.O. Tax Increment Refunding Bonds 3/16/2004 2/1/2011 2.00 -3.25% 4,260,000 Certificates of Indebtedness: 2007A G.O. Equipment Certificates 3/13/2007 2/1/2011 4.00% 760,000 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 Total certificates of indebtedness 2,040,000 Capital Improvement Bonds: 2004A G.O. Capital Improvement Bonds 3/16/2004 2/1/2017 2.00 -3.75% 3,890,000 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 - 3.125% 1,660,000 Total bonded indebtedness 54,290,000 Compensated absences payable - Total governmental activities indebtedness 54,290,000 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 $ 71,665,000 158 Exhibit 1 Principal Payments Prior Current Outstanding 2012 Payment Years Year 12/31/11 Principal Interest Total $ 1,355,000 $ 415,000 $ 17,810,000 $ 435,000 $ 897,456 $ 1,332,456 - - 10,000,000 - 424,227 424,227 - - 6,865,000 - 291,982 291,982 1,355,000 415,000 34,675,000 435,000 1,613,665 2,048,665 2,960,000 600,000 - - - - 2,525,000 1,735,000 - - - - 560,000 200,000 - - - - 304,000 160,000 166,000 166,000 2,905 168,905 130,000 125,000 130,000 130,000 1,462 131,462 - - 265,000 76,000 4,540 80,540 994,000 485,000 561,000 372,000 8,907 380,907 1,395,000 295,000 2,200,000 315,000 70,993 385,993 - 355,000 1,125,000 365,000 18,850 383,850 - 215,000 740,000 220,000 16,115 236,115 - - 1,660,000 135,000 40,215 175,215 9,229,000 4,100,000 40,961,000 1,842,000 1,768,745 3,610,745 - - 584,313 - - - 9,229,000 4,100,000 41,545,313 1,842,000 1,768,745 3,610,745 2,440,000 415,000 6,925,000 6,925,000 324,440 7,249,440 - - 6,570,000 - 266,146 266,146 60,000 60,000 905,000 55,000 30,089 85,089 2,500,000 475,000 14,400,000 6,980,000 620,675 7,600,675 - - 139,353 - - - 2,500,000 475,000 14,539,353 6,980,000 620,675 7,600,675 $ 11,729,000 $ 4,575,000 $ 56,084,666 $ 8,822,000 $ 2,389,420 $ 11,211,420 I 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 2008A G.O. Equipment Certificate 2009A G.O. Equipment Certificate 2011A G.O. Equipment Certificate 2012 G.O. Equipment Certificate Total Debt Service Levy Lower Rum River Watershed Total Voter - Approved Open Space Referendum - MV Exhibit 2 Taxes Payable $ 23,477,711 (1,871,779) (1,091,258) 20,514,674 4,649,558 $ 25,164,232 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 1[:111 35.138% 6.952% 0.449% 42.539% 0.00778% $ 26,174,350 (2,027,557) (1,229,714) 22,917,079 5,153,518 $ 28,070,597 2011 Certified Tax Capacity Levy Rate $ 7,500,802 210,000 61,500 1,064,959 54,926 8,892,187 412,320 960,858 188,972 142,783 85,000 1,789,933 35,000 10,717,120 $ 10,856,299 31.941% 6.466% 0.339% 38.746% 0.00568% CITY OF ANDOVER, MINNESOTA SCHEDULE OF DEFERRED TAX LEVIES Exhibit 3 GENERAL OBLIGATION BONDS December 31, 2011 11.1 Certificates of Taxes Indebtedness Payable 2011A 2012 $ 97,780 2013 96,900 Refunding $ 194,680 11.1 Capital EDA Public Facility Lease Open Space Improvement Revenue Refunding Refunding Referendum Total Taxes Bonds Bonds Bonds Bonds Bonds Deferred Tax Payable 2004A of 2004 of 2006 of 2007 Total 2010A Levies 2012 $ 385,993 $ 697,456 $ - $ - $ 697,456 $ 175,215 $ 1,356,444 2013 390,905 693,534 - - 693,534 172,515 1,353,854 2014 404,596 269,373 212,114 145,991 627,478 174,765 1,206,839 2015 417,000 - 371,528 258,483 630,011 176,915 1,223,926 2016 423,050 - 372,828 259,283 632,111 173,942 1,229,103 2017 427,875 - 369,589 260,323 629,912 175,657 1,233,444 2018 - - 369,064 259,773 628,837 176,841 805,678 2019 - - 368,628 264,183 632,811 177,507 810,318 2020 - - 372,525 258,214 630,739 172,827 803,566 2021 - - 366,328 262,249 628,577 172,870 801,447 2022 - - 369,921 256,145 626,066 172,656 798,722 2023 - - 370,234 253,020 623,254 - 623,254 2024 - - 365,207 264,423 629,630 - 629,630 2025 - - 367,812 257,461 625,273 - 625,273 2026 - - 364,346 261,447 625,793 - 625,793 2027 - - 363,444 261,889 625,333 - 625,333 2028 - - 359,127 264,770 623,897 - 623,897 2029 - - 362,690 259,468 622,158 - 622,158 2030 - - 363,030 262,191 625,221 - 625,221 2031 - - 359,379 262,286 621,665 - 621,665 2032 - - 362,592 258,641 621,233 - 621,233 2033 - - 362,313 262,667 624,980 - 624,980 2034 - - 563,660 391,111 954,771 - 954,771 $ 2,449,419 $ 1,660,363 $ 7,736,359 $ 5,484,018 $14,880,740 $1,921,710 $ 19,446,549 11.1 CITY OF ANDOVER, MINNESOTA SCHEDULE OF FUND TRANSFERS December 31, 2011 General Fund Water EF Sewer EF Total General Fund Special Revenue Funds (SRF) Community Center SRF 2004 EDA Public Facility Lease Revenue Bond DSF Right of Way Management / Utility SRF Road and Bridge CPF Total Special Revenue Funds Debt Service Funds (DSF) 2004 EDA Public Facility Lease Revenue Bonds DSF Community Center SRF 2004B G.O. TIE Refunding Bonds DSF TIE Projects CPF 2005A G.O. Improvement Bonds DSF PIR CPF 2007A G.O. Capital Note DSF Building CPF 2010A PIR Refunding Bonds DSF PIR CPF Total Debt Service Funds Capital Proiects Funds (CPF) Sewer Trunk CPF Sewer EF Road and Bridge CPF Right of Way Management / Utility SRF Building CPF 2007A G.O. Capital Note DSF TIE Projects CPF TIE Projects CPF 2004B G.O. TIE Refunding Bonds DSF Building CPF PIR CPF 2005A G.O. Improvement Bonds DSF 2010A PIR Refunding Bonds DSF Total Capital Projects Funds Transfer Transfer In Out $ 150,250 $ 46,680 196,930 - 369,034 6,600 - 375,634 369,034 1,744,013 383,298 8,002 380,000 - 2,876,345 8,002 Exhibit 4 General Fund Admin Allocatior General Fund Admin Allocatior Debt Service Allocation Roadway Degredation Debt Service Allocation Debt Service Allocation Debt Service Allocation Close Debt Service Fund Debt Service Allocation 400,000 Replacement Reserve 6,600 Roadway Degredation 8,002 Close Debt Service Fund 755,000 Future Land Purchases 763,002 - - 1,744,013 Debt Service Allocation 755,000 Future Land Purchases 2,499,013 383,298 Debt Service Allocation 380,000 Debt Service Allocation - 763,298 1,169,602 3,262,311 1".4 CITY OF ANDOVER, MINNESOTA SCHEDULE OF FUND TRANSFERS December 31. 2011 Enterprise Funds Water EF General Fund Sewer EF General Fund Sewer Trunk CPF Total Enterprise Funds Total All Funds - $ 150,250 46,680 400,000 446,680 - 596,930 S 4,242,877 S 4,242,877 I"M Exhibit 4 (Continued) General Fund Admin Allocatior General Fund Admin Allocatior Replacement Reserve - This page intentionally left blank - M-Ell City of Andover, a Comprehensive Annual Financial Report Report on Internal Control Communication With Those Charged With Governance Copyright ©2012 HLB Tautges Redpath, Ltd. Audit Management Letter State Legal Compliance Report TAUTGES REDPATH, LTD. Certified Public Accountants • City's financial statements • Independent auditor reports on the fair presentation of the financial statements • "Clean opinion" on the 2011 financial statements • The City received the 2010 GFOA Certificate of Achievement for Excellence in Financial Reporting Program Copyright ©2012 HLB Tautges Redpath, Ltd. 3 ; TAUTGEs REDPATH, LTD. Certified Public Accountonts Consideration of internal control as a basis for designing audit procedures. No opinion on internal control. No findings for 2011. ®1 Copyright ©2012 HLB Tautges Redpath, Ltd. 1 TAUTGEs REDPATH, LTD. Certified Public Accountonts Required by Minnesota Statute §6.65 OSA audit guide covers seven categories: 1) contracting and bidding 2) deposits and investments 3) conflicts of interest 4) public indebtedness 5) claims and disbursement 6) other miscellaneous provisions 7) tax increment financing No compliance findings ®1 Copyright ©2012 HLB Tautges Redpath, Ltd. 5 TAUTGEs REDPATH, LTD. 1 Certified Public Accountants • General Fund: — Fund balance increased $777,232 during 2011. Revenue Expenditures Increase (decrease) before other financing sources Other financing sources: Transfers in from Water and Sewer Funds Increase (decrease) in General Fund balance Budget Aetual Variance $8,861,364 $9,294,085 $432,721 9,125,255 8,711783 411,472 (263,891) 580,302 844,19' 196,930 - ($66,961) $777,232 $844,193 Copyright V2012 HLBTautges Red path, Ltd. 6 ; TAUTGES REDPATH, LTD. Certified Public Accountants • General Fund: — Fund balance at December 31, 2011 was $5,888,137. — Working Capital Reserve: • Approximately 81% of the General Fund's revenue sources are from property taxes and state aids. These revenue sources are not received until the second half of the fiscal year. As such, a minimum fund balance at December 31 is required to finance operations for the first six months of the year. TAUTGES REDPATH, LTD. Copyright ©2012 HLB Tautges Redpath, Ltd. 1 Certified Public Accountants • General Fund: — For the City of Andover, the General Fund's recommended unassigned fund balance per City policy is computed as follows: 2012 General Fund budgeted expenditures Cashflow (fifty percent of total) Contingencies (three percent of total) Recommended General Fund unassigned balance General Fund unassigned fund balance at December 31, 2011 $9,263,720 4,631,860 277,912 $4,909,772 $5,665,496 ®1 Copyright ©2012 HLB Tautges Redpath, Ltd. 1 TAUTGEs REDPATH, LTD. Certified Public Accountants • Audit firm responsibility under U.S. audit standards • Planned scope and timing of audit • Significant audit results • Difficulties encountered in performing the audit (none) • Corrected and uncorrected misstatements • Disagreements with management (none) • Management representations • Consultations with other auditors • Other audit findings and issues • Other information in documents containing audited financial statements 1 TAUTGES REDPATH, LTD. Copyright ©2012 HLB Tautges Redpath, Ltd. 9 1 Certified Public Accountants • 2011 property tax collection rate was 99.5% compared to 99.0% for 2010. • The City implemented GASB Statement No. 54, Fund Balance Reporting and Fund Type Definitions during 2011. Fund balance for governmental funds is now presented as: • Nonspendable • Restricted • Committed • Assigned • Unassigned ®1 Copyright ©2012 HLB Tautges Redpath, Ltd. 10 TAUTGEs REDPATH, LTD. 1 Certified Public Accountants TAUTGEs REDPATH, LTD. Certifted Public Accountants REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS To the Honorable Mayor and Members of the City Council City of Andover, Minnesota We have audited the 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, 2011, which collectively comprise the City of Andover, Minnesota's basic financial statements, and have issued our report thereon, dated April 19, 2012. 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. Internal Control Over Financial Reporting In planning and performing our audit, we considered the City of Andover, Minnesota's internal control over financial reporting as a basis for designing our auditing procedures for the purpose of expressing our opinions on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of the City of Andover, Minnesota's internal control over financial reporting. Accordingly, we do not express an opinion on the effectiveness of the City of Andover, Minnesota's internal control over financial reporting. A deficiency in internal control exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct misstatements on a timely basis. A material weakness is a deficiency, or a combination of deficiencies, in internal control such that there is a reasonable possibility that a material misstatement of the entity's financial statements will not be prevented, or detected and corrected on a timely basis. Our consideration of internal control over financial reporting was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control over financial reporting that might be deficiencies, significant 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 HLS Teutq s Redpath. Ltd u a member of HW Intematio L a w rld -wide network of Independent aep ttng fbms and busmen adWe . City of Andover, Minnesota Report on Internal Control over Financial Reporting and on Compliance and Other Matters Page 2 deficiencies, or material weaknesses. We did not identify any deficiencies in internal control over financial reporting that we consider to be material weaknesses, as defined above. Compliance and Other Matters As part of obtaining reasonable assurance about whether the City of Andover, Minnesota's financial statements are free of material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements, noncompliance with which could have a direct and material effect on the determination of financial statement amounts. However, providing an opinion on compliance with those provisions was not an objective of our audit and, accordingly, we do not express such an opinion. The results of our tests disclosed no instances of noncompliance or other matters that are required to be reported under Government Auditing Standards. This report is intended solely for the information and use of the City of Andover, Minnesota's management, City Council, and others within the entity, and is not intended to be, and should not be, used by anyone other than these specified parties. HLB TAUTGES REDPATH, LTD. April 19, 2012 TAUTGEs REDPATH, LTD. Certified Public Accountants REPORT ON COMPLIANCE WITH MINNESOTA LEGAL COMPLIANCE AUDIT GUIDE FOR POLITICAL SUBDIVISIONS To the Honorable Mayor and Members of the City Council City of Andover, Minnesota We have audited the basic financial statements of the City of Andover, Minnesota, as of and for the year ended December 31, 2011, and have issued our report thereon dated April 19, 2012. We conducted our audit in accordance with auditing standards generally accepted in the United States of America, and the provisions of the Minnesota Legal Compliance Audit Guide for Political Subdivisions promulgated by the State Auditor pursuant to Minnesota Statutes Section 6.65. Accordingly, the audit included such tests of the accounting records and such other auditing procedures as we considered necessary in the circumstances. The Minnesota Legal Compliance Audit Guide for Political Subdivisions covers seven categories of compliance to be tested: contracting and bidding, deposits and investments, conflicts of interest, public indebtedness, claims and disbursements, miscellaneous provisions, and tax increment financing. Our study included all of the listed categories. The results of our tests indicate that for the items tested, the City of Andover, Minnesota complied with the material terms and conditions of applicable legal provisions. This report is intended solely for the information and use of the City of Andover, Minnesota's management, City Council, and others within the entity, and is not intended to be, and should not be, used by anyone other than these specified parties. AMS HLB TAUTGES REDPATH, LTD. April 19, 2012 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 Hut Tamges Redpath. Led b a member of HLB ImemadormL a world -wide network of indepeMeM a¢ounffng flans and business adMso . TAUTGEs REDPATH, LTD. Certified Public Accountants COMMUNICATION WITH THOSE CHARGED WITH GOVERNANCE To the Honorable Mayor and Members of the City Council City of Andover, Minnesota We have audited the 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 (the City) for the year ended December 31, 2011. Professional standards require that we provide you with information about our responsibilities under generally accepted auditing standards and Government Auditing Standards, as well as certain information related to the planning scope and timing of our audit. We have communicated such information in our letter to you dated December 27, 2011. Professional standards also require that we communicate to you the following information related to our audit. Simtificant Audit Results Qualitative Aspects of Accounting Practices Management is responsible for the selection and use of appropriate accounting policies. The significant accounting policies used by the City are described in Note 1 to the financial statements. For fiscal year 2011, the City was required to implement GASB Statement No. 54, Fund Balance Reporting and Governmental Fund Type Definitions. The most significant effect of this standard is that fund balance is now classified into the five following categories: nonspendable, restricted, committed, assigned and unassigned. These categories are based on the constraint imposed on the use of resources. We noted no transactions entered into by the City during the year for which there is a lack of authoritative guidance or consensus. All significant transactions have been recognized in the financial statements in the proper period. Accounting estimates are an integral part of the financial statements prepared by management and are based on management's knowledge and experience about past and current events and assumptions about future events. Certain accounting estimates are particularly sensitive because of their significance to the financial statements and because of the possibility that fixture events affecting them may differ significantly from those expected. The most sensitive estimate affecting the financial statements was management's estimate of the value of land held for resale. Management's estimate of the value of land held for resale is based on estimated recoverable costs. We evaluated the key factors and assumptions used to develop the estimate for the value of land held for resale in determining that it is reasonable in relation to the financial statements taken as a whole. 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 HLe rautges Red am, Ltd. is a member of HLe ]memanonaL a v rld -wide network of independent accounting Hnti and buelness adWsms. City of Andover, Minnesota Communication with Those Charged with Governance Page 2 Certain financial statement disclosures are particularly sensitive because of the significance to financial statement users. The City does not have any particularly sensitive disclosures in its financial statements. Difficulties Encountered in Performing the Audit We encountered no significant difficulties in dealing with management in performing and completing our audit. Corrected and Uncorrected Misstatements Professional standards require us to accumulate all known and likely misstatements identified during the audit, other than those that are trivial, and communicate them to the appropriate level of management. The attached schedule summarizes uncorrected misstatements of the financial statements. Management has determined that their effects are immaterial, both individually and in the aggregate, to the financial statements taken as a whole. There were no misstatements detected as a result of audit procedures that were corrected by management. Disagreements with Management For purposes of this letter, professional standards define a disagreement with management as a financial accounting, reporting, or auditing matter, whether or not resolved to our satisfaction that could be significant to the financial statements or the auditor's report. We are pleased to report that no such disagreements arose during the course of our audit. Management Representations We have requested certain representations from management that are included in the management representation letter dated April 19, 2012. Management Consultations with Other Independent Accountants In some cases, management may decide to consult with other accountants about auditing and accounting matters, similar to obtaining a "second opinion" on certain situations. If a consultation involves application of an accounting principle to the City's financial statements or a determination of the type of auditor's opinion that may be expressed on those statements, our professional standards require the consulting accountant to check with us to determine that the consultant has all the relevant facts. To our knowledge, there were no such consultations with other accountants. Other Audit Findings or Issues We generally discuss a variety of matters, including the application of accounting principles and auditing standards, with management each year prior to retention as the City's auditors. However, these discussions occurred in the normal course of our professional relationship and our responses were not a condition to our retention. City of Andover, Minnesota Communication with Those Charged with Governance Page 3 Other Information in Documents Containing Audited Financial Statements With respect to the supplementary information accompanying the financial statements, we made certain inquiries of management and evaluated the form, content, and methods of preparing the information to determine that the information complies with accounting principles generally accepted in the United States of America, the method of preparing it has not changed from the prior period, and the information is appropriate and complete in relation to our audit of the financial statements. We compared and reconciled the supplementary information to the underlying accounting records used to prepare the financial statements or to the financial statements themselves. With respect to the other information accompanying the financial statements, we read the other information and did not identify any material inconsistencies with the audited financial statements. Closing This information is intended solely for use of the City of Andover, Minnesota's management and City Council, and is not intended to be, and should not be, used by anyone other than these specified parties. ji a Imp. R+AA,1wL' HLB TAUTGES REDPATH, LTD. April 19, 2012 AUDIT DIFFERENCE EVALUATION FORM PURPOSE: To summarize (mown and projected audit differences. Governmental Unit: City of Andover Balance Sheet Date 12131/2011 Opinion Unit: Governmental activities The following table lists audit differences exceeding: $49,600 Financial Statement Effect - Amount of Over nder Statement of: Description (Nature) of Audit Difference Known (K) or Likely W/P Ref. Total Assets Total Liabilities Net Assets Revenues Expenditures Uncollectible taxes not recorded L 4250.06 $94,322 $ - $94,322 $94,322 $ - Not recording unamortized bond Zscounts/prennums K 5400.09 - 217,204 217,204 - 5,219 Not recording unamortized bond costs deferred K 5400.08 592,042 592,042 45,857 W(S5 Total unadjusted audit differences - current year Effect of Unadjusted Audit Differences - Prior Year Net Audit Differences 497,720 $497,720 217,204 $217,204 280,516 $280,516 94,322 66,616) $27,706 AUDIT DIFFERENCE EVALUATION FORM PURPOSE: To summarize known and projected audit differences. Governmental Unit: City of Andover Balance Sheet Date 12/31/2011 Opinion Unit: Business type activities The following table lists audit differences exceeding: $2,700 Financial Statement Effect - Amount of Over (Under) Statement of: Description (Nature) of Audit Difference Known (K) or Likely W/P Ref. Total Assets Total Liabilities Net Assets Revenues Expenditures Not recording unamortized bond costs deferred char s K 5400.08 $75,259 $ $75,259 $ $6,627) No PY audit differences that will affect CY Total unadjusted audit differences - current year Effect of Unadjusted Audit Differences - Prior Year Net Audit Differences (75,259)1 - 75,259 - 6,627) $75,259 $ $75,259 $ - $6,627 AUDIT DIFFERENCE EVALUATION FORM PURPOSE: To summarize (mown and projected audit differences. Governmental Unit: City of Andover Balance Street Date 12/31/2011 Opinion Unit: Water The following table lists audit differences exceeding: $1,600 Financial Statement Effect - Amount of Over (under) Statement of Description (Nature) of Audit Difference Known (K) or Like W/P Ref. Total Liabilities Net Assets Revenues Ex enditures Not recordin unavwrtized bond costs deferred c s K 5400.08 $ $75,259 $ $6,627 Not unamortized bond discounts/ 'ums K 5400.09 RAssets 1,609 1,609 - 5,219 No PY audit differences that will affect CY Total unadjusted audit differences - crurent year Effect of Unadjusted Audit Differences - Prior Year Net Audit Differences 75,259 1,609 (73,650 ) (11,846 $75259 $1,609 $73,650 $ - ($11,846) L I CITY OF ANDOVER, MINNESOTA ' AUDIT MANAGEMENT LETTER ' December 31, 2011 1 1 1 1 I 1 n r, - This page intentionally left blank - , ®1 TAUTGEs REDPATH, LTD. Certified Public Accountants ' To the Honorable Mayor and Members of the City Council ' City of Andover, Minnesota We have completed the 2011 audit of the City of Andover, Minnesota and have issued ' our report thereon. Our Independent Auditor's Report is included in the City's Comprehensive Annual Financial Report. This Audit Management Letter provides a ' summary of audit results ' Thank you for the opportunity to serve the City. We are available to discuss this report with you at your convenience. F i JY, a-4/&. HLB TAUTGES REDPATH, LTD. April 19, 2012 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 rautges Bedpatb, Ltd. b a member or NU lnternsdionat, a world -wide network W mde umdent accounting firms and business ad"sors. LI 1 - This page intentionally lets blank - , d �i lu I 0 11 1 I Audit Management Letter Table of Contents Table of Contents ReportSummary .................................................... ............................... 2 Certificate of Achievement ..................................... ............................... 3 Government -Wide Financial Statements ................ ............................... 4 GeneralFund ......................................................... ............................... 10 Debt Service Funds ................................................ ............................... 17 Audit Management Letter Report Summary Report Summary Several reports are issued in conjunction with the audit. A summary is as follows: REQUIRED REPORTS Comprehensive Annual Financial • Financial statements • Unqualified ( "clean') Report (CAFR) . Footnotes opinion on the Financial • Supplemental information Statements Report on Internal Control Over Results of testing • No compliance findings Financial Reporting and on . Internal controls over • No internal control Compliance and Other Matters financial reporting findings • Compliance with laws, regulations, contracts and grants State Legal Compliance Report . Results of testing certain No compliance findings provisions of Minnesota Statutes Communication with Those • Required Communications Charged with Governance DISCRETIONARY REPORTS Audit Management Letter Intended to be a working tool for City Council II II 1 I II II II II II II II I ' Audit Management Letter Certificate of Achievement 1 Certificate of Achievement for Excellence in Financial Reporting ' The "Certificate of Achievement for Excellence in Financial Reporting" is an award program offered by the Government Finance Officers Association of the United States and Canada (GFOA). ' The City of Andover, Minnesota submitted their Comprehensive Annual Financial Report (CAFR) to the GFOA and received the award for 2002 through 2010. The City of Andover is one of 127 Minnesota entities receiving the award in 2010. We commend the City on this achievement. The City is submitting the 2011 CAFR to the Certificate Program. 1 1 I Audit Management Letter Government -Wide Financial Statements GOVERNMENT -WIDE FINANCIAL STATEMENTS The govemment -wide financial statements of the City of Andover, Minnesota are presented in Statements 1 and 2 of the 2011 Comprehensive Annual Financial Report. The following comments relate to the Statement of Net Assets (Statement 1) and the Statement of Activities (Statement 2). Cash and Investments Cash and investment balances of Minnesota cities are commonly restricted by statutory requirements and long range financial planning objectives. The following schedule presents cash and investment balances by fund type: Cash and Investment Balances December 31, Increase Fund Type 2010 2011 (Decrease) General $4,391,570 $5,140,136 $748,566 Special Revenue 677,217 726,855 49,638 Debt Service 1,097,338 857,240 (240,098) Capital Projects 16,190,736 15,777,979 (412,757) Enterprise 4,188,237 4,328,154 139,917 Internal Service 370,709 451,656 80,947 $26,915,807 $27,282,020 $366,213 1) Restated for the reclassification of the Trail and Transportation and Capital Equipment Reserve Funds from Special Revenue to Capital Projects Funds. I 1 1 I LJ Government -Wide Financial Statements Governmental accounting standards require the reporting of investments at fair value (i.e., market value). Therefore, investment income consists of interest, dividends and the change in market value of investments. Reporting investments at fair value results in greater "swings" in investment earnings because of market changes. Investment income of the City for 2010 and 2011 was as follows: Interest and dividends Market value change Total 2010 2011 $1,428,159 $1,514,066 4,088 256,554 $1,432,247 $1,770,620 Government -Wide Financial Statements Property Taxes Receivable A schedule of property tax activity for the past three years is as follows: 2009 2010 2011 Delinquent taxes - January 1 $275,365 $282,741 $352,191 Current levy 10,190,844 * 10,366,069 * 10,326,996 Total collectible 10,466,209 10,648,810 10,679,187 Collections 10,162,699 * 10,259,758 * 10,270,965 * Less adjustment to County (20,769) (36,861) (43,324) Delinquent taxes - December 31 $282,741 $352,191 $364,898 Total collections as a percent of current levy 99.7% 99.0% 99.5% As presented above, the City is experiencing a consistently solid collection rate for property taxes. In addition to the $364,898 of delinquent taxes above, the City has $117,969 in delinquent tax increments receivable. See later discussion of tax increments (page 7). The Minnesota Property Tax System is complex with the number of different classes of property defined in State Statutes. However, the formulas are based on a simple equation, which is as follows: Market Value x Class Rate = Tax Capacity Market value is the starting point in the property tax equation and in theory is consistently applied to all properties. Class rate is the mechanism used to allocate property taxes on a basis other than market value. L I i 1 LJ II L L 17 LJ 1 11 P I Audit Management Letter Government -Wide Financial Statements Tax Increments A schedule of tax increment revenues by district is as follows: TIF District 1 -3, Fund 4510, is a pass - through, pay -as- you -go district. The City has 4 active tax increment districts. Reporting requirements implemented by the Office of the State Auditor (OSA) require reporting of tax increment activity by district. Delinquent 2011 Collection Balance TIF District Fund TIF District Current Delinquent 12/31/11 1-1,1-2 3506, 4501 TIF Refunding Bonds of 2003B and 2004B $1,800,703 $7,860 $103,870 1 -3 4510 Tax Increment Projects 152,999 - - 1 -4 4502 Tax Increment Projects 11,231 4,007 14,099 $1,964,933 $11,867 $117,969 TIF District 1 -3, Fund 4510, is a pass - through, pay -as- you -go district. The City has 4 active tax increment districts. Reporting requirements implemented by the Office of the State Auditor (OSA) require reporting of tax increment activity by district. Audit Management Government -Wide Financial Statements Bonded Debt The City has the following bond issues outstanding at December 31, 2011 and 2010: G.O. Revenue Bonds G.O. Special Assessment Bonds G.O. Tax Increment Bonds G.O. Certificates/Capital Notes G.O. Permanent Improvement Revolving Bonds G.O. Capital Improvement Bonds G.O. State Aid Bonds G.O. Referendum Bonds Less amount to be paid by escrow: Public Facility Lease Revenue Bonds Water Revenue Bonds Net December 31, 2010 2011 $49,965,000 $49,075,000 600,000 1,735,000 - 781,000 561,000 1,480,000 1,125,000 2,495,000 2,200,000 955,000 740,000 1,660,000 1,660,000 59,671,000 55,361,000 (16,455,000) (16,455,000) (6,490,000) (6,490,000) $36,726,000 $32,416,000 The Permanent Improvement Revolving Bonds will be paid by special assessments. The City issued the $10,000,000 Public Facility Lease Revenue Refunding Bonds of 2006 to advance refund $9,755,000 of outstanding 2004 Series Bonds. The City issued the $6,865,000 Public Facility Lease Revenue Refunding Bonds of 2007 to advance refund $6,700,000 of outstanding 2004 Series Bonds. The City is responsible for the debt service of the refunded bonds through the crossover date (February 1, 2014) 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. 1 [1 I 1 L-1 1 [1 11 I i 1 Government -Wide Financial Statements ' The City issued the $6,570,000 G.O. Water Revenue Bonds, Series 2007B to advance ' refund $6,490,000 of outstanding 2002 Series Bonds. The City is responsible for the debt service of the refunded bonds through the crossover date (August 1, 2012) 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. I The financial statements present each bond issue and the escrow account assets pursuant to GASB Statement No. 7. The effect on the financial statements is to report greater debt than, of substance, the City will be responsible for paying. 1 I 1 I Audit Management Letter GENERAL FUND General Fund The General Fund of the City is maintained to account for the current operating and capital outlay expenditures common to all cities. These basic services include (but are not limited to) public safety, public works, parks and recreation and general government. A history of major revenue sources is as follows: All Other Revenue I 11 1 11 Total Revenue ' Amount State Aids Property Taxes Year Amount Percent Amount Percent 1999 $849,429 15% $3,125,776 55% 2000 948,259 15% 3,571,186 55% 2001 1,074,805 15% 3,982,174 58% 2002 1,005,219 16% 3,782,334 58% 2003 330,845 5% 4,286,838 68% 2004 372,550 5% 4,541,227 65% 2005 424,634 6% 4,550,918 64% 2006 478,795 6% 5,324,649 70% 2007 710,459 8% 5,776,653 67% 2008 555,758 6% 6,249,011 73% 2009 454,546 5% 6,588,601 78% 2010 428,572 5% 7,191,602 78% 2011 439,187 5% 7,115,936 76% All Other Revenue I 11 1 11 Total Revenue ' Amount Percent Amount $1,725,890 30% $5,701,095 1,936,635 30% 6,456,080 1,867,945 27% 6,924,924 1,708,234 26% 6,495,787 1,665,554 27% 6,283,237 2,084,201 30% 6,997,978 2,163,539 30% 7,139,091 1,809,320 24% 7,612,764 2,089,632 25% 8,576,744 1,811,108 21% 8,615,877 1,451,722 17% 8,494,869 1,538,442 17% 9,158,616 1,738,962 19% 9,294,085 Local Government Aid (LGA) for the City was eliminated beginning in 2003. The second half of market value homestead credit was unallotted by the State in 2008. Market value homestead credit in the amounts of $350,938, $490,230 and of $529,303 were unallotted/reduced by the State in 2009, 2010 and 2011, respectively. Percent 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% I I LI I I� �J I I IAudit Management Letter IA graph of the 2011 and 2010 revenue is as follows: I CJ I E Fll LJ General Fund 58,000,000 57,500,000 S7,000,000 56,500,000 $'000,000 $5,500,000 $5,000,000 $4,500,000 $4,000,000 $3,500,000 53,000,000 $LM,000 $2,000,000 $ i,s00,000 $1,000,000 $500,000 $ General pmpe Lice savd InWgovemmemal charges for Fines Inveswem Miecellaceoas taxes Pew services income E2011 8],115,936 $387,206 $566,706 $866,584 $99,]TI 5130,36] $127,509 52010 87,191,602 $329,901 $570,097 $755,184 S104,780 870,368 $136,686 ' Detail of the 2011 revenue is presented in Statements 4 and 10 of the Comprehensive Annual Financial Report. I I 1 Audit Management Letter General Fund A graph of 2011 and 2010 expenditures is as follows: $4,500,000 $4,000,000 $3,500,000 $3,000,000 $2,500,000 $2,000,000 $1,500,000 $1,000,000 $500,000 s - of Public safety Public works reParkss a d Recycling Unallocated guve(mm ■2011 $2,271,085 $3,960,220 $1,452,758 $889,178 $109,911 $30,631 02010 $2,224,867 $3,920,073 $1,466,216 $827,910 $109,034 $24,953 I I I 1 I Detail of the 2011 expenditures is presented in Statements 4 and 10 of the Comprehensive Annual Financial Report. I I I 1 Audit Management Letter I I 1 11 I LJ General Fund The fund balance of the General Fund increased by $777,232 in 2011 as follows: Revenues: General property taxes Licenses and permits Intergovernmental Charges for services Fines Investment income Miscellaneous Total revenues Expenditures: Current: General government Public safety Public works Parks and recreation Recycling Unallocated Capital outlay Total expenditures Revenues over(under)expenditures Other financing sources: Transfers in Net change in fund balance 2011 Over Final (Under) Budget Actual Budget $7,217,219 $7,115,936 ($101,283) 250,080 387,206 137,126 558,215 566,706 8,491 580,200 866,584 286,384 105,750 99,777 (5,973) 65,000 130,367 65,367 84,900 127,509 42,609 8,861,364 9,294,085 432,721 2,415,960 2,271,085 (144,875) 4,082,713 3,960,220 (122,493) 1,542,477 1,444,833 (97,644) 916,832 889,178 (27,654) 122,273 109,911 (12,362) 45,000 30,631 (14,369) - 7,925 7,925 9,125,255 8,713,783 (411,472) (263,891) 580,302 844,193 196,930 196,930 ($66,961) $777,232 $844,193 Audit Management Letter General Fund The City's December 31, 2011 General Fund fund balance totaled $5,888,137. The City's General Fund balance has been as follows for the past ten years: $6,000,000 General Fund Balance $5,500,000 $5,000,000 $1,500,000 - -- 51.000.000 $3,500,000 $3,000,000 $2,500,000 $2,000.000 $1,500.000 $1,000,000 &500,000 $ 2002 2003 2001 2006 2008 200] 2108 Me 2010 2011 NFU ftla.c 12,819,972 1 $2593,027 1 43,302,565 $3,21 II 53,392913 E2890A60 $A,T15,035 E1,328Al2 $4110,905 55,888,13] 1 1 1 1 I 11 1 I 11 1 1 I I 1 I I I H I� i I I I Audit Management Letter The fund balance at December 31, 2011 is reported as follows. General Fund Fund Balance Classificadons Classification Nonspendable: Prepaid items Inventory Total nonspendab le Unassigned Total fund balance Amount $91,000 131,641 222,641 5,665,496 $5,888,137 General Fund The City implemented GASB Statement No. 54, Fund Balance Reporting and Governmental Fund Type Definitions for the year ended December 31, 2011. GASB No. 54 changed the reporting of fund balance from the previous categories of reserved, designated and unreserved/undesignated to five categories based on the constraint imposed on the use of the resources. The fund balance 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 is 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. Audit Management Letter General Fund Minimum Unassigned Fund Balance As previously noted, approximately 81 % of the General Fund's revenue sources are from property taxes and state aids. These revenue sources are not received until the second half of the fiscal year. As a result, the City is required to have sufficient reserves at the beginning of the year to fund operations of the first six months of the year. The City's fund balance policy states that the City will maintain a minimum fund balance equal to approximately six months of the subsequent years operations for cash flow and 1 -3% of budgeted expenditures for contingencies. For the City, the minimum unassigned fund balance is computed as follows: 2012 General Fund budgeted expenditures $9,263,720 Cashflow (fifty percent of total) 4,631,860 Contingencies (three percent of total) 277,912 Recommended General Fund unassigned balance $4,909,772 General Fund unassigned fund balance at December 31, 2011 $5,665,496 A summary of the purposes of General Fund unassigned balances is as follows: I I I I i 7 I I� 1 h L✓ J 17 U I J I I 1 I 11 I 1 I 1 I I 1 I 11 Debt Service Funds DEBT SERVICE FUNDS The financial statements for the EDA Public Facility Lease Revenue Refunding Bonds of 2006 and EDA Public Facility Lease Revenue Refunding Bonds of 2007 are presented in Statements 3 and 4 and the combining financial statements for the nonmajor Debt Service Funds are presented in Statements 16 and 17 of the 2011 Comprehensive Annual Financial Report. Debt Service Funds are a type of governmental fund to account for the accumulation of resources for the payment of interest and principal on debt (other than Enterprise Fund debt). Current governmental reporting standards do not provide for the matching of long -term debt with its related financing sources. Although this information can be found in the City's Comprehensive Annual Financial Report, it is located in several separate sections of the Comprehensive Annual Financial Report. The following schedule extracts information from these sections of the Comprehensive Annual Financial Report to provide an overview analysis of long -term debt and its related funding. The reader is cautioned that 1) fixture interest revenue from assessments and investments, and 2) future interest expense on bonded debt, is not included in the following schedule. 1 i 1 r r Debt Service Funds December 31, 2011 Final Fund Fund Deferred Outstanding Maturity Scri0tion Balance Revenues Total Debt Date General Obligation Bonds: 17,758 31,877 2,200,000 02/01/17 EDA Public Facility Lease Revenue Bonds of 2004 $553,769 $41,375 $595,144 $17,810,000 02/01/14 EDA Public Facility Lease Revenue Refunding Bands of 2006 9,923,753 - 9,923,753 10,000,000 02/01/34 EDA Public Facility Lease Revenue Refunding Bands of 2007 6,813,801 - 6,813,801 6,865,000 02101134 Total general obligation bonds 17,291,323 41,375 17,332,698 34,675,000 Certificates of indebtedness: G.O. Equipment Certificate of 2008A G.O. Equipment Certificate of 2009A G.O. Equipment Certificate of 2011A Total certificates of indebtedness Permanent Improvement Revolving Bonds: G.O. PIR Refunding Bonds of 2010A Capital Improvement Bonds: G.O. Capital Improvement Bonds of 2004A State Aid Refunding Bonds 2009A Open Space Referendum Bonds 2010A Totals -All Debt Service Funds 176,711 - 176,711 166,000 02101112 133,459 - 133,459 130,000 02/01/12 79,961 3,661 83,622 265,000 02111/14 390,131 3,661 393,792 561,000 8,857 - 8,857 1,125,000 02101/14 14,119 17,758 31,877 2,200,000 02/01/17 269,445 269,445 740,000 02/01/15 172,862 4,242 177,104 1,660,000 02/01122 118,146,737 $67,036 $18,213,773 $40,961,000 The City analyzes its debt position annually as part of the budget and CIP process and the City's fiscal agent prepares a quarterly review and a refunding/call review with each new issuance. We recommend the City continue to annually review debt service requirements and long -term funding for the above bond issues. I I 1 1 1 i 1 I Fi I II II 11 i 11 1 11 [J 1 1 1 1 1 1 1 F 1 Audit Management Letter Debt Service Funds The following decision chart prompts questions to further evaluate a fund's financial position: Condition A Fund balance plus deferred revenue meets or exceeds bonds payable. Cautions I 1. Is the City experiencing favorable collection rates for special assess- ments? 2. Are anticipated investment interest rates earned on prepayments ade- quate to replace assessment interest? 3. Is the timing of receipts sufficient to meet bonded debt payments as they become due? 4. Are significant portions of assess- ments not scheduled for collection (green acres, tax forfeit, etc.)? 5. Is arbitrage or negative arbitrage an issue? The debt service fund is clearly adequately nded. Plan for eventu use of surplus. Conclusion 1 Condition B Fund balance plus deferred revenue is less than bonds payable. I Questions 1. Are sufficient future assets scheduled (such as property taxes to meet bonded debt payments? 2. Are cash assets sufficient to generate investment earnings? 3. Are transfers or other funding sources available? 4. Are there future assets to pledge such as assessments, MSA allot- ments, etc.? The debt service fund is clearly not adequately funded. Plan for altern- ative funding (taxes, transfers, other sources). Conclusion 2 Variables and possible outcomes are too diverse. Prepare projections to analyze possible scenarios and options. Conclusion 3 I 1 i 1 11 1 1 1 - This page intentionally left blank - 1 1 1 !1 1 i 1 1