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HomeMy WebLinkAbout7. 2012 Annual Financial Report and Audit Presentation by Kern, DeWenter, Viere Ltd. (KDV) �. �E t.i�;c.�����;t�, TO: Mayor and City Council Mark McNeill, City Administrator FROM: Julie Linnihan, Finance Director/City Clerk DATE: OS/07/2013 SUBJECT: 2012 Annual Financial Report and Audit Presentation by Kern, DeWenter, Viere, Ltd. (KDV)(C) Action Sought Staff requests the acceptance of the 2012 audit and accompanying reports, as presented by audit staff from KDV. Background Audit staff from KDV conducted the annual audit process, beginning in December,2012, continuing into April, 2013. The audit results and accompanying data will be presented at the May 7th, 2013 meeting, by Steve W ischmann, Government Audit Partner. Included in the agenda packet are the following reports: .Comprehensive Annual Financial Report(CAFR) .Communications Letter .Report on Compliance Similar to the previous year audit, the City did not expend greater than$500,000 in federal funds, and was not subject to the "single audit" process. Attachments: CAFR Comm Letter � Report on Compliance CITY OF SHAKOPEE, MINNESOTA Scott County COMPREHENSIVE ANNUAL FINANCIAL REPORT For the Year Ended December 31, 2012 DEPARTMENT OF FINANCE JULIE LINNIHAN, Director of Finance MEMBER OF GOVERNMENT FINANCE OFFICERS ASSOCIATION OF THE UNITED STATES AND CANADA 129 HOLMES STREET SOUTH SHAKOPEE, MN 55379 (THIS PAGE LEFT BLANK 1NTENTIONALL� CITY OF SHAKOPEE TABLE OF CONTENTS SECTION I Page INTRODUCTORY SECTION Elected Officials and Administration................................................................................ 1 OrganizationChart............................................................................................................ 2 Letterof Transmittal......................................................................................................... 3 Certificate of Achievement for Excellence in Financial Reporting.................................. 8 SECTION II FINANCIAL SECTION Independent Auditor's Report........................................................................................... 9 Management's Discussion and Analysis (Unaudited) ...................................................... 13 Basic Financial Statements: Government-Wide Financial Statements: Statement of Net Position..................................................................................... 26 Statement of Activities.......................................................................................... 27 Fund Financial Statements: Balance Sheet—Governmental Funds.................................................................. 28 Reconciliation of the Balance Sheet to the Statement of Net Position— GovernmentalFunds........................................................................................... 29 Statement of Revenues, Expenditures and Changes in Fund Balances— Governmental Funds........................................................................................... 30 Reconciliation of the Statement of Revenues, Expenditures and Changes in Fund Balances to the Statement of Activities—Governmental Funds ............... 31 Statement of Revenues, Expenditures and Changes in Fund Balances— Budget and Actual—General Fund..................................................................... 33 Statement of Net Position—Proprietary Funds..................................................... 34 Statement of Revenues, Expenses and Changes in Fund Net Position— ProprietaryFunds................................................................................................ 35 Statement of Cash Flows—Proprietary Funds...................................................... 36 Combined Statement of Fiduciary Net Position ................................................... 38 Statement of Net Position—Component Unit ...................................................... 39 Statement of Revenues, Expenses and Changes in Fund Net Position— ComponentUnit................................................................................................. 40 Notes to the Financial Statements............................................................................... 41 Required Supplementary Information: Schedule of Funding Progress—Other Post Employment Benefits............................ 76 Supplementary Information: Schedule of Revenues, Expenditures and Changes in Fund Balance— Budget and Actual—General Fund........................................................................... 78 Combining and Individual Fund Financial Statements and Schedules: Combining Balance Sheet—Nonmajor Governmental Funds.............................. 80 Combining Statement of Revenues, Expenditures and Changes in Fund Balances—Nonmajor Governmental Funds ....................................................... 86 CITY OF SHAKOPEE TABLE OF CONTENTS SECTION II (Continued) Table Page FINANCIAL SECTION Supplementary Information: (Continued) Combining and Individual Fund Financial Statements and Schedules: (Continued) Schedule of Revenues, Expenditures and Changes in Fund Balance— Budget and Actual: TransitFund.................................................................................................... 92 Economic Development Authority Fund........................................................ 93 Combining Statement of Fund Net Position—Internal Service Funds................. 94 Combining Statement of Revenues, Expenses and Changes in Fund Net Position—Internal Service Funds ....................................................................... 95 Combining Statement of Cash Flows—Internal Service Funds ........................... 96 Statement Fiduciary Net Position—Escrow Agency Fund................................... 97 Statement of Changes in Assets and Liabilities—Escrow Agency Fund.............. 98 SECTION III STATISTICAL SECTION Net Position by Component.............................................................................................. 1 104 Changes in Net Position.................................................................................................... 2 106 Fund Balances—Governmental Funds ............................................................................. 3 110 Changes in Fund Balances—Governmental Funds........................................................... 4 112 Tax Capacity and Estimated Actual Value of Taxable Property ...................................... 5 114 Direct and Overlapping Property Tax Rates..................................................................... 6 115 PrincipalTaxpayers........................................................................................................... 7 116 Property Tax Levies and Collections................................................................................ 8 117 Ratio of Outstanding Debt by Type .................................................................................. 9 118 Ratio of General Bonded Outstanding.............................................................................. 10 119 Direct and Overlapping Governmental Activities Debt.................................................... 11 121 Legal Debt Margin Information........................................................................................ 12 122 Pledged Revenue Coverage .............................................................................................. 13 124 Demographic and Economic Statistics ............................................................................. 14 125 PrincipalEmployers.......................................................................................................... 15 127 Full-Time Equivalent City Government Employees by Function/Program...................... 16 128 Operating Indicators by Function/Program....................................................................... 17 130 Capital Asset Statistics by Function/Program................................................................... 18 132 CITY OF SHAKOPEE ELECTED OFFICIALS AND ADMINISTRATION DECEMBER 31,2012 Elected Officials Position Term Expires Brad Tabke Mayor December 31, 2013 Matthew Lehman Council Member December 31, 2015 Jay Whiting Council Member December 31, 2015 Steven Clay Council Member December 31, 2013 Pamela Schurman Council Member December 31, 2013 Administration Mark H. McNeill City Administrator Appointed Julie Linnihan Finance Director Appointed 1 CITY OF SHAKOPEE ORGANIZATION CHART DECEMBER 31,2012 ELECTORATE CITY COUNCIL Planning Commission and Board of Adjusvnent and Appeals Building Code Board of Adjustment and Appeals Police Civil Service Commission Telecommunications Advisory Commission Park and Recreation Advisory Board Board of Review Economic Development Authoriry-Committee(EDAC) Public Utili6es Commission Em�ironmental Advisory Commission Historic Preservation Commission Administration Police Fire Public Works Recceation Finance/ Communiry City Clerk Development Nahual Resources EmergencyManagement Engineering Operations Planning BuildingInspeaion Transit Streets/Parks Sewers Fleet N i � i � i ! Sx��oPE� i April 17th,2013 To the Honorable Mayor,Members of the City Council,and Citizens of the City of Shakopee: Minnesota Statutes require that within six months of the close of each fiscal year every city publish a complete set of audited financial statements. This report is published to fu1fill that specific requirement for � the fiscal year ended Decernber 31,20I2. The City's management staff has exercised its best efforts to insure that the infonnation presented in the ,: report is complete and reliable and is based upon a comprehensive framework of interna] control that has been established for this purpose. The costs of intemal controI should not exceed anticipated benefits and ,. therefore the object is to provide reasonable rather than absolute assurance that the financial statements are ; free from material misstatement. � The City of Shakopee's financial statements have been audited by Kern, DeWenter, Viere, Ltd., a fiirm of licensed certified public accountants. The goal of the independent audit was to provide reasonable assurance that the fmancial statements of the City for the year ended December 31, 2012, are fairly presented in confornuty with GAAP (generally accepted accounting principles). Based on the audit, the independent auditor concluded ti�at there was reasonable basis for rendering an unqua]ified ("clean") opinion on the City's financial statements for the year ended Decsmber 31, 2012. The independent audit involved examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements; assessing the accounting principles used; si�mificant estimates made by management; as well as evaluation of the overall financial statement presenta,tion. The independent auditor's report is presented as the first component of the fmancial section of this report. Management Discussion and Analysis(MD&A}immediately follows the independent auditor's report and provides a narrative inh-oducrion, overview,and analysis to accompany the basic financial statements, 'This letter of transrnittal is designed to comp]emw,nt the NID&A and should be read in conjunct�on with it. Profile of the City The City of Shakopee was incorporated far the second time in 1870 and is located approximateIy 25 miles southwest of Minneapolis. Bounded by the Minnesota River on the north, Shakopee is in the northem part of Scott County and is the county seat. In recent years,the City has been one of the most rapidly growing communities in the state. The 20d0 population of the City was 20,Sb8 and the land area covered is approximately 30 square miles, The 2010 census confirmed that the population had increased to 37,076 and has been continuing to experience growth into the current year, with an estimated population of 37,660 in 2012. The city comprises a unique blend of residential, commcrcial and indusirial properties, which provides a wide range of opportunities that are the result of the strong economic health of the community and regian. Approximately 45%of the comnnunity is developed, with approximately 28%of the developeti land as residential. However, about 23.3%of the undeveloped land is owned ar controlled by the Shakopee Mdewakanton Sioux Community(SMSC),a federally recognized Native American Tribe. The City levies a property tax on both real and per5ona] property located within its boundaries. The City may also by state statute,extend its corporate limits by annexation,which historically has occurred periodically. COMMUNI"I'Y PRIll�SINCE 1857 129 Hotmes Street South • Shakopcc,btinnesota • 55379-1351 • 952-233-9300 • E�X 952-233-3801 • k-w-w.ci.shakopee.mn.us 3 Shakopee is organized in Minnesota under Plan A, which includes a City Administrator, but the City Council retains primary decision making authority such as policy setting, adopting ardinances and budget and staffing. The City Council has four members who serve staggered terms of four years plus the Mayor who serves a two-year term. All council positions are non-partisan, part-time and members are elected at large. The City provides typical municipal services such as police and fire protection, street and infrastructure construction, public works maintenance, parks, recreation, planning and zoning. Also provided are utilities such as sewer and storm drainage utilities, organized refuse collection, recycling, and certain transit services. Electric and water utilities are operated by Shakopee Public Utilities Commission which is appointed by the City Council but which operates independently of the City of Shakopee. Economic development and redevelopment are controlled by the Shakopee Economic Development Authority (the Authority). The Authority is comprised of City Council members and is included as an integral part of the City's report. The economic development activities of the both staff and Council have increased significantly over the past year, with contacts and inquiries relating to growth and expansion of both commercial and industrial ventures. 2013 continues to offer similar promise far business development in several areas of the City, as well as the current upturn in residential housing construction and plat development. The aru�ual budget is the basis for the City's financial planning and controL The budget is prepared by Fund (e.g., General), function (e.g., Public Works) and department (e.g., Engineering). Budget requests are submitted in July by Department Heads. The City Administrator reviews the submittals with the Finance Director and department heads,to determine the priaritization of specific budget requests. Presentations are provided to the City Council during work sessions and allow for open community discussion. The City Council is presented with a proposed budget and ta�c levy in August of each year. City Council is required to adopt a maximum tax levy by September 15. The final tax levy and budget are adopted in December after a public meeting, which provides the City Council and community impact information relating to both the budget decisions and property tax levies. Final levy information is submitted to the County, for development of the upcoming year property tax statements. Budgeting control is provided by an annual budget resolution passed by City Council (or EDA as appropriate). Formal control is at the division level and Council action is necessary to change budgeted amounts between divisions and/or funds. The Finance Director or City Administrator may make changes within divisions. Along with the operating budget,the city annually prepares a five-year capital improvement plan(CIP)that is the basis for the long term goal of providing and maintaining a functional public facility program, that provides the residents and businesses with infrastructure necessary for the on-going growth and development. The capital plans are reviewed with the Council and City staff, and the funding sources and priorities developed for the annual and future budget practices. A ten-year majar equipment list is also annually prepared and presented to Council,the funding for this program through Internal Service fund rate charges, determined by departmental use, replacement plans and determination of life and salvage value. Internal Service funds are utilized for the definition and application of other charges, including governmental buildings, park assets, and information technology. These charges are integrated into the individual budgets of the General fund and departments that are benefitted by the activities of the progams. The Internal Service funds continue to be reviewed and updated as the community needs and council directives are considered during each budget cycle. Local Economy The City is benefitted by its' convenient location within the Twin Cities metropolitan region, direct access to Highway 169 and proximity to other major metro roadways which provide access to major businesses and a unique and broad variety of attractions. Bordering on Hennepin County, Shakopee is the CounTy seat 4 of Scott County. The community has benefited from a decade of strong and consistent growth, and for 2012 and future years,continues to benefit from the growth of commercial,industrial and residential ventures. In 2012, permits were issued and construction initiated on a Holiday Inn Express, which will provide lodging for the growing and expanding recreational activities of the area, including Canterbury Park horse racing,Valleyfair Amusement and Water Park,and historical sites, such as The Landing, providing a family friendly learning environment for the state and region. During 2012 the Economic Development Authority(EDA),received requests for assistance for several new business ventures. The EDA and City Council (the members of the City Council also serve as the EDA) reviewed and approved tax increment and t� abatement requests for several new businesses in the community. These include the construction of a new facility for SanMar, a 580,000 square foot warehouse and distribution facility. This business is anticipated to provide approximately 150 new jobs for the area as well as adding new value to the property tax base. Trystar, Inc., a privately held company, will initiate construction of a new manufacturing facility in the Dean Lakes PUDBusiness Park in Shakopee. This project, which will serve as the administrative headquarters, manufacturing and distribution site of the organization, will provide an estimated 120 new jobs, in the cable technology field. In the summer of 2012, Trident Housing approached the City with a request for T�Increment Financing for the All Saints Senior Housing project. This project, which will begin construction late spring of 2013, will provide a range of senior living options for the area, including independent living, assisted living, and memory care living options. The facility will provide 83 units,a common area and wellness center. The site is approximately 10 acres,and will be locate near residential neighborhoods. The City has recently approved the Preliminary Plat of a 66 single family residential subdivision, Dakota Crossings. This 40 acre site will provide needed construction sites far the anticipated needs of a growing community, and also provides for additional roadway connections and access, which are vital in the planning for a growing and mobile community. The City has also continued to maintain and expand their commitment to the infrastructure needs of the community. The 2012 budget initiated the discussion of an annual funding option for the Capital Improvement Progam (CIP), as a portion of the properiy tax levy. The 2013 adopted budget provides for the first committed funding source for the streets, infrastructure,trails,and requested projects, per the 5 year plan. This action has laid the groundwark for the future funding needs, and allows far a consistent and reliable revenue source for the aging infrastructure, as well as the newly planned projects, which are often unplanned and unbudgeted,due to growth and development requests. Local commercial industrial areas, similar to many areas of the Midwest, are experiencing strong and consistent interest from the marketplace. The City continues to receive requests for development information, because of a strong economic environment, as well as the availability of a skilled wark force and available land and utility and infrastructure availability. The City has traditionally had a strong industrial base with commerciaUindustrial property currently comprising approximately 23% of market value and 40% of taY capacity. The City is also fortunate to have a broad base of employers and taxpayer base, which reduces the economic risk of reliance on one ar two significant employers. Companies in the City manufacture chemicals, food products, roofing products, glass, cardboard and electronics. Health care and related industries continue to progess on positive trends as well benefitting from the continuing expansion of a trained and skilled work force. As in many other areas of the Midwest, the community is also fortunate to experience the expansion of technology based employers, which provides skilled and well- paying jobs.At the State level,the current legislative session and governing activities are moving toward the end of session,with the prospect of a budget ageement and a less than contentious atmosphere than in prior sessions. This provides both the state and local economies with an assurance that last minute and game changing legislation will not negatively impact the planning far the current and upcoming budget and financial planning programs. 5 Long-Term Financial Planning Historically, the City has issued bonds and utilized internal funding for the planned infrastructure replacement, expansion and additions, specific to streets, underground utilities and trail and sidewalk expansion. A portion of the debt is funded by special assessments against benefited properties. In prior years, the City has revised the Assessment Policy, and no longer levies special assessments for street overlays. While this has not impacted the funding mechanisms for the majority of street projects, it does require the identification of an alternative funding source, which has been identified as an additional properiy ta�c levy, over the operational levy needed for the City. Recent discussions with the City Council have involved the use of inter-fund transfers, existing fund balance position, as well as review of charges and fees that may be applicable to the projects,and currently not tapped for future funding sources. City Equipment needs are currently identified and funded in a manner that will not place an undue burden or single year expense fluctuation on the taxpayers. The planned program clearly identifies the equipment needs for current projects as well as future use, based on known and anticipated programs and mandates, such as environmental program adjustments and possible community expansion and gowth. The 10 year listing is presented to the City Council and public,as a part of budget planning and t�levy consideration. Relevant Financial Policies The City's target General Fund balance is to maintain an unassigned level between 40% (minimum) and approximately 45% of current year expenditures. This level is to provide warking capital for cash flow, expected decline in revenues and unforeseen expenditures such as natural disasters. Replenishing fund balance when it falls below the target level shall be accomplished by inter-fund transfers or budgeting for expenditures and other uses to be less than revenues or other sources over a period not to exceed three years. The City historically receives no local government aid (LGA) or market value homestead credit (MVHC) from the State of Minnesota. Annual legislative actions may impact the financial position of cities that are currently reliant on these and other revenue sources, leaving them vulnerable to the economies of the State as a whole. As previously mentioned, the current legislative session, and legislative body as a whole, do not indicate that the pending legislative actions will negatively impact the city and its' operations and planning. The standard budget process, which provides for the presentation and approval of the property tax levies for the General fund (including Economic Development), debt service and referendum debt, will be consistent with prior year actions, as there does not appear to be any specific changes to legislation impacting property tax rate structure, aid to cities or additional unfunded mandates. The accounting, auditing and financial reporting policies are designed to maintain a system of financial monitoring, control and reporting for all operations and funds in order to provide effective means of ensuring that overall City goals and objectives will be met and to assure the City's residents and investors that the City is well managed and fiscally sound. The investment policy provides for conservative investing, preserving capital and maintaining adequate liquidity for forecasted cash needs. A third party investment manager handles the majority of the portfolio and all investments are held in a trust account. The debt policy ensures that the City's debt; 1) does not weaken the City's financial structure; and 2) provide limits on debt to avoid problems in servicing debt. This policy is critical for maintaining the best possible credit rating. 6 Capital policies include having expenditures forecast ahead for five to ten years and are updated annually. Internal Service Funds for major equipment, major buildings and facilities, park asset replacement and information technology costs stabilize the annual impact of those items to the General fund. Awards and Acknowledgements The Government Finance Officers Association of the United States and Canada (GFOA) awarded a Certificate of Achievement for Excellence in Financial Reporting to the City of Shakopee for its Comprehensive Annual Financial Report(CAFR) far the fiscal year ended December 31, 2011. This was the twenty eighth consecutive year that the City has received this award. In order to be awarded a Certificate of Achievement, a government must publish an easily readable and efficiently organized CAFR. This report satisfied both GAAP and applicable legal requirements. A Certificate of Achievement is valid far a period of one year only. We believe our current CAFR continues to meet the Certificate of Achievement Prograi��'s requirements and we are submitting it to the GFOA to determine its eligibility for another certificate. The preparation of this report would not have been possible without the efficient and dedicated services of the Finance Department and the entire city staff. We would like to express our appreciation to all staff members who assisted and contributed to the preparation of this report. Credit also must be given to the Mayor and Councilors for their unfailing support for maintaining the highest standards of professionalism in the management of the City of Shakopee's finances. Respectfully submitted, � � j ������ �f�_L� u�� C{�. ��-�������4«� Mark McNeill Julie A.Linnihan Administrator Finance Director 7 .-, . ,.. �..:����l�C�l� �:� . ��;��.°��s���.�: , ��� ����;;���:,-��.� ���� ��Y������� �����;������ Presented to ��i�� a.� �.�.���'���:�: �i/��..��1�5�'�i� Por its comprehensive Annuat Financial Re�ort fi�the.Fiscat Yeur Ended I]ecember 31, 2p11 A CertiBcate of Acl�ievement{nr gxceUence in Financla] �Fo�+��P�nted by the Qovemment Finance Officers Association of the United States and Canada to goverr�nent wuts end public employee retirement systems v✓hose con�prehe,isiv�:annual finsnciel reports(CAPRs)achisve the lughest standarde in govaivment accuuatang and finsn�tial x+epor[ing. �:j`�'�,f�+':,� �,j��;�.-�_ 'j..r t` ,��s wtFr��,'t.,, r.�yr �� 'f4���dfi'�.k'��`d: 4�,,,, � `��j�j� �.� a� ('1fb�i�v�;l`tn$� }� t� Al�il �/{ S;• �i �_ r> *� � C8�1.7.1.1.'�+'�v ��;� I'SeS'1C�.IIL a., �`(� ���,,.�.��� �� � � �'NiC1t`? _�-"` ♦ Exectltive Director 8 Expert advice. When you need it.`"' INDEPENDENT AUDITOR'S REPORT Honorable Mayor and Members of the City Council City of Shakopee Shakopee, Minnesota Report on the Financial Statements We have audited the accompanying financial statements of the governmental activities, the business-type activities, the aggregate discretely presented component units, each major fund and the aggregate remaining fund information of the City of Shakopee, Minnesota, as of and for the year ended December 31, 2012, and the related notes to the financial statements, which collectively comprise the City's basic financial statements as listed in the Table of Contents. Management's Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. Auditor's Responsibility Our responsibility is to express opinions on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on t11e auditor's judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the City's preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the City's internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinions. 9 D� 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, the aggregate discretely presented component units, each major fund and the aggregate remaining fund information of the City of Shakopee, Minnesota, as of December, 31 2012, and the respective changes in financial position and, where applicable, cash flows thereof and the respective budgetary comparison of the general fund for the year then ended in accordance with accounting principles generally accepted in the United States of America. Implementation of GASB 63 As discussed in Note 21 to the financial statements, the City has adopted the provisions of the Governmental Accounting Standards Board (GASB) Statement No. 63,Financial Reporting of Deferred Ou�ows of Resources, Deferred Inflows of Resources and Net Position. Other Matters Required Supplementary Information Accounting principles generally accepted in the United States of America requi�-e that the management's discussion and analysis and Schedule of Funding Progress for Retired Health Plan on pages 13 —24 and page 76 respectively, 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 inquicies, 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. Other Information Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the City of Shakopee's basic financial statements. The accompanying supplementary information as listed in the Table of Contents are presented for purposes of additional analysis and are not a required part of the basic financial statements. The accompanying supplementary information as listed in the Table of Contents are the responsibility of management and were derived from and relates directly to the underlying accounting and other records used to prepare the basic financial statements. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the basic financial statements or to the basic financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion,the supplementary information section is fairly stated, in all material respects, in relation to the basic financial statements as a whole. 10 D� Other Information (Continued) The introductory 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 it. Other Reporting Required by GovernmentAuditing Standards In accordance with Government Auditing Standards, we have also issued our report dated April 17, 2013 on our consideration of the City of Shakopee's internal control over financial reporting and on our tests of its compliance with certain provision of laws, regulations, contracts, and grant agreements and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with GovernmentAuditing Standards in considering the City of Shakopee's � internal control over financial reporting and compliance. ��,,,.., Dew,��, �-� t.�P- KERN, DEWENTER, VIERE, LTD. St. Cloud, Minnesota April 17, 2013 11 (THIS PAGE LEFT BLANK INTENTIONALL� 12 CITY OF SHAKOPEE MANAGEMENT'S DISCUSSION AND ANALYSIS December 31,2012 As management of the City of Shakopee (the "City"), we offer readers of the City's financial statements this narrative overview and analysis of the financial activities of the City for the year ended December 31, 2012. We encourage readers to consider the information presented here in conjunction with additional information that we have furnished in our Letter of Transmittal,which can be found on pages 3 to 7 of this report. Financial Highlights • The assets of the City exceeded its liabilities at the close of the most recent year by$ 257.4 million (net position). Of this amount, $ 68.2 million (unrestricted net position) may be used to meet the Ciry's ongoing obligations to citizens and creditors. • The City's total net position increased by $ 1,731,421. • As of the close of the current year, the City's governmental funds reported combined ending fund balances of$ 31.7 million, increasing from the prior year. Approximately 28.7%of this total amount, $ 9.1 million is available for spending at tl�e City's discretion (unassigned fund balance). • At the end of the current year, unassigned fund balance for the General Fund was $ 9.5 million, or 50.9 %, of total General Fund expenditures. • The City's total bonded debt increased $ 2,915,000. Refunding bonds were issued in the amount of$ 4,865,000 which will refund two bonds in upcoming years. Overview of the Financial Statements This 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 private-sector business. The Statement of Net Position presents information on all of the City's assets and liabilities, with the difference between the two reported as net position. Over time, increases or decreases in net position may serve as a useful indicator of whether the financial position of the City is improving or deteriorating. The Statement of Activities presents information showing how the City's net position changed during the most recent year. All changes in net position are reported as soon as the underlying event giving rise to the change occurs, regardless of the timing of related cash flows. Thus, revenues and expenses are reported in this statement for some items that will only result in cash flows in future fiscal periods (e.g., uncollected taxes and earned but unused employee leaves). 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, 13 CITY OF SHAKOPEE MANAGEMENT'S DISCUSSION AND ANALYSIS December 31,2012 highways and streets, economic development and recreation. The business-type activities of the City include sewer and storm drainage utilities. The government-wide financial statements include not only the City itself(known as the primary government), but also two legally separate entities for which the City is financially accountable. The component units are Shakopee Public Utilities Commission (SPUC) and the Economic Development Authority(EDA). SPUC's financial information is reported separately from the financial information presented for the primary government as a discretely presented component unit. The EDA, which functions like a department of the City although it is a legally separate entity, is presented within the City's government-wide financial statements. The City Council is the EDA Board. The government-wide financial statements can be found on pages 26 and 27 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. Government Funds Government 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 spendable resources, as well as on balances of spendable resources available at the end of the year. Such information may be useful in evaluating a City's near-term financing's requirements. Because the focus of governmental funds is narrower than that of the government-wide financial statements, it is useful to compare the information presented for governmental funds with similar information presented for governmental activities in the government-wide financial statements. By doing so, readers may better understand the long-term impact of the City's near-term financing decisions. The governmental funds Balance Sheet and the governmental funds Statement of Revenues, Expenditures and Changes in Fund Balances provide a reconciliation to facilitate this comparison between governmental funds and governmental activities. The City maintains 30 individual governmental funds. Information is presented separately in the governmental funds Balance Sheet and in the governmental funds Statement of Revenues, Expenditures and Changes in Fund Balances for the General Fund, the 2004A Improvement Bond Debt Service Fund, and the Capital Improvement Capital Project Fund. Those are considered to be major funds. 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 Fund and two of its Special Revenue Funds. A budgetary comparison statement has been prepared for those funds to demonstrate compliance with the budget. 14 CITY OF SHAKOPEE MANAGEMENT'S DISCUSSION AND ANALYSIS December 31,2012 The basic governmental funds financial statements can be found on pages 28 to 31 of this report. Proprietary Funds The City maintains two different types of proprietary funds. Enterprise funds are used to report the same functions presented as business-type activities in the government-wide financial statements. The City uses enterprise funds to account for its sewer and storm drainage operations. Internal service funds are an accounting device used to accumulate and allocate costs internally among the City's various functions. The City uses internal service funds to account for its fleet of vehicles and mobile equipment, its major buildings, the replacement of park assets, information technology items and for employee compensated absences. All of these services predominantly benefit governmental rather than business- type functions. Proprietary funds provide the same type of information as the government-wide financial statements. The proprietary fund financial statements provide separate information for the sewer and storm drainage operations, all of which are considered to be major funds of the City. Conversely, all internal service funds are combined into a single, aggregated presentation in the proprietary fund financial statements. Individual fund data for the internal service funds is provided in the form of combining statements elsewhere in this report. The basic proprietary fund financial statements can be found on pages 34 to 37 of this report. Component Units Component units are legally separate organizations for which the City is financially accountable. The government-wide financial statements present information for the component units in a single column on the Statement of Net Position. Also, some information on the Statement of Changes in Net Position is aggregated for component units. The component units' Statements of Net Position and Statement of Changes in Net Position provide detail for each major component unit. Fiduciary Funds Fiduciary funds are used to account for resources held for the benefit of parties outside the government. Fiduciary funds are not reflected in the government-wide financial statement because the resources of those funds are not available to support the City's own programs. The basic fiduciary fund financial statements can be found on page 38 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 41 to 73 of this report. Other Information In addition to the basic financial statements and accompanying notes,this report also presents certain required suppletnentary infocmation concerning the City's progress in funding its obligation to provide pension benefits to its employees. 15 CITY OF SHAKOPEE MANAGEMENT'S DISCUSSION AND ANALYSIS December 31,2012 The combining statements referred to earlier in connection with non-major governmental funds, internal service funds and fiduciary funds are presented immediately following the required supplementary information on pensions. Combining and individual fund statements and schedules can be found on pages 80 to 98 of this report. GOVERNMENT-WIDE FINANCIAL ANALYSIS As noted earlier, net position may serve over time as a useful indicator of a City's financial position. For the City, assets exceeded liabilities by $ 257.4 million at the close of the most recent year. By far the largest portion of the City's net position(69.7 %)reflects its investment in capital assets (e.g., land,buildings and equipment); less any related debt used to acquire those assets that is still outstanding. The City used 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 �•eported 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. Net Position (Expressed in Thousand) Governir�ental Activities Busu�ess-Type Activities Total 2012 2011 2012 2011 2012 2011 Cwrent and Other Assets $ 54,141 $ 48,799 $ 34,525 $ 33,433 $ 88,666 $ 82,232 CapitalAssets 129,387 131,127 64,125 65,080 193,512 196,207 TotalAssets $ 183,528 $ 179,926 $ 98,650 $ 98,513 $ 282,178 $ 278,439 I,ong-Term Liabilities Outstand'mg $ 18,793 $ 15,830 $ 1,089 $ 74 $ 19,882 $ 15,904 Other LiabilRies 4,807 5,428 82 1,431 4,889 6,859 TotalLiabilities $ 23,600 $ 21,258 $ 1,171 $ 1,505 $ 24,771 $ 22,763 NET PO SITION: Invested'm Capital Assets, Net ofRelated Debt $ 115,192 $ 114,982 $ 64,125 $ 65,080 $ 179,317 $ 180,062 Restricted 9,912 10,915 - - 9,912 10,915 Unresh-icted 34,824 32,771 33,354 31,928 68,178 64,699 TotalNetPosition $ 159,928 $ 158,668 $ 97,479 $ 97,008 $ 257,407 $ 255,676 An additional portion of the City's net position (4 %)represents resources that are subject to external restrictions on how they may be used. The remaining balance of unrestricted net position ($ 68.2 million) may be used to meet the City's ongoing obligations to citizens and creditors. 16 CITY OF SHAKOPEE MANAGEMENT'S DISCUSSION AND ANALYSIS December 31,2012 At the end of the current year,the City was able to report positive balances in all three categories of net position, both for the government as a whole, as well as for its separate governmental and business-type activities. The same situation held true for the prior year. During the cucrent year,the City's net position increased by $ 1.7 million. This is a result of conservative spending in 2012 as well as higher than anticipated property taxes and fiscal disparities. Additionally charges for services increased due to increasing demands for public safety services and intergovernmental revenue increased as a result of more state construction aid. The enterprise fund activities experienced an increase in net position during 2012 with revenues increasing at a greater rate than expenses, due to higher than anticipated usage, and lower than anticipated maintenance and operational costs. Changes in Net Position (Expressed in Thousands) Govenm�entalAcvtivrties Business-TypeActivrties Total 2012 2011 2012 2011 2012 2011 REVENLTES: Program Revenues: Charges far Services $ 7,574 $ 3,781 $ 5,170 $ 4,026 $ 12,744 $ 7,807 Operating Grants and Corrtrbutions 2,107 3,606 - - 2,107 3,606 Capital Grants and Cornrbutions 1,479 3,153 349 93 1,828 3,246 General Revenues: Property Taxes 15,003 14,488 - - 15,003 14,488 OtherTaxes 114 161 - - 114 161 Other 558 1,032 424 758 982 1,790 Total Revenues 26,835 26,221 5,943 4,877 32,778 31,098 EXPINSES: General Govemment 4,603 4,253 - - 4,603 4,253 Public Safety 9,431 9,237 - - 9,431 9,237 Public Works 7,083 7,094 - - 7,083 7,094 Economic Development 152 244 - - 152 244 Cuhi�re and Recreation 3,818 3,866 - - 3,818 3,866 Interest on I.ong-Term Debt 587 619 - - 587 619 Sewer - - 3,926 3,807 3,926 3,807 Storm - - 1,446 1,382 1,446 1,382 TotalE�enses 25,674 25,313 5,372 5,189 31,046 30,502 Increase(Decrease inNet PosrtionbeforeTransfers 1,161 908 571 (312) 1,732 596 Transfers 100 100 (100) (100) - - ChangeuiNetPosition 1,261 1,008 471 (412) 1,732 596 NET POSTION: January 1 158,667 157,659 97,008 97,420 255,675 255,079 December 31 $ 159,928 $ 158,667 $ 97,479 $ 97,008 $ 257,407 $ 255,675 17 CITY OF SHAKOPEE MANAGEMENT'S DISCUSSION AND ANALYSIS December 31,2012 Governmental Activities Governmental activities increased the City's net position by$ 1,260,310. The major increase was a result of municipal state aid revenue received on prior and current year construction projects. Expenses and Program Revenues—Governmental Activities $io,000,000 $9,000,000 $s,000,000 ��.000.000 — $6.000.000 — -------- — ■Prosrazn Re�•enues $5.000.000 ___ __ _ _ $4.000.000 ■Espenses $3,000,000 ; � -_ _ $?.000.000 .. $1,000.000 $- � -- ,., � � en � :� ` '1 � C.) CJ y � ^ � � ^ ✓� 3 J p �'1. '� U � �? , � O C7 — � ..`'i S c� ^ � � � 7 �" "� �J t, V U . Revenues by Source—Governmental Activities Other Revenues Operating Grauts Charees for 2;% and Services _Contributions 28°io 8°,% '� �_ �� , � � Capital Grants � ��� �� and Contributions Other Tales -- ,� `� 6°�0 0% �� ��, Property Ta�es 56% 18 CITY OF SHAKOPEE MANAGEMENT'S DISCUSSION AND ANALYSIS December 31,2012 Business-Type Activities Business-type activities increased the City's net position by $ 471,111. During 2011, it was determined SPUC no longer met the criteria of a blended component unit and it was determined SPUC's funds would be presented as discretely presented component units prospectively. Key elements of this increase are as follows: • Charges for services increased $ 1.1 million as the utility funds have experienced increased revenue collections due to increased usage as well as more connection charges due to a rise in new development. • Expenses increased in 2012 due to higher Met Council fees, which are anticipated to continue annually. This was offset by lower than anticipated maintenance and operational costs. • The sewer and storm water activities will continue to experience a higher degree of expense, as the deferral of maintenance will continue to put pressure on the funds, to meet the demands of on-going and future development needs. Expenses and Program Revenues—Business-Type Activities $,�,500,000 $4,000,000 - _ _ _ _ � � � $3,500,000 _ ����a �'� _ _ $3,000,000 _ �W.,.,, . _ $2,500,000 _ � ';, _ __ �Program $2,000,000 - j � Re�-enues '�� , ■Espenses $1,500,000 � � ! �� t I f ( � $1,000,000 . �,; - .;�,� �-. $500,000 --- ,°" t � � ,��°. '�`� i 3. j"' rc`4�� �� Se���er Stonn Revenues by Source—Business-Type Activities Capital Grants and Contributions� ��� 6% /' Investrnent_/ I _Char es for Earnings - - g �o o % Services 87°.'0 19 CITY OF SHAKOPEE MANAGEMENT'S DISCUSSION AND ANALYSIS December 31,2012 FINANCIAL ANALYSIS OF THE CITY'S FUNDS As noted earlier, the City uses fund accounting to ensure and demonstrate compliance with finance- related legal requirements. Governmental Funds The focus of the City's governmental funds is to provide infor�nation on near-term inflows, outflows and balances of spendable resources. Such information is useful in assessing the City's financing requirements. In particular, assigned and unassigned fund balance may serve as a useful measure of a City's net resoucces avai(able for spending at the end of the year. As of the end of the current year, the City's governmental funds reported combined ending fund balances of$ 31,749,751, an increase of$ 7,706,685 in comparison with the prior year. Approximately 28.7%, ($ 9,118,687), of the total amount constitutes unassigned fund balance, which is available for spending at the City's discretion. Approximately 28.8%, ($ 9,143,130), of the total amount constitutes assigned fund balance, which is assigned for designated purposes. The remainder of fund balance, ($ 13,487,934), is not available for new spending because it has already been restricted or is Non-spendable. The General Fund is the chief operating fund of the City. At the end of the current year, fund balance of the General Fund was $ 9,522,841. As a measure of the General Fund's liquidity, it may be useful to compare fund balance (unassigned)to total fund expenditures. Fund balance represents 50.8%of total General Fund expenditures. Fund balance of the City's General Fund increased by $ 218,647 during the current year. Key factors in this increase consist of the following: • Before transfer fund balance of the General Fund resulted in a $ 3,076,247 increase. After the net transfer of$ 2,857,600, fund balance increased $ 218,647. Transfers provided the necessary funding for several significant capital infrastructure programs and projects, as well as funding for the growing Information Technology needs of the City. • Reimbursements for services increased in 2012, specific to services provided by Public Safety division, for requested, specific services and events. • Debt Service funds did not have specific levies for the 2012 budget year, and the transfers at year end provided a needed funding source for these funds, allowing for the cash coverage for future year bond payments • Revenues exceeded the budget by $ 2.50 million, or 13%. Tax collections which reflect the recent changes to the property tax classification and structure, specifically Market Value Homestead Credit, have resulted in higher than previous year revenue collections. The 2012 revenue year reflects this positive adjustment, resulting in higher than anticipated and higher than previous year revenue. This is a revenue source that can change annually, depending on the adjustments to property tax classifications and structure, as addressed by the State Legislature. Fiscal disparities, intergovernmental receipts, as well as charges for services from the component unit provided a larger than anticipated revenue base. • Under-spending the budget by $ 1.4 million, or 7.1%. City staff continued a trend of conservative spending. Additionally staff vacancies that were unfilled and then filled at a lower wage also impacted the under-budget expenditures. Anticipated budgets for utility fuel and 20 CITY OF SHAKOPEE MANAGEMENT'S DISCUSSION AND ANALYSIS December 31, 2012 commodity costs were higher than experienced, allowing for many divisions to experience expenditures under budget in 2012. • The mild weather in 2012 impacted the expenditures specific to Public Works, as both personnel costs and operational costs for ice control, snow plowing and street maintenance were significantly lower than anticipated. Proprietary funds The City's prop�•ietary funds provide the same type of information found in the government-wide financial statements, but in more detail. Unrestricted net position of the enterprise funds: Sewer Storm Begu�ning ofYear $ 16,361 $ 15,509 Change During Year 426 947 End ofYear $ 16,787 $ 16,456 The City has undertaken several new development projects, beginning in 2012 and continuing into 2013, which will expand both the collections of revenues for connection fees and charges for services. The capital assets of the projects will increase the capital assets of these funds, as well as future year depreciation charges. A portion of these projects are funded through special assessments, but a significant portion of this is funded through the anticipated future revenues collected for services. GENERAL FUND BUDGETARY HIGHLIGHTS The original legally adopted budget for expenditures was $ 20,120,671 and transfers out were budgeted at $ 0 with no budget adjustments. Actual expenditures of$ 18,694,101 were $ 1,426,570 under budget. The variance was a result several unique events, including higher than anticipated position turnover and the accompanying lag in replacement hiring time and lower than anticipated commodity costs. Additionally weather related benefits such as a mild winter, and early spring resulted in Public Works projects coming in under budget, and requiring many adjustments to planned workflow. The City was diligent in obtaining many of the services and supplies originally budgeted for the year at a lower than anticipated cost, such as training and training related costs, building maintenance costs and limited use of the contingency funds which provide for unplanned events or occurrences. The original and final adopted budgets for revenues were $ 19,268,810 and transfers in were $ 1,072,400. Actual revenues of$ 21,770,348 were $ 2,501,538 over budget. This was a result of an increase in collection of property taxes and fiscal disparities, as well as higher than anticipated lodging tax. The lodging tax revenues are offset by related expenditures at a rate of 95%. Additionally the city saw an increase in dividends from the League of Minnesota Cities Insurance Trust for both workers compensation and property and liability coverage, as well as increased funding from the State for State Aid Maintenance and other state aid funding sources. 21 CITY OF SHAKOPEE MANAGEMENT'S DISCUSSION AND ANALYSIS December 31,2012 The revenues received from the Electric and Water utility, component units, is recorded as a Charge for Service, and the warm, dry weather increased revenues well beyond the anticipated budget. CAPITAL ASSET AND DEBT ADMINISTRATION Capital Assets The City's investment in capital assets for its governmental and business type activities as of December 31, 2012, amounts to $ 179,316,358 (net of accumulated depreciation and related debt). This investment in capital assets includes land, buildings and systems, improvement, machinery and equipment, park facilities, roads, highways and bridges. The City's capital assets for the current year were similar to the previous year, with an increase in construction in progress, and a decrease in related debt. Major capital assets events during the current year included the following: • Main Street utility improvements,which provided for the utility replacement and resurfacing of the Main Street area, north of Highway 101 • County State Aid Highway 21 and accompanying transportation improvements, specific to the Southbridge Park and Ride. This road projects provided for the paving, curb, gutter, aggregate base and other improvements for the Southbridge area of the community, a high growth and transportation area • County Road 69 Utility project, which provides for an intersection safety improvement area near the Hwy. 169 exit ramp, connected to County Highway 17. This project will continue into future years and involves multiple governmental entities • Park expansion for several areas of the community, including the Green Meadows park construction which is located in the Greenfield development, a residential neighborhood. This project included a park shelter, and warming house, as well as other significant park amenities � The 17th Ave. Sports Complex field lighting was completed in 2012, allowing for lighting at the soccer complex for evening play, a requested park amenity • Riverside Park construction will be delayed from the planned program of 2012, as staff continues to determine cost to estimated budget and available funding. This project, near the residential Riverside Bluffs subdivision is a multi-year planning and construction project • Trail projects were undertaken for the County Road 18 area, connecting segments of existing trails, as well as 101 trail extension, on the South portion of the 101 road way • Several bituminous overlay projects were also undertaken in the community, to maintain the infrastructure of the system In the near future, the impact of planned business, commercial and residential expansions will impact the type and funding of capital projects, as the economy in the area is experiencing upward and steady growth and will impact planning and construction of roads,trails, parks and traffic flows and management. 22 CITY OF SHAKOPEE MANAGEMENT'S DISCUSSION AND ANALYSIS December 31,2012 Capital Assets (Net of Depreciation) Expressed in Thousands GovernmentalActiv�ies Busmess-Type Activities Total 2012 2011 2012 2011 2012 2011 Land $ 20,023 $ 19,488 $ 3,944 $ 3,944 $ 23,967 $ 23,432 ROW - - 75 75 75 75 Construction m Progress 3,841 5,300 1,289 1,745 5,130 7,045 L'me Rights - - 891 916 891 916 Infrastructure 73,708 74,817 56,597 56,886 130,305 131,703 Buiklmgs 24,634 24,230 - - 24,634 24,230 Machmery and Equipment 7,181 7,292 1,329 1,514 8,510 8,806 Total $ 129,387 $ 131,127 $64,125 $ 65,080 $ 193,512 $ 196,207 Additional information on the City's capital assets can be found in Note 6 on pages 58 to 60 of this report. In 2012, several projects that were "in progress"were continued and completed, as these projects often involved the coordination with County, State and Federal entities. The status of these projects is highly dependent on weather and the funding and staffing of cooperating entities, and will often impact the ability of the City to complete these projects in the anticipated year. Long-Term Debt At the end of the current year,the City had total bonded debt outstanding of$ 19,060,000. Of this amount, $ 5,460,000 comprises debt backed by the full faith and credit of the government and $ 13,600,000 is special assessment debt for which the government is liable in the event of default by the property owners subject to the assessment. Outstanding Debt G.O. and Revenue Bonds Expressed in Thousands Governmental Activities 2012 2011 G.O. Bonds $ 5,460 $ 5,905 Special Assessment Debt with Governmental Commitment 13,600 10,240 Revenue Bonds - - Total $ 19,060 $ 16,145 23 CITY OF SHAKOPEE MANAGEMENT'S DISCUSSION AND ANALYSIS December 31,2012 The City's total bonded debt increased by $ 2,195,000 during the current year. Minnesota Statutes limit the amount of general obligation(G.O.) debt a government entity may issue to a net figure of 3%of the taxable market value. The current legal debt margin for the City is $ 99 million, which is significantly in excess of the City's outstanding G.O. debt. Additional information on the City's long-term debt can be found in Note 7 on pages 60-63 of this report. ECONOMIC FACTORS AND NEXT YEAR'S BUDGETS AND RATES The unemployment rate for the state was 5.0%at year-end. This is a decrease from prior years rates. The City is continuing to benefit from the strong workforce and excellent transportation system of the region. There are currently several business entities approaching the EDA and City Council for Tax Increment Financing and tax abatement proposals. These business ventures will bring not only a strong base of varied jobs to the area but enhanced tax base for the recently developed commercial and industrial sites. During the current year, the unassigned fund balance in the General Fund was $ 9,503,652. This can be similarly compared to the unassigned fund balance of 2011 of$ 9,172,000. The City has maintained a strong financial position, even with the decrease in certain revenue categories, such as permit revenue, as the strong cash flows from other areas has been consistent. The tax levy for 2012/2013 is increased to 15,333,223, in comparison to the prior year amount of $ 14,837,000. This levy increase was approved to provide funding for several position that are to be filled in the City operations, such as a Human Resources specialist,Natural Resources Coordinator, Crime Prevention Specialist, as well as additional funding needed for the Capital Improvement fund, and planned infrastructure activity of 2013. The upcoming year will be a major street reconstruction project year, and only 30 %of some of the project costs are funded through special assessments which will require a firm commitment of the Council to provide needed resources for maintenance and improvements to the existing infrastructure. Utility rates for the Electric and Water Enterprise Funds slightly increased in 2012. City staff will begin review of the rates and charges related to the Sewer and Storm water funds, in 2013. The City will be reviewing and revising many areas of the Council approved rate chart and rate schedule in upcoming months. It has been several years since these specific areas of revenue and cash flow have been analyzed in detail, and the coordination of the staff and council are critical in maintaining an accurate fee plan for the many components of the City operations. The infrastructure planning and development as well as coordination with capital programs of the City, County and SPUC, as well as coordination with private developers and business and commercial entities will determine and drive many of the planned and unplanned projects and expenditures in 2013. REQUESTS FOR INFORMATION This financial report is designed to provide a general view of the City's finances for all those with an interest in the City's finances. Questions concerning any of the information provided in this report or requests for additional information should be addressed to the Finance Director, 129 Holmes St. S., Shakopee, Minnesota, 55379. 24 BASIC FINANCIAL STATEMENTS 25 CITY OF SHAKOPEE STATEDZENT OF NET POSTION December 31,2012 Governmental Business-Type Activities Activities Total Component Unit ASSETS Cash and Investments(Including Cash Equivalents) $ 42,946,914 $ 32,563,019 $ 75,509,933 $ 29,226,437 Restricted Cash and Investments 4,881,561 - 4,881,561 8,979,575 Property Tax Receivable 235,011 - 235,011 - Accounts Receivable(Net of Allowance for UncollectibleAccounts) 438,149 - 438,149 3,532,567 InterestReceivable 186,956 141,138 328,094 41,630 Due From Other Govemments 1,181,070 1,173,841 2,354,911 63,572 Special Assessments Receivable 4,062,579 154,884 4,217,463 - Inventories - - - 977,414 Prepaid Expenses 19,189 - 19,189 84,495 Notes Receivable 19Q000 - 190,000 - Unamortized Debt Issue Costs - - - 438,145 Electric Plant Acquisition(Net of Accumulated Amortization) - - - 262,104 Long-Term SAC Credits - 492,322 492,322 - Capital Assets,Net of Accumulated Depreciaiton(Where Applicable): Land and Land Improvements 20,023,040 3,944,380 23,967,420 - Right of Way - 75,000 75,000 - Construction in Progress 3,841,256 ],288,695 5,129,951 137,942 Line Rights - 891,009 891,009 - Infrastructure 73,707,331 56,596,735 130,304,066 - Plant in Service - - - 72,279,728 Buildings 24,633,986 - 24,633,986 - Machinery and Equipment 7,181,155 1,328,771 8,509,926 - TotalAssets $ 183,528,197 $ 98,649,794 $ 282,177,991 $ 116,023,609 LIABILITIES AND NET POSTTION Liabilities Accounts and Contracts Payable $ 671,225 $ 24,608 $ 695,833 $ 3,539,060 Other Current Liabilities - 19,422 19,422 211,613 Due to Other Governments 540,980 521,198 1,062,178 899,586 Salaries and Benefits Payable 463,998 - 463,998 - Deposiu Payable - - - 1,156,784 Interest Payable 277,046 - 277,046 326,369 Unearned Revenue - 492,322 492,322 - Customer Advances - - - 134,072 Bond Principal Payable,Net: Payable Within One Year 2,070,000 - 2,070,000 9,090,000 Payable After One Year 16,990,000 - 16,990,000 8,251,414 Compensated Absences Payable: Payable Within One Year 784,164 31,277 815,441 - Payable After One Year 958,423 38,226 996,649 - Net Other Post Employment Benefits(OPEB)Obligation 844,330 43,630 887,960 - Total Liabilities 23,600,166 1,170,683 24,77Q849 23,608,898 Net Position Net Investment in Capital Assets 115,191,768 64,124,590 179,316,358 55,776,505 Restricted for: Economic Development 562,959 - 562,959 - Cable PEG Fees 66,989 - 66,989 - Transit 1,045,340 - 1,045,340 - Forfeiture 195,823 - 195,823 - Debt Service 8,041,440 - 8,041,440 - Component Units - - - 7,388,373 Unrestricted 34,823,712 33,354,521 68,178,233 29,249,833 TotalNetPosition 159,928,031 97,479,ll1 257,407,142 92,414,711 Total Liabilities and Net Position $ 183,528,197 $ 98,649,794 $ 282,177,991 $ 116,023,609 The Notes to the Financial Statements are an integal part of this statement. 26 CITY OF SHAKOPEE STATEMEN'C OF ACTIVI"I'IES Forthe Year Ended December31,2012 Net(Expense)Revenues Program Revenues and Changes in Net Position Operating Capital Grants Charges for Grants and and Governmental Business-Type Functions/Programs Expenses Services Contributions Contributions Activities Activities Total Component Units Governmental Activities General Govemment $ 4,603,027 S 3,356,772 $ 705,900 S - S (540,355) $ - $ (540,355) S - Pubiic Safety 9,430,785 1,524,158 533,282 - (7,373,345) - (7,373,345) - Public Works 7,083,299 454,145 713,354 1,475,676 (4,440,124) - (4,440,124) - Economic Development 152,541 16,500 15,000 3,667 (117,374) - (I ll,374) - CulNre and Recreation 3,SI7,677 2,222,430 139,023 - (1,456,224) - (1,456,224) - Interest on Long-Term Debt 587,384 - - (587,384) (587,384) TotalGovemmenlalActivities 25,674,713 7,574,005 2,106,559 1,479,343 (14,514,806) (14,514,806) Business-Type Activities Sewer 3,926,541 3,728,189 - A6,462 - (151,890) (151,890) - Stortn Drainage 1,445,633 1,442,394 - 302,294 - 299,055 299,055 - TotalBusiness-TypeAaivities 5,372,174 5,170,583 - 348,756 - 147,165 147,165 - TotalPrimaryGovemment $ 31,046,887 $ 12,744,588 $ 2,106,559 S 1,828,099 (14,514,806) 147,165 (14,367,641) - Component Unit-SPtiC Elec[ric $ 36,078,321 $ 40,050,172 $ - S 122,617 - - - 4,094,468 Water 4,624,441 5,395,965 1,858,647 2,63Q171 TotalComponentUnit $ 40,702,762 S 45,446,137 $ - $ 1,981,264 - - - 6,724,639 General Revenuea Property Taxes 15,002,764 - 15,002,764 - TaxIncremen[s 113,902 - 113,902 - UnrestrictedlnvestmentFamings 546,681 423,946 97Q627 118,274 Crain on Sale of Asset 11,769 - 11,769 - Transfers 100,000 (100,000) Total General Revenues and Transfers 15,775,116 323,946 16,099,062 ll8,274 Change in Net Position 1,26Q310 471,111 1,731,421 6,842,913 Vet Position-Beginning 158,667,721 97,00$000 255,675,721 85,571,798 Net Position-Ending $ 159,928,031 $ 97,479,111 S 257,407,142 $ 92,414,711 � 'Ihe Notes to the Financial Statements are an integral part of this statement. CITY OF SHAKOPEE BALANCE SHEET-GOVEI2.'VZVIENTAL FUNDS December 31,2012 Debt Service Capital Project 2004A Other Total Improvement Capital Governmental Governmental General Fund Bonds Improvements Funds Funds ASSETS Cash and Investments $ 9,496,035 $ 320,951 $ 8,006,696 $ 8,771,164 $ 26,594,846 Cash with a Fiscal Agent - 1,135,000 - 3,746,561 4,881,561 Delinquent Tvices Receivable 232,968 - - 2,043 235,011 Special Assessments Receivable: Delinquent 5,477 - 131 19,085 24,693 Defened 33,849 1,882,716 415,842 1,705,479 4,037,886 Accounts Receivable 262,978 - - 175,171 438,149 InterestReceivable 53,683 1,394 27,748 31,133 113,958 Due from Other Funds - - 383,296 - 383,296 Due From Other Governments 537,305 - 638,842 4,923 1,181,070 Prepaid Items 19,189 - - - 19,189 Total Assets $ 10,641,484 $ 3,340,061 $ 9,472,555 $ 14,455,559 $ 37,909,659 LIABILITIES AND FUND BALANCES Liabilities Accounts Payable $ 305,385 $ 200 $ ll,487 $ 136,268 $ 453,340 Contracts Payable - - 5,019 19,696 24,715 Dueto OtherFunds - - - 383,296 383,296 Due to Other Governments 76,966 - 358,601 101,402 536,969 Salaries and Benefits Payable 463,998 - - - 463,998 Deferred Revenue 272,294 1,882,716 415,973 1,726,607 4,297,590 Total Liabilities 1,118,643 1,882,916 791,080 2.367,269 6,159,908 Fund Balances Nonspendable 19,189 - - - 19,189 Restricted - 1,457,145 - 12,011,600 13,468,745 Assigned - - 8,681,475 461,655 9,143,130 Unassigned 9,503,652 - - (384,965) 9,ll8,687 Total Fund Balances 9,522,841 1,457,145 8,681,475 12,088,290 31,749,751 Total Liabilities and Fund Balances $ 10,641,484 $ 3,340,061 $ 9,472,555 $ 14,455,559 $ 37,909,659 The Notes to the Financial Statements are an integral part of this statement. 28 CITY OF SHAKOPEE RECONCILIATION OF THE BALANCE SHEET TO THE STATEMENT OF NET POSITION- GOVERNMENTAL FUNDS December 31, 2012 Total Fund Balances - Governmental Funds $ 31,749,751 Amounts reported for governmental activities in the Statement of Net Position are different because: Capital assets used in governmental activities are not current financial resources and,therefore, are not reported as assets in governmental funds. Cost of Capital Assets 157,487,167 Less Accumulated Depreciation (61,657,216) Long-term liabilities, including bonds payable, are not due and payable in the current period and, therefore, are not reported as liabilities in the funds. Long-term liabilities at year-end consist of: Bond Principal Payable (19,060,000) Net OPEB Obligation (844,330) Delinquent property taxes and assessments receivable will be collected this year, but are not available soon enough to pay for the current period's expenditures and, therefore, are deferred in the funds. Property Taxes 235,011 Special Assessments 24,693 Deferred special assessments receivable are not available to pay for current expenditures and, therefore, are deferred in the funds. Deferred Special Assessments 4,037,886 Governmental funds do not report a liability for accrued interest due and payable. (277,046) Internal service funds are used by management to charge the costs of equipment, buildings,park assets and employee benefits to individual funds. A portion of the assets and liabilities of those funds are included in governmental activities in the Statement of Net Position. 48,232,115 Total Net Position - Governmental Activities $ 159,928,031 The Notes to the Financial Statements are an integral part of this statement. 29 CITY OF SHAKOPEE STATEMENT OF REVENUES,EXPENDITURES AND CHANGES IN FUND BALANCES-GOVERNME�'TAL FUNDS For the Year Ended December 31,2012 Debt Service Capital Projects 2004A Other Total Improvement Capital Govemmental Governmental General Fund Bonds Improvements Funds Funds REVENUES Property Taxes $14,773,080 $ - $ - $ 254,921 $ 15,028,001 Ta�cIncrement - - - 113,902 113,902 Special Assessments 13,228 239,069 347,843 899,670 1,499,810 LicensesandPermits 1,229,184 - - 1,212,062 2,441,246 Intergovernmental 991,445 - 788,842 768,405 2,548,692 Charges for Services 4,035,921 - - 413,082 4,449,003 Fines and Forfeitures 368,167 - - 50,307 418,474 Miscellaneous 359,323 (767) 132,038 346,274 836,868 Total Revenues 21,770,348 238,302 1,268,723 4,058,623 27,335,996 EXPENDITtiRES Current General Government 3,112,118 - - 1,284,101 4,396,219 Public Safety 9,408,233 - - 75,766 9,483,999 Public Works 2,349,042 - - - 2,349,042 Culture and Recreation 3,792,729 - - 6,994 3,799,723 Economic Development - - - 155,692 155,692 Debt Service Principal - 285,000 - 1,665,000 1,950,000 Interest and Other Chazges - 74,342 - 559,721 634,063 CapitalOutlay 31,979 - 1,5�1,495 580,579 2,164,053 Total Expenditures 18,694,101 359,342 1,551,495 4,327,853 24,932,791 Excess of Revenues Over (Under)Expenditures 3,076,247 (121,040) (282,772) (269,230) 2,403,205 OTHER FINANCING SOURCES (USES) Bonds Issued - 1,135,000 - 3,730,000 4,865,000 Premium on Bonds Issued - - - 73,480 73,480 Transfers In 122,400 - 2,000,000 1,245,000 3,367,400 Transfers Out (2,980,000) - - (22,400) (3,002,400) Total Other Financing Souroes(Uses) (2,857,600) 1,135,000 2,000,000 5,026,080 5,303,480 Net Change in Fund Balances 218,647 1,013,960 1,717,228 4,756,850 7,706,685 FUND BALANCES BeginningofYear 9,304,194 443,185 6,964,247 7,331,440 24,043,066 End of Year $ 9,522,841 $ 1,457,145 $ 8,681,475 $ 12,088,290 $31,749,751 The Notes to the Financial Statements aze an integral part of this statement. 30 CITY OF SHAKOPEE RECONCILIATION OF THE STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES TO THE STATEMENT OF ACTIVITIES-GOVERNMENTAL FUNDS For the Year Ended December 31,2012 Net Change in Fund Balances-Governmental Funds $ 7,706,685 Amounts reported for governmental activities in the Statement of Activities are different because: Capital outlays are reported in governmental funds as expenditures. However, in the Statement of Activities,the cost of those assets is allocated over the estimated useful lives as depreciation expense. Capital Outlays 1,957,893 Depreciation Expense (4,424,788) Loss on Disposal of Fixed Assets (12,274) Contributed Assets 535,000 Principal payments on long-term debt are recognized as expenditures in the governmental funds but as an increase in the net position in the Statement of Activities. 1,950,000 Interest on long-term debt in the Statement of Activities differs from the amount reported in the governmental funds because interest is recognized as an expenditure in the funds when it is due and thus requires use of current financial resources. In the Statement of Activities,however, interest expense is recognized as the interest accrues,regardless of when it is due. (26,801) Certain revenues in the Statement of Activities that do not provide current financial resources are not reported as revenues in the funds. Special Assessments (1,264,363) OPEB obligations are recognized when paid in the government funds but recognized when incurred in the Statement of Activities (146,227) Delinquent and deferred receivables will be collected this year,but are not available soon enough to pay for the current period's expenditures and,therefore, are not revenues in the funds. (25,237) Internal service funds are used by management to charge the costs of certain activities such as buildings, equipment,park assets and employee benefits to individual funds. (See Note 2.B.) (124,578) Change in Net Position-Governmental Activities $ 1,260,310 The Notes to the Financial Statements are an integral part of this statement. 31 (THIS PAGE LEFT BLANK INTENTIONALLY) 32 CITY OF SHAKOPEE STATEMENT OF REVENUES,EXPENDITURES AND CHANGES IN FUND BALANCES- BUDGET AND ACTUAL-GENERAL FUND For the Year Ended December 31,2012 Variance with Original and Actual Final Budget- Final Budget Amounts Over (Under) REVENUES PropertyTaxes $ 13,407,920 $ 14,773,080 $ 1,365,160 Special Assessments 13,000 13,228 228 Licenses and Permits 1,275,300 1,229,184 (46,116) Intergovernmental 749,560 991,445 241,885 Charges for Services 3,040,630 4,035,921 995,291 Fines and Forfeitures 436,000 368,167 (67,833) Miscellaneous Revenues: Investment Income 275,000 89,975 (185,025) Contributions and Donations 3,000 24,860 21,860 Rents 4,400 7,436 3,036 Other 64,000 237,052 173,052 Total Revenues 19,268,810 21,770,348 2,501,538 EXPENDITURES Current General Government 3,497,307 3,112,118 (385,189) Public Safety 9,667,231 9,408,233 (258,998) Public Works 2,868,352 2,349,042 (519,310) Parks and Recreation 3,992,281 3,792,729 (199,552) Capital Outlay General Government 5,500 5,290 (210) Public Safety 80,000 - (80,000) Public Works 10,000 26,689 16,689 Total Expenditures 20,120,671 18,694,1 O 1 (1,426,570) Excess of Revenues Over (Under)Expenditures (851,861) 3,076,247 3,928,108 OTHER FINANCING SOURCES(USES) Transfers In 1,072,400 122,400 (950,000) Transfers Out - (2,980,000) (2,980,000) Total Other Financing Sources (Uses) 1,072,400 (2,857,600) (3,930,000) Net Change in Fund Balances $ 220,539 218,647 $ (1,892) FUND BALANCES Beginning of Year 9,304,194 End of Year $ 9,522,841 The Notes to the Financial Statements are an integral part of this statement. 33 CITY OF SHAKOPEE STATEMENT OF NET POSITION-PROPRIETARY FUNDS December 31,2012 Business-Type Activities-Enterprise Funds Governmental Activities- Storm Intemal Sewer Drainage Total Service Funds ASSETS Current Assets Cash and Investments,Including Cash Equivalents $ 16,403,968 $ 16,047,835 $ 32,451,803 $16,463,284 InterestReceivable 71,488 69,650 141,138 72,998 Special Assessment Receivable: Delinquent 16,538 259 16,797 - Deferred 138,011 76 138,087 - Notes Receivable,Current - - - 95,000 Due from Other Govemments 752,462 421,379 1,173,841 - TotalCurrentAssets 17,382,467 16,539,199 33,921,666 16,631,282 Noncurrent Assets Long-Term SAC Credits 492,322 - 492,322 - Notes Receivable,Noncurrent - - - 95,000 Capital Assets: Land 4,500 3,939,880 3,944,380 - Right of Way - 75,000 75,000 - Construction in Progress 508,110 780,585 1,288,695 150,752 Line Rigltts 1,368,569 - 1,368,569 - Infrastructure 37,794,904 37,881,387 75,676,291 2,923,925 Buildings - - - 34,795,354 Machinery and Equipment 1,815,659 806,550 2,622,209 12,253,573 Total Cost 41,491,742 43,483,402 84,975,144 50,123,604 Less Accumulated Depreciation (10,631,213) (10,219,341) (20,850,554) (16,566,787) Net Capital Assets 30,860,529 33,264,061 64,124,590 33,556,817 TotalNoncurrentAssets 31,352,851 33,264,061 64,616,912 33,6�1,817 Total Assets $48,735,318 $49,803,260 $ 98,538,578 $50,283,099 LIABILITIES AND NET POSITION Current Liabilities Accounts Payable $ 8,179 $ 16,428 $ 24,607 $ 193,170 Contracts Payable 9,944 9,478 19,422 - Due to Other Govemments 505,326 15,873 521,199 4,011 Cuaent Compensated Absences 22,526 8,751 31,277 784,164 Total Current Liabilities 545,975 50,530 596,505 981,345 Noncurrent Liabilities Uneamed Revenue 492,322 - 492,322 - Compensated Absences 27,531 10,695 38,226 958,423 Net OPEB Obligation 21,815 21,815 43,630 - TotalNoncurzentLiabilities 541,668 32,510 574,178 958,423 Total Liabilities 1,087,643 83,040 1,170,683 1,939,768 Net Position Net Investment in Capital Assets 30,860,529 33,264,061 64,124,590 33,556,817 Unrestricted 16,787,146 16,456,159 33,243,305 14,786,514 Total Net Position 47,647,675 49,720,220 97,367,895 48,343,331 Total Liabilities and Net Position $48,735,318 $49,803,260 $50,283,099 Adjustment to Reflect the Consolidation of Internal Service Fund Activiry Related to Enterprise Funds(See Note 2c) 111,216 Total Business-Type Activities Net Position $ 97,479,111 The Notes to the Financial Statements are an integral part of this statement. 34 CITY OF SHAKOPEE STATEA4ENT OF REVENUES,EXPENSES AND CHANGES IN Fti�'D NET POSITION-PROPRIETARY FUNDS For the Year Ended December 31,2012 Business-Type Activities-Enterprise Funds Governmental Activities- Internal Service Sewer Storm Drainage Total Funds OPERATING REVENiJES Charges for Services $ 3,730,226 $ 1,037,427 $ 4,767,653 $ - Rental and Other Chazges - - - 2,063,140 TotalOperatingRevenues 3,730,226 1,037,427 4,767,653 2,063,140 OPERATInG EXPENSES Salaries and Benefits 293,925 453,613 747,538 123,495 Depreciation 730,107 685,645 1,415,752 1,683,317 Professional Services 86,850 65,821 152,671 9,554 Sewer Disposal Charges 2,348,064 - 2,348,064 - Repairs and Maintenance 90,267 136,666 226,933 32,022 Materials and Supplies 27,203 50,533 77,736 274,501 Rent 37,703 55,445 93,148 - Insurance 26,563 23,243 49,806 - Utilities 312,587 1,395 313,982 - TotalOperatingExpenses 3,953,269 1,472,361 5,425,630 2,122,889 Operating Loss (223,043) (434,934) (657,977) (59,749) NONOPERATING REVENUES (EXPENSES) Investment Income 214,615 209,331 423,946 238,191 Special Assessments 15,025 340 15,365 - Grants and Contributions - 290,020 290,020 - Loss on Sale of Asset - - - 11,769 Other Income (U,062) 404,627 387,565 - Total Nonoperating Revenues (Expenses) 212,578 904,318 1,ll6,896 249,960 Income before Capital Contributions and Transfers (10,465) 469,384 458,919 190,211 Capital Contributions 46,462 12,274 58,736 3,667 Transfers In - - - 200,000 Transfers Out (50,000) (50,000) (100,000) (465,000) Change in Net Position (14,003) 431,658 417,655 (71,122) NET POSITION Beginning of Year 47,661,678 49,288,562 96,950,240 48,414,453 End of Year $ 47,647,675 $ 49,720,220 97,367,895 $ 48,343,331 Adjustment to Reflect the Consolidation of Internal Service Fund Activity Related to Enterprise Funds(See Note 2d) 53,456 Change in Net Position-Business-Type Activities $ 471,111 The Notes to the Financial Statements are an integral part of this statement. 35 CITY OF SHAKOPEE STATEMENT OF CASH FLOWS-PROPRIETARY FUNDS For the Year Ended December 31,2012 Business-Type Activities-Enterprise Funds Governmental Activities- Storm Internal Sewer Drainage Total Service Funds CASH FLOWS-OPERATING ACTIVITIES Receipts from Customers and Users $ 3,288,131 $ 1,034,434 $ 4,322,565 $ 2,063,140 Payments to Suppliers (2,460,694) (329,381) (2,790,075) (476,398) Payments to Employees (289,393) (450,462) (739,855) (84,806) Net Cash Flows-Operating Activities 538,044 254,591 792,635 1,501,936 CASH FLOWS-NONCAPITAL FINANCING ACTIVITIES Transfer from Other Funds - - - 200,000 Transferto OtherFunds (50,000) (50,000) (100,000) (465,000) Net Cash Flows-Noncapital Financing Activities (50,000) (50,000) (100,000) (265,000) CASH FLOWS-CAPITAL AND RELATED FINANCING ACTIVITIES Trunk Charges (17,062) 404,627 387,565 - Capital Related Special Assessments 47,032 - 47,032 - Intergovernmental Capital Grant - - - - Proceeds from Disposal of Capital Assets - - - 248,485 Acquisition of Capital Assets (289,564) (158,434) (447,998) (1,977,737) Net Cash Flows-Capital and Related Financing Activiries (259,594) 246,193 (13,401) (1,729,252) CASH FLOWS-INVESTING ACTIVITIES Payment Received for Notes Receivable - - - 90,000 Interest and Dividends Received 207,132 202,296 409,428 230,814 Net Cash Flows-Investing Activities 207,132 202,296 409,428 320,814 Net Change in Cash and Cash Equivalents 435,582 653,080 1,088,662 (171,502) CASH AND CASH EQUIVALENTS Beginning of Year 15,968,386 15,394,755 31,363,141 16,634,786 End of Year $16,403,968 $16,047,835 $32,451,803 $ 16,463,284 The Notes to the Financial Statements are an integral part of this statement. 36 CITY OF SHAKOPEE STATEMENT OF CASH FLOWS-PROPRIETARY FUNDS For the Year Ended December 31,2012 (Continued) Business-Type Activities-Enterprise Funds Governmental Activities- Storm Internal Sewer Drainage Total Service Funds RECONCILIATION OF OPERATING INCOME(LOSS)TO NET CASH FLOWS- OPERATING ACTNITIES Operating Loss $ (223,043) $ (434,934) $ (657,977) $ (59,749) Adjustments to Reconcile Operating Income(Loss)to Net Cash Flows- Operating Activities: Depreciation and Amortization Expense 730,107 685,645 1,415,752 1,683,317 Change in Assets and Liabilities: Accounts Receivable,Net (442,095) (3,541) (445,636) - Special Assessments Receivable - 548 548 - Due to Other Governments 505,326 15,873 521,199 24 Accounts Payable (46,727) (18,917) (65,644) (160,345) Contracts Payable 9,944 6,766 16,710 - Compensated Absences Payable 846 (535) 311 38,689 Net OPEB Obligation 3,686 3,686 7,372 - Total Adjustments 761,087 689,525 1,450,612 1,561,685 Net Cash Flows- Operating Activities $ 538,044 $ 254.591 $ 792,635 $ 1,501,936 NONCASH INVESTING,CAPITAL AND FINANCING ACTIVITIES Recognition of Sewer Access Capacity Credits as Asset and Unearned Revenue $ 814,837 $ - $ 814,837 $ - Contribution of Capital Asset 46,462 12,558 59,020 3,667 The Notes to the Financial Statements are an integral part of this statement. 37 CITY OF SHAKOPEE COMBINED STATEMENT OF FIDUCIARY NET POSITION December 31,2012 Total Agency Funds ASSETS Cash and Investments $ 1,481,090 Receivables: Interest Receivable 3,119 Due from Other Governments 50,033 Total Assets $ 1,534,242 LIABILITIES Accounts Payable $ 677,467 Due to Other Governments 21,380 Deposits Payable 835,395 Total Liabilities $ 1,534,242 The Notes to the Financial Statements are an integral part of this statement. 38 CITY OF SHAKOPEE STATEMENT OF NET POSITION-CONIPONErT UNTT-SPUC December 31,2012 Enterprise Funds Electric Water Total ASSETS Current Assets Cash and Investments $ 24,383,802 $ 4,842,635 $ 29,226,437 Restricted Assets: Sinking Account 838,266 28,938 867,204 Accrued Interest Receivable 33,659 7,971 41,630 Customer Accounts Receivable 3,264;380 292,640 3,557,020 Allowance for Uncollectible Accounts (45,282) (12,805) (58,087) Other Accounts Receivable 7;337 26,297 33,634 Due from City of Shakopee 48,155 15,417 63,572 Inventory 941,357 36,057 977,414 PrepaidExpenses 63,371 21,124 84,495 Total Current Assets 29,535,045 5,258,274 34,793,319 Noncurrent Assets Restricted Assets: Customer Deposits Account 1,148,735 8,049 1,156,784 Connection Account - 5,986,987 5,986,987 Water Reconstruction Account - 868,600 868,600 Emergency Repairs Account 100,000 - 100,000 Capital Assets: Plant in Service 53,094,177 47,578,086 100,672,263 Accumulated Depreciation (15,750,607) (12,641,928) (28,392,535) ConstructioninProgress 101,328 36,614 137,942 Other Assets: Unamortized Debt Issuance Costs 421,067 17,078 438,145 Electric Plant Acquisition,Net 262,104 - 262,104 Total Noncurrent Assets 39,376,804 41,853,486 81,230,290 Total Assets $ 68,911,849 $ 47,111,760 $116,023,609 LLIBILITIES AND NET ASSETS Current Liabilities Accounts Payable $ 3,102,129 $ 436,931 $ 3,539,060 Due to City of Shakopee 61,390 838,196 899,586 Other Current Liabilities 146,629 64,984 211,613 Current Portion of Revenue Bonds 7,820,000 680,000 8,500,000 Total Current Liabilities 11,130,148 2,020,111 13,150,259 Liabilities Payable from Restricted Assets Cunent Portion of Revenue Bonds 572,000 18,000 590,000 Accrued Interest Payable 313,932 12,437 326,369 CustomerDeposits 1,148,735 8,049 1,156,784 Total Liabilities Payable from Restricted Assets 2,034,667 38,486 2,073,153 Noncurrent Liabilities Revenue Bonds 9,195,000 - 9,195,000 Unamortized Loss on Refunding (887,542) (56,044) (943,586) Customer Advances 75,246 58,826 134,072 Total Noncurrent Liabilities 8,382,704 2,782 8,385,486 Total Liabilities 21,547,519 2,061,379 23,608,898 Net Position Investment in Capital Assets 21,428,611 34,347,894 55,776,505 Restricted 524,334 6,864,039 7,388,373 Unrestricted 25,411,385 3,838,448 29,249,833 Total Net Position 47,364,330 45,050,381 92,414,7ll Total Liabilities and Net Position $ 68,911,849 $ 47,111,760 $1]6,023,609 The Notes to the Financial Statements are an integral part of these statements. 39 CITY OF SHAKOPEE STATEMENT OF REVENUES,EXPENSES AND CHANGES IN FUND NET POSITION-COMPONENT UNIT-SPUC For the Year Ended December 31,2012 Enterprise Funds Electric Water Total Operating Revenues $39,732,240 $ 5,287,076 $45,019,316 Operating Expenses Operation,Customer and Administrative 32,179,990 2,426,214 34,606,204 Depreciation of Capital Assets 1,707,314 1,109,321 2,816,635 Depreciation of Plant Acquisition 23,141 - 23,141 Amortization of Plant Acquisition 63,004 - 63,004 Total Operating Expenses 33,973,449 3,535,535 37,508,984 Operating Income 5,758,791 1,751,541 7,510,332 NONOPERATING REVENUES(EXPENSES) Rentals and Miscellaneous 227,932 99,551 327,483 Interdepartmental Rent from Water 90,000 - 90,000 Investment Income 102,323 15,951 118,274 Interest Expense (757,491) (29,917) (787,408) Amortization of Debt Issuance Costs and Loss on Refunding (81,168) (4,718) (85,886) Gain(Loss)on Disposition of Property (965) 9,338 8,373 Total Nonoperating Revenues(Expenses) (419,369) 90,205 (329,164) Income Before Contributions and Transfers 5,339,422 1,841,746 7,181,168 Capital Contributions 122,617 1,858,647 1,981,264 Transfers to Municipality (1,265,248) (1,054,271) (2,319,519) Change in Net Assets 4,196,791 2,646,122 6,842,913 NET ASSETS Beginning of Year 43,167,539 42,404,259 85,571,798 End of Year $47,364,330 $45,050,381 $92,414,7ll The Notes to the Financial Statements are an integral part of these statements. 40 CITY OF SHAKOPEE NOTES TO THE FINANCIAL STATEMENTS DECEMBER 31, 2012 NOTE 1 —SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES A. Reporting Entity The City of Shakopee is a statutory city governed by an elected mayor and four council members. The accompanying financial statements present the government entities for which the government is considered to be financially accountable. The financial statements present the City and its component units. The City includes all funds, organizations, institutions, agencies, departments and offices that are not legally separate from such. Component units are legally separate organizations for which the elected officials of the City are financially accountable and are included within the financial statements of the City because of the significance of their operational or financial relationships with the City. The City is considered financially accountable for a component unit if it appoints a voting majority of the organization's governing body and it is able to impose its will on the organization by significantly influencing the programs,projects, activities or level of services performed or provided by the organization or there is a potential for the organization to provide specific financial benefits to or impose specific financial burdens on,the City. As a result of applying the component unit definition criteria above, certain organizations have been defined and are presented in this report as follows: Blended Component Unit—Reported as if they were part of the City. Discretely Presented Component Unit—Entails reporting the component unit financial data in statements separate from the financial date of the City. Joint Ventures and Jointly Governed Organizations—The relationship of the City with the entity is disclosed. For each of the categories above, the specific entities are identified as follows: 1. Blended Component Unit The Shakopee Economic Development Authority(EDA)was organized to promote development, improve housing and reduce blighted areas in the City. It is included by reason of the City Council having final approval for Shakopee EDA actions and the Shakopee EDA Board being comprised entirely of City Council Members. City staff handles Shakopee EDA activity including Shakopee EDA funds and the City approves Shakopee EDA tax levies and bonding activity. Therefore,the City has financial oversight for Shakopee EDA activities. The activity of the Shakopee EDA is shown in the Shakopee EDA Special Revenue Fund in the Ciry's financial statements. No separate financial statements for the Shakopee EDA are issued. For any information desired beyond what is presented in this report, contact the Finance Director for the City of Shakopee at 129 Holmes Street South, Shakopee, Minnesota 55379-1351. 41 CITY OF SHAKOPEE NOTES TO THE FINANCIAL STATEMENTS DECEMBER 31,2012 NOTE 1 —SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES A. Reporting Entity (Continued) 2. Discretely Presented Component Unit The electric and water utilities of the Shakopee Public Utilities Commission (SPUC) are self- supporting entities and collectively comprise separate enterprise funds of the City of Shakopee (the "City"). The utility provides electric and water operations to properties within the City as well as electric distribution to certain other areas outside of the City. The utility accounts for the costs of electric and water operations on a continuing basis and is managed by the SPUC. The SPUC Board consists of five members who serve three year consecutive terms. Separate financial statements are included in this report for the SPUC Funds to emphasize that it is legally separate from the City. The water and electric funds are presented as enterprise funds. The complete financial statements can be obtained from the Shakopee Public Utility Commission, 225 Sarazin Street, Shakopee, Minnesota 55379. 3. Joint Ventures and Jointly Governed Organizations Local Government Information Systems Local Government Information Systems (LOGIS) is a joint venture of approximately 44 governmental entities that provides computerized data processing and support services to its members. Legally separate, the City does not appoint a voting majority of the Board and LOGIS is fiscally independent of the City. During 2012, the City paid $ 125,845 to LOGIS for services provided which is included in expenditures of the General Fund. Financial statements are available by contacting LOGIS, 5750 Duluth Street, Golden Valley, Minnesota 55422-4036. Scott Joint Prosecution Association Scott Joint Prosecution Association(SJPA) is a joint venture of approximately seven cities that provides legal prosecution and support services to its members. Legally separate, the City does not appoint a voting majority of the Board of Directors and the SJPA is fiscally independent of the City. During 2012, the City paid $ 382,417 to the SJPA for services provided which is included in expenditures of the General Fund. Financial statements are available by contacting the SJPA, 200 Fourth Avenue West, Shakopee, Minnesota 55379. 42 CITY OF SHAKOPEE NOTES TO THE FINANCIAL STATEMENTS DECEMBER 31,2012 NOTE 1 —SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES A. Reporting Entity (Continued) 4. Other Organizations Shakopee Volunteer Fire Department Relief Association The Shakopee Volunteer Fire Department Relief Association (the "Association") is organized as a nonprofit organization, legally separate from the City, by its members to provide pensions and other benefits to such members in accordance with Minnesota Statutes. It is not a component unit of the City because the Board of Directors is appointed by the membership of the Association and not by the City Council. The financial oversight of the City is limited to approval authority for amending the Association bylaws when the change results in an increase in the pension benefit level requiring an increased City contribution. The Association has the authority to levy its own taxes for pensions and deficits and would continue to exist for its members if the City was dissolved. Because the Association is fiscally independent of the City, the financial statements of the Association have not been included within the City's ceporting entity. B. Government-Wide and Fund Financial Statements The government-wide �nancial statements (i.e.,the Statement of Net Position and the Statement of Activities) report information on all of the nonfiduciary activities of the City. The fiduciary funds are only reported in the Statement of Fiduciary Net Position at the fund financial statement level. 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 segment is offset by program revenues. Direct expenses are those that are clearly identifiable with a specific function or segment. Interest on general long-term debt is considered an indirect expense and is reported separately in the Statement of Activities. 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 segment and 2) grants and contributions that are restricted to meeting the operational or capital requirements of a particular function or segment. Taxes and other items not properly included among program revenues are reported instead as general revenues. Internally dedicated revenues are reported as general revenues rather than program revenues. Separate financial statements are provided for governmental funds and proprietary funds. Major individual governmental funds and major individual enterprise funds are reported as separate columns in the fund financial statements. The Escrow Agency Fund is presented in the fiduciary fund financial statements. Since, by definition, these assets are being held for the benefit of a third party(other local governments,private parties, etc.) and cannot be used to address activities or obligations of the City,this Fund is not incorporated into the government-wide statements. 43 CITY OF SHAKOPEE NOTES TO THE FINANCIAL STATEMENTS DECEMBER 31,2012 NOTE 1 —SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES 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. Properry 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 Agency Funds report only assets and liabilities and have no measurement focus, but do use the accrual basis of accounting to recognize receivables and payables. 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 revenues to be available if they are collected within 60 days of the end of the current 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, franchise taxes, licenses and interest associated with the current period are all considered to be susceptible to accrual and so have been recognized as revenues of the current period. Only the portion of special assessments receivable due within the current 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. Description of Funds: Major Governmental Funds: General Fund—This Fund is the City's primary operating fund. It accounts for all financial resources of the general City, except those required to be accounted for in another fund. 2004A Improvement Bonds Debt Service Fund—This Fund accounts for resources accumulated and payments made for principal and interest on this bond issue. Capital Improvements Capital Project Fund—This Fund accounts for the capital projects of the City not accounted for in separate capital funds. Proprietary Funds: Sewer Fund—This Fund accounts foc operations of the City's sewer utility. Storm Drainage Fund—This Fund accounts for the activities of the City's storm drainage utiliry. 44 CITY OF SHAKOPEE NOTES TO THE FINANCIAL STATEMENTS DECEMBER 31,2012 NOTE 1 —SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES C. Measurement Focus,Basis of Accounting and Financial Statement Presentation (Continued) Description of Funds: (Continued) Internal Service Funds: Equipment Fund—This Fund accounts for the City's acquisition of larger pieces of equipment. Building Fund—This Fund accounts for the City's funds accumulated for construction, improvement or major repairs of major public buildings. Park Assets Fund—This Fund accounts for the City's funds accumulated for the replacement of park assets. Employee Benefits Fund—This Fund accotmts for the City's funds accumulated for compensated absences and OPEB. Information Technology—This Fund accounts for the City's funds accumulated for infocmation technology resources. The City's internal service funds are allocated between governmental and business-type activities and are combined, as allocated in Note 2,with the respective governmental activities and business-type activities in the government-wide financial statements. Fiduciary Funds: Escrow Agency Fund—This Fund accounts for the monies held for specific purposes for individuals, private organizations, other government units and other funds. Escrows are held on behalf of builders and developers, for security deposits and police evidence deposits. Southwest Metro Drug Task Force Agency Fund—This Fund accounts for the activity related to the task force held by the City in a strictly custodial capacity. Component Unit Funds: Electric Fund—This Fund accounts for the operations of the SPUC's electric utility. Water Fund—This Fund accounts for the operations of the SPUC's water utility. 45 CITY OF SHAKOPEE NOTES TO THE FINANCIAL STATEMENTS DECEMBER 31,2012 NOTE 1 —SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES C. Measurement Focus,Basis of Accounting and Financial Statement Presentation (Continued) As a general rule,the effect of interfund activity has been eliminated from the government-wide financial statements. Exceptions to this general rule are payments, where the amounts are reasonably equivalent in value to the interfund services provided and other charges between the City's utility function and various other functions of the City. Elimination of these charges would distort the direct costs and program revenues reported for the various functions concerned. 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 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 use, it is the City's policy to use restricted resources first, then unrestricted resources as they are needed. D. Assets,Liabilities and Net Position or Equity 1. Deposits and Investments The City's cash and cash equivalents are considered to be cash on hand, demand deposits and highly liquid debt instruments purchased with original maturities of three months or less from the date of acquisition. Investments are stated at fair value. Minnesota Statutes authorizes the City to invest in obligations of the U.S. Treasury, agencies and instrumentalities, shares of investment companies whose only investments are in the aforementioned securities, obligations of the State of Minnesota or its municipalities, bankers' acceptances, future contracts, repurchase and reverse repurchase agreements and commercial paper of the highest quality with a maturity of no longer than 270 days and in the Minnesota Municipal Money Market Fund. The Minnesota Municipal Money Market Fund is an external investment pool not registered with the Securities Exchange Commission (SEC)that follows the same regulatory rules of the SEC under Rule 2.a.7. The fair value of the position in the pool is the same as the value of the pool shares. The City's investment policy for all funds except the component units addresses custodial credit risk for deposits. The policy also addresses credit risk, interest rate risk, concentration of credit risk and custodial credit risk for investments. The City's component units also have a formal policy to address all of these risks except custodial credit risk for investments. 46 CITY OF SHAKOPEE NOTES TO THE FINANCIAL STATEMENTS DECEMBER 31,2012 NOTE 1 —SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES D. Assets,Liabilities and Net Position or Equity (Continued) 1. Deposits and Investments (Continued) Custodial Credit Risk—Deposits: This is the risk that in the event of a bank failure,the City's deposits may not be returned to it. Minnesota Statutes require all deposits be protected by federal deposit insurance, corporate surety bonds or collateral. The market value of collateral pledged must equal 110% of deposits not covered by Federal Deposit Insurance Corporation (FDIC) insurance or corporate surety bonds and letters of credit. The City and component unit's investment policies state deposits must be collateralized in order to comply with Minnesota Statutes. Credit Risk: This is the risk that an issuer or other counterparty to an investment will not fulfill its obligation to the holder of the investment. Minnesota Statutes 118A.04 and 188A.05 limit investments that are in the top two ratings issued by nationally recognized statistical rating organizations. The City's investment policy references Minnesota Statutes and further limits the types of investments that the City is allowed to invest in. The component unit's investment policy also defines suitable and authorized investments and related minimum ratings. Interest Rate Risk: This is the risk that changes in market interest rates will adversely affect the fair value of an investment. The City's policy states the investment portfolio shall be designed with the objective of attaining a market rate of return throughout budgetary and economic cycles, taking into account the investment risk constraints and liquidity needs. To the extent possible, the City shall attempt to match its investments in short-term operating funds with anticipated cash flow requirements. Unless matched to a specific cash flow, the City will not directly invest in securities maturing more than ten years from the date of purchase. Long-term funds shall not be invested in securities exceeding 10 years in modified duration, at time of purchase. The investment policy for the City's Electric and Water Enterprise Funds (Shakopee Public Utilities Com�nission) addresses this risk by requiring holding of securities to maturity(subject to certain exceptions) and]imiting maturity constraints to a relatively short duration. Concentration of Credit Risk: This is the risk of loss attributed to the magnitude of an investment in a single issuer. According to the Ciry's investment policy, the aggregate investment portfolio shall be diversified by: • Limiting investments to avoid over concentration in securities from a specific issuer or business sector. • Limiting investments in securities that have higher credit risks. • Investing in securities with varying maturities. • Continuously investing a portion of the portfolio in readily available funds, such as Local Government Investment Pools (LGIP), money market funds or repurchase agreements to ensure appropriate liquidity is maintained in order to meet ongoing obligations. 47 CITY OF SHAKOPEE NOTES TO THE FINANCIAL STATEMENTS DECEMBER 31,2012 NOTE 1 —SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES D. Assets, Liabilities and Net Position or Equity (Continued) 1. Deposits and Investments (Continued) • Having all investments, other than those in direct obligations or agencies of the United States, secured by collateral or repurchase agreements, shall not exceed 50%of the aggregate investment portfolio. Mortgage backed securities shall not exceed 35% of the aggregate investment portfolio, at the time of investment(i.e., commercial paper or bankers' acceptance). • Limiting investments in any one corporation to 5%of the aggregate investment portfolio. The investment policy for the City's Electric and Water Enterpcise Funds (Shakopee Public Utilities Commission) defines suitable and authorized investments and related minimum ratings as well as application of prudent person standards in construction of portfolio management and diversification. Custodial Credit Risk—Investments: For an investment,this is the risk that in the event of the failure of the counterparty,the City will not be able to recover the value of its investments or collateral securities that are in the possession of an outside party. The City's investment policy states all securities purchased, including appropriate collateral, shall be placed with an independent third party for custodial safekeeping. 2. Receivables and Payables Activity between funds that are representative of lending/borrowing arrangements outstanding at the end of the year are referred to as "advances to/fram other funds". All other outstanding balances betweei� funds are reported as "due to/from other funds". Any residual balances outstanding between the governmental activities and business-type activities are reported in the government-wide financial statements as"interfund balances". All trade and property tax receivables are shown at a gross amount since both are assessable to the property taxes and are collectible upon the sale of the property. The City levies its property tax for the subsequent year during the month of December. December 28 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 January 1 and are recorded as receivables by the City at that date. The property tax is recorded as revenue when it becomes measurable and available. Scott County is the collecting agency for the levy and remits the collections to the City three times a year. The tax levy notice is mailed in March with the first half of the payment due on May 15 and the second half due on October 15. Taxes not collected as of December 31 each year are shown as delinquent taxes receivable. The County Auditor prepares the tax list for all taxable property in the City, applying the applicable tax rate to the tax capacity of individual properties, to arrive at the actual tax for each property. The County Auditor also collects all special assessments, except for certain prepayments paid directly to the City. 48 CITY OF SHAKOPEE NOTES TO THE FINANCIAL STATEMENTS DECEMBER 31,2012 NOTE 1 —SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES D. Assets,Liabilities and Net Position or Equity (Continued) 2. Receivables and Payables (Continued) The County Auditor submits the list of taxes and special assessments to be collected on each parcel of property to the County Treasurer in January of each year. 3. Inventory, Prepaid Items and Other Assets 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. Other assets include unamortized debt issuance costs for the Electric and Water Enterprise Funds (Shakopee Public Utilities Commission). Prepaid expenditures of governmental funds are reported using the consumption method and recorded as expenditures/expenses at the time of consumption. Inventories of enterprise funds are valued at average cost using the first in, first out(FIFO) method. Inventory in the governmental funds is recorded as an expenditure when consumed rather than when purchased. 4. Restricted Assets Certain cash and investments in the component units are classified as restricted. The Electric Fund has monies restricted for customer deposits and debt service. The Water Fund has monies restricted for water production and trunk distribution facility acquisition, based on trunk and connection fees collected from users, construction projects and debt service. 5. Capital Assets Capital assets,which include property,plant, equipment and infrastructure assets (e.g., roads, sidewalks and similar items), are reported in the applicable governmental or business-type activities columns in the government-wide financial statements. Capital assets are defined by the City, excluding the component unit, as assets with an initial, individual cost of more than $ 10,000 and an estimated useful life in excess of two years. Capital assets for the component unit are defined as assets with an initial, individual cost of more than $ 1,000 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 costs of normal maintenance and repairs that do not add to the value of the asset or materially extend assets lives are not capitalized. 49 CITY OF SHAKOPEE NOTES TO THE FINANCIAL STATEMENTS DECEMBER 31, 2012 NOTE 1 —SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES D. Assets,Liabilities and Net Position or Equity (Continued) 5. Capital Assets (Continued) Property,plant and equipment of the City are depreciated using the straight-line method over the following estimated useful lives. Assets Years Buildings 30-50 Park Buildings 30 Building Improvements 25 Light Vehicles 4-10 Machinery and Equipment 4-20 Utility Distribution System 50-75 Infrastructure 30-50 Fire Trucks 20-25 6. Compensated Absences Vacation and sick leave benefits are recorded as expenditures in the Employee Benefits Internal Service Fund and governmental funds when the obligations have matured and are expected to be liquidated with expendable financial resources. City employees earn vacation time based on years of City service. Employees who have 0 to 15 years of employment may accumulate no more than 240 hours. Employees who have 16 or more years of service may accumulate no more than 360 hours of vacation leave. Upon termination, employees will receive compensation for all unused vacation. Employees earn sick leave and may accumulate to a maximum of 960 hours. The City compensates employees who leave municipal service at the rate of 45%up to 15 years of service. After 15 years of service, employees who leave are compensated at the rate of 55%plus 2% for each year of service beyond 15 years up to 75% of unused sick leave. 7. Long-Term Obligations In the government-wide financial statements and proprietary fund types in the fund financial statements, long-term debt and other long-term obligations are reported as liabilities in the applicable governmental activities, business-type activities or proprietary fund type Statement of Net Position. Enterprise fund bond premiums and discounts, as well as issuance costs, are deferred and amortized over the life of the bonds using the effective interest method. Bonds payable are reported net of the applicable bond premium or discount. Bond issuance costs are reported as deferred charges and amortized over the term of the related debt. 50 CITY OF SHAKOPEE NOTES TO THE FINANCIAL STATEMENTS DECEMBER 31,2012 NOTE 1 —SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES D. Assets, Liabilities and Net Position or Equity (Continued) 7. Long-Term Obligations (Continued) 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 expenditures. 8. Fund Equity a. Classification In the fund financial statements, governmental funds report fund classifications that comprise a hierarchy based primarily on the extent to which the City is bond to honor constraints on the specific purpose for which amounts in those funds can be spent. Non-spendable fund balances include amounts that cannot be spent because they are not in spendable form. Amounts that are restricted to specific purposes either by a) constraints placed on the use of resources by creditors, grantors, contributors, or laws or regulations of other governments or b) imposed by law through enabling legislation are classified as restricted fund balances. Amounts that can only be used for specific purposes pursuant to constraints imposed by the City Council (highest level of decision making authority)through resolution are classified as committed fund balances. Amounts that are constrained by the City's intent to be used for specific purposes but are neither restricted nor committed are classified as assigned fund balances. Assignments are made by the City's Finance Director based on the City Council's direction. Unassigned fund balance represents fund balance that has not been assigned to other funds and that has not been restricted, committed or assigned to a specific purpose in the General Fund. The City's policy is to consider unrestricted fund balance to be spent by City Council action, appropriations or emergency situations. The City applies restricted resources first when expenditures are incurred for purposes for which either restricted or unrestricted (committed, assigned and unassigned) are available. Similarly, within unrestricted fund balance, committed amounts are reduced first followed by assigned and then unassigned amounts when expenditures are incurred for purposes for which amounts in any of the unrestricted fund balance classifications could be used. b. Minimum Fund Balance The City's target General Fund balance is to maintain an unassigned level between 40% (minimum) and 45%of current year expenditures. This level is to provide working capital for cash flow, expected decline in revenues and unforeseen expenditures such as natural disasters. Replenishing fund balance when it falls below the target level shall be accomplished by interfund transfers or budgeting for expenditures and other uses to be less than revenues or other sources over a period not to exceed three years. 51 CITY OF SHAKOPEE NOTES TO THE FINANCIAL STATEMENTS DECEMBER 31, 2012 NOTE 1 —SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES D. Assets,Liabilities and Net Position or Equity(Continued) 9. Net Position Net position represents the difference between assets and liabilities in the government-wide financial statements. Net investment in capital assets consists of capital assets, net of accumulated depreciation, reduced by the outstanding balance of any long-term debt used to build or acquire the capital assets. Net position is reported as restricted in the government-wide financial statement when there are limitations on their use through external restrictions imposed by creditors, grantors or laws or regulations of other governments. 10. Use of Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements. Estimates also affect the reported amounts of revenue and expenditures/expense during the reporting period. Actual results could differ from those estimates. NOTE 2—RECONCILIATION OF GOVERNMENT-WIDE AND FUND FINANCIAL STATEMENTS A. Explanation of Certain Differences between the Governmental Fund Balance Sheet and the Government-Wide Statement of Net Position The governmental fund Balance Sheet includes reconciliation between fund balance—total governmental funds and net position—governmental activities as reported in the government-wide Statement of Net Position. One element of that reconciliation explains that"Internal Service Funds are used by management to charge the costs of providing certain services for the City." Net Position of the Internal Service Funds $ 48,343,331 Less Portion of of Loss Related to Business-Type Activities (111,216) Net Adjustment to Increase Fund Balance-Total Governmental Funds to Arrive at Net Position-Governmental Activities $ 48,232,I 15 52 CITY OF SHAKOPEE NOTES TO THE FINANCIAL STATEMENTS DECEMBER 31,2012 NOTE 2—RECONCILIATION OF GOVERNMENT-WIDE AND FUND FINANCIAL STATEMENTS B. Explanation of Certain Differences between the Governmental Fund Statements of Revenues,Expenditures, and Changes in Fund Balances and the Government-Wide Statement of Activities Another element of that reconciliation states that"Internal Service Funds are used by management to charge the costs of providing various services for the City." The details of this difference are as follows: Change in Net Position of the Internal Service Fund $ (71,122) Less the Net of Indirect Revenues and Expense (53,456) Net Adjustment to Decrease Net Chan�e in Fund Balances-Total Governmental Funds to Arrive at Changes in Net Position of Governmental Activities $ (124,578) C. Explanation of Certain Differences between the Proprietary Fund Statements of Net Position and the Government-Wide Statement of Net Position The proprietary fund Statement of Net Position includes reconciliation between net position—total enterprise funds and net position of business-type activities as reported in the government-wide Statement of Net Position. The description of the sole reconciliation is "adjustment to reflect the consolidation of internal service fund activities related to enterprise funds." The details of this $ 117,182 are as follows: Internal Payable Representii�g Costs less than Charges to Business-Type Activities-Current Year $ 1 l 1,216 D. Explanation of Certain Differences between the Proprietary Fund Statements of Revenues, Expenses, and Changes in Fund Net Position and the Government-Wide Statement of Activities Net Adjustment to Increase Net Change in Fund Balances-Total Enterprise Funds to Arrive at Cllanges in Net Position of Business-Type Activities $ 53,456 53 CITY OF SHAKOPEE NOTES TO THE FINANCIAL STATEMENTS DECEMBER 31,2012 NOTE 3—STEWARDSHIP, COMPLIANCE AND ACCOUNTABILITY A. Budgetary Information Budgets are adopted on a basis consistent with accounting principles generally accepted in the United States of America.. Annually appropriated budgets are adopted for the General Fund and the Shakopee EDA and Transit Special Revenue Funds. Budgeted amounts present the originally adopted budget and final amended budget approved by the City Council. The City does not use encumbrances. Budgeted expenditure appropriations lapse at year-end. 1. In August of each year, City staff submits to the City Council, a proposed operating budget for the year commencing the following January 1. The operating budget includes proposed expenditures and the means of financing them for the upcoming year. 2. Public hearings are conducted to obtain taxpayer comments. 3. The budget is legally enacted through passage of a resolution after obtaining taxpayer comments. 4. Expenditures may not legally exceed budgeted appropriations at the division level. No fund's budget can be increased without City Council approval. The City Council may authorize transfer of budgeted amounts between divisions within any fund. Management may amend budgets within a division level, so long as the total division budget is not changed. S. Annual budgets are adopted for the General and applicable Special Revenue Funds. Annual appropriated budgets are not adopted for Debt Service Funds because effective budgetary control is alternatively achieved through bond indenture provisions. Budgetary control for Capital Projects Funds is accomplished through the use of project controls and budgets are not adopted. 6. Budgeted amounts are as originally adopted or as amended by the City Council. Individual amendments were not material in relation to the original amounts budgeted, except for transfers in the General, Telecommunication and Recreation Funds. NOTE 4—DEPOSITS AND INVESTMENTS A. Deposits In accordance with applicable Minnesota Statutes,the City and the Component Unit maintains deposits at depository banks authorized by the City Council and the Commissioners. Custodial Credit Risk: As of December 31, 2012,the City and Commission's bank balances were not exposed to custodial credit risk because they were insured through Federal Deposit Insurance Corporation (FDIC) and properly collateralized with securities held by the pledging financial institutions' trust departments or agents in the City's name. 54 CITY OF SHAKOPEE NOTES TO THE FINANCIAL STATEMENTS DECEMBER 31,2012 NOTE 4—DEPOSITS AND INVESTMENTS A. Deposits (Continued) As of December 31, 2012, the City had the following deposits: City Deposits $ 1,136,852 Component Unit Deposits 8,251,017 Total Deposits $ 9,387,869 B. Investments As of December 31, 2012,the City held the following investments: Modified Duration Moody's Fair Value (Years) Rating Concentration 4M 4,483 N/A Aaa O.O l% 4M Plus 998 N/A Aaa 0.00% Certificate of Deposit 9,349,237 1.78 NR 12.33% Commercial Paper 3,650,798 0.38 NR 4.81% Money Market Fund 3,077,868 N/A NR 4.06% Mortgage 0.00% FAMC 675,510 4.30 AA1 0.89°/a FFCB 2,864,151 2.65 AA1 3.78% FHLB 17,952,575 3.48 Aaa 23.67% FHLMC 7,889,325 6.91 Aaa 10.40% FNMA 1,296,109 5.05 NR 1.71% GNMA 38,608 1.44 NR 0.05% Municipal Bond 11,575,752 3.77 AAA-A1 15.26% US Treasury Notes 17,477,595 1.19 Aaa 23.04% TotalInvestments $ 75,853,009 3.43 Cash with fiscal agent totaled $ 4,881,561 at December 31, 2012 and consisted of U.S. Treasury State and Local Government series time deposits with a modified duration of 1.09 years. 55 CITY OF SHAKOPEE NOTES TO THE FINANCIAL STATEMENTS DECEMBER 31,2012 NOTE 4—DEPOSITS AND INVESTMENTS B. Investments (Continued) As of December 31, 2012,the component units had the following investments: Years to Maturity Less than Rating Fair Value One Year 1-5 Years U.S.Agencies AAA $ 13,495,183 $ 5,403,803 $ 8,091,380 U.S. Treasuries AAA 5,847,026 5,847,026 - 4M Fund N/A 10,500,021 10,500,021 - Money Market Fund N/A 111,065 111,065 - Total $ 29,953,295 $ 21,861,915 $ 8,091,380 Custodial Credit Risk—Investments: As of December 31, 2012, all investments of the City and the component units were insured, registered and held by the City or its agent and in the City's name, or by the SPUC and in the SPUC's name. Concentration of Credit Risk: As of December 31, 2012, the City held investments that exceeded 5%of its total investments for all funds as noted in the table on the previous page. The component units' investments in FHLB, FNMA and FHLMC also exceeded 5%of the total investments of those funds at December 31, 2012. The following is a summary of total deposits and investments as of December 31, 2012: Deposits (Note 3.A.) $ 9,387,869 City Investments 75,853,009 City Investment with Fiscal Agent 4,881,561 Component Unit Investments 29,953,295 Petty Cash 2,862 Total Deposits and Investments $ 120,078,596 56 CITY OF SHAKOPEE NOTES TO THE FINANCIAL STATEMENTS DECEMBER 31,2012 NOTE 4—DEPOSITS AND INVESTMENTS B. Investments (Continued) Deposits and investments axe presented in the December 31, 2012 basic financial statements as follows: City Component Funds iJnits Total Statement of Net Position: Cash and Investments $ 75,509,933 $ 29,226,437 $ 104,736,370 Cash with Fiscal Agent 4,881,561 - 4,881,561 Restricted Assets - 8,979,575 8,979,575 Statement of Fiduciary Net Assets: Cash and Invest�nents l,481,090 - 1,481,090 Total $ 81,872,584 � 38,206,012 $ 120,078,596 NOTE 5—RECEIVABLES/DEFERRED REVENUE A. Taxes and Assessments 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 year, the various components of deferred revenue reported in the governmental funds were as follows: Delinquent Delinquent Deferred Property Special Special Taxes Assessments Assessments Total General Fund $ 232,968 $ 5,477 $ 33,849 $ 272,294 2004A Improvement Bonds - - 1,882,716 1,882,716 CapitalImprovements - 131 415,842 415,973 Nonmajor Funds 2,043 19,085 1,705,479 1,726,607 Total $ 235,011 $ 24,693 $ 4,037,886 $ 4,297,590 B. Notes Receivable The Equipment Internal Service Fund has a note receivable with the Scott County HRA that originated in 1998 as a result of the River City Centre Development Project. This note has an interest rate of 6.75% and will be paid in full in February 2014. At December 31, 2012,the note's balance was $ 190,000. During 2012, $ 90,000 of principal and $ 15,863 of interest was paid. 57 CITY OF SHAKOPEE � NOTES TO THE FINANCIAL STATEMENTS DECEMBER 31, 2012 NOTE 6—CAPITAL ASSETS Governmental capital asset activity for the year ended December 31, 2012 was as follows: Beginning Ending Balance Increases Decreases Balance Governmental Activities: Capital Assets not being Depreciated: Land $ 19,488,040 $ 535,000 $ - $ 20,023,040 Construction in Progress 5,300,319 2,825,366 4,284,429 3,841,256 Total Capital Assets not being Depreciated 24,788,359 3,360,366 4,284,429 23,864,296 Capital Assets being Depreciated: Buildings 33,742,981 1,244,165 - 34,987,146 Infrastructure 131,609,457 3,298,672 - 134,908,129 Machinery and Equipment 13,473,561 885,445 507,806 13,851,200 Total Capital Assets being Depreciated 178,825,999 5,428,282 507,806 183,746,475 Less Accumulated Depreciation for: Buildings 9,512,778 840,382 - 10,353,160 Infrastructure 56,792,568 4,408,230 - 61,200,798 Machinery and Equipment 6,182,057 859,493 371,505 6,670,045 Total Accumulated Depreciation 72,487,403 6,108,105 371,505 78,224,003 Total Capital Assets being Depreciated,Net 106,338,596 (679,823) 136,301 105,522,472 Governmental Activities Capital Assets,Net $ 131,126,955 $ 2,680,543 $ 4,420,730 $ 129,386,768 Depreciation expense was charged to functions/programs of the City as follows: Governmental Activities: General Government $ 229,796 Public Safety 591,660 Public Works 4,618,810 Parks and Recreation 667,839 Total Depreciation Expense-Governmental Activities $ 6,108,105 58 CITY OF SHAKOPEE NOTES TO THE FINANCIAL STATEMENTS DECEMBER 31, 2012 NOTE 6—CAPITAL ASSETS Business-type capital asset activity for the year ended December 31, 2012 was as follows: Beginning Euding Balance increases Decreases Balance Business-Type Activities: Capital Assets not being Depreciated: Land $ 3,944,380 $ - $ - $ 3,944,380 Right-0f-Way 75,000 - - 75,000 Construction in Progress 1,745,002 421,205 877,512 1,288,695 Total Capital Assets not being Depreciated 5,764,382 421,205 877,512 5,308,075 Capital Assets beina Depreciated: Line Rights 1,368,569 - - 1,368,569 Plant in Service 74,740,857 935,434 - 75,676,291 Machinery and Equipment 2,664,378 190,528 232,697 2,622,209 �I'otal Capital Assets being Depreciated 78,773,804 1,125,962 232,697 79,667,069 Less Accumulated Depreciation for: Line Rights 452,759 24,801 - 477,560 Plant in Seivice 17,855,089 1,224,467 - 19,079,556 Machinery and Equipment 1,150,268 166,484 23,314 1,293,438 Total Accumulated Depreciation 19,458,116 1,415,752 23,314 20,850,554 Total Capital Assets being Depreciated,Net 59,315,688 (289,790) 209,383 58,816,515 Business-Type Activities Capital Assets,Net $ 65,080,070 $ 131,415 $ 1,086,895 $ 64,124,590 Depreciation expense was charged to functions/programs of the City as follows: Business-Type Activities: Sanitary Sewer $ 730,107 Storin Drainage 685,645 Total Depreciation Expense-Business-Type Activities $ 1,415,752 59 CITY OF SHAKOPEE NOTES TO THE FINANCIAL STATEMENTS DECEMBER 31,2012 NOTE 6—CAPITAL ASSETS Component unit capital asset activity for the year ended December 31, 2012 was as follows: Beginning Ending Balance Increases Decreases Balance Component Unit Capital Assets not being Depreciated: Land and Land Rights $ 5,097,532 $ - $ - $ 5,097,532 Construction in Progress 6,179 1,576,026 1,444,263 137,942 Total Capital Assets not being Depreciated 5,103,7ll 1,576,026 1,444,263 5,235,474 Capital Assets being Depreciated: Distribution 80,372,004 2,152,729 288,658 82,236,075 General 13,071,772 303,187 36,303 13,338,656 Total Capital Assets being Depreciated 93,443,776 2,455,916 324,961 95,574,731 Less Accumulated Depreciation 25,710,299 2,816,635 134,399 28,392,535 Total Capital Assets being Depreciated,Net 67,733,477 (360,719) 190,562 67,182,196 Component Unit Capital Assets,Net $ 72,837,188 $ 1,215,307 $ 1,634,825 $ 72,417,670 Depreciation expense was charged to functions/programs of the component units as follows: Component Units: Electric $ 1,707,314 Water 1,109,321 Total Depreciation Expense-Component Units $ 2,816,635 NOTE 7—LONG-TERM DEBT A. General Obligation Bonds The City issues general obligation (G.O.) bonds to provide for financing tax increment projects, street improvements and construction of government buildings. Debt service is covered respectively by tax increments and special assessments against benefited properties with any shortfalls being paid from general taxes. G.O. bonds are direct obligations and pledge the full faith and credit of the City. These bonds generally are issued as serial bonds with equal debt service payments each year. G.O. bonds currently outstanding are shown on the following page. 60 CITY OF SHAKOPEE NOTES TO THE FINANCIAL STATEMENTS DECEMBER 31,2012 NOTE 7—LONGTERM DEBT B. Revenue Bonds The Commission issues Revenue Bonds for electric and water activity. Debt service is covered through the revenue producing activities of these funds. C. Components of Long-Term Liabilities Issue Interest Original Final Principal Due Within Date Rates Issue Maturity Outstanding One Yeaz Govemmental Activities: G.O.Bonds: G.O.Improvement Bonds: 2004A OS/01/04 2.25%-4.10% $ 4,225,000 02/O1/25 � 1,665,000 S 280,000 2004C 11/01/04 3.00%-4.00% 2,570,000 02/O1/15 770,000 255,000 2006A 07/01/06 4.00% 3,440,000 02/O1/17 1,820,000 350,000 2007A 02/O1/07 4.00% 1,370,000 02/O1/17 825,000 205,000 2007B 09/O1/07 4.00% 1,445,000 02/O1/18 895,000 140,000 2008A 09i01/08 3.50%-4.00% 2,170,000 02/O1/19 1,425,000 195,000 2010A 08i01/10 0.50%-2.90% 1,555,000 02/O1/21 1,335,000 185,000 G.O.Building Refunding Bonds 2004B OS/Ol/04 2.25%-4.00% 2,275,000 02/01/17 1,055,000 195,000 G.O.Capital Improvement Bonds 2004D 11/O1/04 2.50%-420% 6,000,000 02/O1/25 4,405,000 265,000 G.O.Building Refunding Bonds 2012A 06/14/12 1.50%-2.125% 4,865,000 02/O1/25 4,865,000 - Total G.O.Bonds ]9,060,000 2,070,000 CompensatedAbsences 1,742,587 784,164 Total Govemmental Activities $ 20,802,587 $ 2,854,164 Business-Type Activities Compensated Absences $ 69,503 $ 31,277 Component Unit Long-Term Liabilities: Utility Revenue Bonds: Series 2004 Refunding Bonds 10/O1/04 3.50°/a-4.50% 9,83Q000 OS/O1/28 $ 8,725,000 $ 8,725,000 Series 2006A Crossover Refunding Bonds 11/21/06 4.125%-4375% 10,570,000 02/O1/30 9,56Q000 365,000 Total Bonds 18,285,000 9,090,000 Unamortized Loss on Refunding (943,586) (59,493) Total Component Unit Long-Term Liabilities $ ]7,341,414 $ 9,030,507 Long-term bonded indebtedness listed above were issued to finance acquisition and construction of capital facilities or to refinance (refund)previous bond issues. 61 CITY OF SHAKOPEE NOTES TO THE FINANCIAL STATEMENTS DECEMBER 31,2012 NOTE 7—LONG-TERM DEBT D. Changes in Long-Term Liabilities Long-term liability information for the year ended December 31, 2012 was as follows. Beginning Ending Due Within Bala��ce Additions Reductions Bala��ce One Year Governmental Activities: Bonds Payable $ 16,145,000 $ 4,865,000 $ 1,950,000 $ 19,060,000 $ 2,070,000 Compensated Absences ],703,898 1,034,437 995,748 1,742.587 784,164 "I'otal Governmental Activities $ 17,848,898 $ �,899,�137 $ 2,945,748 $ 20,802,587 $ 2,8�4,164 Business-Type Activities CompensatedAbsences $ 69,192 $ 43,024 $ 42,713 $ 69,503 $ 31,277 Component Unit Activites: G.O.Utility Revenue Bonds $ 18,88�,000 $ - $ 600,000 $ 18,285,000 $ 9,090,000 Unamortized Loss on Refunding (1,003,079) - (59,493) (943,586) (59,493) Total Component Unit AcCivites $ 17,881,921 $ - � �40,�07 $ 17_341,414 $ 9,030,�07 The General Fund, Employee Benefits Internal Service Fund and Sewer and Storm Drainage Enterprise Funds typically liquidate the liability related to compensated absences. E. Governmental Activity G.O. Bonds Debt service to maturity for outstanding G.O. bonds is as follows: Year Ending Governmental Bonds December 31, Principal Interest Total 2013 $ 2,070,000 $ 613,348 $ 2,683,348 2014 2,050,000 524,746 2,574,746 2015 2,230,000 447,828 2,677,828 2016 2,075,000 374,155 2,449,155 2017 2,085,000 304,783 2,389,783 2018-2022 5,605,000 877,069 6,482,069 2023-2027 2,945,000 145,286 3,090,286 Total $ 19,060,000 $ 3,287,215 $ 22,347,215 62 CITY OF SHAKOPEE NOTES TO THE FINANCIAL STATEMENTS DECEMBER 31, 2012 NOTE 7—LONG-TERM DEBT F. Component Unit Revenue Bonds Debt service to maturity for outstanding revenue bonds is as follows: Year Ending Utility Revenue Bonds December 31, Principal Interest Total 2013 $ 9,090,000 $ 771,821 $ 9,861,821 2014 380,000 387,269 767,269 2015 390,000 371,388 761,388 2016 410,000 354,888 764,888 2017 425,000 337,400 762,400 2018-2022 2,405,000 1,394,386 3,799,386 2023-2027 3,005,000 816,579 3,821,579 2028-2030 2,180,000 146,342 2,326,342 Total $ 18,285,000 $ 4,580,073 $ 22,865,073 G. Refunding In June 2012,the City issued $ 4,865,000 G.O. Improvement Refunding Bonds to refund G.O. Bonds, Series 2004A, maturing in years 2015 through 2025 and G.O. Bonds, Series 2004D, maturing in years 2015 through 2025. The net proceeds of$ 4,951,424 were deposited with an escrow agent to provide for the payment of the principal maturities at the call date of the refunded bonds and for the interest on the refunding bonds through the call date. The City is responsible for the principal and interest payments on the remaining refunded bond issues through the call date. The call date for the refunded bonds is February 1, 2015. The refunding resulted in reduction of future debt service payments of$442,330 and a net present value savings of$ 387,886. Component Unit Refunding On February l, 2013,the Shakopee Public Utilities exercised its call option to fully redeem the series 2004 Refunding Bonds in the amount of$ 8,725,000. 63 CITY OF SHAKOPEE NOTES TO THE FINANCIAL STATEMENTS DECEMBER 31,2012 NOTE 8—CONDUIT DEBT OBLIGATIONS Conduit debt obligations are certain limited obligation revenue bonds or similar debt instruments issued for the express purpose of providing capital financing for a specific third party. The City has issued various revenue bonds to provide funding to private-sector entities for projects deemed to be in the public interest. Although these bonds bear the name of the City,the City has no obligation for such debt beyond the resources provided by related leases or loans. Accordingly,the bonds are not reported as liabilities in the financial statements of the City. As of December 31, 2012, the following conduit debt was outstanding: Date of Original Amount Balance Project Issue of Issue Retired Outstanding St. Francis RMC 10/06/04 $ 52,520,000 $ 405,000 $ 49,060,000 St. Francis RMC 12/23/87 8,000,000 580,000 3,215,000 St. Gertrudes 09/30/10 5,675,000 15,249 5,659,751 Total $ 57,934,751 NOTE 9—PLEDGING AGREEMENTS The City has pledged its taxing authority to back certain revenue bonds issued by the Scott County Community Development Agency(CDA), formally known as the Scott County Housing and Redevelopment Authority(HRA), for the Blocks 3 and 4 redevelopment project in downtown Shakopee. Refunding bonds were issued during 2006 to advance refund the 1997A, 1997D and 1997E Series Bonds on their call dates. The 1997D Series Bonds were called on September l, 2006 and the 1997A and 1997E Series Bonds were called on February 1, 2008. • Scott County CDA Housing Development Refunding Revenue Bonds, Series 2006A, the amount is $ 3,260,000 and payments are scheduled from February 1, 2007 to 2027, with interest ranging from 4.25%to 4.50%. � Scott County CDA Housing Development Refunding Revenue Bonds, Series 2006D, the amount is $ 905,000 and payments are scheduled from February 1, 2007 to 2018,with interest ranging from 5.70%to 6.25%. • Scott County CDA Housing Development Refunding Revenue Bonds, Series 2006E, the amount is $ 1,225,000 and payments are scheduled from February 1, 2018 to 2024,with interest ranging from 4.50%to 4.70%. 64 CITY OF SHAKOPEE NOTES TO THE FINANCIAL STATEMENTS DECEMBER 31,2012 NOTE 9—PLEDGING AGREEMENTS The City has pledged its taxing authority to back a series of revenue bonds issued by the Scott County CDA for the North Ridge Court Redevelopment Project in downtown Shakopee. The issue is: • Scott County CDA Housing Development Revenue Bonds, Series 2003,the amount is $ 6,640,000 and payments are scheduled from February 1, 2006 to 2034,with interest ranging from 2.00%to 5.00%. The City and the Shakopee EDA have a development agreement for costs related to an Imagine! Print Solutions, formally known as Challenge Printing, facility moving to Shakopee. The Shakopee EDA issued a Taxable Tax Increment Revenue Note in the amount of$ 513,900 in support of development costs for the Imagine! Print Solutions Project. Imagine! Print Solutions is the holder of the note. The Shakopee EDA is liable only to the extent of the tax increment received from the Imagine! Print Solutions property. The interest on the note is 6.00%. Payments are scheduled semiannually from August 1, 2006 to February 1, 2015. The City and the Shakopee EDA have a development agreement for costs related to Open Systems Facility located in Shakopee. The Shakopee EDA issued a Taxable Tax Increment Revenue Note in the amount of$ 125,000 in support of development costs for the Open Systems Project. Open Systems is the holder of the note. The Shakopee EDA is liable only to the extent of the tax increment received from the Open Systems property. The interest on the note is 6.00%. Payments are scheduled semiannually from August 1, 2007 to February l, 2014. NOTE 10—INTERFUND ASSETS/LIABILITIES The composition of interfund balances as of December 31, 2012 is as follows: Recievable Fund Payable Fund Amount Capital Improvements Nonmajor Governmental Funds $ 383,296 The due from/due to other funds balance represents borrowing to eliminate a cash deficit. This will be repaid as funds are available. 65 CITY OF SHAKOPEE NOTES TO THE FINANCIAL STATEMENTS DECEMBER 31,2012 NOTE 11 —INTERFUND TRANSFERS Transfer In Other internal General Capital Governmental Service Fund Improvements Funds Fund Total Transfers Out: General Fund $ - $ 2,000,000 $ 780,000 $ 200,000 $ 2,980,000 Other Governmental Funds 22,400 - - - 22,400 Sewer Fund 50,000 - - - 50,000 Storm Drainage Fund 50,000 - - - 50,000 intecnal Service Fund - - 465,000 - 465,000 Total $ 122,400 $ 2,000,000 $ 1,245,000 $ 200,000 $ 3,567,400 Transfers were made according to budgets for operating purposes, to finance projects and for the cancellation of the debt service levy. NOTE 12—RISK MANAGEMENT The City purchases commercial insurance coverage through the League of Minnesota Cities Insurance Trust(LMCIT) with other cities in the state which is a public entity risk pool currently operating as a common risk management and insurance program. The City pays an annual premium to the LMCIT for its insurance coverage. The LMCIT is self-sustaining through member premiums and reinsures through commercial companies far excess claims. The City is covered through the pool for any claims incurred but unreported, however,retains risk for the deductible portion of its insurance policies. The amount of these deductibles ranges from $ 2,500 to $ 5,000 and is considered immaterial to the financial statements. There were no significant reductions in insurance from the previous year or settlements in excess of insurance coverage for any of the past three years. Through the pool, the City is subject to reassessment but due to reserves and reinsurance contracts, the likelihood is very low. The policy limits through the pool included $ 2,000,000 aggregate for liability, $ 1,500,000 for automobile coverage, $ 500,000 faithful performance employee bonding and $ 1,000,000 for universal umbrella coverage. Property coverage is at approximately$ 91,000,000. 66 CITY OF SHAKOPEE NOTES TO THE FINANCIAL STATEMENTS DECEMBER 31,2012 NOTE 13— DEFINED BENEFIT PENSION PLANS—STATE-WIDE Public Employees' Retirement Association 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 or 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 are covered by the PEPFF. PERA provides retirement benefits as well as disability benefits to members, and benefits to survivors upon death of eligible members. Benefits are established by state statute and vest after three years of credited service. The defined retirement benefits are based on a member's highest average salary for any five successive years of allowable service, age and years of credit at termination of service. Two methods are used to compute benefits for PERA's Coordinated and Basic Plan members. The retiring member receives the higher of a step-rate benefit accrual formula(Method 1) or a level accrual formula(Method 2). Under Method l,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 GERF and PEPFF members hired prior to July 1, 1989,whose annuity is calculated using Method l, a full annuity is available when age plus years of service equa190. Normal retirement age is 55 for PEPFF members and 65 for Basic and Coordinated Plan members hired prior to July l, 1989. Normal retirement age is the age for unreduced Social Security benefits capped at 66 for Coordinated Plan 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 yet receiving them are bound by the provisions in effect at the time they last terminated their public service. 67 CITY OF SHAKOPEE NOTES TO THE FINANCIAL STATEMENTS DECEMBER 31, 2012 NOTE 13—DEFINED BENEFIT PENSION PLANS—STATE-WIDE Public Employees' Retirement Association (Continued) A. Plan Description (Continued) 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 at 60 Empire Drive, #200, St. Paul, Minnesota 55103-2088 or by calling (651) 296-7460 or(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 9.1% and 6.25%, respectively, of their annual covered salary in 2012. PEPFF members were required to contribute 9.6%of their annual covered salary in 2012. In 2012, the City was required to contribute the following percentages of annual covered payroll: 11.78%for Basic Plan members, 7.25%for Coordinated Plan members and 14.4% for PEPFF members. The City's contributions to the Public Employees' Retirement Fund for the yeacs ending December 31, 2012, 2011 and 2010 were $ 349,790, $ 353,579 and $ 549,973, respectively. The City's contributions to the PEPFF for the years ending December 31, 2012, 20ll and 2010 were $ 529,799, $ 500,257, and $ 475,396, respectively. The City's contributions were equal to the contractually required contributions for each year as set by state statute. NOTE 14—DEFINED CONTRIBUTION PLAN—STATE-WIDE Four Council Membecs of the City are covered by the Public Employees' Defined Contribution Plan (PEDCP), a multiple-employer deferred compensation plan administered by PERA. The PEDCP is a tax qualified plan under Section 401(a) of the Internal Revenue Code and all contributions by or on behalf of employees are tax deferred until time of withdrawal. Plan benefits depend solely on amounts contributed to the plan plus investment earnings, less administrative expenses. Minnesota Statutes Chapter 353D.03 specifies the employee and employer contribution rates for those qualified personnel who elect to participate. An eligible elected official who decides to participate contributes 5% of salary which is matched by the elected official's employer. Employer and employee contributions are combined and used to purchase shares in one or more of the seven accounts of the Minnesota Supplemental Investment Fund. For administering the plan, PERA receives 2% of employer contributions and four-tenths of 1%of the assets in each member's account annually. Total contributions made by the City during year 2012 were: Contribution Amount Percentage of Covered Payroll Required Employee Employer Employee Employer Rates $ 1,400 $ 1,400 5% 5% 5% 68 CITY OF SHAKOPEE NOTES TO THE FINANCIAL STATEMENTS DECEMBER 31,2012 NOTE 15—DEFINED BENEFIT PENSION PLAN—SHAKOPEE VOLUNTEER FIRE RELIEF ASSOCIATION A. Plan Description The Shakopee Fire Relief Association(the"Association") is the administrator of a single employer defined benefit pension plan established to provide benefits for members of the Shakopee Fire Department. The Association provides retirement and disability benefits to members, and benefits to survivors upon the death of eligible members. Benefits are established in accordance with Minnesota Statutes. The defined retirement benefits are based on a member's years of service. Benefit provisions can be amended by the Association within the parameters provided by Minnesota Statutes. The Association issues a publicly available financial report that includes financial statements and required supplementary information. That report may be obtained by writing to Shakopee Fire Relief Association, 129 Holmes Street South, Shakopee, Minnesota 55379. B. Funding Policy Minnesota Statutes Chapter 69.772 specifies minimum support rates required on an annual basis. The minimum support rates from the municipality and from state aid are determined as the amount required to meet the normal cost plus amortizing any existing prior service costs over a 10 year period. Actuarial valuations are not required for the Association as the Association follows Minnesota Statutes for the valuation calculation. The City has decided to make an annual contribution in addition to state aid received for pension cost. The Association is comprised of volunteers; therefore, there are no payroll expenditures (i.e., there are no covered payroll percentage calculations). Contributions totaling$ 298,118 ($ 152,677 City of Shakopee and $ 145,441 State of Minnesota)were made in accordance with contribution requirements as of December 31, 2012. These contributions were entirely for normal service cost. The City's annual pension cost for the current year and related information is as follows: Valuation Date December 31, 2012 Actuarial Cost Method Entry Age Normal Amortization Method Level annual dollar closed Remaining Amortization Period: Normal Cost 20 years Prior Service Cost 10 years Asset Valuation Method Market Actuarial Assumptions: Investment Rate of Return 5% Projected Salary Increases N/A Includes Inflation at N/A Cost of Living Adjustments None 69 CITY OF SHAKOPEE NOTES TO THE FINANCIAL STATEMENTS DECEMBER 31, 2012 NOTE 15—DEFINED BENEFIT PENSION PLAN—SHAKOPEE VOLUNTEER FIRE RELIEF ASSOCIATION B. Funding Policy (Continued) Annual Percentage Net Pension of APC Pension Year Ended Cost(APC) Contributed Obligation 12/31/10 $ 339,752 100% $ - 12/31/11 351,976 100% - 12/31/12 152,677 100% - Statutory Statutory Funded Valuation Value of Accrued (Unfunded) Funded Date Assets Liability(SAL) SAL Ratio 12/31/10 $ 3,690,248 $ 4,507,908 $ (817,660) 81.9% 12/31/ll 3,974,012 4,480,608 (506,596) 88.7% 12/31/12 4,634,023 4,832,549 (198,526) 95.9% The Association is comprised of volunteers; therefore,there are no payroll expenditures (i.e.,there are no covered payroll amounts or percentage calculations). NOTE 16—POST EMPLOYMENT HEALTH BENEFITS PLAN A. Plan Description The City provides a single-employer defined benefit health care plan to eligible retirees and their spouses. The plan offers medical coverage administered by Medica. It is the City's policy to periodically review its medical coverage and to obtain requests for proposals in order to provide the most favorable benefits and premiums for City employees and retirees. B. Funding Policy Retirees and their spouses contribute to the health care plan at the same rate as City employees. This results in the retirees receiving an implicit rate subsidy. Contribution requirements are established by the City, based on the contract terms with Medica. The required contributions are based on projected pay-as-you-go financing requirements. For the year 2012,the City contributed $ 23,595 to the plan. As of January 1, 2012,there were seven retirees and two disabled officers receiving health benefits from the City's hea(th plan. 70 CITY OF SHAKOPEE NOTES TO THE FINANCIAL STATEMENTS DECEMBER 31,2012 NOTE 16—POST EMPLOYMENT HEALTH BENEFITS PLAN C. Annual OPEB Cost and Net OPEB Obligation The City's annual OPEB cost(expense) is calculated based on the annual required contribution (ARC) of the City, 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 cost each year and amortize any unfunded actuarial liabilities (or funding excess) over a period not to exceed 30 years. The following table shows the components of the City's annual OPEB cost of the year, the amount actually contributed to the plan, and changes in the City's net OPEB obligation to the plan. ARC $ 220,284 Interest on Net OPEB Obligation 29,374 Adjustment to ARC (42,468) Annual OPEB Cost(Expense) 207,190 Contribution Made (53,591) Increase in Net OPEB Obligation 153,599 Net OPEB Obligation - Beginning of Year 734,361 Net OPEB Obligation-End of Year $ 887,960 The City's annual OPEB cost, the percentage of annual OPEB cost contributed to the plan and the net OPEB obligation for 2012 was as follows: Percentage of Fiscal Year Annual OPEB Employer Annual OPEB Net OPEB End Cost Contribution Cost Contributed Obligation 12/31/12 $ 207,190 $ 53,591 26% $ 887,960 12/31/11 200,980 45,723 23% 734,361 12/31/10 170,040 27,020 16% 579,104 D. Funded Status and Funding Progress As of January 1, 2010, the most recent actuarial valuation date, the City had no assets deposited to fund the plan. The actuarial accrued liability for benefits was $ 1,483,810 and the actuarial value of assets was $ 0, resulting in an unfunded actuarial accrued liability(UAAL) of$ 1,483,810. The covered payroll (annual payroll of active employees covered by the plan) was $ 7,154,161 and the ratio of the UAAL to the covered payroll was 20.7%. 71 CITY OF SHAKOPEE NOTES TO THE FINANCIAL STATEMENTS DECEMBER 31,2012 NOTE 16—POST EMPLOYMENT HEALTH BENEFITS PLAN D. Funded Status and Funding Progress (Continued) Actuarial valuations involve estimates of the value of reported amounts and assumptions about the probability of occurrence of events far 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 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—Other Post Employment Benefits, presented as required supplementary information following the Notes to the Financial Statements, presents multi-year trend information about whether the actuarial value of plan assets is increasing or decreasing over time relative to the actuarial accrued liabilities for benefits. E. Actuarial Methods and Assumptions Projections of benefits for financial reporting purposes are based on the substantive plan (the plan as understood by the employer and the plan members) and include the types of benefits provided at the time of each valuation and the historical pattern of sharing of benefit costs between the employer and plan members to that point. The actuarial methods and assumptions used include techniques that are designed to reduce the effects of short-term volatility in actuarial accrued liabilities, consistent with the long-term perspective of the calculations. In the January l, 2010 actuarial valuation, the projected unit credit actuarial cost method was used. The actuarial assumptions included a 4.0 % discount rate, which is based on the investment yield expected to finance benefits depending on whether the plan is funded in a separate trust(about 7.0°/o to 8.5%, long- term, similar to a pension plan) or unfunded(3.5%to 5.0%, shorter-term, based on City's general assets). The City currently does not fund this benefit. At the actuarial valuation date,the annual health care cost trend rate was calculated to be 10% initially, reduced incrementally to an ultimate rate of 5% after five years. The UAAL is being amortized as a level percentage of payroll on an open basis. The remaining amortization period at January 1, 2010 was 30 years. NOTE 17—SEGMENT INFORMATION The City maintains two enterprise funds that account for the sewer and storm drainage utilities. The City considers each of its enterprise funds to be a segment. Since the required segment information is already included in the City's proprietary funds' Balance Sheet and Statement of Revenues, Expenses and Changes in Fund Net Position balances,this information has not been repeated in the Notes to the Financial Statements. 72 CITY OF SHAKOPEE NOTES TO THE FINANCIAL STATEMENTS DECEMBER 31,2012 NOTE 18—FUND BALANCE DETAIL Fund equity balances are classified as follows to reflect the limitations and restrictions of the respective funds. 2004A Other General Improvement Capital Governmental Fund Bonds Improvements Funds Total Nonspendable: Prepaid Items $ 19,189 $ - $ - $ - $ 19,189 Restricted: Forfeitures - - - 195,823 195,823 Transit - - - 1,045,340 1,045,340 SCDP Grant - - - 22,447 22,447 Revolving Loans - - - 252,639 252,639 Economic Development - - - 562,959 562,959 Debt Service - 1,457,145 - 8,117,053 9,574,198 CapitalImprovements - - - 1,815,339 1,815,339 Total Restricted - 1,457,145 - 12,011,600 13,468,745 Assigned: Telecommunications - - - 66,989 66,989 CapitalImprovements - - 8,681,475 394,666 9,076,141 TotalAssigned - - 8,681,475 461,655 9,143,130 Unassigned 9,503,652 - - (384,965) 9,118,687 Total Fund Balance $ 9,522,841 $ 1,457,145 $ 8,681,475 $ 12,088,290 $ 31,749,751 NOTE 19—SUBSEQUENT EVENTS The City has evaluated subsequent events through April 17, 2013,the date which the financial statements were available to be issued. NOTE 20—COMMITTMENTS Project Work 12/31/12 Authorization Completed Commitment 2012 Bituminous Overlay $ 694,987 $ 669,244 $ 25,743 Upper Valley Drainageway 194,725 189,562 5,163 Fire Station#2 2,380,661 2,376,557 4,104 NOTE 21—CHANGE IN ACCOUNTING PRINCIPLE For the year ended December 31, 2012,the City implemented GASB Statement No. 63. This implementation resulted in the establishment of categories outside of assets and liabilities titled deferred outflows and deferred inflows. The Statement also retitled Net Assets as Net Position. 73 (THIS PAGE LEFT BLANK INTENTIONALLY) 74 REQUIRED SUPPLEMENTARY INFORMATION 75 CITY OF SHAKOPEE SCHEDULE OF FUNDING PROGRESS-OTHER POST EMPLOYMENT BENEFITS December 31,2012 Actuarial Accrued Liability UAAL as a Actuarial (AAL)- Unfunded Percentage of Actuarial Value of Projected AAL Funded Covered Covered Valuation Assets Unit Credit (UAAL) Ratio Payroll Payroll Date (a) (b) (b-a) (a/b) (c) ((b-a)/c) O1/O1/08 $ - $ 1,887,961 $ 1,887,961 0.0% $ 6,652,669 28.4% O1/O1/09 * - 1,887,961 1,887,961 0.0% 6,652,669 28.4% O1/O1/10 - 1,483,810 1,483,810 0.0% 7,154,161 20.7% O1/O1/11 * - 1,483,810 1,483,810 0.0% 7,154,161 20.7% O1/O1/12 * - 1,483,810 1,483,810 0.0% 7,154,161 20.7% * Because an actuarial valuation is being performed once every thre years,the amounts for the O1/O1/08 and O1/Ol/09,and the O1/O1/10,O1/O1/ll and O1/O1/12 valuations are the same. 76 SUPPLEMENTARY INFORMATION 77 CITY OF SHAKOPEE Scott County,Minnesota SCHEDULE OF REVENUES,EXPENDITURES AND CHANGES IN FUND BALANCES- BUDGET AND ACTUAL-GENERAL FUND For the Year Ended December 31,2012 Variance with Variance with Original and Actual Final Budget- Final Budget Amounts Over(Under) REVENUES Property Taxes General Property Taxes $ 11,585,400 $ 12,845,292 $ 1,259,892 Fiscal Disparities 1,630,520 1,676,669 46,149 LodgingTax 180,000 230,131 50,131 Tax Increments - 5,086 5,086 Aggregate Tax 12,000 15,902 3,902 Total Property Taxes 13,407,920 14,773,080 1,365,160 Special Assessments 13,000 13,228 228 Licenses and Permits 1,275,300 1,229,184 (46,116) Intergovernmental Revenues Federal Grants 5,000 23,941 18,941 PERA Aid 11,930 18,170 6,240 Police Aid 300,000 291,264 (8,736) Fire Aid - 159,441 159,441 State Grants 424,630 477,966 53,336 Other Grants and Aids 8,000 20,663 12,663 Total Intergovernmental Revenues 749,560 991,445 241,885 Charges for Services General Government 1,304,180 2,180,012 875,832 Public Safety 394,200 447,008 52,808 Public Works 283,200 357,048 73,848 PazksandRecreation 1,059,050 1,051,853 (7,197) Totai Charges for Services 3,040,630 4,035,921 995,291 Fines and Forfeitures 436,000 368,167 (67,833) Miscellaneous Revenues Investment Income 275,000 89,975 (185,025) Contributions and Donations 3,000 24,860 21,860 Rents 4,400 7,436 3,036 Other 64,000 237,052 173,052 Total Miscellaneous Revenues 346,400 359,323 12,923 Total Revenues 19,268,810 21,770,348 2,501,538 EXPENDITtiRES General Government Current: Mayor and Council 190,729 154,341 (36,388) Administration 1,013,687 894,981 (118,706) City Clerk 352,722 257,832 (94,890) Finance 837,605 843,134 5,529 Legal - 28,319 28,319 Planning 448,481 430,182 (18,299) Government Buildings 429,083 392,087 (36,996) Unallocated 225,000 111,242 (113,758) CapitalOutlay 5,500 5,290 (210) Total General Govemment 3,502,807 3,117,408 (385,399) 78 CITY OF SHAKOPEE Scott County,biinnesota SCHEDULE OF REVENUES,EXPENDITURES AND CHANGES 1N FUND BALANCES- BUDGET AND ACTUAL-GENERAL FUND For the Year Ended December 31,2012 (Conrinued) Variance with Original and Actual Final Budget- Final Budget Amounts Over(Under) EXPENDITliRES Public Safety Police $ 7,131,987 $ 6,836,268 $ (295,719) Fire 1,816,277 1,872,288 56,011 Building Inspection 718,967 699,677 (19,290) CapitalOutlay 80,000 - (80,000) Total Public Safety 9,747,231 9,408,233 (338,998) Public Works Current: Streets and Highways: Engineering 661,179 498,876 (162,303) Streets 2,112,394 1,817,001 (295,393) Shop 94,779 33,165 (61,614) CapitalOutlay 10,000 26,689 16,689 Total Public Works 2,878,352 2,375,731 (502,621) Parks and Recreation Current: Parks and Recreation: ParkMaintenance 1,581,162 1,574,169 (6,993) Natural Resources 45,214 24,998 (20,216) Library/Congregate Dining - 1,081 1,081 Recreation 2,365,905 2,192,481 (173,424) Total Parks and Recreation 3,992,281 3,792,729 (199,552) TotalExpenditures 20,120,671 18,694,101 (1,426,570) Excess of Revenues Over (Under)Expenditures (851,861) 3,076,247 3,928,108 OTHER FINANCING SOURCES(USES) Transfers In 1,072,400 122,400 (950,000) Transfers Out - (2,980,000) (2,980,000) Total Other Financing Sources (Uses) 1,072,400 (2,857,600) (3,930,000) Net Change in Fund Balances $ 220,539 218,647 $ (1,892) FU\D BALANCES Beginning of Year 9,304,194 End ofYear $ 9,522,841 79 CITY OF SHAKOPEE COMBINING BALANCE SHEET- NONMAJOR GOVERNMENTAL FUNDS December 31,2012 Special Revenue Forfeiture Transit Telecommunication SCDP Grant ASSETS Cash and Investments $ 197,848 $ 1,089,306 $ 58,629 $ 22,350 Cash with Fiscal Agent - - - - Taxes Receivable-Delinquent - - - - Special Assessments Receivable: Delinquent - - - - Defened - - - - Accounts Receivable 2,415 144,516 8,105 - Interest Receivable 896 4,781 255 97 Due From Other Governments 420 - - - Total Assets $ 201,579 $ 1,238,603 $ 66,989 $ 22,447 LIABILITIES AND FUND BALANCES Liabilities Accounts Payable $ 5,392 $ 92,357 $ - $ - Contracts Payable - - - - Due to Other Funds - - - - Due to Other Govemments 364 100,906 - - Deferred Revenue - - - - Total Liabilities 5,756 193,263 - - Fund Balances Restricted for: Special Revenue 195,823 1,045,340 - 22,447 Debt Service - - - - Capital Projects - - - - Assigned - - 66,989 - Unassigned - - - - Total Fund Balances 195,823 1,045,340 66,989 22,447 Total Liabilities and Fund Balances $ 201,579 $ 1,238,603 $ 66,989 $ 22,447 80 Special Revenue Debt Service Economic 2004B 2004C 2004D Revolving Development Refunding Improvement Building Loan Authority Total Bonds Bonds Bonds $ 251,546 $ 561,077 $ 2,180,756 $ 397,489 $ 643,103 $ 492,395 - - - - - 3,730,000 - 35 35 2,008 - - - - - - 322,756 - - - 155,036 - - - 1,093 2,138 9,260 1,074 2,359 115 - - 420 1,058 784 - $ 252,639 $ 563,250 $ 2,345,507 $ 401,629 $ 969,002 $ 4,222,510 $ - $ 256 $ 98,005 $ 200 $ 200 $ 200 - - 101,270 - - - - 35 35 2,008 322,756 - - 291 199,310 2,208 322,956 200 252,639 562,959 2,079,208 - - - - - - 399,421 646,046 4,222,310 - - 66,989 - - - 252,639 562,959 2,146,197 399,421 646,046 4,222,310 $ 252,639 $ 563,250 $ 2,345,507 $ 401,629 $ 969,002 $ 4,222,510 81 CITY OF SHAKOPEE COMBINING BALANCE SHEET- NONMAJOR GOVERNMENTAL FUNDS December 31,2012 Debt Service 2006A 2007A 2007B 2008A Improvement Improvement Improvement Improvement Bonds Bonds Bonds Bonds ASSETS Cash and Investments $ 771,132 $ 565,256 $ 381,657 $ 364,749 Cash with Fiscal Agent - - - - Taxes Receivable-Delinquent - - - - Special Assessments Receivable: Delinquent 172 15,423 - 715 Defened 165,552 388,358 56,620 390,890 Accounts Receivable - - - - Interest Receivable 2,480 2,021 1,441 1,585 Due From Other Governments - - 108 - Total Assets $ 939,336 $ 971,058 $ 439,826 $ 757,939 LIABILITTES AND FUND BALANCES Liabilities AccountsPayable $ 201 $ 201 $ 200 $ 200 Contracts Payable - - - - Due to Other Funds - - - - Due to Other Governments - - - - Deferred Revenue 165,724 403,781 56,620 391,605 Total Liabilities 165,925 403,982 56,820 391,80� Fund Balances Restricted for: Special Revenue - - - - Debt Service 773,411 567,076 383,006 366,134 Capital Projects - - - - Assigned - - - - Unassigned - - - - Total Fund Balances 773,411 567,076 383,006 366,134 Total Liabilities and Fund Balances $ 939,336 $ 971,058 $ 439,826 $ 757,939 82 Debt Service Capital Projects 2010A Improvement 2011A&2012 Bonds Bond Total Park Reserve TIF No. 10 Seal Coat $ 405,776 $ 332,188 $ 4,353,745 $ 1,784,620 $ 20,165 $ 11,038 - 16,561 3,746,561 - - - - - 2,008 - - - 2,542 233 19,085 - - - 234,578 146,725 1,705,479 - - - - - - 20,135 - - 1,328 1,443 13,846 7,732 88 48 1,916 637 4,503 - - - $ 646,140 $ 497,787 $ 9,845,227 $ 1,812,487 $ 20,253 $ 11,086 $ 200 $ - $ 1,602 $ 2,157 $ 19,975 $ - - - - 132 - - 237,120 146,958 1,726,572 - - - 237,320 146,958 1,728,174 2,289 19,975 - 408,820 350,829 8,117,053 - - - - - - 1,810,198 278 - - - - - - 11,086 408,820 350,829 8,117,053 1,810,198 278 11,086 $ 646,140 $ 497,787 $ 9,845,227 $ 1,812,487 $ 20,253 $ 11,086 83 CITY OF SHAKOPEE COMBINING BALANCE SHEET- NONMAJOR GOVERNMENTAL FUND5 December 31,2012 Capital Projects Tree Replacement Lions Park TIF No. 12 TIF No. 13 ASSETS Cash and Investments $ 61,149 $ 14,137 $ 426 $ 18,882 Cash with Fiscal Agent - - Ta�ces Receivable-Delinquent - - - - Special Assessments Receivable: Delinquent - - - - Deferred - - - - Accounts Receivable - - - - Interest Receivable 266 61 2 82 Due From Other Governments - - - - Total Assets $ 61,415 $ 14,198 $ 428 $ 18,964 LIABILITIES AND FUND BALANCES Liabilities Accounts Payable $ - $ - $ 427 $ 14,102 Contracts Payable - - - - Due to Other Funds - - - - Due to Other Governments - - - - Deferred Revenue - - - - Total Liabilities - - 427 14,102 Fund Balances Restricted for: Special Revenue $ - $ - - - Debt Service - - - - Capital Projects - - 1 4,862 Assigned 61,415 14,198 - Unassigned - - - Total Fund Balances 61,415 14,198 1 4,862 Total Liabilities and FundBalances $ 61,415 $ 14,198 $ 428 $ 18,964 84 Capital Projects Total Road Expansion Fire Station 2 Governmental Dedication 2010 Projects Construction 2011 Projects Total Funds $ 79,714 $ 129,652 $ 116,880 $ - $ 2,236,663 $ 8,771,164 - 3,746,561 - - - - - 2,043 - - - - - 19,085 - - - - - 1,705,479 - - - - 20,135 175,171 346 563 508 (1,669) 8,027 31,133 - - - - - 4,923 $ 80,060 $ 130,215 $ 117,388 $ (1,669) $ 2,264,825 $ 14,455,559 $ - $ - $ - $ - 36,661 $ 136,268 - - 19,696 - 19,696 19,696 - - - 383,296 383,296 383,296 - - - - ]32 101,402 - - - - - 1,726,607 - - 19,696 383,296 439,785 2,367,269 - - - - - 2,079,208 - - - - - 8,117,053 - - - - 1,815,339 1,815,339 80,060 130,215 97,692 - 394,666 461,655 - - - (384,965) (384,965) (384,965) 80,060 130,215 97,692 (384,965) 1,825,040 12,088,290 $ 80,060 $ 130,215 $ ll7,388 $ (1,669) $ 2,264,825 $ 14,455,559 85 CITY OF SHAKOPEE COMBINING STATEMENT OF REVENUES,EXPE:VDITURES AND CHANGES IN EUND BALANCES-NON�iAJOR GOVERNNiENTAL FUNDS For the Year Ended December 31,2012 Special Revenue Forfeiture Transit Telecommunication SCDP Grant REVENUES Property Taxes $ - $ - $ - $ - Tax Increments - - - - Special Assessments - - - - Licenses and Permits - - 35,366 - Intergovernmental: State Grants - 687,018 - - Other Grants and Aids - - - - Chazges for Services - 404,351 - - Fines and Forfeitures 50,307 - - - Miscellaneous: Investment Income 2,825 10,925 1,123 (15) Contributions and Donations - - - - Other 9,939 - 10,395 - Total Revenues 63,071 1,102,294 46,884 (15) EXPENDITURES Current General Government - 1,283,516 585 - Public Safety 75,766 - - - Culture and Recreation - - - - Economic Development - - - - Debt Service Principal - - - - Interest and Other Charges - - - - Capital Outlay General Government - - 24,991 - Public Safety - - - - Public Works - - - - Pazk and Recreation - - - - Total Expenditures 75,766 1,283,516 25,576 - Excess of Revenues Over (Under)Expendihues (12,695) (181,222) 21,308 (15) OTAER FINANCING SOURCES(USES) Bonds Issued - - - - Premium on Bonds Issued - - - - Transfers In - - - - Transfers Out - (11,200) - - Total Other Financing Sources(Uses) - (1],200) - - Net Change in Fund Balances (12,695) (192,422) 21,308 (15) FUND BALANCES Beginning of Year 208,518 1,237,762 45,681 22,462 End of Year $ 195,823 $ 1,045,340 $ 66,989 $ 22,447 86 Special Revenue Debt Service Economic 2004B 2004C Development Refunding Improvement 2004D Building Revolving Loan Authority Total Bonds Bonds Bonds $ - $ 27 $ 27 $ 119,444 $ - $ - - - - - 109,053 - - 10,500 45,866 - - - - - 687,018 - - - - 15,000 15,000 - - - - 6,000 410,351 - - - - - 50,307 - - - 3,563 7,604 26,025 2,907 3,758 3,255 - - 20,334 - - - 3,563 39,131 1,254,928 122,351 112,811 3,255 - - 1,284,101 - - - - - 75,766 - - - - 42,747 42,747 - - - - - - 190,000 250,000 255,000 71 - 71 45,651 34,213 185,181 - - 24,991 - - - 71 42,747 1,427,676 235,651 284,213 440,181 3,492 (3,616) (172,748) (113,300) (171,402) (436,926) - - - - - 3,730,000 - 80,000 80,000 150,000 100,000 465,000 - (ll,200) (22,400) - - - - 68,800 57,600 150,000 100,000 4,195,000 3,492 65,184 (115,148) 36,700 (71,402) 3,758,074 249,147 497,775 2,261,345 362,721 717,448 464,236 $ 252,639 $ 562,959 $ 2,146,197 $ 399,421 $ 646,046 $ 4,222,310 87 CITY OF SHAKOPEE COMBINING STATEMENT OF REVENUES,EXPENDITURES AND CHANGES IN FUND BALANCES-NONMAJOR GOVERNMENTAL FtiNDS For the Year Ended December 31,2012 Debt Service 2006A 2007A 2007B 2008A Improvement Improvement Improvement Improvement Bonds Bonds Bonds Bonds REVENUES Property TaYes $ - $ - $ - $ - Tax Increments - - - - Special Assessments 80,937 444,493 23,505 133,482 Licenses and Permits - - - - Intergovernmental: State Grants - - - - Other Grants and Aids - - - - Charges for Services - - - - Fines and Forfeitures - - - - Miscellaneous: Investment Income 1,442 7,227 2,981 1,508 Contributions and Donations - - - - Other - - - - Total Revenues 82,379 451,720 26,486 134,990 EXPENDITURES Current General Government - - - - Public Safety - - - - Culture and Recreation - - - - Economic Development - - - - Debt Service Principal 340,000 105,000 145,000 190,000 Interest and Other Charges 80,233 35,731 39,249 58,988 Capital OuUay General Government - - - - Public Safety - - - - Public Works - - - - Park and Recreation - - - - Total Expenditures 420,233 140,731 184,249 248,988 Excess of Revenues Over (Under)Expenditures (337,854) 310,989 (157,763) (113,998) OTHER FINANCING SOURCES(USES) Bonds Issued - - - - Premium on Bonds Issued - - - - Transfers In 200,000 100,000 50,000 - Transfers Out - - - - Total Other Financing Sources(Uses) 200,000 100,000 50,000 - Net Change in Fund Balances (137,854) 410,989 (107,763) (113,998) FUND BALANCES Beginning of Year 911,265 156,087 490,769 480,132 End of Year $ 773,411 $ 567,076 $ 383,006 $ 366,134 88 Debt Service Capital Projects 2010A Improvement 2011A&2012 Tree Bonds Bond Total Seal Coat Pazk Reserve TIF No. 10 Replacement $ 135,450 $ - $ 254,894 $ - $ - $ - $ - - - - - - 39,950 - 65,578 42,622 899,670 - - - - - - - - 1,166,196 - - - - - - 2,731 - - 4,626 8,194 35,898 189 29,477 (54) 1,047 - - - 10,897 60,000 - 60,368 205,654 50,816 1,190,462 11,086 1,258,404 39,896 61,415 - - - - 6,994 - - - - - - - 39,986 - 190,000 - 1,665,000 - - - - 25,490 54,914 559,650 - - - - - - - - 394,405 - - 215,490 54,914 2,224,650 - 401,399 39,986 - (9,836) (4,098) (1,034,188) 11,086 857,005 (90) 61,415 - - 3,730,000 - - - - - 73,480 73,480 - - - - 100,000 - 1,165,000 - - - - 100,000 73,480 4,968,480 - - - - 90,164 69,382 3,934,292 11,086 857,005 (90) 61,415 318,656 281,447 4,182,761 - 953,193 368 - $ 408,820 $ 350,829 $ 8,117,053 $ 11,086 $ 1,810,198 $ 278 $ 61,415 89 CITY OF SHAKOPEE COMBINING STATEMEYT OF REVENUES,EXPENDITURES AND CHANGES IN FUND BALANCES-NONMAJOR GOVERNMENTAL FUNDS For the Year Ended December 31,2012 Capital Projects Road Expansion TIF No. 12 Lions Park TIF No. 13 Dedication REVENUES Properry TaYes $ - $ - $ - $ - Tax Increments 42,614 - 31,338 - Special Assessments - - - - Licenses and Permits - - - - Intergovernmental: State Grants - - - - Other Grants and Aids - - - - Charges for Services - - - - Fines and Forfeitures - - - - Miscellaneous: Investment Income (762) 242 (2) 1,366 Contributions and Donations - 13,956 - 78,694 Other - - - - Total Revenues 41,852 14,198 31,336 80,060 EXPENDITURES Current General Government - - - - Public Safety - - - - Culture and Recreation - - - - Economic Development 42,632 - 30,327 - Debt Service Principal - - - - Interest and Other Charges - - - - Capital Outlay General Govemment - - - - Public Safety - - - - Public Works - - - - Park and Recreation - - - - Total Expenditures 42,632 - 30,327 - Excess of Revenues Over (Under)Expenditures (780) 14,198 1,009 80,060 OTHER FINANCING SOURCES(USES) Bonds Issued - - - - Premium on Bonds Issued - - - - Transfers In - - - - Transfers Out - - - - Total Other Financing Sources(Uses) - - - - Net Change in Fund Balances (780) 14,198 1,009 80,060 FUND BALAI�CES Beginning of Year 781 - 3,853 - End of Year $ 1 $ 14,198 $ 4,862 $ 80,060 90 Capital Projects Total Other Fire Station 2 Governmental 2010 Projects Construction 2011 Projects Total Funds $ - $ - $ - $ - $ 254,921 - - - 113,902 113,902 - - - - 899,670 - - - 1,166,196 1,212,062 - - 66,387 66,387 753,405 - - - - 15,000 - - - 2,731 413,082 - - - - 50,307 1,344 (1,417) 8,672 40,102 102,025 - - - 223,915 223,915 - - - - 20,334 1,344 (1,417) 75,059 1,613,233 4,058,623 - - - - 1,284,101 - - - - 75,766 - - - 6,994 6,994 - - - ]12,945 155,692 - - - - 1,665,000 - - - - 559,721 - - - - 24,991 - 185,248 - 185,248 185,248 - - (24,065) (24,065) (24,065) - - - 394,405 394,405 - 185,248 (24,065) 675,527 4,327,853 1,344 (186,665) 99,124 937,706 (269,230) - - - - 3,730,000 - - - - 73,480 - - - - 1,245,000 - - - - (22,400) - - - - 5,026,080 1,344 (186,665) 99,124 937,706 4,756,850 128,871 284,357 (484,089) 887,334 7,331,440 $ 130,215 $ 97,692 $ (384,965) $ 1,825,040 $ 12,088,290 91 CITY OF SHAKOPEE SCHEDULE OF REVENUES,EXPENDITURES AND CHANGES IN FUND BALANCE -BUDGET AND ACTUAL - TRANSIT FUND For the Year Ended December 31,2012 Original Variance with And Final Actual Final Budget- Budget Amounts Over (Under) REVENUES Intergovernmental Revenue State Grants $ 719,140 $ 687,018 $ (32,122) Charges for Services General Government 237,700 404,351 166,651 Miscellaneous Revenues Investment Income 42,000 10,925 (31,075) Total Revenues 998,840 1,102,294 103,454 EXPENDITURES Current: General Government 1,240,547 1,283,516 42,969 Excess of Revenues Over (Under) Expenditures (241,707) (181,222) 60,485 OTHER FINANCING USES Transfers Out (11,200) (11,200) - Net Change in Fund Balance $ (252,907) (192,422) $ 60,485 FUND BALANCE Beginning of Year 1,237,762 End of Year $ 1,045,340 92 CITY OF SHAKOPEE SCHEDULE OF REVENUES,EXPENDITURES AND CHANGES IN FUND BALANCE- BUDGET AND ACTUAL- ECONOMIC DEVELOPMENT AUTHORITY FUND For the Year Ended December 31,2012 Original Variance with And Final Actual Final Budget- Budget Amounts Over(Under) REVENUES Property Taxes Property Taxes $ 80,000 $ 27 $ (79,973) Licenses and Permits - 10,500 10,500 Intergovernmental Revenue: Other Grants and Aids - 15,000 15,000 Charges for Services: General Government - 6,000 6,000 Miscellaneous Revenues Investment Income 10,000 7,604 (2,396) Total Revenues 90,000 39,131 (50,869) EXPENDITURES Economic Development Current 41,989 42,747 758 Excess of Revenues Over (Under)Expenditures 48,011 (3,616) (51,627) OTHER FINANCING SOURCES (USES) Transfers In - 80,000 80,000 Transfers Out (11,200) (11,200) - Total Other Financing Sources (Uses) (ll,200) 68,800 80,000 Net Change in Fund Balance $ 36,811 65,184 $ 28,373 FUND BALANCE Beginning of Year 497,775 End of Year $ 562,959 93 CITY OF SHAKOPEE COMBINING STATEMENT OF FUND NET POSITION- INTERNAL SERVICE FLNDS December 31,2012 Governmental Activities-Internal Service Funds n ormation Employee and Equipment Buildings Park Assets Benefits Technology Total ASSETS Current Assets Cash and Investments,Including Cash Equivalents $ 7,073,775 $ 6,007,379 $1,630,637 $ 1,408,232 $ 343,261 $ 16,463,284 interestReceivable 31,028 28,125 6,671 6,118 1,056 72,998 Notes Receivable,Current Portion 95,000 - - - - 95,000 Total Current Assets 7,199,803 6,035,504 1,637,308 1,414,350 344,317 16,631,282 Noncurrent Assets Notes Receivable 95,000 - - - - 95,000 Capital Assets: Construction in Progress - 150,752 - - - 150,752 Buildings - 31,603,795 3,191,559 - - 34,795,354 Infrastructure - - 2,923,925 - - 2,923,925 Machinery and Equipment 8,470,946 135,700 3,486,925 - 160,002 12,253,573 Total Cost 8,470,946 31,890,247 9,602,409 - 160,002 50,123,604 Less Accumulated Depreciation (4,289,409) (9,299,595) (2,934,136) - (43,647) (16,566,787) Net Capital Assets 4,181,537 22,590,652 6,668,273 - 116,355 33,556,817 Total Noncurrent Assets 4,276,537 22,590,652 6,668,273 - 116,355 33,651,817 Total Assets $ 11,476,340 $28,626,156 $8,305,581 $ 1,414,350 $ 460,672 $ 50,283,099 LIABILITIES AND�ET POSITION Current Liabilities Accounts Payable $ 111,961 $ 77,621 $ - $ - $ 3,588 $ 193,170 Due to Other Governments 3,987 - - - 24 4,011 Current Compensated Absences - - - 784,164 - 784,164 Total Current Liabilities 115,948 77,621 - 784,164 3,612 981,345 Noncurrent Liabilities Compensated Absences - - - 958,423 - 958,423 Total Liabilities 115,948 77,621 - 1,742,587 3,612 1,939,768 Net Position Investment in Capital Assets 4,181,537 22,590,652 6,668,273 - 116,355 33,556,817 Unrestricted 7,178,855 5,957,883 1,637,308 (328,237) 340,705 14,786,514 Total Net Position 11,360,392 28,548,535 8,305,581 (328,237) 457,060 48,343,331 Total Liabilities and Net Position $ 11,476,340 $28,626,156 $8,305,581 $ 1,414,350 $ 460,672 $ 50,283,099 94 CITY OF SHAKOPEE C014BINING STATEMENT OF REVENUES,EXPENSES AND CHANGES IN FUND NET ASSETS- INTERNAL SERVICE FUNDS For the Year Ended December 31,2012 Govemmental Activities-Intemal Service Funds In ormation Employee and Equipment Buildings Pazk Assets Benefits Technology Total OPERATING REVENUES Rental Charges $ 634,280 $ 664,616 $ 483,744 $ - $ 275,500 $ 2,058,140 Other Charges - - 5,000 - - 5,000 Total Operating Revenues 634,280 664,616 488,744 - 275,500 2,063,140 OPERATING EXPENSES Employee Benefits - - - 123,495 - 123,495 Materials and Supplies 16 114,441 - - 160,044 274,501 Repairs and Maintenance - 24,365 - - 7,657 32,022 Professional Services - 669 - - 8,885 9,554 Depreciation 548,708 735,476 359,050 - 40,083 1,683,317 TotalOperatingEapenses 548,724 874,951 359,050 123,495 216,669 2,122,889 Operating Income(Loss) 85,556 (210,335) 129,694 (123,495) 58,831 (59,749) NONOPERATING REVENUES Investment Income 120,824 70,031 27,951 16,956 2,429 238,191 Gain(Loss)on Disposal of Assets 11,769 - - - - 11,769 Total Nonoperating Revenues 132,593 7Q031 27,951 16,956 2,429 249,960 Income(Loss)before Capital Contributions and Transfers 218,149 (140,304) 157,645 (106,539) 61,260 190,211 Capital Contributions - - 3,667 - - 3,667 Transfers In - - 100,000 - 100,000 200,000 Transfers Out - (465,000) - - - (465,000) Change in Net Position 218,149 (605,304) 261,312 (106,539) 161,260 (71,122) NET POSITION BeginningofYear 11,142,243 29,153,839 8,044,269 (221,698) 295,800 48,414,453 End of Year $11,360,392 $28,548,535 $8,305,581 $ (328,237) $ 457,060 $48,343,331 95 CITY OF SHAKOPEE COMBINING STATEMENT OF CASH FLOWS- INTER'VAL SERVICE FUNDS For the Year Ended December 31,2012 Inf'ortnation Employee and Equipment Buildings Pazk Assets Benefits Technology Total CASH FLOWS-OPERATING ACTIVITIES Receipts from Customers and Users $ 634,280 $ 664,616 $ 488,744 $ - $ 275,500 $ 2,063,140 Payments to Suppliers (16) (134,454) - - (341,928) (476,398) Payments to Employees - - - (84,806) (84,806) Net Cash Flows-Operating Activities 634,264 530,162 488,744 (84,806) (66,428) 1,501,936 CASH FLOWS-NONCAPITAL FINANCING ACTIVITIES Transfer from Other Funds - - 100,000 - 100,000 200,000 Transfer ta Other Funds - (465,000) - - (465,000) Net Cash Flows-Noncapital Fi�ancing Activities - (465,000) 1OQ000 - 100,000 (265,000) CASH FLOWS-CAPITAL AND RELATED FINANCING ACTIVTCIES Proceeds from Disposal of Capital Assets 248,485 - - - - 248,485 Acquisition of Capital Assets (69Q914) (1,240,744) (46,079) - (1,977,737) Net Cash Flows-Capital and Related Financing Activities (442,429) (1,240,744) (46,079) - - (],729,252) CASH FLO�'VS-INVESTING ACTIVITIES Payment Received for Notes Receivable 90,000 - - - - 90,000 InterestReceived ll5,075 71,483 24,915 ]6,957 2,384 23Q814 Net Cash Flows-Investing Activities 205,075 71,483 24,915 16,957 2,384 32Q814 Net Change in Cash and Cash Equivalents 396,910 (1,104,099) 567,580 (67,849) 35,956 (171,502) CASH AND CASH EQUIVALENTS Beginning of Year 6,676,865 7,111,478 1,063,057 1,476,08] 307,305 16,634,786 End of Year S 7,073,775 $6,007.379 $1,630.637 $1,408,232 �, 343,261 $ 16,463,284 RECONCILIATION OF OPERATING INCOME(LOSS)TO NET CASH FLOWS-OPERATING ACTIVITIES Operating Income(Loss) $ 85,556 $ (210,335) $ 129,694 $ (123,495) $ 58,831 $ (59,749) Adjustments to Reconcile Operating Income(Loss)to Net Cash Flows-Operating Activities: Depreciation Expense 548,708 735,476 359,050 - 40,083 1,683,317 Changes in: Due to Other Govemments - 24 24 Accounts Payable - 5,021 - - (165,366) (160,345) Compensated Absences Payable - - - 38,689 38,689 TotalAdjustments 548,708 74Q497 359,050 38,689 (125,259) 1,561,685 Net Cash Flows-Operating Activities $ 634,264 $ 530,162 $ 488,744 $ (84,806) $ (66,428) $ 1,501,936 NONCASH INVESTI�i'G,CAPITAL A\D FINA\CING ACTIVTTIES Contributions of Capital Assets from the Municipality and Developers � - $ - $ 3,667 $ - $ - $ 3,667 96 CITY OF SHAKOPEE COMBINED STATEMENT OF FIDUCIARY NET POSITION December 31,2012 Escrow Agency Southwest Metro Total Agency Fund Drug Task Force Funds ASSETS Cash and Investments $ 749,973 $ 731,117 $ 1,481,090 Interest Receivable - 3,119 3,ll9 Due from Other Governments - 50,033 50,033 Total Assets $ 749,973 $ 784,269 $ 1,534,242 LIABILITIES Accounts Payable $ - $ 677,467 $ 677,467 Due to Other Governments - 21,380 21,380 Deposits Payable 749,973 85,422 835,395 Total Liabilities $ 749,973 $ 784,269 $ 1,534,242 97 CITY OF SHAKOPEE STATEMENT OF CHANGES IN ASSETS AND LIABILITIES- AGENCY FUNDS For the Year Ended December 31,2012 Escrow Agency Fund Balance at Balance at December 31, December 31, 2011 Additions Deductions 2012 ASSETS Current Cash and Investments $ 1,563,629 $ 568,505 $ 1,382,161 $ 749,973 LIABILITIES Accounts Payable $ 2,777 $ - $ 2,777 $ - Deposits Payable 1,560,852 568,505 1,379,384 749,973 Total Liabilities $ 1,563,629 $ 568,505 $ 1,382,161 $ 749,973 Southwest Metro Drug Task Force Agency Fund Balance at Balance at December 31, December 31, 2011 Additions Deductions 2012 ASSETS Current Cash and Investments $ 715,778 $ 428,607 $ 413,268 $ 731,117 Receivables: Accounts Receivable 9,379 - 9,379 - Interest Receivable 2,790 329 - 3,ll9 Due from Other Governments 39,128 10,905 - 50,033 Total Assets $ 767,075 $ 439,841 $ 422,647 $ 784,269 LIABILITIES Accounts Payable $ 680,278 $ 359,150 $ 361,961 677,467 Due to Other Governments - 21,380 - 21,380 Deposits Payable 86,797 59,311 60,686 85,422 Total Liabilities $ 767,075 $ 439,841 $ 422,647 $ 784,269 98 CITY OF SHAKOPEE Scott County, Minnesota STATEMENT OF CHANGES IN ASSETS AND LIABILITIES- AGENCY FUNDS For the Year Ended December 31,2012 Total Agency Funds Balance at Balance at December 31, December 31, 2011 Additions Deductions 2012 ASSETS Current Cash and Investments $ 2,279,407 $ 997,112 $ 1,795,429 $ 1,481,090 Receivables: Accounts Receivable 9,379 - 9,379 - Interest Receivable 2,790 329 - 3,119 Due from Other Governments 39,128 10,905 - 50,033 Total Assets $ 2,330,704 $ 1,008,346 $ 1,804,808 $ 1,534,242 LIABILITIES Accounts Payable $ 683,055 $ 359,150 $ 364,738 $ 677,467 Due to Other Governments - 21,380 - 21,380 Deposits Payable 1,647,649 627,816 1,440,070 835,395 Total Liabilities $ 2,330,704 $ 1,008,346 $ 1,804,808 $ 1,534,242 99 (THIS PAGE LEFT BLANK INTENTIONALLY) 100 STATISTICAL SECTION 101 (THIS PAGE LEFT BLANK INTENTIONALL� 102 CITY OF SHAKOPEE STATISTICAL SECTION December 31,2012 This part of the City's Comprehensive Annual Financial Report(CAFR)presents detailed information for placing in context and understanding what the information shown in the financial statements,note disclosures and required supplementary information reveals about the City's overall financial health. CONTENTS Page Financial Trends 104 These schedules show trend information to help the reader understand how the City's financial performance and well being have changed over time. Revenue Capacity 114 Portrayed is information to help the reader assess the City's most important local revenue source,the property tax. Debt Capacity 118 These schedules present information to help the reader assess the affordability of the City's current levels of outstanding debt and the City's ability to issue additional debt in the future. Demographic and Economic Information 125 Shown are demographic and economic indicators to help the reader understand the environment within which the City's financial activities take place. Operating Information 128 These schedules shown 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. Source: Unless noted otherwise,the information in these schedules is from the CAFR for the relevant year. 103 CITY OF SHAKOPEE NET POSITION BY COMPONENT Years 2003 Through 2012 2003 2004 2005 2006 Governmental Activities: Invested in Capital Assets, Net of Related Debt $ 94,388,758 $ 90,281,410 $ ll 1,237,672 $ 119,661,761 Restricted 15,231,314 29,731,412 21,638,112 12,998,982 Unrestricted 15,241,647 21,214,073 21,845,121 29,264,714 Total Governmental Activities Net Position $ 124,861,719 $ 141,226,895 $ 154,720,905 $ 161,925,457 Business-Type Activities: Invested in Capital Assets, Net of Related Debt $ 81,725,264 $ 89,415,817 $ 99,140,973 $ 109,337,014 Restricted 978,371 1,867,077 2,232,469 880,069 Unrestricted 38,234,063 37.354,576 41,291,469 42,400,797 Total Business-Type Activities Net Position $ 120,937,698 $ 128,637,470 $ 142,664,911 $ 152,617,880 Primary Government: Invested in Capital Assets, Net of Related Debt $ 176,114,022 $ 179,697,227 $ 210,378,645 $ 228,998,775 Restricted 16,209,685 31,598,489 23,870,581 13,879,051 Unrestricted 53,475,710 58,568,649 63,136,590 71,665,511 Total Primary Government Net Position $ 245,799,417 $ 269,864,365 $ 297,385,816 $ 314,543,337 From 2003-2010,the SPUC Funds,Water and Electric Enterprise Funds,were reported as a blended component unit of the City. In 2011,SPUC funds have been presented as discretely presented component units as it no longer met the criteria for blending. 104 Table 1 2007 2008 2009 2010 2011 2012 $ 113,534,056 $ 112,909,793 $ 112,097,148 $ 111,905,152 $ 114,981,955 $ 115,191,768 13,081,337 21,915,945 16,518,865 1,844,129 10,914,439 9,912,551 28,316,931 22,086,771 28,832,576 43,910,102 32,771,327 34,823,712 $ 154,932,324 $ 156,912,509 $ 157,448,589 $ 157,659,383 $ 158,667,721 $ 159,928,031 $ 114,546,218 $ 115,124,238 $ 114,331,216 $ 115,064,968 $ 65,080,070 $ 64,124,590 1,026,351 1,756,369 3,574,612 4,889,050 - - 46,169,289 49,366,581 55,595,594 59,014,070 31,927,930 33,354,521 $ 161,741,858 $ 166,247,188 $ 173,501,422 $ 178,968,088 $ 97,008,000 $ 97,479,111 $ 228,080,274 $ 228,034,031 $ 226,428,364 $ 226,970,120 $ 180,062,025 $ 179,316,358 14,107,688 23,672,314 20,093,477 6,733,179 10,914,439 9,912,551 74,486,220 71,453,352 84,428,170 102,924,172 64,699,257 68,178,233 $ 316,674,182 $ 323,159,697 $ 330,950,011 $ 336,627,471 $ 255,675,721 $ 257,407,142 105 CITY OF SHAKOPEE CHANGES IN NET POSITION Years 2003 Through 2012 2003 2004 2005 2006 EXPENSES: Governmental Activities: General Government $ 2,761,210 $ 3,135,421 $ 2,563,526 $ 3,161,106 Public Safety 4,995,127 5,461,190 6,190,689 6,856,485 Public Works 3,673,623 6,036,920 8,298,258 6,798,917 Culture and Recreation 894,321 2,150,765 3,664,944 4,653,240 Economic Development 683,035 360,167 314,858 333,462 Other 668,531 861,864 924,270 896,110 Total Governmental Activities Expenses 13,675,847 18,006,327 21,956,545 22,699,320 Business-Type Activities: Electric 17,634,004 19,820,900 23,378,764 29,169,297 Water 2,337,860 2,723,003 2,460,977 2,949,990 Sewer 1,835,242 2,009,468 2,349,047 2,786,234 Storm 800,092 941,842 999,849 1,523,343 Total Business-Type Activities Expenses 24,159,722 25,495,213 29,188,637 36,428,864 TotalPrimaryGovernmentExpenses $ 37,835,569 $ 43,501,540 $ 51,145,182 $ 59,128,184 PROGRAM REVENUES: Governmental Activities: Charges for Services: General Government $ 1,706,644 $ 3,591,641 $ 791,504 $ 714,105 Public Safety 2,408,012 3,446,465 3,462,283 2,063,023 Public Works 3,691,149 4,534,285 2,668,728 2,986,495 Culture and Recreation 1,330,062 1,497,853 1,826,847 1,676,630 Economic Development - - - - Operating Grants and Contributions 2,622,953 4,303,581 3,646,605 1,653,238 Capital Grants and Contributions 11,009 - 8,666,283 6,116,366 Total Governmental Activities Program Revenues 11,769,829 17,373,825 21,062,250 15,209,857 Business-Type Activities: Charges for Services: Electric 19,733,990 22,161,542 27,425,921 31,906,714 Water 2,569,848 2,349,505 2,627,084 3,127,207 Sewer 2,827,777 3,078,191 2,971,601 3,471,984 Storm 1,947,139 1,806,974 1,937,430 1,859,912 Recreation 758,124 - - - Operating Grants and Contributions 2,345 - - - Capital Grants and Contributions 8,800,811 10,844,269 10,913,464 6,174,786 Total Business-Type Activities Program Revenues 36,640,034 40,240,481 45,875,500 46,540,603 Total Primary Government Program Revenues $ 48,409,863 $ 57,614,306 $ 66,937,750 $ 61,750,460 Net(Expense)Revenue: Governmental Activities $ (1,906,018) $ (632,502) $ (894,295) $ (7,489,463) Business-Type Activities 12,480,312 14,745,268 16,686,863 10,111,739 Total Primary Government Net Expense $ 10,574,294 $ 14,112,766 $ 15,792,568 $ 2,622,276 106 Table 2 2007 2008 2009 2010 2011 2012 $ 3,543,980 $ 3,514,573 $ 3,388,268 $ 3,042,918 $ 4,252,887 $ 4,603,027 8,301,075 8,346,104 8,528,413 9,123,316 9,236,767 9,430,785 15,264,606 8,099,384 7,860,080 8,397,874 7,094,047 7,083,299 5,323,087 3,637,527 3,859,670 3,765,660 3,866,307 3,817,677 363,805 522,074 316,566 427,169 244,361 152,541 1,042,133 1,033,999 1,040,044 784,824 619,099 587,384 33,838,686 25,153,661 24,993,041 25,541,761 25,313,468 25,674,713 34,710,974 36,186,676 30,140,842 32,700,410 - - 3,332,132 3,461,261 3,316,102 3,293,079 - - 2,938,955 3,308,759 3,398,117 3,685,417 3,807,322 3,926,541 1,352,078 1,435,376 1,264,261 1,792,749 1,382,391 1,445,633 42,334,139 44,392,072 38,119,322 41,471,655 5,189,713 5,372,174 $ 76,172,825 $ 69,545,733 $ 63,112,363 $ 67,013,416 $ 30,503,181 $ 31,046,887 $ 583,247 $ 606,259 $ 680,681 $ 652,686 $ 721,180 $ 3,356,772 1,650,235 1,506,680 1,677,772 1,716,573 1,503,188 1,524,158 2,615,402 2,354,276 1,342,173 941,224 478,788 454,145 1,086,750 1,295,772 1,013,044 1,039,820 1,071,482 2,222,430 - - - - 7,100 16,500 1,943,805 1,660,191 1,485,124 2,943,857 3,606,089 2,106,559 2,463,129 1,825,124 1,241,884 952,450 3,152,881 1,479,343 10,342,568 9,248,302 7,440,678 8,246,610 10,540,708 11,159,907 37,407,565 38,732,701 34,272,099 36,872,008 - - 3,525,140 3,390,309 3,605,498 4,417,498 - - 2,806,371 2,556,299 3,485,882 3,508,947 2,941,753 3,728,189 1,505,247 1,379,821 1,405,560 1,281,986 1,083,878 1,442,394 - - - 6,415 - - 4,138,977 1,007,519 1,879,530 1,661,001 93,810 348,756 49,383,300 47,066,649 44,648,569 47,747,855 4,119,441 5,519,339 $ 59,725,868 $ 56,314,951 $ 52,089,247 $ 55,994,465 $ 14,660,149 $ 16,679,246 $ (23,496,118) $ (15,905,359) $ (17,552,363) $ (17,295,151) $ (14,772,760) $ (14,514,806) 7,049,161 2,674,577 6,529,247 6,276,200 (1,070,272) 147,165 $ (16,446,957) $ (13,230,782) $ (11,023,116) $ (11,018,951) $ (15,843,032) $ (14,367,641) 107 CITY OF SHAKOPEE CHANGES IN POSITION Years 2003 Through 2012 2003 2004 2005 2006 GENERAL REVENUES AND OTHER CHANGES IN NET ASSETS: Governmental Activities: Taxes: Property Ta�ces $ 7,995,002 $ 7,842,043 $ 9,341,977 $ 10,547,177 Other Ta�ces 507,706 364,211 314,858 336,648 Unrestricted Investment Earnings 550,705 740,612 951,795 1,661,257 Gain on Disposal of Assets 69,623 294,833 746,340 2,700 Enterprise Fund Reclassed to Special Revenue - 5,539,108 1,658,132 - Transfers 443,651 2,215,871 1,375,203 2,146,233 Total Governmental Activities 9,566,687 16,996,678 14,388,305 14,694,015 Business-Type Activities: Investment Earnings 942,040 709,483 870,714 1,973,715 Gain on Disposal of Assets 9,260 - 409,918 13,749 SpecialItem - (5,539,108) (1,658,132) - Transfers (443,651) (2,215,871) (1,375,203) (2,146,233) Total Business-Type Activities 507,649 (7,045,496) (1,752,703) (158,769) Total Primary Government $ 10,074,336 $ 9,951,182 $ 12,635,602 $ 14,535,246 Change in Net Position: GovernmentActivities $ 7,660,669 $ 16,364,176 $ 13,494,010 $ 7,204,552 Business-Type Activities 12,987,961 7,699,772 14,934,160 9,952,970 Total Primary Government $ 20,648,630 $ 24,063,948 $ 28,428,170 $ 17,157,522 From 2003-2010,the SPUC funds,Water and Electric Enterprise Funds,were reported as a blended component unit of the City. In 201 l,SPUC Funds have been presented as discretely presented component units as it no longer met the criteria for biending. 108 Table 2(Continued) 2007 2008 2009 2010 2011 2012 $ 12,767,354 $ 14,200,833 $ 14,676,518 $ 14,229,111 $ 14,487,805 $ 15,002,764 369,240 388,935 151,956 147,561 160,884 113,902 2,232,717 1,941,335 1,323,230 1,039,867 1,032,409 546,681 22,628 56,453 37,162 - - 11,769 1,111,046 1,297,988 1,899,577 2,089,406 100,000 100,000 16,502,985 17,885,544 18,088,443 17,505,945 15,781,098 15,775,116 3,185,863 3,128,741 1,336,979 1,279,872 758,182 423,946 (1,111,046) (1,297,988) (1,899,577) (2,089,406) (100,000) (100,000) 2,074,817 1,830,753 (562,598) (809,534) 658,182 323,946 $ 18,577,802 $ 19,716,297 $ 17,525,845 $ 16,696,411 $ 16,439,280 $ 16,099,062 $ (6,993,133) $ 1,98Q185 $ 536,080 $ 210,794 $ 1,008,338 $ 1,260,310 9,123,978 4,505,330 5,966,649 5,466,666 (412,090) 471,111 $ 2,130,845 $ 6,485,515 $ 6,502,729 $ 5,677,460 $ 596,248 $ 1,731,421 109 CITY OF SHAKOPEE Table 3 FUND BALANCES-GOVERNMENTAL FUNDS Last Ten Fiscal Years 2003 2004 2005 2006 General Fund: Nonspendable: Prepaids $ - $ - $ - $ - Reserved 79,003 13,586 16,465 1,490,157 Restricted for: BATC Litigation - - - - Committed to: Working Capital - - - - Unreserved 5,565,816 '7,233,268 9,662,677 8,354,477 Unassigned - - - - Total General Fund $ 5,644,819 $ 7,246,854 $ 9,679,142 $ 9,844,634 All Other Governmental Funds Reserved: Special Revenue Funds $ 1,778,684 $ 2,232,061 $ 2,861,564 $ 3,386,721 Debt Service Funds 6,369,303 10,837,684 9,236,020 7,930,114 Capital Projects Funds 7,088,887 17,088,803 9,915,610 8,082,799 Restricted for: Forfeitures - - - - Transit - - - - Telecomminication - - - - SCDP Grant - - - - Revolving Loans - - - - Economic Development - - - - Debt Service - - - - Capital Improvements - - - - Committed to: Working Capital - - - - Transit - - - - Revolving Loans - - - - Economic Development - - - - Park Projects - - - - Capital Improvements - - - - 2008 Projects - - - - 2009 Projects - - - - 2010 Projects - - - - Fire Station 2 - - - - Assigned to: Capital Improvements - - - - Capital Projects Funds - - - - Telecomminication - - - - Unreserved Special Revenue Funds - (4,971) - - Debt Service Funds - - - - Capital Projects Funds (705,537) (28,081) (1,833,937) (1,205,899) Unassigned - - - - Total all Other Governmental Funds $ 14,531,337 $ 30,125,496 $ 20,179,257 $ 18,193,735 Note: GASB Statement No.54 was implemented in 2010. Only 2010-2012 are repor[ed in compliance with GASB Statement No.54. 2003-2009 are reported as previously stated. 110 Table 3(Continued) 2007 2008 2009 2010 2011 2012 $ - $ - $ - 149,940 131,447 19,189 1,810,650 1,126,074 799,276 - - - - - - 218,032 - - - - - 345,820 - - 7,896,883 8,733,528 10,703,004 - - - - - - 8,323,938 9,172,747 9,503,652 $ 9,707,533 $ 9,859,602 $ 11,502,280 $ 9,037,730 $ 9,304,194 $ 9,522,841 $ 2,489,775 $ 2,738,909 $ 2,677,290 $ - $ - $ - 3,849,703 4,873,440 4,185,059 - - - - - - 189,112 208,518 195,823 - - - 1,158,355 1,237,762 1,045,340 - - - 49,192 45,681 - - - - 55,743 22,462 22,447 - - - 143,023 249,147 252,639 - - - 447,319 497,775 562,959 - - - 5,127,697 4,625,946 9,574,198 - - - 2,203,238 958,195 1,815,339 - - - 345,820 - - - - - 463,470 - - - - - 100,000 - - - - - 20.930 - - - - - 1,785,164 - - - - - 3,616,689 - - - - - 190,431 - - - - - 14,876 - - - - - 131,398 - - - - - 2,476,886 - - - - - - 6,964,247 8,681,475 - - - - 413,228 394,666 - - - - - 66,989 993,555 1,130,452 - - - - 7,941,439 7,658,289 7,504,770 - - - 1,673,762 1,994,812 2,453,383 - - - - - - (116,803) (484,089) (384,965) $ 16,948,234 $ 18,395,902 $ 16,820,502 $ 18,402,540 $ 14,738,872 $ 22,226,910 111 CITY OF SHAKOPEE Table 4 CHANGES IN FUND BALANCES-GOVERNMENTAL FUNDS Last Ten Fiscal Years 2003 2004 2005 2006 REVENUES: Taxes $ 7,991,699 $ 8,207,254 $ 9,621,721 $ 10,815,367 Special Assessments 3,158,560 3,175,161 2,564,470 1,751,871 Licenses and Permits 4,748,457 4,173,804 4,444,491 2,675,935 Intergovernmental 2,612,877 4,162,581 3,646,605 2,877,245 Charges for Service 1,537,412 2,382,405 2,455,171 2,290,996 Fines and Forfeits 275,583 288,492 322,579 422,850 Miscellaneous 605,947 766,614 1,159,536 1,979,419 Total Revenues 20,930,535 23,156,311 24,214,573 22,813,683 EXPENDITURES: General Government 3,192,768 3,486,029 3,120,544 3,149,717 Police 3,148,785 3,698,352 4,159,724 4,842,268 Fire 975,656 1,141,700 1,194,610 1,481,327 Protective Inspection 645,030 690,920 855,864 829,526 Public Works 2,221,004 2,564,662 3,003,554 3,095,392 Culture and Recreation 669,570 2,489,749 2,792,590 3,453,545 Economic Development - - - - Miscellaneous 317,167 - - - Debt Service: Principal 3,720,000 1,775,000 1,845,000 3,055,000 Interest and Other Charges 717,098 701,976 1,106,324 1,195,618 CapitalOutlay 5,532,652 7,432,575 14,058,508 10,650,449 Total Expenditures 21,139,730 23,980,963 32,136,718 31,752,842 Excess of Revenues Under Expenditures (209,195) (824,652) (7,922,145) (8,939,159) OTHER FINANCING SOURCES (USES): Bonds Issued 2,215,567 15,070,000 - 3,440,000 Sale of Assets 41,761 299,183 753,024 2,700 Premium on Bonds Issued - - - 20,275 Refunded Bond Escrow - - (2,190,000) - Transfers In 1,732,872 5,963,741 3,374,566 6,683,532 Transfers Out (2,289,221) (3,312,078) (1,529,396) (3,354,364) Total Other Financing Sources (Uses) 1,700,979 18,020,846 408,194 6,792,143 Net Change in Fund Balance $ 1,491,784 $ 17,196,194 $(7,513,951) $ (2,147,016) Debt Service as a Percentage of Noncapital Expenditures 33% 15% 19% 21% 112 Table 4(Continued) 2007 2008 2009 2010 2011 2012 $ 13,084,595 $14,437,766 $ 14,992,051 $ 14,385,788 $ 14,699,066 $ 15,141,903 2,301,560 1,879,974 1,810,511 1,404,088 1,475,324 1,499,810 1,378,570 1,221,939 1,492,746 1,338,111 1,281,150 2,441,246 2,540,584 2,702,993 1,811,668 2,924,161 3,941,830 2,548,692 2,089,375 2,209,269 1,808,865 2,202,524 3,958,237 4,449,003 501,228 442,626 428,662 549,543 411,211 418,474 2,322,755 2,028,529 1,503,722 1,255,038 705,969 836,868 24,218,667 24,923,096 23,848,225 24,059,253 26,472,787 27,335,996 3,479,925 3,517,957 3,331,193 2,960,233 4,004,684 4,396,219 5,562,945 5,818,091 6,038,687 6,361,621 6,705,512 6,912,036 1,833,876 1,857,482 1,796,134 1,866,037 2,028,186 1,872,289 945,196 786,715 769,883 784,909 727,126 699,674 3,769,491 3,628,954 3,591,049 3,902,622 2,602,104 2,349,042 3,651,539 4,101,175 3,898,844 4,075,919 3,902,386 3,799,723 - 522,074 316,566 270,915 247,591 155,692 3,110,000 3,280,000 2,660,000 3,800,000 2,565,000 1,950,000 1,025,868 1,077,711 1,077,325 833,245 658,265 634,063 7,288,033 3,300,942 1,797,299 2,812,488 6,301,406 2,164,053 30,666,873 27,891,101 25,276,980 27,667,989 29,742,260 24,932,791 (6,448,206) (2,968,005) (1,428,755) (3,608,736) (3,269,473) 2,403,205 2,815,000 2,170,000 - 1,555,000 - 4,865,000 17,700 - - 6,000 - - 9,956 16,741 - - - 73,480 4,411,281 4,605,693 4,958,133 13,199,807 2,968,919 3,367,400 (2,188,333) (2,224,692) (3,462,100) (12,380,403) (2,750,830) (3,002,400) 5,065,604 4,567,742 1,496,033 2,380,404 218,089 5,303,480 $ (1,382,602) $ 1,599,737 $ 67,278 $ (1,228,332) $ (3,051,384) $ 7,706,685 16% 17% 16% 18% 14% 11% 113 CITY OF SHAKOPEE Table 5 TAX CAPACITY AND ESTIMATED ACTUAL VALUE OF TAXABLE PROPERTY Last Ten Fiscal Years Taxable Tax Estimated Capacity as a Commercial Less Less Net Net Ta�cable Total Taxable Percentage of Fiscal Residential Industrial Other TvcIncrement Fiscal Tax Direct Mazket Estimated Year Property Property Property Property Disparities Capacity Tax Rate Value Mazket Value 2003 $13,89Q536 $1Q452,944 5 589,540 $ 497,860 $2,035,749 $22,399,411 0.33939 $2,062,115,200 1.09% 2004 16,721,302 10,609,240 913,912 497,255 2,121,170 25,626,029 032433 2,464,564,300 1.04% 2005 20,394,086 11,749,438 528,300 327,963 2,132,628 3Q211,233 031115 2,654,161,900 1.14% 2006 23,162,320 12,710,783 565,215 352,543 1,615,190 34,470,585 030974 2,987,657,400 1.15% 2007 26,817,616 14,013,644 675,479 378,593 1,963,379 39,164,767 031939 3,419,040,600 1.15% 2008 29,942,078 15,426,355 741,679 411,490 1,846,919 43,851,703 031925 3,800,795,500 1.15% 2009 29,805,971 16,088,685 1,319,935 156,799 1,862,715 45,195,077 032630 3,85Q591,200 117% 2010 27,805,069 16,459,872 1,279,807 151,914 1,584,552 43,808,282 033710 3,710,814,056 1.18% 2011 24,652,932 18,351,835 1,304,688 161,430 1,630,522 42,517,503 0.34731 3,570,069,500 1.19% 2012 23,180,073 17,956,273 852,512 155,002 1,740,447 40,093,409 0.36655 3,347,179,800 120% Source:Scott County Auditor 114 CITY OF SHAKOPEE Table 6 DIRECT AND OVERLAPPING PROPERTY TAX RATES Last Ten Fiscal Years City Direct Rate General Obligation Shakopee Debt Service Fiscal Operating Debt Service Total Direct School Scott Other Market Value Year Rate Rate Rate District County Jurisdictions Rate 2003 0.33172 0.00767 0.33939 0.24168 0.38554 0.05685 0.01393 2004 0.31131 0.01302 0.32433 0.21517 0.36635 0.04123 0.01189 2005 0.29855 0.01260 0.31115 0.25215 0.35361 0.04660 0.00969 2006 0.28996 0.01978 0.30974 0.27789 0.34974 0.04578 0.00848 2007 0.29822 0.02117 0.31939 0.27132 033140 0.04434 0.00728 2008 0.29874 0.02051 0.31925 0.26103 0.32646 0.04642 0.00537 2009 0.30401 0.02229 0.32630 0.27274 0.32684 0.04960 0.00651 2010 0.32152 0.01558 0.33710 0.29050 0.33240 0.04980 0.00651 2011 0.32996 0.01735 0.34731 0.31182 0.35541 0.05020 0.00342 2012 0.34005 0.02650 0.36655 0.35512 0.38802 0.05610 0.00345 Sources: Scott County Auditor and Leauge of Minnesota Cities Reports 115 CITY OF SHAKOPEE Table 7 PRINCIPAL TAXPAYERS Current Year and Nine Years Ago 2012 2003 Percentage Percentage 2011/12 of Total 2002/03 of Total Tvc Cap. Tax Cap. Tax Cap. Tax Cap. Taxpayer Type of Business Value Rank Value Value Rank Value Excel Energy Electrical Generation 537,082 1 134% $ 372,190 4 1.49% Rahr Malting Grain Processing 407,838 2 1.02% 316,160 5 1.27% Seagate Manufacturing/Reseazch 399,250 3 1.00°/o 739,250 2 2,96% St.Francis RMC Health Care 358,500 4 0.89% Shakopee Crossing LTD Retail 357,420 5 0.89% Ryan Companies Property Management 332,700 6 0.83% Canterbury Park Horse Racing 324,236 7 0.81% Certainteed Manufacturing 319,250 8 0.80% Shakopee Valley Mazket Retail 315,750 9 0.79% Walmart Retail 315,250 ]0 0.79% ADC Telecommunications Electronics 740,108 1 2.97% OIRE Property Management 411,328 3 1.65% KMaR Warehouse Warehouse/Distribution Center 285,404 6 1.14% Principal Mutual Mortgage Financial 266,918 7 1.07% 1000 Valley Drive Warehouse 261,250 8 1.05% Valley Fair Amusement Park 256,032 9 1.03°/a First Industrial LP Wazehouse 178,206 10 0.71% $3,667,276 9.16% $ 3,826,846 1534% Source: Scott CounTy Auditor 116 CITY OF SHAKOPEE Table 8 PROPERTY TAX LEVIES AND COLLECTIONS Last Ten Fiscal Years Ratio of Accumulated Percentage Delinquent Collections Percentage Collections of Total Accumulated Taxes to Year Ta� of Current of Levy of Prior Total Collections Delinquent Current Collected Levy Years Taxes Collected Years TaYes Collections To Tax Levy TaYes Yeazs Ta�ces 2003 $ 7,889,018 $ 7,191,567 91% $ 47,055 $ 7,238,622 92% $ 79,710 1.01% 2004 8,625,695 7,878,618 91% (86,619) 7,791,999 90% 175,774 2.04% 2005 9,703,206 9,025,261 93% 67,187 9,092,448 94% 164,517 1.70% 2006 10,951,917 9,945,490 91% 38,986 9,984,476 91% 279,316 2.55% 2007 12,745,449 12,418,768 97% 91,200 12,509,968 98°/a 331,315 2.60% 2008 14,222,007 13,661,366 96% 208,470 13,869,836 98% 483,317 3.40% 2009 14,983,677 14,457,378 96% 1�7,920 14,615,298 98% 319,740 2.13% 2010 14,918,665 13,971,356 94% 55,020 14,026,376 94% 310,624 2.08% 2011 14,837,438 14,019,831 94% 278,981 14,298,812 96% 260,248 1J5% 2012 14,837,438 14,553,417 98% 188,750 14,742,167 99% 235,011 1.58% Source:Scott County Auditor 1. The above data does not include tax increment districts. 2. The State of Minnesota cancelled$561,000 in 2003 to 2006,$243,439 in 2008,$511,956 in 2009,$558,860 in 2010 and$595,572 of annual aid payments to the City that were part of the ta�c levy. 117 CITY OF SHAKOPEE Table 9 RATIO OF OUTSTANDING DEBT BY TYPE Last Ten Fiscal Years Governmental Activities G.O.Revenue Business-type Tax Special Activities Total Percentage Fiscal G.O. Increment Assessment Revenue Primary of Personal Per Year Bonds Bonds Bonds Bonds Government Income Capita 2003 $ 2,445,000 $ - $ 13,060,000 $ 25,215,000 $ 40,720,000 5.0% 1,631 2004 10,595,000 - 18,205,000 25,515,000 54,315,000 5.5% 1,879 2005 8,275,000 - 16,360,000 24,750,000 49,385,000 4.4% 1,593 2006 7,950,000 - 17,070,000 34,535,000 59,555,000 4.9% 1,816 2007 7,560,000 - 17,165,000 33,895,000 58,620,000 4.5% 1,752 2008 7,165,000 - 16,450,000 33,225,000 56,840,000 4.1% 1,689 2009 6,755,000 - 14,200,000 22,235,000 43,190,000 4.1% 1,276 2010 6,340,000 - 12,370,000 21,470,000 40,180,000 3.4% 1,084 2011 5,905,000 - 10,240,000 - 16,145,000 1.3% 428 2012 10,325,000 - 8,735,000 - 19,060,000 1.6% 504 Sources: See Table 14 far income and population data. Note:From 2003-2010,the SPUC Funds,Water and Electric Enterprise Funds,were reported as a blended component unit of the City. In 2011,SPUC Funds have been presented as discretely presented component units as it no longer met the criteria for blending. 118 CITY OF SHAKOPEE Table 10 RATIOS OF GENERAL BONDED OUTSTANDING Last Ten Fiscal Years Percentage of Percentage of Actual Taxable Total Fiscal G.O. Value of Per Personal Year Bonds Property Capita Income 2003 $ 2,445,000 0.12% 98 0.30% 2004 10,595,000 0.43% 366 1.07% 2005 8,275,000 0.31% 267 0.76% 2006 7,950,000 0.27% 242 0.65% 2007 7,560,000 0.22% 226 0.61% 2008 7,165,000 0.19% 213 0.52% 2009 6,755,000 0.18% 199 0.65% 2010 6,340,000 0.17% 171 0.54% 2011 5,905,000 0.17% 157 0.49% 2012 10,325,000 0.31% 273 0.86% Sources: 1. Metropolitan Council estimated for population. 2005-2009 populations are the City's estimate. 2. Scott County Auditor 119 (THIS PAGE LEFT BLANK INTENTIONALLY) 120 CITY OF SHAKOPEE Table 11 DIRECT AND OVERLAPPING GOVERNMENTAL ACTIVITIES DEBT December 31,2012 Percentage Amount Applicable Applicable G.O. To City of To City of Debt Shakopee(1) Shakopee Direct Debt: City of Shakopee $ 19,060,000 100.0% $ 19,060,000 Overlapping Debt: Independent School DistrictNo. 720 176,155,000 85.0% 149,731,750 Independent School District No. 191 113,620,000 6.8% 7,726,160 Scott County 96,795,000 29.4% 28,457,730 Metropolitan Council 1,724,988,995 1.0% 18,060,635 Total Overlapping Debt: 2,111,558,995 203,976,275 Total Direct and Overlapping Debt $2,130,618,995 $ 223,036,275 Source: Scott County Auditor Dakota County Auditor Metropolitan Council Note: Overlapping governments are those that coincide, at least in part, with geographic boundaries of the City. This schedule estimates the portion of the outstanding debt of those overlapping governments that is borne by the residents and businesses of the City. This process recognizes that,when considering the City's ability to issue and repay long-term debt,the entire debt burden borne by the residents and businesses should be taken into account. However,this does not imply that every taxpayer is a resident, and therefore responsible for repaying the debt of each government. (1)The percentage of overlapping debt is estimated using tax capacity. Applicable percentages were estimated by determining the portion of Scott County's tax capacity that is within the City's boundaries and dividing it by Scott County's total taY capacity. 121 CITY OF SHAKOPEE Table 12 LEGAL DEBT MARGIN INFORMATION Last Ten Fiscal Years 2003 2004 2005 2006 Market Value(Taxable) $ 2>062,115,200 $ 2,464,564,300 $ 2,654,161,900 $ 2,987,657,400 Debt Limit-Percent of Market Value(Note A) 41,242,304 49,291,286 53,083,238 59,753,148 Amount of Debt Applicable to Debt Limit: G.O.Bonds 2,445,000 10,595,000 8,275,000 7,950,000 Available in Debt Service Funds (297,657) (2,539,292) (1,155,148) (810,494) Total Debt Applicable toDebtLimit 2,147,343 8,055,708 7,119,852 7,139,506 Legal Debt Margin $ 39,094,961 $ 41,235,578 $ 45,963,386 $ 52,613,642 NOTE(A): M.S.A.Section 475.53(Limit on Net Debt) Subdivision 1.Generally,except of otherwise provided in Sections 475.51 to 475.75,no municipality,except a school district or a city of the first class,shall incur or be subject to a net debt in excess of 2% (3%starting 2008)of the market value of taxable property in the municipality." NOTE(B): M.S.A. Section 475.51 Definitions: Subdivision 4."Net debt"means the amount remaining after deduction from its gross debt the aggregate of the principal of the following: (1) Obligations issued for improvements which are payable wholly or partly from the proceeds of special assessments levied upon property specially benefited thereby,including those which are general obligations of the municipality issuing them,if the municipality is entitled to reimbursement in whole or in part from the proceeds of the special assessments. (2) Warrants or orders having no definite or fixed maturity. (3) Obligations payable wholly from the income of revenue-producing conveniences. (4) Obligations issued to create or maintain a permanent improvement revolving fund. (5) Obligation issued for the acquisition,and betterment of public waterworks systems,and public lighting, heating or power systems and on any combination thereof or for any other public convenience from which a revenue is or may be derived. (6) Amount of all money and the face value of all securities held as a sinking fund for the extinguishment of obligations other than those deductible under this subdivision. M.S.A. Section 469.178,subdivision 1.(tax increment bonds)"...The bonds are not included for purposes of computing the net debt of any municipality. 122 Table 12(Continued) 2007 2008 2009 2010 2011 2012 $3,419,040,600 $3,800,795,500 $3,850,591,200 $ 3,710,814,056 $3,570,069,500 $3,347,179,800 68,380,812 114,023,865 115,517,736 107,102,085 107,102,085 l OQ415,394 7,560,000 7,165,000 6,755,000 6,340,000 5,905,000 10,325,000 (834,155) (847,608) (837,100) (786,306) (826,957) (4,623,939) 6,725,845 6,317,392 5,917,900 5,553,694 5,078,043 5,701,061 $ 61,654,967 $ 107,706,473 $ 109,599,836 $ 101,548,391 $ 102,024,042 $ 94,714,333 123 CITY OF SHAKOPEE Table 13 PLEDGED REVENUE COVERAGE Last Ten Fiscal Years Utility Bonds Utility Less: Net Fiscal Service Operating Available Debt Service Year Charges Expense Revenue Principal Interest Coverage 2003 $ 22,871,121 $ 17,585,831 $ 5,285,290 $ 580,000 $ 1,348,883 2.74 2004 25,473,439 19,778,149 5,695,290 640,000 1,307,626 2.92 2005 33,841,730 25,821,489 8,020,241 765,000 1,074,487 4.36 2006 38,445,403 31,436,969 7,008,434 785,000 1,174,711 3.58 2007 44,692,049 36,644,414 8,047,635 640,000 1,574,925 3.63 2008 45,499,791 38,689,351 6,810,440 670,000 1,523,198 3.11 2009 42,437,910 33,009,500 9,428,410 710,000 1,012,874 5.47 2010 45,586,795 36,375,440 9,211,355 765,000 939,426 5.40 2011 - - - - - - 2012 - - - - - - l. Operating expense excludes depreciation and amortization. Note: From 2003-2010,the SPUC Funds, Water and Electric Enterprise Funds,were reported as a blended component unit of the City. In 2011, SPUC Funds have been presented as discretely presented component units as it no longer met the criteria for blending. 124 CITY OF SHAKOPEE Table 14 DEMOGRAPHIC AND ECONOMIC STATISTICS Last Ten Calendar Years Fiscal School Unemployment Total Per Capita Personal Year Population(1) Enrollment(2) Rate(3) Employment Income(4) Income(5) 2003 24,967 4,790 4.3% 15,887 $ 32,760 $ 817,918,920 2004 28,913 5,121 3.9% 16,213 34,284 991,253,292 2005 31,000 6,247 3.6% 16,192 35,956 1,114,636,000 2006 32,800 6,643 3.7% 17,787 37,023 1,214,354,400 2007 33,460 6,905 4.6% 18,225 39,042 1,306,345,320 2008 33,660 7,163 6.7% 18,688 31,900 1,375,044,660 2009 33,860 7,465 7.8°/a 18,926 30,900 1,046,274,000 2010 37,076 7,814 7.0% 18,771 31,700 1,175,309,200 2011 37,721 8,115 4.6% 20,718 32,017 1,207,713,257 2012 37,841 8,392 5.0% 19,971 31,628 1,196,835,148 Source: 1. Metropolitan Council population estimates except for 2010 which is the official census figure. 2005-2009,2011-2012 are the City's estimate. 2. Shakopee School District,SACS,Bloomington Lutheran 3. Minnesota Department of Employment and Economic Development 4. Bureau of Economic Analysis and MET Council Community Profile Dad 5. Per capita income times population 125 (THIS PAGE LEFT BLANK INTENTIONALLY) 126 CITY OF SHAKOPEE Table 15 PRINCIPAL EMPLOYERS Current Year and Nine Years Ago 2012 2003 Total Total City Ciry Taxpayer Type of Business Employees Rank Employment Employees Rank Employment Valley Fair Amusement Park 1,600 1 8.01% 1,200 2 7.55% Seagate Manufacturing/Research 1,595 2 7.99% 1,100 3 6.92% School District No.720 Education 1,090 3 5.46% 390 8 2.45% St.Francis RMC Health Care 1,000 4 5.01% 363 9 228% Canterbury Pazk Horse Racing 750 5 3.76% ScottCounty Government 700 6 3.51% 430 4 2.71% Northstaz Auto Auction Auto Auction 350 7 1.75% Anchor Glass Manufacturing 279 8 1.40% Minnesota Conectional Facilities Government 259 9 1.30% TORO Manufacturing 240 10 120% ADC Manufacturing 1,400 1 8.81% Kmart Distribution Center 424 5 2.67% Shakopee Valley Printing Printing 415 6 2.61% American Color-SVP Printing 415 7 2.61% CertainTeed Roofing Manufacturing 300 10 1.89% 7,863 39.39% 6,437 40.50% Total Employment 19,971 15,887 Source: Minnesota Department of Employment and Economic Development. 127 CITY OF SHAKOPEE Table 16 FULL-TIME EQUIVALENT CITY GOVERNMENT EMPLOYEES BY FUNCTION/PROGRAM Last Ten Fiscal Years 2003 2004 2005 2006 2007 General Government: Administration 6 6 6 6 5 City Clerk 4 4 4 4 4 Finance 3 3 3 3 3 Planning 6 5 5 5 5 Facilities Maintenance 1 4 4 6 6 Information Technology 1 2 2 2 2 Public Safety: Police: Licensed 34 40 42 45 46 Other 7 7 9 7 7 Fire: Full time - - - - 1 Paid On Call 50 50 50 48 48 Building Inspection 7 8 8 8 7 Public Works: Engineering 9 9 9 9 7 Street 9 11 12 12 12 Shop 3 3 3 3 3 Park and Recreation: Park Maintenance 7 7 7 7 8 Recreation 8 8 10 10 10 Total 155 167 174 175 174 Source: City departments 128 Table 16(Continued) 2008 2009 2010 2011 2012 5 5 5 5 6 4 4 4 4 3 3 3 3 3 4 5 5 5 5 5 7 6 6 6 4 2 2 2 2 2 47 47 47 50 49 6 6 6 6 7 2 3 3 3 3 48 44 44 42 44 6 5 5 5 5 7 7 7 7 7 13 13 13 13 13 3 3 3 4 3 8 8 8 8 8 7 7 7 7 7 173 168 168 170 170 129 CITY OF SHAKOPEE Table 17 OPERATING INDICATORS BY FUNCTION/PROGRAM Last Ten Fiscal Years 2003 2004 2005 2006 2007 General Government Planning Number of Case Files 127 109 120 91 67 Number of Plats Filed 11 9 7 10 3 Number of Acres Platted 385 238 321 155 38 Public Safety Police Arrests 1,147 1,248 1,451 1,770 2,199 Citations 3,129 3,802 3,843 4,970 6,073 Calls for Service 14,799 16,062 17,363 18,333 19,606 Fire Calls for Service 482 479 539 494 609 Building Inspection Building Permits Issued 1,744 1,638 1,512 1,131 1,194 Number of Inspections 15,016 14,535 15,175 9,671 8,174 Single Family Homes Permitted 384 396 352 223 138 Public Works Street Miles of Roadway 138 114 123 153 154 Park and Recreation Park Maintenance Acres Maintained 671 760 925 930 930 Recreation Program Participants 10,194 9,693 9,842 9,928 10,847 Community Center Members 556 541 516 578 597 Community Center Admissions 77,014 75,018 77,543 91,776 100,044 Source: City departments 130 Table 17(Continued) 2008 2009 2010 2011 2012 68 35 33 24 47 2 2 1 2 5 50 34 6 68 89 1,881 1,913 1,962 1,666 1,798 4,058 6,127 5,528 5,647 5,636 19,057 17,909 17,831 17,852 18,349 538 517 557 600 617 1,019 1,102 1,083 1,881 1,413 5,946 9,726 8,048 8,004 8,191 94 314 160 118 97 154 154 154 154 154 933 933 933 933 933 11,410 10,377 13,001 13,157 13,104 613 823 2,534 3,682 4,009 100,397 109,257 117,336 120,667 128,929 131 CITY OF SHAKOPEE Table 18 CAPITAL ASSET STATISTICS BY FUNCTION/PROGRAM Last Ten Fiscal Years 2003 2004 2005 2006 2007 Police: Stations 1 1 1 1 1 Patrol Zones 4 4 4 4 4 Patrol Units 12 13 13 15 15 Fire Stations 2 2 2 2 2 Street: Miles of Roadway 138 114 123 153 154 Traffic Signals 23 25 25 25 25 Parks: Acres 671 760 925 1,015 1,015 Ball Fields 42 46 46 47 47 Playgrounds 13 13 13 18 22 Source: City Departments 132 Table 18 (Continued) 2008 2009 2010 2011 2012 1 1 1 1 1 4 4 4 4 4 15 15 15 15 15 2 2 2 2 2 154 154 154 154 154 26 27 27 27 29 1,019 1,024 1,024 1,024 1,048 49 49 52 54 56 24 24 24 26 26 133 CITY OF SHAKOPEE Scott County, Minnesota COMMUNICATIONS LETTER For the Year Ended December 31,2012 CITY OF SHAKOPEE TABLE OF CONTENTS REPORT ON MATTERS IDENTIFIED AS A RESULT OF THE AUDIT OF THE FINANCIAL STATEMENTS............................................................... 1 SIGNIFICANTDEFICIENCY....................................................................................................... 3 DEFICIENCIES............................................................................................................................... 4 REQUIREDCOMMUNICATION................................................................................................ 5 FINANCIALANALYSIS................................................................................................................ 8 Expert udvice. When you neea it."' REPORT ON MATTERS IDENTIFIED AS A RESULT OF THE AUDIT OF THE FINANCIAL STATEMENTS Honorable Mayor and Members of the City Council City of Shakopee Shakopee, Minnesota In planning and performing our audit of the financial statements of the City of Shakopee, Minnesota, as of and for the year ended December 31, 2012, in accordance with auditing standards generally accepted in the United States of America and GovernmentAuditing Standards, we considered the City's internal control over financial reporting (internal control) as a basis for designing our auditing procedures that are appropriate in the circumstances for the purpose of expressing our opinion on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of the City's internal control. Accordingly, we do not express an opinion on the effectiveness of the City's internal control. Our consideration of internal control was for the limited purpose described in the preceding paragraph and was not designed to identify all deficiencies in internal control that might be deficiencies, significant deficiencies or material weaknesses and,therefore, material weaknesses or significant deficiencies may exist that were not identified. However, as discussed below, we identified certain deficiencies in internal control that we consider to be significant deficiencies. 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 combination of deficiencies in internal control, such that there is a reasonable possibility that a material misstatement of the City's financial statements will not be prevented ar detected and corrected on a timely basis. A significant deficiency is a deficiency, or combination of deficiencies, in internal control that is less severe than a material weakness, yet important enough to merit attention by those charged with governance. A significant deficiency is identified within this letter. The accompanying memorandum also includes financial analysis provided as a basis for discussion. The matters discussed herein were considered by us during our audit and they do not modify the opinion expressed in our Independent Auditor's Report dated April 17, 2013, on such statements. During our audit, we also became aware of matter which we believe represent opportunities for strengthening internal control and operating efficiently and those are also included within this letter. 1 D� This communication is intended solely for the information and use of management,the City Council, others within the City and state oversight agencies and is not intended to be and should not be used by anyone other than these specified parties. ��(�,,, Dcw,��, V-� t.�P. KERN, DEWENTER, VIERE, LTD. Bloomington, Minnesota April 17, 2013 2 CITY OF SHAKOPEE SIGNIFICANT DEFICIENCY December 31, 2012 LACK OF SEGREGATION OF ACCOUNTING DUTIES Adequate segregation of accounting duties is in place when the four areas of a transaction have been separated: authorization, custody, recording and reconciliation. During 2012,the City did not have sufficient staff to segregate the duties listed above. Specific areas where this is a lack of internal controls includes (but is not all-inclusive): Payroll The Payroll Clerk processes payroll, posts payroll to the general ledger, issues direct deposits, prepares the payroll taxes, initiates transfers for payment of payroll, prepares all W-2s and maintains all data files as well as the payroll program. Cash Receipts Deposits at City Hall—The front desk personnel receives money, codes the revenue and prepares bank deposits. The Accountant reconciles cash and posts all deposits into the general ledger. Deposits at Recreation Center—One employee is able to receipt money and prepare the bank deposit. Cash Disbursements The Accountant enters invoices, matches purchase orders to invoices and prepares checks for payment. Management is aware of this condition and has taken certain steps to compensate for the lack of segregation but due to the small staff needed to handle all of the accounting duties, the costs of obtaining desirable segregation of accounting duties often exceeds benefits which could be derived. However, management must remain aware of this situation and should continually monitor the accounting system, including changes that occur. 3 CITY OF SHAKOPEE DEFICIENCIES December 31,2012 IMPROVE ICE ARENA RECEIPTING INTERNAL CONTROL During our audit, we analyzed the receipts collection process of the ice arena and found the process to be decentralized from the City's regular receipting process. Currently, the City employs an Ice Arena Manager who collects and records funds and also maintains copies of signed ice rental contracts and a list of payers, creating a segregation of duties incompatibility. Areas where controls could be implemented include: • Segregate duties so that employees are not able to receipt money, prepare reconciliations and prepare the deposit • Have an employee independent of collecting the cash maintain and create the billing contracts to ensure that all the contracts are being billed and the revenue is being deposited by the City • Check ice arena schedules to contracts to ensure that all ice time is being billed To improve internal control over the ice arena receipting process and to prevent potential omissions and errors, we recommend the City implement additional oversight procedures to ensure the accuracy and completeness of ice arena receipts. IMPROVE COMMUNITY CENTER RECEIPTING INTERNAL CONTROL During our audit, we analyzed the receipts collection process of the community center and also found the process to be decentralized from the City's regular receipting process. Currently,the City employees who collect and record funds, remit payments to the Community Center Manager who maintains all ledgers and prepares deposits, creating a segregation of duties incompatibility. Areas where controls could be implemented include: • Include support for deposits from the Teen Center • Ensure all cash collected is processed through the cash register • Segregate duties so that employees are not able to receipt money, prepare reconciliations and prepare the deposit To improve internal control over the community center receipting process and to prevent potential omissions and errors, we recommend the City implement additional oversight procedures to ensure the accuracy and completeness of community center receipts. FOLLOW CITY COUNCIL APPROVED FEE SCHEDULE During the audit, collections of building permit fees were reviewed and compared to the current City Counci] approved fee schedule. Of the 10 building permits tested, three instances were noted where the fee charged was not in accordance with the approved fee schedule. We recommend the City's inspection department employees follow the City Council approved fee schedule for all calculations of permits and other building related fees. The current language in the City Fee Schedule may need to be refined to more clearly define the fees and charges to be applied to building inspection services. 4 CITY OF SHAKOPEE REQUIRED COMMUNICATION December 31, 2012 We have audited the basic financial statements of the City for the year ended December 31, 2012, and have issued our report dated April 17, 2013. Professional standards require that we provide you with the following information related to our audit. OUR RESPONSIBILITY UNDER AUDITING STANDARDS GENERALLY ACCEPTED IN THE UNITED STATES OF AMERICA AND GOVERNMENTAUDITING STANDARDS As stated in our engagement letter, our responsibility, as described by professional standards, is to express an opinion about whether the financial statements prepared by management with your oversight are fairly presented, in all material respects, in conformity with accounting principles generally accepted in the United States of America. Our audit of the financial statements does not relieve you or management of your responsibilities. Our responsibiliry is to plan and perform our audit to obtain reasonable, but not absolute, assurance that the financial statements are free of material misstatement. As part of our audit, we considered the internal control of the City. Such considerations were solely for the purpose of determining our audit procedures and not to provide any assurance concerning such internal control. We are responsible for communicating significant matters related to the audit that are, in our professional judgment, relevant to your responsibilities in overseeing the financial reporting process. However, we are not required to design procedures specifically to identify such matters. As part of obtaining reasonable assurance about whether the City'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. PLANNED SCOPE AND TIMING OF THE AUDIT We performed the audit according to the planned scope and timing previously communicated to you. QUALITATIVE ASPECTS OF ACCOUNTING PRACTICES Management is responsible far the selection and use of appropriate accounting policies. In accordance with the terms of our engagement letter, we will advise management about the appropriateness of accounting policies and their application. The significant accounting policies used by the City are described in Note 1 to the financial statements. We noted no transactions entered into during the year for which there is a lack of authoritative guidance or consensus. There were no significant transactions that have been recognized in the financial statements in a different period than when the transaction occurred. 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 future events affecting them may differ significantly from those expected. The most sensitive estimates affecting the financial statements were as listed on the following p�ge. 5 CITY OF SHAKOPEE REQUIRED COMMUNICATION December 31, 2012 QUALITATIVE ASPECTS OF ACCOUNTING PRACTICES Depreciation—The City is currently depreciating its capital assets over their estimated useful lives, as determined by management, using the straight-line method. Expense/Expenditure Allocation—The City is currently allocating certain costs among the programs and supporting services benefited. The costs are allocated based on management's estimates. Net Other Post Employment Benefits (OPEB) Obligation—This liability is based on an actuarial study using estimates of future obligations of the City for post employment benefits. We evaluated the key factors and assumptions used to develop the above estimates in determining they are reasonable in relation to the financial statements taken as a whole. The disclosures in the financial statements are neutral, consistent and clear. DIFFICULTIES ENCOUNTERED IN PERFORMING THE AUDIT We encountered no 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. Consistent with prior years, the City does not amortize bond issuance costs. This uncorrected misstatement was not material to the financial statements. 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 requested certain representations from management which were provided to us in the management representation letter. 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. We are not aware of any consultations by the City's management with other accountants during the course of our audit. 6 CITY OF SHAKOPEE REQUIRED COMMUNICATION December 31,2012 OTHER 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. OTHER INFORMATION IN DOCUMENTS CONTAINING AUDITED FINANCIAL STATEMENTS We have not reviewed, and it is our understanding, that no other published documents exist that contain audited financial statement information, for which we are currently auditing. As stated in our engagement letter, if you publish or reproduce the financial statements or make reference to our Firm name in relation to such documents, you agree to provide us with a copy of the final reproduced material for our approval before it is distributed. 7 CITY OF SHAKOPEE FINANCIAL ANALYSIS December 31, 2012 The following pages provide graphic representation of select data pertaining to the financial position and operations of the City for the past five years. Our analysis of each graph is presented to provide a basis for discussion of past performance. GENERAL FUND OPERATIONS OF THE CITY For the year ended December 31, 2012, revenues exceeded expenditures and transfers out and increased the fund balance by approximately $ 218,000. General Fund sza,000,000 $2QOOQ006 �- � -- � - - �- $16,OOQOOU � -- - - $12,OOQ000 - - - -- ---- $8,000,000 $4,000,000 -� - ?>a. $ Z008 'OOO '_010 ?O77 20I3 _ .____- — I __. __._..__ -- — ■Revenues $U,A73,0-1? 517,07�,G39 519,589,535 S�Q956,396 $21,770,313 �Expenditures 16,289,022 16,030,691 18,724,835 18,674,938 18,694,1O1 m Fund Balance 9,859,602 11,502,280 9,037,730 9,304,194 9,522,841 General Fund Revenues/Expenditures Per Capita $�oo $600 - - ------— ------ � �-- -- - $577 �5(� $50$ - :.. _____ $48? .5�,�� �$A84 $497 S.19� Sd96 $500 54i6 " . $400 - $300 $200 $100 -- $- - 7—_ 2003 2009 2010 2011 _°UL' ■Rc�enucs �E.epcndiWrcs * 2010 updated for change in accounting principle for component unit reporting 8 CITY OF SHAKOPEE FINANCIAL ANALYSIS December 31,2012 GENERAL FUND OPERATIONS OF THE CITY For the 2012 operating year, the City Council provided a budget that would increase the General Fund balance by $ 220,539. Revenues exceed expectations and expenditures were 7.1%under budget. At year-end, expenditures and transfers out exceeded revenues and transfers in by only $ 1,892. Budget Actual Variance Revenues: Taxes and Assessments $ 13,420,920 $ 14,786,308 $ 1,365,388 Licenses and Permits 1,275,300 1,221,469 (53,831) Intergovernmental 749,560 991,445 241,885 Charges for Services 3,040,630 4,016,255 975,625 Fines and Forfeitures 436,000 368,167 (67,833) Miscellaneous Revenues 346,400 386,704 40,304 Total Revenues $ 19,268,810 $ 21,770,348 $ 2,501,538 Expenditures: General Government $ 3,502,807 $ 3,117,408 $ (385,399) Public Safety 9,747,231 9,408,233 (338,998) Public Works 2,878,352 2,375,731 (502,621) Parks and Recreation 3,992,281 3,792,729 (199,552) Total Expenditures $ 20,120,671 $ 18,694,101 $ (1,426,570) Transfers In $ 1,072,400 $ 122,400 $ (950,000) Transfers Out - (2,980,000) (2,980,000) Net Transfers 1,072,400 (2,857,600) (3,930,000) Change in Fund Balance $ 220,539 $ 218,647 $ (1,892) Significant revenue budget variances are a result of receiving more in property taxes than anticipated, state fire aid, and higher than expected charges for services for services with Shakopee Public Utilities Commission (SPUC). All functions of the expenditures were under budget. General government was under budget due to switching janitorial services from employees to contracted services, as well as employee changes in health insurance plans. Public Safety was under budget due to open positions during the year. Public Works spent more time working on projects that were charged out to other funds. Parks and Recreation had less participation than anticipated causing a decrease in supplies and instructors needed. 9 CITY OF SHAKOPEE FINANCIAL ANALYSIS December 31,2012 GENEI2AL FUND OPERATIONS OF THE CITY �Unreserved/Unassigned Fund Balance as a Percent of Expenditures �o�ra 16��io 6o�ro 50% '.54% �� ., �;49°/a I 51% 40% 44% 30% 20% ]0% 0% 2008 2009 2010 2011 2012 The City's target General Fund balance is an unassigned level between 40% (minimum) and 45%of current year expenditures. This level is to provide working capital for cash flow, eXpected decline in revenues and unforeseen expenditures such as natural disasters. Replenishing the fund balance when it falls below the target level shall be accomplished by interfund transfers or budgeting for expenditures and other uses to be less than revenues or other sources over a period not to exceed three years. For the year-ended December 31, 2012,the City exceeded their policy, maintaining an unassigned fund balance of 51%. 10 CITY OF SHAKOPEE FINANCIAL ANALYSIS December 31,2012 GENERAL FUND REVENUES The City's revenue in the General Fund has increased each of the last five years. During 2012, revenue in the General Fund exceeded the budget by $ 2,500,000 and exceeded the prior year revenue by $ 813,000, increasing from $ 20,956,396 to $ 21,770,348. The major increases in the 2012 revenue were in property taxes, intergovernmental and charges for services. Property taxes increased due to keeping the EDA levy in the general fund and then transferring it to the EDA fund, as well as the change in Market Value Credit(MVC) at the state level. In 2012,the state eliminated the MVC,which caused the whole of the levy to be levied upon the City instead of being reduced by the MVC state aid. In 20l l, the state unalloted the City's portion of MVC in the amount of approximately $595,000. Intergovernmental increased due to a change in the recording of the state fire aid. Charges for services increased due to the electrical fund transfer due to increased usage. During 2012, property taxes represented 68%of the total General Fund revenues. Charges for services represented the second largest component at 18%. General Fund Revenues $24,000,000 $21,000,000 $18,000,000 ;��.���� ���,�'� $15,000,000 ., .n,:.. ,�::; $12,000,000 $9,000,000 $6,000,000 $3,000,000 $ 2008 2009 2010 20ll 2012 ■Miscellaneous $484,110 $416,023 $418,654 $397,477 $359,323 �Charges for Services 1,093,250 804,536 3,028,330 3,879,113 4,035,921 ❑Fines and Forfeitures 366,618 364,895 423,746 357,249 368,167 mLicenses and Permits 691,415 1,122,619 1,303,904 1,225,560 1,229,184 �Intergovemmental 361,412 593,647 828,906 796,076 991,445 ■Taxes and Assessments 12,881,242 13,772,919 13,585,995 14,300,921 14,786,308 11 CITY OF SHAKOPEE FINANCIAL ANALYSIS December 31,2012 TAX LEVY, CAPACITY AND RATES The 2012 levy includes the General Fund and debt service levies. The tax levy is then reduced by fiscal disparity credit that is received in the form of state aid. Disparity aid is reported as tax revenue and reduces the amount of property tax revenue levied upon the City. Taxable Tax Capacity and Certified Levy $45,000,000 $4Q000,000 $35,000,000 � ' . $30,000,000 �� � � $25,000,000 $20,000,000 —- $15,000,000 — � $10,000,000 -- - $5,000,000 ( $- 2004 2009 62010 2011 '012 ■TarableTaxCapacity $4Q291,149 $4Q934,72�� $38,952,163 $37,680,>87 53�,402,744 aCertified Levy 14,222,007 14,983,677 14,715,299 14,717,367 14,717,435 * Tax capacity values and levy obtained from the League of Minnesota Cities. 12 CITY OF SHAKOPEE FINANCIAL ANALYSIS December 31,2012 TAX LEVY, CAPACITY AND RATES As illustrated below and on the prior page, the tax capacity of the City decreased $ 4.8 million, or 12.i%, since 2008. The City's property tax levy increased 3.5%, or$495,428, in the same time frame. With the levy increasing and tax capacity declining, the tax rate increased from 31.930% in 2008 to 36.660% in 2012. The state average tax rate for Minnesota cities was 46.260%for 2012. Tax Capacity Rate 40.000 '36.660 I�34.730 �,..._..--'• 35.000 - - �33.710 '31.930 32.630 _ _ _ 30.000 25.000 _ - _ - 20.000 15.000 10.000 -- _ ___ 5.000 0.000 2008 2009 2010 2011 2012 * Tax rates obtained from the League of Minnesota Cities. 13 CITY OF SHAKOPEE FINANCIAL ANALYSIS December 31,2012 GENERAL FUND In 2012,total General Fund expenditures increased $ l 9,163, or less than 1%, from $ 18,674,938 in 2011 to $ 18,694,l Ol in 2012. General government increased approximately $ 342,000 as a result of expensing more of the Information Technology Internal Service Fund in the prior year, adding staffing positions that had been vacant, and repair work that needed to be done. Public works decreased $ 253,850 as a result of expensing their time to projects through-out the year instead of the general fund. All of the functions were under their budgets. 2012 General Fund Expenditures General Govemment Recreation� � 17% 20% � <y � � � Public Works `� l3% \ \ �`.Public Safety 50% 2011 General Fund Expenditures General Govemment Recreation ]5% 21% }.` t�" f l�}' �� � s, � � Public Works� 14% �"�'° `'�.;„� ;�:. �Public Safety 48% 14 CITY OF SHAKOPEE FINANCIAL ANALYSIS December 31,2012 ENTERPRISE FUNDS The City has two enterprise funds. The following charts compare the segment information and retained earnings of all the enterprise funds for the last five years. SewerFund $5,000,000 ---------- --- _i $4,000,000 ��; $3,OOQ000 - -- — — p';s "{ $2,000,000 �;. - — — — t" si,000,000 - - --, �>_ �� �*��� , �, $- - — s�t,000,000j znos aoo�� z�no zan zniz ■OperaUngAecen�es 52,��2,56�1 $3J43,04� $3,d60,974 $2,936,1�� 53,730,226 �OpecatingEzpenses 3,30d,759 3,398,117 3683,1G8 3,836,202 3,953,269 OOpecetinglncome(Loss) (762,195) 45,927 (222,191) (90QOi8) (223,OJ3) ■Change in Net Assels 6l 1,20G 6U3,882 301,4?9 (�52J,858) ($1J,003) Storm Drainage Fund� az,000,000 _—_- , si,soo,000 — — -- --'� si 000,000 - - - - --. asoo,000 — - - - - - s- _ $(500,000) -- �—�- — � — --- $(1,000,000) y008 2009 20t0 2011 2012 ■SeniceCharges $1,2G5,37J $1.32�).566 SL187,229 $995855 $1037,4D �OpzratingExpenses 1,435,376 1,2GJ,261 1,787,295 1,411,271 1,472,361 �OperatingLncome(Loss) (17q002) 5G,30i (6W,UG6) (41?,41G) (434,93J) 6ChangeinNetAssets 70G,206 G73,GlR 29Q132 55,008 431,658 During 2012, the Sewer and Storm Drainage Funds both had operating losses. This is the fourth time in the past five years the Funds reported an operating loss. This is primarily due to the depreciation expense in both Funds. 15 CITY OF SHAKOPEE FINANCIAL ANALYSIS December 31,2012 DEBT SERVICE The following charts illustrate debt service requirements through 2027 and bonded debt for the last five years. Debt Service Schedule (Five Year Increments) �ia,000,000 —_ _._ _._ _ __--� $13,000,000 $12,000,000 � $11,000,000 $1Q000,000 $9,000,000 ' $8,000,000 ' $7,000,000 ' $6,000,000 $5,000,000 $4,000,000 $3,000,000 �� I $Z,OOQ000 � I $I,000,000 $- � 20L3-2017 2018-2032 2023-2027 � �G.O.BondPrincipal �Interest � �onded General Obligation Debt $3QOOQ000 --...._..._—..—____ _ .. � $25,OOQ000 � i — � � $20,000,000 I$�,G�8,289 � — — —— � $7,504,770 � S5,L7,697 $15,00Q000 — — �$1,625,94G IS9,999,769 �515,2>6.711 sio,000,000 � -- a��� — — � $13,45U,2�0 $13,583,303 $11,519,051 �$9,OGQ231 $S,OOQ000 — -- — $- T_ _ 2UOS 2009 3010 2011 2U1? I ■Gross Bonded Deb[ ■Debt$eruice Fund Balance �Net Bonded Debt I 16 CITY OF SHAKOPEE FINANCIAL ANALYSIS December 31, 2012 ADDITIONAL INFORMATION Minnesota Median City Bond Ratings 40% 36°/a 35% 30°/a �26% 25% 20% 20% 15% 10% 8% 6"�� 5% 2% oo�0 1°/a 0% Aaa Aal Aa2* Aa3 A1 A2 A3 Baal * Denotes City's Rating Information obtained from Moody's Bond Ratings for Minnesota Median Cities 17 CITY OF SHAKOPEE FINANCIAL ANALYSIS December 31,2012 ADDITIONAL INFORMATION The following information shows 2011 per capita data for the City in comparison to three other cities similar in size and/or operations (Cities of Savage, Chanhassen and Chaska [the "Cities"]). This information is based on the population estimates listed below. Information for 2012 is not yet available. When analyzing this information, keep in mind that each of the Cities is unique in its operations. , Shakopee 37,076 168 Savage 26,911 149 Chanhassen 22,952 68 Chaska 23,770 181 The graph below shows the total General Fund revenues and expenditures per capita, as well as General Fund tax revenues per capita for the various Cities. 2011 General Fund Revenues and Expenditures Per Capita $600 � $�00 - — $400 $300 - — ___—_ $200 —— $100 — — $0 - �I�otal E�pen�liwr�s �I olal I:evenucs I a�Rz��enu�� ■Shakopee $49� $556 $379 0 Savage 404 444 3�3 ■Chanhassen 401 419 302 ■Chaska 417 433 168 * Population, revenues and expenditures obtained from 2011 Comprehensive Annual Financial Report(CAFR) for all Cities 18 CITY OF SHAKOPEE FINANCIAL ANALYSIS December 31,2012 ADDITIONAL INFORMATION The following graphs show the General Fund expenditures by function per capita for the various Cities. 20ll General Fund Expenditures Per Capita �zso $zoo —__ _ $�so -- $�oo -- - �, �so - �o *�s���; �� _ - Ge�eral Go�cmment Publi�Safety Public U�orks Recreallon ----- - -____ ._._ ■Shakopee S?5 $?49 �,69 SIG^ OSaoage 72 192 76 4� ■Chanhassen 8l 123 98 81 ■Chaska 135 162 100 19 2011 Per Capita Information Governmental Funds sa,000 $3,500 �3,000 $2,500 $2,000 $1,500 $1,000 '�r.� -- �- -- $500 — �s' „��� - —� - a:,. �r .�. � �'. „x�_, . �-, $0 �. : _ . _ .. . OuUi in hn U,I� � Total Rc�enu��" l�as Re�enucs* Capital Outlay ■Shakopee 54?3 $702 $385 $167 e Savage 2,255 9l9 549 197 ■Chanhassen 982 726 42l 113 ■Chaska 1,433 860 440 109 * Data obtained from 2011 Comprehensive Annual Financial Report(CAFR) for all Cities 19 CITY OF SHAKOPEE Scott County, Minnesota REPORTS ON COMPLIANCE WITH GOVERNMENT A UDITING STANDARDS AND MINNESOTA LEGAL COMPLIANCE For the Year Ended December 31, 2012 CITY OF SHAKOPEE TABLE OF CONTENTS 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.................................................................... 1 REPORT ON LEGAL COMPLIANCE........................................................................................ 3 SCHEDULE OF FINDING AND RESPONSE ON INTERNAL CONTROL .......................... 4 E;z�erC urlvice. Whe�n you �ieed it.'^; 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 A UDITING STANDARDS INDEPENDENT AUDITOR'S REPORT Honorable Mayor and Members of the City Council City of Shakopee Shakopee, Minnesota We have audited, in accordance with the auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in UovernmentAuditing Standards issued by the Comptroller General of the United States, the financial statements of the governmental activities, the business-type activities, the aggregate discretely presented component unit, each major fund, and the aggregate remaining fund information of the City of Shakopee, Minnesota as of and for the year ended December 31, 2012,and the related notes to the financial statements, which collectively comprise the City's basic financial statements, and have issued our report thereon dated April 17, 2013. Internal Control Over Financial Reporting In planning and performing our audit of the financial statements, we considered the City's internal control over financial reporting (internal control)to determine the audit procedures that are appropriate in the circumstances 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's internal control. Accordingly, we do not express an opinion on the effectiveness of the City's internal control. 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. A significant deficieney is a deficiency, or a combination of deficiencies, in internal control that is less severe than a material weakness, yet important enough to merit attention by those charged with governance. �� Our consideration of internal control was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control that might be material weaknesses or significant deficiencies and therefore, material weaknesses or significant deficiencies may exist that were not identified. Given these limitations, during our audit we did not identify any deficiencies in internal control that we consider to be material weaknesses. However, material weaknesses may exist that have not been identified. We did identify certain deficiencies in internal control, described in the accompanying Schedule of Finding and Response on Internal Controls that we consider to be significant deficiencies, listed as audit finding 10-01. Compliance and Other Matters As part of obtaining reasonable assurance about whether the City's financial statements are free from 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. City's Response to Findings The City's response to the findings identified in our audit are described in the accompanying Schedule of Finding and Response on Internal Control. The City's response was not subjected to the auditing procedures applied in the audit of the financial statements and, accordingly, we express no opinion on it. Purpose of this Report The purpose of this report is solely to describe the scope of our testing of internal control and compliance and the result of that testing, and not to provide an opinion on the effectiveness of the entity's internal control or on compliance. This report is an integral part of an audit performed in accordance with GovernmentAuditing Standards in considering the entity's internal control and compliance. Accordingly, this communication is not suitable for any other purpose. ��(�.w., De(.v,��, V-�, (.hP_ KERN, DEWENTER, VIERE, LTD. Bloomington, Minnesota April 17, 2013 1 £-,xpert ndi,ice. L��}ten yoti neerl it.',, REPORT ON LEGAL COMPLIANCE Honorable Mayor and Members of the City Council City of Shakopee Shakopee, Minnesota We have audited the financial statements of the governmental activities,the business-type activities, the discreetly presented component unit, each major fund and the aggregate remaining fund information of the City of Shakopee, Minnesota, for the year ended December 31, 2012, which collectively comprise the City's basic financial statements and have issued our report thereon dated April 17, 2013. 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 Sec. 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 complied with the material terms and conditions of applicable legal provisions. This report is intended solely for the information and use of the City Council, management and the Office of the State Auditor, and is not intended to be and shou(d not be used by anyone other than those specified parties. ��,�,,,,, D�w,��, �-� c.�. KERN, DEWENTER, VIERE, LTD. Bloomington, Minnesota April 17, 2013 2 CITY OF SHAKOPEE SCHEDULE OF FINDING AND RESPONSE ON INTERNAL CONTROL December 31,2012 AUDIT FINDING 10-1: LACK OF SEGREGATION OF ACCOUNTING DUTIES Adequate segregation of accounting duties is in place when the four areas of a transaction have been separated: authorization, custody, recording and reconciliation. During 2012, the City did not have sufficient staff to segregate the duties listed above. Specific areas where this is a lack of internal controls includes (but is not all-inclusive): Payroll The Payroll Clerk processes payroll, posts payroll to the general ledger, issues direct deposits, prepares the payroll taxes, initiates transfers for payment of payroll, prepares all W-2s and maintains all data files as well as the payroll program. Cash Receipts Deposits at City Hall—The front desk personnel receives money, codes the revenue and prepares bank deposits. The Accountant reconciles cash and posts all deposits into the general ledger. Deposits at Recreation Center—One employee is able to receipt money and prepare the bank deposit. Cash Disbursements The Accountant enters invoices, matches purchase orders to invoices and prepares checks for payment. Management is aware of this condition and has taken certain steps to compensate for the lack of segregation but due to the small staff needed to handle all of the accounting duties, the costs of obtaining desirable segregation of accounting duties often exceeds benefits which could be derived. However, management must remain aware of this situation and should continually monitor the accounting system, including changes that occur. Management's Response: The auditors recognize that with the City's limited number of employees, this will most likely remain as a significant deficiency. The City continues to analyze personnel responsibilities in an attempt to provide for enhanced controls and to mitigate control risks. 3 5/7/2013 �., � I�( �� � ., � � :=' 1d��� � �: , �. City of Shakopee � Steve Wischmann,CPN ',��`�� A;:d':?ar�rer .s »�, • r � F�I)\ ��++ Audit Process • Planning • Fieldwork • Draft CAFR • Final Reports • Board Presentation I�l)\ �� Independent Auditor's Report • Unqualified Opinion on the Basic Financial Statements • Comprehensive Annual Financial Report(CAFR)also reviewed for GFOA Certificate of Achievement for Excellence in Financial Reporting 1 5/7/2013 hi�� �� Minnesota Legal Compliance • Gompliance audrt basad on the Minnesota Legal Compliance Aud�it Guide for Local Governments covers sevan areas of compliance-. ❑ Deposits ana Inves[ments ❑ Confllcis N In�eres� ❑ Public IMebtetlness ❑ CmtrxGrg arW BlOding ❑ Claims and Dlsbursemants J Miscellaneous Prohsims J T�Incremm�Financing • No f�inding5 ���� �a+ GAS Report Report on GovernmentAUditing Standards Findings: • Lack of Segregation of Accounting Duties-SD • Improve Ice Arena Receipting Internal Controls-D • Improve Community Center Receipting Intemal Controls-D • Follow City Council Approved Fee Schedule-D ��)� Ceral Faad /� w�.�. w•�. -- wtt. �lM P.�r M/�Jw _ __ • an m r� snpaM mJMM �ti�� WiVr m7�. '���a"_- r . ���-_. �_ R�7� �� __ �AP_.._. ..T�___. Y�P_.._ Y!�.1._�.__._1 Sm!!�._.. 2 5/7/2013 hi�� (Co�l Fmi�w�u�lS�ai�r� �� I Pr C*ita l+ao � _ _____.... _.� lavrl . 1�--�.L�: ���'� �� �- _ '� ; � � � - - ; �, _ �__ _ . � � � � __ � . m m a�o u� a� , .r� o�.r�� ._..� hl)\ �� General Fund Performance � , , �� °, �°�1�, �;�;��.;�,.::,,�. k�p�otlnun�.: �mw � f I NM:��ulir`T .. � yVyi.�N'o�1• .n n R�]5.]]I YeA.aN P.r-nao�n lexl qx m� Y IX Y 1\I�\ �� Transit Fund - Budget and Actual Total Revenues • Budgeted:$998,840 • Actual:$1,102,294 Total Expenditures and Other Financing Uses • Budgeted:$1.251.747 • Actual:S 1,294,716 Net change in fund balance • Budgeted:($252.907) • Actual:($192.422) Fund balance at beginning of the yeai was$1,237,762 Fund balance at the end of the year is 5 1.045,340 3 5/7/2013 hi>� � , '�,IlmsswdAl�{sdFdBaYo�aP�mte[E�dWw � � � s _ • , � .. � .'',.. w � s s a a _. ._....... . ..__- __. . ... _.... . . 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SWC�fY� 'IW�� ]Y���� ��+�.: sas , us aA . 0 0' w� m _ __ ___— ._-— ___ vd� �� a9 � •�� 91 . _ °' __--__M 2011GssdF�sd ��)\ E m�PQ C /�ai sao 7� 1�00 s�w S�m ..__..._.._ ._ .. ..__ iso -_ '____ � G.s.lGo..�.�,a ke N R.e.m� �ShakoPx.. S15 T!C . ... ._._— St@ oS�R�_ .... .n ...... '�.... __....'16 �S o[IWe�� 81 I H; �CI.J. I]5 IR Im —"'--19 7 5/7/2013 �������� hi�� ��._.. �� � � .�. ---- - � �. ium — — twu+ ----------- �. —_.__ 70 orrtur ��rrn.�r � m.�.� c� sm s�m i�s ir� �io�� �26 !! Sf lA � ��0���. � Lf m ID ��.�0� � � M 10 �'���� /_Jy T� Questions? Steve Wischmanq CPA 320-650-0217 swischmann@kdv.com 8