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Home My WebLink About2. Comprehensive Annual Financial Report #c2 CITY OF SHAKOPEE Memorandum TO: Mayor and Council Mark McNeill, City Administrator FROM: Gregg Voxland, Finance Director SUBJ: Comprehensive Annual Financial Report DATE: June 21, 2007 Introduction & Background Council has retained the firm of Kern, DeWenter and Viere to audit the financial records of the City of Shakopee for 2006. Steve Wischmann, Partner and Dan Etling, Manager will be at the meeting on June 27th to present their report. General Fund had a surplus of $165,492 in spite of a major decrease in permit revenue. Due to conservative spending, the final budget was under spent by $1,077,845. Divisions exceeding the expenditure budget were Planning ($17,203), Shop ($7,318) and Library/Congregate Dining ($12,483) . The report is due to the State Auditors Office and the Government Finance Officers Association by June 30th. Governmental Accounting Standards Board pronouncement #45 on other post employment benefits was not implemented for 2006 but will be for 2007. An actuarial study was conducted and resulted in an annual funding level of approximately $245,000. This stems from former employees being allowed to stay on the city's health insurance (required by state law) . The person pays the premium but has the benefit of the lower "group" premium. The differential in premium thus becomes a city liability. Since the city never actually pays out the money, it is not planned to fund or set aside the money to cover that annual "cost" of $245,000. Action Move to accept the auditor's report. G~OXland Finance Director U,\cafrOS I I I I I CITY OF SHAKO PEE Scott County, Minnesota I Reports on Government Auditing Standards and Legal Compliance I For the Fiscal Year Ended December 31, 2006 I I I I I I I I I I I I I I CITY OF SHAKOPEE I Scott County, Minnesota T ABLE OF CONTENTS I REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS BASED ON AN I AUDIT OF THE FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS......................... 1 I REPORT ON LEGAL COMPLIANCE.................... ........................................................ 3 SCHEDULE OF FINDINGS ON LEGAL COMPLIANCE AND INTERNAL CONTROLS................................................................................. ..................................... 4 I I I I I I I I I I I I I I KDV I I KE RN. 0 EWE NTE R. VI E RE I June l8, 2007 I I Honorable Mayor and Members of the City Council City of Shakopee Shakopee, Minnesota I We have audited the financial statements of the governmental activities, the business-type I activities, each major fund, the aggregate remaining fund information and fiduciary activities of the City of Shakopee, Minnesota, as of and for the year ended December 31, 2006, and have issued our report thereon dated June 18,2007. We conducted our audit in accordance with U.S. I generally accepted auditing standards and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. INTERNAL CONTROL OVER FINANCIAL REPORTING I In planning and performing our audit, we considered the City's internal control over financial reporting as a basis for designing our auditing procedures for the purpose of expressing our I opinion on the financial statements but not for the purpose of expressing an opinion on the effectiveness of the City's internal control over financial reporting. Accordingly, we do not express an opinion on the effectiveness of the City's internal control over financial reporting. I Our consideration of internal control over financial reporting was for the limited purpose described in the preceding paragraph and would not necessarily identify all deficiencies in I internal control over financial reporting that might be significant deficiencies or material weaknesses. However, as discussed below, we identified certain deficiencies in internal control over financial reporting that we consider to be significant deficiencies. I A control deficiency exists when the design or operation of a control does not allow management or employees, in the normal course or performing their assigned functions, to prevent or detect misstatements on a timely basis. A significant deficiency is a control deficiency, or combination I of control deficiencies, that adversely affects the entity's ability to initiate, authorize, record, process or report financial data reliably in accordance with U.S. generally accepted accounting principles such that there is more than a remote likelihood that a misstatement ofthe City's I financial statements that is more than inconsequential will not be detected by the City's internal control. We consider the deficiencies described in the accompanying Schedule of Findings on Legal Compliance and Internal Controls as findings 06-01 and 06-02, to be significant I deficiencies over financial reporting. I I 1 I I KDV KE RN. D EWENTE R. VI E RE I I A material weakness is a significant deficiency, or combination of significant deficiencies, that results in more than a remote likelihood that a material misstatement of the financial statements I will not be prevented or detected by the City's internal control. Our consideration of the internal control over financial reporting was for the limited purpose I described in the first paragraph of this section and would not necessarily identify all deficiencies in the internal control that might be significant deficiencies and, accordingly, would not necessarily disclose all significant deficiencies that are also considered to be material weaknesses. However, ofthe significant deficiencies described above, we consider finding I 06-02 to be a material weakness. COMPLIANCE AND OTHER MATTERS I 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, I 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, I we do not express such an opinion. The results of our tests disclosed no instances of noncompliance that are required to be reported under Government Auditing Standards. We also noted certain additional matters that we reported to management of the City in a I separate letter dated June 18,2007. This report is intended solely for the information and use of the City Council, management, I federal and state oversight awarding agencies and pass-through entities, and is not intended to be and should not be used by anyone other than these specified parties. I ~t lJeJJJ.wk, V~( w. I KERN, DEWENTER, VIERE, LTD. Minneapolis, Minnesota I I I I I 2 I KDV I I KERN. DEWENTER.VIERE I REPORT ON LEGAL COMPLIANCE I I June 18,2007 I Honorable Mayor and Members of the City Council I City of Shako pee Shakopee, Minnesota I We have audited the financial statements of the City of Shakopee, Minnesota, as of and for the year ended December 31, 2006, and have issued our report thereon dated June 18, 2007. I We conducted our audit in accordance with U.S. generally accepted auditing standards and the provisions of the Minnesota Legal Compliance Audit Guide for Local Government, promulgated by the State Auditor pursuant to Minnesota Statute Sec. 6.65. Accordingly, the audit included I such tests of the accounting records and such other auditing procedures as we considered necessary in the circumstances. I The Minnesota Legal Compliance Audit Guide for Local Government covers seven main categories of compliance to be tested: contracting and bidding, deposits and investments, conflicts of interest, public indebtedness, claims and disbursements, miscellaneous provisions for I local governments and tax increment financing. Our study included all of the listed categories. The results of our tests indicate that for the items tested, the City of Shakopee, Minnesota, I complied with the material terms and conditions of applicable legal provisions, except as described in the Schedule of Findings on Legal Compliance and Internal Controls. This report is intended solely for the information and use of management, the City Council, and I state regulatory agencies, and is not intended to be and should not be used by anyone other than these specified parties. I ~,b<.w~, V~. W- I KERN, DEWENTER, VIERE, LTD. Minneapolis, Minnesota I I 3 I I CITY OF SHAKO PEE I Scott County, Minnesota SCHEDULE OF FINDINGS ON LEGAL COMPLIANCE AND INTERNAL CONTROLS I Year Ended December 31, 2006 I CURRENT YEAR LEGAL COMPLIANCE FINDING: Obtain Two Quotations for Contracts Between $ 10,000 and $ 50,000 I Minnesota Statutes 471.345, Subd. 4 states for contracts estimated to exceed $ lO,OOO but not to exceed $ 50,000, the contract may be made either upon sealed bids or by direct negotiation, by I obtaining two or more quotations for the purchase or sale when possible, and without advertising for bids or otherwise complying with the requirements of competitive bidding. The Statute also states all quotations obtained must be kept on file at least a year. I During our audit, it was noted the City only obtained one quote for the purchase of seven Scott Air Packs. I We recommend the City either obtains two direct quotes or hold competitive bids for all contracts that exceed $ lO,OOO but do not exceed $ 50,000. I PRIOR YEAR LEGAL COMPLIANCE FINDING: Employee Recognition Events/Purchases I A Statement of Position issued by the Office of the State Auditor dated December 2004 clarifies the Office's position on employee recognition events. I The Statement of Position indicates that "authority for an expenditure may be specifically stated in statute or charter, or it may be implied as necessary to do what an express power authorizes". The Minnesota Attorney General's Office has considered the issue several times and has I consistently said that local governments do not have implied authority to sponsor employee social events simply because they have the express power to compensate employees. Instead, the Attorney General's position is that nonmonetary benefits must be specifically authorized by law I or charter. Since Minnesota Statutes do not provide specific authority for employee recognition events, and I in the absence ofa City Charter, the opinion of the Office of the State Auditor (according to their Statement of Position) is that City employee recognition events are unauthorized and improper. The City adopted a public purpose food and refreshment policy during 2006. I I I I 4 I I CITY OF SHAKOPEE I Scott County, Minnesota SCHEDULE OF FINDINGS ON LEGAL COMPLIANCE AND INTERNAL CONTROLS I Year Ended December 31, 2006 I CURRENT YEAR INTERNAL CONTROL FINDINGS: Significant Deficiency I Audit Finding 06-01 - Lack of Segregation of Accounting Duties I During the year ended December 31, 2006, the City had a lack of segregation of accounting duties due to a limited number of office employees. Management and the City Council are aware of this condition and have taken certain steps to I 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 can often exceed benefits which could be derived. However, management and the City Council must I remain aware of this situation and should continually monitor the accounting system, including changes that occur. I Material Weakness Audit Finding 06-02 - Material Audit Adjustments I During our audit, we proposed audit adjustments that we considered to be quantitatively material to the financial statements. The audit adjustments we proposed that were material to the financial statements related to reclassification of capital assets and an adjustment to I deferred revenue. I I I I I I I 5 I I I I CITY OF SHAKOPEE, MINNESOTA Scott County I COMPREHENSIVE ANNUAL FINANCIAL REPORT I For the Fiscal Year Ended December 3l, 2006 I DEPARTMENT OF FINANCE I GREGG M. VOXLAND, Director of Finance I I I MEMBER OF GOVERNMENT FINANCE OFFICERS ASSOCIATION OF THE UNITED STATES AND CANADA I l29 HOLMES STREET SOUTH I SHAKOPEE, MN 55379 I I I I I I I I I I I I I I I (THIS PAGE LEFT BLANK INTENTIONALLY.) I I I I I I I I I I I I CITY OF SHAKOPEE Scott County, Minnesota I TABLE OF CONTENTS SECTION I I Page INTRODUCTORY SECTION: Elected Officials and Administration......................... ........... ........................................... 3 I Organization Chart........................................................................................................... 4 Letter of Transmittal..................... ................................................................................... 5 Certificate of Achievement for Excellence in Financial Reporting................................. 9 I SECTION II FINANCIAL SECTION: I Independent Auditors' Report..................... ..... ...................... ...... ............ ........................ 11 Management's Discussion and Analysis (Unaudited) ..................................................... 13 Basic Financial Statements: I Government-Wide Financial Statements: Statement ofN et Assets ........ ........................... ................................ .................... 27 Statement of Activities...... ............................................ ....... ............................ .... 28 I Fund Financial Statements: Balance Sheet - Governmental Funds............... ......... .................. ................. ...... 29 Reconciliation of the Balance Sheet to the Statement of Net Assets- I Governmental Funds... ....... ..... ............. ................... ............. .......... ..... .............. 30 Statement of Revenues, Expenditures and Changes in Fund Balances - Governmental Funds.... ..... .................... ............... ....................................... ...... 31 I Reconciliation of the Statement of Revenues, Expenditures and Changes in Fund Balances to the Statement of Activities - Governmental Funds ......... 32 Statement of Revenues, Expenditures and Changes in Fund Balances- Budget and Actual - General Fund................................................................... 33 I Statement of Net Assets - Proprietary Funds ...................................................... 35 Statement of Revenues, Expenses and Changes in Fund Net Assets- Proprietary Funds.............................................................................................. 36 I Statement of Cash Flows - Proprietary Funds ..................................................... 37 Statement of Fiduciary Net Assets........ ...................... ............ ........................ ..... 39 Notes to the Financial Statements................. .... ................... ........ .............................. 40 I Combining and Individual Fund Financial Statements and Schedules: Combining Balance Sheet - Nonmajor Governmental Funds ............................. 70 Combining Statement of Revenues, Expenditures and Changes in Fund I Balances - Nonmajor Governmental Funds ..................................................... 76 Schedule of Revenues, Expenditures and Changes in Fund Balance - Budget and Actual: I Transit Fund.......... .......................................... ............ ......................... ......... 83 Telecommunication Fund ............................................................................ 84 Economic Development Authority Fund ..................................................... 85 Recreation Fund........................................................................................... 86 I I 1 I I CITY OF SHAKOPEE I Scott County, Minnesota TABLE OF CONTENTS I SECTION II Table Page I FINANCIAL SECTION: Basic Financial Statements: (Continued) Combining and Individual Fund Financial Statements and Schedules (Continued): I Combining Statement of Fund Net Assets - Internal Service Funds................... 87 Combining Statement of Revenues, Expenses and Changes in Fund Net Assets - Internal Service Funds........................................................................ 88 Statement of Cash Flows - Internal Service Funds ............................................. 89 I Statement of Changes in Assets and Liabilities - Escrow Agency Fund............. 90 SECTION III I STATISTICAL SECTION: Net Assets by Component................................................................................................ 1 91 I Changes in Net Assets .......... .................... ............ ........................ ................................... 2 92 Fund Balances - Governmental Funds.... ........................................................................ 3 94 Changes in Fund Balances - Governmental Funds.......................................................... 4 95 I Tax Capacity and Estimated Actual Value of Taxable Property..................................... 5 96 Direct and Overlapping Property Tax Rates.... .......... .............................. ...... .................. 6 97 Principal Taxpayers.......................................................................................................... 7 98 I Property Tax Levies and Collections ...... ......... ................. .... ............... ........... .......... ....... 8 99 Ratio of Outstanding Debt by Type ............... ......... ....... ......... ................. ......... ..... .......... 9 100 Ratio of General Bonded Outstanding .................... ......... ....... ...... ....... ........... .... ............. 10 101 I Direct and Overlapping Governmental Activities Debt................................................... II l02 Legal Debt Margin Information....................................................................................... 12 103 Pledged Revenue Coverage ...... ......... .......... ....... ....... ...................................................... 13 104 Demographic and Economic Statistics .... .................... ................... ............... ............. ..... 14 105 I Principal Employers..... ........ ........................................ .......... .......................................... 15 106 Full- Time Equivalent City Government Employees by FunctionlProgram..................... 16 107 Operating Indicators by Function/Program....... ....... ............... ................... .......... ............ 17 108 I Capital Asset Statistics by FunctionlProgram.. ................ ............ ..... ......... ...................... 18 109 I I I I I 2 I I I CITY OF SHAKOPEE Scott County, Minnesota I ELECTED OFFICIALS AND ADMINISTRATION December 31,2006 I Elected Officials Position Term Expires I John Schmitt Mayor December 31, 2007 Matthew Lehman Council Member December 31, 2007 I Steven Menden Council Member December 31, 2007 Steven Clay Council Member December 31, 2009 I Terry loos Council Member December 31, 2009 I Administration Mark H. McNeill City Administrator Appointed I Gregg M. V oxland Finance Director Appointed I I I I I I I I I 3 I CITY OF SHAKOPEE Scott County, Minnesota ORGANIZATION CHART December 31,2006 ELECTORATE CITY COUNCIL Planning Commission & Board of Adjustment & Appeals Building Code Board Of Adjustment & Appeals Police Civil Service Commission Telecommunications Advisory Commission Park & Recreation Advisory Board Board of Review Economic Development Authority Public Utilities Commission Environmental Advisory Commission Historic Preservation Commission Administration Police Fire Public Works Recreation Finance Community City Clerk Development Planning Bldg Inspection Transit Streets/Parks .J::>. - - - - - - - - - - - - - - - - - - - I I SHAKOPEE I I June 18, 2007 I To the Honorable Mayor, Members of the City Council, and Citizens of the City of Shakopee: State law requires that all general-purpose local governments publish within six months of the I close of the fiscal year, a complete set of financial statements presented in conformity with generally accepted accounting principles (GAAP) and audited in accordance with generally accepted auditing standards by a firm of licensed certified public accountants. Pursuant to that I requirement, we hereby issue the Comprehensive Annual Financial Report of the City of Shakopee for the fiscal year ended December 31, 2006. I The report consists of the city's management team representations concerning the finances of the City of Shakopee (City). Consequently, management assumes full responsibility for the completeness and reliability of all of the information presented in this report. To provide a I reasonable basis for making these representations, management of the City has established a comprehensive internal control framework that is designed both to protect the government's assets from loss, theft, or misuse and to compile sufficient reliable information for the preparation of the City's financial statements in conformity with GAAP. Because the cost of internal controls I should not outweigh their benefits, the City's comprehensive framework of internal controls has been designed to provide reasonable rather than absolute assurance that the financial statements . will be free from material misstatements. As management, we assert that, to the best of our I knowledge and belief, this financial report is complete and reliable in all material respects. The City of Shakopee's financial statements have been audited by Kern, DeWenter, Viere, Ltd., a I firm of licensed certified public accountants. The goal of the independent audit was to provide reasonable assurance that the financial statements of the City for the fiscal year ended December 31, 2006, are free of material misstatements, and to comply with state law requiring such an audit. I The independent audit involved examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements; assessing the accounting principles used and significant estimates made by management; and evaluating the overall financial statement presentation. I The independent auditor concluded, based on the audit, that there was a reasonable basis for rendering an unqualified opinion that the City's financial statements for the fiscal year ended December 31, 2006, are fairly presented in conformity with GAAP. The independent audno~s report is presented as the first component of the financial section of this report. I Management is providing a narrative introduction, overview, and analysis to accompany the basic financial statements in the form of 'Management's Discussion and Analysis' (MD&A). This letter I of transmittal is designed to complement the MD&A and should be read in conjunction with the MD&A. I I COMMUNITY PRIDE SINCE 1857 5 129 Holmes Street South. Shakopee, Minnesota. 55379.1351 . 952-233.9300 . FAX 952.233.3801 . www.ci.shakopee.mn.us I I Profile of the Government I The City of Shakopee was incorporated for the second time in 1870 and is located about 25 miles southwest of Minneapolis. Bounded by the Minnesota River on the north, Shakopee is in the I northern part of Scott County and is the county seat. The City is one of the most rapidly growing communities of the state. The 2000 population of the City was 20,568 and the land area covered is approximately 30 square miles. For 2006, the estimated population ;s about 34,000. The City I is empowered to levy a property tax on both real and personal property located within its boundaries. It is also empowered by state statute to extend its corporate limits by annexation, which occurs periodically. I Shakopee is organized in Minnesota under Plan A, which includes a City Administrator, but the City Council retains most decision making authority such as policy setting, adopting ordinances, budget adoption and staffing. The City Council has four members who serve staggered terms of I 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 the normal municipal services such as police and fire protection, street and I infrastructure construction and maintenance, parks and recreation, planning and zoning. Also provided are electrical distribution, water, sewer and storm drainage utilities, organized refuse I collection and recycling, and some transit services. Electric and water utilities are operated by Shakopee Public Utilities Commission which is appointed by the City Council and is included as an integral part of the City's report. Housing, economic development and redevelopment are I controlled by the Shakopee Economic Development Authority. The Authority is comprised of City Council members and is included as an integral part of the City's report. The annual budget is the basis for the City's financial planning and control. Budget requests from I divisions are submitted by the last week in July and are prepared by fund and division. The City Administrator reviews the submittals and presents City Council with a proposed budget in August of each year. City Council is required to adopt a maximum tax levy by September 15. The final I tax levy and budget are adopted in December after a public hearing. 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 I between divisions and/or funds. The Finance Director or City Administrator may make changes within divisions. Along with the operating budget, a five-year capital improvement plan and major equipment list is also prepared annually. Budget-to-actual comparisons are provided in this report I for each individual governmental fund for which an appropriated annual budget has been formally adopted. Factors Affecting Financial Condition I The information presented in the financial statements is perhaps best understood when it is I considered from the broader perspective of the specific environment within which the City of Shakopee operates. Local Economy. The City currently has favorable economic environment and local indicators I point to continued growth. The tax base grew 14% for taxes payable in 2007 and 13% for taxes payable in 2006. The City has traditionally had a strong industrial base with commerciallindustrial I property currently comprising 20% of market value and 35% of tax capacity. The largest commercial/industrial taxpayer comprises 1.5% of total tax capacity. Companies in the City 6 I I I I manufacture chemicals, malt, roofing products, glass, cardboard and electronics with electronics being the rapidly growing industry in recent years. Housing has grown rapidly over the past ten years following the opening of the new Highway 169 bridge over the Minnesota River. Other I governmental units with a significant presence in the City include the State of Minnesota Women's Correctional Facility, Scott County Courthouse, Shakopee School District #720 and federal wildlife/refuge areas. I Long-term financial planning. About every year, the City issues bonds to fund infrastructure expansion and additions for the growing population. Much of this debt is funded by special assessments against benefited I properties. The City has built a new library (2003), police station (2003) and public works building (2005). A new city hall and three satellite fire stations are anticipated to be built over the next five to ten years. The Shakopee Public Utilities Commission has constructed a new service center I (2004). The City of Shakopee annually prepares an updated five-year capital improvement plan and five I year capital equipment list. City Council has embarked on a long-term growth study that would help guide the anticipated growth of the city over the next 20 to 40 years. I Cash management policies and practices. Cash temporarily idle during the year was invested in commercial paper or securities backed by the U.S. Government such as treasuries and agencies or pools that invest in such securities. Of the city's total investments, 30% will mature in less than one year and 35% will mature in one to five years. The majority of the portfolio is I managed by an independent investment manager. The manager is required to follow the City's Investment Policy. I Risk management. The City has third party insurance coverage for all significant risks. The City has the exposure for deductibles under the various policies. Deductibles are $5,000 or less. I Pension and other post employment benefits. All full-time and certain part-time employees of the City of Shakopee are covered by defined benefit plans administered by the Public Employees Retirement Association of Minnesota (PERA). PERA administers the Public I Employees Retirement Fund (PERF) and the Public Employees Police and Fire Fund (PEPFF). These are cost sharing, multiple-employer retirement plans. These plans are established and administered in accordance with Minnesota Statutes, Chapters 353 and 356. The City has no I obligation in connection with employee benefits offered through this plan beyond its annual required contributions. I PERA issues a publicly available financial report that includes financial statements and required supplementary information for PERF and PEPFF. That report may be obtained by writing to PERA, 514 St. Peter Street #200, St. Paul, Minnesota, 55102 or by calling 651-296-7460 or 1- 800-652-9026. I The Shakopee Fire Department Relief Association is the administrator of a single employer defined benefit pension plan established to provide benefits for paid on call members of the I Shakopee Fire Department. The Relief Association provides retirement benefits to members and benefits to survivors upon the death of eligible members. Benefit provisions are also subject to enabling state statutes; therefore, any amendments to benefit provisions are I reviewed by the Office of the State Auditor. Benefits are lump sum payments and the annual City contribution to the Association is determined by State of Minnesota directed calculations. I 7 I I Deficits are amortized over ten years as part of the city contribution. Annual actuarial studies I are not done because the calculations to determine liability and city contributions are done by following Minnesota State law. The Relief Association issues a publicly available financial report that includes financial I statements and required supplementary information for the Relief Association. The Association's report may be obtained by writing to Shakopee Fire Department Relief I Association, 129 Holmes St. S., Shakopee, MN 55379. City employees are eligible to participate in COBRA provisions after severing employment or I MN Chapter 488 after retirement, which allows employees to continue coverage on the City's health insurance plan under certain provisions. Currently, the City has 7 former employees/dependents participating under the MN Chapter 488 provision and 4 disabled at the end of 2006. The participants pay for the premium under the above provisions. I Awards and Acknowledgements The Government Finance Officers Association of the United States and Canada (GFOA) awarded I a Certificate of Achievement for Excellence in Financial Reporting to the City of Shakopee for its Comprehensive Annual Financial Report (CAFR) for the fiscal year ended December 31, 2005. I This was the twenty second 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. I A Certificate of Achievement is valid for a period of one year only. We believe our current CAFR continues to meet the Certificate of Achievement Program's requirements and we are submitting it I 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 I 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. I Respectfully submitted, I lAkiL /lc vJ1Q ~~ I Mark McNeill City Administrator Finance Director I I I 8 I I I I Certificate of I Achievement for Excellence I in Financial I Reporting I Presented to City of Shakopee I Minnesota I For its Comprehensive Annual I Financial Report for the Fiscal Year Ended December 31,2005 I A Certificate of Achievement for Excellence in Financial Reporting is presented by the Government Finance Officers Association of the United States and Canada to I government units and public employee retirement systems whose comprehensive annual [mancial reports (CAFRs) achieve the highest I standards in government accounting and [mancial reporting. I I President I ~/~ Executive Director I I I 9 I I I I I I I I I I (THIS PAGE LEFT BLANK INTENTIONALLY) I I I I I I I I 10 I I I KDV I KERN. DEWENTER.VIERE I I INDEPENDENT AUDITORS' REPORT I June 18,2007 I I Honorable Mayor and Members of the City Council City of Shakopee I Shakopee, Minnesota I We have audited the accompanying financial statements of the governmental activities, the business-type activities, each major fund, the aggregate remaining fund information and fiduciary activities of the City of Shakopee, Minnesota, as of and for the year ended December 31, 2006, which collectively comprise the City's basic financial statements as listed in the Table of I Contents. These financial statements are the responsibility of the City's management. Our responsibility is to express opinions on these financial statements based on our audit. We did not audit the Electric Fund and Water Fund financial statements of the Shakopee Public Utilities I Commission which represent 54% and 90%, respectively, of the assets and operating revenues of the Enterprise Funds. Those statements were audited by other auditors whose report thereon has been furnished to us, and our opinion expressed herein, insofar as it relates to the amounts I included for the Shakopee Public Utilities Commission, is based solely upon the report of the other auditors. I We conducted our audit in accordance with U.S. generally accepted auditing standards and the standards applicable to financial audits contained in Government Auditing Standards issued by the Comptroller General of the United States. Those Standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of I material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating I the overall financial statement presentation. We believe our audit provides a reasonable basis for our OpInIOns. I In our opinion, based on our audit and the report of other auditors, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities, the business-type activities, each major fund, the aggregate remaining I fund information and fiduciary fund information of the City of Shakopee, Minnesota, as of December 31, 2006, and the respective changes in financial position and cash flows, where applicable, thereof and the respective budgetary comparison for the General Fund for the year I then ended in conformity with U.S. generally accepted accounting principles. 11 I ~DV I KERN.DEWENTER.VIERE I I In accordance with Government Auditing Standards, we have also issued our report dated June 18,2007, on our consideration of the City's internal control over financial reporting and on I our tests of its compliance with certain provisions of laws, regulations, contracts and grant agreements and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and the results of that testing, and not to provide an I opinion on the internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards and should be considered in assessing the results of our audit. I The Management's Discussion and Analysis, which follows this report letter, is not a required part of the basic financial statements but is supplementary information required by U.S. generally I accepted accounting principles. We have applied certain limited procedures, which consisted principally of inquiries of management regarding the methods of measurement and presentation of the required supplementary information. However, we did not audit the information and I express no opinion on it. Our audit was performed for the purpose of forming opinions on the financial statements that collectively comprise the City's basic financial statements. The information identified in the I Table of Contents as Combining and Individual Fund Statements and Schedules is presented for purposes of additional analysis and is not a required part of the basic financial statements. This information has been subjected to the auditing procedures applied in the audit of the basic I financial statements and, in our opinion, is fairly stated in all material respects in relation to the basic financial statements taken as a whole. The information identified in the Table of Contents as the Introductory and Statistical Sections I are presented for purposes of additional analysis and are not a required part ofthe basic financial statements of the City of Shako pee, Minnesota. This information has not been subjected to the I audit procedures applied in the audit of the basic financial statements and, accordingly, we express no opinion on it. ~, D~w~,V~J W. I KERN, DEWENTER, VIERE, LTD. I Minneapolis, Minnesota I I I 12 I I I I CITY OF SHAKOPEE Scott County, Minnesota I MANAGEMENT'S DISCUSSION AND ANALYSIS December 31,2006 I As management of the City of Shako pee (City), we offer readers of the City's financial statements this narrative overview and analysis of the financial activities of the City of Shako pee for the fiscal year ended December 3l, 2006. We encourage readers to consider the information I presented here in conjunction with additional information that we have furnished in our letter of transmittal, which can be found on pages 5 to 8 of this report. All amounts, unless otherwise indicated, are expressed in thousands of dollars. I Financial Highlights I . The assets of the City exceeded its liabilities at the close of the most recent fiscal year by $315 million (net assets). Of this amount, $72 million (unrestricted net assets) may be used to meet the government's ongoing obligations to citizens and creditors. . The government's total net assets increased by $17 million. I . As of the close of the current fiscal year, the City's governmental funds reported combined ending fund balances of $28 million, a decrease of $2 million in comparison with the prior year. Approximately 25% of this total amount, $7 million is available for I spending at the City's discretion (unreserved fund balance). . At the end of the current fiscal year, unreserved fund balance for the general fund was $8.4 million or 60 percent of total general fund expenditures. I . The City's total debt increased by $.5 million (2%) during the current fiscal year. Overview of the Financial Statements I This discussion and analysis are intended to serve as an introduction to the City of Shako pee's basic financial statements. The City's basic financial statements comprise three components: 1) I 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. I 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. I The statement of net assets presents information on all of the City of Shakopee' s assets and liabilities, with the difference between the two reported as net assets. Over time, increases or I decreases in net assets may serve as a useful indicator of whether the financial position of the City is improving or deteriorating. I The statement of activities presents information showing how the government's net assets changed during the most recent fiscal year. All changes in net assets are reported as soon as the underlying event giving rise to the change occurs, regardless of the timing of related cash flows. Thus, revenues and expenses are reported in this statement for some items that will only result in ,I cash flows in future fiscal periods (e.g., uncollected taxes and earned but unused employee leaves). I 13 I I CITY OF SHAKOPEE I Scott County, Minnesota MANAGEMENT'S DISCUSSION AND ANALYSIS I December 31, 2006 Both of the government-wide financial statements distinguish functions of the City of Shakopee I 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 I user fees and charges (business-type activities). The governmental activities of the City include general government, public safety, highways and streets, economic development, and recreation. The business-type activities ofthe City include an electrical distribution operation, water, sewer and storm drainage utilities. I The government-wide financial statements include not only the City of Shakopee itself (known as the primary government), but also the Economic Development Authority which functions like I a department of the City although it is a legally separate entity. City Council is the EDA Board. The Shakopee Public Utilities Commission (electric and water funds) is mostly legally separate but functions as a department of the City. City Council appoints Commission members and I therefore it has been included as an integral part of the primary government. The government-wide financial statements can be found on pages 27 and 28 of this report. Fund financial statements. Afund is a grouping of related accounts that is used to maintain I 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 I 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 I reported as governmental activities in the government-wide financial statements. However, unlike the government-wide financial statements, governmental fund financial statements focus I on near-term inflows and outflows of spendable resources, as well as on balances of spendable resources available at the end ofthe fiscal year. Such information may be useful in evaluating a government's near-term financing's requirements. Because the focus of governmental funds is narrower than that of the government-wide financial I 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. I By doing so, readers may better understand the long-term impact of the government's near-term financing decisions. Both the governmental fund balance sheet and the governmental fund statement of revenues, expenditures, and changes in fund balances provide a reconciliation to I facilitate this comparison between governmental funds and governmental activities. The City of Shakopee maintains 35 individual governmental funds. Information is presented I 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, Park Reserve and 2004A Debt Service Funds. These are considered to be major funds. Data from the other governmental funds are combined into a single, aggregated presentation. Individual fund data I, for each of these non-major governmental funds is provided in the form of combining statements elsewhere in this report. l4 I I I I CITY OF SHAKOPEE Scott County, Minnesota I MANAGEMENT'S DISCUSSION AND ANALYSIS December 31,2006 I The City of Shakopee adopts an annual appropriated budget for its general fund and four special revenue funds. A budgetary comparison statement has been prepared for those funds to demonstrate compliance with the budget. I The basic governmental funds financial statements can be found on pages 29 to 34 of this report. I 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 Electric, I Water, 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 of Shakopee uses internal service funds to account for its fleet of vehicles and mobile equipment, I and its major buildings, 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 I statements. The proprietary fund financial statements provide separate information for the Electric, Water, Sewer and Storm operations, all of which are considered to be major funds of the City of Shakopee. Conversely, all internal service funds are combined into a single, I 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. I The basic proprietary fund financial statements can be found on pages 35 to 38 ofthis report. Fiduciary funds. Fiduciary funds are used to account for resources held for the benefit of parties outside the government. Fiduciary funds are not reflected in the government-wide I financial statement because the resources of those funds are not available to support the City of Shakopee's own programs. I The basic fiduciary fund financial statements can be found on page 39 ofthis report. Notes to the financial statements. The notes provide additional information that is essential to I 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 40 to 70 of this report. I Other information. In addition to the basic financial statements and accompanying notes, this report also presents certain required supplementary information concerning the City's progress in funding its obligation to provide pension benefits to its employees. I The combining statements referred to earlier in connection with non-major governmental funds and internal service funds are presented immediately following the required supplementary information on pensions. Combining and individual fund statements and schedules can be found I on pages 72 to 99 of this report. I 15 I I CITY OF SHAKO PEE I Scott County, Minnesota MANAGEMENT'S DISCUSSION AND ANALYSIS I December 31,2006 Government-wide Financial Analysis I As noted earlier, net assets may serve over time as a useful indicator of a government's financial I position. For the City of Shakopee, assets exceeded liabilities by $3l5 million at the close of the most recent fiscal year. By far the largest portion of the City's net assets (73 percent) reflects its investment in capital I 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 I in its capital assets is reported net of related debt, it should be noted that the resources needed to repay this debt must be provided from other sources, since the capital assets themselves cannot be used to liquidate these liabilities. I City of Shakopee's Net Assets Governmental Business-type I Activities Activities Total 2006 2005 2006 2005 2005 2005 I Current and other assets $ 46,438 $ 47,912 $ 61,705 $ 49,474 $108,143 $ 97,386 I Capital assets 144,682 135,873 130,377 122,822 275,059 285,695 Total assets $ 191,120 $ 183,785 $192,082 $ 172,296 $383,202 $356,081 I Long-term liabilities I outstanding $ 26,277 $ 25,777 $ 33,515 $ 23,680 $ 59,792 $ 49,457 Other liabilities 2,918 3,287 5,949 5,951 8,867 9,238 Total liabilities 29,195 29,064 39,464 29,631 68,659 58,695 I Net assets: Invested in capital I assets, net of related debt 119,662 111,238 109,337 99,141 228,999 210,379 Restricted 12,998 21,638 880 2,232 13,878 23,870 I Umestricted 29,265 21,845 42,401 41,292 71,666 63,137 Total net assets $ 161,925 $ 154,721 $152,618 $ 142,665 $314,543 $297,386 I 16 I I I I CITY OF SHAKOPEE Scott County, Minnesota I MANAGEMENT'S DISCUSSION AND ANALYSIS December 31,2006 I An additional portion of the City's net assets (4 percent) represents resources that are subject to external restrictions on how they may be used. The remaining balance of unrestricted net assets ($72 million) may be used to meet the government's ongoing obligations to citizens and I creditors. At the end of the current fiscal year, the City is able to report positive balances in all three I categories of net assets, 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 fiscal year. I During the current fiscal year, the government's net assets increased by $l7 million. About 58 percent of this increase is due to enterprise fund activities reflecting the growth in the city. City of Shakopee Changes in Net Assets I Governmental Business-type I Activities Activities Total 2006 2005 2006 2005 2006 2005 Revenues; I Program Revenues: Cha~ges for $7,440 $8,749 $40,366 $35,189 $47,806 $43,938 servIces Operating grants ;1 and contributions 1,653 3,647 - - 1,653 3,647 Capital grants and contributions 6,116 8,666 6,175 10,913 12,291 19,579 General revenues: I Property taxes 10,547 9,342 - - 10,547 9,342 Other taxes 337 315 - - 337 315 II Other 1,664 1,698 1,987 1,281 3,651 2,979 Total revenues 27,757 32,417 48,528 47,383 76,285 79,800 I I I I: I 17 I I CITY OF SHAKOPEE I Scott County, Minnesota MANAGEMENT'S DISCUSSION AND ANALYSIS I December 31,2006 City of Shakopee Changes in Net Assets (Continued) I Expenses: I General government 3,161 2,563 - - 3,161 2,563 Public safety 6,856 6,191 - - 6,856 6,191 Public Warks 6,799 8,298 - - 6,799 8,298 I Economic Development 334 315 - - 334 315 Culture and Recreation 4,653 3,665 - - 4,653 3,665 I Interest on long- term debt 896 924 - - 896 924 Electric - - 29,169 24,427 29,169 24,427 Water - - 2,950 2,546 2,950 2,546 I Sewer - - 2,786 2,349 2,786 2,349 Storm - - 1,524 1,000 1,524 1,000 I' Total expenses 22,699 21,956 36,429 30,322 59,128 52,278 Increase in net assets before I transfers 5,058 10,461 12,099 17,061 17,157 27,522 Special Item - 1,658 - (1,658) - - I Transfers 2,146 1,375 (2,146) (1,375) - - Change in net assets 7,204 13,494 9,953 14,028 17,157 27,522 Net assets January 1 154,721 141,227 142,665 128,637 297,386 269,864 I Net assets December 31 $161,925 $154,721 $152,618 $142,665 $314,543 $297,386 Governmental activities. Governmental activities increased the City of Shakopee' s net assets I by $7 million, thereby accounting for 41 percent of the total growth in net assets ofthe City. I Some elements of this increase are as follows: . Developer contributions of infrastructure $3, l68. . Contributions for parks $1 ,25l. I I I 18 I I I I CITY OF SHAKOPEE Scott County, Minnesota I MANAGEMENT'S DISCUSSION AND ANALYSIS December 31, 2006 I Expenses and Program Revenues - governmental Activities 9,000 I 8,000 7,000 6,000 I 5,000 . Program Revenues 4,000 . Expenses 3,000 I 2,000 1,000 - - :>, (/) - c: c: E c: c: - 0) ..... -i: lJ 0) Q o '- 0) I ~ E '+- 0 .- E 1ii .......0)- (Il ;s: E c.. 001-...0 0) c: (f) ~ ~O)Ql c: '- Q 0 0) 0) .S! u c:_ u Q5c:O (!) ~ o 0) (1) ....... 0 ..Q ...0 U .,. [( ~....J (!) ::l ::l W (1) 0.. 0.. 0 I I Revenues by Source - Governmental Activities Capital Grants Property Taxes I and 31% Contributions 28% I I I I I I I 19 I I CITY OF SHAKOPEE I Scott County, Minnesota MANAGEMENT'S DISCUSSION AND ANALYSIS I December 31,2006 For the most part, increases in expenses closely paralleled inflation and growth in the demand for I servIces. Business-type activities. Business-type activities increased the City's net assets by $10 million, I accounting for 59 percent of the total growth in the government's net assets. Key elements of this increase are as follows. . Capital grants and contribution by developers - $6,l75. I . Charges for utility service - $40,366. Expenses and Program Revenues - Business-type Activities I $35,000,000 I $30,000,000 $25,000,000 I $20,000,000 I $15,000,000 $10,000,000 I $5,000,000 I $- Electric Water Sewer Storm I I I I I 20 I I I I CITY OF SHAKOPEE Scott County, Minnesota I MANAGEMENT'S DISCUSSION AND ANALYSIS December 31,2006 I Revenues by Source - Business-type Activities I I Capital Grants and Contributions 15% I Investment Charges for I Earnings Services 4% 77% I I Financial Analysis of the Government's Funds As noted earlier, the City of Shakopee uses fund accounting to ensure and demonstrate I compliance with finance-related legal requirements. Governmental funds. The focus of the City's governmental funds is to provide information on I near-term inflows, outflows, and balances of spendable resources. Such information is useful in assessing the city's financing requirements. In particular, unreserved fund balance may serve as a useful measure of a government's net resources available for spending at the end of the fiscal I year. As ofthe end of the current fiscal year, the City of Shako pee's governmental funds reported I combined ending fund balances of $28,039, a decrease of$l,820 in comparison with the prior year. The Park Reserve Fund showed a decrease of $1.0 due to large construction proj ects. Approximately 26 percent ($7,l48) of the total amount of $28,039 constitutes unreservedfund balance, which is available for spending at the government's discretion. The remainder of fund I balance is reserved to indicate that it is not available for new spending because it has already been committed to pay debt service ($7,930) or a variety of other restricted purposes. I The General Fund is the chief operating fund of the City of Shakopee. At the end of the current fiscal year, fund balance of the general fund was $9,845. As a measure ofthe general fund's liquidity, it may be useful to compare fund balance (unreserved) to total fund expenditures. I Fund balance represents 60 percent of total General Fund expenditures. I 2l I I CITY OF SHAKOPEE I Scott County, Minnesota MANAGEMENT'S DISCUSSION AND ANALYSIS I December 31, 2006 Fund balance ofthe City's General Fund increased by $l65 during the current fiscal year. This I was in spite of a substantial decrease in building and development related revenues due to the downturn in the housing market and certain fee reductions. Key factors in this growth are as I follows: . Under-spending the budget by $l ,078 or 7 percent. . Revenues exceeding the budget by $930. I Proprietary funds. The City of Shakopee's proprietary funds provide the same type of information found in the government-wide financial statements, but in more detail. I Unrestricted net assets of the enterprise funds: Electric Water Sewer Storm I Beginning of year $l2,403 $1,490 $l5,502 $ll,897 Change during year 903 (l54) (466) 827 End of year $13.306 $1.336 $15.036 $l2.724 I General Fund Budgetary Highlights The difference between the original General Fund budget and the final amended budget for I expenditures was not significant for the current year. The original legally adopted budget for expenditures was $14,784 and transfers out were $1 ,3l8. Final budget was $14,940 and transfers I out were $l,3l8. The change in the estimate for revenues was significant due to the reduction in building activity in the housing market. Original adopted budget for revenues was $l4,033 and the final amended was $12,821. The state legislature cut all local government aid and market I value credit reimbursement to the City due to fiscal problems at the state level. The loss amounted to $560, which is 4 percent of the original budget. Capital Asset and Debt Administration I Capital assets. The City of Shako pee's investment in capital assets for its governmental and business type activities as of December 3l, 2006, amounts to $228,999 (net of accumulated I 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 total increase in the city's capital assets for the current fiscal year was 9 percent (an 8 I percent increase for governmental activities and a lO percent increase for business-type activities). Major capital assets events during the current fiscal year included the following: I . A variety of street construction projects were completed with a value of $6,020. . Park additions and improvements added $2,684. . Buildings added $2,203. I . Additions to the utility assets for Electric $2,l51, Water $3,923, Sewer $2,425 and Storm $l,696. 22 I I I I CITY OF SHAKOPEE Scott County, Minnesota I MANAGEMENT'S DISCUSSION AND ANALYSIS December 31, 2006 I City of Shakopee's Capital Assets (Net of depreciation) I Governmental Business-type Activities Activities Total _2006 2005 2006 2005 2006 2005 I Land $ 19,832 $ 19,020 $ 6,082 $ 4,807 $ 25,914 $ 23,827 Construction in progress 1,859 - 1,370 2,032 3,229 2,032 Buildings and system 25,793 24,356 122,503 113,553 148,296 137,309 I Improvements other than buildings Infrastructure 90,011 86,912 - - 90,011 86,912 Machinery and equipment 7 .186 5.585 422 451 7.608 6.036 Total $144.681 $135.873 $130.377 $120.843 $275.058 $256.716 I Additional information on the city's capital assets can be found in note 5 on pages 55 and 57 of this report. I Long-term debt. At the end of the current fiscal year, the City of Shakopee had total bonded debt outstanding of$59,555. Ofthis amount, $7,950 comprises debt backed by the full faith and I credit ofthe government and $17,070 is special assessment debt for which the government is liable in the event of default by the property owners subject to the assessment. The remainder of the City's debt represented bonds secured solely of specified revenue sources (i.e., revenue bonds). I City of Shakopee's Outstanding Debt General Obligation and Revenue Bonds I Governmental Business-type Activities Activities Total 2006 2005 2006 2005 2006 2005 I General obligation bonds $ 7,950 $ 8,275 $ $ $ 7,950 $ 8,275 Special assessment debt with governmental commitment 17,070 16,360 17,070 16,360 I Revenue bonds 34.535 24.750 34.535 24.750 Total $25.020 $24.635 $34.535 $24.750 $59.555 $49.385 I The City's total debt increased by $102 during the current fiscal year. State Statutes limit the amount of general obligation debt a government entity may issue to a net I figure of two percent of the taxable market value. The current debt limitation for the City is $53 million, which is significantly in excess of the City's outstanding general obligation debt. I I 23 I I CITY OF SHAKOPEE I Scott County, Minnesota MANAGEMENT'S DISCUSSION AND ANALYSIS I December 31, 2006 Additional information on the City's long-term debt can be found in note 6 on pages 57 to 60 I report. Economic Factors and Next Year's Budgets and Rates I The unemployment rate for Shakopee was 3.7% at years end. This is an increase from a rate of 3.6% a year ago. The state's average unemployment rate was 4.2% and the national average rate I was 4.3%. Inflationary trends in the region compare favorably to national indices. I During the current fiscal year, unreserved fund balance in the general fund decreased from $9,662 to $8,354. The City has appropriated $662 ofthis amount for spending in the 2007 fiscal I year. General Fund revenues from development activities such as permits, engineering fees and platting were $2,292, which is 17% oftotal revenues. For 2005, the amounts were $4,058 and 28%. Building permits have been a significant source of in revenue in recent years. The downturn in I that sector of the economy and a reduction in the fees charged for permits had a significant impact on the General Fund for 2006. The city has reserved part of the fund balance for building I inspection related activities. The slower housing market is expected to continue through 2007 and into 2008. The tax levy for 2006/07 increased from $lO,932 to $l2,725, an increase of l6.4%. The tax rate I increased from 30.974 to 3l.939 (3.l % increase) due to increase in the tax levy moderated by the growth in the tax base. The General Fund budget for 2007 expenditures as originally adopted I was $16,545 compared to $l4,784 for 2006 and $13,2l6 for 2005. This is reflective ofthe rapid population, commercial/industrial activity and infrastructure growth in the city. In 2006, there were 214 lots/units in lO plats made available for building. The respective I numbers for the prior year were 700 and 7. Utility rates for the enterprise funds were slightly increased from 2005. I Requests for Information This financial report is designed to provide a general view of the City of Shakopee' s finances for I all those with an interest in the government's finances. Questions concerning any of the information provided in this report or requests for additional information should be addressed to I the Finance Director, 129 Holmes St. S., Shakopee, MN, 55379. I 24 I I I I I I I I I I I I BASIC FINANCIAL STATEMENTS I I I I I I I I 25 I I I I I I I I I I (THIS PAGE LEFT BLANK INTENTIONALLY) I I I I I I I I I 26 I I CITY OF SHAKOPEE I Scott County, Minnesota STATEMENT OF NET ASSETS December 31,2006 I Governmental Business-Type Activities Activities Total I ASSETS: Cash and Investments $ 34,773,575 $ 41,871,774 $ 76,645,349 Restricted Accounts 12,574,434 12,574,434 I Receivables: Property Tax Receivable 279,316 - 279,316 Accounts Receivable 1,164,129 3,765,748 4,929,877 Interest Receivable 270,776 335,995 606,771 I Notes Receivable 952,016 - 952,016 Special Assessments Receivable 8,771,642 305,930 9,077,572 Due from Other Funds (Internal Balances) 216,897 (216,897) - Inventories - 834,433 834,433 I Prepaid Expenses 10,282 64,232 74,514 Unamortized Debt Issue Costs - 1,045,255 1,045,255 Electric Plant Acquisition (Net of Accumulated Amortization) - 1,124,079 1,124,079 I Capital Assets not being Depreciated: Land 19,832,201 6,082,364 25,914,565 Construction in Progress 1,859,230 1,369,834 3,229,064 Capital Assets being Depreciated: I Infrastructure 126,163,148 - 126,163,148 Plant in Service 149,120,057 149,120,057 Buildings 31,173,154 - 31,173,154 Machinery and Equipment 11,231,832 747,128 11,978,960 I Less Accumulated Depreciation (45,577,804) (26,942,688) (72,520,492) Total Assets $ 191,120,394 $ 192,081,678 $ 383,202,072 I LIABILITIES AND NET ASSETS: Liabilities: Accounts Payable $ 1,628,490 $ 4,152,714 $ 5,781,204 Contracts Payable 378,515 30,281 408,796 I Due to Other Governments 260,345 - 260,345 Salaries and Benefits Payable 248,468 - 248,468 Deposits Payable - 787,458 787,458 I Interest Payable 402,560 513,259 915,819 Unearned Revenue - 22,648 22,648 Customer Advances - 442,069 442,069 Bond Principal Payable: I Payable Within One Year 3,110,000 640,000 3,750,000 Payable After One Year 21,910,000 32,875,369 54,785,369 Compensated Absences Payable: Payable Within One Year 620,000 - 620,000 I Payable After One Year 636,559 - 636,559 Total Liabilities 29,194,937 39,463,798 68,658,735 Net Assets: I Invested in Capital Assets, Net of Related Debt 119,661,761 109,337,014 228,998,775 Restricted for: Special Revenue 2,430,047 - 2,430,047 Debt Service 7,527,554 880,069 8,407,623 I Capital Projects 3,041,381 - 3,041,381 Unrestricted 29,264,714 42,400,797 71,665,511 Total Net Assets 161,925,457 152,617,880 314,543,337 I Total Liabilities and Net Assets $ 191,120,394 $192,081,678 $ 383,202,072 The Notes to the Financial Statements are an integral part of this statement. 27 I CITY OF SHAKO PEE Scott County, Minnesota STATEMENT OF ACTIVITIES For the Year Ended December 31, 2006 Net (Expense) Revenues Program Revenues and Changes in Net Assets Operating Capital Grants Charges for Grants and and Governmental Business-Type Functions/Programs Expenses Services Contributions Contributions Activities Activities Total Governmental Activities: General Government $ 3,161,106 $ 714,105 $ 154,805 $ - $ (2,292,196) $ - $ (2,292,196) Public Safety 6,856,485 2,063,023 378,917 - (4,414,545) - (4,414,545) Public Works 6,798,917 2,986,495 1,119,516 4,402,808 1,709,902 - 1,709,902 Economic Development 333,462 - - - (333,462) - (333,462) Culture and Recreation 4,653,240 1,676,630 - 1,713,558 (1,263,052) - (1,263,052) Interest on Long-Term Debt 896,110 - - - (896,110) - (896,110) Total Governmental Activities 22,699,320 7,440,253 1,653,238 6,116,366 (7,489,463) - (7,489,463) Business-Type Activities: Electric 29,169,297 31,906,714 - 502,888 - 3,240,305 3,240,305 Water 2,949,990 3,127,207 - 2,876,948 - 3,054,165 3,054,165 Sewer 2,786,234 3,471,984 - 929,341 - 1,615,091 1,615,091 Storm Drainage 1,523,343 1,859,912 - 1,865,609 - 2,202,178 2,202,178 Total Business-Type Activities 36,428,864 40,365,817 - 6,174,786 - 10,111,739 10,111,739 Total Governmental and Business-Type Activities $ 59,128,184 $ 47,806,070 $ 1,653,238 $ 12,291,152 (7,489,463) 10,111,739 2,622,276 General Revenues: Property Taxes 10,547,177 - 10,547,177 Tax Increments 336,648 - 336,648 Unrestricted Investment Earnings 1,661,257 1,973,715 3,634,972 Gain of Sale of Asset 2,700 13,749 16,449 Transfers 2,146,233 (2,146,233) - Total General Revenues and Transfers 14,694,015 (158,769) 14,535,246 Change in Net Assets 7,204,552 9,952,970 17,157,522 Net Assets - Beginning 154,720,905 142,664,910 297,385,815 Net Assets - Ending $ 161,925,457 $152,617,880 $314,543,337 ~ The Notes to the Financial Statements are an integral part ofthis statement. - - - - - - - - - - - - - - - - - - - I CITY OF SHAKO PEE I Scott County, Minnesota BALANCE SHEET-GOVERNMENTAL FUNDS December 31, 2006 I Debt Service Capital Projects I 2004A Other Total Improvement Governmental Governmental General Fund Bonds Park Reserve Funds Funds I ASSETS: Cash and Investments (Including Cash Equivalents) $ 8,907,995 $ 1,434,294 $ 761,562 $ 17,107,667 $ 28,211,518 Taxes Receivable - Delinquent 271,852 - - 7,464 279,316 I Special Assessments Receivable: Delinquent 3,655 - - 13,058 16,713 Deferred 25,667 2,826,914 5,902,348 8,754,929 Accounts Receivable 235,006 - 161 928,962 1,164,129 I Interest Receivable 53,032 10,511 11,755 145,516 220,814 Due from Other Funds 1,266,897 - - 12,173 1,279,070 Notes Receivable - - - 337,016 337,016 ,I Prepaid Items 10,282 - - - 10,282 Total Assets $ 10,774,386 $ 4,271,719 $ 773,478 $ 24,454,204 $ 40,273,787 I LIABILITIES AND FUND BALANCES: Liabilities: Accounts Payable $ 380,110 $ $ 261,767 $ 612,030 $ 1,253,907 Contracts Payable - 93,313 266,254 359,567 I Due to Other Funds - 1,062,173 1,062,173 Due to Other Governments - - 260,345 260,345 Salaries and Benefits Payable 248,468 - - - 248,468 Deferred Revenue 301,174 2,826,914 - 5,922,870 9,050,958 I Total Liabilities 929,752 2,826,914 355,080 8,123,672 12,235,418 Fund Balances: I Reserved for: Special Revenue - - - 3,386,721 3,386,721 Debt Service - 1,444,805 - 6,485,309 7,930,114 Capital Projects - - 418,398 7,664,401 8,082,799 I Prepaid Items 10,282 - - 10,282 Building Permits and Activities 1,479,875 - - 1,479,875 Unreserved, Reported in: General Fund - Undesignated 8,354,477 - - - 8,354,477 I Capital Projects - Undesignated - (1,205,899) (1,205,899) Total Fund Balances 9,844,634 1,444,805 418,398 16,330,532 28,038,369 I Total Liabilities and Fund Balance $ 10,774,386 $ 4,271,719 $ 773,478 $ 24,454,204 $ 40,273,787 I I I The Notes to the Financial Statements are an integral part of this statement. 29 I CITY OF SHAKOPEE I Scott County, Minnesota I RECONCILIATION OF THE BALANCE SHEET TO THE STATEMENT OF NET ASSETS - GOVERNMENTAL FUNDS I December 31,2006 Total Fund Balances - Governmental Funds $ 28,038,369 I Amounts reported for governmental activities in the Statement of Net Assets I are different because: Capital assets used in governmental activities are not current financial resources I and, therefore, are not reported as assets in governmental funds. Cost of Capital Assets 153,940,777 I Less Accumulated Depreciation (37,660,326) Long-term liabilities, including bonds payable, are not due and payable in I the current period and, therefore, are not reported as liabilities in the funds. Long-term liabilities at year-end consist of: Bond Principal Payable (25,020,000) I Delinquent property taxes receivable will be collected this year, but are not available soon enough to pay for the current period's expenditures and, I therefore, are deferred in the funds. Property Taxes 279,316 Special Assessments 16,713 I Deferred special assessments receivable are not available to pay for current I expenditures and, therefore, are deferred in the funds. Deferred Special Assessments 8,754,929 Governmental funds do not report a liability for accrued interest I due and payable. (402,560) Internal Service Funds are used by management to charge the costs of equipment I buildings to individual funds. A portion of the assets and liabilities of those funds are included in governmental activities in the Statement of Net Assets. 33,978,239 I Total Net Assets - Governmental Activities $ 161,925,457 I I The Notes to the Financial Statements are an integral part of this statement. 30 I I I CITY OF SHAKO PEE I Scott County, Minnesota STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES - GOVERNMENTAL FUNDS I For the Year Ended December 31, 2006 Debt Service Capital Projects I 2004A Other Total Improvement Governmental Governmental General Fund Bonds Park Reserve Funds Funds I REVENUES: Property Taxes $ 9,471,595 $ - $ - $ 1,007,124 $ 10,478,719 Tax Increments - - 336,648 336,648 Special Assessments 6,597 337,399 1,407,875 1,751,871 I Licenses and Pennits 1,644,172 - 733,389 298,374 2,675,935 Intergovernmental 506,240 - - 2,371,005 2,877 ,245 Charges for Services 1,294,733 - 472 995,791 2,290,996 I Fine and Forfeitures 374,807 - - 48,043 422,850 Miscellaneous 452,508 54,077 596,199 876,635 1,979,419 Total Revenues 13,750,652 391,476 1,330,060 7,341,495 22,813,683 I EXPENDITURES: Current: General Government 2,897,832 - - 251,885 3,149,717 Public Safety 7,067,620 - - 85,501 7,153,121 I Public Works 2,386,623 - 708,769 3,095,392 Culture and Recreation 1,337,112 - - 2,116,433 3,453,545 Debt Service: I Principal - 185,000 - 2,870,000 3,055,000 Interest and Other Charges - 141,986 - 726,646 868,632 Capital Outlay 173,063 - - - 3,425,465 7,051,921 10,650,449 Total Expenditures 13,862,250 - 326,986 - 3,425,465 13,811,155 31,425,856 I Excess of Revenues Over (Under) Expenditures (111,598) 64,490 (2,095,405) (6,469,660) (8,612,173) I OTHER FINANCING SOURCES (USES): Proceeds from Sale of Capital Asset 2,700 - - - 2,700 I Bonds Issued - - 1,051,993 2,388,007 3,440,000 Premium on Bonds Issued - - 20,275 20,275 Transfers In 1,586,979 - 5,096,553 6,683,532 Transfers Out (1,312,589) - - (2,041,775) (3,354,364) I Total Other Financing Sources (Uses) 277,090 - 1,051,993 5,463,060 6,792,143 I Net Change in Fund Balances 165,492 64,490 (1,043,412) (1,006,600) (1,820,030) FUND BALANCES: I Beginning of Year 9,679,142 1,380,315 1,461,810 17,337,132 29,858,399 End of Year $ 9,844,634 $ 1,444,805 $ 418,398 $ 16,330,532 $ 28,038,369 I I The Notes to the Financial Statements are an integral part of this statement. 31 I CITY OF SHAKO PEE I Scott County, Minnesota I RECONCILIATION OF THE STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES TO I THE STATEMENT OF ACTIVITIES - GOVERNMENTAL FUNDS For the Year Ended December 31,2006 Total Net Change in Fund Balances - Governmental Funds I $(1,820,030) Amounts reported for governmental activities in the Statement of Activities are I different because: Capital outlays are reported in governmental funds as expenditures. However, I in the Statement of Activities, the cost of those assets is allocated over the estimated useful lives as depreciation expense. I Capital Outlays 11,619,781 Depreciation Expense (4,197,183) Principal payments on long-term debt are recognized as expenditures in the governmental I funds but as an increase in the net assets in the Statement of Activities. 3,055,000 Interest on long-term debt in the Statement of Activities differs from the amount I 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. I In the Statement of Activities, however, interest expense is recognized as the interest accrues, regardless of when it is due. (27,478) Proceeds from long-term debt are recognized as other financing source in the I governmental funds but as a decrease in net assets in the Statement of Activities. Bonds Payable (3,440,000) I Certain revenues in the Statement of Activities that do not provide current financial resources are not reported as revenues in the funds. I Special Assessments 205,059 Delinquent and deferred receivables will be collected this year, but are not available I soon enough to pay for the current period's expenditures and, therefore, are not revenues in the funds. 68,458 Internal Service Funds are used by management to charge the costs of certain activities I such as buildings and equipment, to individual funds. This amount represents the change in net assets of the Internal Service Funds, which all is reported with governmental activities. 1,740,945 I Change in Net Assets - Governmental Activities $ 7,204,552 I The Notes to the Financial Statements are an integral part of this statement. 32 I I I CITY OF SHAKOPEE I Scott County, Minnesota STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES - I BUDGET AND ACTUAL - GENERAL FUND For the Year Ended December 31,2006 I Variance with Final Budget - Budgeted Amounts Positive I REVENUES: Original Final Actual Amounts (Negative) Property Taxes: General Property Taxes $ 8,270,440 $ 8,270,440 $ 8,365,408 $ 94,968 I Fiscal Disparities 887,410 887,410 862,751 (24,659) Lodging Tax 210,000 210,000 198,070 (I 1,930) Tax Increments - - 36,152 36,152 I- AggregateTax 12,000 12,000 9,214 (2,786) Total Property Taxes 9,379,850 9,379,850 9,471,595 91,745 Special Assessments - - 6,597 6,597 I Licenses and Permits 2,813,000 1,513,000 1,644,172 131,172 I Intergovernmental Revenue: Federal Grants 70,000 143,370 155,509 12,139 PERA Aid 19,000 19,000 18,170 (830) Police Aid 185,000 185,000 223,408 38,408 I Other Grants and Aids 11,000 11 ,000 109,153 98,153 Total Intergovernmental Revenue 285,000 358,370 506,240 147,870 Charges for Services: I General Government 197,660 197,660 191,531 (6,129) Public Safety 165,000 165,000 232,804 67,804 Public Works 725,000 725,000 870,398 145,398 I Total Charges for Services 1,087,660 1,087,660 1,294,733 207,073 Fine and Forfeitures 267,000 267,000 374,807 107,807 I Miscellaneous Revenue: 150,000 150,000 388,297 238,297 Investment Income Rents 1,000 1,000 7,418 6,418 I Other 50,000 64,125 56,793 (7,332) Total Miscellaneous Revenue 201,000 215,125 452,508 237,383 Total Revenues 14,033,510 12,821,005 13,750,652 929,647 I EXPENDITURES: General Government: Mayor and Council 113,320 113,320 85,176 28,144 Administration 532,410 532,410 424,010 108,400 I City Clerk 305,210 325,210 320,670 4,540 Finance 723,020 723,020 677,882 45,138 Legal 485,100 485,100 448,961 36,139 I Planning 419,660 419,660 436,863 (I7,203) Government Buildings 333,720 333,720 303,298 30,422 Information Technology 268,540 317,540 298,603 18,937 Total General Government 3,180,980 3,249,980 2,995,463 254,517 I The Notes to the Financial Statements are an integral part of this statement. 33 I CITY OF SHAKO PEE I Scott County, Minnesota I STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES - BUDGET AND ACTUAL - GENERAL FUND I For the Year Ended December 31,2006 Variance with I Final Budget - Budgeted Amounts Positive Original Final Actual Amounts (Negative) I EXPENDITURES: Public Safety: Police $ 4,809,020 $ 4,889,015 $ 4,796,124 $ 92,891 Fire 1,561,570 1,569,070 1,481,327 87,743 I Building Inspection 912,090 912,090 829,526 82,564 Total Public Safety 7,282,680 7,370,175 7,106,977 263,198 Public Works: I Streets and Highways: Engineering 930,580 930,580 867,415 63,165 Streets 1,452,940 1,452,940 1,190,775 262,165 I Shop 357,190 357,190 364,508 (7,318) Total Public Works 2,740,710 2,740,710 2,422,698 318,012 Park and Recreation I Park Maintenance 1,171,530 1,171,530 1,076,929 94,601 Library/Congregate Dining 247,700 247,700 260,183 (12,483) Total Park and Recreation 1,419,230 1,419,230 1,337,112 82,118 I Miscellaneous 160,000 160,000 - 160,000 Total Expenditures 14,783,600 14,940,095 13,862,250 1,077,845 Excess of Revenues Over I , (Under) Expenditures (750,090) (2,119,090) (111,598) 2,007,492 OTHER FINANCING SOURCES (USES): I Proceeds from Sale of Capital Asset - - 2,700 2,700 Transfers In 1,625,000 1,625,000 1,586,979 (38,021) Transfers Out (1,318,110) (1,318,110) (1,312,589) 5,521 I Total Other Financing Sources (Uses) 306,890 306,890 277,090 (29,800) Net Change in Fund Balances $ (443,200) $ (1,812,200) 165,492 $ 1,977,692 I FUND BALANCES: Beginning of Year 9,679,142 End of Year $ 9,844,634 I I I The Notes to the Financial Statements are an integral part of this statement. 34 I I I CITY OF SHAKOPEE Scott County, Minnesota I STATEMENT OF NET ASSETS - PROPRIETARY FUNDS December 31, 2006 I Business-Type Activities - Enterprise Funds Governmental Activities - Storm Total Enterprise Internal Service I Electric Water Sewer Drainage Funds Funds ASSETS: Current Assets: Cash and Investments (Including Cash Equivalents) $ 4,747,465 $ 648,515 $ 1,881,325 $ 1,602,609 $ 8,879,914 $ 1,329,533 I Investments 6,381,573 3.277,535 12,501,721 10,831,031 32,991.860 5,232,524 Restricted Accounts 1.216,039 65,485 1,281,524 Accounts Receivable 2,922,656 252,693 380,646 209,753 3,765,748 Interest Receivable 69,513 26,208 126,353 101,216 323,290 49,962 Special Assessment Receivable, Current 30,593 30,593 I Notes Receivable, Current 55,000 Due from Other Funds 1,293,093 36,082 1,329,175 Inventories 803,793 30,640 834,433 Prepaid Expenses 46,247 17,98:5 64,232 Total Current Assets 17.480,379 4,355,143 14,920,638 12,744,609 49,500,769 6,667,019 I Noncurrent Assets: Restricted Accounts 10,610,888 582,022 11,192,910 Other Accounts 100,000 100,000 I Interest Receivable 12,705 12,705 Special Assessment Receivable, Noncurrent 275,337 275,337 Notes Receivable, Noncurrent 560,000 Unamortized Debt Issue Costs 979,680 65,575 1,045,255 Electric Plant Acquisition (Net of Amortization) 1,124,079 1,124,079 I Capital Assets: Land 4,810,575 892,333 379,456 6,082,364 Plant in Service 35,755,326 41,501,104 32,617,466 39,246,161 149,120,057 29,024,022 Machinery and Equipment 299,121 448.007 747,128 7,294,766 Construction In Progress 581,587 788,247 1,369,834 I Total Cost 41,147,488 43,181,684 32,916,587 40,073,624 157,319,383 36,318,788 Less Accumulated Depreciation (7,589,831) (7,415,376) (5,166,810) (6,770,671) (26,942,688) (7,917,478) Net Capital Assets 33,557,657 35,766,308 27,749,777 33,302,953 130,376,695 28,401,310 Total Noncurrent Assets 46,372,304 36,426,610 28,025,114 33,302,953 144,126,981 28,961,310 I Total Assets $ 63,852,683 $ 40,781,753 $ 42,945,752 $ 46,047,562 $ 193,627,750 $ 35,628,329 LIABILITIES AND NET ASSETS: Current Liabilities: I Accounts Payable $ 2,754,371 $ 1,303,587 $ 85,434 $ 9,322 $ 4,152,714 $ 374,583 Contracts Payable 27,590 2,691 30,281 18,948 Due To Other Funds 129,898 1,359,863 47,411 8,900 1,546,072 Current Compensated Absences 620,000 Total Current Liabilities 2,884,269 2,663,450 160,435 20,913 5,729,067 1,013,531 I Liabilities Payable from Restricted Accounts: Current Portion of Revenue Bonds 546,800 93,200 640,000 Accrued Interest Payable 479,735 33,524 513,259 I Customer Deposits 787,458 787,458 Total Current Liabilities Payable from Restricted Assets 1,813,993 126,724 1,940,717 Noncurrent Liabilities: I Deferred Revenue 22,648 22,648 Customer Advances 151,614 290,455 442.069 Compensated Absences 636,559 Revenue Bonds (Net of Unamortized Bond Premium and I Unamortized Loss on Advance Refunding) 31.123,867 1,751,502 32,875.369 Total Noncurrent Liabilities 31,298,129 2,041,957 33,340,086 636,559 Total Liabilities 35,996,391 4,832,131 160,435 20,913 41,009,870 1,650,090 Net Assets: I Invested in Capital Assets, Net of Related Debt 14,297,103 33,987,181 27,749,777 33,302,953 109,337,014 28,401,310 Restricted 253,380 626,689 880,069 Unrestricted 13,305,809 1,335,752 15,035,540 12,723,696 42,400,797 5,576,929 Total Net Assets 27,856,292 35,949,622 42,785,317 46,026,649 152,617,880 33,978,239 I Total Liabilities and Net Assets $ 63,852,683 $ 40,781,753 $ 42,945.752 $ 46,047,562 $ 193,627,750 $ 35,628,329 The Notes to the Financial Statements are an integral part of this statement. 35 I CITY OF SHAKO PEE I Scott County, Minnesota STATEMENT OF REVENUES, EXPENSES AND CHANGES I IN FUND NET ASSETS - PROPRIETARY FUNDS For the Year Ended December 31,2006 I Business-Type Activities - Enterprise Funds Governmental I Activities - Internal Electric Water Sewer Storm Drainage Total Service Funds OPERATING REVENUES: I Charges for Services $ 31,685,394 $ 3,061,504 $ 2,527,442 $ 1,171,063 $ 38,445,403 $ Rental and Other Charges 2,569,692 Total Operating Revenues 31,685,394 3,061,504 2,527,442 1,171,063 38,445,403 2,569,692 OPERATING EXPENSES: I Operations and Maintenance 26,666,978 1,788,019 2,183,330 798,642 31,436,969 Depreciation 1,259,545 1,068,939 602,904 723,721 3,655,109 1,152,599 Amortization 63,004 - 63,004 I Employee Benefits - 788,890 Total Operating Expenses 27,989,527 2,856,958 2,786,234 1,522,363 35,155,082 1,941,489 Operating Income (Loss) 3,695,867 204,546 (258,792) (351,300) 3,290,321 628,203 I NONOPERATING REVENUE (EXPENSES): I Investment Income 526,395 223,046 686,190 538,084 1,973,715 309,369 Special Assessments 305,931 305,931 Interest Expense (1,091,652) (82,079) (980) (1,174,711) Gain (Loss) on Disposal of Assets 13,749 13,749 (19,345) I Amortization of Debt Issue Costs and Loss on Refunding (88,118) (10,953) (99,071) Other Income 221,320 65,703 638,611 688,849 1,614,483 Total Nonoperating Revenue I (Expenses) (418,306) 195,717 1,630,732 1,225,953 2,634,096 290,024 Income before Capital Contributions and Transfers 3,277,561 400,263 1,371,940 874,653 5,924,417 918,227 I Capital Contributions 502,888 2,876,948 1,762,781 2,215,104 7,357,721 822,718 Transfers Out (908,980) (677,999) (1,175,525) (566,664) (3,329,168) Change in Net Assets 2,871,469 2,599,212 1,959,196 2,523,093 9,952,970 1,740,945 I NET ASSETS: Beginning of Year 24,984,823 33,350,410 40,826,121 43,503,556 142,664,910 32,237,294 I End of Year $ 27,856,292 $35,949,622 $42,785,317 $ 46,026,649 $152,617,880 $33,978,239 I I I The Notes to the Financial Statements are an integral part of this statement. 36 I I I CITY OF SHAKOPEE I Scott County, Minnesota STATEMENT OF CASH FLOWS - PROPRIETARY FUNDS For the Year Ended December 31,2006 I Business-Type Activities - Enterprise Funds Governmental Activities - I Storm Internal Electric Water Sewer Drainage Total Service Funds CASH FLOWS - OPERATING ACTIVITIES: I Receipts from Customers and Users $32,009,114 $3,140,597 $2,546,189 $ 1,168,872 $38,864,772 $ 2,569,692 Payments to Suppliers (25,460,159) (1,462,350) (2,020,660) (655,755) (29,598,924) Payments to Employees (1,145,000) (475,000) (110,963) (151,206) (1,882,169) (674,638) Payments for Interfund Services 236,046 (207,758) 28,288 I Net Cash Flows - Operating Activities 5,403,955 1,203,247 650,612 154,153 7,411,967 1,895,054 CASH FLOWS - NONCAPITAL FINANCING ACTIVITIES: I Cash Implicitly Financed from Other Funds (1,080,705) 1,080,705 - - Transfer to Other Funds (908,980) (677,999) (1,175,525) (566,664) (3,329,168) Net Cash Flows - Noncapital Financing Activities (1,989,685) 402,706 (1,175,525) (566,664) (3,329,168) I CASH FLOWS - CAPITAL AND RELATED FINANCING ACTIVITIES: Principal Paid on Debt (546,000) (94,000) (145,000) (785,000) - I Interest Paid on Debt (1,041,056) (83,350) (4,000) (1,128,406) Contributions Received for Construction 300,261 300,261 Customer Advances 77,623 77,623 - Installation Fees 82,946 82,946 I Connection Charges 1,060,859 1,060,859 Trunk Charges 228,756 638,611 688,849 1,556,216 Bond Proceeds 10,570,000 10,570,000 Bond Issuance Costs (302,858) - - (302,858) - I Proceeds from Disposal of Capital Assets 13,749 - - - 13,749 46,029 Acquisition of Capital Assets (2,953,790) (3,255,655) (1,266,028) (59,535) (7,535,008) (1,477,684) Net Cash Flows - Capital and Related Financing Activities 6,040,306 (1,982,821) (627,417) 480,314 3,910,382 (1,431,655) I CASH FLOWS - INVESTING ACTIVITIES: Proceeds (Purchases) of Investments (9,175,797) 170,321 (1,713,316) (10,831,031) (21,549,823) (644,040) Payment Received for Notes Receivable - - - 50,000 I Interest and Dividends Received 516,708 217,735 649,824 505, I 04 1,889,371 294, III Net Cash Flows - Investing Activities (8,659,089) 388,056 (1,063,492) (10,325,927) . (19,660,452) (299,929) Net Change in Cash and Cash Equivalents 795,487 11,188 (2,215,822) (10,258,124) (11,667,271) 163,470 I Cash and Cash Equivalents, January I 3,951,978 637,327 4,097,147 11,860,733 20,547,185 1,166,063 Cash and Cash Equivalents, December 31 $ 4,747,465 $ 648,515 $1,881,325 $ 1,602,609 $ 8,879,914 $ 1,329,533 I RECONCILIATION OF CASH AND CASH EQUIVALENTS TO THE STATEMENT OF I NET ASSETS: Restricted Accounts $11,826,927 $ 647,507 $ $ $12,474,434 $ Other Accounts 100,000 100,000 Cash and Investments 11,129,038 3,926,050 14,383,046 12,433,640 41,871,774 6,562,057 I Subtotal 23,055,965 4,573,557 14,383,046 12,433,640 54,446,208 6,562,057 Less Long-Term Investments 18,308,500 3,925,042 12,501,721 10,831,031 45,566,294 5,232,524 Cash and Cash Equivalents $ 4,747,465 $ 648,515 $1 ,881,325 $ 1,602,609 $ 8,879,914 $ 1,329,533 I The Notes to the Financial Statements are an integral part of this statement. 37 I CITY OF SHAKOPEE I Scott County, Minnesota STATEMENT OF CASH FLOWS - PROPRIETARY FUNDS I For the Year Ended December 31, 2006 Business-Type Activities - Enterprise Funds I Governmental Activities - Storm Internal I Electric Water Sewer Drainage Total Service Funds RECONCILIATION OF OPERATING INCOME (LOSS) TO NET CASH I FLOWS - OPERATING ACTIVITIES: Operating Income (Loss) $ 3,695,867 $ 204,546 $ (258,792) $ (351,300) $ 3,290,321 $ 628,203 Adjustments to Reconcile Operating Income (Loss) to Net Cash Flows - I Operating Activities: Miscellaneous Revenue 22l,320 65,703 287,023 - Depreciation and Amortization Expense 1,322,549 1,068,939 602,904 723,721 3,718,113 1,152,599 Accounts Receivable (38,473) 13,390 18,747 (2,191 ) (8,527) Due from Other Funds 788 (29,076) 209,652 181,364 I Prepaid Items (9,521) (5,743) 147,323 132,059 Inventory 44,049 (566) 43,483 Accounts Payable 65,305 (131,106) (123,206) (11,010) (200,017) 315,114 I Contracts Payable 27,590 2,691 30,281 (11,052) Amounts Payable Related to Capital Asset Purchases (304,062) Customer Deposits 148,952 148,952 I Deferred Revenue (8,079) (8,079) - Due to Other Funds (42,949) 23,149 26,394 (207,758) (201,164) - Other Liabilities 4,147 (5,989) (1,842) 114,252 Total Adjustments 1,708,088 998,701 909,404 505,453 4,121,646 1,266,851 ,I Net Cash Flows - Operating Activities $ 5,403,955 $1,203,247 $ 650,612 $ 154,153 $ 7,411,967 $ 1,895,054 NONCASH INVESTING, CAPITAL AND FINANCING ACTIVITIES: I Contributions of Capital Assets from the Municipalities and Developers $ - $1,504,388 $1,762,781 $ 2,215,104 $ 5,482,273 $ 822,718 Purchases of Capital Assets on Account (363,531 ) Other Disposals and Transfers of Capital Assets - (24,700) (24,700) (659,342) I Other Disposals and Transfers of Accumulated Depreciation 2,470 2,470 464,659 Capital Asset Trade-Ins - 22,230 22,230 129,309 I I I I I The Notes to the Financial Statements are an integral part of this statement. 38 I I I' CITY OF SHAKO PEE I: Scott County, Minnesota STATEMENT OF FIDUCIARY NET ASSETS I December 31,2006 I Escrow Agency Fund ASSETS: I Cash and Investments $ (Including Cash Equivalents) 1,592,928 I Other Receivables 77,053 Total Assets $ 1,669,981 I LIABILITIES: Accounts Payable $ 81,411 I Deposits Payable 1,588,570 Total Liabilities $ l,669,98l I I I, I I I I I I I The Notes to the Financial Statements are an integral part ofthis statement. 39 I I CITY OF SHAKOPEE I Scott County, Minnesota NOTES TO THE FINANCIAL STATEMENTS I December 31, 2006 NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES I A. Reporting Entity I 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 City is considered to be financially accountable. I 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 I 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. I 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 I 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. I As a result of applying the component unit definition criteria above, certain organizations have been defined in accordance with Governmental Accounting Standards Board (GASB) I Statement No. l4 and are presented in this report as follows: Blended Component Unit - Reported as if they were part of the City Joint Ventures and Jointly Governed Organizations - The relationship of the City with the I entity is disclosed For each of the categories above, the specific entities are identified as follows: I 1. Blended Component Unit I 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 I 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. I The activity of the Shakopee EDA is shown in the Shakopee EDA - Special Revenue Fund in the City's financial statements. No separate financial statements for the Shakopee EDA are I issued. For any information desired beyond what is presented in this report, contact the Finance Director for the City of Shako pee at 129 Holmes Street South, Shakopee, Minnesota 55379-1351. I 40 I I' I CITY OF SHAKOPEE Scott County, Minnesota I' NOTES TO THE FINANCIAL STATEMENTS December 31, 2006 I NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES ,I A. Reporting Entity (Continued) 2. Joint Ventures and Jointly Governed Organizations I Local Government Information Systems: Local Government Information Systems (LOGIS) is a joint venture of approximately 28 I 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 2006, the City paid $ 178,808 to LOGIS :1 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. I Scott Joint Prosecution Association: I Scott Joint Prosecution Association (SJP A) is a joint venture of approximately five cities that provides legal prosecution and support services to its members. Legally separate, the City does not appoint a voting majority of the Board and SJP A is fiscally independent of the City. I During 2006, the City paid $ 320,08l to SJP A for services provided which is included in expenditures ofthe General Fund. Financial statements are available by contacting SJP A, 200 Fourth Avenue West, Shakopee, Minnesota 55379. I 3. Other Organizations Shakopee Fire Relief Association: I, Shakopee Fire Relief Association (the "Association") is organized as a nonprofit organization by its members to provide pensions and other benefits to its members in accordance with I Minnesota Statutes. It is not a component unit of the City because the Board of Directors is appointed by the membership. 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 I 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. I I I 41 I I CITY OF SHAKOPEE I Scott County, Minnesota NOTES TO THE FINANCIAL STATEMENTS ,I December 31, 2006 NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES I B. Government-Wide and Fund Financial Statements The government-wide financial statements (i.e., the Statement of Net Assets and the Statement I 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 Assets at the fund financial statement I level. For the most part, the effect of interfund activity has been removed from these Statements. Governmental activities, which normally are supported by taxes and intergovernmental revenues, are reported separately from business-type activities, which rely to I a significant extent on fees and charges for support. The Statement of Activities demonstrates the degree to which the direct expenses of a given I function or segment are 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 I 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 I segment. Taxes and other items not properly included among program revenues are reported instead as general revenues. Separate financial statements are provided for governmental funds and proprietary funds. Major I individual governmental funds and major individual enterprise funds are reported as separate columns in the fund financial statements. The City's Agency Fund is presented in the fiduciary fund financial statements. Since, by I 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 ofthe City, this Fund I is not incorporated into the government-wide statements. C. Measurement Focus, Basis of Accounting and Financial Statement Presentation I 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 I statements. Revenues are recorded when earned and expenses are recorded when a liability is incurred, regardless of the timing of related cash flows. Property taxes are recognized as revenues in the year for which they are levied. Grants and similar items are recognized as revenue as soon 'I as all eligibility requirements imposed by the provider have been met. The City's Agency Fund reports only assets and liabilities and has no measurement focus, but does use the accrual basis of accounting to recognize receivables and payables. I 42 I I I I CITY OF SHAKOPEE Scott County, Minnesota I NOTES TO THE FINANCIAL STATEMENTS December 31, 2006 I NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES I C. Measurement Focus, Basis of Accounting and Financial Statement Presentation (Continued) I 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 I current period. For this purpose, the City considers revenues to be available ifthey are collected within 60 days of the end of the current fiscal period. Expenditures generally are recorded when a liability is incurred, as under accrual accounting. However, debt service expenditures, as well I as expenditures related to claims and judgments, are recorded only when payment is due. Property taxes, franchise taxes, licenses and interest associated with the current fiscal period are I all considered to be susceptible to accrual and so have been recognized as revenues of the current fiscal period. Only the portion of special assessments receivable due within the current fiscal period is considered to be susceptible to accrual as revenue of the current period. All I other revenue items are considered to be measurable and available only when cash is received by the City. I Description of Funds: Major Governmental Funds: I General Fund - This Fund is the City's primary operating fund. It accounts for all financial resources ofthe general City, except those required to be accounted for in another fund. I Park Reserve Capital Projects Fund - This Fund accounts for costs associated with various park reserve projects. I 2004A Improvement Bonds Fund - This Fund accounts for the resources accumulated and payments made for principal and interest on this bond issue. I Major Proprietary Funds: Electric Fund - This Fund accounts for the operations of the City's electric utility. I Water Fund - This Fund accounts for the operations of the City's water utility. Sewer Fund - This Fund accounts for operations of the City's sewer utility. I Storm Drainage Fund - This Fund accounts for the activities of the City's storm drainage operations. I 43 I I CITY OF SHAKOPEE I Scott County, Minnesota NOTES TO THE FINANCIAL STATEMENTS I December 31, 2006 NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES I c. Measurement Focus, Basis of Accounting and Financial Statement Presentation I (Continued) Description of Funds: (Continued) I Internal Service Funds: Equipment Fund - This Fund accounts for the City's acquisition of larger pieces of I equipment. Building Fund - This Fund accounts for the'City's funds accumulated for construction, I improvement or major repairs of major public buildings. Employee Benefits Fund - This Fund accounts for the City's funds accumulated for I compensated absences. Fiduciary Fund: I Escrow Agency Fund - This Fund accounts for the monies held for specific purposes for individuals, private organizations, other government units and other funds. Escrows may be I held on behalf of builders and developers, for security deposits and police evidence deposits. Private-sector standards of accounting and financial reporting issued prior to December l, 1989, generally are followed in both the government-wide and proprietary fund financial statements to I the extent that those standards do not conflict with or contradict guidance of the GASB. Governments also have the option of following subsequent private-sector guidance for their business-type activities and enterprise funds, subject to this same limitation. The City has I elected not to follow subsequent private-sector guidance. As a general rule, the effect of interfund activity has been eliminated from the government-wide I financial statements. Exceptions to this general rule are payments in lieu of taxes, 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 I charges would distort the direct costs and program revenues reported for the various functions concerned. Amounts reported as program revenues include l) charges to customers or applicants for goods, I services or privileges provided, 2) operating grants and contributions and 3) capital grants and contributions, including special assessments. General revenues include all taxes. I 44 I I I I CITY OF SHAKOPEE Scott County, Minnesota I NOTES TO THE FINANCIAL STATEMENTS December 31,2006 I NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES I c. Measurement Focus, Basis of Accounting and Financial Statement Presentation (Continued) I 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 I 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. Taxes not collected as of December 31 each year are shown as delinquent taxes receivable. I 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 I property. The County Auditor also collects all special assessments, except for certain prepayments paid directly to the City. I 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. I 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 I principal operating revenues ofthe 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. I 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. I D. Assets, Liabilities and Net Assets or Equity I 1. Cash and Investments The City's cash and cash equivalents are considered to be cash on hand, demand deposits and I 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 I 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 I commercial paper of the highest quality with a maturity of no longer than 270 days and in the Minnesota Municipal Investment Pool. 45 I I CITY OF SHAKOPEE I Scott County, Minnesota NOTES TO THE FINANCIAL STATEMENTS I December 31,2006 NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES I D. Assets, Liabilities and Net Assets or Equity (Continued) I 1. Cash and Investments (Continued) The City's investment policy for all funds but the Electric and Water Enterprise Funds I (Shakopee Public Utilities Commission) addresses the following risks associated with GASB Statement No. 40: credit risk, interest rate risk and concentration of credit risk, as explained below and on the following page. I Interest Rate Risk: This is the risk that changes in market interest rates will adversely affect the fair value of an investment. The City will minimize the risk that the market value of I securities in the portfolio will fall due to changes in interest rates by: . Structuring the short-term investment portfolio so securities mature to meet cash I requirements for ongoing operations, thereby avoiding the need to sell securities on the open market prior to maturity. . Investing short-term funds primarily in shorter term securities, money market mutual I funds or similar investment pools. . Evaluating the longer term investment portfolio against an agreed upon benchmark that meets the risk tolerances of the City and its investment policy. I The City's Electric and Water Enterprise Funds (Shakopee Public Utilities Commission) do not have a policy addressing this risk. I 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 five years from the date of I purchase or in accordance with state and local statutes and ordinances. The City shall adopt a maximum weighted average maturity of three years for these funds. Longer term funds shall not be invested in securities exceeding lO years in modified duration, at time of purchase. In I accordance with the City's investment policy, the City is invested in securities with high ratings. I I I 46 I I I I CITY OF SHAKOPEE Scott County, Minnesota I NOTES TO THE FINANCIAL STATEMENTS December 31,2006 I NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES I D. Assets, Liabilities and Net Assets or Equity (Continued) 1. Cash and Investments (Continued) I Concentration of Credit Risk: Concentration of credit risk is the risk of loss that may be caused by the City's investment in a single issuer. The aggregate investment portfolio shall be diversified by: I . Limiting investments to avoid over concentration in securities from a specific issuer or business sector. I . 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 I Local Government Investment Pools (LGIPs), money market funds or repurchase agreements to ensure that appropriate liquidity is maintained in order to meet ongoing obligations. I . All investments other than in direct obligations or agencies of the United States, secured by collateral or repurchase agreements, shall not exceed 50% ofthe aggregate investment portfolio. Mortgage backed securities shall not exceed 35% of the I aggregate investment portfolio, at the time of investment, i.e., commercial paper or bankers' acceptance. . Investments in anyone corporation shall not exceed 10% of the aggregate investment I portfolio and 5% ofthe corporation's assets. The City's Electric and Water Enterprise Funds (Shakopee Public Utilities Commission) do I not have a policy addressing this risk. The Minnesota Municipal Investment Pool is an external investment pool not registered with the Securities Exchange Commission (SEC) that follows the same regulatory rules ofthe I 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. I 2. Receivables and Payables Activity between funds that are representative of lendinglborrowing arrangements I outstanding at the end of the fiscal year are referred to as either "due to/from other funds" (i.e., the current portion of inter fund loans) or "advances to/from other funds" (i.e., the noncurrent portion of inter fund loans). All other outstanding balances between funds are I reported as "due to/from other funds". I 47 I I CITY OF SHAKOPEE I Scott County, Minnesota NOTES TO THE FINANCIAL STATEMENTS I December 31, 2006 NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES I D. Assets, Liabilities and Net Assets or Eqnity (Continued) I 2. Receivables and Payables (Continued) Any residual balances outstanding between the governmental activities and business-type I activities are reported in the government-wide financial statements as "interfund balances." All property taxes receivable are shown at a gross amount since it is assessable and is I collectible upon the sale of the property. 3. Inventory and Prepaid Items I 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 I assets include unamortized debt issue costs for the Electric and Water Enterprise Funds. Also included is the unamortized cost of buying capacity in a sewer inceptor owned by Metropolitan Council - Environmental Services. Inventories of enterprise funds are valued at average cost using the first in, first out (FIFO) I method. Inventories of governmental funds are not recorded at year-end on the Balance Sheets because they accumulate insignificant inventories I 4. Restricted Assets Certain cash and investments in the enterprise funds are classified as restricted. The Electric I Fund has monies restricted for customer deposits, emergency system repairs, construction projects and debt service. The Water Fund has monies restricted for water production and I trunk distribution facility acquisition, based on trunk and connection fees collected from users, construction projects and debt service. 5. Capital Assets I 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 I activities columns in the government-wide financial statements. Capital assets are defined by the City as assets with an initial, individual cost of more than $ 5,000 (amount not rounded) and an estimated useful life in excess of one year. Such assets are recorded at historical cost I 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 I materially extend assets lives are not capitalized. 48 I I I I CITY OF SHAKOPEE Scott County, Minnesota I NOTES TO THE FINANCIAL STATEMENTS December 31,2006 I NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES I D. Assets, Liabilities and Net Assets or Equity (Continued) 5. Capital Assets (Continued) I Property, plant and equipment of the City are depreciated using the straight-line method over the following estimated useful lives. I Assets Years Buildings 30-50 I Park Buildings 30 Building Improvements 25 Light Vehic1es 4-10 I Machinery and Equipment 4-20 Fire Trucks 20-25 Utility Distribution System 10-50 I Infrastructure 30-50 I 6. Compensated Absences Vacation and sick leave benefits are recorded as expenditures in the Employee Benefits I Internal Service Fund and governmental funds when the obligations 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 I more than 360 hours of vacation leave. Upon termination, employees will receive compensation for unused vacation. Employees earn sick leave at a rate of 3.69 hours per pay period and may accumulate it to a maximum of 960 hours. The City compensates I employees who leave municipal service at the rate of 45% plus 2% for each year of service beyond 15 years up to 75% of unused sick leave up to a maximum of960 hours. The General Fund and Employee Benefits Internal Service Fund typically liquidates the I compensated absences liability. 7. Long-Term Obligations I 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 I applicable governmental activities, business-type activities or proprietary fund-type Statement of Net Assets. 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 I are reported as deferred charges and amortized over the term of the related debt. 49 I I CITY OF SHAKOPEE I Scott County, Minnesota NOTES TO THE FINANCIAL STATEMENTS I December 31, 2006 NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES I D. Assets, Liabilities and Net Assets or Equity (Continued) I 7. Long-Term Obligations (Continued) In the fund financial statements, governmental fund types recognize bond premiums and I 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 I financing uses. Issuance costs, whether or not withheld from the actual debt proceeds received, are reported as debt service expenditures. 8. Fund Equity I In the fund financial statements, governmental funds report reservations of fund balance for I amounts that are not available for appropriation or are legally restricted by outside parties for use for a specific purpose. Designations of fund balance represent tentative management plans that are subject to change. 8. Net Assets I Net assets represent the difference between assets and liabilities in the government-wide I financial statements. Net assets invested in capital assets, net of related debt 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 assets are reported as restricted I 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. I 9. Use of Estimates The preparation of financial statements in conformity with U.S. generally accepted I accounting principles 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 I and expenditures/expense during the reporting period. Actual results could differ from those estimates. NOTE 2 - STEWARDSHIP, COMPLIANCE AND ACCOUNTABILITY I A. Budgetary Information Budgets are adopted on a basis consistent with U.S. generally accepted accounting principles. I Annually appropriated budgets are adopted for the General Fund and the Shakopee EDA, Transit, Telecommunications and Recreation Special Revenue Funds. The Forfeiture Fund is not required I to have a budget adopted. All activity in this Fund is at the discretion ofthe Chief of Police. 50 I I I CITY OF SHAKOPEE Scott County, Minnesota I NOTES TO THE FINANCIAL STATEMENTS December 31, 2006 I NOTE 2 - STEWARDSHIP, COMPLIANCE AND ACCOUNT ABILITY I A. Budgetary Information (Continued) Budgeted amounts present the originally adopted budget and final amended budget approved by I 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 I budget for the fiscal year commencing the following January 1. The operating budget includes proposed expenditures and the means of financing them for the upcoming year. I 2. Public hearings are conducted to obtain taxpayer comments. 3. The budget is legally enacted through passage of a resolution after obtaining taxpayer I comments. 4. Budgets for the General and Special Revenue Funds are adopted on a basis consistent I with U.S. generally accepted accounting principles. 5. Expenditures may not legally exceed budgeted appropriations at the division level. No I 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. I 6. Annual appropriated budgets are adopted during the year for the General and applicable Special Revenue Funds. Annual appropriated budgets are not adopted for Debt Service I Funds because effective budgetary control is alternatively achieved through bond indenture provisions. Budgetary control for Capital Projects Funds is accomplished through the use ofproject controls and formal appropriated budgets are not adopted. I 7. 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, I except for licenses and permit revenue in the General Fund. B. Deficit Fund Equity I 2005 Projects $ (1,139,194) 2007 Projects (69,891) I The deficit fund balances in the Capital Projects Funds are a result of ongoing construction which is periodically reimbursed by transfers from other funds and bond proceeds. I 51 I I CITY OF SHAKOPEE I Scott County, Minnesota NOTES TO THE FINANCIAL STATEMENTS I December 31, 2006 NOTE 3 - CASH AND INVESTMENTS I The following is a summary of total cash and investments as of December 31,2006: I Cash $ 1,021,143 Investments (All Funds but the Electric and Water Enterprise Funds) 62,956,694 I Investments (Electric and Water Enterprise Funds) 26,833,504 Petty Cash 1,370 I Total Deposits and Investments $ 90,812,711 Cash and investments are classified in the December 31,2006 financial statements as follows: I Statement of Net Assets: Cash and Investments $ 76,645,349 I Restricted and Other Accounts 12,574,434 Statement of Fiduciary Net Assets 1,592,928 I Total Cash and Investments $ 90,812,711 Custodial Credit Risk - Deposits: Custodial credit risk is the risk that in the event of a bank I failure, the City's deposits may not be returned to it. State statutes require that insurance, surety bonds or collateral protect all City deposits. The market value of collateral pledged must equal 110% of deposits not covered by insurance or bonds. As of December 31, 2006, the bank I balance of the City's deposits was covered by federal depository insurance or covered by collateral pledged and held in the City's name. As of December 3l, 2006, the City had the following investments for all funds, excluding the I Electric and Water Enterprise Funds (Shakopee Public Utilities Commission). Short- Term Investments I Weighted Average Maturity Moody's I Fair Value (Years ) Ratings Agency Bonds: FNMA $ 2,003,120 4.92 Aaa I FHLB 998,130 0.74 Aaa FHLMC 1,000,000 2.41 Aaa Mortgage Bonds: I FHLMC 2,000,000 2.79 Aaa Commercial Paper 3,485,090 0.08 P-l Money Market Funds 375,046 N/A NR Total Short-Term Investments $ 9,861,386 10.94 I 52 I I I CITY OF SHAKOPEE Scott County, Minnesota I NOTES TO THE FINANCIAL STATEMENTS December 31, 2006 I NOTE 3 - CASH AND INVESTMENTS I Longer Term Investments Modified Duration Moody's I Fair Value (Years ) Ratings U.S. Treasury Notes $ 1,700,650 3.53 Aaa I Agency Bonds: FFCB 3,241,873 4.02 Aaa FHLB 4,910,684 1.32 Aaa FHLMC 6,229,821 1.47 Aaa I FNMA 9,961,107 1.63 Aaa Agency Step-Up Bonds: FHLMC 493,950 2.66 Aaa FNMA 348,033 2.74 Aaa I Mortgage Bonds: CMO 6,033,031 2.66 Aaa FHLMC 4,613,436 3.57 Aaa I FNMA 5,674,603 3.45 Aaa GNMA 560,356 2.44 Aaa Municipal Bonds 6,353,567 1.54 (Aaa-A3) Commercial Paper 2,247,451 0.42 PI I Money Market Funds 726,746 NIA NR Total Longe Term Investments 53,095,307 2.14 I Total Investments $ 62,956,694 As of December 31,2006, the City's Electric and Water Enterprise Funds (Shakopee Public I Utilities Commission) had the following investments. Investment Maturities Fair Less than 1 - 5 6 - 10 More than I Investment Type Value One Year Years Years 10 Years U.S. Treasuries $ 14,351,473 $ 2,673,724 $ 11,677,749 $ - $ - I U.S. Agencies 9,792,806 6,050,637 3,742,169 - - External Investment Pools 2,689,225 2,689,225 - - Total Investments $ 26,833,504 $ 11,413,586 $ 15,419,918 $ - $ - I I I 53 I I CITY OF SHAKOPEE I Scott County, Minnesota NOTES TO THE FINANCIAL STATEMENTS I December 31,2006 NOTE 3 - CASH AND INVESTMENTS I Custodial Credit Risk - Investments: For investments, custodial credit risk is the risk that in the I event of a failure of the counterparty, the City will not be able to recover the value of its investments that are in the possession of an outside party. As of December 31, 2006, all investments of the City and the Electric and Water Enterprise Funds (Shakopee Public Utilities Commission) were insured, registered and held by the City or its agent in the City's name. I Interest Rate Risk: In accordance with the City's investment policy, short-term investments have a weighted average maturity of less than three years. Longer term investments have a modified I duration of less than 10 years. Credit Risk: In accordance with the City's investment policy, the City is invested in securities I with high ratings. Investments in government bonds are rated Aaa, AI, Aal, Aa2, A3 and Aa3. Investments in commercial paper have a credit rating ofP-l, and the money market funds do not have credit ratings. The City's Electric and Water Enterprise Funds investments in U.S. Agency I Securities have ratings by Moody's Investors Service ranging from unrated to Aaa. Concentration of Credit Risk: As of December 31, 2006, investments exceeding 5% of the I City's total investments were as follows. Percentage of I Issuer Investment Type Portfolio Black Diamond USA Fdg. Commercial Paper 8.0% I Federal Farm Credit Banks (FFCB) U.S. Agencies 5.1% Federal Home Loan Bank (FHLB) U.S. Agencies 14.0% Federal Home Loan Mortgage Corporation (FHLMC) U.S. Agencies 30.5% I Federal National Mortgage Association (FNMA) U.S. Agencies 25.2% The City's Electric and Water Enterprise Funds investments in FHLB, FNMA and FHLMC I exceeded 5% of the Electric and Water Enterprise Funds total investments at December 3l, 2006. I I I 54 I I I I CITY OF SHAKOPEE Scott County, Minnesota I NOTES TO THE FINANCIAL STATEMENTS December 31,2006 I NOTE 4 - RECEIV ABLES Governmental funds report deferred revenue in connection with receivables for revenues that are I not considered to be available to liquidate liabilities of the current period. Governmental funds also defer revenue recognition in connection with resources that have been received, but not yet earned. At the end of the current fiscal year, the various components of deferred revenue I reported in the governmental funds were as follows: Delinquent Delinquent Deferred I Property Special Special Taxes Assessments Assessments Total General Fund $ 271,852 $ 3,655 $ 25,666 $ 301,173 I 2004A Improvement Bonds Fund - - 2,826,914 2,826,914 N onmajor Funds 7,464 13,058 5,902,349 5,922,871 I Total $ 279,316 $ 16,713 $ 8,754,929 $ 9,050,958 I NOTE 5 - CAPITAL ASSETS Capital asset activity for the year ended December 31, 2006 was as follows: I Beginning Ending Balance Increases Decreases Balance Governmental Activities: ClJ.pital Assets not being Depreciated: I Land $ 19,020,408 $ 951,725 $ 139,932 $ 19,832,201 Construction in Progress - 1,859,230 - 1,859,230 Total Capital Assets I not being Depreciated 19,020,408 2,810,955 139,932 21,691,431 Capital Assets being Depreciated: I Buildings 29,029,818 2,202,736 59,400 31,173,154 Infrastructure 119,113,930 7,049,218 - 126,163,148 Machinery and Equipment 9,412,658 2,440,982 621,808 11,231,832 I Total Capital Assets being Depreciated 157,556,406 11,692,936 681,208 168,568,134 Less Accumulated Depreciation for: I Buildings 4,673,624 743,175 36,828 5,379,971 Infrastructure 32,202,299 3,949,683 - 36,151,982 Machinery and Equipment 3,828,219 656,924 439,292 4,045,851 I Total Accumulated Depreciation 40,704,142 5,349,782 476,120 45,577,804 Total Capital Assets being Depreciated, Net 116,852,264 6,343,154 205,088 122,990,330 I Governmental Activities Capital Assets, Net $ 135,872,672 $ 9,154,1 09 $ 345,020 $144,681,761 55 I I CITY OF SHAKOPEE I Scott County, Minnesota NOTES TO THE FINANCIAL STATEMENTS I December 31, 2006 NOTE 5 - CAPITAL ASSETS I Beginning Ending Balance Increases Decreases Balance I Business-Type Activities: Capital Assets not being Depreciated: I Land $ 4,806,644 $ 1,275,720 $ - $ 6,082,364 Construction in Progress 2,032,435 4,505,217 (5,167,818) 1,369,834 Total Capital Assets I not being Depreciated 6,839,079 5,780,937 (5,167,818) 7,452,198 Capital Assets being Depreciated: Plant in Service 136,642,738 12,553,439 (76,120) 149,120,057 I Machinery and Equipment 719,241 52,587 (24,700) 747,128 Total Capital Assets being Depreciated 13 7 ,361,979 12,606,026 (100,820) 149,867,185 I Less Accumulated Depreciation for: Plant in Service 23,090,021 3,596,019 (68,219) 26,617,821 I Machinery and Equipment 268,246 59,090 (2,469) 324,867 Total Accumulated Depreciation 23,358,267 3,655,109 (70,688) 26,942,688 Total Capital Assets being I Depreciated, Net 114,003,712 8,950,917 (30,132) 122,924,497 Business-Type Activities Capital I Assets, Net $ 120,842,791 $ 14,731,854 $ (5,197,950) $ 130,376,695 I I I I I 56 I I I, I CITY OF SHAKOPEE Scott County, Minnesota I NOTES TO THE FINANCIAL STATEMENTS December 31,2006 I NOTE 5 - CAPITAL ASSETS I Depreciation expense was charged to functions/programs of the City as follows: Governmental Activities: I General Government $ 215,926 Public Safety 455,973 Public Works 4,279,440 I Park and Recreation 398,443 Total Depreciation Expense - Governmental Activities $ 5,349,782 I Business- Type Activities: Electric $ 1,259,545 I Water 1,068,939 Sanitary Sewer 602,904 Storm Drainage 723,721 I Total Depreciation Expense - Business-Type Activities $ 3,655,109 I NOTE 6 - LONG-TERM DEBT A. General Obligation Bonds I The City issues General Obligation (G.O.) Bonds to provide for financing tax increment projects and street improvements. Debt service is covered respectively by tax increments and special assessments against benefited properties with any shortfalls being paid from general taxes. I 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 I currently outstanding are shown on the following page. B. Revenue Bonds I The City has issued Revenue Bonds for electric and water activity. I Debt service is covered through the revenue producing activities of these funds. I I 57 I I CITY OF SHAKOPEE I Scott County, Minnesota NOTES TO THE FINANCIAL STATEMENTS I December 31, 2006 NOTE 6 - LONG-TERM DEBT I C. Components of Long-Term Liabilities I Issue Interest Original Final Principal Due Within Date Rates Issue Maturity Outstanding One Year Governmental Activities: I G.O. Bonds: G.O. hnprovement Bonds: 1995A 11/01/95 4.75%-5.10% $ 3,180,000 02/01/07 $ 185,000 $ 185,000 1996A 12/01/96 4.60%-4.80% 2,555,000 02/01/08 325,000 175,000 I 1997B 11/05/97 4.40%-4.75% 1,805,000 02/01/09 280,000 105,000 1998B 12/01/98 4.00%-4.40% 2,375,000 02/01/1 0 800,000 215,000 2000A 09/19/00 4.45%-4.95% 2,560,000 02/01/11 1,185,000 240,000 I 2002A 02/01/02 3.00%-4.30% 1,185,000 02/01/12 795,000 125,000 2002B 07/01/02 2.00%-4.10% 3,750,000 02/01/13 2,455,000 730,000 2003A 07/01/03 2.00%-3.00% 2,215,000 02/01/14 1,295,000 185,000 2004A 05/01/04 2.25%-4.10% 4,225,000 02/01/25 4,040,000 510,000 I G.O. Building Refunding Bonds 2004B 05/01/04 2.25%-4.00% 2,275,000 02/01/17 2,110,000 165,000 G.O. hnprovement Bonds I 2004C 11/01/04 3.00%-4.00% 2,570,000 02/01/15 2,270,000 250,000 G.O. Capital Improvement Bonds 2004D 11/01/04 2.50%-4.20% 6,000,000 02/01/17 5,840,000 225,000 G.O. hnprovement Bonds I 2006A 07/01/06 4.00% 3,440,000 02/01/17 3,440,000 Total G.O. Bonds 25,020,000 3,110,000 Compensated Absences 1,256,559 620,000 I Total Governmental Activities $ 26,276,559 $ 3,730,000 I Business-Type Activities: Revenue Bonds: I Utility Revenue Bonds 1999 12/06/99 5.00% $ 9,850,000 08/01/18 $ 390,000 $ 115,000 Utility Revenue Bonds 2001 06/01/01 4.25%-5.12% 12,000,000 02/01/30 11,075,000 255,000 Utility Refunding Revenue Bonds 2003A 05/01/03 2.25%-4.45% 3,385,000 08/01/18 2,845,000 195,000 I Utility Refunding Revenue Bonds 2004A 1 % 1/04 3.50%-4.50% 9,830,000 10/01/18 9,655,000 75,000 Utility Refunding Revenue Bonds 2006A 11/01/06 4.125%-4.375% 10,570,000 02/01/30 10,570,000 - I Total Business-Type Activities $ 34,535,000 $ 640,000 I 58 I I I I CITY OF SHAKOPEE Scott County, Minnesota I NOTES TO THE FINANCIAL STATEMENTS December 31,2006 I NOTE 6 - LONG-TERM DEBT I C. Components of Long-Term Liabilities (Continued) Long-term bonded indebtedness listed on the previous page were issued to finance acquisition and I construction of capital facilities or to refinance (refund) previous bond issues. On November l, 2006, the Shakopee Public Utilities Commission issued $ lO,570,000 Public Utilities Crossover Refunding Revenue Bonds, Series 2006A, to crossover refund $ 10,280,000 of I the $ 11,075,000 outstanding ofthe $ 12,000,000 Shakopee Public Utilities Revenue Bonds, Series 2001 on February 1, 2009. I D. Changes in Long-Term Liabilities Long-term liability information for the year ended December 31,2006, was as follows. I Beginning Ending Balance Additions Reductions Balance I Governmental Activities: Bonds Payable: G.O. Bonds $ 24,635,000 $ 3,440,000 $ 3,055,000 $ 25,020,000 I Compensated Absences 1,142,306 788,890 674,637 1,256,559 Total Governmental Activities $ 25,777,306 $ 4,228,890 $ 3,729,637 $ 26,276,559 I Business-Type Activities: Revenue Bonds $ 24,750,000 $ 10,570,000 $ 785,000 $ 34,535,000 Bond Premium 58,149 - 4,714 53,435 I Deferred Refunding Costs (1,127,204) - (54,138) (1,073,066) Total Business-Type Activities $ 23,680,945 $ 10,570,000 $ 735,576 $ 33,515,369 I The General Fund, EDA, Recreation and Employee Benefit Internal Service Funds typically liquidate the liability related to compensated absences. I I I I 59 I I CITY OF SHAKO PEE I Scott County, Minnesota NOTES TO THE FINANCIAL STATEMENTS I December 31,2006 NOTE 6 - LONG-TERM DEBT I E. Governmental Activity G.O. Bonds I Debt service to maturity for outstanding G;O. Bonds is as follows. Year Ended I December 31, Principal Interest Total 2007 $ 3,110,000 $ 898,155 $ 4,008,155 I 2008 3,170,000 779,480 3,949,480 2009 2,430,000 68l,657 3,111,657 I 2010 2,315,000 597,384 2,912,384 2011 1,930,000 520,179 2,450,179 2012-2016 7,375,000 1,679,865 9,054,865 I 2017-2021 2,715,000 699,028 3,414,028 2022-2026 1,975,000 185,20l 2,160,201 Total $25,020,000 $6,040,949 $31,060,949 I F. Business-Type Activity Revenue Bonds I Debt service to maturity for outstanding Revenue Bonds is as follows: Year Ended I December 31, Principal Interest Total 2007 $ 640,000 $ 1,078,698 $ l,7l8,698 I 2008 670,000 l,053,048 1,723,048 2009 7l0,000 1,25l,898 1,961,898 I 2010 1,055,000 1,443,241 2,498,241 2011 1,080,000 1,401,393 2,481,393 2012-2016 6,100,000 6,282,075 12,382,075 I 20l7-202l 7,545,000 4,765,263 12,310,263 2022-2026 9,545,000 2,835,552 12,380,552 I 2027-2031 7,190,000 627,444 7,8l7,444 Total $34,535,000 $20,738,612 $55,273,6l2 I 60 I I I I CITY OF SHAKOPEE Scott County, Minnesota I NOTES TO THE FINANCIAL STATEMENTS December 31,2006 I NOTE 7 - CONDUIT DEBT OBLIGATIONS I 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 ,I 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. I As of December 3l, 2006, the following conduit debt was outstanding: Date of Original Amount Balance I Project Issue ofIssue Retired Outstanding St. Francis RMC 08/l7/04 $ 52,520,000 $ l,670,000 $50,850,000 I St. Francis RMC l2/23/87 8,000,000 2,285,000 5,7l5,000 Total $56,565,000 I NOTE 8 - PLEDGING AGREEMENTS I The City has pledged its taxing authority to back certain revenue bonds issued by 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 I 1997 A, 1997D and 1997E Series Bonds on their call dates. The 1997D Series Bonds were called on September 1, 2006 and the 1997A and 1997E Series Bonds are callable on February 1, 2008. The outstanding issues at December 31, 2006 are: I . Scott County Housing and Redevelopment Authority Housing Development Refunding Revenue Bonds, Series 2006A, the amount is $ 3,260,000 and payments are scheduled I from February l, 2007 to 2027 with interest ranging from 4.25% to 4.5%. . Scott County Housing and Redevelopment Authority Housing Development Refunding I Revenue Bonds, Series 2006D, the amount is $ 925,000 and payments are scheduled from February l, 2007 to 2016 with interest ranging from 5.7% to 6.25%. . Scott County Housing and Redevelopment Authority Housing Development Refunding I Revenue Bonds, Series 2006E, the amount is $ 1,245,000 and payments are scheduled from February 1, 2018 to 2023 with interest ranging from 4.5% to 4.7%. . Scott County Housing and Redevelopment Authority Housing Development Revenue I Bonds, Series 1997 A, the original amount is $ 3,220,000 and payments are scheduled from February l, 2002 to the call date of February l, 2008 with interest ranging from 4.l0% to 5.38%. I 61 I I CITY OF SHAKOPEE I Scott County, Minnesota NOTES TO THE FINANCIAL STATEMENTS I December 31,2006 NOTE 8 - PLEDGING AGREEMENTS I . Scott County Housing and Redevelopment Authority Taxable Tax Increment Development Revenue Bonds, Series 1997E, the original amount is $ 1,170,000 and I: payment is scheduled for the call date on February 1, 2008 with interest at 5.38%. The City has pledged its taxing authority to back a series of revenue bonds issued by the Scott I County Housing and Redevelopment Authority for the North Ridge Court redevelopment project in downtown Shakopee. The issue is: . Scott County Housing and Redevelopment Authority Housing Development Revenue I Bonds, Series 2003, the amount is $ 6,690,000 and payments are scheduled from February 1, 2006 to 2034 with interest ranging from 2.00% to 5.00%. I The City and Shakopee EDA have a development agreement for costs related to a Seagate facility moving to Shakopee. The Shakopee EDA issued a Taxable Tax Increment Revenue Note in the amount of $ 4,572,725 in support of development costs for the Seagate project. Seagate is the I holder of the note. The Shakopee EDA is liable only to the extent of the tax increment received from the Seagate property. The interest on the note is 7.5%. Payments are scheduled semiannually from August 1,2000 to February 1, 2009. I The City and Shakopee EDA have a development agreement for costs related to a Challenge Printing facility moving to Shakopee. The Shakopee EDA issued a Taxable Tax Increment I Revenue Note in the amount of $ 513,900 in support of development costs for the Challenge Printing project. Challenge Printing is the holder of the note. The Shakopee EDA is liable only to the extent of the tax increment received from the Challenge Printing property. The interest on I the note is 6.0%. Payments are scheduled semiannually from August 1,2006 to February 1, 20l5. The City and Shakopee EDA have a development agreement for costs related to Open Systems I 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 I 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 6.0%. Payments are scheduled semiannually from August 1,2007 to February 1, 2014. I I I 62 I I I I CITY OF SHAKOPEE Scott County, Minnesota I NOTES TO THE FINANCIAL STATEMENTS December 31, 2006 I NOTE 9 - INTERFUND ASSETS/LIABILITIES I The composition of inter fund balances as of December 31,2006 is as follows: Receivable Fund Payable Fund Amount I General Fund Nomnajor Governmental Funds $ 1,050,000 General Fund Electric Fund 129,898 General Fund Water Fund 86,999 I Nomnajor Governmental Funds Nomnajor Governmental Funds 12,173 Electric Fund Water Fund 1,272,864 Electric Fund Sewer Fund 20,229 I Water Fund Sewer Fund 27,182 Water Fund Storm Drainage Fund 8,900 I Total $ 2,608,245 The due from/due to other funds balances generally represent borrowing to resolve deficit cash I balances and billing expenses. NOTE 10 - INTERFUND TRANSFERS I Transfer In Nonmajor General Governmental I Fund Funds Total Transfer Out: General Fund $ - $ 1,312,589 $ 1,312,589 I Nonmajor Governmental Funds - 2,041,775 2,041,775 Electric Fund 908,980 - 908,980 Water Fund 677,999 - 677,999 I Sewer Fund - 1,175,525 1,175,525 Storm Drainage Fund - 566,664 566,664 I Total $ 1,586,979 $ 5,096,553 $ 6,683,532 General Fund transfers in the amount of$ 1,287,110 were made to the Recreation Fund for I operating purposes and $ 25,479 to the EDA Fund for tax abatements. Transfers in the amount of$ 378,961 were made from the 2003 Projects Capital Projects Fund to I the 2004C Improvements Bonds Debt Service Fund to close the 2003 Projects Fund. Other transfers between nonmajor governmental funds were made for operating purposes. I Transfers from the business-type funds were made to assist with financing of various activities in the recipient funds. 63 I I CITY OF SHAKOPEE I Scott County, Minnesota NOTES TO THE FINANCIAL STATEMENTS I December 31, 2006 NOTE 11 - FUND EQUITY/NET ASSETS I Fund equity or net assets are the residual or "net" assets of a given fund. Fund equity is what is I left over when the total liabilities of a fund are deducted from its total assets. Governmental funds refer to a fund's net assets as "fund balance." The government-wide statement of net assets and the City's proprietary fund financial statements refer to a fund's residual assets as "net I assets". Governmental fund balance is divided into three major categories: reserved, designated and unreserved. Reservations of governmental fund balance are used to quantify the amount of a I fund's net assets that are not available to meet the current financial needs ofthe City. Designations are used to indicate a future use has been identified for net assets that are available for current financial needs. Finally, unreserved fund balance is a measure of a governmental I fund's net resources available for current financial needs. The government-wide Statement of Net Assets and the proprietary fund financial statements I divide net assets into the following components: net assets invested in capital assets, net of related debt; restricted net assets and unrestricted net assets. Restricted net assets are required to be reported when external parties mandate their restriction. I NOTE 12 - RISK MANAGEMENT The City is exposed to various risks of loss related to torts: theft of, damage to and destruction of I assets; errors and omissions and natural disasters for which the City carries insurance policies through a risk pool from the League of Minnesota Cities Insurance Trust. The City retains risk for the deductible portions of the insurance policies. The amount of these deductibles ranges I from $ 2,500 to $ 5,000. 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 I contracts, the likelihood is very low. The policy limits through the pool included $ 1,000,000 aggregate for property/liability, $ 1,000,000 for automobile coverage and $ 100,000 faithful I performance employee bonding. I I I 64 I I I I CITY OF SHAKOPEE Scott County, Minnesota I NOTES TO THE FINANCIAL STATEMENTS December 31,2006 I NOTE 13 - DEFINED BENEFIT PENSION PLANS - STATEWIDE I Public Employees' Retirement Association A. Plan Description I All full-time and certain part-time employees of the City of Shakopee are covered by defined benefit pension plans administered by the Public Employees' Retirement Association of Minnesota (PERA). PERA administers the Public Employees' Retirement Fund (PERF) and the I 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. I PERF members belong to either the Coordinated Plan or the Basic Plan. Coordinated Plan members are covered by social security and Basic Plan members are not. All new members must I participate in the Coordinated Plan. All police officers, firefighters and peace officers who qualify for membership by statute are covered by the PEPFF. I 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 I 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 Plan and Basic Plan I members. The retiring member receives the higher of a step-rate benefit accrual formula (Method 1) or a level accrual formula (Method 2). Under Method 1, the annuity accrual rate for a Basic Plan member is 2.2% of average salary for each of the first lO years of service and 2.7% 'I for each remaining year. The annuity accrual rate for a Coordinated Plan member is 1.2% of average salary for each of the first lO 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 I Coordinated Plan members for each year of service. For PEPFF members, the annuity accrual rate is 3.0% for each year of service. For all PEPFF members and for PERF members hired prior to July 1, 1989, whose annuity is calculated using Method 1, a full annuity is available when age I plus years of service equal 90. Normal retirement age is 55 for PEPFF members and 65 for Basic Plan and Coordinated Plan members hired prior to July l, 1989. Normal retirement age for unreduced social security benefits is capped at 66 for Coordinated Plan members hired on or after I July 1, 1989. A reduced retirement annuity is also available to eligible members seeking early retirement. I I 65 I I CITY OF SHAKOPEE I Scott County, Minnesota NOTES TO THE FINANCIAL STATEMENTS I December 31, 2006 NOTE 13 - DEFINED BENEFIT PENSION PLANS - STATEWIDE I Public Employees' Retirement Association (Continued) I A. Plan Description (Continued) There are different types of annuities available to members upon retirement. A single-life I 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 I 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. I 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 I are not yet receiving them are bound by the provisions in effect at the time they last terminated their public service. PERA issues a publicly available financial report that includes financial statements and required I supplementary information for PERF and PEPFF. That report may be obtained on the Internet at www.mnpera.org, by writing to PERA, 60 Empire Drive, Suite 200, St. Paul, Minnesota 55103- 2088 or by calling (651) 296-7460 or (800) 652-9026. I B. Funding Policy Minnesota Statutes Chapter 353 sets the rates for employer and employee contributions. These I Statutes are established and amended by the state legislature. The City makes annual contributions to the pension plans equal to the amount required by state statutes. PERF Basic I Plan members and Coordinated Plan members were required to contribute 9.l % and 5.5%, respectively, of their annual covered salary. PEPFF members are required to contribute 6.20 of their annual covered salary in 2006. Contribution rates in the coordinated Plan will increase in I 2007 to 5.75%. The City is required to contribute the following percentages of annual covered payroll: ll.78% for Basic Plan PERF members, 6.00% for Coordinated Plan PERF members and 9.30% for PEPFF members. Employer contribution rates for the Coordinated Plan will I increase to 6.25% effective January 1, 2007. The City's contributions to the PERF for the years ending December 31, 2006, 2005 and 2004 were $ 410,849, $ 353,029 and $ 327,380, respectively. The City's contributions to the PEPFF for the years ending December 31, 2006, I 2005 and 2004 were $ 278,056, $ 209,66l and $ 196,673, respectively. The City's contributions were equal to the contractually required contributions for each year as set by state statute. I 66 I I I I CITY OF SHAKOPEE Scott County, Minnesota I NOTES TO THE FINANCIAL STATEMENTS December 31,2006 I NOTE 13 - DEFINED BENEFIT PENSION PLANS - STATEWIDE I Public Employees' Retirement Association (Continued) C. Shakopee Volunteer Fire Relief Association I The City contributes to the Shakopee Volunteer Fire Department Relief Association ("the Association") that provides pension benefits to its members under a defined benefit plan. Since fire department members are volunteers, contributions to the Association are not based on I payroll, but rather on years of active service. All active firefighters may apply for membership in the Association and shall become a member immediately upon approval by the Board of Trustees. I The City's contribution to the Association is determined by multiplying $ 7,500 by the number of years of active service completed by members ofthe Association for the plan year, prorated by I months for members who did not complete a full year of active service. Required and actual employer contributions to the plan during 2006 were $ 232,880. Members of the Association are not allowed to make voluntary contributions to the plan. I D. Post Retirement Benefits City employees are eligible to participate in COBRA provisions after severing employment or MN I Chapter 488 after retirement, which allows employees to continue coverage on the City's health insurance plan under certain provisions. Currently, the City has eight former employees/dependents participating under the MN Chapter 488 provision and two disabled at the I end of 2006. The participants pay for the premium under the above provisions. NOTE 14 - CONTINGENT LIABILITIES AND COMMITMENTS I The City is a currently a defendant in litigation with a developer concerning platting issues. Although the outcome of this lawsuit is not presently determinable, the resolution in not expected I to have a material adverse effect on the financial condition of the City. There are various uncompleted construction contracts as of year end totaling approximately I $ 3,267,541 for work yet to be done. Completed work is reflected in the financial statements, work yet to be done is not. I I I 67 I I CITY OF SHAKOPEE I Scott County, Minnesota NOTES TO THE FINANCIAL STATEMENTS I December 31, 2006 NOTE 15 - SEGMENT INFORMATION I The City maintains four Enterprise Funds that account for the water, sewer and electric utilities I and the storm water utility. 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 Net Assets balance, this information has not been repeated in the Notes to the Basic Financial Statements. I NOTE 16 - SUBSEQUENT EVENT On February 1, 2007, the City authorized the issuance ofG.O. Improvement Bonds for the 1 ih I Avenue Street Project. The amount of the issuance is $ l,370,000, with interest rate of 4% and principal maturity payments ranging from $ 110,000 to $ 205,000 until February 1,2017. I I I I I I I I I I 68 I I I I I I I I I I I I NONMAJOR FUNDS I I I I I I I I 69 I CITY OF SHAKOPEE I Scott County, Minnesota I COMBINING BALANCE SHEET - NONMAJOR GOVERNMENTAL FUNDS December 31, 2006 I Special Revenue I Forfeiture Transit Telecommunication SCDP Grant I ASSETS: Cash and Investments $ 70,041 $ 1,801,874 $ 485,064 $ 48,614 Taxes Receivable - Delinquent - - - - I Special Assessments Receivable: Delinquent - - - - Deferred - - - - I Accounts Receivable - 59,157 73,309 - Interest Receivable 675 13,942 3,996 392 Due from Other Funds - - - - I Notes Receivable - - - - Total Assets $ 70,716 $ 1,874,973 $ 562,369 $ 49,006 I LIABILITIES AND FUND BALANCES: Liabilities: I Accounts Payable $ 2,056 $ 73,112 $ 15,043 $ Contracts Payable - - - - Due to Other Funds - - - Due to Other Governments - - - - I Deferred Revenue - - - - Total Liabilities 2,056 73,112 15,043 - Fund Balances: I Reserved for: Special Revenue 68,660 1,801,861 547,326 49,006 I Debt Service - - - - Capital Projects - - - - Unreserved, Reported in: I Capital Projects - Undesignated - - - - Total Fund Balances 68,660 1,801,861 547,326 49,006 Total Liabilities and I Fund Balances $ 70,716 $ 1,874,973 $ 562,369 $ 49,006 I I 70 I I I I I I Special Revenue Debt Service Economic 1995A 1996A 1997B Development Total Special Improvement Improvement Improvement I Revolving Loan Authority Recreation Revenue Bonds Bonds Bonds $ 129,642 $ 327,706 $ 409,470 $ 3,272,411 $ 97,820 $ 217,034 $ 118,525 I - 1,591 1,591 - - - - - - - - 655 - I - - - - 98,463 7,823 78,026 - - 54,901 187,367 - - - 1,000 2,383 7,136 29,524 61 1,382 550 I - - - - - - - 337,016 - 337,016 - - - I $ 467,658 $ 331,680 $ 471,507 $ 3,827,909 $ 196,344 $ 226,894 $ 197,101 I $ - $ 26,882 $ 62,159 $ 179,252 $ - $ - $ - - - - - - - - - - - - - - - I 260,345 - - 260,345 - - - - 1,591 - 1,591 98,463 8,478 78,026 260,345 28,473 62,159 441,188 98,463 8,478 78,026 I I 207,313 303,207 409,348 3,386,721 - - - - - - - 97,881 218,416 119,075 - - - - - - - I - - - - - - - 207,313 303,207 409,348 3,386,721 97,881 218,416 119,075 I $ 467,658 $ 331,680 $ 471,507 $ 3,827,909 $ 196,344 $ 226,894 $ 197,101 I I I 71 I CITY OF SHAKOPEE I Scott County, Minnesota I COMBINING BALANCE SHEET - NONMAJOR GOVERNMENTAL FUNDS (CONTINUED) I December 31, 2006 Debt Service I 1998B 2000A 2002A 2002B 2003A Improvement Improvement Improvement Improvement Improvement Bonds Bonds Bonds Bonds Bonds I ASSETS: Cash and Investments $ 471,089 $ 642,038 $ 352,742 $ 1,504,128 $ 884,841 Taxes Receivable - Delinquent - - - - - I Special Assessments Receivable: Delinquent 298 68 - - - Deferred 140,936 359,216 156,880 1,568,659 396,734 I Accounts Receivable - - - - - Interest Receivable 3,525 4,863 2,419 10,947 7,461 Due from Other Funds - - - - - I Notes Receivable - - - - - Total Assets $ 615,848 $ 1,006,185 $ 512,041 $ 3,083,734 $ 1,289,036 I LIABILITIES AND FUND BALANCES: Liabilities: I Accounts Payable $ - $ - $ - $ - $ - Contracts Payable - - - - - Due to Other Funds - - - - - Due to Other Governments - - - - - I Deferred Revenue 141,234 359,284 156,880 1,568,659 396,734 Total Liabilities 141,234 359,284 156,880 1,568,659 396,734 Fund Balances: I Reserved for: Special Revenue - - - - - I Debt Service 474,614 646,901 355,161 1,515,075 892,302 Capital Projects - - - - - Unreserved, Reported in: I Capital Projects - Undesignated - - - - - Total Fund Balances 474,614 646,901 355,161 1,515,075 892,302 Total Liabilities and I Fund Balances $ 615,848 $ 1,006,185 $ 512,041 $ 3,083,734 $ 1,289,036 I I 72 I I I I I I Debt Service 2004B 2004C 2004D 2006A 2007 A Refunding Improvement Building Improvement Improvement Total Debt I Bonds Bonds Bonds Bonds Bonds Service $ 352,714 $ 1,041,430 $ 451,552 $ 289,394 $ - $ 6,423,307 I 5,873 - - - - 5,873 - - - 1,088 - 2,109 I - 901,951 - 636,504 1,332,679 5,677,871 - - - - - - 1,836 7,906 4,392 4,487 - 49,829 I - - - 12,173 - 12,173 - - - - - - I $ 360,423 $ 1,951,287 $ 455,944 $ 943,646 $ 1,332,679 $ 12,171,162 I $ - $ - $ - $ - $ - $ - - - - - - - - - - - - - I - - - - - - 5,873 901,951 - 637,592 1,332,679 5,685,853 5,873 901,951 - 637,592 1,332,679 5,685,853 I I - - - - - - 354,550 1,049,336 455,944 306,054 - 6,485,309 - - - - - - I - - - - - 354,550 1,049,336 455,944 306,054 - 6,485,309 I $ 360,423 $ 1,951,287 $ 455,944 $ 943,646 $ 1,332,679 $ 12,171,162 I I I 73 I CITY OF SHAKOPEE I Scott County, Minnesota I COMBINING BALANCE SHEET - NONMAJOR GOVERNMENTAL FUNDS (CONTINUED) I December 31, 2006 Capital Projects I Capital East Dean's West Dean's 2004 State Aid Improvements Lake Lake Projects I ASSETS: Cash and Investments $ 2,595,921 $ 3,655,470 $ 325,477 $ 289,998 $ 7 Taxes Receivable - Delinquent - - - - - I Special Assessments Receivable: Delinquent - 10,949 - - - Deferred - 224,477 - - - I Accounts Receivable - 372,119 - - - Interest Receivable 27,062 31,966 2,653 2,371 - Due from Other Funds - - - - - I Notes Receivable - - - - - Total Assets $ 2,622,983 $ 4,294,981 $ 328,130 $ 292,369 $ 7 I LIABILITIES AND FUND BALANCES: Liabilities: Accounts Payable $ - $ 86,422 $ - $ 207,565 $ 7 I Contracts Payable - 2,129 - - - Due to Other Funds - 12,173 - - - Due to Other Governments - - - - - I Deferred Revenue - 235,426 - - - Total Liabilities - 336,150 - 207,565 7 Fund Balances: I Reserved for: Special Revenue - - - - - I Debt Service - - - - - Capital Projects 2,622,983 3,958,831 328,130 84,804 - Unreserved, Reported in: I Capital Projects - Undesignated - - - - - Total Fund Balances 2,622,983 3,958,831 328,130 84,804 - Total Liabilities and I Fund Balances $ 2,622,983 $ 4,294,981 $ 328,130 $ 292,369 $ 7 I I 74 I I I I I I Capital Projects Total Public Works Total Capital Governmental I Building 2005 Projects TIF #12 2006 Projects 2007 Projects Projects Funds $ 414,529 $ 105 $ 33,453 $ 96,930 $ 59 $ 7,411,949 $ 17,107,667 I - - - - - - 7,464 - - - - - 10,949 13,058 I - - - - 224,477 5,902,348 10,344 - - 359,132 - 741,595 928,962 2,111 - - - - 66,163 145,516 I - - - - - - 12,173 - - - - - - 337,016 I $ 426,984 $ 105 $ 33,453 $ 456,062 $ 59 $ 8,455,133 $ 24,454,204 I $ 9,472 $ 59,027 $ 30,267 $ 5,068 $ 34,950 $ 432,778 $ 612,030 5,000 65,272 - 193,853 - 266,254 266,254 - 1,015,000 - - 35,000 1,062,173 1,062,173 I - - - - - - 260,345 - - - - - 235,426 5,922,870 14,472 1,139,299 30,267 198,921 69,950 1,996,631 8,123,672 I I - - - - - - 3,386,721 - - - - - - 6,485,309 412,512 - - 257,141 - 7,664,401 7,664,401 I - (1,139,194) 3,186 - (69,891) (1,205,899) (1,205,899) 412,512 (1,139,194) 3,186 257,141 (69,891) 6,458,502 16,330,532 I $ 426,984 $ 105 $ 33,453 $ 456,062 $ 59 $ 8,455,133 $ 24,454,204 I I I 75 I CITY OF SHAKO PEE I Scott County, Minnesota I COMBINING STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES - NONMAJOR GOVERNMENTAL FUNDS For the Year Ended December 31, 2006 I Special Revenue I Forfeiture Transit Telecommunication SCDP Grant REVENUES: I Property Taxes $ $ 66 $ - $ Tax Increments - - - - Special Assessments - - - - I Licenses and Permits - 295,954 Intergovernmental: State Grants - 896,741 - - Other Grants and Aids - - - - I Charges for Services 72,777 - - Fine and Forfeitures 48,043 - - Miscellaneous: I Investment Income 4,105 71,767 21,615 1,976 Other 1,431 - 509 10,056 Total Revenues 53,579 1,041,351 318,078 12,032 EXPENDITURES: I Current: General Government - 145,267 Public Safety 85,501 - - - I Public Works 708,769 - - Culture and Recreation - - - Debt Service: I Principal - - - - Interest and Other Charges - - - - Capital Outlay - 16,251 136,146 - Total Expenditures 85,501 725,020 281,413 - I Excess of Revenues Over (Under) Expenditures (31,922) 316,331 36,665 12,032 I OTHER FINANCING SOURCES (USES): Bonds Issued - - - Premium on Bonds Issued - - I Transfers In - - - - Transfers Out - - - - Total Other Financing Sources (Uses) - - - - I Net Change in Fund Balances (31,922) 316,331 36,665 12,032 FUND BALANCES: I Beginning of Year 100,582 1,485,530 510,661 36,974 End of Year $ 68,660 $ 1,801,861 $ 547,326 $ 49,006 I 76 I I I I I Special Revenue Debt Service I Economic 1995A 1996A 1997B Revolving Development Total Special Improvement Improvement Improvement Loan Authority Recreation Revenue Bonds Bonds Bonds I $ $ 75,584 $ - $ 75,650 $ 170,319 $ 91,256 $ 59,757 - - - - - I - - 37,686 12,400 36,372 2,420 298,374 - - - - 896,741 - - - I - 27,482 - 27,482 - - - - - 923,014 995,791 - - - - - - 48,043 - - - I 10,706 13,438 39,745 163,352 837 8,916 3,080 - 15,319 27,315 - - - 10,706 116,504 980,498 2,532,748 208,842 112,572 99,209 I 106,618 - 251,885 - - - I - - - 85,501 - - - - - - 708,769 - - - - 2,116,433 2,116,433 - - - I - - - 210,000 175,000 105,000 5,195 - - 5,195 18,564 23,373 16,333 - - - 152,397 - - - I 5,195 106,618 2,116,433 3,320,180 228,564 198,373 121,333 I 5,511 9,886 (1,135,935) (787,432) (19,722) (85,801) (22,124) - - - - - - I - - - - - - - 25,479 1,287,110 1,312,589 - - - - - - - - - - I - 25,479 1,287,110 1,312,589 - - - (19,722) (85,801) (22,124) 5,511 35,365 151,175 525,157 I 201,802 267,842 258,173 2,861,564 117,603 304,217 141,199 I $ 207,313 $ 303,207 $ 409,348 $ 3,386,721 $ 97,881 $ 218,416 $ 119,075 I 77 I CITY OF SHAKO PEE I Scott County, Minnesota I COMBINING STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES - NONMAJOR GOVERNMENTAL FUNDS (CONTINUED) For the Year Ended December 31, 2006 I Debt Service 1998B 2000A 2002A 2002B I Improvement Improvement Improvement Improvement Bonds Bonds Bonds Bonds REVENUES: I Property Taxes $ 62,519 $ 55,298 $ 95,891 $ - Tax Increments - - - - Special Assessments 58,993 114,789 42,743 397,095 I Licenses and Permits - Intergovernmental: State Grants - - Other Grants and Aids - - - - I Charges for Services - Fine and Forfeitures - - - - Miscellaneous: I Investment Income 20,656 6,768 12,563 62,224 Other - - - Total Revenues 142,168 176,855 151,197 459,319 EXPENDITURES: I Current: General Government - - - Public Safety - - - I Public Works - - - - Culture and Recreation - - - - Debt Service: I Principal 215,000 245,000 125,000 745,000 Interest and Other Charges 40,816 65,626 35,341 99,138 Capital Outlay - - - Total Expenditures 255,816 310,626 160,341 844,138 I Excess of Revenues Over (Under) Expenditures (113,648) (133,771) (9,144) (384,819) I OTHER FINANCING SOURCES (USES): Bonds Issued - - - - I Premium on Bonds Issued - - - Transfers In - - - Transfers Out - - Total Other Financing Sources (Uses) - - I Net Change in Fund Balances (113,648) (133,771) (9,144) (384,819) FUND BALANCES: I Beginning of Year 588,262 780,672 364,305 1,899,894 End of Year $ 474,614 $ 646,901 $ 355,161 $ 1,515,075 I 78 I I I I I I Debt Service 2003A 2004B 2004C 2004D 2006A Improvement Refunding Improvement Building Improvement Total Debt Bonds Bonds Bonds Bonds Bonds Service I $ - $ 249,249 $ 147,185 $ - $ - $ 931,474 - - - - - - I 24,385 - 146,935 - 122,306 993,704 - - - - - - - - - - - I - - - - - - - - - - - - I 45,233 7,976 25,186 24,516 19,944 237,899 - - - - - 69,618 257,225 319,306 24,516 142,250 2,163,077 I I - - - - - - - - - - - - - - - - - - - - - - I 425,000 165,000 300,000 160,000 - 2,870,000 38,315 76,380 82,204 225,015 544 721,649 - - - - - - I 463,315 241,380 382,204 385,015 544 3,591,649 I (393,697) 15,845 (62,898) (360,499) 141,706 (l,428,572) I - - - - - - - - - - - 378,961 - 378,961 - - (320,785) (320,785) I - - 378,961 - (320,785) 58,176 (393,697) 15,845 316,063 (360,499) (179,079) (1,370,396) I 1,285,999 338,705 733,273 816,443 485,133 7,855,705 I $ 892,302 $ 354,550 $ 1,049,336 $ 455,944 $ 306,054 $ 6,485,309 I 79 I CITY OF SHAKO PEE I Scott County, Minnesota I COMBINING STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES - NONMAJOR GOVERNMENTAL FUNDS (CONTINUED) For the Year Ended December 31, 2006 I Capital Projects I Capital East Dean's State Aid Improvements TIF #10 Lake REVENUES: I Property Taxes $ $ - $ - $ - Tax Increments - 31,057 Special Assessments - 188,371 - - I Licenses and Permits - Intergovernmental: State Grants 446,782 - - - Other Grants and Aids - - - - I Charges for Services - - - - Fine and Forfeitures - - - - Miscellaneous: I Investment Income 141,556 184,901 14,382 Other - - - - Total Revenues 588,338 373,272 31,057 14,382 EXPENDITURES: I Current: General Government - - - Public Safety - - - I Public Works - - Culture and Recreation - - - - Debt Service: I Principal - - - - Interest and Other Charges - - - - Capital Outlay 89,958 31,057 - I Total Expenditures - 89,958 31,057 - Excess of Revenues Over (Under) Expenditures 588,338 283,314 - 14,382 I OTHER FINANCING SOURCES (USES): Bonds Issued - - - I Premium on Bonds Issued - - - Transfers In - - - Transfers Out (l, 111 ,406) (230,623) - Total Other Financing Sources (Uses) (l, 111 ,406) (230,623) - - I Net Change in Fund Balances (523,068) 52,691 14,382 FUND BALANCES: I Beginning of Year 3,146,051 3,906,140 313,748 End of Year $ 2,622,983 $ 3,958,831 $ - $ 328,130 I 80 I I I I I I Capital Projects West Dean's Public Works TIF # II 2003 Projects Lake 2004 Projects Building 2005 Projects TIF #12 I $ - $ - $ - $ $ - $ - $ - 241,870 - - - - - 63,721 I - - - - - 30,800 - - - - - - - - - - - - - I - - - - - 1,000,000 - - - - - - - - - - - - I - 22,238 15,338 (844) 67,252 (7,098) - - - - - 10,344 - 241,870 22,238 15,338 (844) 77,596 1,023,702 63,721 I I - - - - - - - - - - - - - - - - - - - - - - - - - I - - - - - - - - - - - - (198) - I 241,870 21,572 82,466 26,865 822,718 2,102,177 60,535 241,870 21,572 82,466 26,865 822,718 2,101,979 60,535 I - 666 (67,128) (27,709) (745,122) (1,078,277) 3,186 I - - - 213,696 - 889,919 - - - 2,076 - 6,967 - - - - 277,940 600,000 336,003 - - (378,961) - - - - - I - (378,961 ) - 493,712 600,000 1,232,889 - - (378,295) (67,128) 466,003 (145,122) 154,612 3,186 I - 378,295 151,932 (466,003) 557,634 (1,293,806) - I $ - $ - $ 84,804 $ - $ 412,512 $(1,139,194) $ 3,186 I 81 I CITY OF SHAKO PEE I Scott County, Minnesota I COMBINING STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES - NONMAJOR GOVERNMENTAL FUNDS (CONTINUED) For the Year Ended December 31, 2006 I Capital Projects I Total Other Total Capital Governmental 2006 Projects 2007 Projects Projects Funds REVENUES: I Property Taxes $ - $ - $ $ 1,007,124 Tax Increments - - 336,648 336,648 Special Assessments 195,000 - 414,171 1,407,875 I Licenses and Permits - - 298,374 Intergovernmental: State Grants - - 446,782 1,343,523 Other Grants and Aids - - 1,000,000 1,027,482 I Charges for Services - - - 995,791 Fine and Forfeitures - - 48,043 MisceIlaneous: I Investment Income - - 437,725 838,976 Other - - 10,344 37,659 Total Revenues 195,000 - 2,645,670 7,341,495 EXPENDITURES: I Current: General Government - - - 251,885 Public Safety - - - 85,501 I Public Works - - - 708,769 Culture and Recreation - - 2,116,433 Debt Service: I Principal - - - 2,870,000 Interest and Other Charges - - (198) 726,646 Capital Outlay 3,350,415 69,891 6,899,524 7,051,921 I Total Expenditures 3,350,415 69,891 6,899,326 13,811,155 Excess of Revenues Over (Under) Expenditures (3,155,415) (69,891) (4,253,656) (6,469,660) I OTHER FINANCING SOURCES (USES): Bonds Issued 1,284,392 - 2,388,007 2,388,007 Premium on Bonds Issued 11,232 - 20,275 20,275 I Transfers In 2,191,060 - 3,405,003 5,096,553 Transfers Out - - (1,720,990) (2,041,775) Total Other Financing Sources (Uses) 3,486,684 - 4,092,295 5,463,060 I Net Change in Fund Balances 331,269 (69,891) (161,361 ) (1,006,600) FUND BALANCES: I Beginning of Year (74,128) - 6,619,863 17,337,132 End of Year $ 257,141 $ (69,891) $ 6,458,502 $ 16,330,532 I 82 I I I CITY OF SHAKOPEE I Scott County, Minnesota SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES I IN FUND BALANCE - BUDGET AND ACTUAL - TRANSIT FUND I For the Year Ended December 31,2006 I Variance with Final Budget - Budgeted Amounts Positive I REVENUES: Original Final Actual Amounts (Negative) Property Taxes $ - $ - $ 66 $ 66 I Intergovernmental Revenue: State Grants 650,000 650,000 896,741 246,741 Charges for Services 40,000 40,000 72,777 32,777 I Miscellaneous Revenues: Investment Income 30,000 30,000 71,767 41,767 Total Revenues 720,000 720,000 1,041,351 321,351 I EXPENDITURES: I Public Works: Current 829,440 829,440 708,769 120,671 Capital Outlay - - 16,251 (16,251) I Total Expenditures 829,440 829,440 725,020 104,420 Excess of Revenues Over I (Under) Expenditures $ (109,440) $ (109,440) 316,331 $ 425,77l FUND BALANCE: I Beginning of Year 1,485,530 End of Year $ 1,80l,86l I I I I I 83 I I CITY OF SHAKOPEE Scott County, Minnesota I SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE-BUDGET AND ACTUAL- I TELECOMMUNICATION FUND For the Year Ended December 31,2006 Variance with I Final Budget - I Budgeted Amounts Positive Original Final Actual (Negative) REVENUES: I Licenses and Permits $ 250,000 $ 250,000 $ 295,954 $ 45,954 Miscellaneous Revenues: Investment Income 8,000 8,000 2l,6l5 13,6l5 I Other - - 509 509 Total Revenues 258,000 258,000 318,078 60,078 EXPENDITURES: I General Government: I Current 202,160 216,390 145,267 71,123 Capital Outlay 187,600 187,600 136,146 51,454 Total Expenditures 389,760 403,990 281,413 122,577 I Excess of Revenues Over (Under) Expenditures $ (131,760) $ (145,990) 36,665 $ 182,655 I FUND BALANCE: Beginning of Year 510,661 I End of Year $ 547,326 I I I I I 84 I I I, CITY OF SHAKOPEE I Scott County, Minnesota SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES I IN FUND BALANCE - BUDGET AND ACTUAL - ECONOMIC DEVELOPMENT AUTHORITY I For the Year Ended December 31, 2006 I Variance with Final Budget - Budgeted Amounts Positive I REVENUES: Original Final Actual (Negative) Property Taxes $ 80,000 $ 80,000 $ 75,584 $ (4,416) I Intergovernmental Revenue: Other Grants and Aids 27,000 27,000 27,482 482 Miscellaneous Revenues: I Investment Income 5,000 5,000 13,438 8,438 Total Revenues 112,000 112,000 116,504 4,504 I EXPENDITURES: General Government: I Current 141,440 141,440 106,618 34,822 Excess of Revenues Over I (Under) Expenditures (29,440) (29,440) 9,886 39,326 OTHER FINANCING SOURCES: I Transfers In 31,000 31,000 25,479 (5,521) Excess of Revenues and Other I Sources Over Expenditures $ 1,560 $ 1,560 35,365 $ 33,805 FUND BALANCE: I Beginning of Year 267,842 I End of Year $ 303,207 I' I I 85 I I CITY OF SHAKOPEE Scott County, Minnesota I SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE - BUDGET AND ACTUAL - I RECREATION FUND For the Year Ended December 31, 2006 I Variance with I Final Budget - Budgeted Amounts Positive Original Final Actual (Negative) I REVENUES: Licenses and Permits $ - $ - $ 2,420 $ 2,420 Intergovernmental Revenue: I Charges for Services 908,340 908,340 923,014 14,674 Miscellaneous Revenues: Investment Income 10,000 10,000 39,745 29,745 I Other 43,500 43,500 15,319 (28,181) Total Revenues 961,840 961,840 980,498 18,658 I EXPENDITURES: Culture and Recreation: I Current 2,248,950 2,248,950 2,116,433 132,517 Excess of Revenues Over I (Under) Expenditures (1,287,110) (1,287,110) (1,135,935) 151,175 OTHER FINANCING SOURCES: I Transfers In 1,287,110 1,287,110 1,287,110 - Excess of Revenues and Other I Sources Over Expenditures $ - $ - 151,175 $ 151,175 FUND BALANCE: I Beginning of Year 258,173 End of Year $ 409,348 I I I 86 I I I CITY OF SHAKO PEE I Scott County, Minnesota COMBINING STATEMENT OF FUND NET ASSETS- I INTERNAL SERVICE FUNDS December 31,2006 I Governmental Activities - Intemal Service Funds Employee Total Internal I ASSETS: Equipment Buildings Benefits Service Funds Current Assets: I Cash and Cash Equivalents $ - $ - $ 1,329,533 $ 1,329,533 Investments 3,177,680 2,054,844 - 5,232,524 Interest Receivable 25,565 14,498 9,899 49,962 I Long-term Receivable (Current Portion) 55,000 - - 55,000 Total Current Assets 3,258,245 2,069,342 1,339,432 6,667,019 I Noncurrent Assets: Long-Term Receivable 560,000 - - 560,000 Capital Assets: I Buildings and System - 29,024,022 - 29,024,022 Machinery and Equipment 7,294,766 - - 7,294,766 Total Cost 7,294,766 29,024,022 - 36,318,788 I Less Accumulated Depreciation (2,992,249) (4,925,229) - (7,917,478) Net Capital Assets 4,302,517 24,098,793 - 28,401,310 Total Noncurrent Assets 4,862,517 24,098,793 - 28,961,310 I Total Assets $ 8,120,762 $26,168,135 $ 1,339,432 $ 35,628,329 LIABILITIES AND NET ASSETS: I Current Liabilities: $ $ 374,583 $ $ 374,583 Accounts Payable - - Contracts Payable - 18,948 - 18,948 I Current Compensated Absences - - 620,000 620,000 Total Current Liabilities - 393,531 620,000 1,013,531 I Noncurrent Liabilities: 636,559 636,559 Compensated Absences - - Total Liabilities - 393,531 1,256,559 1,650,090 I Net Assets: Invested in Capital Assets, Net of Related Debt 4,302,517 24,098,793 - 28,401,310 I Unrestricted 3,818,245 1,675,811 82,873 5,576,929 Total Net Assets 8,120,762 25,774,604 82,873 33,978,239 I Total Liabilities and Net Assets $ 8,120,762 $26,168,135 $ 1,339,432 $ 35,628,329 I 87 I CITY OF SHAKOPEE I Scott County, Minnesota I COMBINING STATEMENT OF REVENUES, EXPENSES AND CHANGES IN FUND NET ASSETS - INTERNAL SERVICE FUNDS I For the Year Ended December 31,2006 Governmental Activities - I Internal Service Funds Employee Total Internal I Equipment Buildings Benefits Service Funds OPERATING REVENUES: Rental Charges $ 940,982 $ 839,820 $ - $ 1,780,802 I Other Charges - - 788,890 788,890 Total Operating Revenues 940,982 839,820 788,890 2,569,692 OPERATING EXPENSES: I Employee Benefits - - 788,890 788,890 Depreciation 456,059 696,540 - 1,152,599 I Total Operating Expenses 456,059 696,540 788,890 1,941,489 Operating Income 484,923 143,280 - 628,203 I NONOPERATING REVENUE (EXPENSES): Investment Income 189,389 67,471 52,509 309,369 Gain (Loss) on Disposal of Assets 3,227 (22,572) - (19,345) I Total Nonoperating Revenue (Expenses) 192,616 44,899 52,509 290,024 Income before Capital Contributions and Transfers 677,539 188,179 52,509 918,227 I Capital Contributions - 822,718 - 822,718 Change in Net Assets 677,539 1,010,897 52,509 1,740,945 I NET ASSETS: I Beginning of Year 7,443,223 24,763,707 30,364 32,237,294 End of Year $ 8,120,762 $ 25,774,604 $ 82,873 $ 33,978,239 I I I I 88 I I I CITY OF SHAKO PEE I Scott County, Minnesota COMBINING STATEMENT OF CASH FLOWS- INTERNAL SERVICE FUNDS I For the Year Ended December 31, 2006 I Employee Equipment Buildings Benefits Total CASH FLOWS - OPERATING ACTIVITIES: Receipts from Customers and Users $ 940,982 $ 839,820 $ 788,890 $ 2,569,692 I Payments to Suppliers - - - - Payments to Employees - - (674,638) (674,638) Net Cash Flows - Operating Activities 940,982 839,820 114,252 1,895,054 I CASH FLOWS - CAPITAL AND RELATED FINANCING ACTIVITIES: Proceeds from Disposal of Capital Assets 46,029 - - 46,029 I Acquisition of Capital Assets (1,320,817) (156,867) - (1,477,684) Net Cash Flows - Capital and Related Financing Activities (1,274,788) (156,867) - (1,431,655) I CASH FLOWS - INVESTING ACTIVITIES: Proceeds (Purchases ofInvestments) 97,653 (741,693) - (644,040) Payment Received for Notes Receivable 50,000 - - 50,000 I, Interest Received 186,153 58,740 49,218 294, III Net Cash Flows - Investing Activities 333,806 (682,953) 49,218 (299,929) I Net Change in Cash and Cash Equivalents - - 163,470 163,470 Cash and Cash Equivalents, January 1 - - 1,166,063 1,166,063 I Cash and Cash Equivalents, December 31 $ - $ - $ 1,329,533 $ 1,329,533 RECONCILIATION OF OPERATING INCOME I TO NET CASH FLOWS - OPERATING ACTIVITIES: Operating Income $ 484,923 $ 143,280 $ - $ 628,203 Adjustments to Reconcile Operating Income to Net Cash Flows - I Operating Activities: Depreciation Expense 456,059 696,540 - 1,152,599 Changes in: Accounts Payable (59,469) 374,583 - 315,114 I Contracts Payable - (11,052) - (11,052) Amounts Payable Related to Capital Asset Purchases 59,469 (363,531 ) - (304,062) Compensated Absences Payable - 114,252 114,252 I Total Adjustments 456,059 696,540 114,252 1,266,851 Net Cash Flows - Operating Activities $ 940,982 $ 839,820 $ 114,252 $ 1,895,054 NONCASH INVESTING, CAPITAL AND FINANCING I ACTIVITIES: . Contributions of Capital Assets from the Municipality $ $ 822,718 $ - $ 822,718 Purchases of Capital Assets on Account - (363,531) - (363,531 ) I Disposals and Transfers of Capital Assets (599,942) (59,400) - (659,342) . . Disposals and Transfers of Accumulated Depreciation 427,831 36,828 - 464,659 Capital Asset Trade-Ins 129,309 - - 129,309 I 89 I' CITY OF SHAKO PEE I Scott County, Minnesota I STATEMENT OF CHANGES IN ASSETS AND LIABILITIES- ESCROW AGENCY FUND I December 31, 2006 Balance at Balance at I December 31, December 31, I 2005 Additions Deductions 2006 ASSETS: Current: I Cash and Investments (Including Cash Equivalents) $ 1,603,856 $ 1,279,928 $ 1,290,856 $ 1,592,928 Other Receivables - 77,053 - 77,053 I Total Assets $ 1,603,856 $ 1,356,981 $ 1,290,856 $ 1,669,981 LIABILITIES: I Accounts Payable $ 14,697 $ 77,053 $ 10,339 $ 81,411 Deposits Payable 1,589,159 1,279,928 1,280,517 1,588,570 I Total Liabilities $ 1,603,856 $ 1,356,981 $ 1,290,856 $ 1,669,981 I I I I I I I I 90 I I I CITY OF SHAKOPEE I Scott County, Minnesota Table 1 NET ASSETS BY COMPONENT I Years 2003 Through 2006 I Governmental Activities: 2003 2004 2005 2006 Invested in Capital Assets, Net of Related Debt $ 94,388,758 $ 90,281,410 $ 111,237,672 $ 119,661,761 I 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 Assets $ 124,861,719 $ 141,226,895 $ 154,720,905 $ 161,925,457 I 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 I Unrestricted 38,234,063 37,354,576 41,291,469 42,400,797 Total Business-Type Activities Net Assets $ 120,937,698 $ 128,637,470 $ 142,664,911 $ 152,617,880 I 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 I Unrestricted 53,475,710 58,568,649 63,136,590 71,665,511 Total Primary Government Net Assets $ 245,799,417 $ 269,864,365 $ 297,385,816 $ 314,543,337 I Note: The City began to report accrual information when it implemented GASB Statement No. 34 in fiscal year 2003. I I I I I I I I 91 I I CITY OF SHAKOPEE Scott County, Minnesota I Table 2 CHANGES IN NET ASSETS Years 2003 Through 2006 I 2003 2004 2005 2006 Expenses I 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 I Public Works 3,673,623 6,036,920 8,298,258 6,798,917 Economic Development 683,035 360,167 314,858 333,462 Recreation 894,321 2,150,765 3,664,944 4,653,240 Other 668,531 861,864 924,270 896,110 I Total Governmanta1 Activities Expenses 13,675,847 18,006,327 21,956,545 22,699,320 Business-Type Activities: I 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 I Storm 800,092 941,842 999,849 1,523,343 Recreation 1,552,524 - - - Total Business-Type Activities Expenses 24,159,722 25,495,213 29,188,637 36,428,864 I Total Primary Govenrment Expenses $ 37,835,569 $ 43,501,540 $ 51,145,182 $ 59,128,184 Program Revenues Governmental activities: I 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 I Public Works 3,691,149 4,534,285 2,668,728 2,986,495 Park and Recreation 1,330,062 1,497,853 1,826,847 1,676,630 Operating Grants and Contributions 2,622,953 4,303,581 3,646,605 1,653,238 I 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: I 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 I 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 - - I 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 I Net (Expense) Revenue I 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 I 92 I I CITY OF SHAKOPEE I Scott County, Minnesota Table 2 CHANGES IN NET ASSETS I Years 2003 Through 2006 General Revenues and Other Changes in Net Assets 2003 2004 2005 2006 I Governmental Activities: Taxes Property Taxes $ 7,995,002 $ 7,842,043 $ 9,341,977 $ 10,547,177 I Other Taxes 507,706 364,211 314,858 336,648 Umestricted 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 Rec1assed to Special Revenue - 5,539,108 1,658,132 - I 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 I 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 I Special Item - (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) I Total Primary Government $ 10,074,336 $ 9,951,182 $ 12,635,602 $ 14,535,246 Change in Net Assets Government Activities $ 7,660,669 $ 16,364,176 $ 13,494,010 $ 7,204,552 I 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 I Note: The City began to report accrual information when it implemented GASB Statement No. 34 in fiscal year 2003. I I I I I I I 93 I CITY OF SHAKOPEE Scott County, Minnesota Table 3 FUND BALANCES - GOVERNMENTAL FUNDS Last Ten Fiscal Years 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 General Fund ReseIVed $ $ $ $ 200,000 $ $ $ 79,003 $ 13,586 $ 16,465 $ 1,490,157 UmeseIVed 3,828,501 4,019,747 4,700,338 4,673,116 3,144,560 3,534,080 5,565,816 7,233,268 9,662,677 8,354,477 Total General Fund $ 3,828,501 $ 4,019,747 $ 4,700,338 $ 4,873,116 $ 3,144,560 $ 3,534,080 $ 5,644,819 $ 7,246,854 $ 9,679,142 $ 9,844,634 All Other Governmental Funds Reserved Special Revenue Funds 604,804 654,833 676,404 680,537 945,041 1,456,237 1,778,684 2,232,061 2,861,564 3,386,721 Debt SeIVice Funds 5,611,176 8,608,467 10,082,459 9,321,002 8,502,950 7,653,349 6,369,303 10,837,684 9,236,020 7,930,114 Capital Projects Funds 6,527,137 9,674,967 6,107,324 6,959,298 4,547,275 6,818,306 7,088,887 17,088,803 9,915,610 8,082,799 UmeseIVed (561,206) (294,026) (970,952) (512,538) (24,624) (777,600) (705,537) (33,052) (1,833,937) (1,205,899) Total all Other Governmental Funds $ 12,181,911 $ 18,644,241 $ 15,895,235 $ 16,448,299 $ 13,970,642 $ 15,150,292 $ 14,531,337 $ 30,125,496 $ 20,179,257 $ 18,193,735 \0 .j>. - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - CITY OF SHAKO PEE Scott County, Minnesota Table 4 CHANGES IN FUND BALANCES - GOVERNMENTAL FUNDS Last Ten Fiscal Years 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 Revenues Taxes $ 5,661,102 $ 5,200,663 $ 5,499,168 $ 5,148,137 $ 6,069,719 $ 7,128,598 $ 7,991,699 $ 8,207,254 $ 9,621,721 $10,815,367 Special Assessments 2,445,043 5,154,203 2,351,600 2,959,962 2,380,186 1,466,432 3,158,560 3,175,161 2,564,470 1,751,871 Licenses and Permits 881,803 1,853,115 2,415,281 2,517,470 3,159,222 3,814,646 4,748,457 4,173,804 4,444,491 2,675,935 Intergovernmental 1,339,229 2,084,018 1,293,661 2,234,040 1,627,879 5,230,607 2,612,877 4,162,581 3,646,605 2,877 ,245 Charges for Service 1,113,754 1,359,853 1,964,050 1,982,395 1,093,146 1,489,516 1,537,412 2,382,405 2,455,171 2,290,996 Fines and Forfiets 84,708 99,140 148,835 172,017 230,085 253,348 275,583 288,492 322,579 422,850 Miscelaneous 1,118,686 1,418,724 922,833 1,892,997 1,386,351 1,656,828 605,947 766,614 1,159,536 1,979,419 Total Revenues 12,644,325 17,169,716 14,595,428 16,907,018 15,946,588 21,039,975 20,930,535 23,156,311 24,214,573 22,813,683 Expenditures General Government 1,502,375 1,748,550 2,269,248 2,458,342 2,770,732 3,186,072 3,192,768 3,486,029 3,120,544 3,149,717 Police 1,821,114 1,693,868 1,971,138 2,090,873 2,421,948 3,014,829 3,148,785 3,698,352 4,159,724 4,842,268 Fire 433,951 453,576 576,220 728,749 767,061 889,390 975,656 1,141,700 1,194,610 1,481,327 Protective Inspection 249,818 253,465 359,572 499,892 521,856 555,384 645,030 690,920 855,864 829,526 Public Works 1,684,314 1,975,808 2,022,599 1,907,102 2,019,943 2,258,903 2,221,004 2,564,662 3,003,554 3,095,392 Park and Recreation 315,551 390,557 458,417 621,306 664,340 622,099 669,570 2,489,749 2,792,590 3,453,545 Miscellaneous 90,936 413,064 109,182 86,805 103,681 109,455 317,167 Debt Service 3,840,234 3,054,576 2,974,694 5,042,692 4,035,152 3,744,300 4,437,098 2,476,976 2,951,324 3,923,632 Capital Outlay 6,603,727 8,044,678 2,619,354 4,585,657 4,396,346 9,249,946 5,532,652 7,432,575 14,058,508 10,650,449 Total Expenditures 16,542,020 18,028,142 13,360,424 18,021,418 17,701,059 23,630,378 21,139,730 23,980,963 32,136,718 31,425,856 Excess of Revenues Over (Under) Expenditures (3,897,695) (858,426) 1,235,004 (1,114,400) (1,754,471) (2,590,403 ) (209,195) (824,652) (7,922,145) (8,612,173) Other Financing Sources (Uses) Bonds Issued 4,895,704 6,838,664 2,550,892 4,938,612 2,215,567 15,070,000 3,440,000 Sale of Assets 75,000 130,100 278,628 102,517 13,680 9,644 41,761 299,183 753,024 2,700 Premium on Bonds Issued 20,275 Refunded Bond Escrow (2,190,000) Transfers In 4,222,007 3,038,580 2,866,069 2,273,569 1,718,995 1,701,837 1,732,872 5,963,741 3,374,566 6,683,532 Transfers Out (3,750,487) (2,495,342) (4,154,048) (3,086,736) (4,268,740) (2,490,520) (2,289,221) (3,312,078) (1,529,396) (3,354,364) Total Other Financing Sources (Uses) 5,442,224 7,512,002 (1,009,351) 1,840,242 (2,536,065) 4,159,573 1,700,979 18,020,846 408,194 6,792,143 Net Change in Fund Balance $ 1,544,529 $ 6,653,576 $ 225,653 $ 725,842 $ (4,290,536) $ 1,569,170 $ 1,491,784 $ 17,196,194 $ (7,513,951) $ (l,820,030) Debt Service as a Percentage of Noncapital Expenditures 39% 31% 28% 38% 30% 26% 28% 15% 16% 19% '" V> CITY OF SHAKO PEE I Scott County, Minnesota I Table 5 TAX CAPACITY AND ESTIMATED ACTUAL VALUE OF TAXABLE PROPERTY Last Ten Fiscal Years Taxable Tax I Estimated Capacity as a Commercial Less: Less: Net Net Taxable Taxable Percentage of I Fiscal Residential Industrial Other Tax Increment Fiscal Tax Market Estimated Year Property Property Property Property Disparities Capacity Value Market Value 1997 $ 6,291,552 $ 9,961,416 $ 618,602 $ 1,514,980 $ 1,969,054 $ 13,387,536 $ 695,306,365 1.93% I 1998 6,860,681 9,138,720 548,855 1,332,062 1,668,299 13,547,895 776,534,400 1.74% 1999 7,580,688 9,460,927 551,646 1,231,584 1,452,992 14,908,685 897,901,119 1.66% I 2000 8,920,457 10,681,728 530,294 1,211,989 1,718,112 17,202,378 1,087,145,000 1.58% 2001 11,560,704 13,820,811 542,037 1,801,828 1,997,080 22,124,644 1,369,102,400 1.62% I 2002 11,469,272 10,023,762 409,721 975,773 1,543,453 19,383,529 1,743,136,300 1.11% I 2003 13,890,536 10,452,944 589,540 497,860 2,035,749 22,399,411 2,062,115,200 1.09% 2004 16,721,302 10,609,240 913,912 497,255 2,121,170 25,626,029 2,464,564,300 1.04% I 2005 20,394,086 11,749,438 528,300 327,963 2,132,628 30,211,233 2,654,161,900 1.14% 2006 23,162,320 12,710,783 565,215 352,543 4,467,213 31,618,562 2,987,657,400 1.06% I Source: Scott County Auditor I I I I I I I 96 I I I CITY OF SHAKO PEE Scott County, Minnesota I Table 6 DIRECT AND OVERLAPPING PROPERTY TAX RATES Last Ten Fiscal Years I City Direct Rate General I Special Obligation Assessment Shakopee Debt Service Fiscal Operating Debt Service Total Direct School Scott Other Market Value I Year Rate Rate Rate District County Jurisdictions Rate 1997 0.21703 0.01395 0.23098 0.61174 0.41683 0.04680 0.04245 I 1998 0.19506 0.01621 0.21127 0.73306 0.40679 0.06329 0.03237 I 1999 0.21660 0.01698 0.23358 0.58686 0.39282 0.03192 0.02909 0.04324 2000 0.18699 0.01433 0.20132 0.50203 0.36182 0.02497 I 2001 0.16959 0.01024 0.17983 0.42982 0.31729 0.03034 0.01980 I 2002 0.33194 0.00782 0.33976 0.26080 0.39517 0.04976 0.00764 2003 0.33172 0.00767 0.33939 0.24168 0.38554 0.05685 0.01393 I 2004 0.31131 0.01302 0.32433 0.21517 0.36635 0.04123 0.01189 I 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 I Sources: Scott County Auditor I I I I I I 97 I CITY OF SHAKOPEE I Scott County, Minnesota Table 7 I PRINCIPAL TAXPAYERS Current Year and Nine Years Ago 2006 1997 I Percentage Percentage 2005/06 of Total 1996/97 of Total Tax Cap. Tax Cap. Tax Cap. Tax Cap. I Taxpayer Type of Business Value Rank Value Value Rank Value Excel Energy Electrical Generation $ 422,938 1 1.51% $ 938,178 2 5.56% Rahr Malting Grain Processing 401,067 2 1.43% 914,122 3 5.42% I Seagate ManufacturinglResearch 399,250 3 1.42% Shakopee Crossings Retail 344,163 4 1.23% I Inland Shakopee Valley Market Retail 339,458 5 1.21% Certainteed Manufacturing 335,258 6 1.19% 289,731 7 1.72% I KMart Warehouse WarehouselDistribution Center 300,988 7 1.07% 1,369,719 1 8.12% Valley Fair Amusement Park 300,784 8 1.07% 572,765 4 3.39% I First Industrial LP Property Management 280,962 9 1.00% I OIRE Property Management 272,128 10 0.97% - Tsumara Manufacturing 559,145 5 3.31% I Silgan Container Warehouse 309,056 6 1.83% Canterbury Park Horse Racing - 274,400 8 1.63% I AA Holdings Auto Auction 252,008 9 1.49% Anchor Glass Manufacturing 213,192 10 1.26% I $ 2,974,058 10.59% $ 5,692,316 24.21% Source: Scott County Auditor I I I I I 98 I I I CITY OF SHAKOPEE I Scott County, Minnesota Table 8 PROPERTY TAX LEVIES AND COLLECTIONS Last Ten Fiscal Years I Ratio of Accumulated Percentage Delinquent I Collections Percentage Collections of Total Accumulated Taxes to Year Tax of Current of Levy of Prior Total Collections Delinquent Current Collected Levy Years Taxes Collected Years Taxes Collections To Tax Levy Taxes Years Taxes I 1997 $ 3,578,560 $ 3,598,147 101% $ 46,416 $ 3,644,563 102% $ 71,033 1.98% 1998 3,263,583 3,230,184 99% 22,665 3,252,849 100% 78,834 2.42% I 1999 3,819,736 3,757,750 98% 25,186 3,782,936 99% 65,389 1.71% 2000 3,853,808 3,738,963 97% 24,342 3,763,305 98% 88,656 2.30% I 2001 4,477,969 4,335,602 97% 62,905 4,398,507 98% 61,661 1.38% 2002 6,645,713 6,484,920 98% 41,342 6,526,262 98% 70,622 1.06% I 2003 7,889,018 7,191,567 91% 47,055 7,238,622 92% 79,710 1.01% I 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% I 2006 10,951,917 9,945,490 91% 38,986 9,984,476 91% 279,316 2.55% Source: Scott County Auditor I I. The above data does not include tax increment districts. 2. In 2003 to 2006, the State of Minnesota cancelled $ 561,000 in annual aid payments to the City of Shakopee that were part of the tax levy. I I I I I I I 99 I CITY OF SHAKOPEE I Scott County, Minnesota Table 9 RATIO OF OUTSTANDING DEBT BY TYPE I Last Ten Fiscal Years Governmental Activities I GO Revenue Business-type General Tax Special Activities Total Percentage I Fiscal Obligation Increment Assessment Revenue Primary of Personal Per Year Bonds Bonds Bonds Bonds Government Income Capita 1997 $ 3,140,000 $ 3,695,000 $ 10,545,000 $ 5,020,000 $ 22,400,000 5.4% $ 1,474 I 1998 2,980,000 2,615,000 16,405,000 4,820,000 26,820,000 5.6% 1,635 I 1999 2,880,000 2,020,000 15,090,000 14,480,000 34,470,000 6.5% 2,004 2000 2,780,000 1,400,000 14,215,000 14,235,000 32,630,000 4.7% 1,586 I 2001 2,675,000 755,000 11,660,000 26,000,000 41,090,000 5.5% 1,852 2002 2,565,000 390,000 14,055,000 25,660,000 42,670,000 5.5% 1,785 I 2003 2,445,000 - 13,060,000 25,215,000 40,720,000 5.0% 1,631 I 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 4.6% 1,593 I 2006 7,950,000 - 17,070,000 34,535,000 59,555,000 1,747 I Sources: See table 14 for income and population data. I I I I I I 100 I I I CITY OF SHAKOPEE Scott County, Minnesota I Table 10 RATIOS OF GENERAL BONDED OUTSTANDING Last Ten Fiscal Years I Percentage of I General Actual Taxable Fiscal Obligation Value of Per Year Bonds Property Capita I 1997 $ 3,140,000 0.45% $ 207 I 1998 2,980,000 0.38% 182 I 1999 2,880,000 0.32% 167 2000 2,780,000 0.26% 135 I 2001 2,675,000 0.20% 121 I 2002 2,565,000 0.15% 107 2003 2,445,000 0.12% 98 I 2004 10,595,000 0.43% 366 I 2005 8,275,000 0.27% 267 I 2006 7,950,000 0.27% 233 Sources: 11. Metropolitan Council population estimated except for 2000 which is the the official census figure. 2005/6 is the City's estimate. 2. Scott County Auditor I I I I I 101 I CITY OF SHAKOPEE I Scott County, Minnesota I Table 11 DIRECT AND OVERLAPPING GOVERNMENTAL ACTIVITIES DEBT December 31,2006 I Percentage Amount I Applicable Applicable G.O. To City of To City of I Debt Shakopee Shakopee City of Shakopee $ 25,020,000 100.0% $ 25,020,000 I School District #720 140,315,000 84.8% 118,987,120 School District #191 54,360,000 1.7% 924,120 Scott County 60,820,000 26.8% 16,283,748 I Metropolitan Council 27,435,000 1.1% 301,785 Metropolitan Transit 147,310,000 1.2% 1,767,720 Total Direct and Overlapping Debt $ 455,260,000 $ 163,284,493 I Source: Scott County Auditor I Dakota County Auditor State Department of Revenue I I I I I I I I 102 I I - - - - - - - - - - - - - - - - - - - CITY OF SHAKO PEE Scott County, Minnesota Table 12 LEGAL DEBT MARGIN INFORMATION Last Ten Fiscal Years 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 Market Value (taxable) $ 69~,306,36~ $ 776,~34,400 $ 897,901,119 $ 1,087,14~,000 $ 1,369,102,400 $ 1,743,136,300 $ 2,062,1l~,200 $ 2,464,~64,300 $ 2,6~4,161,900 $ 2,987,6~7,400 Debt Limit Two Percent of Market Value (Note A) 13,906,127 1~,~30,688 17,9~8,022 21,742,900 27,382,048 34,862,726 41,242,304 49,291,286 ~3,083,238 ~9,7~3,148 Amount of Debt Applicable to Debt Limit: General Obligation Bonds 3,140,000 2,980,000 2,880,000 2,780,000 2,67~,000 2,~6~,000 2,44~,000 1O,~9~,000 8,27~,000 7,9~0,000 Available in Debt Service Funds (299,783) (209,286) (326,98~) (3~7,~47) (390,619) (284,119) (297 ,6~7) (2,~39,292) (1,1~~,148) (810,494) Total Debt Applicable to Debt Limit 2,840,217 2,770,714 2,~~3,01~ 2,422,4~3 2,284,381 2,280,881 2,147,343 8,0~~, 708 7,119,8~2 7,139,~06 Legal debt margin $ 11,06~,910 $ 12,7~9,974 $ 1~,40~,007 $ 19,320,447 $ 2~,097,667 $ 32,581,845 $ 39,094,961 $ 41,235,578 $ 4~,963,386 $ ~2,613,642 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 two percent 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: (I) Obligations issued for improvements which are payable wholly or partly from the proceeds of special assessments levied upon property specially benefited thereby, includeing 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 acquistion, 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. ;; w I CITY OF SHAKOPEE Scott County, Minnesota I Table 13 PLEDGED-REVENUE COVERAGE Last Ten Fiscal Years I Utility Bonds I Utility Less: Net Fiscal Service Operating Available Debt Service Year Charges Expense Revenue Principal Interest Coverage I 1997 $ 10,975,174 $ 8,667,316 $ 2,307,858 $ 180,000 $ 268,903 5.14 1998 13,479,624 10,436,594 3,043,030 200,000 261,217 6.60 I 1999 15,615,257 11,990,257 3,625,000 205,000 252,687 7.92 I 2000 19,212,094 14,212,682 4,999,412 230,000 620,116 5.88 2001 21,667,471 16,153,413 5,514,058 235,000 797,759 5.34 I 2002 21,148,771 16,343,532 4,805,239 340,000 1,468,242 2.66 I 2003 22,871,121 17,585,831 5,285,290 580,000 1,348,883 2.74 I 25,473,439 19,778,149 5,695,290 640,000 1,307,626 2.92 2004 2005 33,841,730 25,821,489 8,020,241 765,000 1,074,487 4.36 I 2006 38,445,403 31,436,969 7,008,434 785,000 1,174,711 3.58 I 1. Operating expense excludes depreciation. I I I I I 104 I I I CITY OF SHAKOPEE I Scott County, Minnesota Table 14 DEMOGRAPHIC AND ECONOMIC STATISTICS I Last Ten Calendar Years I Fiscal School Unemployment Total Per Capita Personal Year Population (l) Enrollment (2) Rate (3) Employment Income (4) Income (5) I 1997 15,200 3,296 2.5% n/a $ 27,251 $ 414,215,200 1998 16,400 3,528 2.0% n/a 29,076 476,846,400 I 1999 17,200 3,723 1.8% n/a 30,894 531,376,800 I 2000 20,568 3,900 2.6% 12,740 33,709 693,326,712 2001 22,192 3,892 4.0% 13,809 33,401 741,234,992 I 2002 23,900 4,487 4.0% 15,024 32,575 778,542,500 I 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 I 2005 31,000 6,247 3.6% 16,192 34,955 1,083,605,000 I 2006 34,085 6,643 3.6% 17,787 N/A N/A Source: 1. Metropolitan Council polupation estimates except for 2000 which is the official I census figure. 2005 and 2006 are the City's estimate. 2. Shakopee School District, SACS, Bloomington Lutheran I 3. Minnesota Department of Employment and Economic Development 4. Bureau of Economic Analysis - Scott County data 5. Scott County per capita income times population I I I I I 105 I I CITY OF SHAKO PEE Scott County, Minnesota I Table 15 PRINCIPAL EMPLOYERS Current Year and Nine Years Ago 2006 1996 I Total Total City City I Taxpayer Type of Business Employees Rank Employment Employees Rank Employment Valley Fair Amusement Park 1,600 1 8.88% 1,200 1 11.21 % I Seagate Manufacturing/Research 1,500 2 8.32% Canterbury Park Horse Racing 1,000 3 5.55% I School District No. 720 Education 787 4 4.37% 390 5 3.64% St. Francis RMC Health Care 750 5 4.16% 363 6 3.39% I Scott County Government 740 6 4.11% 495 2 4.62% North Star Auto Auction Auto Auction 350 7 1.94% I American Color - SVP Printing 300 8 1.66% 415 4 3.88% TORO Manufacturing 300 9 1.66% 275 9 2.57% I Certain Teed Roofing Manufacturing 300 10 1.66% 300 7 2.80% I Kmart Distribution Center 424 3 3.96% Anchor Glass Glass Container Manufaturing 285 8 2.66% I Tsumura Chemical Manufacturing 250 10 2.34% 7,627 42.33% 4,397 41.08% Total employment 18,019 10,703 I Source: Minnesota Department of Employment and Economic Development. I I I I I 106 I I - - - - - - - - - - - - - - - - - - - CITY OF SHAKOPEE Scott County, Minnesota Table 16 FULL-TIME EQUIVALENT CITY GOVERNMENT EMPLOYEES BY FUNCTION/PROGRAM Last Ten Fiscal Years 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 General Government Administration 3 4 4 4 6 6 6 6 6 6 City Clerk 3 3 4 4 4 3 4 4 4 4 Finance 4 4 4 4 4 4 3 3 3 3 Planning 5 5 7 5 5 6 6 5 5 5 Faci1ties Maintenance 1 1 1 1 1 1 1 4 4 6 Information Technology 1 1 1 2 2 2 Public Safety Police Licensed 22 22 23 24 25 34 34 40 42 45 Other 5 4 5 6 6 7 7 7 9 7 Fire - Paid On-Call 44 44 45 47 47 50 50 50 50 48 Building Inspection 4 4 5 7 7 7 7 8 8 8 Public Works Engineering 7 7 8 8 9 9 9 9 9 9 Street 8 8 7 9 9 9 9 11 12 12 Shop 2 2 2 2 2 2 3 3 3 3 Park and Recreation Park Maintenance 4 4 5 5 6 7 7 7 7 7 Recreation 5 6 7 7 9 8 8 8 10 10 Subtotal 117 118 126 132 141 154 155 167 174 175 Shakopee Public Utilities Electric 15 17 Water 7 7 Other 22 24 Subtotal 44 48 Total 218 223 ..... C> --.J CITY OF SHAKOPEE Scott County, Minnesota Table 17 OPERATING INDICATORS BY FUNCTlONIPROGRAM Last Ten Fiscal Years 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 General Government Planning Number of Case Files 123 115 118 101 102 121 127 109 120 91 Number of Plats Filed N/A 27 26 16 19 10 11 9 7 10 Number of Acres Platted N/A N/A N/A 119 142 378 385 238 321 155 Public Safety Police Arrests N/A N/A N/A N/A N/A ],348 1,147 1,248 1,451 1,770 Citations N/A N/A N/A N/A N/A 3,805 3,129 3,802 3,843 4,970 Calls for Service N/A N/A N/A N/A 13,213 13,939 14,799 16,062 17,363 18,333 Fire Calls for Service 335 340 370 457 488 446 482 479 539 494 Building Inspection Building Permits Issued 648 819 1,057 1,473 1,469 1,310 1,744 1,638 1,512 1,131 Number of Inspections N/A N/A 1,844 12,204 11,878 11,416 15,016 14,535 15,175 9,671 Single Family Homes Permitted 140 175 357 458 442 260 384 396 352 223 Public Works Engineering Amount of Construction (000) 6,712 3,908 3,839 3,850 7,048 14,160 9,569 17,927 13,178 10,279 Street Miles of Roadway 95 108 115 119 124 131 138 114 123 123 Park and Recreation Park Maintenance Acres Maintained 372 612 612 612 638 655 671 760 925 930 Recreation Program Participants N/A N/A N/A N/A N/A 9,911 10,194 9,693 9,842 9,928 Community Center Members N/A N/A N/A N/A N/A 520 556 541 516 578 Community Center Admissions N/A N/A N/A N/A N/A 95,247 116,996 93,383 101,405 111,026 Shakopee Public Utilities Electric Number of Metered Accounts 6,319 14,698 15,275 KWH Sold (mw) 401 371 Peak Demand KW 38,500 45,300 56,200 62,500 71,100 67,000 74,700 70,000 86,500 94,100 Water Number of Metered Accounts 9,310 9,717 Gallons Pumped (mg) 882 951 923 . 1,271 1,422 1,364 1,629 1,716 1,762 1,931 Peak Demand (mg) 7.13 6.22 6.20 8.81 10.03 8.60 12.30 10.36 12.41 13.37 ;; co - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - CITY OF SHAKO PEE Scott County, Minnesota Table 18 CAPITAL ASSET STATISTICS BY FUNCTION/PROGRAM Last Ten Fiscal Years 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 Police Stations 1 1 1 1 1 1 1 1 1 1 Patrol Zones 2 3 3 4 4 4 4 4 4 4 Patrol Units N/A N/A N/A 10 11 12 12 13 13 15 Fire Stations 1 2 2 2 2 2 2 2 2 2 Street Miles of Roadway 95 108 115 119 124 131 138 114 123 123 Traffic Signals 17 18 21 21 21 21 23 25 25 25 Parks Acres 372 612 612 612 638 655 671 760 925 1,015 Ball Fields 40 42 42 42 42 42 42 46 46 47 Playgrounds 10 11 11 11 12 12 13 13 13 14 Electric Number of Substations 3 3 3 4 4 4 4 4 4 4 Water Miles of Water Mains 145 Fire Hydrants 1,750 Storage Capacity (mg) 10 10 10 ........ 0 \0 I I I I I CITY OF SHAKOPEE Scott County, Minnesota I Management Letter For the Fiscal Year Ended December 31, 2006 I I I I I I I I I I I I I I I KDV I KE RN. DEWE NTE R. VI E RE I I June 18,2007 Honorable Mayor and Members I of the City Council City of Shakopee Shakopee, Minnesota I In planning and performing our audit of the financial statements of the City of Shakopee, I Minnesota, as of and for the year ended December 31, 2006, in accordance with U.S. generally accepted auditing standards, we considered the City's internal control over financial reporting (internal control) as a basis for designing our auditing procedures for the purpose of expressing I 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. I Our consideration of internal control was for the limited purpose described in the preceding paragraph and would not necessarily identify all deficiencies in internal control that might be significant deficiencies or material weaknesses. Also, projection of any evaluation of the I internal control to future periods is subject to the risk that procedures may become inadequate because of changes in conditions or the degree of compliance may deteriorate. However, as discussed below, we identified certain a deficiency in internal control that we consider to be a I significant deficiency. A control deficiency exists when the design or operation of a control does not allow management I or employees, in the normal course of performing their assigned functions, to prevent or detect misstatements on a timely basis. A significant deficiency is a control deficiency, or combination of control deficiencies, that adversely affects the City's ability to initiate, authorize, record, process or report financial data reliably in accordance with U.S. generally accepted accounting I principles such that there is more than a remote likelihood that a misstatement ofthe City's financial statements that is more than inconsequential will not be prevented or detected by the City's internal control. We consider the following deficiency to be a significant deficiency in I internal control: Lack of Segregation of Accounting Duties . I A material weakness is a significant deficiency, or combination of significant deficiencies, that results in more than a remote likelihood that a material misstatement of the financial statements I will not be prevented or detected by the City's internal control. We consider the following deficiency to be a material weakness: . Material Audit Adjustments I I 1 I K-DV I KE RN' DEWEN TER. VI E RE I The accompanying memorandum also includes financial trend information and suggestions for I improvement of accounting procedures and internal accounting control measures that came to our attention as a result of our audit of the financial statements of the City of Shakopee, I Minnesota, for the year ended December 31, 2006. The matters discussed herein were considered by us during our audit and they do not modify the opinion expressed in our Independent Auditors' Report dated June 18,2007, on such statements. I This communication is intended solely for the information and use of management, the City Council, federal and state oversight awarding agencies and pass-through entities and is not I intended to be and should not be used by anyone other than these specified parties. We would like to express our appreciation for cooperation extended to us by the employees of the City during our audit. I L be.w~ V~ L-f&. I t .. KERN, DEWENTER, VIERE, LTD. Minneapolis, Minnesota I I I I I I I I I 2 I I I CITY OF SHAKOPEE I Scott County, Minnesota MATTERS OF COMMUNICATION December 31, 2006 I We have audited the basic financial statements of the City of Shakopee, Minnesota, for the year I ended December 31, 2006 and have issued our report dated June 18, 2007. Professional standards require that we provide you with the following information related to our audit. I THE AUDITORS' RESPONSIBILITY UNDER U.S. GENERALLY ACCEPTED AUDITING STANDARDS AND GOVERNMENT AUDITING STANDARDS I As stated in our audit engagement letter, our responsibility, as described by professional standards, is to plan and perform our audit to obtain reasonable, but not absolute, assurance that the basic financial statements are free of material misstatements and are fairly presented in accordance with U.S. generally accepted accounting principles. Because an audit is designed to I provide reasonable, but not absolute, assurance and because we did not perform a detailed examination of all transactions, there is a risk that material misstatements may exist and not be detected by us. I 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 I concerning such internal control. SIGNIFICANT ACCOUNTING POLICIES I Management has the responsibility for 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 I used by the City are described in Note 1 of the financial statements. We noted no significant unusual transactions and no significant accounting policies in I controversial or emerging areas for which there is a lack of authoritative guidance or consensus. MANAGEMENT JUDGMENTS AND ACCOUNTING ESTIMATES I Accounting estimates are an integral part of the basic financial statements accepted 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 I sensitive because of their significance to the basic financial statements and because of the possibility that future events affecting them may differ significantly from those expected. I The most sensitive estimate affecting the financial statements was: . Depreciation - The City is currently depreciating its capital assets over their estimated useful I lives, as determined by management, using the straight-line method. We evaluated the key factors and assumptions used to develop the above estimate in determining I that they are reasonable in relation to the financial statements taken as a whole. I 3 I CITY OF SHAKOPEE I Scott County, Minnesota I MATTERS OF COMMUNICATION December 31, 2006 I SIGNIFICANT AUDIT ADJUSTMENTS An audit adjustment, whether or not recorded by the City, is a proposed correction of the basic I financial statements that, in our judgment, may not have been detected except through our auditing procedures performed. Audit adjustments, individually or in the aggregate, may have a I significant effect on the City's financial reporting process. Matters underlying adjustments proposed by us but not recorded by the City could potentially cause future financial statements to be materially misstated, even though we may have concluded that the adjustments are not material to the current financial statements. I We proposed audit adjustments to capital assets and deferred revenue that were considered to be quantitatively material to the financial statements. We also proposed other adjustments that we I did not consider to be material, either individually or in the aggregate, to the financial statements. OTHER INFORMATION IN DOCUMENTS CONTAINING AUDITED FINANCIAL I STATEMENTS The Management's Discussion and Analysis, located in the City's financial statements, is not a I required part of the basic financial statements but is supplemental information required by U.S. generally accepted accounting principles. Additionally, the statistical section is a required part of the Comprehensive Annual Financial Report but also is not part of the basic financial statements. We have applied certain limited procedures to both of these sections, which I consisted principally of inquiries of management regarding the methods of measurement and presentation of the required supplemental information. However, we did not audit the information and express no opinion on it. I DISAGREEMENTS WITH MANAGEMENT Disagreements with management, whether or not satisfactorily resolved, are defined as matters I that individually or in the aggregate could be significant to the City's financial statements or the auditors' report. Disagreements may occasionally arise over the application of accounting I principles to the City's specific transactions and events and the basis for management's judgments about accounting estimates. Disagreements may also arise regarding the scope of the audit, disclosures to be included in the City's financial statements and the wording of the auditors' report. I No such disagreements with management occurred during the course of our audit. I I I 4 I I I CITY OF SHAKOPEE I Scott County, Minnesota MATTERS OF COMMUNICATION December 31, 2006 I CONSULTATIONS WITH OTHER ACCOUNTANTS I In some cases, management may decide to consult with other accountants about auditing and accounting matters. If a consultation involves application of an accounting principle to the I City's financial statements or a determination of the type of auditors' 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. I We are aware of no consultations by the City's management with other accountants during the course of our audit. I MAJOR ISSUES DISCUSSED WITH MANAGEMENT PRIOR TO RETENTION We generally discuss a variety of matters, including the application of accounting principles and I auditing standards, with management prior to retention as the City's auditors. These discussions occurred in the normal course of our professional relationship and our I responses were not a condition to our retention. DIFFICUL TIES ENCOUNTERED IN PERFORMING THE AUDIT I We encountered no difficulties in dealing with management related to the performance of our audit. I I I I I I I I 5 I CITY OF SHAKOPEE I Scott County, Minnesota I LEGAL COMPLIANCE FINDING December 31,2006 I OBTAIN TWO QUOTATIONS FOR CONTRACTS BETWEEN $ 10,000 AND $ 50,000 Minnesota Statutes 471.345 Subd. 4 states for contracts estimated to exceed $ 10,000 but not to I exceed $ 50,000, the contract may be made either upon sealed bids or by direct negotiation, by obtaining two or more quotations for the purchase or sale when possible, and without advertising I for bids or otherwise complying with the requirements of competitive bidding. The Statute also states all quotations obtained must be kept on file at least a year. During our audit, it was noted the City only obtained one quote for the purchase of seven Scott I Air Packs. We recommend the City either obtain two direct quotes or hold competitive bids for all contracts I that exceed $ 10,000 but do not exceed $ 50,000. I I I I I I I I I I 6 I I I CITY OF SHAKOPEE I Scott County, Minnesota MATERIAL WEAKNESS December 31, 2006 I MATERIAL AUDIT ADJUSTMENTS I We proposed audit adjustments that we considered to be quantitatively material to the financial statements. The audit adjustments we proposed that were material to the financial statements I related to capital assets and deferred revenue. SIGNIFICANT DEFICIENCY I LACK OF SEGREGATION OF ACCOUNTING DUTIES During the year ended December 31, 2006, the City had a lack of segregation of accounting I duties due to a limited number of office employees. Management is aware of this condition and has taken certain steps to compensate for the lack of I 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 I monitor the accounting system, including changes that occur. I I I I I I I I I 7 I CITY OF SHAKOPEE I Scott County, Minnesota I CONTROL DEFICIENCY December 31,2006 I IMPROVE ICE ARENA RECEIPTING INTERNAL CONTROLS During our audit, we reviewed the receipts collection system of the ice arena and found the I process to be decentralized from the City's regular receipting process. Currently, the City employs an ice arena manager who collects funds and also maintains copies of signed ice rental I contracts and a list ofpayors. No other copies of the ice rental contracts appear to be maintained within the City. There also appears to be a lack of verification or reconciliation of the ice arena receipts to actual deposits. To improve internal controls over the ice arena receipting process and to prevent omissions and I errors, we recommend the City's finance department periodically compare actual receipts to contracts and ice rental bookings. In addition, we recommend the performance of periodic I reconciliation of ice arena receipts to actual deposits. I I I I I I I I I I 8 I I I CITY OF SHAKOPEE I Scott County, Minnesota NEW STANDARDS December 31,2006 I STATEMENTS OF AUDITING STANDARDS (STANDARDS) NOS. 104 -111 I In March 2006, the Auditing Standards Board (ASB) issued Statements of Auditing Standards (Standards) Nos. 104 - 111 that provide extensive guidance concerning the auditors' assessment I of the risks of material misstatement in a financial statement audit and the design and performance of audit procedures whose nature, timing and extent are in response to the identified assessed risks. Additionally, the Standards establish standards and provide guidance on planning I and supervision, the nature of audit evidence and evaluating whether the audit evidence obtained provides a reasonable basis for an opinion on the financial statements being audited. These Standards will be effective for audits of financial statements for periods beginning on or after December 15,2006. I Audit teams will be performing additional procedures to gain a more in depth understanding of the City's environment, including its internal control. This will involve evaluating the design of I the controls and determining those controls have been implemented. The audit procedures performed to obtain the necessary understanding are called "risk assessment procedures" and require more than simple inquiries of management. The Standards specifically call for inquiries I of management and other personnel, analytical procedures and observation and inspection. The procedures also involve discussions among the audit team to determine whether the potential exists for misstatements. These Standards also expand the documentation requirements for auditors. I In summary, these Standards will result in a substantial change in audit practice. The Standards will strengthen the auditors' understanding of the City and its environment, including its internal I control, to identify the risks of material misstatement in the financial statements and determine what the City is doing to mitigate those risks. Auditors will identify assessed risks based on the understanding obtained. There will be an improved correlation between those assessed risks and I the nature, timing and extent of audit procedures performed in response to those risks. I I I I I I 9 --------- I CITY OF SHAKO PEE I Scott County, Minnesota FINANCIAL ANALYSIS I December 31,2006 I GENERAL FUND In 2006, expenditures exceeded revenues for the first time in five years. The Fund balance did I increase slightly due to transfers in from other funds from $ 9,679,142 in 2005 to $ 9,844,634 in 2006. This Fund balance represents 71 % of 2006 General Fund expenditures. The bar chart I below highlights the General Fund total revenues, expenditures and fund balance the last five years. I I General Fund $16,000,000 I $14,000,000 - I $12,000,000 I $10,000,000 I I $8,000,000 $6,000,000 I $4,000,000 - I $2,000,000 $- I 2002 2003 2004 2005 2006 o Revenues $11,046,479 $12,753,322 $12,887,186 $14,495,115 $13,750,652 o Expenditures 9,622,006 9,833,284 11,199,607 12,259,973 13,862,250 I !ill Fund Balance 3,534,080 5,644,819 7,246,854 9,679,142 9,844,634 I I I I 10 I I I CITY OF SHAKO PEE I Scott County, Minnesota I FINANCIAL ANALYSIS I December 31,2006 I I GENERAL FUND I The City consistently experienced increased revenues from 2002 through 2005. In 2006, however, General Fund revenues decreased by 5% from $ 14,495,115 in 2005 to $ 13,750,652 in I 2006. Decreases in revenues from 2005 to 2006 were primarily a result of a 48% decrease in license and permit revenue. The following graphs illustrate the allocation of the revenues for 2006 and 2005. I 2006 General Fund Revenues Miscellaneous Charges for Services 3% I 9% Fines and Forfeitures 3% I Licenses and Permits 12% I I Special Assessments Taxes Less than ] % 69% I I 2005 General Fund Revenues I Charges for Services Miscellaneous I ]1% 2% Fines and Forfeitures 2% I Licenses and Permits I 22% Taxes 60% I Intergovernmental 3% Special Assessments I Less than 1% I 11 I I I CITY OF SHAKOPEE I Scott County, Minnesota I FINANCIAL ANALYSIS I December 31,2006 I I GENERAL FUND I General Fund Revenue I ! Budget and Actual I $10,000,000 $9,000,000 I $8,000,000 $7,000,000 I $6,000,000 $5,000,000 I $4,000,000 - $3,000,000 I $2,000,000 I $1,000,000 e-. -:-~ - - $- ~ .~.,.,~ " I Taxes Special Assessments Intergovernmental Licenses and Permits Fines and Forfeits Charges for Services Miscellaneous o Actual $9,471,595 $6,597 $506,240 $1,644,172 $374,807 $1,294,733 $452,508 . Budget 9,379,850 358,370 1,513,000 267,000 1,087,660 215.125 As shown in the above graph, actual revenues were fairly close to budgeted amounts for 2006. I Actual revenues exceeded budgeted revenues by $ 929,647. The largest area that came in over budget was charges for services with actual revenue exceeding budgeted amounts by $ 207,073. I I I I I 12 I ---~------_.._--_._--- -------- I I CITY OF SHAKO PEE I Scott County, Minnesota FINANCIAL ANALYSIS December 31,2006 I I GENERAL FUND I Total General Fund expenditures increased in 2006 from $ 12,259,973 to $ 13,862,250, or 13%. Expenditures have steadily increased over the past five years due to growth in the City. The I following is an illustrated expenditure breakdown for 2006 and 2005. The largest expenditure increases during 2006 were in public safety and recreation with increases of $ 949,143 and $ 424,157, respectively. The increase in public safety expenditures was primarily related to an I increase in police wages and benefits of approximately $ 627,000 and an increase in internal charges to the fire department for equipment and building rent of approximately $ 268,000. The increase in recreation expenditures related primarily to the change in reporting of library and congregate dining expenditures from building maintenance to recreation. I 2006 General Fund Expenditures I Recreation 10% General Government I 22% I I Public Works 17% I I I Public Safety 51% I 2005 General Fund Expenditures I Recreation I I 7% General Government 23% Public Works I 19% I I Public Safety 51% I 13 I I CITY OF SHAKO PEE I Scott County, Minnesota I FINANCIAL ANALYSIS December 31, 2006 I GENERAL FUND General Fund Expenditures I Budget and Actual I $8,000,000 $7,000,000 I $6,000,000 I $5,000,000 $4,000,000 I $3,000,000 I $2,000,000 - $1,000,000 I $- ~.~ ,'''''' I General Government Public Safety Public Works Recreation o Actual $2,995,463 $7,106,977 $2,422,698 $1,337,112 . Budget 3,249,980 7,370,175 2,740,710 1,419,230 Actual expenditures were under budgeted amounts in the General Fund by $ 1,077,845. As I shown above, actual expenditures came in below budgeted amounts in every function. The I largest difference between actual and budgeted amounts was in public works, where actual expendi tures were under budgeted expenditures by $ 3 18,012. I I I I I I 14 I I I I CITY OF SHAKO PEE I Scott County, Minnesota FINANCIAL ANALYSIS December 31,2006 I DEBT SERVICE I The following charts illustrate debt service requirements through 2030, and bonded debt for the last five years. I Debt Service Schedule (Including Principal and Interest) I $16,000,000 SI4,000,000 I $12,000,000 SIO,OOO,OOO I' $8,000,000 $6,000,000 I $4,000,000 I $2,000.000 $- 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022+ I I . G.O. Bonds o Revenue Bonds I Bonded G.O. Debt I $30,000,000 $25,000,000 I $20,000,000 I $15,000,000 I $10,000,000 I $5,000.000 $- I 2002 2003 2004 2005 2006 o Gross Bonded Debt . Net Bonded Debt . Debt Service Fund Balance I 15 I CITY OF SHAKO PEE I Scott County, Minnesota FINANCIAL ANALYSIS I December 31, 2006 ENTERPRISE FUNDS I The City has four Enterprise Funds. The following charts compare the segment information and I retained earnings of all the Enterprise Funds for the last five years. Electric Fund I $35,000,000 $30,000,000 I $25,000,000 I $20,000,000 $15,000,000 'I $5,000,000 I $- I 2002 2003 2004 2005 2006 . Operating Expenses o Income before Contributions and Transfers Water Fund I $4,500,000 I $4,000,000 $3,500.000 I $3,000,000 $2,500,000 $2,000,000 I $ 1,500.000 $ 1,000,000 I $500,000 $- I $(500,000) 2002 2003 2004 2005 2006 . Operating Expenses I o Income before Contributions and Transfers 16 I I I CITY OF SHAKO PEE I Scott County, Minnesota FINANCIAL ANALYSIS December 31,2006 I I ENTERPRISE FUNDS I Sewer Fund $4,500,000 I $4,000,000 $3,500,000 I $3,000,000 I $2,500,000 $2,000,000 I $1,500,000 $1,000,000 I $500,000 $- I $(500,000) 2002 2003 2004 2005 2006 o Operating Revenues . Operating Expenses 13 Operating Income o Change in Net Assets I During 2006, the Sewer Fund had an operating loss for the first time in five years. This was a result of operating revenues decreasing while operating expenses increased. The primary reason I for the decrease in operating revenues was a decrease in new development which resulted in a $ 269,550 decrease in SAC revenue. Operating expenses increased $ 437,189, or 19%, from 2005 to 2006. The primary reason for this increase was an increase in the usage charge for I disposal services. Although the Fund had an operating loss for the year, the Fund net assets increased by $ 1,959,196, primarily as a result of capital contributions from the City and developers in the amount of$I,762,781, and an increase in investment income of$ 374,513. I I I I I 17 I CITY OF SHAKO PEE I Scott County, Minnesota FINANCIAL ANALYSIS I December 31, 2006 I I ENTERPRISE FUNDS Storm Drainage Fund I $6,000,000 I $5,000,000 $4,000,000 I $3,000,000 I $2,000,000 I $1,000,000 - $- I $(1,000,000) I 2002 2003 2004 2005 2006 o Service Charges . Operating Expenses o Operating Income o Change in Net Assets Operating income in the Storm Drainage Fund has been slowly declining over the last five years I and in 2006 showed an operating loss for the first time in five years. This was a result of I operating expenses increasing significantly while operating revenues only slightly increased from the prior year. The primary reason for the $ 531,065 increase in operating expenses was an increase in repairs and maintenance expenses. Although the Fund had an operating loss for the I year, the Fund net assets increased by $ 2,523,093, primarily as a result of $ 2,215,104 in capital contributions from the City and developers and an increase in investment income of $ 300,939. I I I I 18 I I I CITY OF SHAKO PEE I Scott County, Minnesota FINANCIAL ANALYSIS December 31,2006 I INTERNAL SERVICE FUNDS I The Equipment Fund was started in 1995 to fund City equipment purchases. The Fund has shown increasing growth and income each year as illustrated by the following chart. This I increase is primarily due to new equipment additions and user charge adjustments to the various departments. Equipment Fund I $1,000.000 I $800,000 $700,000 $600.000 I $500,000 $400,000 I $300,000 $200,000 $100,000 I $- 2002 2003 2004 2005 2006 o Rental Charges . Operating ExpensesIDepreciation [] Operating Income o Change in Net Assets I The Building Fund was established in 1999 to fund City building improvements. The following chart illustrates fund activity for 2002 through 2006. The Fund saw a large increase in net assets I in 2005 mainly due to the completion of the City's Public Works Building. Building Fund I $3,500,000 $3,000,000 I $2,500,000 $2,000,000 I $1,500,000 $1,000,000 I $500,000 $- I $(500,000) 2002 2003 2004 2005 2006 o Rental Charges . Operating ExpensesIDepreciation [3 Operating Income o Change in Net Assets I 19 I CITY OF SHAKO PEE I Scott County, Minnesota I FINANCIAL ANALYSIS December 31,2006 I INTERNAL SERVICE FUNDS The Employee Benefits Fund was established in 2004 to account for funds accumulated for City I employee compensated absences. The Fund is fully funded with $ 1,339,432 in assets and $ 1,256,559 in liabilities. I ADDITIONAL INFORMATION As seen in the chart below, the City's taxable tax capacity has been consistently increasing since I tax reforms were implemented in 2002. Taxable tax capacity increased by 5% from 2005 to 2006. This enabled the City's tax capacity rate to decrease from 31.115% for property taxes payable in 2005 to 30.970% for property taxes payable in 2006, in spite of the City's certified I levy increase of 12%. Taxable Tax Capacity and Certified Levy I $35,000,000 $30,000,000 I $25,000,000 I $20,000,000 $15,000,000 ,I $10,000,000 I $5,000,000 $- I 2002 2003 2004 2005 2006 iii Taxable Tax Capacity $19,383,529 $22,399,411 $25,626,029 $30,211,233 $31,618,556 . Certified Levy 6,645,713 7,889,018 8,625,695 9,703,206 10,951,917 I I I I 20 I I I CITY OF SHAKO PEE I Scott County, Minnesota FINANCIAL ANALYSIS December 31,2006 I ADDITIONAL INFORMATION I Tax Capacity Rate 34.500% 133976%1 r-. 33.939"10 I 34000% 33.500% - ~ 33000% I-- I 32.500% I-- 132433%1 - 32.000% '--- I 31.500% - ~ 31.115% 130970%1 31.000% - ~ I 30.500% - .- 30.000% - - 29.500% I-- I-- I 29.000% 2002 2003 2004 2005 2006 I 2002 2003 2004 2005 2006 Population 23,900 24,967 28,913 31,000 34,085 I Number of Full-Time Employees 154 155 167 174 175 Population Per Employee 155 161 173 178 195 I General Fund Revenues/Expenditures Per Capita I $600 $500 I $400 I $300 $200 I $100 I $- 2002 2003 2004 2005 2006 o Revenues . Expenditures I I 21 I CITY OF SHAKO PEE I Scott County, Minnesota I i FINANCIAL ANALYSIS I December 31, 2006 I ADDITIONAL INFORMATION National Bond Ratings I 18% 16% I 14% I 12% 10% I 8% I 6% 4% I 2% I 0% Aaa Aal Aa2 Aa3* Al A2 A3 Baal Baa2 Baa3 Below I * - Denotes City of Shako pee's Rating The City's bond rating was raised to Aa3 in April 2004. I I I i 'I I I I 22 I CITY OF SHAKO PEE Scott County, Minnesota COMP ARA TIVE TREND INFORMATION December 31, 2006 ADDITIONAL INFORMATION Presented below are 2005 per capita data for Shakopee and two surrounding cities. 2005 Comparison Per Capita $600.00 $500.00 $400.00 $300.00 $200.00 $100.00 $- Shakopee Savage Prior Lake o Property Taxes $310.04 $433.06 $326.62 . Current Expenditures 512.47 365.9 381.26 o Capital Outlay 482.43 274.2 505.05 o Debt Service 100.61 345.06 520.35 CITY OF SHAKO PEE Scott County, Minnesota COMPARATIVE TREND INFORMATION December 31, 2006 ADDITIONAL INFORMATION Below is information taken from the Office of the State Auditors regarding 2005 data on cities with population sizes of 20,000 to 100,000 people. The information for the City of Shakopee is the percentages of revenues and expenditures using their 2006 data. Percentage of Total Revenues and Expenditures Cities Population City of size (20,000- Shakopee 100,000) Property Taxes 45.9% 37.7% Tax Increments 1.5% 6.2% Special Assessments 7.7% 9.0% Licenses and Permits 11. 7% 5.2% Intergovernmental 12.6% 19.1% Charges for Services 10.0% 9.6% I Fine and Forfeitures 1.9% 1.0% I Miscellaneous 8.7% 12.2% Total 100.0% 100.0% Current: General Government 10.2% 8.2% Public Safety 22.7% 20.6% Public Works 9.9% 24.2% Health 0.0% 0.4% Culture and Recreation 11.0% 8.7% Economic Development 0.0% 6.2% Unallocated 0.0% 1.3% Debt Service: Principal 9.7% 11.2% Interest and Other Charges 2.8% 4.0% Capital Outlay 33.8% 15.2% Total 100.0% 100.0%