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HomeMy WebLinkAbout7. 2010 Audit Presentation by Kern, DeWenter, Vierre, Ltd. (KDV)City of Shakopee, MN Memorandum To: Mayor and City Council Mark, McNeill, City Administrator From: Julie A. Linnihan, Finance Director Subject: 2010 Annual Financial Reports Date: June 14, 2011 Introduction: The City of Shakopee annually completes the audit process that results in the preparation of the Comprehensive Annual Financial Report (CAFR), as well as any required reporting related to compliance with OMB Circular A -133, Single Audit and Legal Compliance. This specific report is generated in the event that a municipality expends Federal Awards (grants) of an amount greater than $500,000. Attached for your review are the three reports specific to the 2010 audit process: • Report on Compliance with Government Audit Standards, A -133, Single Audit • Management Letter for year ended December 31, 2010 • Comprehensive Annual Financial Report for the Fiscal Year Ended 12/31/2010 Kara Gaffy, Certified Public Accountant and Audit Manager with the accounting firm of Kern, DeWenter, Viere, Ltd., will discuss the report information on Tuesday, June 21'` as well as providing a short power point update on important information. The audit firm of KDV has been retained by the City of Shakopee for several years and has been extremely helpful during the Finance Director transition period of the past few months. Council presentation 2010 audit [Type text] CITY OF SHAKOPEE Scott County, Minnesota REPORTS ON COMPLIANCE WITH GOVERNMENT AUDITING STANDARDS, OMB CIRCULAR A -133 SINGLE AUDIT AND MINNESOTA LEGAL COMPLIANCE For the Fiscal Year Ended December 31, 2010 CITY OF SHAKOPEE TABLE OF CONTENTS SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS .................. ............................... 1 NOTE TO THE SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS ..................... 2 REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS ....... ............................... 3 REPORT ON COMPLIANCE WITH REQUIREMENTS THAT COULD HAVE A DIRECT AND MATERIAL EFFECT ON EACH MAJOR PROGRAM AND ON INTERNAL CONTROL OVER COMPLIANCE IN ACCORDANCE WITH OMB CIRCULAR A- 133 ................................. ............................... 5 SCHEDULE OF FINDINGS AND QUESTIONED COSTS IN ACCORDANCE WITH OMB CIRCULAR A -133 .................................................................... ............................... 8 REPORT ON MINNESOTA LEGAL COMPLIANCE ............................... ............................... 10 CITY OF SHAKOPEE SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS For the Year Ended December 31, 2010 CFDA Federal Agency /Pass Through Agency/Program Title Number Expenditures U.S. Environmental Protection Agency Passed through Minnesota Pollution Control Agency Clean Diesel Grant 66.036 $ 34,040 U.S. Department of Transportation Passed Through Minnesota Department of Transportation: ARRA - Highway Planning and Construction Grant 20.205 700,000 Highway Safety Cluster: State and Community Highway Safety 20.600 28,590 Occupant Protection Incentive Grant 20.602 11,741 Total Highway Cluster 40,331 Minimum Penalties for Repeat Offenders for Driving While Intoxicated 20.608 26,790 Total U.S. Department of Transportation 767,121 U.S. Department of Justice Direct Bulletproof Vest Partnership Program 16.607 6,256 U.S. Department of Homeland Security Passed through Minnesota Department of Justice Disaster Grant - Public Assistance 97.036 9,792 Total Federal Expenditures $ 817,209 The Note to the Schedule of Expenditures of Federal Awards are an integral part of this statement. 1 CITY OF SHAKOPEE NOTE TO THE SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS December 31, 2010 BASIS OF PRESENTATION The accompanying Schedule of Expenditures of Federal Awards includes the federal grant activity of the City of Shakopee, Minnesota, and is presented on the modified accrual basis of accounting. The information in this Schedule is presented in accordance with requirements of U.S. Office of Management and Budget (OMB) Circular A -133, Audits of States, Local Governments and Nonprofit Organizations. Therefore, some amounts presented in this Schedule may differ from amounts presented in, or used in the preparation of, the basic financial statements. 2 RM Expert advice. When you need it.' REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GoVERNMENTAUDITING STANDARDS Honorable Mayor and Members of the City Council City of Shakopee Shakopee, Minnesota We have audited the financial statements of the governmental activities, the business -type activities, each major fund and the aggregate remaining fund information of the City of Shakopee, Minnesota, as of and for the year ended December 31, 2010, which collectively comprise the City's basic financial statements and have issued our report thereon dated June 7, 2011. 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. INTERNAL CONTROL OVER FINANCIAL REPORTING 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 opinions 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. A deficiency in internal control exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent or detect misstatements on a timely basis. A material weakness is a deficiency, or combination of deficiencies, in internal control such that there is a reasonable possibility that a material misstatement of the financial statements will not be prevented or detected and corrected on a timely basis. Our consideration of the internal control over financial reporting was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in the internal control that might be deficiencies, significant deficiencies or material weaknesses. We did not identify any deficiencies in internal control over financial reporting that we consider to be material weaknesses as defined above. However, we identified a certain deficiency in internal control over financial reporting, described in the accompanying Schedule of Findings and Questioned Costs in Accordance with OMB Circular A -133 that we consider to be a significant deficiency in internal control over financial reporting, listed as Audit Finding 10 -01. A significant deficiency is a deficiency, or combination of deficiencies, in internal control that is less severe than a material weakness, yet important enough to merit attention by those charged with governance. COMPLIANCE AND OTHER MATTERS As part of obtaining reasonable assurance about whether the City's basic financial statements are free of material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts and grant agreements, noncompliance with which could have a direct and material effect on the determination of financial statement amounts. However, providing an opinion on compliance with those provisions was not an objective of our audit and, accordingly, we do not express such an opinion. The results of our tests disclosed no instances of noncompliance or other matters that are required to be reported under Government Auditing Standards. We noted certain additional matters that we reported to management of the City in a separate letter dated June 7, 2011. The City's response to the findings identified in our audit is described in the accompanying Schedule of Finding and Response on Internal Control. We did not audit the City's response and, accordingly, we express no opinion on it. This report is intended solely for the information and use of the City Council, management and state and federal awarding and oversight agencies and is not intended to be and should not be used by anyone other than those specified parties. 4 4.,—, 2�e W-t�, vt� W- KERN, DEWENTER, VIERS, LTD. Bloomington, Minnesota June 7, 2011 am Expert advice. When you need it.s' REPORT ON COMPLIANCE WITH REQUIREMENTS THAT COULD HAVE A DIRECT AND MATERIAL EFFECT ON EACH MAJOR PROGRAM AND ON INTERNAL CONTROL OVER COMPLIANCE IN ACCORDANCE WITH OMB CIRCULAR A -133 Honorable Mayor and Members of the City Council City of Shakopee Shakopee, Minnesota COMPLIANCE We have audited the compliance of the City of Shakopee, Minnesota, with the types of compliance requirements described in the OMB Circular A -133 Compliance Supplement that could have a direct and material effect on each of its major federal programs for the year ended December 31, 2010. The City's major federal program is identified in the summary of auditor's results section of the accompanying Schedule of Findings and Questioned Costs in Accordance with OMB Circular A -133. Compliance with the requirements of laws, regulations, contracts and grants applicable to each of its major federal programs is the responsibility of the City's management. Our responsibility is to express an opinion on the City's compliance based on our audit. We conducted our audit of compliance in accordance with U.S. generally accepted auditing standards; the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States and OMB Circular A -133, Audits of States, Local Governments and Nonprofit Organizations. Those Standards and OMB Circular A -133 require that we plan and perform the audit to obtain reasonable assurance about whether noncompliance with the types of compliance requirements referred to above that could have a direct and material effect on a major federal program occurred. An audit includes examining, on a test basis, evidence about the City's compliance with those requirements and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. Our audit does not provide a legal determination of the City's compliance with those requirements. In our opinion, the City of Shakopee, Minnesota, complied, in all material respects, with the requirements referred to above that could have a direct and material effect on each of its major federal programs for the year ended December 31, 2010. INTERNAL CONTROL OVER COMPLIANCE The management of the City is responsible for establishing and maintaining effective internal control over compliance with the requirements of laws, regulations, contracts and grants applicable to federal programs. In planning and performing our audit, we considered the City's internal control over compliance with the requirements that could have a direct and material effect on a major federal program to determine the auditing procedures for the purpose of expressing our opinion on compliance and to test and report on internal control over compliance in accordance with OMB Circular A -133, but not for the purpose of expressing an opinion on the effectiveness of internal control over compliance. Accordingly, we do not express an opinion on the effectiveness of the City's internal control over compliance. A deficiency in internal control over compliance exists when the design or operation of a control over compliance does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, noncompliance with a type of compliance requirement of a federal program on a timely basis. A material weakness in internal control over compliance is a deficiency, or combination of deficiencies, in internal control over compliance, such that there is a reasonable possibility that material noncompliance with a type of compliance requirement of a federal program will not be prevented, or detected and corrected, on a timely basis. Our consideration of internal control over compliance was for the limited purpose described in the first paragraph of this section and would not necessarily identify all deficiencies in internal control that might be deficiencies, significant deficiencies or material weaknesses. We did not identify any deficiencies in internal control over compliance that we consider to be material weaknesses, as defined above. SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS We have audited the financial statements of the governmental activities, the business -type activities, each major fund and the aggregate remaining fund information of the City of Shakopee, Minnesota, as of and for the year ended December 31, 2010, and have issued our report thereon dated June 7, 2011, which contained unqualified opinions on those financial statements. Our audit was performed for the purpose of forming opinions on the financial statements as a whole. The Schedule of Expenditures of Federal Awards is presented for purposes of additional analysis as required by OMB Circular A -133, Audits of States, Local Governinents and Nonprofit Organizations, and is also not a required part of the financial statements. Such information is the responsibility of management and was derived from and relate directly to, the underlying accounting and other records used to prepare the financial statements. The information has been subjected to the auditing procedures applied in the audit of the financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the financial statements or to the financial statements themselves, and other procedures in accordance with U.S. generally accepted auditing standards. In our opinion, the information is fairly stated, in all material respects in relation to the financial statements as a whole. KOV This report is intended solely for the information and use of the City Council, administration, and state and federal awarding agencies and pass - through entities and is not intended to be and should not be used by anyone other than these specified parties. KERN, DEWENTER, VIERS, LTD. Bloomington, Minnesota June 7, 2011 7 CITY OF SHAKOPEE SCHEDULE OF FINDINGS AND QUESTIONED COSTS IN ACCORDANCE WITH OMB CIRCULAR A -133 December 31, 2010 SECTION I — SUMMARY OF AUDITOR'S RESULTS Financial Statements Type of auditor's report issued: Unqualified Internal control over financial reporting: • Material weakness(es) identified? No • Significant deficiency(ies) identified that are not considered to be material weakness(es)? Yes, Audit Finding 10 -01 Noncompliance material to financial statements noted? No Federal Awards Type of auditor's report issued on compliance for major programs: Unqualified Internal control over major programs: • Material weakness(es) identified? No • Significant deficiency(ies) identified that are not considered to be material weakness(es)? No Any audit findings disclosed that are required to be reported in accordance with Section 510(a) of OMB Circular A -133? No Identification of Major Programs CFDA No.: 20.205 Name of Federal Program or Cluster: Highway Planning and Construction Grant Dollar threshold used to distinguish between type A and type B programs: $ 300,000 Auditee qualified as low risk auditee No N CITY OF SHAKOPEE SCHEDULE OF FINDINGS AND QUESTIONED COSTS IN ACCORDANCE WITH OMB CIRCULAR A -133 December 31, 2010 SECTION II — FINANCIAL STATEMENT FINDING Audit Finding 10 -01 Criteria or Specific Requirement: Internal control that supports the City's ability to initiate, record, process and report financial data consistent with the assertions of management in the financial statements requires adequate segregation of accounting duties. Condition: The City does not have adequate segregation of accounting duties due to a limited number of office employees. Questioned Costs: None Context: This finding impacts the internal control for all significant accounting functions. Effect: The lack of adequate segregation of accounting duties could adversely affect the City's ability to initiate, record, process and report financial data consistent with the assertions of management in the financial statements. Cause: There are a limited number of office employees. Recommendation: Continue to review the accounting system, including changes that may occur and implement segregation whenever practical. Management's Response: The auditors recognize that with the City's limited number of employees, this will most likely remain as a significant deficiency. The City continues to analyze personnel responsibilities in an attempt to provide for enhanced controls and to mitigate control risks. SECTION III — FEDERAL AWARD FINDING AND QUESTIONED COSTS Audit Finding 10 -02 There were no questioned costs. F DV Expert advice. When you need it." REPORT ON MINNESOTA LEGAL COMPLIANCE Honorable Mayor and Members of the City Council City of Shakopee Shakopee, Minnesota We have audited the financial statements of the governmental activities, the business -type activities and each major fund and the aggregate remaining fund information of the City of Shakopee, Minnesota, for the year ended December 31, 2010, which collectively comprise the City's basic financial statements and have issued our report thereon dated June 7, 2011. We conducted our audit in accordance with U.S. generally accepted auditing standards and the provisions of the Minnesota Legal Compliance Audit Guide for Political Subdivisions, promulgated by the State Auditor pursuant to Minnesota Statutes See. 6.65. Accordingly, the audit included such tests of the accounting records and such other auditing procedures as we considered necessary in the circumstances. The Minnesota Legal Compliance Audit Guide for Political Subdivisions covers seven categories of compliance to be tested: contracting and bidding, deposits and investments, conflicts of interest, public indebtedness, claims and disbursements, miscellaneous provisions and Tax Increment Financing. Our study included all of the listed categories. The results of our tests indicate that for the items tested, the City complied with the material terms and conditions of applicable legal provisions. This report is intended solely for the information and use of the City Council, management and the Office of the State Auditor, and is not intended to be and should not be used by anyone other than those specified parties. KERN, DEWENTER, VIERE, LTD. Bloomington, Minnesota June 7, 2011 10 CITY OF SHAKOPEE Scott County, Minnesota MANAGEMENT LETTER For the Fiscal Year Ended December 31, 2010 CITY OF SHAKOPEE TABLE OF CONTENTS REPORT ON MATTERS IDENTIFIED AS A RESULT OF THE AUDIT OF THE FINANCIAL STATEMENTS ........................... SIGNIFICANT DEFICIENCY .................................... ............................... DEFICIENCY ............................................................... ............................... REQUIRED COMMUNICATION ............................. ............................... FINANCIALANALYSIS ............................................. ............................... I ................... ................... 3 ................... 4 ................... 5 ................... 8 Expert advice. When you need it.' REPORT ON MATTERS IDENTIFIED AS A RESULT OF THE AUDIT OF THE FINANCIAL STATEMENTS Honorable Mayor and Members of the City Council City of Shakopee Shakopee, Minnesota In planning and performing our audit of the financial statements of the City of Shakopee, Minnesota, as of and for the year ended December 31, 2010, in accordance with U.S. generally accepted auditing standards and Government 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 our opinion on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of the City's internal control. Accordingly, we do not express an opinion on the effectiveness of the City's internal control. Our consideration of internal control was for the limited purpose described in the preceding paragraph and would not necessarily identify all deficiencies in internal control that might be significant deficiencies or material weaknesses and, therefore, there can be no assurance that all deficiencies, significant deficiencies or material weaknesses have been identified. Material weaknesses and significant deficiencies identified, if any, are stated within this letter. A deficiency in internal control exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent or detect and correct misstatements on a timely basis. A material weakness is a deficiency, or combination of deficiencies in internal control, such that there is a reasonable possibility that a material misstatement of the City's financial statements will not be prevented or detected and corrected on a timely basis. A significant deficiency is a deficiency, or combination of deficiencies, in internal control that is less severe than a material weakness, yet important enough to merit attention by those charged with governance. The accompanying memorandum includes financial analysis and recommendations for improvement of accounting procedures and internal control measures that came to our attention as a result of our audit of the financial statements of the City for the year ended December 31, 2010. The matters discussed herein were considered by us during our audit and they do not modify the opinion expressed in our Independent Auditor's Report dated June 7, 2011, on such statements. This communication is intended solely for the information and use of management, the City Council, others within the City and state oversight agencies and is not intended to be and should not be used by anyone other than these specified parties. W L)t w - A ' v..t ' tom' . KERN, DEWENTER, VIERE, LTD. Bloomington, Minnesota June 7, 2011 11 CITY OF SHAKOPEE SIGNIFICANT DEFICIENCY December 31, 2010 LACK OF SEGREGATION OF ACCOUNTING DUTIES Adequate segregation of accounting duties is in place when the four areas of a transaction have been separated: authorization, custody, recording and reconciliation. Management is aware of this condition and has taken certain steps to compensate for the lack of segregation but due to the small staff needed to handle all of the accounting duties, the costs of obtaining desirable segregation of accounting duties often exceeds benefits which could be derived. However, management must remain aware of this situation and should continually monitor the accounting system, including changes that occur. 3 CITY OF SHAKOPEE DEFICIENCY December 31, 2010 IMPROVE ICE ARENA RECEIPTING INTERNAL CONTROL During our audit, we reviewed the receipts collection system of the ice arena and found the process to be decentralized from the City's regular receipting process. Currently, the City employs an Ice Arena Manager who collects and records funds and also maintains copies of signed ice rental contracts and a list of payers. To improve internal control over the ice arena receipting process and to prevent omissions and errors, we recommend the City implement additional oversight procedures to ensure the accuracy and completeness of ice arena receipts. rd CITY OF SHAKOPEE REQUIRED COMMUNICATION December 31, 2010 We have audited the basic financial statements of the City for the year ended December 31, 2010, and have issued our report dated June 7, 2011. Professional standards require that we provide you with the following information related to our audit. OUR RESPONSIBILITY UNDER U.S. GENERALLY ACCEPTED AUDITING STANDARDS AND GOVERNMENT AUDITING STANDARDS AND OMB CIRCULAR A -133 As stated in our engagement letter, our responsibility, as described by professional standards, is to express an opinion about whether the financial statements prepared by management with your oversight are fairly presented, in all material respects, in conformity with U.S. generally accepted accounting principles. Our audit of the financial statements does not relieve you or management of your responsibilities. Our responsibility is to plan and perform our audit to obtain reasonable, but not absolute, assurance that the financial statements are free of material misstatement. As part of our audit, we considered the internal control of the City. Such considerations were solely for the purpose of determining our audit procedures and not to provide any assurance concerning such internal control. We are responsible for communicating significant matters related to the audit that are, in our professional judgment, relevant to your responsibilities in overseeing the financial reporting process. However, we are not required to design procedures specifically to identify such matters. As part of obtaining reasonable assurance about whether the City's financial statements are free of material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts and grant agreements, noncompliance with which could have a direct and material effect on the determination of financial statement amounts. However, providing an opinion on compliance with those provisions was not an objective of our audit. We also considered internal control over compliance with requirements that could have a direct and material effect on a major federal program in order to determine our auditing procedures for the purpose of expressing our opinion on compliance and to test and report on internal control over compliance in accordance with U.S. Office of Management and Budget (OMB) Circular A -133. Also, in accordance with OMB Circular A -133, we examined, on a test basis, evidence about the City's compliance with the types of compliance requirements described in the OMB Circular A -133 Compliance Supplement applicable to its major federal program for the purpose of expressing an opinion on the City's compliance with those requirements. While our audit provides a reasonable basis for our he City's compliance with those requirements. uirements. legal determination on t q opinion, it does not provide a g Y p PLANNED SCOPE AND TIMING OF THE AUDIT We performed the audit according to the planned scope and timing previously communicated to you QUALITATIVE ASPECTS OF ACCOUNTING PRACTICES Management is responsible for the selection and use of appropriate accounting policies. In accordance with the terms of our engagement letter, we will advise management about the appropriateness of accounting policies and their application. The significant accounting policies used by the City are described in Note 1 to the financial statements. No new accounting policies were adopted and the application of existing policies was not changed during 2010. We noted no transactions entered into during the year for which there is a lack of authoritative guidance or consensus. There were no significant transactions that have been recognized in the financial statements in a different period than when the transaction occurred. CITY OF SHAKOPEE REQUIRED COMMUNICATION December 31, 2010 QUALITATIVE ASPECTS OF ACCOUNTING PRACTICES Accounting estimates are an integral part of the financial statements prepared by management and are based on management's knowledge and experience about past and current events and assumptions about future events. Certain accounting estimates are particularly sensitive because of their significance to the financial statements and because of the possibility that future events affecting them may differ significantly from those expected. The most sensitive estimates affecting the financial statements were: Depreciation — The City is currently depreciating its capital assets over their estimated useful lives, as determined by management, using the straight -line method. Expense /Expenditure Allocation — The City is currently allocating certain costs among the programs and supporting services benefited. The costs are allocated based on management's estimates. Net Other Post Employment Benefits (OPEB) Obligation — This liability is based on an actuarial study using estimates of future obligations of the City for post employment benefits. We evaluated the key factors and assumptions used to develop the above estimates in determining they are reasonable in relation to the financial statements taken as a whole. The disclosures in the financial statements are neutral, consistent and clear. DIFFICULTIES ENCOUNTERED IN PERFORMING THE AUDIT We encountered no difficulties in dealing with management in performing and completing our audit. CORRECTED AND UNCORRECTED MISSTATEMENTS Professional standards require us to accumulate all known and likely misstatements identified during the audit, other than those that are trivial, and communicate them to the appropriate level of management. DISAGREEMENTS WITH MANAGEMENT For purposes of this letter, professional standards define a disagreement with management as a financial accounting, reporting or auditing matter, whether or not resolved to our satisfaction that could be significant to the financial statements or the auditor's report. We are pleased to report that no such disagreements arose during the course of our audit. CITY OF SHAKOPEE REQUIRED COMMUNICATION December 31, 2010 MANAGEMENT REPRESENTATIONS We requested certain representations from management which were provided to us in the management representation letter. MANAGEMENT CONSULTATIONS WITH OTHER INDEPENDENT ACCOUNTANTS In some cases, management may decide to consult with other accountants about auditing and accounting matters, similar to obtaining a "second opinion" on certain situations. If a consultation involves application of an accounting principle to the City's financial statements or a determination of the type of auditor's opinion that may be expressed on those statements, our professional standards require the consulting accountant to check with us to determine that the consultant has all the relevant facts. We are not aware of any consultations by the City's management with other accountants during the course of our audit. OTHER ISSUES We generally discuss a variety of matters, including the application of accounting principles and auditing standards, with management each year prior to retention as the City's auditors. However, these discussions occurred in the normal course of our professional relationship and our responses were not a condition to our retention. OTHER INFORMATION IN DOCUMENTS CONTAINING AUDITED FINANCIAL STATEMENTS We have not reviewed, and it is our understanding, that no other published documents exist that contain audited financial statement information, for which we are currently auditing. As stated in our engagement letter, if you publish or reproduce the financial statements or make reference to our Firm name in relation to such documents, you agree to provide us with a copy of the final reproduced material for our approval before it is distributed. 7 I CITY OF SHAKOPEE ' • FINANCIAL ANALYSIS December 31, 2010 The following pages provide graphic representation of select data pertaining to the financial position and operations of the City for the past five years. Our analysis of each graph is presented to provide a basis for discussion of past performance. We suggest you view each graph and document if our analysis is consistent with yours. IV GENERAL FUND OPERATIONS OF THE CITY For the 2010 operating year, the City Council provided a budget that would decrease the General Fund I balance by nearly $ 2.7 million. Revenues exceed expectations and expenditures were 5% under budget. At year -end, expenditures and transfers out exceeded revenues and transfers in by approximately $ 2.4 million. I General Fund Budget Actual Variance Revenue $17,806,060 $18,416,479 $610,419 I Expenditures (19,791,420) (18,724,835) 1,066,585 Excess of Revenues Over (Under) I Expenditures (1,985,360) (308,356) 1,677,004 Transfers In and Other Sources 2,044,400 2,239,806 195,406 Transfers Out (2,796,000) (4,396,000) (1,600,000) Net Transfers (751,600) (2,156,194) (1,404,594) Change in Fund balance (2,736,960) 2 464 550 272,410 I Beginning Fund Balance 11,502,280 11,502,280 I - Ending Fund Balance $ 8,765,320 $ 9,037,730 $ 272,410 I 2006 2007 2008 2009 2010 Population 32,800 33,460 33,660 33,860 37,076 Number of Full -Time Employees 175 174 173 168 168 I I Significant revenue budget variances are a result of cable franchise fees recorded in licenses and permits but budgeted in a different fund were over budget. Further, State Maintenance Aid received that was not r anticipated All functions of the expenditures were under budget. Public safety expenditures were under budget due I to unfilled p olice positions, less fire calls than anticipated and changes implemented during the year p regarding the number of individuals attending to calls, reducing compensation for attendance at calls. g g g g P General government expenditures were under budget in a number of areas including engineering fees, I legal fees, maintenance and supplies as a result of the City reducing spending for various items in anticipation of potential future reductions in state aid. Park and recreation was under budget due to a vacant staff position for a portion of the year and open projects. I 8 1 I CITY OF SHAKOPEE III FINANCIAL ANALYSIS December 31, 2010 I GENERAL FUND OPERATIONS OF THE CITY I Over the past five years, expenditures have exceeded revenues for four years, including 2010. This decreased was planned by the City Council when the budget was set in 2009. Revenues and expenses in I the General Fund increased over the prior four years due to including the Recreation Fund activity in the General Fund for the first time. These activities account for nearly $ 2.5 million revenues and expenses. General Fund I $20,000,000 — -- — — — - - - -- - -- — $18,000,000 I $16,000,000 $14,000,000 1 $12,000,000 $10,000,000 - -- $8,000,000 $6,000,000 / $4,000,000 I $2,000,000 — I $ 2006 `_ 2007 2008 x--- 2009 2010 ■ Revenues $13,750,652 $15266,076 $15,878,047 $17,074,639 $18,416,479 0 Expenditures 13,862,250 16,129,807 16,289,022 16,030,691 18,724,835 all Fund Balance 9,844,634 9,707,533 9,859,602 11,502,280 9,037,730 I General Fund Revenues /Expenditures Per Capita I $600 I $500 $468 ® $497 $505 Era $456 CIE $419 $395 $400 @ l I 1 III $300 E l 1111 111 $200 I $100 I $- 1 2_ Oix 2007 2008 2009 2010 •Revenues ■Expenditures 9 1 CITY OF SHAKOPEE FINANCIAL ANALYSIS December 31, 2010 GENERAL FUND OPERATIONS OF THE CITY Unreserved/UnassignedFund Balance as a Percent of Expenditures g P 70% 167%1 1 160%1 50% - - -- - - 154 % [49%1 44% 40% 30% 20% - - - -- -- - - - - - -- -- - -- 10% 0% 7 - t - -- - - 2006 2007 2008 2009 2010 The City's target General Fund balance is an unassigned level between 40% (minimum) and 45% of current year expenditures. This level is to provide working capital for cash flow, expected decline in revenues and unforeseen expenditures such as natural disasters. Replenishing fund balance when it falls below the target level shall be accomplished by interfund transfers or budgeting for expenditures and other uses to be less than revenues or other sources over a period not to exceed three years. At year end, I the City was in compliance with their policy, maintaining an unassigned fund balance of 44 %. i 1 1 1 CITY OF SHAKOPEE FINANCIAL ANALYSIS December 31, 2010 1 I GENERAL FUND REVENUES The City's revenue in the General Fund has increased each of the last five years. In 2010, revenues increased $ 1.3 million, or 8 %, from $ 17,074,639 in 2009 to $ 18,416,479 in 2010. This increase was primarily attributed to recreation revenue that was previously recorded in a separate fund. Licenses and permits revenue increased $ 181,000 due to the City allocating the cable franchise fees to the General I Fund in 2010. Intergovernmental revenues increased by $ 235,000, or 40 %, due to an increase in State Maintenance Aid for street maintenance. Finally, property tax revenue declined over $ 300,000 due to 2010 abatements and less fiscal disparities received from Scott County. I ` 2010 General Fund Revenues' Charges Fines and for Services 1 111 Forfeitures 10% Miscellaneous 2% 2 % I Licenses and Permits 7% I Intergovernmental 5% Taxes 74% I ' 2009 General Fund Revenues' 1 Charges Fines and for Services Forfeitures 5 % Miscellaneous 2% 2% Licenses and 1 I Permits 7% Intergovernmental I 3% Taxes I 81% I 11 I CITY OF SHAKOPEE FINANCIAL ANALYSIS December 31, 2010 TAX LEVY, CAPACITY AND RATES The graph below presents information relating to the City's tax levy, tax capacity and rates. I The 2010 levy includes the General Fund and debt service levies. The tax levy is then reduced by a Market Value Credit and fiscal disparity that are received in the form of state aids. Disparity aid is reported as tax revenue, but Market Value Credit reduces the amount of property tax revenue and is reflected as intergovernmental revenue in the City's financial statements; however, during 2010 the City's Market Value Credit of $ 558,000 was unalloted due to budget reductions made by the state. Taxable Tax Capacity and Certified Levy I $45,000,000 -- $40,000,000 I $35,000,000 $30,000,000 I $25,000,000 I 1 $20,000,000 $15,000,000 I ii $10,000,00 - - ■ ■ $5,000,000 -- ■ -- - $ 2006 2007 2008 2009 2010 I I UTaxable Tax Capacity $31,618,556 $36,078,921 $40,291,149 $40,984,725 $38,952,163 ■Certified Levy 10,951,917 12,745,449 14,222,007 14,983,677 14,715,299 * Tax capacity values and levy obtained from the League of Minnesota Cities 1 I I 12 I 1 CITY OF SHAKOPEE I FINANCIAL ANALYSIS December 31, 2010 I TAX LEVY, CAPACITY AND RATES As illustrated el w b o and on the e rior page, tax capacity of the City increased p g, p y C has ncreased over $ 7 million, , or 23 %, since 2006, primarily due to the economic development. The City's property tax levy has I increased 34 %, or $ 3,763,000, in the same time frame. With the levy increasing and tax capacity declining in 2010, the tax rate increased from 30.97% in 2006 to 33.71 in 2010. The state average tax rate for Minnesota cities was 39.26% for 2010. Tax Capacity Rate 40.000 - 35.000 33 30.970 31.940 31.930 32.630 i u 30.000 1 25.000 20.000 15.000 1 10.000 1 5.000 I 0.000 2006 2007 2008 2009 2010 Tax rates obtained from the League of Minnesota Cities I I I I I - 13 t CITY OF SI3AKOPEE FINANCIAL ANALYSIS December 31, 2010 GENERAL FUND In 2010, total General Fund expenditures increased $ 2.7 million, or 17 %, from $ 16,030,691 in 2009 to I $ 18,724,835 in 2010. The inclusion of the recreation activities significantly changed the percentage of expenditures by program in the General Fund from 2009 to 2010. Expenses for recreation were approximately $ 2.3 million. Additionally, expenditures in public safety increased $ 443,000 due to the City coding all legal expenses, previously recorded in general government, to public safety. As noted earlier, a majority of functions were below the City's expenditure budgets. 2010 General Fund Expenditures, I I Economic Development General Government Recreation Less than 1% 16% 22% Public Works 14% Public Safety '1 48% 2009 General Fund Expenditures I Economic I Development Recreation 1% 11% General Government 20% Public Works I 15% 1 Public Safety I I 53% 1 14 I I CITY OF SHAKOPEE FINANCIAL ANALYSIS December 31, 2010 I ENTERPRISE FUNDS I The City has four enterprise funds. The following charts compare the segment information and retained earnings of all the enterprise funds for the last five years. Electric Fund $40,000,000 I $35,000,000 - r I $30,000,000 -- + $25,000,000 t I $20,000,000 $15,000,000 I $10,000,000 - I $5,000,000 _ _ H I I L I a 2006 2007 2008 2009 2010 I ■ Operating Revenues $31,685,394 j $37,178,581 $38,437,626 $34,085,001 $36,643,018 ■Operating Expenses 27,981,626 33,115,838 34,646,907 29,110,172 31,752,857 — OOperatinglncome _ 3,703,768 4,062,743 3,790,719 _ 4,974,829 4,890,161 LChange in Net Assets 2,871,469 2,945,574 2,761,050 3,394,077 3,412,552 I Water Fund $4,500,000 -- - - $4,000,000 $3,500,000 — "'" $3,000,000 -- - -- h� $2,500,000 $2,000,000 $ l soo,000 — — $1,000,000 — Ii i — $500,000 — — a S- I i Al $(500,000) 2006 2007 2008 2009 I 2010 ■ Operating Revenues j $3,061,504 $3,474,059 $3,254,227 $3,588,299 _ $4,295,574 1 11 ■ Operating Expenses 2,856,958 3,242,420 3,373,596 3,233,646 3,214,125 ❑ Operating Income (Loss) 204,546 231,639 (119,369) 354,653 1,081,449 I ® Change in Net Assets 2,599,212 765,783 426,868 1,295,072 1,453 ,523 1 15 L III CITY OF SHAKOPEE I !I FINANCIAL ANALYSIS December 31, 2010 I ENTERPRISE FUNDS Sewer Fund`` I 1 $4,000,000 — — - -- -- _ $3,500,000 - - ll lilL, ' $3 000,000 - i 1'I J L I ■ $- $(500,000) - - $(1,000,000) — 2006 2007 2008 2009 1 2010 •Operating Revenues $2,527,442 $2,773,051 $2,542,564 $3,444,044 $3,460,974 ■0perating Expenses 2,786,234 2,938,955 3,304,759 3,398,117 3,683,168 'O Operating Income (Loss) (258,792) � (165,904) (762,195) 45,927 (222,194) ' Ili Change in Net Assets 1,959,1961 3,884,672 611,206 603,882 301,459 I I Storm Drainage Fund 1 $3,000,000 $2,500,000 I $2,000,000 $1,500,000 $1,000,000 i $500,000 [ I $(500.000) $(1,000,000) 2006 I 2007 2008 2009 2010 1 I•ServiceCharges $1,171,063 i $1,266,358 $1,265,374 $1,320,566 $1,187,229 h Operating Expenses 1,522,363 j 1,352,078 1,435,376 1,264,261 1,787,295 ID Operating Income (Loss) (351,300) I (85,720) (170,002) 56,305 _ ( 600,066) I 1® Change in Net Assets 2,523,093 1,527,949 706,206 673,618 [ 299,132 ( 99,132 During 2010 the Sewer and Storm Drainage Funds both had operating losses. This is the fourth time in the past five years that the Funds reported an operating loss. This is primarily a result of an increase in I operating expenses of approximately 8% while revenues remained consistent with the prior year. 16 I I I CITY OF SHAKOPEE FINANCIAL ANALYSIS December 31, 2010 I I 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 $5,000,000 $4,500,000 I $4,000,000 $3,500,000 I $3,000,000 I $2,500,000 I $2,000,000 $1,500,000 $1,000,000 —1 111111 1 1111111 I $ 111 I 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 • Revenue Bonds • G.O. Bonds I I I Bonded General Obligation Debt $30,000,000 I $25,020,000 $25,000,000 -_ 1) 0)1 ,7 93 114 UI 520.955.000 57.941.439 57 658228 $20,000,000 $ 1 8,710,000 _ 57.504.770 I — 55.12 i.697 $15,000,000 U �' I $17.089.886 $10,000,000 LS 16.. 783.5611 $15,956,711 ; P 513. 450 30 513- 582303 I $5,000,000 i Ir Ill $- II 2006 2 007 2008 ® Debt Servic 2009 2010 ■Gross Bonded Debt e Fund Balance [Net Bonded Debt I 1 17 CITY OF SHAKOPEE FINANCIAL ANALYSIS December 31, 2010 ADDITIONAL INFORMATION Minnesota Median City Bond Ratings' 40% 36% 35% 30% 26% 25% 20% 20% 15% 10% —1111---- - —— 5% - 1 0% 0% Aaa Aal Aa2 Aa3* Al A2 A3 Baal * Denotes City's Rating Information obtained from Moody's Bond Ratings for Minnesota Median Cities I � I 1 18 I CITY OF SHAKOPEE FINANCIAL ANALYSIS December 31, 2010 1 ADDITIONAL INFORMATION The following information shows 2009 per capita data for the City in comparison to three other cities similar in size and /or operations (Cities of Savage, Crystal and Apple Valley [the "Cities ")). This information is based on the population estimates listed below. Information for 2010 is not yet available. When analyzing this information, keep in mind that each one of the Cities is unique in its operations. Population Shakopee 33,660 Savage 25,532 Crystal 22,138 Apple Valley 49,983 The graph below shows the total General Fund revenues and expenditures per capita, as well as General Fund tax revenues per capita for the various Cities. 2009 General Fund II � I Revenues and Expenditures Per Capita $600 — I � I $500 — II $400 - I $300 I $200 $100 I $0 Total Expenditures Total Revenues Tax Revenues • Shakopee $473 $504 $406 ■ Savage 412 424 362 CI 483 537 337 ® Apple Valley 453 493 399 * Revenues and expenditures obtained from audited financial data ** Population obtained from 2009 Comprehensive Annual Financial Report (CAFR) for all Cities I except Apple Valley * ** Population for Apple Valley obtained from the League of Minnesota Cities I V 19 li • t CITY OF SHAKOPEE FINANCIAL ANALYSIS December 31, 2010 ADDITIONAL INFORMATION The following graphs show the General Fund expenditures by function per capita for the various Cities. I 2009 General Fund I Expenditures Per Capita $300 — — — — — $250 $200 1 $150 I $100 $50 — 11 _ ___ it, iiL___ 1 $0 General Government Public Safety Public Works Recreation 1 ■ Shakopee $94 $252 $73 $51 ■ Savage 75 188 81 47 O Crystal 93 227 49 86 ® Apple Valley 82 197 71 92 2009 Per Capita Information Governmental Funds $2,500 - -- -- -_ -- I $2,000 I I I I $1,500 1 I j $1,000 — I ' $500 —, _.. I II 1 $0 Outstanding Debt Total Revenues* Tax Revenues* Capital Outlay ■Shakopee $619 $694 $438 $53 •Savage 2,456 785 561 203 I ❑ Crystal 579 895 444 417 ®Apple Valley 848 _ 702 436 238 * Amounts obtained from audited financial data M 20 I I I il I • ! C omprehens i ve Annual Financial Report 1 i I ,,,, I .. ......+,.... -,- I ., ,,,„ , ..„, 9 ., w t. t r A r 0 l,r � ° 0 - � 1R- ► n y // r` ir • T a w .1 ? *p a` , �za k* 1(ea., V • tr 1" r P.c% q i t ', 1 � .. a /l w C � I 1 For the City of Shakopee, Minnesota For the Fiscal Year Ended 1 Dec. 31 2010 I I CITY OF SHAKOPEE, MINNESOTA Scott County COMPREHENSIVE ANNUAL FINANCIAL REPORT For the Fiscal Year Ended December 31, 2010 DEPARTMENT OF FINANCE GREGG M. VOXLAND, Director of Finance MEMBER OF GOVERNMENT FINANCE OFFICERS ASSOCIATION OF THE UNITED STATES AND CANADA 129 HOLMES STREET SOUTH SHAKOPEE, MN 55379 (THIS PAGE LEFT BLANK INTENTIONALLY) CITY OF SHAKOPEE TABLE OF CONTENTS SECTION I INTRODUCTORY SECTION Elected Officials and Administration ............... ............................... OrganizationChart ........................................... ............................... Letter of Transmittal ........................................ ............................... Certificate of Achievement for Excellence in Financial Reporting SECTION II FINANCIAL SECTION Page Independent Auditor's Report ............................................................ ............................... 9 Management's Discussion and Analysis (Unaudited) ....................... ............................... 11 Basic Financial Statements: Government -Wide Financial Statements: Statement of Net Assets ......................................................... ............................... 24 Statement of Activities ........................................................... ............................... 25 Fund Financial Statements: Balance Sheet — Governmental Funds ................................... ............................... 26 Reconciliation of the Balance Sheet to the Statement of Net Assets — Governmental Funds .............................................................. ............................... 27 Statement of Revenues, Expenditures and Changes in Fund Balances — Governmental Funds ............................................................ ............................... 28 Reconciliation of the Statement of Revenues, Expenditures and Changes in Fund Balances to the Statement of Activities — Governmental Funds ............... 29 Statement of Revenues, Expenditures and Changes in Fund Balances — Budget and Actual — General Fund ...................................... ............................... 30 Statement of Net Assets — Proprietary Funds ........................ ............................... 32 Statement of Revenues, Expenses and Changes in Fund Net Assets — ProprietaryFunds ................................................................. ............................... 33 Statement of Cash Flows — Proprietary Funds ....................... ............................... 34 Statement of Fiduciary Net Assets ......................................... ............................... 36 Notes to the Financial Statements ................................................ ............................... 37 Required Supplementary Information: Schedule of Funding Progress — Other Post Employment Benefits ...................... 70 Supplementary Information: Schedule of Revenues, Expenditures and Changes in Fund Balance — Budget and Actual — General Fund ...................................... ............................... 72 Combining and Individual Fund Financial Statements and Schedules: Combining Balance Sheet — Nonmajor Governmental Funds .............................. 74 Combining Statement of Revenues, Expenditures and Changes in Fund Balances — Noninajor Governmental Funds ........................ ............................... 80 Schedule of Revenues, Expenditures and Changes in Fund Balance — Budget and Actual: TransitFund ..................................................................... ............................... 86 Economic Development Authority Fund ......................... ............................... 87 CITY OF SHAKOPEE TABLE OF CONTENTS SECTION II FINANCIAL SECTION Supplementary Information: (Continued) Combining and Individual Fund Financial Statements and Schedules: (Continued) Combining Statement of Fund Net Assets — Internal Service Funds .................... Combining Statement of Revenues, Expenses and Changes in Fund Net Assets — Internal Service Funds ........................................... ............................... Statement of Cash Flows — Internal Service Funds ............... ............................... Statement of Changes in Assets and Liabilities — Escrow Agency Fund .............. Table Page M SECTION III STATISTICAL SECTION NetAssets by Component ........................................................... ............................... Changesin Net Assets ................................................................ ............................... Fund Balances — Governmental Funds ....................................... ............................... Changes in Fund Balances — Governmental Funds ..................... ............................... Tax Capacity and Estimated Actual Value of Taxable Property ............................... Direct and Overlapping Property Tax Rates ............................... ............................... PrincipalTaxpayers ..................................................................... ............................... Property Tax Levies and Collections .......................................... ............................... Ratio of Outstanding Debt by Type ............................................ ............................... Ratio of General Bonded Outstanding ........................................ ............................... Direct and Overlapping Governmental Activities Debt .............. ............................... Legal Debt Margin Information .................................................. ............................... Pledged Revenue Coverage ........................................................ ............................... Demographic and Economic Statistics ....................................... ............................... PrincipalEmployers .................................................................... ............................... Full -Time Equivalent City Government Employees by Function/Program ............... Operating Indicators by Function / Program ................................. ............................... Capital Asset Statistics by Function / Program ............................. ............................... .. 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 97 198 100 102 104 105 106 107 108 109 111 112 114 115 117 118 120 ..... 18 122 SECTION 1 INTRODUCTORY SECTION CITY OF SHAKOPEE ELECTED OFFICIALS AND ADMINISTRATION December 31, 2010 Elected Officials Position Term Expires John Schmitt Mayor December 31, 2011 Matthew Lehman Council Member December 31, 2011 Patrick Heitzman Council Member December 31, 2011 Steven Clay Council Member December 31, 2013 Pamela Punt Council Member December 31, 2013 Administration Mark H. McNeill City Administrator Appointed Gregg M. Voxland Finance Director Appointed 1 CITY OF SHAKOPEE ORGANIZATION CHART December 31, 2010 ELECTORATE Planning Commission and Board of Adjustment and Appeals Police Civil Service Commission Park and Recreation Advisory Board Economic Development Authority Environmental Advisory Commission CITY COUNCIL Building Code Board of Adjustment and Appeals Telecommunications Advisory Commission Board of Review Public Utilities Commission Historic Preservation Commission Administration Police Fire Public Works Recreation Finance Community City Clerk Development Emergency Management Engineering Operations Planning Building Inspection Transit Streets/Parks Sewers N p SHAKOPEE June 7, 2011 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 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 requirement, we hereby issue the Comprehensive Annual Financial Report of the City of Shakopee for the fiscal year ended December 31, 2010. 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 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 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 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 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, 2010 are free of material misstatements, and to comply with state law requiring such an audit. 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. 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, 2010, are fairly presented in conformity with GAAP. The independent auditor's report is presented as the first component of the financial section of this report. 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 of transmittal is designed to complement the MD &A and should be read in conjunction with the MD &A. COMMUNITY PRIDE SINCE 1857 3 129 Holmes Street South - Shakopee, Minnesota - 55379 -1351 • 952- 233 -9300 • FAX 952- 233 -3801 • www.ctshalcopee.mmus Profile of the Government 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 northern part of Scott County and is the county seat. In recent years, the City has been 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. The recently released 2010 census indicates that the 2010 population has increased to 37,076. This increase continues to maintain Shakopee as one of the most rapidly growing suburbs in Minnesota over the past decade. Growth, while slowing since the mid 2000s, continues to provide Shakopee with the assurance that the city's unique blend of residential, commercial and industrial opportunities will provide a strong base for the economic health of the community and region. The City 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. 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 and budget and staffing. The City Council has four members who serve staggered terms of four years plus the Mayor who serves a two -year term. All council positions are non - partisan, part-time and members are elected at large. The City provides the typical municipal services such as police and fire protection, street and infrastructure construction and maintenance, parks and recreation, planning and zoning. Also provided are electrical distribution, water, sewer and storm drainage utilities, organized refuse 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 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 divisions are submitted 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 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 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 a ten - year major equipment list is also prepared annually. Internal Service funds are utilized for the definition and application of charges for equipment, buildings, park assets, employee benefits and information technology. These charges are integrated into the individual budgets of the funds and departments that are benefitted by the activities of the programs. The Internal Service funds continue to be reviewed and updated as the community needs and council directives are considered during each budget cycle. Budget - to- actual comparisons are provided in this report for each individual governmental fund for which an appropriated annual budget has been formally adopted. Factors Affecting Financial Condition The information presented in the financial statements is perhaps best understood when it is considered from the broader perspective of the specific environment within which the City of Shakopee operates. 4 Local Economy. Compared to the majority of national markets, the City has had a relatively stable economic environment, and there continues to be positive activity in the housing market. While still down significantly from the peak development years, the number of building permits that have been issued by the City have stabilized from the rapid growth years of the early 2000's The City has issued roughly 1,100 permits per year since the downturn of 2007. Housing and related development had grown rapidly following the opening of the new Highway 169 bridge over the Minnesota River in 1995 and the resulting increase in population, reflected in the 2010 census, corresponds with this growth in permits and offsetting revenues. The local commercial industrial sector seems to have been spared major contraction up to this point. The City has traditionally had a strong industrial base with commercial /industrial property currently comprising 20% of market value and 36% of tax capacity. The largest commercial /industrial taxpayer comprises 1.2% of total tax capacity, which indicates the diversity of the local tax base. Companies in the City manufacture chemicals, malt, roofing products, glass, cardboard and electronics. Health care and related services are indicating positive trends in growth in recent years. The tax base is anticipated to decrease less than 1% for 2011 after having decreased 3% for taxes payable in 2010 and 5% for taxes payable in 2009. While this is still lower than the early years of 2000 significant growth, the trend appears to be very encouraging, as the tax capacity decrease for taxes payable in 2011 is less than 3 per cent. Long -term Financial Planning. Dependent on the volume of infrastructure work the City issues bonds to fund infrastructure replacement, expansion and additions for the growing population each year, or every other year. Much of this debt is funded by special assessments against benefited properties. The City has built a new library (2003), police station (2003) and public works building (2005). A replacement fire station is schedule to be built in 2011, replacing the existing fire station located in a less densely populated area of the City. Within the next five years a satellite station will be built to meet the needs of a growing population, as well as educational and commercial and industrial growth. The Shakopee Public Utilities Commission constructed a new service center in 2004. Starting with the 2010 budget cycle, staff prepared a two year operating budget but the Council actually adopts only the next year, not both years at once. The City of Shakopee annually prepares an updated five -year capital improvement plan and ten year capital equipment list. These plans are presented during the budget process for review and planning purposes. Relevant Financial Policies The City's target General Fund balance is to maintain an unassigned level between 40% (minimum) and 45% of current year expenditures. This level is to provide working capital for cash flow, expected decline in revenues and unforeseen expenditures such as natural disasters. Replenishing fund balance when it falls below the target level shall be accomplished by interfund transfers or budgeting for expenditures and other uses to be less than revenues or other sources over a period not to exceed three years. The City typically receives no local government aid (LGA) or market value homestead credit (MVHC) from the State of Minnesota. The State Legislature is currently reviewing the LGA and MVHC programs during the 2011 legislative session, as the current state budget deficit has generated interest and review in many of the existing aid programs throughout the state. The results of the on -going budget discussions may impact the financial position of cities that are currently reliant on these and other revenue sources. 5 The major source of revenue for the General Fund is property taxes which are received one half in June and one half in December. The property tax levy, including levies for debt service and the Economic Development Authority (EDA) are approved as a component of the annual budget process. The accounting, auditing and financial reporting policies are designed to maintain a system of financial monitoring, control and reporting for all operations and funds in order to provide effective means of ensuring that overall City goals and objectives will be met and to assure the City's residents and investors that the City is well managed and fiscally sound. The investment policy provides for conservative investing, preserving capital and maintaining adequate liquidity for forecasted cash needs. A third party investment manager handles the majority of the portfolio and all investments are held in a trust account. The debt policy ensures that the City's debt; 1) does not weaken the City's financial structure; and 2) provide limits on debt to avoid problems in servicing debt. This policy is critical for maintaining the best possible credit rating. Capital policies include having expenditures forecast ahead for five to ten years and are updated annually. Internal Service Funds for major equipment, major buildings, park asset replacement and information technology costs stabilize the annual impact of those items to the General fund. Awards and Acknowledgements The Government Finance Officers Association of the United States and Canada (GFOA) awarded a Certificate of Achievement for Excellence in Financial Reporting to the City of Shakopee for its Comprehensive Annual Financial Report (CAFR) for the fiscal year ended December 31, 2009. This was the twenty sixth consecutive year that the City has received this award. In order to be awarded a Certificate of Achievement, a government must publish an easily readable and efficiently organized CAFR. This report satisfied both GAAP and applicable legal requirements. A Certificate of Achievement is valid 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 to the GFOA to determine its eligibility for another certificate. The preparation of this report would not have been possible without the efficient and dedicated services of the Finance Department and the entire city staff. We would like to express our appreciation to all staff members who assisted and contributed to the preparation of this report. Credit also must be given to the Mayor and Councilors for their unfailing support for maintaining the highest standards of professionalism in the management of the City of Shakopee's finances. Respectfully submitted, Mark McNeill Julie A. Linnihan Administrator Finance Director for Excellence In Financial Reporting Presented to City of Shakopee Minnesota For its Comprehensive Annual Financial Report for the Fiscal Year Ended December 31, 2009 A Certificate of Achievement for Excellence in Financial Reporting is presented by the Government Finance Officers Association of the United States and Canada to government units and public employee retirement systems whose comprehensive annual financial reports (CAFRs) achieve the highest standards in government accounting and financial reporting. President Iy Executive Director 7 (THIS PAGE LEFT BLANK INTENTIONALLY) Honorable Mayor and Members of the City Council City of Shakopee Shakopee, Minnesota Expert advice. When you need it.'" INDEPENDENT AUDITOR'S REPORT We have audited the accompanying financial statements of the governmental activities, the business -type activities, each major fund and the aggregate remaining fund information of the City of Shakopee, Minnesota, as of and for the year ended December 31, 2010, which collectively comprise the City's basic financial statements as listed in the Table of 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 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 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 the overall financial statement presentation. We believe our audit provides a reasonable basis for our opinions. In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities, the business -type activities, each major fund and the aggregate remaining fund information of the City of Shakopee, Minnesota, as of December 31, 2010, and the respective changes in financial position and where applicable, cash flows, thereof, and the respective budgetary comparison for the General Fund for the year then ended in conformity with U.S. generally accepted accounting principles. The City has implemented Governmental Accounting Standards Board (GASB) Statement No. 54, Fund Balance Reporting and Governmental Fund Type Definitions for the year ended December 31, 2010. Expert advice. When you need it sin Certified Public Accountants Wealth Management Payroll Services Business Valuations Technology Services St. Cloud Twin Cities 220 Park Avenue S. 3800 American Boulevard W. P.O. Box 1304 Suite 1000 St, Cloud, Minnesota Bloomington, Minnesota 56302 55431 Phone: 320.251.7010 Phone: 952.563.6800 Fax: 320.251.1784 Fax: 951563.6801 www.kdv.com Toll Free 877.912.7696 Technology Help Desk 866.400.6426 In accordance with Government Auditing Standards, we have also issued our report dated June 7, 2011, on our consideration of the City's internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts and grant agreements and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing and not to provide an opinion on 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. U.S. generally accepted accounting principles require that the Management's Discussion and Analysis, which follows this report letter, and the Analysis and Schedule of Funding Progress — Other Post Employment Benefits, as listed in the Table of Contents, to be presented to supplement the basic financial statements. Such information, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board (GASB), who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic or historical context. We have applied certain limited procedures to the required supplementary information in accordance with U.S. generally accepted auditing standards, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management's responses to our inquiries, the basic financial statements and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance. Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the City's financial statements as a whole. The accompanying supplementary information identified in the Table of Contents is presented for purposes of additional analysis and is not a required part of the financial statements. The supplementary information is the responsibility of management and was derived from and relate directly to, the underlying accounting and other records used to prepare the financial statements. The information has been subjected to the auditing procedures applied in the audit of the financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the financial statements or to the financial statements themselves, and other procedures in accordance with U.S. generally accepted auditing standards. In our opinion, the information is fairly stated, in all material respects in relation to the financial statements as a whole. The information identified in the Table of Contents as the Introductory and Statistical Sections are presented for purposes of additional analysis and are not a required part of the basic financial statements. This information has not been subjected to the audit procedures applied in the audit of the basic financial statements and, accordingly, we express no opinion on it. KERN, DEWENTER, VIERS, LTD. Bloomington, Minnesota June 7, 2011 10 CITY OF SHAKOPEE MANAGEMENT'S DISCUSSION AND ANALYSIS December 31, 2010 As management of the City of Shakopee (the "City "), we offer readers of the City's financial statements this narrative overview and analysis of the financial activities of the City for the fiscal year ended December 31, 2010. We encourage readers to consider the information presented herein conjunction with additional information that we have furnished in our Letter of Transmittal, which can be found on pages 3 to 6 of this report. Financial Highlights • The assets of the City exceeded its liabilities at the close of the most recent fiscal year by $ 336.6 million (net assets). Of this amount, $ 103 million (unrestricted net assets) may be used to meet the City's ongoing obligations to citizens and creditors. • The City's total net assets increased by $ 5.7 million. • As of the close of the current fiscal year, the City's governmental funds reported combined ending fund balances of $ 27.1 million, slightly lower than the prior year. Approximately 30% of this total amount, $ 8 million is available for spending at the City's discretion (unassigned fund balance). • At the end of the current fiscal year, unassigned fund balance for the General Fund was $ 8.3 million, or 45 %, of total General Fund expenditures. • The City's total bonded debt decreased by $ 2.8 million, or 7 %, during the current fiscal year. Overview of the Financial Statements This discussion and analysis are intended to serve as an introduction to the City's basic financial statements. The City's basic financial statements comprise three components: 1) government -wide financial statements, 2) fund financial statements and 3) Notes to the Financial Statements. This report also contains other supplementary information in addition to the basic financial statements themselves. Government -Wide Financial Statements The government -wide financial statements are designed to provide readers with a broad overview of the City's finances, in a manner similar to private- sector business. The Statement of Net Assets presents information on all of the City's assets and liabilities, with the difference between the two reported as net assets. Over time, increases or decreases in net assets may serve as a useful indicator of whether the financial position of the City is improving or deteriorating. The Statement of Activities presents information showing how the City's net assets changed during the most recent fiscal year. All changes in net assets are reported as soon as the underlying event giving rise to the change occurs, regardless of the timing of related cash flows. Thus, revenues and expenses are reported in this statement for some items that will only result in cash flows in future fiscal periods (e.g., uncollected taxes and earned but unused employee leaves). 11 CITY OF SHAKOPEE MANAGEMENT'S DISCUSSION AND ANALYSIS December 31, 2010 Both of the government -wide financial statements distinguish functions of the City that are principally supported by taxes and intergovernmental revenues (governmental activities) from other functions that are intended to recover all or a significant portion of their costs through user fees and charges (business- type activities). The governmental activities of the City include general government, public safety, highways and streets, economic development and recreation. The business -type activities of the City include an electrical distribution operation, water, sewer and storm drainage utilities. The government -wide financial statements include not only the City itself (known as the primary government), but also the Economic Development Authority (EDA) which functions like a department of the City although it is a legally separate entity. The 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 therefore it has been included as an integral part of the primary government. The government -wide financial statements can be found on pages 24 and 25 of this report. Fund Financial Statements A fund is a grouping of related accounts that is used to maintain control over resources that have been segregated for specific activities or objectives. The City, like other state and local governments, uses fund accounting to ensure and demonstrate compliance with finance- related legal requirements. All of the funds of the City can be divided into three categories: governmental funds, proprietary funds and fiduciary funds. Government Funds Government funds are used to account for essentially the same functions reported as governmental activities in the government -wide financial statements. However, unlike the government -wide financial statements, governmental fund financial statements focus on near -term inflows and outflows of spendable resources, as well as on balances of spendable resources available at the end of the fiscal year. Such information may be useful in evaluating a City's near -term financing's requirements. Because the focus of governmental funds is narrower than that of the government -wide financial statements, it is useful to compare the information presented for governmental funds with similar information presented for governmental activities in the government -wide financial statements. By doing so, readers may better understand the long -term impact of the City's near -term financing decisions. The governmental funds Balance Sheet and the governmental funds Statement of Revenues, Expenditures and Changes in Fund Balances provide a reconciliation to facilitate this comparison between governmental funds and governmental activities. The City maintains 34 individual governmental funds. Information is presented separately in the governmental funds Balance Sheet and in the governmental funds Statement of Revenues, Expenditures and Changes in Fund Balances for the General Fund and the 2004A Improvement Bond Debt Service Fund. Those are considered to be major funds. Data from the other governmental funds are combined into a single, aggregated presentation. Individual fund data for each of these non -major governmental funds is provided in the form of combining statements elsewhere in this report. 12 CITY OF SHAKOPEE MANAGEMENT'S DISCUSSION AND ANALYSIS December 31, 2010 The City adopts an annual appropriated budget for its General Fund and four of its special revenue funds. A budgetary comparison statement has been prepared for those funds to demonstrate compliance with the budget. The basic governmental funds financial statements can be found on pages 26 to 30 of this report. Proprietary Funds The City maintains two different types of proprietary funds. Enterprise funds are used to report the same functions presented as business -type activities in the government -wide financial statements. The City uses enterprise funds to account for its electric, 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 uses internal service funds to account for its fleet of vehicles and mobile equipment, its major buildings, the replacement of park assets, information technology items and for employee compensated absences. All of these services predominantly benefit governmental rather than business -type functions. Proprietary funds provide the same type of information as the government -wide financial statements. The proprietary fund financial statements provide separate information for the electric, water, sewer and storm drainage operations, all of which are considered to be major funds of the City. Conversely, all internal service funds are combined into a single, aggregated presentation in the proprietary fund financial statements. Individual fund data for the internal service funds is provided in the form of combining statements elsewhere in this report. The basic proprietary fund financial statements can be found on pages 31 to 34 of this 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 financial statement because the resources of those funds are not available to support the City's own programs. The basic fiduciary fund financial statements can be found on page 36 of this report. Notes to the Financial Statements The notes provide additional information that is essential to a full understanding of the data provided in the government -wide and fund financial statements. The Notes to the Financial Statements can be found on pages 37 to 68 of this report. 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. 13 CITY OF SHAKOPEE MANAGEMENT'S DISCUSSION AND ANALYSIS December 31, 2010 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 on pages 74 to 91 of this report. GOVERNMENT -WIDE FINANCIAL ANALYSIS As noted earlier, net assets may serve over time as a useful indicator of a City's financial position. For the City, assets exceeded liabilities by $ 336.6 million at the close of the most recent fiscal year. By far the largest portion of the City's net assets (67 %) reflects its investment in capital assets (e.g., land, buildings and equipment); less any related debt used to acquire those assets that is still outstanding. The City used these capital assets to provide services to citizens; consequently, these assets are not available for future spending. Although the City's investment in its capital assets is 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. Net Assets (Expressed in Thousand) Current and Other Assets Capital Assets Total Assets Long -Term Liabilities Outstanding Other Liabilities Total Liabilities NET ASSETS: Invested in Capital Assets, Net of Related Debt Restricted Unrestricted Total Net Assets An additional portion of the City's net assets (2 %) represents resources that are subject to external restrictions on how they may be used. The remaining balance of unrestricted net assets ($ 103 million) may be used to meet the City's ongoing obligations to citizens and creditors. At the end of the current fiscal year, the City was able to report positive balances in all three 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. 14 Governmental Activities Business -Type Activities Total 2010 2009 2010 2009 2010 2009 $ 49,844 $ 49,252 $ 68,276 $ 65,201 $ 118,120 $ 114,453 130,615 133,052 135,999 134,295 266,614 267,347 $ 180,459 $ 182,304 $ 204,275 $ 199,496 $ 384,734 $ 381,800 $ 17,065 $ 19,273 $ 19,496 $ 20,360 $ 36,561 $ 39,633 5,735 5,583 5,811 5,634 11,546 11,217 $ 22,800 $ 24,856 $ 25,307 $ 25,994 $ 48,107 $ 50,850 $ 111,905 $ 112,097 $ 115,065 $ 114,331 $ 226,970 $ 226,428 1,844 16,519 4,889 3,575 6,733 20,094 43,910 28,833 59,014 55,595 102,924 84,428 $ 157,659 $ 157,449 $ 178,968 $ 173,501 $ 336,627 $ 330,950 An additional portion of the City's net assets (2 %) represents resources that are subject to external restrictions on how they may be used. The remaining balance of unrestricted net assets ($ 103 million) may be used to meet the City's ongoing obligations to citizens and creditors. At the end of the current fiscal year, the City was able to report positive balances in all three 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. 14 CITY OF SHAKOPEE MANAGEMENT'S DISCUSSION AND ANALYSIS December 31, 2010 During the current fiscal year, the City's net assets increased by $ 5.7 million. 96 % of this increase is due to enterprise fund activities reflecting increased operating income. Changes in Net Assets (Expressed in Thousands) Governmental Activities Business -Type Activities 2010 2009 2010 2009 REVENUES: Program Revenues Total 2010 2009 Charges for Services $ 4,350 $ 4,714 $ 46,080 $ 42,769 $ 50,430 $ 47,483 Operating Grants and Contributions 2,944 1,485 6 - 2,950 1,485 Capital Grants and Contributions 952 1,242 1,661 1,879 2,613 3,121 General Revenues: Property Taxes 14,229 14,676 - - 14,229 14,676 Other Taxes 148 152 - - 148 152 Other 1,040 1,360 1,280 1,337 2,320 2,697 Total Revenues 23,663 23,629 49,027 45,985 72,690 69,614 EXPENSES: General Government 3,043 3,388 - - 3,043 3,388 Public Safety 9,123 8,528 - - 9,123 8,528 Public Works 8,398 7,860 - - 8,398 7,860 Economical Development 427 317 - 427 317 Cultural and Recreation 3,766 3,860 - - 3,766 3,860 Interest on Long -Tenn Debt 785 1,040 - - 785 1,040 Electric - - 32,700 30,141 32,700 30,141 Water - - 3,293 3,316 3,293 3,316 Sewer - - 3,685 3,398 3,685 3,398 Storm - - 1,793 1,264 1,793 1,264 Total Expenses 25,542 24,993 41,471 38,119 67,013 63,112 Increase (Decrease) in Net Assets before Transfers (1,879) (1,364) 7,556 7,866 5,677 6,502 Transfers 2,089 1,900 (2,089) (1,900) - - Change in Net Assets 210 536 5,467 5,966 5,677 (6,502) NET ASSETS: January 1 157,449 156,913 173,501 166,247 330,950 323,160 Prior Period Adjustment - - - 1,288 - 1,288 January 1 As Restated 157,449 156,913 173,501 167,535 330,950 324,448 December 31 $ 157,659 $ 157,449 $ 178,968 $ 173,501 $ 336,627 $ 330,950 IM CITY OF SHAKOPEE 1 1 MANAGEMENT'S DISCUSSION AND ANALYSIS December 31, 2010 i Governmental Activities Governmental activities increased the City's net assets by $ 210,794. Expenses increased by only 1 rn $ 549,000 from the prior year. Expenses increased in the area of public safety due to additional spending for professional services, specifically with the inclusion of prosecuting attorney fees in the Police Division budgets. Revenues increased by $ 34,000. There were no major changes between the years. 1 Expenses and Program Revenues — Governmental Activities 10,000,000 -- 1 9,000,000 - 8 — 7,000,000 ___ __ —_- 6,000,000 5,000,000 ■Program Revenues 4,000,000 - - ' ■Expenses 3,000,000 2 II I ,000,000 - — 1,000,000 _ - ti x t 0 0 0 1 3 5 a, 2 03 rn 2 F a C �i 0 7 0 0 9 °> ° a A a WA �� 1I Revenues by Source — Governmental Activities 1 1 1 Other Revenues Operating Grants and 1 Charges for Services 4% Contributions 0 18 /0 13% Other Taxes 1% Capital Grants and 1 Contributions 1 4% Property Taxes 1 60% I 16 , 1 I CITY OF SHAKOPEE MANAGEMENT'S DISCUSSION AND ANALYSIS December 31, 2010 1 Business-Type Activities yP I Business -type activities increased the City's net assets by $ 5,466,666, accounting for 96% of the total growth in the City's net assets. Key elements of this increase are as follows: I • Increase in Charges for Services of $ 3,300,000 as the utility funds have experienced increased revenue collections due to rate increases. I • Expenses increased in 2010 due to higher usage. • Net transfers - $ (2,100,000), in comparison to the net transfer of $ (1,900,000), in 2009. 1 Expenses and Program Revenues — Business -Type Activities I $40,000,000 - -- - - - $35,000,000 - - - - - $30,000,000 - - $25,000,000 -- --- I $20,000,000 -- 'Revenues "Expenses $15,000,000 --- - - - - -- -- 1 $10,000,000 -- _ - --_ $5,000,000 - - $- . Electric Water Sewer Storm Revenues by Source — Business -Type Activities 1 Capital Grants and C ontributions 1 Investment Earnings 3% I Charges for Services 94% 1 1 1 7 CITY OF SHAKOPEE MANAGEMENT'S DISCUSSION AND ANALYSIS December 31, 2010 FINANCIAL ANALYSIS OF THE CITY'S FUNDS As noted earlier, the City uses fund accounting to ensure and demonstrate compliance with finance - related legal requirements. Governmental Funds The focus of the City's governmental funds is to provide information on near -term inflows, outflows and balances of spendable resources. Such information is useful in assessing the City's financing requirements. In particular, assigned and unassigned fund balance may serve as a useful measure of a City's net resources available for spending at the end of the fiscal year. As of the end of the current fiscal year, the City's governmental funds reported combined ending fund balances of $ 27,094,450, a decrease of $ 1,228,332 in comparison with the prior year. Approximately 30 %, ($ 8,207,135), of the total amount of $ 27,094,450 constitutes unassigned fund balance, which is available for spending at the City's discretion. The remainder of fund balance, ($ 18,887,000), is not available for new spending because it has already been committed, restricted or is non - spendable. The General Fund is the chief operating fund of the City. At the end of the current fiscal year, fund balance of the General Fund was $ 9,037,730. As a measure of the General Fund's liquidity, it may be useful to compare fund balance (assigned and unassigned) to total fund expenditures. Fund balance represents 48% of total General Fund expenditures. Fund balance of the City's General Fund decreased by $ 2,464,550 during the current fiscal year. Key factors in this decrease consist of the following: General Fund results for the year were a negative $ 2,465,000, due to transfers from the General Fund totaling $ 4,400,000. These transfers were approved by the City Council in the second half of 2010. Transfers provided the necessary funding for several significant capital, infrastructure and facility expansions that will be undertaken in 2011. Total expenditures increased by $ 2,700,000, as there were changes to the structure of the General Fund, with the inclusion of Recreation Fund, which had been previously reported as a separate fund in previous years. Expenditures also increased in the area of public safety, with increased expenditures for professional services, specifically, with the inclusion of prosecuting attorney fees in the Police Division budgets. Revenues exceeded the budget by $ 610,000, or 3.4 %. Tax collections and building permit revenues exceeded expectations. Under - spending the budget by $ 1,067,000, or 5.4 %. City staff continued a trend of conservative spending, as well as vacant staff positions left unfilled in 2010. Proprietary funds The City's proprietary funds provide the same type of information found in the government -wide financial statements, but in more detail. M CITY OF SHAKOPEE MANAGEMENT'S DISCUSSION AND ANALYSIS December 31, 2010 Unrestricted net assets of the enterprise funds: Electric Water Sewer Storm Beginning of Year $ 20,068 $ 2,702 $ 16,302 $ 16,524 Change During Year 2,330 714 500 (127) End of Year $ 22,398 $ 3,416 $ 16,802 $ 16,397 GENERAL FUND BUDGETARY HIGHLIGHTS The difference between the original General Fund budget and the final amended budget for expenditures was not significant for the current year. The original legally adopted budget for expenditures was $ 19,768,000 and transfers out were $ 0. Final budget for expenditures was $ 19,791,000 and transfers out were $ 2,796,000. Amended transfers were from the General Fund to the Park Reserve Fund $ 2,025,000, to the Building Fund $ 671,000 and to the Technology Fund $ 100,000. Original and final adopted budgets for revenues were $ 17,806,000. Actual revenues of $ 18,416,000 were $ 610,000 over budget. CAPITAL ASSET AND DEBT ADMINISTRATION Capital Assets The City's investment in capital assets for its governmental and business type activities as of December 31, 2010, amounts to $ 227,528,000 (net of accumulated depreciation and related debt). This investment in capital assets includes land, buildings and systems, improvement, machinery and equipment, park facilities, roads, highways and bridges. The City's capital assets for the current fiscal year were similar to the previous year, with an increase in construction in progress, and a decrease in related debt. Major capital assets events during the current fiscal year included the following: • A variety of street construction projects were completed with a value of $ 2,249,000. • Utility plant in service added $ 2,600,000. • Equipment added $ 1,471,000. Change in net utility capital assets for electric $ (1,098,000), water $ (613,000), sewer $ (199,000) and storm $ 426,000. 19 CITY OF SHAKOPEE MANAGEMENT'S DISCUSSION AND ANALYSIS December 31, 2010 Capital Assets (Net of Depreciation) Expressed in Thousands Additional information on the City's capital assets can be found in Note 6 on pages 52 to 54 of this report. Long -Term Debt At the end of the current fiscal year, the City had total bonded debt outstanding of $ 40,180,000. Of this amount, $ 6,340,000 comprises debt backed by the full faith and credit of the government and $ 12,370,000 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). Outstanding Debt G.O. and Revenue Bonds Expressed in Thousands Governmental Activities Business -Type Activities Total 2010 2009 2010 2009 2010 2009 G.O. Bonds $ 6,340 $ 6,755 $ - $ - $ 6,340 $ 6,755 Special Assessment Debt with Governmental Commitment 12,370 14,200 - - 12,370 14,200 '.. Revenue Bonds - - 21,470 22,235 21,470 22,235 Total $ 18,710 $ 20,955 $ 21,470 $ 22,235 $ 40,180 $ 43,190 The City's total bonded debt decreased by $ 3,010,000 during the current fiscal year. 20 Governmental Activities Business -Type Activities Total Restated Restated 2010 2009 2010 2009 2010 2009 Intangible Assets $ - $ - $ 1,369 $ 1,369 $ 1,369 $ 1,369 Land 19,488 19,469 9,042 8,521 28,530 27,990 Construction in Progress 730 147 2,300 553 3,030 700 Buildings and Systems 25,078 25,869 120,854 122,345 145,932 148,214 lnfrastructre 77,541 79,538 - - 77,541 79,538 Machinery and Equipment 7,778 8,029 1,442 1,507 9,220 9,536 Total Assets $ 130,615 $ 133,052 $ 135,007 $ 134,295 $ 265,622 $ 267,347 Additional information on the City's capital assets can be found in Note 6 on pages 52 to 54 of this report. Long -Term Debt At the end of the current fiscal year, the City had total bonded debt outstanding of $ 40,180,000. Of this amount, $ 6,340,000 comprises debt backed by the full faith and credit of the government and $ 12,370,000 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). Outstanding Debt G.O. and Revenue Bonds Expressed in Thousands Governmental Activities Business -Type Activities Total 2010 2009 2010 2009 2010 2009 G.O. Bonds $ 6,340 $ 6,755 $ - $ - $ 6,340 $ 6,755 Special Assessment Debt with Governmental Commitment 12,370 14,200 - - 12,370 14,200 '.. Revenue Bonds - - 21,470 22,235 21,470 22,235 Total $ 18,710 $ 20,955 $ 21,470 $ 22,235 $ 40,180 $ 43,190 The City's total bonded debt decreased by $ 3,010,000 during the current fiscal year. 20 CITY OF SHAKOPEE MANAGEMENT'S DISCUSSION AND ANALYSIS December 31, 2010 Minnesota Statutes limit the amount of general obligation debt a government entity may issue to a net figure of 3% of the taxable market value. The current legal debt margin for the City is $ 111 million, which is significantly in excess of the City's outstanding general obligation debt. Additional information on the City's long -term debt can be found in Note 7 on pages 54 to 57 of this report. ECONOMIC FACTORS AND NEXT YEAR'S BUDGETS AND RATES The unemployment rate for the state was 7.0% at year -end. This is a decrease from a rate of 7.8% a year ago. Inflationary trends in the region compare favorably to national indices. During the current fiscal year, the unassigned fund balance in the General Fund was $ 8,324,000. This can be similarly compared to the undesignated fund balance of 2009 of $ 10,703,000. The City has restricted $ 218,032 for programs and committed an additional $ 346,000 for spending in the 2011 fiscal year. Building permits have been a significant source of revenue in recent years. The downturn in that sector of the economy and a reduction in the fees charged for permits and development had a significant impact on the General Fund starting in 2007. The City has restricted part of the fund balance for building inspection related activities. The slower housing market and reduced fees compared to prior years are expected to continue through 2011 and into 2012. The tax levy for 2010/2011 decreased from $ 14,919,000 to $ 14,837,000, a decrease of 0.5 %. The tax rate increased from 33.7099 to 34.6827, a 2.9% increase. The General Fund budget for 2011 expenditures as originally adopted was $ 20,176,000 compared to $ 19,768,000 for 2010 and $ 17,355,000 for 2009. The increase for 2010 reflects the merger of the Recreation and Telecommunications Special Revenue Funds into the General Fund. In 2010, there were 6 lots /units in 1 final plats made available for building. The respective numbers for the prior year were 40 and 2. Utility rates for the Electric and Water Enterprise Funds were slightly increased from 2010 while the Sewer Fund flow rate increased 3% with the flat fee decreasing 29% and the Storm Drainage Fund rate was decreased 15 %. REQUESTS FOR INFORMATION This financial report is designed to provide a general view of the City's finances for all those with an interest in the City's finances. Questions concerning any of the information provided in this report or requests for additional information should be addressed to the Finance Director, 129 Holmes St. S., Shakopee, Minnesota, 55379. 21 (THIS PAGE LEFT BLANK INTENTIONALLY) 22 i BASIC FINANCIAL STATEMENTS 23 CITY OF SHAKOPEE STATEMENT OF NET ASSETS December 31, 2010 ASSETS Cash and Investments (Including Cash Equivalents) Restricted and Other Accounts Property Tax Receivable Accounts Receivable (Net of Allowance for Uncollectible Accounts) Interest Receivable Notes Receivable Special Assessments Receivable Due from Other Funds (Internal Balances) Inventories Prepaid Expenses Unamortized Debt Issue Costs Electric Plant Acquisition (Net of Accumulated Amortization) Capital Assets not being Depreciated: Land Line Rights Construction in Progress Capital Assets being Depreciated: Infrastructure Plant in Service Buildings Machinery and Equipment Less Accumulated Depreciation Total Assets LIABILITIES AND NET ASSETS Liabilities Accounts Payable Due to Other Governments Salaries and Benefits Payable Deposits Payable Interest Payable Unearned Revenue Customer Advances Bond Principal Payable, Net: Payable Within One Year Payable After One Year Compensated Absences Payable: Payable Within One Year Payable After One Year Net Other Post Employment Benefits (OPEB) Obligation: Payable After One Year Total Liabilities Net Assets Invested in Capital Assets, Net of Related Debt Restricted for: Economic Development Cable PEG Fees Transit Forfeiture Debt Service Capital Improvements Unrestricted Total Net Assets Total Liabilities and Net Assets Governmental Business -Type $ 3,899,099 Activities Activities Total $ 41,251,476 $ 56,873,992 $ 98,125,468 - 6,506,765 6,506,765 310,624 - 310,624 1,287,263 3,866,978 5,154,241 181,734 234,737 416,471 447,241 - 447,241 6,055,894 147,133 6,203,027 159,632 (159,632) - - 722,599 722,599 149,940 83,924 233,864 - 557,471 557,471 - 434,392 434,392 19,488,040 9,041,912 28,529,952 - 1,368,569 1,368,569 729,343 2,299,805 3,029,148 130,000,996 - 130,000,996 - 161,344,240 161,344,240 33,688,980 - 33,688,980 13,297,595 2,418,498 15,716,093 (66,589,802) (41,466,367) (108,056,169) $ 180,458,956 $ 204,275,016 $ 384,733,972 $ 732,539 $ 3,166,560 $ 3,899,099 367,351 - 367,351 480,004 - 480,004 - 1,133,783 1,133,783 289,411 382,532 671,943 - 97,944 97,944 - 55,466 55,466 2,565,000 780,000 3,345,000 16,145,000 19,596,081 35,741,081 750,000 35,000 785,000 919,770 30,956 950,726 550,498 28,606 579,104 22,799,573 25,306,928 48,106,501 111,905,152 115,064,968 226,970,120 447,470 - 447,470 49,192 - 49,192 1,158,355 - 1,158,355 189,112 - 189,112 - 605,000 605,000 - 4,284,050 4,284,050 43,910,102 59,014,070 102,924,172 _ 157,659,383 178,968,088 336,627,471 $ 180,458,956 $ 204,275,016 $ 384,733,972 The Notes to the Financial Statements are an integral part of this statement. 24 CITY OF SHAKOPEE STATEMENT OF ACTIVITIES For the Year Ended December 31, 2010 �"'„ The Notes to the Financial Statements are an integral part of this statement. 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 $ 3,042,918 $ 652,686 $ 42,228 S 9,500 $ (2,338,504) $ - $ (2,338,504) Public Safety 9,123,316 1,716,573 372,188 - (7,034,555) - (7,034,555) Public Works 8,397,874 941,224 2,529,441 502,050 (4,425,159) - (4,425,159) Economic Development 427,169 - - - (427,169) - (427,169) Culture and Recreation 3,765,660 1,039,820 - 440,900 (2,284,940) - (2,284,940) Interest on Long -Term Debt 784,824 - - - (784,824) - (784,824) Total Governmental Activities 25,541,761 4,350,303 2,943,857 952,450 (17,295,151) - (17,295,151) Business -Type Activities Electric 32,700,410 36,872,008 - 137,211 - 4,308,809 4,308,809 Water 3,293,079 4,417,498 - 1,078,590 - 2,203,009 2,203,009 Sewer 3,685,417 3,508,947 6,415 45,600 - (124,455) (124,455) Storm Drainage 1,792,749 1,281,986 - 399,600 (111,163) (111,163) Total Business -Type Activities 41,471,655 46,080,439 6,415 1,661,001 - 6,276,200 6,276,200 Total Governmental and Business -Type Activities $ 67,013,416 $ 50,430,742 $ 2,950,272 S 2,613,451 (17,295,151) 6,276,200 (11,018,951) General Revenues Property Taxes 14,229,111 - 14,229,111 Tax Increments 147,561 - 147,561 Umestricted Investment Earnings 1,039,867 1,279,872 2,319,739 Transfers 2,089,406 (2,089,406) - Total General Revenues and Transfers 17,505.945 (809,534) 16,696,411 Change in Net Assets 210,794 5,466,666 5,677,460 Net Assets - Beginning 157,448,589 173,501,422 330,950,011 Net Assets - Ending S 157,659,383 $ 178,968,088 $ 336,627,471 �"'„ The Notes to the Financial Statements are an integral part of this statement. CITY OF SHAKOPEE BALANCESHEET- GOVERNMENTALFUNDS December 31, 2010 Debt Service 2004A Improvement General Fund Bonds ASSETS Cash and Investments Taxes Receivable - Delinquent Special Assessments Receivable: Delinquent Deferred Accounts Receivable Interest Receivable Due from Other Funds Notes Receivable Prepaid Items Total Assets LIABILITIES AND FUND BALANCES Liabilities Accounts Payable Due to Other Funds Due to Other Governments Salaries and Benefits Payable Deferred Revenue Total Liabilities Fund Balance Nonspendable Restricted Committed Unassigned Total Fund Balances $ 8,846,962 $ 474,642 305,598 - 4,684 - 50,464 2,169,496 565,331 - 46,631 1,775 234,632 - 149,940 $ 10,204,242 $ 2,645,913 Other Total Governmental Governmental Funds Funds $ 17,518,177 $ 26,839,781 5,026 310,624 26,105 30,789 3,805,145 6,025,105 721,032 1,286,363 68,787 117,193 - 234,632 82,241 82,241 149,940 $ 22,226,513 $ 35,076,668 $ 325,762 $ - $ 367,583 $ 693,345 - - 75,000 75,000 - - 367,351 367,351 480,004 - - 480,004 360,746 2,169,496 3,836,276 6,366,518 1,166,512 2,169,496 4,646,210 7,982,218 149,940 - - 149,940 218,032 476,417 8,897,262 9,591,711 345,820 - 8,799,844 9,145,664 8,323,938 - (116,803) 8,207,135 9,037,730 476,417 17,580,303 27,094,450 Total Liabilities and Fund Balances $ 10,204,242 $ 2,645,913 $ 22,226,513 $ 35,076,668 The Notes to the Financial Statements are an integral part of this statement. 26 CITY OF SHAKOPEE RECONCILIATION OF THE BALANCE SHEET TO THE STATEMENT OF NET ASSETS - GOVERNMENTAL FUNDS December 31, 2010 Total Fund Balances - Governmental Funds $ 27,094,450 Amounts reported for governmental activities in the Statement of Net Assets are different because: Capital assets used in governmental activities are not current financial resources and, therefore, are not reported as assets in governmental funds. Cost of Capital Assets 148,906,849 Less Accumulated Depreciation (53,017,680) Long -term liabilities, including bonds payable, are not due and payable in the current period and, therefore, are not reported as liabilities in the funds. Long -term liabilities at year -end consist of: Bond Principal Payable (18,710,000) Net OPEB Obligation (550,498) Delinquent property taxes and assessments receivable will be collected this year, but are not available soon enough to pay for the current period's expenditures and, therefore, are deferred in the funds. Property Taxes 310,624 Special Assessments 30,789 Deferred special assessments receivable are not available to pay for current expenditures and, therefore, are deferred in the funds. Deferred Special Assessments 6,025,105 Governmental funds do not report a liability for accrued interest due and payable. (289,411) Internal service funds are used by management to charge the costs of equipment, buildings, park assets and employee benefits to individual funds. A portion of the assets and liabilities of those funds are included in governmental activities in the Statement of Net Assets. 47,859,155 Total Net Assets - Governmental Activities $ 157,659,383 The Notes to the Financial Statements are an integral part of this statement. 27 CITY OF SHAKOPEE STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES - GOVERNMENTAL FUNDS For the Year Ended December 31, 2010 REVENUES Property Taxes Tax Increments Special Assessments Licenses and Permits Intergovernmental Charges for Services Fines and Forfeitures Miscellaneous Total Revenues Current General Government Public Safety Public Works Culture and Recreation Economic Development Debt Service Principal Interest and Other Charges Capital Outlay Total Expenditures Excess of Revenues Under Expenditures OTHER FINANCING SOURCES (USES) Proceeds from Sale of Capital Asset Bonds Issued Transfers In Transfers Out Total Other Financing Sources (Uses) Net Change in Fund Balances Debt Service 2004A Other Improvement Governmental General Fund Bonds Funds Total Governmental n„ «a.. $ 13,557,007 $ $ 681,220 $ 14,238,227 - 147,561 147,561 28,988 231,967 1,143,133 1,404,088 1,303,904 - 34,207 1,338,111 828,906 - 2,095,255 2,924,161 1,827,039 - 375,485 2,202,524 423,746 - 125,797 549,543 446,889 3,939 804,210 1,255,038 18,416,479 235,906 5,406,868 24,059,253 2,960,233 - - - 2,960,233 8,953,176 - 59,391 9,012,567 2,632,923 - 1,269,699 3,902,622 4,075,919 - - 4,075,919 70,019 - 200,896 270,915 - 420,000 3,380,000 3,800,000 - 91,550 741,695 833,245 32,565 - 2,779,923 2,812,488 18,724,835 511,550 8,431,604 27,667,989 (308,356) (275,644) (3,024,736) (3,608,736) 6,000 - - 6,000 - - 1,555,000 1,555,000 2,233,806 - 10,966,001 13,199,807 (4,396,000) - (7,984,403) (12,380,403) (2,156,194) - 4,536,598 2,380,404 (2,464,550) (275,644) 1,511,862 (1,228,332) FUND BALANCES Beginning of Year 11,502,280 752,061 16,068,441 28,322,782 End of Year $ 9,037,730 $ 476,417 $ 17,580,303 $ 27,094,450 The Notes to the Financial Statements are an integral part of this statement. 28 CITY OF SHAKOPEE RECONCILIATION OF THE STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES TO THE STATEMENT OF ACTIVITIES - GOVERNMENTAL FUNDS For the Year Ended December 31, 2010 Net Change in Fund Balances - Governmental Funds $ (1,228,332) Amounts reported for governmental activities in the Statement of Activities are different because: Capital outlays are reported in governmental funds as expenditures. However, in the Statement of Activities, the cost of those assets is allocated over the estimated useful lives as depreciation expense. Capital Outlays 2,291,036 Depreciation Expense (4,320,960) Loss on Disposal of Fixed Assets (140,817) Contributed Assets 480,000 Principal payments on long -term debt are recognized as expenditures in the governmental funds but as an increase in the net assets in the Statement of Activities. 3,800,000 Interest on long -term debt in the Statement of Activities differs from the amount reported in the governmental funds because interest is recognized as an expenditure in the funds when it is due and thus requires use of current financial resources. In the Statement of Activities, however, interest expense is recognized as the interest accrues, regardless of when it is due. 48,421 Proceeds from long -term debt are recognized as an other financing source in the governmental funds but as a decrease in net assets in the Statement of Activities. Bonds Payable (1,555,000) Certain revenues in the Statement of Activities that do not provide current financial resources are not reported as revenues in the funds. Special Assessments (1,283,904) OPEB obligations are recognized when paid in the government funds but recognized when incurred in the Statement of Activities (129,614) Delinquent and deferred receivables will be collected this year, but are not available soon enough to pay for the current period's expenditures and, therefore, are not revenues in the funds. (9,116) Internal service funds are used by management to charge the costs of certain activities such as buildings, equipment, park assets and employee benefits to individual funds. (See Note 2.B.) 2,259,080 Change in Net Assets - Governmental Activities $ 210,794 The Notes to the Financial Statements are an integral part of this statement. 29 CITY OF SHAKOPEE STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES - BUDGET AND ACTUAL - GENERAL FUND For the Year Ended December 31, 2010 Current General Government Budgeted Amounts 3,164,250 Variance with (204,017) Public Safety 9,284,200 Actual Final Budget - (308,841) Original Final Amounts Over (Under) REVENUES Park and Recreation 4,377,240 4,413,880 4,075,919 Property Taxes $ 13,481,010 $13,481,010 $ 13,557,007 $ 75,997 Special Assessments 2,000 2,000 28,988 26,988 Licenses and Permits 1,028,800 1,028,800 1,303,904 275,104 Intergovernmental 608,260 608,260 828,906 220,646 Charges for Services 1,880,040 1,880,040 1,827,039 (53,001) Fines and Forfeitures 381,000 381,000 423,746 42,746 Miscellaneous Revenues: Excess of Revenues Over Investment Income 375,000 375,000 314,043 (60,957) Contributions and Donations 5,000 5,000 2,322 (2,678) Other 44,950 44,950 130,524 85,574 Total Revenues 17,806,060 17,806,060 18,416,479 610,419 Current General Government 3,229,250 3,164,250 2,960,233 (204,017) Public Safety 9,284,200 9,262,017 8,953,176 (308,841) Public Works 2,707,590 2,714,090 2,632,923 (81,167) Park and Recreation 4,377,240 4,413,880 4,075,919 (337,961) Economic Development 155,000 142,000 70,019 (71,981) Capital Outlay Beginning of Year General Government 8,000 73,000 10,382 (62,618) Public Safety - 22,183 22,183 Public Works 6,500 - Total Expenditures 19,767,780 19,791,420 18,724,835 (1,066,585) Excess of Revenues Over (Under) Expenditures (1,961,720) (1,985,360) (308,356) 1,677,004 OTHER FINANCING SOURCES (USES) Proceeds from Sale of Capital Asset - - 6,000 6,000 Transfers In 2,044,400 2,044,400 2,233,806 189,406 Transfers Out - (2,796,000) (4,396,000) (1,600,000) Total Other Financing Sources (Uses) 2,044,400 (751,600) (2,156,194) (1,404,594) Net Change in Fund Balances $ 82,680 $ (2,736,960) (2,464,550) $ 272,410 FUND BALANCES Beginning of Year 11,502,280 End of Year $ 9,037,730 The Notes to the Financial Statements are an integral part of this statement. 30 CITY OF SHAKOPEE STATEMENT OF NET ASSETS- PROPRIETARY FUNDS December 31, 2010 Noncurrent Assets $ 2,865,354 Business -Type Activities - Enterprise Funds $ 3,166,560 $ 39,194 Restricted Accounts 1,132,383 1,400 - - 1,133,783 Governmental Other Accounts 100,000 4,285,450 - - 4,385,450 Activities - Notes Receivable, Noncurrent - - - Storro - Internal Unamortized Debt Issue Costs Electric Water Sewer Drainage Total Service Funds ASSETS 434,392 - - - 434,392 - Current Assets 1,132,383 1,400 1,133,783 Cash and Investments, Including Cash Equivalents $ 20,981,118 $ 3,408,384 $16,311,730 $16,172,760 $ 56,873,992 $ 14,411,695 Restricted Accounts 906,389 81,143 - - 987,532 - Accounts Receivable 2,979,708 269,680 459,546 204,594 3,913,528 900 Allowance for Uncollectible Accounts (39,789) (6,761) - - (46,550) - Interest Receivable 54,035 13,224 79,115 88,363 234,737 64,541 Special Assessment Receivable, Current - - 147,133 - 147,133 - Notes Receivable, Current - - - - - 85,000 Due from Other Funds 55,882 18,627 - - 74,509 - Inventories 681,775 40,824 - - 722,599 35,005,983 Prepaid Expenses 62,943 20,981 $48,381,790 $49,301,926 83,924 $49,568,119 Total Current Assets 25,682,061 3,846,102 16,997,524 16,465,717 62,991,404 14,562,136 Noncurrent Assets $ 2,865,354 $ 206,651 $ 74,151 $ 20,404 $ 3,166,560 $ 39,194 Restricted Accounts 1,132,383 1,400 - - 1,133,783 - Other Accounts 100,000 4,285,450 - - 4,385,450 - Notes Receivable, Noncurrent - - - - - 280,000 Unamortized Debt Issue Costs 511,572 45,899 - - 557,471 - ElechicPlantAcquisition (Net of Amortization) 434,392 - - - 434,392 - Capital Assets: 1,132,383 1,400 1,133,783 Line Rights - - 1,368,569 - 1,368,569 - LandandLandImprovements 4,205,199 892,333 4,500 3,939,880 9,041,912 - PlantinService 42,078,038 44,642,628 37,384,919 37,238,655 161,344,240 33,497,188 Machinery and Equipment - - 1,800,761 617,737 2,418,498 14,650,165 Construction in Progress 2,296,753 3,052 Compensated Absences - 2,299,805 150,752 Total Cost 48,579,990 45,538,013 40,558,749 41,796,272 176,473,024 48,298,105 Less Accumulated Depreciation (12,688,764) (10,643,057) (9,174,483) (8,960,063) (41,466,367) (13,572,122) Net Capital Assets 35,891,226 34,894,956 31,384,266 32,836,209 135,006,657 34,725,983 Total Noncurrent Assets 38,069,573 39,227,705 31,384,266 32,836,209 141,517,753 35,005,983 Total Assets $63,751,634 $43,073,807 $48,381,790 $49,301,926 $204,509,157 $49,568,119 LIABILITIES AND NET ASSETS Current Liabilities Accounts and Contracts Payable $ 2,865,354 $ 206,651 $ 74,151 $ 20,404 $ 3,166,560 $ 39,194 Due to Other Funds 69,315 90,317 55,882 18,627 234,141 - Current Compensated Absences - - 21,000 14,000 35,000 750,000 Liabilities Payable from Restricted Accounts: Current Portion of Revenue Bonds 674,000 106,000 - - 780,000 - Accrued Interest Payable 354,556 27,976 - - 382,532 - Customer Deposits 1,132,383 1,400 1,133,783 Total Current Liabilities 5,095,608 432,344 151,033 53,031 5,732,016 789,194 Noncurrent Liabilities Unearned Revenue 2,690 95,254 - - 97,944 - Customer Advances 51,896 3,570 - - 55,466 - Compensated Absences - - 29,918 1,038 30,956 919,770 Revenue Bonds (Net ofUnamorlized Bond Premium '.. and Unamortized Loss on Advance Refunding) 18,231,895 1,364,186 - - 19,596,081 - Net OPEB Obligation 14,303 14,303 28,606 Total Noncurrent Liabilities 18,286,481 1,463,010 44,221 15,341 19,809,053 919,770 Total Liabilities 23,382,089 1,895,354 195,254 68,372 25,541,069 1,708,964 Net Assets Invested in Capital Assets, Net of Related Debt 17,419,723 - 33,424,770 31,384,266 32,836,209 115,064,968 34,725,983 Restricted for: Debt Service 551,833 53,167 - - 605,000 - Capital Improvements - 4,284,050 - - 4,284,050 - Unrestricted 22,397,989 3,416,466 16,802,270 16,397,345 59,014,070 13,133,172 Total Net Assets 40,369,545 41,178,453 48,186,536 49,233,554 178,968,088 47,859,155 Total Liabilities and Net Assets $63,751,634 $43,073,807 $48,381,790 $49,301,926 $204,509,157 $49,568,119 The Notes to the Financial Statements are an integral part of this statement. 31 CITY OF SHAKOPEE STATEMENT OF REVENUES, EXPENSES AND CHANGES IN FUND NET ASSETS - PROPRIETARY FUNDS For the Year Ended December 31, 2010 The Notes to the Financial Statements are an integral part of this statement. 32 Business -Type Activities - Enterprise Funds Governmental Activities - Intemal Service Electric Water Sewer Storm Drainage Total Funds OPERATING REVENUES Charges for Services $ 36,643,018 $ 4,295,574 $ 3,460,974 $ 1,187,229 $ 45,586,795 $ - Rental and Other Charges 3,103,877 Total Operating Revenues 36,643,018 4 3,460,974 1,187,229 45,586,795 3,103,877 OPERATING EXPENSES Operations and Maintenance 30,184,355 2,119,568 2,958,593 1,112,924 36,375,440 - Depreciation 1,505,499 1,094,557 724,575 674,371 3,999,002 1,709,620 Amortization 63,003 - - - 63,003 - Materials and Supplies - - - - - 3,687 Employee Benefits 389,836 Total Operating Expenses 31,752,857 3,214,125 3,683,168 1,787,295 40,437,445 2,103,143 Operating Income (Loss) 4,890,161 1,081,449 (222,194) (600,066) 5,149,350 1,000,734 NONOPERATING REVENUES (EXPENSES) Investment Income 276,799 66,864 475,914 460,295 1,279,872 385,958 Special Assessments - - 14,235 - 14,235 - Operating Grants and Contributions - - 6,415 - 6,415 - Interest Expense (858,466) (68,957) - - (927,423) - Loss on Sale of Asset - - (2,249) (5,454) (7,703) (7,688) Amortization of Debt issue Costs and Loss on Refunding (89,087) (9,997) - - (99,084) Other Income 228,990 121,924 33,738 94,757 479,409 21,458 Total Nonoperating Revenues (Expenses) (441,764) 109,834 528,053 549,598 745,721 399,728 Income (Loss) before Capital Contributions and Transfers 4,448,397 1,191,283 305,859 (50,468) 5,895,071 1,400,462 Capital Contributions 137,211 1,078,590 45,600 399,600 1,661,001 9,500 Transfers In - - - - - 2,756,299 Transfers Out (1,173,056) (816,350) (50,000) (50,000) (2,089,406) (1,486,297) Change in Net Assets 3,412,552 1,453,523 301,459 299,132 5,466,666 2,679,964 NET ASSETS Beginning of Year 36,956,993 39,724,930 47,885,077 48,934,422 173,501,422 45,179,191 End of Year $ 40,369,545 $ 41,178,453 $ 48,186,536 $ 49,233,554 $ 178,968,088 $ 47,859,155 The Notes to the Financial Statements are an integral part of this statement. 32 CITY OF SHAKOPEE CASH FLOWS - OPERATING ACTIVITIES Receipts from Customers and Users Payments to Suppliers Payments to Employees Payments for Interfund Services Payment from Operating Grants Net Cash Flows - Operating Activities CASH FLOWS - NONCAPITAL FINANCING ACTIVITIES Proceeds from Sale of Assets Transfer from Other Funds Transfer to Other Funds Net Cash Flows - Noncapital Financing Activities CASH FLOWS - CAPITAL AND RELATED FINANCING ACTIVITIES Principal Paid on Debt Interest Paid on Debt Connection Charges Trunk Charges Capital Related Special Assessments Interfund Loan for Capital Acquisition Proceeds from Disposal of Capital Assets Acquisition of Capital Assets Net Cash Flows - Capital and Related Financing Activities CASH FLOWS- INVESTING ACTIVITIES Proceeds (Purchases) of Investments Payment Received for Notes Receivable Interest and Dividends Received Net Cash Flows - Investing Activities Net Change in Cash and Cash Equivalents CASH AND CASH EQUIVALENTS Beginning of Year End of Year RECONCILIATION OF CASH AND CASH EQUIVALENTS TO THE STATEMENT OF NET ASSETS Restricted Accounts Other Accounts Cash and Investments Subtotal Less Long -Term Investments Cash and Cash Equivalents STATEMENT OF CASH FLOWS- PROPRIETARY FUNDS For the Year Ended December 31, 2010 24,133 2,676 - - 26,809 - - - - - - 2,756,299 (975,174) (816,350) (50,000) (50,000) (1,891,524) (1,486,297) (951,041) (813,674) (50,000) (50,000) (1,864,715) 1,270,002 (661,000) (104,000) - - (765,000) - (868,952) (70,474) - - (939,426) - - 1,065,296 - - 1,065,296 - - 33,738 94,757 128,495 - - - 45,518 - 45,518 - - 1,505,000 - 1,505,000 - - 83,376 83,376 228,527 (2,467,641) (470,588) (482,020) (789,249) (4,209,498) (1,393,428) (3,997,593) 420,234 1,102,236 (611,116) (3,086,239) (1,164,901) (5,111,203) 814,310 13,040,736 14,853,804 23,597,647 (3,334,117) - - - - 80,000 321,219 88,232 498,907 490,974 1,399,332 393,969 (4,789,984) 902,542 13,539,643 15,344,778 24,996,979 (2,860,148) (3,469,305) 2,756,236 15,130,249 14,827,017 29,244,197 (337,569) 12,245,195 2,598,691 1,181,481 1,345,743 17,371,110 2,075,357 $ 8,775,890 $ 5,354,927 $ 16,311,730 $ 16,172,760 $ 46,615,307 $ 1,737 788 $ 2,038,772 $ 4,367,993 100,000 - 20,981,118 3,408,384 23,119,890 7,776,377 (14,344,000) (2,421,450) $ 8,775,890 $ 5,354.927 $ - $ - $ 6,406,765 100,000 16,311,730 16,172,760 56,873,992 16,311,730 16,172,760 63,380,757 (16,765,450) $ 16,311,730 $ 16,172,760 $ 46.615.307 14,411,695 14,411,695 (12,673,907) $ 1,737.788 The Notes to the Financial Statements are an integral part of this statement. 33 Business -Type Activities - Enterprise Funds Governmental Activities - Stonn Internal Electric Water Sewer Drainage Total Service Funds $ 36,427,881 $ 4,445,827 $ 3,404,852 $ 1,228,680 $ 45,507,240 $ 3,124,435 (26,942,427) (844,117) (2,565,510) (733,754) (31,085,808) (3,687) (3,216,141) (1,354,576) (255,814) (334,380) (5,160,911) (703,270) - - (51,573) (17,191) (68,764) - 6,415 6,415 6,269,313 2,247,134 538,370 143,355 9,198,172 2,417,478 24,133 2,676 - - 26,809 - - - - - - 2,756,299 (975,174) (816,350) (50,000) (50,000) (1,891,524) (1,486,297) (951,041) (813,674) (50,000) (50,000) (1,864,715) 1,270,002 (661,000) (104,000) - - (765,000) - (868,952) (70,474) - - (939,426) - - 1,065,296 - - 1,065,296 - - 33,738 94,757 128,495 - - - 45,518 - 45,518 - - 1,505,000 - 1,505,000 - - 83,376 83,376 228,527 (2,467,641) (470,588) (482,020) (789,249) (4,209,498) (1,393,428) (3,997,593) 420,234 1,102,236 (611,116) (3,086,239) (1,164,901) (5,111,203) 814,310 13,040,736 14,853,804 23,597,647 (3,334,117) - - - - 80,000 321,219 88,232 498,907 490,974 1,399,332 393,969 (4,789,984) 902,542 13,539,643 15,344,778 24,996,979 (2,860,148) (3,469,305) 2,756,236 15,130,249 14,827,017 29,244,197 (337,569) 12,245,195 2,598,691 1,181,481 1,345,743 17,371,110 2,075,357 $ 8,775,890 $ 5,354,927 $ 16,311,730 $ 16,172,760 $ 46,615,307 $ 1,737 788 $ 2,038,772 $ 4,367,993 100,000 - 20,981,118 3,408,384 23,119,890 7,776,377 (14,344,000) (2,421,450) $ 8,775,890 $ 5,354.927 $ - $ - $ 6,406,765 100,000 16,311,730 16,172,760 56,873,992 16,311,730 16,172,760 63,380,757 (16,765,450) $ 16,311,730 $ 16,172,760 $ 46.615.307 14,411,695 14,411,695 (12,673,907) $ 1,737.788 The Notes to the Financial Statements are an integral part of this statement. 33 CITY OF SHAKOPEE STATEMENT OF CASH FLOWS - PROPRIETARY FUNDS For the Year Ended December 31, 2010 (Continued) - RECONCILIATION OF OPERATING INCOME (LOSS) TO NET CASH FLOWS - OPERATING ACTIVITIES Operating Income (Loss) Adjustments to Reconcile Operating Income (Loss) to Net Cash Flows - Operating Activities: Miscellaneous Operating Revenue Free Electric Service to the City Depreciation and Amortization Expense Change in Assets and Liabilities: Accounts Receivable, Net Due from Other Funds Prepaid Items Inventory Accounts Payable Customer Deposits Deferred Revenue Customer Advances Due to Other Funds Compensated Absences Payable Net OPEB Obligation Other Liabilities Total Adjustments Net Cash Flows - Operating Activities NONCASH INVESTING, CAPITAL AND FINANCING ACTIVITIES Contributions of Capital Assets from the Municipality and Developers Purchases of Capital Assets on Account Free Electric Service to the City Business -Type Activities - Enterprise Funds Governmental Activities - Storm Internal Electric Water Sewer Drainage Total Service Fonds $ 4,890,161 $ 1,081,449 $ (222,194) $ (600,066) $ 5,149,350 $ 1,022,192 228,990 121,924 6,415 - 357,329 - (197,882) - - - (197,882) - 1,568,502 1,094,557 724,575 674,371 4,062,005 1,709,620 (438,046) 7,357 (56,122) 41,451 (445,360) (900) 110,290 72 - - 110,362 - (826) (275) - - (1,101) - 49,907 (8,708) - - 41,199 - (18,761) (57,099) 68,174 16,128 8,442 - 71,236 (500) - - 70,736 - 2,234 25,663 - - 27,897 - 8,041 (4,263) - - 3,778 - 69,275 21,425 4,309 1,436 96,445 - - 6,510 3,332 9,842 107,450 6,703 6,703 13,406 (420,884) (73,808) (34,468) (108,276) 1,379,152 1,165,685 760,564 743,421 4,048,822 1,395,286 $ 6,269,313 $ 2,247,134 $ 538,370 $ 143,355 $ 9.198.172 $ 2,417,478 $ 137,211 $ 13,294 $ 45,600 $ 399,600 $ 595,705 $ 9,500 - - - - - 13,741 197,882 - - - 197,882 - The Notes to the Financial Statements are an integral part of this statement. 34 CITY OF SHAKOPEE STATEMENT OF FIDUCIARY NET ASSETS December 31, 2009 The Notes to the Financial Statements are an integral part of this statement. 35 Escrow Agency Fund ASSETS Cash and Investments $ 1,749,597 LIABILITIES Accounts Payable $ 904 Deposits Payable 1,748,693 Total Liabilities $ 1,749,597 The Notes to the Financial Statements are an integral part of this statement. 35 (THIS PAGE LEFT BLANK INTENTIONALLY) 36 CITY OF SHAKOPEE NOTES TO THE FINANCIAL STATEMENTS December 31, 2010 NOTE 1— SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES A. Reporting Entity The City of Shakopee is a statutory city governed by an elected mayor and four council members. The accompanying financial statements present the government entities for which the government is considered to be financially accountable. The financial statements present the City and its component units. The City includes all funds, organizations, institutions, agencies, departments and offices that are not legally separate from such. Component units are legally separate organizations for which the elected officials of the City are financially accountable and are included within the financial statements of the City because of the significance of their operational or financial relationships with the City. The City is considered financially accountable for a component unit if it appoints a voting majority of the organization's governing body and it is able to impose its will on the organization by significantly influencing the programs, projects, activities or level of services performed or provided by the organization or there is a potential for the organization to provide specific financial benefits to or impose specific financial burdens on, the City. As a result of applying the component unit definition criteria above, certain organizations have been defined and are presented in this report as follows: Blended Component Unit — Reported as if they were part of the City. Joint Ventures and Jointly Governed Organizations — The relationship of the City with the entity is disclosed. For each of the categories above, the specific entities are identified as follows: 1. Blended Component Unit The Shakopee Economic Development Authority (EDA) was organized to promote development, improve housing and reduce blighted areas in the City. It is included by reason of the City Council having final approval for Shakopee EDA actions and the Shakopee EDA Board being comprised entirely of City Council Members. City staff handles Shakopee EDA activity including Shakopee EDA funds and the City approves Shakopee EDA tax levies and bonding activity. Therefore, the City has financial oversight for Shakopee EDA activities. The activity of the Shakopee EDA is shown in the Shakopee EDA Special Revenue Fund in the City's financial statements. No separate financial statements for the Shakopee EDA are issued. For any information desired beyond what is presented in this report, contact the Finance Director for the City of Shakopee at 129 Holmes Street South, Shakopee, Minnesota 55379 -1351. 37 CITY OF SHAKOPEE NOTES TO THE FINANCIAL STATEMENTS December 31, 2010 NOTE 1— SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES A. Reporting Entity (Continued) 2. Joint Ventures and Jointly Governed Organizations Local Government Information Systems Local Government Information Systems ( LOGIS) is a joint venture of approximately 44 governmental entities that provides computerized data processing and support services to its members. Legally separate, the City does not appoint a voting majority of the Board and LOGIS is fiscally independent of the City. During 2010, the City paid $ 129,104 to LOGIS for services provided which is included in expenditures of the General Fund. Financial statements are available by contacting LOGIS, 5750 Duluth Street, Golden Valley, Minnesota 55422 -4036. Scott Joint Prosecution Association Scott Joint Prosecution Association (SJPA) is a joint venture of approximately seven cities that provides legal prosecution and support services to its members. Legally separate, the City does not appoint a voting majority of the Board of Directors and the SJPA is fiscally independent of the City During 2010, the City paid $ 443,039 to the SJPA for services provided which is included in expenditures of the General Fund. Financial statements are available by contacting the SJPA, 200 Fourth Avenue West, Shakopee, Minnesota 55379. 3. Other Organizations Shakopee Volunteer Fire Department Relief Association The Shakopee Volunteer Fire Department Relief Association (the "Association ") is organized as a nonprofit organization, legally separate from the City, by its members to provide pensions and other benefits to such members in accordance with Minnesota Statutes. It is not a component unit of the City because the Board of Directors is appointed by the membership of the Association and not by the City Council. The financial oversight of the City is limited to approval authority for amending the Association bylaws when the change results in an increase in the pension benefit level requiring an increased City contribution. The Association has the authority to levy its own taxes for pensions and deficits and would continue to exist for its members if the City was dissolved. Because the Association is fiscally independent of the City, the financial statements of the Association have not been included within the City's reporting entity. in CITY OF SHAKOPEE NOTES TO THE FINANCIAL STATEMENTS December 31, 2010 NOTE 1— SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES B. Government -Wide and Fund Financial Statements The government -wide financial statements (i.e., the Statement of Net Assets and the Statement of Activities) report information on all of the nonfiduciary activities of the City. The fiduciary funds are only reported in the Statement of Fiduciary Net Assets at the fund financial statement level. Governmental activities, which normally are supported by taxes and intergovernmental revenues, are reported separately from business -type activities, which rely to a significant extent on fees and charges for support. The Statement of Activities demonstrates the degree to which the direct expenses of a given function or segment is offset by program revenues. Direct expenses are those that are clearly identifiable with a specific function or segment. Interest on general long -term debt is considered an indirect expense and is reported separately in the Statement of Activities. Program revenues include 1) charges to customers or applicants who purchase, use or directly benefit from goods, services or privileges provided by a given function or segment and 2) grants and contributions that are restricted to meeting the operational or capital requirements of a particular function or segment. Taxes and other items not properly included among program revenues are reported instead as general revenues. Internally dedicated revenues are reported as general revenues rather than program revenues. Separate financial statements are provided for governmental funds and proprietary funds. Major individual governmental funds and major individual enterprise funds are reported as separate columns in the fund financial statements. The Escrow Agency Fund is presented in the fiduciary fund financial statements. Since, by definition, these assets are being held for the benefit of a third party (other local governments, private parties, etc.) and cannot be used to address activities or obligations of the City, this Fund is not incorporated into the government -wide statements. C. Measurement Focus, Basis of Accounting and Financial Statement Presentation The government-wide financial statements are reported using the economic resources measurement focus and the accrual basis of accounting, as are the proprietary fund financial statements. Revenues are recorded when earned and expenses are recorded when a liability is incurred, regardless of the timing of related cash flows. Property taxes are recognized as revenues in the year for which they are levied. Grants and similar items are recognized as revenue as soon as all eligibility requirements imposed by the provider have been met. The 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. 39 CITY OF SHAKOPEE NOTES TO THE FINANCIAL STATEMENTS December 31, 2010 NOTE 1— SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES C. Measurement Focus, Basis of Accounting and Financial Statement Presentation (Continued) Governmental fund financial statements are reported using the current financial resources measurement focus and the modified accrual basis of accounting. Revenues are recognized as soon as they are both measurable and available. Revenues are considered to be available when they are collectible within the current period or soon enough thereafter to pay liabilities of the current period. For this purpose, the City considers revenues to be available if they are collected within 60 days of the end of the current fiscal period. Expenditures generally are recorded when a liability is incurred, as under accrual accounting. However, debt service expenditures, as well as expenditures related to compensated absences and claims and judgments, are recorded only when payment is due. Property taxes, franchise taxes, licenses and interest associated with the current fiscal period are all considered to be susceptible to accrual and so have been recognized as revenues of the current fiscal period. Only the portion of special assessments receivable due within the current fiscal period is considered to be susceptible to accrual as revenue of the current period. All other revenue items are considered to be measurable and available only when cash is received by the City. Description of Funds: Major Governmental Funds: General Fund — This Fund is the City's primary operating fund. It accounts for all financial resources of the general City, except those required to be accounted for in another fund. 2004A Improvement Bonds Debt Service Fund — This Fund accounts for resources accumulated and payments made for principal and interest on this bond issue. Proprietary Funds: Electric Fund — This Fund accounts for the operations of the City's electric utility. 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. Storm Drainage Fund — This Fund accounts for the activities of the City's storm drainage utility. Internal Service Funds: Equipment Fund — This Fund accounts for the City's acquisition of larger pieces of equipment. Building Fund — This Fund accounts for the City's funds accumulated for construction, improvement or major repairs of major public buildings. G!1 CITY OF SHAKOPEE NOTES TO THE FINANCIAL STATEMENTS December 31, 2010 NOTE 1— SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES C. Measurement Focus, Basis of Accounting and Financial Statement Presentation (Continued) Description of Funds: (Continued) Internal Service Funds: (Continued) Park Assets Fund — This Fund accounts for the City's funds accumulated for the replacement of park assets. Employee Benefits Fund — This Fund accounts for the City's funds accumulated for compensated absences and OPEB. Information Technology — This Fund accounts for the City's funds accumulated for information technology resources. Fiduciary Fund: Escrow Agency Fund — This Fund accounts for the monies held for specific purposes for individuals, private organizations, other government units and other funds. Escrows are held on behalf of builders and developers, for security deposits and police evidence deposits. All of the City's internal service funds are governmental in nature and are combined with governmental activities in the government -wide financial statements. Private - sector standards of accounting and financial reporting issued prior to December 1, 1989, generally are followed in both the government -wide and proprietary fund financial statements to the extent that those standards do not conflict with or contradict guidance of the 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 elected not to follow subsequent private - sector guidance. As a general rule, the effect of interfund activity has been eliminated from the government -wide financial statements. Exceptions to this general rule are payments, where the amounts are reasonably equivalent in value to the interfund services provided and other charges between the City's utility function and various other functions of the City. Elimination of these charges would distort the direct costs and program revenues reported for the various functions concerned. Proprietary funds distinguish operating revenues and expenses from nonoperating items. Operating revenues and expenses generally result from providing services and producing and delivering goods in connection with a proprietary fund's principal ongoing operations. The principal operating revenues of the enterprise funds are charges to customers for sales and services. Operating expenses for enterprise funds include the cost of sales and services, administrative expenses and depreciation on capital assets. All revenues and expenses not meeting this definition are reported as nonoperating revenues and expenses. 41 CITY OF SHAKOPEE NOTES TO THE FINANCIAL STATEMENTS December 31, 2010 NOTE 1— SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES C. Measurement Focus, Basis of Accounting and Financial Statement Presentation (Continued) When both restricted and unrestricted resources are available for use, it is the City's policy to use restricted resources first, then unrestricted resources as they are needed. D. Assets, Liabilities and Net Assets or Equity 1. Deposits and Investments The City's cash and cash equivalents are considered to be cash on hand, demand deposits and highly liquid debt instruments purchased with original maturities of three months or less from the date of acquisition. Investments are stated at fair value. Minnesota Statutes authorizes the City to invest in obligations of the U.S. Treasury, agencies and instrumentalities, shares of investment companies whose only investments are in the aforementioned securities, obligations of the State of Minnesota or its municipalities, bankers' acceptances, future contracts, repurchase and reverse repurchase agreements and commercial paper of the highest quality with a maturity of no longer than 270 days and in the Minnesota Municipal Money Market Fund. The Minnesota Municipal Money Market Fund is an external investment pool not registered with the Securities Exchange Commission (SEC) that follows the same regulatory rules of the SEC under Rule 2.a.7. The fair value of the position in the pool is the same as the value of the pool shares. The City's investment policy for all funds except the Electric and Water Enterprise Funds (Shakopee Public Utilities Commission) addresses custodial credit risk for deposits. The policy also addresses credit risk, interest rate risk, concentration of credit risk and custodial credit risk for investments. The City's Electric and Water Enterprise Funds (Shakopee Public Utilities Commission) also have a formal policy to address all of these risks except custodial credit risk for investments. Custodial Credit Risk — Deposits: This is the risk that in the event of a bank failure, the City's deposits may not be returned to it. Minnesota Statutes require all deposits be protected by federal deposit insurance, corporate surety bonds or collateral. The market value of collateral pledged must equal 110% of deposits not covered by Federal Deposit Insurance Corporation (FDIC) insurance or corporate surety bonds and letters of credit. The City's investment policy and the investment policy for the City's Electric and Water Enterprise Funds (Shakopee Public Utilities Commission) state deposits must be collateralized in order to comply with Minnesota Statutes. Credit Risk: This is the risk that an issuer or other counterparty to an investment will not fulfill its obligation to the holder of the investment. Minnesota Statutes 118A.04 and 188A.05 limit investments that are in the top two ratings issued by nationally recognized statistical rating organizations. The City's investment policy references Minnesota Statutes and further limits the types of investments that the City is allowed to invest in. The investment policy for the City's Electric and Water Enterprise Funds (Shakopee Public Utilities Commission) also defines suitable and authorized investments and related minimum ratings. 42 CITY OF SHAKOPEE NOTES TO THE FINANCIAL STATEMENTS December 31, 2010 NOTE 1— SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES D. Assets, Liabilities and Net Assets or Equity (Continued) 1. Deposits and Investments (Continued) Interest Rate Risk: This is the risk that changes in market interest rates will adversely affect the fair value of an investment. The City's policy states the investment portfolio shall be designed with the objective of attaining a market rate of return throughout budgetary and economic cycles, taking into account the investment risk constraints and liquidity needs. To the extent possible, the City shall attempt to match its investments in short-term operating funds with anticipated cash flow requirements. Unless matched to a specific cash flow, the City will not directly invest in securities maturing more than ten years from the date of purchase. Long -term funds shall not be invested in securities exceeding 10 years in modified duration, at time of purchase. The investment policy for the City's Electric and Water Enterprise Funds (Shakopee Public Utilities Commission) addresses this ri sk by requiring holding of securities to maturity (subject to certain exceptions) and limiting maturity constraints to a relatively short duration. Concentration of Credit Risk: This is the risk of loss attributed to the magnitude of an investment in a single issuer. According to the City's investment policy, the aggregate investment portfolio shall be diversified by: • Limiting investments to avoid over concentration in securities from a specific issuer or business sector. • Limiting investments in securities that have higher credit risks. • Investing in securities with varying maturities. • Continuously investing a portion of the portfolio in readily available funds, such as Local Government Investment Pools (LGIP), money market funds or repurchase agreements to ensure appropriate liquidity is maintained in order to meet ongoing obligations. • Having all investments, other than those in direct obligations or agencies of the United States, secured by collateral or repurchase agreements, shall not exceed 50% of the aggregate investment portfolio. Mortgage backed securities shall not exceed 35% of the aggregate investment portfolio, at the time of investment (i.e., commercial paper or bankers' acceptance). • Limiting investments in anyone corporation to 5% of the aggregate investment portfolio. The investment policy for the City's Electric and Water Enterprise Funds (Shakopee Public Utilities Commission) defines suitable and authorized investments and related minimum ratings as well as application of prudent person standards in construction of portfolio management and diversification. Custodial Credit Risk — Investments: For an investment, this is the risk that in the event of the failure of the counterparty, the City will not be able to recover the value of its investments or collateral securities that are in the possession of an outside party. The City's investment policy states all securities purchased, including appropriate collateral, shall be placed with an independent third party for custodial safekeeping. 43 CITY OF SHAKOPEE NOTES TO THE FINANCIAL STATEMENTS December 31, 2010 NOTE 1— SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES D. Assets, Liabilities and Net Assets or Equity (Continued) 2. Receivables and Payables Activity between funds that are representative of lending/borrowing arrangements outstanding at the end of the fiscal year are referred to as "advances to /from other funds ". All other outstanding balances between funds are reported as "due to /from other funds ". Any residual balances outstanding between the governmental activities and business -type activities are reported in the government -wide financial statements as "interfund balances ". All trade and property tax receivables are shown at a gross amount since both are assessable to the property taxes and are collectible upon the sale of the property. The City levies its property tax for the subsequent year during the month of December. December 28 is the last day the City can certify a tax levy to the County Auditor for collection the following year. Such taxes become a lien on January 1 and are recorded as receivables by the City at that date. The property tax is recorded as revenue when it becomes measurable and available. Scott County is the collecting agency for the levy and remits the collections to the City three times a year. The tax levy notice is mailed in March with the first half of the payment due on May 15 and the second half due on October 15. Taxes not collected as of December 31 each year are shown as delinquent taxes receivable. The County Auditor prepares the tax list for all taxable property in the City, applying the applicable tax rate to the tax capacity of individual properties, to arrive at the actual tax for each property. The County Auditor also collects all special assessments, except for certain prepayments paid directly to the City. The County Auditor submits the list of taxes and special assessments to be collected on each parcel of property to the County Treasurer in January of each year. 3. Inventory, Prepaid Items and Other Assets Certain payments to vendors reflect costs applicable to future accounting periods and are recorded as prepaid items in both government -wide and fund financial statements. Other assets include unamortized debt issuance costs for the Electric and Water Enterprise Funds. Inventories of enterprise funds are valued at average cost using the first in, first out (FIFO) method. Inventories of governmental funds are not recorded at year -end on the Balance Sheets because they accumulate insignificant inventories. 4. Restricted Assets Certain cash and investments in the enterprise funds are classified as restricted. The Electric Fund has monies restricted for customer deposits and debt service. The Water Fund has monies restricted for water production and trunk distribution facility acquisition, based on trunk and connection fees collected from users, construction projects and debt service. 44 CITY OF SHAKOPEE NOTES TO THE FINANCIAL STATEMENTS December 31, 2010 NOTE 1— SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES D. Assets, Liabilities and Net Assets or Equity (Continued) 5. Capital Assets Capital assets, which include property, plant, equipment and infrastructure assets (e.g., roads, sidewalks and similar items), are reported in the applicable governmental or business -type activities columns in the government -wide financial statements. Capital assets are defined by the City, excluding the Electric and Water Enterprise Funds (Shakopee Public Utilities Commission), as assets with an initial, individual cost of more than $ 5,000 and an estimated useful life in excess of one year. Capital assets for the Electric and Water Enterprise Funds (Shakopee Public Utilities Commission) are defined as assets with an initial, individual cost of more than $ 1,000 and an estimated useful life in excess of one year. Such assets are recorded at historical cost or estimated historical cost if purchased or constructed. Donated capital assets are recorded at estimated fair market value at the date of donation. The costs of normal maintenance and repairs that do not add to the value of the asset or materially extend assets lives are not capitalized. Property, plant and equipment of the City are depreciated using the straight -line method over the following estimated useful lives. Assets Years Buildings 30 -50 Park Buildings 30 Building hnprovements 25 Light Vehicles 4 -10 Machinery and Equipment 4 -20 Utility Distribution System 50 -75 Infrastructure 30 -50 Fire Trucks 20 -25 6. Compensated Absences Vacation and sick leave benefits are recorded as expenditures in the Employee Benefits Internal Service Fund and governmental funds when the obligations have matured and are expected to be liquidated with expendable financial resources. City employees earn vacation time based on years of City service. Employees who have 0 to 15 years of employment may accumulate no more than 240 hours. Employees who have 16 or more years of service may accumulate no more than 360 hours of vacation leave. Upon termination, employees will receive compensation for all unused vacation. Employees earn sick leave and may accumulate to a maximum of 960 hours. The City compensates employees who leave municipal service at the rate of 45% up to 15 years of service. After 15 years of service, employees who leave are compensated at the rate of 55% plus 2% for each year of service beyond 15 years up to 75% of unused sick leave. 45 CITY OF SHAKOPEE NOTES TO THE FINANCIAL STATEMENTS December 31, 2010 NOTE 1— SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES D. Assets, Liabilities and Net Assets or Equity (Continued) 7. Long -Term Obligations In the government -wide financial statements and proprietary fund types in the fund financial statements, long -term debt and other long -term obligations are reported as liabilities in the applicable governmental activities, business -type activities or proprietary fund type Statement of Net Assets. Enterprise fund bond premiums and discounts, as well as issuance costs, are deferred and amortized over the life of the bonds using the effective interest method. Bonds payable are reported net of the applicable bond premium or discount. Bond issuance costs are reported as deferred charges and amortized over the term of the related debt. In the fund financial statements, governmental fund types recognize bond premiums and discounts, as well as bond issuance costs, during the current period. The face amount of debt issued is reported as other financing sources. Premiums received on debt issuances are reported as other financing sources while discounts on debt issuances are reported as other financing uses. Issuance costs, whether or not withheld from the actual debt proceeds received, are reported as expenditures. 8. Fund Equity A. Classification In the fund financial statements, governmental funds report fund classifications that comprise a hierarchy based primarily on the extent to which the City is bond to honor constraints on the specific purpose for which amounts in those funds can be spent. Non - spendable fund balances include amounts that cannot be spent because they are not in spendable form. Amounts that are restricted to specific purposes either by a) constraints placed on the use of resources by creditors, grantors, contributors, or laws or regulations of other governments or b) imposed by law through enabling legislation are classified as restricted fund balances. Amounts that can only be used for specific purposes pursuant to constraints imposed by the City Council (highest level of decision making authority) through resolution are classified as committed fund balances. Amounts that are constrained by the City's intent to be used for specific purposes but are neither restricted nor committed are classified as assigned fund balances. Assignments are made by the City's finance Director based on the City Council's direction. Unassigned fund balance represents fund balance that has not been assigned to other funds and that has not been restricted, committed or assigned to a specific purpose in the General Fund. The City's policy is to consider unrestricted fund balance to be spent by City Council action, appropriations or emergency situations. B. Minimum Fund Balance The City's target General Fund balance is to maintain an unassigned level between 40% (minimum) and 45% of current year expenditures. This level is to provide working capital for cash flow, expected decline in revenues and unforeseen expenditures such as natural disasters. Replenishing fund balance when it falls below the target level shall be accomplished by interfund transfers or budgeting for expenditures and other uses to be less than revenues or other sources over a period not to exceed three years. ,, CITY OF SHAKOPEE NOTES TO THE FINANCIAL STATEMENTS December 31, 2010 NOTE 1— SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES D. Assets, Liabilities and Net Assets or Equity (Continued) 9. Net Assets Net assets represent the difference between assets and liabilities in the government -wide 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 in the government -wide financial statement when there are limitations on their use through external restrictions imposed by creditors, grantors or laws or regulations of other governments. 10. Use of Estimates The preparation of financial statements in conformity with U.S. generally accepted 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 and expenditures /expense during the reporting period. Actual results could differ from those estimates. NOTE 2 — RECONCILIATION OF GOVERNMENT -WIDE AND FUND FINANCIAL STATEMENTS A. Explanation of Difference between the Proprietary Fund Statements of Revenues Expenses and Changes in Fund Net Assets and the Government -Wide Statement of Activities The proprietary fund Statement of Revenues, Expenses and Changes in Fund Net Assets shows the total change in the internal service funds which are all related to governmental activities. In the prior years, the Employee Benefit hntemal Service Fund reported a liability for net other post employment liabilities. During 2010, the City reclassified its Net OPEB liability from the internal service fund. Internal service funds are used by management to charge the costs of certain activities such as buildings, equipment, park assets and employee benefits to individual funds. This amount represents the change in net assets of the internal service funds, which all is reported with governmental activities. Governmental Acitivty Net OPEB Obligation Net adjustment to Increase Net Change in Fund Balances - Total Governmental Funds to arrice at Changes in Net Assets of Governmental Activities $ 2,679,964 (420,884) $ 2,259,080 47 CITY OF SHAKOPEE NOTES TO THE FINANCIAL STATEMENTS December 31, 2010 NOTE 3 — STEWARDSHIP, COMPLIANCE AND ACCOUNTABILITY A. Budgetary Information Budgets are adopted on a basis consistent with U.S. generally accepted accounting principles. 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 to have a budget adopted. All activity in this Fund is at the discretion of the Chief of Police. Budgeted amounts present the originally adopted budget and final amended budget approved by the City Council. The City does not use encumbrances. Budgeted expenditure appropriations lapse at year -end. 1. In August of each year, City staff submits to the City Council, a proposed operating budget for the fiscal year commencing the following January 1. The operating budget includes proposed expenditures and the means of financing them for the upcoming year. 2. Public hearings are conducted to obtain taxpayer comments. 3. The budget is legally enacted through passage of a resolution after obtaining taxpayer comments. 4. Expenditures may not legally exceed budgeted appropriations at the division level. No fund's budget can be increased without City Council approval. The City Council may authorize transfer of budgeted amounts between divisions within any fund. Management may amend budgets within a division level, so long as the total division budget is not changed. 5. Annual budgets are adopted for the General and applicable Special Revenue Funds. Annual appropriated budgets are not adopted for Debt Service Funds because effective budgetary control is alternatively achieved through bond indenture provisions. Budgetary control for Capital Projects Funds is accomplished through the use of project controls and budgets are not adopted. 6. Budgeted amounts are as originally adopted or as amended by the City Council. Individual amendments were not material in relation to the original amounts budgeted, except for transfers in the General, Telecommunication and Recreation Funds. NOTE 4 — DEPOSITS AND INVESTMENTS A. Deposits In accordance with applicable Minnesota Statutes, the City maintains deposits at depository banks authorized by the City Council. Custodial Credit Risk: As of December 31, 2010, the City's bank balances, including the Electric and Water Enterprise Funds (Shakopee Public Utilities Commission), were not exposed to custodial credit risk because they were insured through FDIC and properly collateralized with securities held by the pledging financial institutions' trust departments or agents in the City's name. As of December 31, 2010, the City had the following deposits: Deposits (All Funds but the Electric and $ 326,934 Water Enterprise Funds Deposits (Electric and Water Enterprise Funds) 10,601,685 Total Deposits $ 10,928,619 48 CITY OF SHAKOPEE NOTES TO THE FINANCIAL STATEMENTS December 31, 2010 NOTE 4 - DEPOSITS AND INVESTMENTS B. Investments As of December 31, 2010, the City held the following investments, excluding the Electric and Water Enterprise Funds (Shakopee Public Utilities Commission): U.S. Treasury Notes Agency Bonds: FAMC FFCB FHLB FHLMC FNMA Agency Step -Up Bonds: FHLB FHLMC FNMA Mortgage Bonds: CMO FHLMC FNMA GNMA Discount Notes Commercial Paper Municipal Bonds Certificates of Deposit Money Market Funds Total Investments Modified 0.53 Duration Moody's Fair Value (Years) Rating $ 16,702,789 2.87 Aaa Concentration 22.2% 1,026,950 0.53 Aaa 1.4% 2,638,185 2.55 Aaa 3.5% 2,366,631 2.41 Aaa 3.1% 755,631 0.30 Aaa 1.0% 2,356,018 0.67 Aaa 3.1% 5,917,260 1.06 Aaa 7.9% 3,987,930 1.10 Aaa 5.3% 11,428,090 1.06 Aaa 15.2% 1,512,793 0.99 Aaa 2.0% 2,872,290 2.57 Aaa 3.8% 2,461,751 2.38 Aaa 3.3% 153,017 1.31 Aaa 0.2% 5,999,480 0.12 Aaa 8.0% 1,893,694 0.55 P1 2.5% 8,468,223 2.45 Aal -Baal 11.3% 3,258,430 1.87 NR 4.3% 1,357,937 N/A NR 1.8% $ 75,157,099 1.32 CITY OF SHAKOPEE NOTES TO THE FINANCIAL STATEMENTS December 31, 2010 NOTE 4 — DEPOSITS AND INVESTMENTS B. Investments (Continued) As of December 31, 2010, the City had the following investments held in the Electric and Water Enterprise Funds (Shakopee Public Utilities Commission). Custodial Credit Risk — Investments: As of December 31, 2010, 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 and in the City's name. Concentration of Credit Risk: As of December 31, 2010, the City held investments that exceeded 5% of its total investments for all funds excluding the Electric and Water Enterprise Funds (Shakopee Public Utilities Commission). The City's Electric and Water Enterprise Funds (Shakopee Public Utilities Commission) investments in FHLB, FNMA and FHLMC also exceeded 5% of the total investments of those funds at December 31, 2010. The following is a summary of total deposits and investments as of December 31, 2010: Deposits (Note 3.A.) $ 10,928,619 Investments (Electric and Water Enterprise Funds) 20,293,282 Investments (All Funds but the Electric and Water Enterprise Funds) 75,157,099 Petty Cash 2,830 Total Deposits and Investments $ 106,381,830 50 Years to Maturity Less than Rating Fair Value One Year 1 -5 Years U.S Agencies AAA $ 10,684,653 $ 3,364,333 $ 7,320,320 U.S. Treasuries AAA 8,408,985 474,284 7,934,701 External Investment Pool N/A 1,129,112 1,129,112 - Money Market Fund N/A 70,532 70,532 Total $ 20,293,282 $ 5,038,261 $ 15,255,021 Custodial Credit Risk — Investments: As of December 31, 2010, 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 and in the City's name. Concentration of Credit Risk: As of December 31, 2010, the City held investments that exceeded 5% of its total investments for all funds excluding the Electric and Water Enterprise Funds (Shakopee Public Utilities Commission). The City's Electric and Water Enterprise Funds (Shakopee Public Utilities Commission) investments in FHLB, FNMA and FHLMC also exceeded 5% of the total investments of those funds at December 31, 2010. The following is a summary of total deposits and investments as of December 31, 2010: Deposits (Note 3.A.) $ 10,928,619 Investments (Electric and Water Enterprise Funds) 20,293,282 Investments (All Funds but the Electric and Water Enterprise Funds) 75,157,099 Petty Cash 2,830 Total Deposits and Investments $ 106,381,830 50 CITY OF SHAKOPEE NOTES TO THE FINANCIAL STATEMENTS December 31, 2010 NOTE 4 — DEPOSITS AND INVESTMENTS B. Investments (Continued) Deposits and investments are presented in the December 31, 2010 basic financial statements as follows: Statement of Net Assets: Cash and Investments $ 98,125,468 Restricted and Other Accounts 6,506,765 Statement of Fiduciary Net Assets 1,749,597 Total Cash and Investments $ 106,381,830 NOTE 5 — RECEIVABLESIDEFERRED REVENUE Governmental funds report deferred revenue in connection with receivables for revenues that are not considered to be available to liquidate liabilities of the current period. Governmental funds also defer revenue recognition in connection with resources that have been received, but not yet earned. At the end of the current fiscal year, the various components of deferred revenue reported in the governmental funds were as follows: 51 Delinquent Delinquent Deferred Property Special Special Taxes Assessments Assessments Total General Fund $ 305,598 $ 4,684 $ 50,464 $ 360,746 2004A Improvement Bonds - - 2,169,496 2,169,496 NonmajorFunds 5,026 26,105 3,805,145 3,836,276 Total $ 310,624 $ 30,789 $ 6,025,105 $ 6,366,518 51 CITY OF SHAKOPEE NOTES TO THE FINANCIAL STATEMENTS December 31, 2010 NOTE 6 — CAPITAL ASSETS Capital asset activity for the year ended December 31, 2010 was as follows: 52 Beginning Ending Balance hicreases Decreases Balance Governmental Activities: Capital Assets not being Depreciated: Land $ 19,469,140 $ 18,900 $ - $ 19,488,040 Construction in Progress 146,702 729,343 146,702 729,343 Total Capital Assets not being Depreciated 19,615,842 748,243 146,702 20,217,383 Capital Assets being Depreciated: Buildings 33,592,118 107,938 11,076 33,688,980 Infrastructure 127,752,351 2,248,645 - 130,000,996 Machinery and Equipment 13,192,061 1,012,492 906,958 13,297,595 Total Capital Assets being Depreciated 174,536,530 3,369,075 918,034 176,987,571 Less Accumulated Depreciation for: Buildings 7,723,387 896,158 8,395 8,611,150 Infrastructure 48,213,623 4,246,003 - 52,459,626 Machinery and Equipment 5,163,214 888,419 532,607 5,519,026 Total Accumulated Depreciation 61,100,224 6,030,580 541,002 66,589,802 Total Capital Assets being Depreciated, Net 113,436,306 (2,661,505) 377,032 110,397,769 Governmental Activities Capital Assets, Net $ 133,052,148 $ (1,913,262) $ 523,734 $130,615,152 52 CITY OF SHAKOPEE NOTES TO THE FINANCIAL STATEMENTS December 31, 2010 NOTE 6 — CAPITAL ASSETS Business -Type Activities: Capital Assets not being Depreciated: Land Line Rights Construction in Progress Total Capital Assets not being Depreciated Restated Beginning Balance Increases $ 8,521,029 $ 520,883 1,368,569 - 553,590 3,540,789 Ending Decreases Balance Capital Assets being Depreciated: Plant in Service Machinery and Equipment Total Capital Assets being Depreciated Less Accumulated Depreciation for: Plant in Service Machinery and Equipment Total Accumulated Depreciation Total Capital Assets being Depreciated, Net Business -Type Activities Capital Assets, Net $ $ 9,041,912 1,368,569 1,794,574 2,299,805 10,443,188 4,061,672 1,794,574 12,710,286 159,487,398 2,079,126 2,448,695 458,978 222,284 161,344,240 489,175 2,418,498 161,936,093 2,538,104 711,459 163,762,738 37,142,090 3,836,296 488,596 40,489,790 941,986 162,706 128,115 976,577 38,084,076 3,999,002 616,711 41,466,367 123,852,017 (1,460,898) 94,748 122,296,371 $ 134,295,205 $ 2,600,774 $ 1,889,322 $ 135,006,657 53 CITY OF SHAKOPEE NOTES TO THE FINANCIAL STATEMENTS December 31, 2010 NOTE 6 — CAPITAL ASSETS Depreciation expense was charged to functions /programs of the City as follows: Governmental Activities General Government $ 266,968 Public Safety 526,069 Public Works 4,538,677 Park and Recreation 698,866 Total Depreciation Expense - Governmental Activities $ 6,030,580 Business -Type Activities Electric $ 1,505,499 Water 1,094,557 Sanitary Sewer 724,575 Storm Drainage 674,371 Total Depreciation Expense - Business -Type Activities $ 3,999,002 NOTE 7 — LONG -TERM DEBT A. General Obligation Bonds The City issues general obligation (G.O.) bonds to provide for financing tax increment projects, street improvements and construction of government buildings. Debt service is covered respectively by tax increments and special assessments against benefited properties with any shortfalls being paid from general taxes. G.O. bonds are direct obligations and pledge the full faith and credit of the City. These bonds generally are issued as serial bonds with equal debt service payments each year. G.O. bonds currently outstanding are shown on the following page. B. Revenue Bonds The City issues Revenue Bonds for electric and water activity. Debt service is covered through the revenue producing activities of these funds. CITY OF SHAKOPEE NOTES TO THE FINANCIAL STATEMENTS December 31, 2010 NOTE 7 — LONG -TERM DEBT C. Components of Long -Term Liabilities 55 Issue Interest Original Final Principal Due Within Date Rates Issue Maturi Outstanding One Year Governmental Activities: G.O. Bonds: G.O. Improvement Bonds: 2000A 09/19/00 4.45% -4.95% $ 2,560,000 02/01/11 $ 225,000 $ 225,000 2003A 07/01/03 2.0 % -3.0% 2,215,000 02/01/14 665,000 665,000 2004A 05/01/04 2.25 % - 4.10% 4,225,000 02/01125 2,135,000 185,000 2004C 11/01/04 3.0 % -4.0% 2,570,000 02/01/15 1,270,000 250,000 2006A 07/01/06 4.00% 3,440,000 02/01/17 2,490,000 330,000 2007A 02/01/07 4.00% 1,370,000 02/01/17 1,040,000 110,000 2007B 09/01/07 4.00% 1,445,000 02/01118 1,185,000 145,000 2008A 09/01/08 3.5 %-4.0% 2,170,000 02/01/19 1,805,000 190,000 2010A 08/01/10 0.5 % -2.9% 1,555,000 02/01/21 1,555,000 30,000 G.O. Building Refunding Bonds 2004B 05101104 125%4.00% 2,275,000 02/01117 1,430,000 185,000 G.O. Capital Improvement Bonds 2004D 11/01/04 2.5 % -4.2% 6,000,000 02101/25 4,910,000 250,000 Total G.O. Bonds 18,710,000 2,565,000 Compensated Absences 1,669,770 750,000 Total Governmental '.. Activities $ 20,379,770 $ 3,315,000 Business -Type Activities: Revenue Bonds Including Refunding Bonds: Bonds2003A 05/01/03 2.25 % -4.45% $ 3,385,000 08/01/18 $ 2,025,000 $ 220,000 Bonds2004A 10/01/04 3.5 %4.5% 9,830,000 02/01/28 9,200,000 225,000 Bonds 2006A 11/21/06 4.125%- 4.375°/ 10,570,000 02101/30 10,245,000 335,000 Total Revenue Bonds 21,470,000 780,000 Unamortized Loss on Refunding (1,128,886) (68,434) Unamortized Bond Premium 34,967 4,715 Compensated Absences 65,956 35,000 Total Business -Type Activities $ 20,442,037 $ 751,281 Long -term bonded indebtedness listed above were issued to finance acquisition and construction of capital facilities or to refinance (refund) previous bond issues. 55 CITY OF SHAKOPEE NOTES TO THE FINANCIAL STATEMENTS December 31, 2010 NOTE 7 — LONG -TERM DEBT D. Changes in Long -Term Liabilities Long -term liability information for the year ended December 31, 2010 was as follows. Business -Type Activities Revenue Bonds $ 22,235,000 $ - $ 765,000 $ 21,470,000 Unamortized Bond Premium 39,682 - 4,715 34,967 Unamortized Loss on Refunding (1,197,321) - (68,435) (1,128,886) Compensated Absences 56,114 45,842 36,000 65,956 Total Business -Type Activities $ 21,133,475 $ 45,842 $ 737,280 $ 20,442,037 The General Fund, Employee Benefits Internal Service Fund and Sewer and Storm Drainage Enterprise Funds typically liquidate the liability related to compensated absences. E. Governmental Activity G.O. Bonds Debt service to maturity for outstanding G.O. bonds is as follows: Year Ending December 31, Principal Interest Total 2011 Beginning $ 658,232 $ 3,223,232 Ending 1,950,000 Balance Additions Reductions Balance Governmental Activities: 2,582,176 2014 2,050,000 438,850 Bonds Payable: 2015 2,020,000 364,065 2,384,065 G.O. Bonds $ 20,955,000 $ 1,555,000 $ 3,800,000 $ 18,710,000 Compensated Absences 1,562,320 810,720 703,270 1,669,770 Total Governmental Activities $ 22,517,320 $ 2,365,720 $ 4,503,270 $ 20,379,770 Business -Type Activities Revenue Bonds $ 22,235,000 $ - $ 765,000 $ 21,470,000 Unamortized Bond Premium 39,682 - 4,715 34,967 Unamortized Loss on Refunding (1,197,321) - (68,435) (1,128,886) Compensated Absences 56,114 45,842 36,000 65,956 Total Business -Type Activities $ 21,133,475 $ 45,842 $ 737,280 $ 20,442,037 The General Fund, Employee Benefits Internal Service Fund and Sewer and Storm Drainage Enterprise Funds typically liquidate the liability related to compensated absences. E. Governmental Activity G.O. Bonds Debt service to maturity for outstanding G.O. bonds is as follows: Year Ending December 31, Principal Interest Total 2011 $ 2,565,000 $ 658,232 $ 3,223,232 2012 1,950,000 580,869 2,530,869 2013 2,070,000 512,176 2,582,176 2014 2,050,000 438,850 2,488,850 2015 2,020,000 364,065 2,384,065 2016 -2020 5,540,000 987,772 6,527,772 2021 -2025 2,515,000 286,724 2,801,724 Total _11&110 ,O00 $ 3,828,688 $ 22,538,688 56 CITY OF SHAKOPEE NOTES TO THE FINANCIAL STATEMENTS December 31, 2010 NOTE 7 — LONG -TERM DEBT F. Business -Type Activity Revenue Bonds Debt service to maturity for outstanding revenue bonds is as follows: Year Ending December 31, Principal Interest Total 09/30/10 5,675,000 2011 $ 780,000 $ 907,232 $ 1,687,232 2012 830,000 876,541 1,706,541 2013 825,000 844,511 1,669,511 2014 875,000 811,044 1,686,044 2015 890,000 772,913 1,662,913 2016 -2020 5,115,000 3,230,859 8,345,859 2021 -2025 6,420,000 1,996,042 8,416,042 2026 -2030 5,735,000 540,562 6,275,562 Total $ 21,470,000 $ 9,979,704 $ 31,449,704 NOTE 8 — CONDUIT DEBT OBLIGATIONS Conduit debt obligations are certain limited obligation revenue bonds or similar debt instruments issued for the express purpose of providing capital financing for a specific third party. The City has issued various revenue bonds to provide funding to private- sector entities for projects deemed to be in the public interest. Although these bonds bear the name of the City, the City has no obligation for such debt beyond the resources provided by related leases or loans. Accordingly, the bonds are not reported as liabilities in the financial statements of the City. As of December 31, 2010, the following conduit debt was outstanding: Date of Original Amount Balance Project Issue of Issue Retired Outstanding St. Francis RMC St. Francis RMC St. Gertrudes Total 10/06/04 $ 52,520,000 12/23/87 8,000,000 09/30/10 5,675,000 $ 375,000 $ 49,450,000 615,000 3,675,000 - 5,675,000 $ 58,800,000 57 leff"0gy "WO NOTES TO THE FINANCIAL STATEMENTS December 31, 2010 NOTE 9 — PLEDGING AGREEMENTS The City has pledged its taxing authority to back certain revenue bonds issued by the Scott County Community Development Agency (CDA), formally known as the Scott County Housing and Redevelopment Authority (HRA), for the Blocks 3 and 4 redevelopment project in downtown Shakopee. Refunding bonds were issued during 2006 to advance refund the 1997A, 1997D and 1997E Series Bonds on their call dates. The 1997D Series Bonds were called on September 1, 2006 and the 1997A and 1997E Series Bonds were called on February 1, 2008. • Scott County CDA Housing Development Refunding Revenue Bonds, Series 2006A, the amount is $ 3,260,000 and payments are scheduled from February 1, 2007 to 2027, with interest ranging from 4.25% to 4.5 %. • Scott County CDA Housing Development Refunding Revenue Bonds, Series 2006D, the amount is $ 905,000 and payments are scheduled from February 1, 2007 to 2018, with interest ranging from 5.7% to 6.25 %. • Scott County CDA Housing Development Refunding Revenue Bonds, Series 2006E, the amount is $ 1,225,000 and payments are scheduled from February 1, 2018 to 2024, with interest ranging from 4.5% to 4.7 %. The City has pledged its taxing authority to back a series of revenue bonds issued by the Scott County CDA for the North Ridge Court Redevelopment Project in downtown Shakopee. The issue is: • Scott County CDA Housing Development Revenue Bonds, Series 2003, the amount is $ 6,640,000 and payments are scheduled from February 1, 2006 to 2034, with interest ranging from 2.00% to 5.00 %. The City and the Shakopee EDA have a development agreement for costs related to an Imagine! Print Solutions, formally known as Challenge Printing, facility moving to Shakopee. The Shakopee EDA issued a Taxable Tax Increment Revenue Note in the amount of $ 513,900 in support of development costs for the Imagine! Print Solutions project. Imagine! Print Solutions is the holder of the note. The Shakopee EDA is liable only to the extent of the tax increment received from the Imagine! Print Solutions property. The interest on the note is 6.0 %. Payments are scheduled semiannually from August 1, 2006 to February 1, 2015. 58 CITY OF SHAKOPEE NOTES TO THE FINANCIAL STATEMENTS December 31, 2010 NOTE 9 — PLEDGING AGREEMENTS The City and the Shakopee EDA have a development agreement for costs related to Open Systems Facility located in Shakopee. The Shakopee EDA issued a Taxable Tax Increment Revenue Note in the amount of $ 125,000 in support of development costs for the Open Systems Project. Open Systems is the holder of the note. The Shakopee EDA is liable only to the extent of the tax increment received from the Open Systems property. The interest on the note is 6.0 %. Payments are scheduled semiannually from August 1, 2007 to February 1, 2014. NOTE 10 — INTERFUND ASSETS/LIABILITIES The composition of interfund balances as of December 31, 2010 is as follows: Receivable Fund General Fund General Fund General Fund Electric Fund Water Fund Total 144,400 1,173,056 816,350 50,000 50,000 The due from/due to other funds balances represent borrowing to cash flow projects and for operating expenses. NOTE 11— INTERFUND TRANSFERS Transfer In Nonmajor Internal General Governmental Service Fund Funds Funds Transfer Out: General Fund Nonmajor Governmental Funds Electric Fund Water Fund Sewer Fund Storm Drainage Fund Internal Service Funds Total $ 2,025,000 7,840,003 $ 2,371,000 1,100,998 385,299 $ 309,141 Total $ 4,396,000 7,984,403 1,173,056 816,350 50,000 50,000 1,486,297 $ 2,233,806 $ 10.966,001 $ 2,756,299 $ 15.956,106 Transfers were made according to budgets for operating purposes, to close funds, to finance projects and for the cancellation of the debt service levy. Payable Fund Amount Water Fund $ 90,317 Norunajor Governmental Funds 75,000 Electric Fund 69,315 Sewer Fund 55,882 Stone Drainage 18,627 59 CITY OF SHAKOPEE NOTES TO THE FINANCIAL STATEMENTS December 31, 2010 NOTE 12 — RISK MANAGEMENT The City purchases commercial insurance coverage through the League of Minnesota Cities Insurance Trust (LMCIT) with other cities in the state which is a public entity risk pool currently operating as a common risk management and insurance program. The City pays an annual premium to the LMCIT for its insurance coverage. The LMCIT is self - sustaining through member premiums and reinsures through commercial companies for excess claims. The City is covered through the pool for any claims incurred but unreported, but retains risk for the deductible portion of its insurance policies. The amount of these deductibles ranges from $ 2,500 to $ 5,000 and is considered immaterial to the financial statements. There were no significant reductions in insurance from the previous year or settlements in excess of insurance coverage for any of the past three fiscal years. Through the pool, the City is subject to reassessment but due to reserves and reinsurance contracts, the likelihood is very low. The policy limits through the pool included $ 2,000,000 aggregate for liability, $ 1,500,000 for automobile coverage, $ 500,000 faithful performance employee bonding and $ 1,000,000 for universal umbrella coverage. Property coverage is at approximately $ 91,000,000. NOTE 13 — DEFINED BENEFIT PENSION PLANS — STATE -WIDE Public Employees' Retirement Association A. Plan Description All full -time and certain part-time employees of the City are covered by defined benefit plans administered by the Public Employees' Retirement Association of Minnesota (PERA). PERA administers the General Employees' Retirement Fund (GERF) and the Public Employees' Police and Fire Fund (PEPFF), which are cost - sharing, multiple - employer retirement plans. These Plans are established and administered in accordance with Minnesota Statutes Chapters 353 and 356. GERF members belong to either the Coordinated or Basic Plan. Coordinated Plan members are covered by Social Security and Basic Plan members are not. All new members must participate in the Coordinated Plan. All police officers, firefighters and peace officers who qualify for membership are covered by the PEPFF. PERA provides retirement benefits as well as disability benefits to members, and benefits to survivors upon death of eligible members. Benefits are established by state statute and vest after three years of credited service. The defined retirement benefits are based on a member's highest average salary for any five successive years of allowable service, age and years of credit at termination of service. O1 CITY OF SHAKOPEE NOTES TO THE FINANCIAL STATEMENTS December 31, 2010 NOTE 13 — DEFINED BENEFIT PENSION PLANS — STATE -WIDE Public Employees' Retirement Association (Continued) A. Plan Description (Continued) Two methods are used to compute benefits for PERA's Coordinated and Basic Plan members. The retiring member receives the higher of a step -rate benefit accrual formula (Method 1) or a level accrual formula (Method 2). Under Method 1, the annuity accrual rate for a Basic Plan member is 2.2% of average salary for each of the first 10 years of service and 2.7% for each remaining year. The annuity accrual rate for a Coordinated Plan member is 1.2% of average salary for each of the first 10 years and 1.7% for each remaining year. Under Method 2, the annuity accrual rate is 2.7% of average salary for Basic Plan members and 1.7% for Coordinated Plan members for each year of service. For PEPFF members, the annuity accrual rate is 3.0% for each year of service. For all GERF and PEPFF members hired prior to July 1, 1989, whose annuity is calculated using Method 1, a full annuity is available when age plus years of service equal 90. Normal retirement age is 55 for PEPFF members and 65 for Basic and Coordinated Plan members hired prior to July 1, 1989. Normal retirement age is the age for unreduced Social Security benefits capped at 66 for Coordinated Plan members hired on or after July 1, 1989. A reduced retirement annuity is also available to eligible members seeking early retirement. There are different types of annuities available to members upon retirement. A single -life annuity is a lifetime annuity that ceases upon the death of the retiree — no survivor annuity is payable. There are also various types of joint and survivor annuity options available which will be payable over joint lives. Members may also leave their contributions in the Fund upon termination of public service in order to qualify for a deferred annuity at retirement age. Refunds of contributions are available at any time to members who leave public service, but before retirement benefits begin. The benefit provisions stated in the previous paragraphs of this section are current provisions and apply to active Plan participants. Vested, terminated employees who are entitled to benefits but are not yet receiving them are bound by the provisions in effect at the time they last terminated their public service. PERA issues a publicly available financial report that includes financial statements and required supplementary information for GERF and PEPFF. That report may be obtained on the Internet at www.mnpera.org, by writing to PERA at 60 Empire Drive, #200, St. Paul, Minnesota 55103 -2088 or by calling (651) 296 -7460 or (800) 652 -9026. 61 CITY OF SHAKOPEE NOTES TO THE FINANCIAL STATEMENTS December 31, 2010 NOTE 13 — DEFINED BENEFIT PENSION PLANS — STATE -WIDE Public Employees' Retirement Association (Continued) B. Funding Policy Minnesota Statutes Chapter 353 sets the rates for employer and employee contributions. These Statutes are established and amended by the State Legislature. The City makes annual contributions to the pension plans equal to the amount required by state statutes. GERF Basic Plan members and Coordinated Plan members were required to contribute 9.1% and 6.0 %, respectively, of their annual covered salary in 2010. PEPFF members were required to contribute 9.4% of their annual covered salary m2010. In 2010, the City was required to contribute the following percentages of annual covered payroll: 11.78% for Basic Plan members, 7.0% for Coordinated Plan members and 14.1% for PEPFF members. The City's contributions to the Public Employees' Retirement Fund for the years ending December 31, 2010, 2009 and 2008 were $ 549,973, $ 516,529 and $ 549,973, respectively. The City's contributions to the PEPFF for the years ending December 31, 2010, 2009 and 2008 were $ 475,396, $ 484,519 and $ 415,440, respectively. The City's contributions were equal to the contractually required contributions for each year as set by state statute. NOTE 14 — DEFINED CONTRIBUTION PLAN — STATE -WIDE Four Council Members of the City are covered by the Public Employees' Defined Contribution Plan ( PEDCP), a multiple- employer deferred compensation plan administered by PERA. The PEDCP is a tax qualified plan under Section 401(a) of the Internal Revenue Code and all contributions by or on behalf of employees are tax deferred until time of withdrawal. Plan benefits depend solely on amounts contributed to the plan plus investment earnings, less administrative expenses. Minnesota Statutes Chapter 353D.03 specifies the employee and employer contribution rates for those qualified personnel who elect to participate. An eligible elected official who decides to participate contributes 5% of salary which is matched by the elected official's employer. Employer and employee contributions are combined and used to purchase shares in one or more of the seven accounts of the Minnesota Supplemental Investment Fund. For administering the plan, PERA receives 2% of employer contributions and four - tenths of 1% of the assets in each member's account annually. Total contributions made by the City during fiscal year 2010 were: Contribution Amount Employee Employer Percentage of Covered Payroll Employee Employer Required Rates 1,064 $ 1,064 5% 5% 5% 62 CITY OF SHAKOPEE NOTES TO THE FINANCIAL STATEMENTS December 31, 2010 NOTE 15 — DEFINED BENEFIT PENSION PLAN — SHAKOPEE VOLUNTEER FIRE RELIEF ASSOCIATION A. Plan Description The Shakopee Fire Relief Association (the "Association") is the administrator of a single employer defined benefit pension plan established to provide benefits for members of the Shakopee Fire Department. The Association provides retirement and disability benefits to members, and benefits to survivors upon the death of eligible members. Benefits are established in accordance with Minnesota Statutes. The defined retirement benefits are based on a member's years of service. Benefit provisions can be amended by the Association within the parameters provided by Minnesota Statutes. The Association issues a publicly available financial report that includes financial statements and required supplementary information. That report may be obtained by writing to Shakopee Fire Relief Association, 129 Holmes Street South, Shakopee, Minnesota 55379. B. Funding Policy Minnesota Statutes Chapter 69.772 specifies minimum support rates required on an annual basis. The minimum support rates from the municipality and from state aid are determined as the amount required to meet the normal cost plus amortizing any existing prior service costs over a 10 year period. Actuarial valuations are not required for the Association as the Association follows Minnesota Statutes for the valuation calculation. The City has decided to make an annual contribution in addition to state aid received for pension cost. The Association is comprised of volunteers; therefore, there are no payroll expenditures (i.e., there are no covered payroll percentage calculations). Contributions totaling $ 466,399 ($ 339,752 City of Shakopee and $ 126,647 State of Minnesota) were made in accordance with contribution requirements as of December 31, 2010. These contributions were entirely for normal service cost. 63 CITY OF SHAKOPEE NOTES TO THE FINANCIAL STATEMENTS December 31, 2010 NOTE 15 — DEFINED BENEFIT PENSION PLAN — SHAKOPEE VOLUNTEER FIRE RELIEF ASSOCIATION B. Funding Policy (Continued) The City's annual pension cost for the current year and related information is as follows: Valuation Date December 31, 2010 Actuarial Cost Method Entry Age Normal Amortization Method Level annual dollar closed Remaining Amortization Period: 100% Normal Cost 20 years Prior Service Cost 10 years Asset Valuation Method Market Actuarial Assumptions: Investment Rate of Return 5% Projected Salary Increases N/A Includes Inflation at N/A Cost of Living Adjustments None Year Ended Annual Pension Cost (APC) Percentage of APC Contributed Net Pension Obligation 12/31/08 $ 187,451 100% $ 12/31/09 240,169 100% 12/31/10 339,752 100% Statutory Statutory Funded Valuation Value of Accrued (Unfunded) Funded Date Assets Liability (SAL) SAL Ratio 12/31/08 $ 2,944,948 $ 4,810,784 $ (1,865,836) 61.2% 12/31/09 3,190,043 4,364,302 (1,174,259) 73.1% 12/31/10 3,690,248 4,507,908 (817,660) 81.9% The Association is comprised of volunteers; therefore, there are no payroll expenditures (i.e., there are no covered payroll amounts or percentage calculations). ZI CITY OF SHAKOPEE NOTES TO THE FINANCIAL STATEMENTS December 31, 2010 NOTE 16 — POST EMPLOYMENT HEALTH BENEFITS PLAN A. Plan Description The City provides a single - employer defined benefit health care plan to eligible retirees and their spouses. The plan offers medical coverage administered by Medica. It is the City's policy to periodically review its medical coverage and to obtain requests for proposals in order to provide the most favorable benefits and premiums for City employees and retirees. B. Funding Policy Retirees and their spouses contribute to the health care plan at the same rate as City employees. This results in the retirees receiving an implicit rate subsidy. Contribution requirements are established by the City, based on the contract terms with Medica. The required contributions are based on projected pay - as- you -go financing requirements. For fiscal year 2010, the City contributed $ 27,020 to the plan. As of January 1, 2010, there were 10 retirees receiving health benefits from the City's health plan. C. Annual OPEB Cost and Net OPEB Obligation The City's annual OPEB cost (expense) is calculated based on the annual required contribution (ARC) of the City, an amount actuarially determined in accordance with the parameters of GASB Statement No. 45. The ARC represents a level of funding that, if paid on an ongoing basis, is projected to cover normal cost each year and amortize any unfunded actuarial liabilities (or funding excess) over a period not to exceed 30 years. The following table shows the components of the City's annual OPEB cost of the year, the amount actually contributed to the plan, and changes in the City's net OPEB obligation to the plan. ARC $ 177,816 Interest on Net OPEB Obligation 17,443 Adjustment to ARC (25,219) Annual OPEB Cost (Expense) 170,040 Contribution Made (27,020) Increase in Net OPEB Obligation 143,020 Net OPEB Obligation - Beginning of Year 436,084 Net OPEB Obligation - End of Year $ 579,104 65 CITY OF SHAKOPEE NOTES TO THE FINANCIAL STATEMENTS December 31, 2010 NOTE 16 — POST EMPLOYMENT HEALTH BENEFITS PLAN C. Annual OPEB Cost and Net OPEB Obligation (Continued) The City's annual OPEB cost, the percentage of annual OPEB cost contributed to the plan and the net OPEB obligation for 2010 was as follows: D. Funded Status and Funding Progress As of January 1, 2010, the most recent actuarial valuation date, the City had no assets deposited to fund the plan. The actuarial accrued liability for benefits was $ 1,483,810 and the actuarial value of assets was $ 0, resulting in an unfunded actuarial accrued liability (UAAL) of $ 1,483,810. The covered payroll (annual payroll of active employees covered by the plan) was $ 7,154,161 and the ratio of the UAAL to the covered payroll was 20.7 %. Actuarial valuations involve estimates of the value of reported amounts and assumptions about the probability of occurrence of events far into the future. Examples include assumptions about future employment, mortality and the health care cost trend. Amounts determined regarding the funded status of the plan and the ARC of the employer are subject to continual revision as actual results are compared with past expectations and new estimates are made about the future. The Schedule of Funding Progress — Other Post Employment Benefits, presented as required supplementary information following the Notes to the Financial Statements, presents multi -year trend information about whether the actuarial value of plan assets is increasing or decreasing over time relative to the actuarial accrued liabilities for benefits. E. Actuarial Methods and Assumptions Projections of benefits for financial reporting purposes are based on the substantive plan (the plan as understood by the employer and the plan members) and include the types of benefits provided at the time of each valuation and the historical pattern of sharing of benefit costs between the employer and plan members to that point. The actuarial methods and assumptions used include techniques that are designed to reduce the effects of short-term volatility in actuarial accrued liabilities, consistent with the long -term perspective of the calculations. .. Percentage of Fiscal Year Annual OPEB Employer Annual OPEB Net OPEB End Cost Contribution Cost Contributed Obligation 12/31/10 $ 170,040 $ 27,020 16% $ 579,104 12/31/09 250,175 54,644 22% 436,084 12/31/08 240,553 - 0% 240,553 D. Funded Status and Funding Progress As of January 1, 2010, the most recent actuarial valuation date, the City had no assets deposited to fund the plan. The actuarial accrued liability for benefits was $ 1,483,810 and the actuarial value of assets was $ 0, resulting in an unfunded actuarial accrued liability (UAAL) of $ 1,483,810. The covered payroll (annual payroll of active employees covered by the plan) was $ 7,154,161 and the ratio of the UAAL to the covered payroll was 20.7 %. Actuarial valuations involve estimates of the value of reported amounts and assumptions about the probability of occurrence of events far into the future. Examples include assumptions about future employment, mortality and the health care cost trend. Amounts determined regarding the funded status of the plan and the ARC of the employer are subject to continual revision as actual results are compared with past expectations and new estimates are made about the future. The Schedule of Funding Progress — Other Post Employment Benefits, presented as required supplementary information following the Notes to the Financial Statements, presents multi -year trend information about whether the actuarial value of plan assets is increasing or decreasing over time relative to the actuarial accrued liabilities for benefits. E. Actuarial Methods and Assumptions Projections of benefits for financial reporting purposes are based on the substantive plan (the plan as understood by the employer and the plan members) and include the types of benefits provided at the time of each valuation and the historical pattern of sharing of benefit costs between the employer and plan members to that point. The actuarial methods and assumptions used include techniques that are designed to reduce the effects of short-term volatility in actuarial accrued liabilities, consistent with the long -term perspective of the calculations. .. CITY OF SHAKOPEE NOTES TO THE FINANCIAL STATEMENTS December 31, 2010 NOTE 16 — POST EMPLOYMENT HEALTH BENEFITS PLAN E. Actuarial Methods and Assumptions (Continued) In the January 1, 2010 actuarial valuation, the projected unit credit actuarial cost method was used. The actuarial assumptions included a 4.0 % discount rate, which is based on the investment yield expected to finance benefits depending on whether the plan is funded in a separate trust (about 7% to 8.5 %, long- term, similar to a pension plan) or unfunded (3.5% to 5 %, shorter -term, based on City's general assets). The City currently does not fund this benefit. At the actuarial valuation date, the annual health care cost trend rate was calculated to be 10% initially, reduced incrementally to an ultimate rate of 5% after 5 years. The UAAL is being amortized as a level percentage of payroll. The remaining amortization period at January 1, 2010 was 30 years. NOTE 17 — SEGMENT INFORMATION The City maintains four enterprise funds that account for the electric, water, sewer and storm drainage utilities. The City considers each of its enterprise funds to be a segment. Since the required segment information is already included in the City's proprietary funds' Balance Sheet and Statement of Revenues, Expenses and Changes in Fund Net Assets balances, this information has not been repeated in the Notes to the Financial Statements. 67 CITY OF SHAKOPEE NOTES TO THE FINANCIAL STATEMENTS December 31, 2010 NOTE 18 — FUND BALANCE DETAIL Fund equity balances are classified as follows to reflect the limitations and restrictions of the respective funds. Committed Working Capital 345,820 - - 2004A Other 463,470 463,470 General Improvement Governmental Economic Development - - 20,930 Fund Bonds Funds Total Nonspendable: 3,616,689 3,616,689 2008 Projects - - 190,431 Prepaid Items $ 149,940 $ - $ $ 149,940 Restricted: 131,398 Fire Station 2 - - 2,476,886 2,476,886 BATC Litigation 218,032 - - 218,032 Forfeitures - - 189,112 189,112 Transit - - 1,158,355 1,158,355 Telecomminication - - 49,192 49,192 SCDP Grant - - 55,743 55,743 Revolving Loans - - 143,023 143,023 Economic Development - - 447,319 447,319 Debt Service - 476,417 4,651,280 5,127,697 Capital Improvements - - 2,203,238 2,203,238 Committed Working Capital 345,820 - - 345,820 Transit - - 463,470 463,470 Revolving Loans - - 100,000 100,000 Economic Development - - 20,930 20,930 Park Projects - - 1,785,164 1,785,164 Capital Improvements - - 3,616,689 3,616,689 2008 Projects - - 190,431 190,431 2009 Projects - - 14,876 14,876 2010 Projects - - 131,398 131,398 Fire Station 2 - - 2,476,886 2,476,886 Unassigned 8,323,938 - (116,803) 8,207,135 Total Fund Balance $ 9,037,730 $ 476,417 $ 17,580,303 $ 27,094,450 NOTE 19 — CHANGE IN ACCOUNTING PRINCIPLE For the year ended December 31, 2010, the City has elected to implement GASB Statement No. 54, Fund Balance Reporting and Governmental Fund Type Definitions. This action resulted in a reclassification of fund balances on the governmental fund statements to correspond with the new fund naming structure required by this statement. REQUIRED SUPPLEMENTARY INFORMATION .' * Because an actuarial valuation is being performed once every three years, the amounts for the 01/01/08 and 01/01/09 valuation are the same. 70 CITY OF SHAKOPEE SCHEDULE OF FUNDING PROGRESS - OTHER POST EMPLOYMENT BENEFITS December 31, 2010 Actuarial UAAL as a Actuarial Accrued Liability Unfunded Percentage of Actuarial Value of (AAL) - AAL Funded Covered Covered Valuation Assets Entry Age (UAAL) Ratio Payroll Payroll Date (a) (b) (b -a) (a/b (c) ((b -a) /c) 01/01/08 $ $ 1,887,961 $ 1,887,961 0.0% $ 6,652,669 28.4% 01/01/09 * 1,887,961 1,887,961 0.0% 6,652,669 28.4% 01 /01 /10 1,483,810 1,483,810 0.0% 7,154,161 20.7% * Because an actuarial valuation is being performed once every three years, the amounts for the 01/01/08 and 01/01/09 valuation are the same. 70 SUPPLEMENTARY INFORMATION 71 CITY OF SHAKOPEE SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES - BUDGET AND ACTUAL - GENERAL FUND For the Year Ended December 31, 2010 Budgeted Amounts REVENUES Property Taxes General Property Taxes Fiscal Disparities Lodging Tax Tax Increments Aggregate Tax Total Property Taxes Special Assessments Licenses and Permits Original Final $ 11,678,460 1,584,550 210,000 8,000 13,481,010 2,000 1,028,800 Intergovernmental Revenues $ 11,678,460 1,584,550 210,000 8,000 13,481,010 2,000 1,028,800 Actual Amounts $ 11,922,110 1,428,353 191,820 2,075 12,649 13,557,007 28,988 1,303,904 Variance with Final Budget - Over (Under) $ 243,650 (156,197) (18,180) 2,075 4,649 75,997 26,988 275,104 Federal Grants 5,000 5,000 15,242 10,242 PERA Aid 11,930 11,930 18,170 6,240 Police Aid 300,000 300,000 309,959 9,959 Other Grants and Aids 291,330 291,330 485,535 194,205 Total Intergovernmental Revenues 608,260 608,260 828,906 220,646 Charges for Services General Government 44,040 54,540 42,952 (11,588) Public Safety 369,700 392,400 417,595 25,195 Public Works 384,800 381,300 364,011 (17,289) Park and Recreation 1,051,800 1,051,800 1,002,481 (49,319) Economic Development 29,700 - - _ Total Charges for Services 1,880,040 1,880,040 1,827,039 (53,001) Fines and Forfeitures 381,000 381,000 423,746 42,746 Miscellaneous Revenues Investment Income 375,000 375,000 314,043 (60,957) Contributions and Donations 5,000 5,000 2,322 (2,678) Other 44,950 44,950 130,524 85,574 Total Miscellaneous Revenues 424,950 424,950 446,889 21,939 Total Revenues 17,806,060 17,806,060 18,416,479 610,419 EXPENDITURES General Government Mayor and Council 207,820 207,820 151,989 (55,831) Administration 755,210 755,210 707,692 (47,518) City Clerk 325,880 325,880 313,344 (12,536) Finance 852,100 852,100 794,864 (57,236) Planning 468,340 541,340 458,199 (83,141) Government Buildings 228,500 228,500 190,739 (37,761) Information Technology 399,400 326,400 353,788 27,388 Total General Government 3,237,250 3,237,250 2,970,615 (266,635) 72 FUND BALANCES Beginning of Year End of Year 11,502,280 $ 9,037,730 73 CITY OF SHAKOPEE SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES - ' BUDGET AND ACTUAL - GENERAL FUND - For the Year Ended December 31, 2010 (Continued) Budgeted Amounts Variance with Actual Final Budget - '.. Original Final Amounts Over (Under) EXPENDITURES Public Safety '. Police $ 6,578,460 $ 6,578,460 $ 6,324,413 $ (254,047) Fire 1,940,080 1,940,080 1,866,037 (74,043) Building Inspection 765,660 765,660 784,909 19,249 Total Public Safety 9,284,200 9,284,200 8,975,359 (308,841) Public Works Streets and Highways: Engineering 663,030 663,030 551,690 (111,340) Streets 1,947,510 1,947,510 1,958,903 11,393 Shop 103,550 103,550 122,330 18,780 Total Public Works 2,714,090 2,714,090 2,632,923 (81,167) Park and Recreation Park Maintenance 1,602,640 1,602,640 1,483,289 (119,351) Natural Resources 54,970 54,970 29,030 (25,940) Library /Congregate Dining 332,150 345,150 297,741 (47,409) Recreation 2,387,480 2,411,120 2,265,859 (145,261) Total Park and Recreation 4,377,240 4,413,880 4,075,919 (337,961) Economic Development 155,000 142,000 70,019 (71,981) Total Expenditures 19,767,780 19,791,420 18,724,835 (1,066,585) Excess of Revenues Over (Under) Expenditures (1,961,720) (1,985,360) (308,356) 1,677,004 OTHER FINANCING SOURCES (USES) Proceeds from Sale of Capital Asset - - 6,000 6,000 Transfers In 2,044,400 2,044,400 2,233,806 189,406 Transfers Out (2,796,000) (4,396,000) (1,600,000) Total Other Financing Sources (Uses) 2,044,400 (751,600) (2,156,194) (1,404,594) Net Change in Fund Balances $ 82,680 $ (2,736,960) (2,464,550) $ 272,410 FUND BALANCES Beginning of Year End of Year 11,502,280 $ 9,037,730 73 CITY OF SHAKOPEE COMBINING BALANCE SHEET - NONMAJOR GOVERNMENTAL FUNDS December 31, 2010 ASSETS Cash and Investments Taxes Receivable - Delinquent Special Assessments Receivable: Delinquent Deferred Accounts Receivable Interest Receivable Notes Receivable Total Assets LIABILITIES AND FUND BALANCES Liabilities Accounts Payable Due to Other Funds Due to Other Governments Deferred Revenue Total Liabilities Fund Balance Restricted for: Special Revenue Debt Service Capital Projects Committed Unassigned Total Fund Balances Total Liabilities and Fund Balances Special Revenue Forfeiture Transit Telecommunication $ 204,082 $ 1,656,729 $ 40,175 950 117,137 8,811 716 8,629 206 $ 205,748 $ 1,782,495 $ 49,192 $ 16,636 $ 160,670 16,636 160,670 $ 189,112 $ 1,158,355 $ 49,192 463,470 189,112 1,621,825 49,192 $ 205,748 $ 1,782,495 $ 49,192 74 $ $ $ $ 177,306 $ $ 67,351 67,351 - - 151 151 325,546 67,351 151 244,808 325,546 $ 55,743 $ 143,023 $ 447,319 $ 2,042,744 $ - $ - 220,743 281,272 100,000 20,930 584,400 55,743 243,023 468,249 2,627,144 220,743 281,272 $ 55,743 $ 310,374 $ 468,400 $ 2,871,952 $ 220,743 $ 606,818 75 Special Revenue Debt Service Economic 2000A 2003A Revolving Development Improvement Improvement SCDP Grant Loan Authority Total Bonds Bonds $ 55,415 $ 227,011 $ 465,717 $ 2,649,129 $ 220,077 $ 279,847 _ - 151 151 - - _ 325,546 - - - 126,898 - - 328 1,122 2,532 13,533 666 1,425 - 82,241 - 82,241 - - $ 55,743 $ 310,374 $ 468,400 $ 2,871,952 $ 220,743 $ 606,818 $ $ $ $ 177,306 $ $ 67,351 67,351 - - 151 151 325,546 67,351 151 244,808 325,546 $ 55,743 $ 143,023 $ 447,319 $ 2,042,744 $ - $ - 220,743 281,272 100,000 20,930 584,400 55,743 243,023 468,249 2,627,144 220,743 281,272 $ 55,743 $ 310,374 $ 468,400 $ 2,871,952 $ 220,743 $ 606,818 75 CITY OF SHAKOPEE COMBINING BALANCE SHEET - NONMAJOR GOVERNMENTAL FUNDS December 31, 2010 (Continued) LIABILITIES AND FUND BALANCES Liabilities Accounts Payable $ $ $ $ Due to Other Funds Due to Other Governments Deferred Revenue 4,875 512,219 297,377 Total Liabilities 4,875 512,219 297,377 Fund Balance Restricted for: Special Revenue $ - $ - $ _ $ _ Debt Service 344,328 881,741 441,978 1,238,387 Capital Projects _ _ _ _ Committed Unassigned - - _ _ Total Fund Balances 344,328 881,741 441,978 1,238,387 Total Liabilities and Fund Balances $ 349,203 $ 1,393,960 $ 441,978 $ 1,535,764 76 Debt Service 2004B 2004C 2004D 2006A Refunding Improvement Building Improvement Bonds Bonds Bonds Bonds ASSETS Cash and Investments $ 343,181 $ 878,182 $ 441,596 $ 1,232,063 Taxes Receivable - Delinquent 4,875 - - - Special Assessments Receivable: Delinquent - 57 620 Deferred - 512,162 296,758 Accounts Receivable - _ - Interest Receivable 1,147 3,559 382 6,323 Notes Receivable - - _ Total Assets $ 349,203 $ 1,393,960 $ 441,978 $ 1,535,764 LIABILITIES AND FUND BALANCES Liabilities Accounts Payable $ $ $ $ Due to Other Funds Due to Other Governments Deferred Revenue 4,875 512,219 297,377 Total Liabilities 4,875 512,219 297,377 Fund Balance Restricted for: Special Revenue $ - $ - $ _ $ _ Debt Service 344,328 881,741 441,978 1,238,387 Capital Projects _ _ _ _ Committed Unassigned - - _ _ Total Fund Balances 344,328 881,741 441,978 1,238,387 Total Liabilities and Fund Balances $ 349,203 $ 1,393,960 $ 441,978 $ 1,535,764 76 Debt Service Capital Projects 2007A 2007B 2008A 2010A Improvement Improvement Improvement Improvement Bonds Bonds Bonds Bonds Total Park Reserve $ 154,439 $ 562,715 $ 381,383 $ 140,673 $ 4,634,156 $ 1,780,108 _ _ - - 4,875 - 17,649 22 4,295 2,452 25,095 911,783 91,243 613,059 341,485 3,092,036 327 2,460 688 146 17,123 5,217 $ 1,084,198 $ 656,440 $ 999,425 $ 484,756 $ 7,773,285 $ 1,785,325 $ $ $ $ $ $ 161 929,432 91,265 617,354 343,937 3,122,005 - 929,432 91,265 617,354 343,937 3,122,005 161 154,766 565,175 382,071 140,819 4,651,280 1,785,164 154,766 565,175 382,071 140,819 4,651,280 1,785,164 $ 1,084,198 $ 656,440 $ 999,425 $ 484,756 $ 7,773,285 $ 1,785,325 77 CITY OF SHAKOPEE COMBINING BALANCE SHEET - NONMAJOR GOVERNMENTAL FUNDS December 31, 2010 (Continued) Fund Balance Restricted for: Special Revenue $ $ $ $ Debt Service Capital Projects 2,203,238 _ Committed 3,616,689 190,431 14,876 131,398 Unassigned _ _ _ - Total Fund Balances 5,819,927 190,431 14,876 131,398 Total Liabilities and Fund Balances $ 6,873,396 $ 190,431 $ 14,876 $ 154,281 W Capital Projects Capital 2008 Improvements Projects 2009 Projects 2010 Projects ASSETS Cash and Investments $ 5,537,836 $ 189,437 $ 14,876 $ 154,281 Taxes Receivable - Delinquent - - _ _ Special Assessments Receivable: Delinquent 1,010 - - - Deferred 713,109 - - _ Accounts Receivable 594,134 - - _ Interest Receivable 27,307 994 - - Notes Receivable _ _ Total Assets $ 6,873,396 $ 190,431 $ 14,876 $ 154,281 LIABILITIES AND FUND BALANCES Liabilities Accounts Payable $ 39,349 $ $ $ 22,883 Due to Other Funds - Due to Other Governments 300,000 Deferred Revenue 714,120 _ Total Liabilities 1,053,469 22,883 Fund Balance Restricted for: Special Revenue $ $ $ $ Debt Service Capital Projects 2,203,238 _ Committed 3,616,689 190,431 14,876 131,398 Unassigned _ _ _ - Total Fund Balances 5,819,927 190,431 14,876 131,398 Total Liabilities and Fund Balances $ 6,873,396 $ 190,431 $ 14,876 $ 154,281 W $ 85,282 $ 42,602 190,277 $ 367,583 - 75,000 75,000 75,000 - 300,000 367,351 - - 714,120 3,836,276 85,282 117,602 1,279,397 4,646,210 $ $ $ Capital Projects 4,651,280 2,203,238 2,203,238 2,476,886 8,215,444 Total Fire Station 2 2011 2,476,886 (116,803) 10,301,879 Governmental Construction Projects Total Funds $ 2,557,555 $ 799 $ 10,234,892 $ 17,518,177 - - - 5,026 - - 1,010 26,105 - - 713,109 3,805,145 - - 594,134 721,032 4,613 - 38,131 68,787 _ _ - 82,241 $ 2,562,168 $ 799 $ 11,581,276 $ 22,226,513 $ 85,282 $ 42,602 190,277 $ 367,583 - 75,000 75,000 75,000 - 300,000 367,351 - - 714,120 3,836,276 85,282 117,602 1,279,397 4,646,210 $ $ $ $ 2,042,744 4,651,280 2,203,238 2,203,238 2,476,886 8,215,444 8,799,844 - (116,803) (116,803) (116,803) 2,476,886 (116,803) 10,301,879 17,580,303 $ 2,562,168 $ 799 $ 11,581,276 $ 22,226,513 79 CITY OF SHAKOPEE COMBINING STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES - NONMAJOR GOVERNMENTAL FUNDS For the Year Ended December 31, 2010 (Continued) Revenue 80 Forfeiture Transit Telecommunication SCDP Grant REVENUES Property Taxes $ - $ 9 $ _ $ _ Tax Increments - - Special Assessments - Licenses and Permits - - 34,207 - Intergovemmental: State Grants - 693,236 - Other Grants and Aids - - Charges for Services - 375,485 Fines and Forfeitures 125,797 - - - Miscellaneous: Investment Income 3,872 39,678 1,579 1,555 Contributions and Donations - - - _ Other 11,043 - - - Total Revenues 140,712 1,108,408 35,786 1,555 EXPENDITURES Current Public Safety 59,391 - - _ Public Works - 1,182,480 - Economic Development - - - 21,495 Debt Service Principal - - _ - Interest and Other Charges - - - _ Capital Outlay - - 39,036 - Total Expenditures 59,391 1,182,480 39,036 21,495 Excess of Revenues Over (Under) Expenditures 81,321 (74,072) (3,250) (19,940) OTHER FINANCING SOURCES (USES) Bonds Issued - Transfers In - Transfers Out - (11,200) Total Other Financing Sources (Uses) - (11,200) Net Change in Fund Balances 81,321 (85,272) (3,250) (19,940) FUND BALANCES Beginning of Year 107,791 1,707,097 52,442 75,683 End of Year $ 189,112 $ 1,621,825 $ 49,192 $ 55,743 80 2,822 Special Revenue 16,223 Debt Service - (11,200) (22,400) Economic - (25,387) 1998B 2000A 2002A 2002B Revolving Development 6,611 (29,616) Improvement Improvement Improvement Improvement Loan Authority Total Bonds Bonds Bonds Bonds $ - $ $ $ 9 $ 11,000 $ 46,214 $ 20,912 $ - 82,907 - - 34,207 - - - - 693,236 375,485 125,797 - - - - 8,504 13,424 68,612 - 1,433 4,476 10,368 - - 11,043 - - - - 8,504 13,424 1,308,389 11,000 130,554 25,388 10,368 _ - 59,391 - - - - - 1,182,480 34,662 56,157 - - - _ _ - 195,000 240,000 410,000 800,000 1,893 1,893 5,590 19,749 15,996 28,589 _ - 39,036 - - - 1,893 34,662 1,338,957 200,590 259,749 425,996 828,589 6,611 (21,238) (30,568) (189,590) (129,195) (400,608) (818,221) 2,822 2,822 16,223 5,071 - (11,200) (22,400) (21,239) - (25,387) (10,367) - (8,378) (19,578) (21,239) (9,164) (5,296) 6,611 (29,616) (50,146) (210,829) (129,195) (409,772) (823,517) 236,412 497,865 2,677,290 210,829 349,938 409,772 823,517 $ 243,023 $ 468,249 $ 2,627,144 $ - $ 220,743 $ - $ 81 CITY OF SHAKOPEE COMBINING STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES - NONMAJOR GOVERNMENTAL FUNDS For the Year Ended December 31, 2010 ''.. (Continued) Debt Service 2003A 2004B 2004C 2004D 2006A Improvement Refunding Improvement Building Improvement Bonds Bonds Bonds Bonds Bonds REVENUES Property Taxes $ - $ 199,158 $ 142,088 $ - $ _ Tax Increments _ _ _ Special Assessments 20,534 - 118,127 - 82,472 Licenses and Permits _ _ _ Intergovernmental: State Grants _ _ - Other Grants and Aids _ _ _ Charges for Services - _ _ Fines and Forfeitures _ _ _ Miscellaneous: Investment Income 5,366 5,284 16,963 1,068 36,203 Contributions and Donations - _ _ _ _ Other _ _ _ Total Revenues 25,900 204,442 277,178 1,068 118,675 EXPENDITURES Current Public Safety _ _ _ _ _ Public Works Economic Development _ _ _ _ _ Debt Service Principal 130,000 175,000 250,000 240,000 325,000 Interest and Other Charges 22,681 57,520 51,087 200,361 106,731 Capital Outlay _ _ _ _ _ '.. Total Expenditures 152,681 232,520 301,087 440,361 431,731 Excess of Revenues Over (Under) Expenditures (126,781) (28,078) (23,909) (439,293) (313,056) OTHER FINANCING SOURCES (USES) Bonds Issued _ _ _ Transfers In - - - 426,000 Transfers Out - _ _ Total Other Financing Sources (Uses) - - - 426,000 - Net Change in Fund Balances (126,781) (28,078) (23,909) (13,293) (313,056) FUND BALANCES Beginning of Year 408,053 372,406 905,650 455,271 1,551,443 End of Year $ 281,272 $ 344,328 $ 881,741 $ 441,978 $ 1,238,387 82 1,001 10,605 380 2,159 95,306 32,568 440,900 - - 2,340 151,277 126,605 343,831 141,569 1,567,855 - 475,808 110,000 140,000 Debt Service Capital Projects 2007A 2007B 2008A 2010A Improvement Improvement Improvement Improvement Bonds Bonds Bonds Bonds Total State Aid Park Reserve $ 11,603 $ 97,304 $ 152,179 $ $ 680,458 $ $ 138,673 18,696 191,272 139,410 792,091 - - 1,001 10,605 380 2,159 95,306 32,568 440,900 - - 2,340 151,277 126,605 343,831 141,569 1,567,855 - 475,808 110,000 140,000 365,000 44,431 50,750 75,350 154,431 190,750 440,350 87,219 122,656 140,819 (2,491,730) (3,154) (64,145) (96,519) 447,294 (56,993) 390,301 (3,154) (64,145) (96,519) 140,819 (2,101,429) 157,920 629,320 478,590 - 6,752,709 $ 154,766 $ 565,175 $ 382,071 $ 140,819 $ 4,651,280 2,700,000 (4,283,830) - (4,283,830) 2,700,000 (4,371,049) 3,053,152 4,371,049 (1,267,988) $ $ 1,785,164 83 87,219 - 3,380,000 - 750 679,585 60,200 _ _ 62,456 750 4,059,585 87,219 122,656 140,819 (2,491,730) (87,219) 353,152 447,294 (56,993) 390,301 (3,154) (64,145) (96,519) 140,819 (2,101,429) 157,920 629,320 478,590 - 6,752,709 $ 154,766 $ 565,175 $ 382,071 $ 140,819 $ 4,651,280 2,700,000 (4,283,830) - (4,283,830) 2,700,000 (4,371,049) 3,053,152 4,371,049 (1,267,988) $ $ 1,785,164 83 CITY OF SHAKOPEE COMBINING STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES - NONMAJOR GOVERNMENTAL FUNDS For the Year Ended December 31, 2010 (Continued) REVENUES Property Taxes Tax Increments Special Assessments Licenses and Permits Intergovernmental: State Grants Other Grants and Aids Charges for Services Fines and Forfeitures Miscellaneous: Investment Income Contributions and Donations Other Total Revenues Current Public Safety Public Works Economic Development Debt Service Principal Interest and Other Charges Capital Outlay Total Expenditures Excess of Revenues Over (Under) Expenditures OTHER FINANCING SOURCES (USES) Bonds Issued Transfers In Transfers Out Total Other Financing Sources (Uses) Net Change in Fund Balances FUND BALANCES Beginning of Year End of Year Capital Proiects Capital East Dean 2008 Improvements TIP No. 10 Lake TIF No. 12 Projects $ 753 $ - $ _ $ _ $ _ - 37,099 82,744 351,042 - _ _ _ 1,327,019 75,000 104,794 11,470 4,603 14,000 - _ 1,872,608 37,099 11,470 82,744 4,603 37,099 1,228,678 - 1,228,678 37,099 643,930 48,820 4,734,834 (3,224,346) 1,559,308 2,203,238 3,616,689 $ 5,819,927 $ 82,694 82,694 11,470 50 4,603 (394,012) (50) (394,012) (50) (382,542) - 4,603 382,542 185,828 $ - $ $ 190,431 84 85 Capital Projects Total Other 2009 2010 Fire Station 2 2011 Governmental TIF No. 13 Projects Projects Construction Projects Total Funds $ _ $ _ $ _ $ _ $ _ $ 753 $ 681,220 27,718 147,561 147,561 _ 351,042 1,143,133 - 34,207 1,327,019 2,020,255 75,000 75,000 _ 375,485 - 125,797 (5,236) (3,828) 27,638 172,009 335,927 _ 454,900 454,900 2,340 13,383 27,718 (5,236) (3,828) 27,638 - 2,530,624 5,406,868 - - 59,391 87,219 1,269,699 24,946 144,739 200,896 - 3,380,000 17 60,217 741,695 15,047 1,167,168 150,752 116,786 2,740,887 2,779,923 24,946 15,047 1,167,168 150,752 116,803 3,033,062 8,431,604 2,772 (20,283) (1,170,996) (123,114) (116,803) (502,438) (3,024,736) - 645,471 860,709 - 1,555,000 1,555,000 481,051 2,600,000 - 10,515,885 10,966,001 '.. (2,772) _ _ _ - (7,905,010) (7,984,403) (2,772) 645,471 1,341,760 2,600,000 4,165,875 4,536,598 625,188 170,764 2,476,886 (116,803) 3,663,437 1,511,862 (610,312) (39,366) - 6,638,442 16,068,441 $ - $ 14,876 $ 131,398 $ 2,476,886 $ 116,803 $10,301,879 $ 17,580,303 85 CITY OF SHAKOPEE SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE - BUDGET AND ACTUAL - TRANSIT FUND For the Year Ended December 31, 2010 Original Final Budget Budget REVENUES Variance with Actual Final Budget - Amounts Over (Under) Property Taxes $ - $ - $ 9 $ 9 Intergovernmental Revenue State Grants 1,025,000 1,025,000 693,236 (331,764) Charges for Services 30,000 30,000 375,485 345,485 Miscellaneous Revenues Investment Income 85,000 85,000 39,678 (45,322) Total Revenues 1,140,000 1,140,000 1,108,408 (31,592) EXPENDITURES Public Works Current 1,134,450 1,134,110 1,182,480 48,370 Excess of Revenues Over (Under) Expenditures 5,550 5,890 (74,072) (79,962) OTHER FINANCING USES Transfers Out (11,200) (11,200) (11,200) Net Change in Fund Balance $ (5,650) $ (5,310) (85,272) $ (79,962) FUND BALANCE Beginning of Year 1,707,097 End of Year $ 1,621,825 T CITY OF SHAKOPEE SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE - BUDGET AND ACTUAL - ECONOMIC DEVELOPMENT AUTHORITY FUND For the Year Ended December 31, 2010 REVENUES Miscellaneous Revenues Investment Income EXPENDITURES Economic Development Current Excess of Revenues Over (Under) Expenditures OTHER FINANCING SOURCES (USES) Transfers In Transfers Out Total Other Financing Sources (Uses) Net Change in Fund Balance FUND BALANCE Beginning of Year End of Year Variance with Original Final Actual Final Budget - Budget Budget Amounts Over (Under) $ 15,000 $ 15,000 $ 13,424 $ (1,576) 39,210 38,870 34,662 (4,208) (24,210) (23,870) (21,238) 2,632 2,822 2,822 (11,200) (11,200) (11,200) (11,200) (11,200) (8,378) 2,822 $ (35,410) $ (35,070) (29,616) $ 5,454 497,865 $ 468,249 M CITY OF SHAKOPEE COMBINING STATEMENT OF FUND NET ASSETS - INTERNAL SERVICE FUNDS December 31, 2010 Total Liabilities and Net Assets $ 10,684,162 $ 28,980,213 $ 8,115,936 $ 1,665,362 $ 122,446 $ 49,568,119 88 Governmental Activities - Internal Service Funds Information Employee and Equipment Building Park Assets Benefits Technology Total ASSETS Current Assets Cash and Investments, Including Cash Equivalents $ 5,690,997 $ 6,217,265 $ 765,645 $ 1,655,185 $ 82,603 $ 14,411,695 Accounts Receivable - 900 - - - 900 Interest Receivable 28,943 23,034 2,263 10,177 124 64,541 Notes Receivable, Current Portion 85,000 - - 85,000 Total Current Assets 5,804,940 6,241,199 767,908 - 82,727 14,562,136 Noncurrent Assets Notes Receivable 280,000 - - - - 280,000 Capital Assets: Buildings and System - 30,355,375 3,141,813 - - 33,497,188 Machinery and Equipment 8,199,596 - 6,410,850 - 39,719 14,650,165 Construction in Progress 150,752 - 150,752 Total Cost 8,199,596 30,506,127 9,552,663 - 39,719 48,298,105 Less Accumulated Depreciation (3,600,374) (7,767,113) (2,204,635) - (13,572,122) Net Capital Assets 4,599,222 22,739,014 7,348,028 39,719 34,725,983 Total Noncurrent Assets 4,879,222 22,739,014 7,348,028 - 39,719 35,005,983 Total Assets $ 10,684,162 $ 28,980,213 $ 8,115,936 $ 1,665,362 $ 122,446 _$_49,568,119 LIABILITIES AND NET ASSETS Current Liabilities Accounts Payable $ 6,963 $ 6,778 $ - $ - $ 25,453 $ 39,194 Current Compensated Absences - - - 750,000 750,000 Total Current Liabilities 6,963 6,778 750,000 25,453 789,194 Noncurrent Liabilities Compensated Absences - - - 919,770 919,770 Total Liabilities 6,963 6,778 1,669,770 25,453 1,708,964 Net Assets Invested in Capital Assets, Net of _ Related Debt 4,599,222 22,739,014 7,348,028 - 39,719 34,725,983 Unrestricted 6,077,977 6,234,421 767,908 (4,408) 57,274 13,133,172 Total Net Assets 10,677,199 28,973,435 8,115,936 (4,408) 96,993 47,859,155 Total Liabilities and Net Assets $ 10,684,162 $ 28,980,213 $ 8,115,936 $ 1,665,362 $ 122,446 $ 49,568,119 88 CITY OF SHAKOPEE COMBINING STATEMENT OF REVENUES, EXPENSES AND CHANGES IN FUND NET ASSETS - INTERNAL SERVICE FUNDS For the Year Ended December 31, 2010 Income (Loss) before Capital Contributions and Transfers 329,153 804,942 (205,044) 474,418 Capital Contributions Transfers In Transfers Out 9,500 - - 2,271,000 (901,000) 338,653 2,174,942 385,299 (585,297) 180,255 (110,879) Change in Net Assets NET ASSETS Beginning of Year End of Year (3,007) 1,400,462 - 9,500 100,000 2,756,299 (1,486,297) 96,993 2,679,964 10,338,546 26,798,493 7,935,681 106,471 - 45,179,191 $10,677,199 $28,973,435 $8,115,936 $ (4,408) $ 96,993 $47,859,155 89 Governmental Activities - Internal Service Funds Information Employee and Equipment Buildings Park Assets Benefits Technology Total OPERATING REVENUES Rental Charges $ 688,667 $ 1,282,020 $ 171,718 $ - $ - $ 2,142,405 Other Charges 150,751 - 810,721 - $ 961,472 Total Operating Revenues 688,667 1,432,771 171,718 810,721 - 3,103,877 OPERATING EXPENSES Employee Benefits - - - 389,836 - 389,836 Materials and Supplies - - - - 3,687 3,687 Depreciation 545,420 791,241 372,959 - - 1,709,620 Total Operating Expenses 545,420 791,241 372,959 389,836 3,687 2,103,143 Operating Income (Loss) 143,247 641,530 (201,241) 420,885 (3,687) 1,000,734 NONOPERATING REVENUES Investment Income 176,062 141,954 13,729 53,533 680 385,958 Gain (Loss) on Disposal of Assets 9,844 - (17,532) - - (7,688) Other Income 21,458 - 21,458 Total Nonoperating Revenues 185,906 163,412 (3,803) 53,533 680 399,728 COMBINING STATEMENT OF REVENUES, EXPENSES AND CHANGES IN FUND NET ASSETS - INTERNAL SERVICE FUNDS For the Year Ended December 31, 2010 Income (Loss) before Capital Contributions and Transfers 329,153 804,942 (205,044) 474,418 Capital Contributions Transfers In Transfers Out 9,500 - - 2,271,000 (901,000) 338,653 2,174,942 385,299 (585,297) 180,255 (110,879) Change in Net Assets NET ASSETS Beginning of Year End of Year (3,007) 1,400,462 - 9,500 100,000 2,756,299 (1,486,297) 96,993 2,679,964 10,338,546 26,798,493 7,935,681 106,471 - 45,179,191 $10,677,199 $28,973,435 $8,115,936 $ (4,408) $ 96,993 $47,859,155 89 CITY OF SHAKOPEE COMBINING STATEMENT OF CASH FLOWS - INTERNAL SERVICE FUNDS For the Year Ended December 31, 2010 tECONCILIATION OF OPERATING INCOME (LOSS) TO NET CASH FLOWS - OPERATING ACTIVITIES Operating Income (Loss) $ 143,247 $ 662,988 $ (201,241) $ 420,885 Information $ 1,022,192 Adjustments to Reconcile Operating Employee and Equipment Buildings Park Assets Benefits Technology Total CASH FLOWS - OPERATING ACTIVITIES Flows - Operating Activities: Receipts from Customers and Users $ 688,667 $ 1,453,329 $ 171,718 $ 810,721 $ - $ 3,124,435 Payments to Suppliers - - - - (3,687) (3,687) Payments to Employees (703,270) (703,270) Net Cash Flows - Operating (900) - - - (900) Activities 688,667 1,453,329 171,718 107,451 (3,687) 2,417,478 CASH FLOWS - NONCAPITAL Compensated Absences Payable - - 107,450 FINANCING ACTIVITIES 107,450 Total Adjustments 545,420 790,341 372,959 (313,434) Transfer from Other Funds - 2,271,000 385,299 - - 100,000 2,756,299 Transfer to Other Funds (901,000) - (585,297) $ 688,667 (1,486,297) Net Cash Flows - Noncapital $ 107451 $ (3.687) $ 2,417,478 RECONCILIATION OF CASH AND CASH Financing Activities 1,370,000 385,299 (585,297) 100,000 1,270,002 CASH FLOWS - CAPITAL AND RELATED FINANCING ACTIVITIES Proceeds from Disposal of Capital Assets 215,152 - 13,375 - - 228,527 Acquisition of Capital Assets (1,113,847) (251,941) (13,374) 6,217,265 (14,266) (1,393,428) Net Cash Flows -Capital and (12,673 907) Cash and Cash Equivalents $ $ Related Financing Activities (898,695) (251,941) 1 NONCASH INVESTING, CAPITAL AND (14,266) (1,164,901) CASH FLOWS - INVESTING ACTIVITIES FINANCING ACTIVITIES Purchases of Investments (56,614) (2,707,832) (569,671) - - (3,334,117) Payment Received for Notes Receivable 80,000 - - - - 80,000 Interest Received 186,642 136,444 12,653 57,674 556 393,969 Net Cash Flows - Investing Purchases of Capital Assets on Account 6,963 6,778 - - - Activities 210,028 (2,571,388) (557,018) 57,674 556 (2,860 148) Net Change in Cash and Cash Equivalents - - - (420,172) 82,603 (337,569) CASH AND CASH EQUIVALENTS Beginning of Year - - 2,075,357 2,075,357 End of Year $ $ $ $ 1,655 185 $ 82 603 $ 1 737 788 tECONCILIATION OF OPERATING INCOME (LOSS) TO NET CASH FLOWS - OPERATING ACTIVITIES Operating Income (Loss) $ 143,247 $ 662,988 $ (201,241) $ 420,885 $ (3,687) $ 1,022,192 Adjustments to Reconcile Operating Income (Loss) to Net Cash Flows - Operating Activities: Depreciation Expense 545,420 791,241 372,959 - - 1,709,620 Changes in: Accounts Receivable - (900) - - - (900) Accrual for OPEB - - - (420,884) - (420,884) Compensated Absences Payable - - 107,450 107,450 Total Adjustments 545,420 790,341 372,959 (313,434) 1,395,286 Net Cash Flows - Operating Activities $ 688,667 $ 1,453,329 $ 171718 $ 107451 $ (3.687) $ 2,417,478 RECONCILIATION OF CASH AND CASH EQUIVALENTS TO THE STATEMENT OF NET ASSETS Cash and Investments 5,690,997 6,217,265 765,645 1,655,185 62,603 14,411,695 Less Long -Tern Investments 5,690,997 6,217,265 765,645 - (12,673 907) Cash and Cash Equivalents $ $ $1,655,165 $ 82,603 $ 1937.788 NONCASH INVESTING, CAPITAL AND FINANCING ACTIVITIES Contributions of Capital Assets from the Municipality and Developers $ 9,500 $ - $ - $ - $ - $ 9,500 Purchases of Capital Assets on Account 6,963 6,778 - - - 13,741 90 91 CITY OF SHAKOPEE STATEMENT OF CHANGES IN ASSETS AND LIABILITIES - ESCROW AGENCY FUND For the Year Ended December 31, 2010 Balance at Balance at December 31, December 31, 2009 Additions Deductions 2010 ASSETS Current Cash and Investments $ 1,728,370 $ 3,095,990 $ 3,074,763 $ 1,749,597 LIABILITIES Accounts Payable $ 18,440 $ 1,432,240 $ 1,449,776 $ 904 Deposits Payable 1,709,930 930,223 891,460 1,748,693 Total Liabilities $ 1,728,370 $ 2,362,463 $ 2,341,236 $ 1,749,597 91 (THIS PAGE LEFT BLANK INTENTIONALLY) 92 STATISTICAL SECTION a-, (THIS PAGE LEFT BLANK INTENTIONALLY) CITY OF SHAKOPEE STATISTICAL SECTION December 31, 2010 This part of the City's Comprehensive Annual Financial Report (CAFR) presents detailed information for placing in context and understanding what the information shown in the financial statements, note disclosures and required supplementary information reveals about the City's overall financial health. CONTENTS Page Financial Trends 97 These schedules show trend information to help the reader understand how the City's financial performance and well being have changed over time. Revenue Capacity 104 Portrayed is information to help the reader assess the City's most important local revenue source, the property tax. Debt Capacity 108 These schedules present information to help the reader assess the affordability of the City's current levels of outstanding debt and the City's ability to issue additional debt in the future. Demographic and Economic Information 115 Shown are demographic and economic indicators to help the reader understand the environment within which the City's financial activities take place. Operating Information 118 These schedules shown service and infrastructure data to help the reader understand how the information in the City's financial report relates to the services the City provides and the activities it performs. Source: Unless noted otherwise, the information in these schedules is from the CAFR for the relevant year. M (THIS PAGE LEFT BLANK INTENTIONALLY) .l CITYOFSHA OPEE NET ASSETS BY COMPONENT Year, 2003 Theaagh 2010 Table I 2003 20M 2005 2006 2007 2008 2009 2010 Cmvsm ncatsl Activities: Invested in Capitei Assets, Net of Related Debt $ 94,388,758 S 90,281,410 S 111,23],6]2 $ 119,661,761 $ 113,534,056 $ 112,909,793 S 112,097,148 S 111,905,152 Restricted 15,231,314 29,731,412 21,638,112 12,998,982 13,081,337 21,915,945 16,518,865 1,844,129 Unrestricted 15.241,647 21214,013 21,845121 29264714 28,316,931 22,086]]1 28,832,576 43,910,102 Teel Crovemmemal Activities Net Assets $ 124861 7 19 S 141, 226,895 S 154920905 $ 161,92545] S 154932, jL 156,912,509 S 157, 4 4 8,569 $ 15]659 Business -Typo Activities: Invested is Capital Assets, Net of Related Debt $ 81,725,264 $ $9,415,817 $ 99,140,973 $ 109,339,014 $ 114,546,218 S 115,124,238 S 114,331,216 $ 115,064,968 Restricted 978,371 1867,077 2,232,469 880,069 1,026,351 1,756,369 3,574612 4,889,050 Unrestricted 39,234,063 37354576 41291,469 42400,797 46,169,289 49,366.581 55,595,594 59,014.070 Total Business - Type Activities %80 $ 161,741858 S 166,24]1 $ 1]3,501,422 E 1]8,968,088 Net Assets $ 120,93],696 $ 128,63],4]0 S 142.664,911 S 152,61], Primary Govemment. Invested in Capital Assets, Net of 996,775 $ 228,080,2]4 $ 228,034,031 $ 22fi,428,164 $ 226,970,120 Related Debt S 176,114,022 $ 1]9,697,22] $ 210,3]8,645 $ 228, ]33,179 Restricted 16,209,685 31 598,489 23 870,581 13,879,051 14,107,688 23,672,314 20,093,4]] 6, Unrestricted 53,475,710 58,568649 63136590 71,665,511 74486,220 71453352 84428.170 102924,172 Total Primary Government 69] 330,950,011 $ 336627,471 Net Assets $ 245,799,417 $ 269,864,365 $ 297385,816 $ 314543,337 E 316674182 E 323,159, E Note: 1'he Ciry began is report accmel information when it implemented GASB Statement Ne. 34 in Jim.) year 2003 97 CITY OF SHAKOPEE CHANGES IN NET ASSETS Years 2003 Through 2010 Table 2 Business -Type Activities: 2003 2004 2005 2006 2007 2008 2009 2010 EXPENSES: 17,634,004 19,820,900 23,378,764 29,169,297 34,710,974 36,186,676 30,140,842 32,700,410 Governmental Activities: 2,337,860 2,723,003 2,460,977 2,949,990 3,332,132 3,461,261 3,316,102 3,293,079 General Government $ 2,761,210 $ 3,135,421 $ 2,563,526 $ 3,161,106 $ 3,543,980 $ 3,514,573 $ 3,388,268 $ 3,042,918 Public Safety 4,995,127 5,461,190 6,190,689 6,856,485 8,301,075 8,346,104 8,528,413 9,123,316 Public Works 3,673,623 6,036,920 8,298,258 6,798,917 15,264,606 8,099,384 7,860,080 8,397,874 Economic Development 683,035 360,167 314,858 333,462 363,805 522,074 316,566 427,169 Culture and Recreation 894,321 2,150,765 3,664,944 4,653,240 5,323,087 3,637,527 3,859,670 3,765,660 Other 668,531 861,864 924,270 896,110 1,042,133 1,033 999 1,040 044 784,824 Total GOVemenened Activities Experaes 13675847 I8,OOS327 21,956,545 22,699320 33,938,686 25,153,661 24,993,041 25,541761 Business -Type Activities: Electric 17,634,004 19,820,900 23,378,764 29,169,297 34,710,974 36,186,676 30,140,842 32,700,410 Water. 2,337,860 2,723,003 2,460,977 2,949,990 3,332,132 3,461,261 3,316,102 3,293,079 Sewer 1,835,242 2,009,468 2,349,047 2,786,234 2,938,955 3,308,759 3,398,117 3,685,417 Storm 800,092 941,842 999,849 1,523,343 1,352,078 1,435376 1,264 261 1,792749 Total Business -Type Activities Expense¢ 24,159,722 25,495,213 29,188,637 36,428 864 42,334,139 44,392.072 38,119 322 41,471,655 Total Primary Govenunent Expenses $ 37,835,569 $ 43,501,540 $ 51,145182 $ 59,128,184 $ 76,172,825 $ 6954573] $ fi3,112363 $ 67,013,416 PROGRAM REVENUES: Governmental Activities: Charges for Services: 19,733,990 22,161,542 27,425,921 31,906,714 37,407,565 38,732,701 34,272,099 36,872,008 General Government $ 1,706,644 $ 3,591,641 $ 791,504 $ 714,105 $ 583,247 $ 606,259 $ 680,681 $ 652,686 Public Safety 2,408,012 3,446,465 3,462,283 2,063,023 1,650,235 1,506,680 1,677,772 1,716,573 Public Works 3,691,149 4,534,285 2,668,728 2,986,495 2,615,402 2,354,276 1,342,173 941,224 Culture end Recreation 1,330,062 1,497,853 1,826,847 1,676,630 1,086,750 1,295,772 1,013,044 1,039,820 Operating Grants and Contributiorvs 2,622,953 4,303,581 3,646,605 1,653,238 1,943,805 1,660,191 1,485,124 2,943,857 Capital Greeds and Contributions 11,009 10,844,269 8,666,283 6,116,366 2,463,129 1,825,124 1,241,884 952,450 Total Gavemmemal Activities Pragmm Revenues 11,769 829 17,373,825 21,062,250 15,209,857 10,342 568 9248,302 7,440,678 8,246,610 Business -Type Activities: Charges for Services: Electric 19,733,990 22,161,542 27,425,921 31,906,714 37,407,565 38,732,701 34,272,099 36,872,008 Water 2,569,848 2,349,505 2,627,084 3,127,207 3,525,140 3,390,309 3,605,498 4,417,498 Sewer 2,827,777 3,078,191 2,971,601 3,471,984 2,806,371 2,556,299 3,485,882 3,508,947 Storm 1,947,139 1,806,974 1,937,430 1,859,912 1,505,247 1,379,821 1,405,560 1,281,986 Recreation 758,124 _ - - - - - - Opemting Grants and Contnbutions 2,345 - - - - - - 6,415 Capital Grams a ad Contnbutions 8,800,811 10,844,269 10,913,464 6,174,786 4,138 977 1,007,519 1,879,530 1,661,001 Total Business- Type Activities Program Revenues 36,640 034 40,240,481 45,875,500 46,540,603 49,383 300 47,066,649 44,648,569 47,747 855 Total Prbrery Govema ant Program Revenues $ 4%,409,863 $ 57,614,306 $ 66,937,750 $ 61,750,460 $ 59,725 868 $ 56,314,951 $ 52,089,247 $ 55,994,465 Net (E,.a) Revenue; Governmental Activities $ (1,906,018) $ (632,502) $ (894,295) $ (7,489,463) $ (23,496,118) $ (15,905,359) $ (17,552,363) $ (17,295,151) Businesa -Type Activities 12,480,312 14,745,268 16,686 863 10,111,739 7,049,161 2,674 577 6,529,247 6,276.200 Total Primary Govemmpnt Net Expense $ /0574294 $ 14,112,766 § 15,792,568 $ 2,622276 $ (16,446,957) $ (13230782) $ (11023116) $ (110189511 98 Note: The City began to report accmal information when it implemented CASE Statement No. 34 in fiscal year 2003 99 CITY OF SHAKOPEE Table (ContinueA) CHANGES IN NET ASSETS Years 2003 Through 2010 2003 2004 2005 2006 2007 2008 2009 2010 GENERAL REVENEES AND OTHER CHANGES IN NET ASSETS: Governmental Activities: Taxes: Property Taxes $ 7,995,002 S 7,842,043 $ 9,341,977 $ 10,547,177 $ 12,767,354 $ 14,200,833 $ 14,fi]6,518 $ 14,229,111 Other Taxes 507,706 364,211 314,858 336,648 369,240 380,935 151,956 147,561 unrestricted Investment Earnings 550,705 740,612 951,795 1,661,251 2,232,717 1,941,335 1,323,230 1,039,867 Gain on Disposal ofAIIeta 69,623 294,833 746,340 2,700 22,620 56,453 37,162 - Enterprise Fund Redealed to Special Revenue - 443,651 5,539,108 2215,871 1,658,132 1,375,203 - 2,146233 - 1,111,046 - 1,297,908 1,899,577 ' 2089406 Transfers Total Governmental Activities 9,566,687 16,996,678 14,388305 14,694,015 16502,985 17885544 18088443 17505,945 Business -Type Activities: Inveatment Pammgs 942,040 709,483 870,714 1,973,715 3,185,863 3,128,741 1,336,979 1,279,872 Gain on Disposal ofMsels 9,260 - 409,918 13,749 - - - - Special item To.fers - (443,651) (5,539,108) (2,215,871) (1,658,132) (1,375,203) - (2146233) (1,111,046) (1,297,900) (1,899,577) (2,089,406) Total Business -Type Activities 507,649 (7045496) (1752,103) (158769) 2,074,817 1830,753 (562,598) (809,534) Total Primary Government S10,074,336 10,074,336 $ 9951,1 82 $ 12,635,602 $ 145]5,246 S 18,577802 S 19716,297 $ 17,525,845 $ 16,696,411 Change in Net Assets: Government Activities $ 7,660,669 S 16,364,176 $ 13,494,010 $ 7,204,552 $ (6,993,133) $ 1,980,185 $ 536,080 $ 210,794 Business -Type Activities 12987961 7,699,772 14,934,160 9952,970 9123,978 4,505,330 5,966649 5,466,666 Total Primary Government $ 20648,630 S 24063948 S 28,428170 $ 17,157,522 $ 2130,845 $ 6,485515 S 6,502,729 $ 5,6]]460 Note: The City began to report accmal information when it implemented CASE Statement No. 34 in fiscal year 2003 99 un eF d p s Debt Service Funds Capital Projects Funds (24,624) (777,600) (705,537) Unassigned _ _ _ Total all Other Governments] Funds $ 13,970,642 $ 15,150,292 $ 14,531,337 Note: GASB Statement No. 54 was implemented in 2010. Only 2010 is reported in compliance with GASB Statement No. 54. 2001 - 2009 are reported as previously stated. 100 CITY OF SHAKOPEE Table 3 FUND BALANCES - GOVERNMENTAL F FUNDS Last Ten Fiscal Years 2001 2 2002 2 2003 General Fund:. Nonspendable: Prepaids $ $ _ $ $ Reserved 7 79,003 Restricted for: BATC Litigation _ _ Committed to: Working Capital Unreserved 3 3,144,560 3 3,534,080 5 5,565,816 Unassigned - - _ _ _ _ Total General Fund $ $ 3,144,560 $ $ 3,534,080 $ $ 5,644,819 All Other Governmental Funds Reserved: Special Revenue Funds $ $ 945,041 $ $ 1,456,237 $ $ 1,778,684 Debt Service Funds 8 8,502,950 7 7,653,349 6 6,369,303 Capital Projects Funds 4 4,547,275 6 6,818,306 7 7,088,887 Restricted for: Forfeitures - - Transit _ _ Telecomminication _ _ SCDP Grant _ _ Revolving Loans - - Economic Development _ _ Debt Service _ _ Capital Improvements _ _ Committed to: Working Capital _ _ Transit _ _ Revolving Loans _ _ _ _ _ _ Economic Development _ _ _ _ _ _ Park Projects _ _ _ _ _ _ Capital Improvements _ _ _ _ - - '.. 2008 Projects _ _ _ _ _ _ 2009 Projects - - _ _ _ _ 2010 Projects _ _ _ _ _ _ Fire Station 2 _ _ Unreserved Secia Revenue nu u p s Debt Service Funds Capital Projects Funds (24,624) (777,600) (705,537) Unassigned _ _ _ Total all Other Governments] Funds $ 13,970,642 $ 15,150,292 $ 14,531,337 Note: GASB Statement No. 54 was implemented in 2010. Only 2010 is reported in compliance with GASB Statement No. 54. 2001 - 2009 are reported as previously stated. 100 Table 3 (Continued) 2004 2005 2006 2007 2008 2009 2010 $ $ $ _ $ _ $ - $ _ 149,940 13,586 16,465 1,490,157 1,810,650 1,126,074 799,276 - - - - 218,032 _ - - 345,820 7,233,268 9,662,677 8,354,477 7,896,883 8,733,528 10,703,004 - - - 8,323,938 $ 7,246,854 $ 9,679,142 $ 9,844,634 $ 9,707,533 $ 9,859,602 $ 11,502,280 $ 9,037,730 $ 2,232,061 $ 2,861,564 $ 3,386,721 $ 2,489,775 $ 2,738,909 $ 2,677,290 $ - 10,837,684 9,236,020 7,930,114 - - - 17,088,803 9,915,610 8,082,799 3,849,703 4,873,440 4,185,059 - - - 189,112 _ - 1,158,355 _ - - 49,192 - _ _ 55,743 - _ - 143,023 - _ _ _ 447,319 _ _ - - 5,127,697 _ - - - 2,203,238 _ _ _ - 345,820 _ - _ _ 463,470 _ _ _ 100,000 _ - _ 20,930 _ 1,785,164 - - 3,616,689 _ - - 190,431 - _ - 14,876 _ _ - 131,398 _ - - 2,476,886 (4,971) 993,555 1,130,452 - 7,941,439 7,658,289 7,504,770 (28,081) (1,833,937) (1,205,899) 1,673,762 1,994,812 2,453,383 _ _ _ - - (116,803) $ 30,125,496 $ 20,179,257 $ 18,193,735 $ 16,948,234 $ 18,395,902 $ 16,820,502 $ 18,402,540 101 CITY OF SHAKOPEE CHANGES IN FUND BALANCES - GOVERNMENTAL FUNDS Last Ten Fiscal Years REVENUES: Taxes Special Assessments Licenses and Permits Intergovernmental Charges for Service Fines and Forfeits Miscellaneous Total Revenues EXPENDITURES: General Government Police Fire Protective Inspection Public Works Culture and Recreation Economic Development Miscellaneous Debt Service: Principal Interest and Other Charges Capital Outlay Total Expenditures Excess of Revenues Under Expenditures OTHER FINANCING SOURCES (USES): Bonds Issued Sale of Assets Premium on Bonds Issued Refunded Bond Escrow Transfers In Transfers Out Total Other Financing Sources (Uses) Net Change in Fund Balance Debt Service as a Percentage of Noncapital Expenditures Table 4 2001 2002 2003 2004 $ 6,069,719 $ 7,128,598 $ 7,991,699 $ 8,207,254 2,380,186 1,466,432 3,158,560 3,175,161 3,159,222 3,814,646 4,748,457 4,173,804 1,627,879 5,230,607 2,612,877 4,162,581 1,093,146 1,489,516 1,537,412 2,382,405 230,085 253,348 275,583 288,492 1,386,351 1,656,828 605,947 766,614 15,946,588 21,039,975 20,930,535 23,156,311 2,770,732 3,186,072 3,192,768 3,486,029 2,421,948 3,014,829 3,148,785 3,698,352 767,061 889,390 975,656 1,141,700 521,856 555,384 645,030 690,920 2,019,943 2,258,903 2,221,004 2,564,662 664,340 622,099 669,570 2,489,749 103,681 109,455 317,167 - 3,265,000 3,015,000 3,720,000 1,775,000 770,152 729,300 717,098 701,976 4,396,346 9,249,946 5,532,652 7,432,575 17,701,059 23,630,378 21,139,730 23,980,963 (1,754,471) (2,590,403) (209,195) (824,652) - 4,938,612 2,215,567 15,070,000 13,680 9,644 41,761 299,183 1,718,995 1,701,837 1,732,872 5,963,741 (4,268,740) (2,490,520) (2,289,221) (3,312,078) (2,536,065) 4,159,573 1,700,979 18,020,846 $(4,290,536) $ 1,569,170 $ 1,491,784 $ 17,196,194 30% 26% 28% 15% 102 Table 4 (Continued) 2005 2006 2007 2008 2009 2010 $ 9,621,721 $10,815,367 $ 13,084,595 $ 14,437,766 $ 14,992,051 $ 14,385,788 2,564,470 1,751,871 2,301, 560 1,879,974 1,810,511 1,404,088 4,444,491 2,675,935 1,378,570 1,221,939 1,492,746 1,338,111 3,646,605 2,877,245 2,540,584 2,702,993 1,811,668 2,924,161 2,455,171 2,290,996 2,089,375 2,209,269 1,808,865 2,202,524 322,579 422,850 501,228 442,626 428,662 549,543 1,159,536 1,979,419 2,322,755 2,028,529 1,503,722 1,255,038 24,214,573 22,813,683 24,218,667 24,923,096 23,848,225 24,059,253 3,120,544 3,149,717 3,479,925 3,517,957 3,331,193 2,960,233 4,159,724 4,842,268 5,562,945 5,818,091 6,038,687 6,361,621 1,194,610 1,481,327 1,833,876 1,857,482 1,796,134 1,866,037 855,864 829,526 945,196 786,715 769,883 784,909 3,003,554 3,095,392 3,769,491 3,628,954 3,591,049 3,902,622 2,792,590 3,453,545 3,651,539 4,101,175 3,898,844 4,075,919 - - - 522,074 316,566 270,915 1,845,000 3,055,000 3,110,000 3,280,000 2,660,000 3,800,000 1,106,324 1,195,618 1,025,868 1,077,711 1,077,325 833,245 14,058,508 10,650,449 7,288,033 3,300,942 1,797,299 2,812,488 32,136,718 31,752,842 30,666,873 27,891,101 25,276,980 27,667,989 (7,922,145) (8,939,159) (6,448,206) (2,968,005) (1,428,755) (3,608,736) - 3,440,000 2,815,000 2,170,000 1,555,000 753,024 2,700 17,700 - 6,000 - 20,275 9,956 16,741 - (2,190,000) - - - - 3,374,566 6,683,532 4,411,281 4,605,693 4,958,133 13,199,807 (1,529,396) (3,354,364) (2,188,333) (2,224,692) (3,462,100) (12,380,403) 408,194 6,792,143 5,065,604 4,567,742 1,496,033 2,380,404 $ (7,513,951) $ (2,147,016) $ (1,382,602) $ 1,599,737 $ 67,278 $ (1,228,332) 16% 19% 16% 17% 16% 23% 103 CITY OF SHAKOPEE TAX CAPACITY AND ESTIMATED ACTUAL VALUE OF TAXABLE PROPERTY Last Ten Fiscal Years Source: Scott County Auditor Table 5 Taxable Tax Capacity as a Percentage of Estimated Market Value 1.62% 1.11% 1.09% 1.04 1.14% 1.15% 1.15% 1.15% 1,17% 1.18% 104 Estimated Commercial Less: Less Net Net Taxable Total Taxable Fiscal Residential Industrial Other Tax Increment Fiscal Tax Direct Market Year Property Property Property Property Disparities Capacity Tax Rate Value 2001 $11,560,704 $ 13,820,811 $ 542,037 $ 1,801,828 $ 1,997,080 $ 22,124,644 0.17983 $ 1,369,102,400 2002 11,469,272 10,023,762 409,721 975,773 1,543,453 19,383,529 033976 1,743,136,300 2003 13,890,536 10,452,944 589,540 497,860 2,035,749 22,399,411 0.33939 2,062,115,200 2004 16,721,302 10,609,240 913,912 497,255 2,121,170 25,626,029 0.32433 2,464,564,300 2005 20,394,086 11,749,438 528,300 327,963 2,132,628 30,211,233 0.31115 2,654,161,900 2006 23,162,320 12,710,783 565,215 352,543 1,615,190 34,470,585 030974 2,987,657,400 2007 26,817,616 14,013,644 675,479 378,593 1,963,379 39,164,767 0.31939 3,419,040,600 2008 29,942,078 15,426,355 741,679 411,490 1,846,919 43,851,703 031925 3,800,795,500 2009 29,805,971 16,088,685 1,319,935 156,799 1,862,715 45,195,077 0.32630 3,850,591,200 2010 27,805,069 16,459,872 1,279,807 151,914 1,584,552 43,808,282 0.33710 3,710,814,056 Source: Scott County Auditor Table 5 Taxable Tax Capacity as a Percentage of Estimated Market Value 1.62% 1.11% 1.09% 1.04 1.14% 1.15% 1.15% 1.15% 1,17% 1.18% 104 CITY OF SHAKOPEE DIRECT AND OVERLAPPING PROPERTY TAX RATES Last Ten Fiscal Years City Direct Rate Sources: Scott County Auditor and Leauge of Minnesota Cities Reports Table 6 General Obligation Debt Service Market Value 0.01980 0.00764 0.01393 0.01189 0.00969 0.00848 0.00728 0.00537 0.00651 0.00651 105 Shakopee Fiscal Operating Debt Service Total Direct School Scott Other Year Rate Rate Rate District County Jurisdictions 2001 0.16959 0.01024 0.17983 0.42982 0.31729 0.03034 2002 0.33194 0.00782 0.33976 0.26080 0.39517 0.04976 2003 0.33172 0.00767 0.33939 0.24168 0.38554 0.05685 2004 0.31131 0.01302 0.32433 0.21517 0.36635 0.04123 2005 0.29855 0.01260 0.31115 0.25215 0.35361 0.04660 2006 0.28996 0.01978 0.30974 0.27789 0.34974 0.04578 2007 0.29822 0.02117 0.31939 0.27132 0.33140 0.04434 2008 0.29874 0.02051 0.31925 0.26103 0.32646 0.04642 2009 0.30401 0.02229 0.32630 0.27274 0.32684 0.04960 2010 0.32152 0.01558 0.33710 0.29050 0.33240 0.04980 Sources: Scott County Auditor and Leauge of Minnesota Cities Reports Table 6 General Obligation Debt Service Market Value 0.01980 0.00764 0.01393 0.01189 0.00969 0.00848 0.00728 0.00537 0.00651 0.00651 105 CITY OF SHAKOPEE Table 7 PRINCIPAL TAXPAYERS Current Year and Niue Years Ago $ 3,850,742 8.58% $ 6,589,359 25.67% Source: Scott County Auditor 106 2010 2000 Pe rcentage Percentage 2009/10 of Total 1999/2000 of Total Tax Cap. Tax Cap. Tax Cap. Tax Cap. Taxpayer Type of Business Value Rank Value Value Rank Value Excel Energy Electrical Generation $ 521,985 1 1.16% $ 657,540 6 2.56% Shakopee Valley Market Retail 412,255 2 0.92% 715,077 3 2.79% Certainteed Manufacturing 399,250 3 0189% 1,332,704 1 5.19% Rahr Malting Grain Processing 389,250 4 0.87% Ryan Companies Property Management 379,464 5 0.85% Seagate Manufacturing/Research 363,250 6 0.81% Ryan Mpis 11 LLC Property Management 361,371 7 0.81% 524,882 7 2.05% Valley Fair Amusement Park 358,500 8 0.80% St. Francis RMC Health Care 341,181 9 0.76% First Industrial LP Property Management 324,236 10 0.72% Canterbury Park Horse Racing 1,060,029 2 4.13% KMart Warehouse Warehouse/Distribution Center 680,123 4 2.65% Tsumara Manufacturing 672,471 5 2.62% Principal Mutual Mortgage Financial 395,986 8 1.54% ADC Telecommunications Electronics 291,036 9 1.13% Silgan Container Warehouse 259,511 10 1.01 °/ $ 3,850,742 8.58% $ 6,589,359 25.67% Source: Scott County Auditor 106 107 CITY OF SHAKOPEE Table 8 PROPERTY TAX LEVIES AND COLLECTIONS Last Ten Fiscal Years Ratio of Accumulated percentage Delinquent Collections Percentage Collections of Total Accumulated Taxes to Year 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 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% 2003 7,889,018 7,191,567 91% 47,055 7,238,622 92% 79,710 1.01% 2004 8,625,695 7,878,618 91% (86,619) 7,791,999 90% 175,774 2,04% 2005 9,703,206 9,025,261 93% 67,187 9,092,448 94% 164,517 1.70% 2006 10,951,917 9,945,490 91% 38,986 9,984,476 91% 279,316 2.55% 2007 12,745,449 12,418,768 97% 91,200 12,509,968 98% 331,315 2.60% 2008 14,222,007 13,661,366 96% 208,470 13,869,836 98% 483,317 3.40% 2009 14,983,677 14,457,378 96% 157,920 14,615,298 98% 319,740 2.13% 2010 14,918,665 13,971,356 94% 55,020 14,026,376 94% 310,624 2.08% Source: Scott County Auditor 1. The above data does not include tax increment districts. 2. The State of Minnesota cancelled $ 561,000 in 2003 to 2006, $ 243,439 in 2008, $ 511,956 in 2009 and $ 558,860 in 2010 of annual '.. aid payments to the City that were part of the tax levy. 107 Sources: See Table 14 for income and population data 108 CITY OF SHAKOPEE Table 9 RATIO OF OUTSTANDING DEBT BY TYPE Last Ten Fiscal Years Governmental Activities G.O. Revenue Business -type Tax Special Activities Total Percentage Fiscal G.O. Increment Assessment Revenue Primary of Personal Per Year Bonds Bonds Bonds Bonds Government Income Capita 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 2003 2,445,000 - 13,060,000 25,215,000 40,720,000 5.0% 1,631 2004 10,595,000 - 18,205,000 25,515,000 54,315,000 5.5% 1,879 2005 8,275,000 - 16,360,000 24,750,000 49,385,000 4.7% 1,593 2006 7,950,000 - 17,070,000 34,535,000 59,555,000 5.5% 1,816 2007 7,560,000 - 17,165,000 33,895,000 58,620,000 4.8% 1,752 2008 7,165,000 - 16,450,000 33,225,000 56,840,000 4.1% 1,689 2009 6,755,000 14,200,000 22,235,000 43,190,000 4.1% 1,276 2010 6,340,000 12,370,000 21,470,000 40,180,000 3.4% 1,084 Sources: See Table 14 for income and population data 108 Sources: 1. Metropolitan Council estimated for population. 2005 -2009 populations are the City's estimate. 2. Scott County Auditor 109 CITY OF SHAKOPEE Table 10 RATIOS OF GENERAL BONDED OUTSTANDING Last Ten Fiscal Years Percentage of Percentage of Actual Taxable Total Fiscal G.O. Value of Per Personal Year Bonds Property Capita Income 2001 $ 2,675,000 0.20% 121 0.36% 2002 2,565,000 0.15% 107 0.33% 2003 2,445,000 0.12% 98 0.30% 2004 10,595,000 0.43% 366 1.07% 2005 8,275,000 0.27% 267 0.76% 2006 7,950,000 0.27% 242 0.65% 2007 7,560,000 0.21% 226 0.61% 2008 7,165,000 0.19% 213 0.52% 2009 6,755,000 0.18% 199 0.65% 2010 6,340,000 0.16% 171 0.54% Sources: 1. Metropolitan Council estimated for population. 2005 -2009 populations are the City's estimate. 2. Scott County Auditor 109 (THIS PAGE LEFT BLANK INTENTIONALLY) 110 CITY OF SHAKOPEE DIRECT AND OVERLAPPING GOVERNMENTAL ACTIVITIES DEBT December 31, 2010 G.O. Debt Direct Debt: City of Shakopee Overlapping Debt: Independent School District No. 720 Independent School District No. 191 Scott County Metropolitan Council Total Overlapping Debt: Total Direct and Overlapping Debt Source: Scott County Auditor Dakota County Auditor Metropolitan Council $ 18,710,000 149,610,000 89,255,000 81,260,000 1,293,495,536 1,613,620,536 $ 1,632,330,536 Table 11 Percentage Amount Applicable Applicable To City of To City of Shakopee(1) Shakopee 100.0% $ 18,710,000 85.0% 127,168,500 9.1% 8,122,205 29.4% 23,890,440 1.0% 16,101,382 175,282,527 $ 193,992,527 Note: Overlapping governments are those that coincide, at least in part, with geographic boundaries of the City of Shakopee. This schedule estimates the portion of the outstanding debt of those overlapping governments that is borne by the residents and businesses of the City of Shakopee. This process recognizes that, when considering the City's ability to issue and repay long -term debt, the entire debt burden borne by the residents and businesses should be taken into account. However, this does not imply that 3every taxpayer is a resident, and therefore responsible for repaying the debt of each government. (1) The percentage of overlapping debt is estimated using tax capacity. Applicable percentages were estimated by determining the portion of Scott County's tax capacity that is within the City of Shakopee's boundaries and dividing it by Scott County's total tax capacity. 111 CITY OF SHAKOPEE - Table 12 Market Value (Taxable) Debt Limit - Percent of Market Value (Note A) Amount of Debt Applicable to Debt Limit: G.O. Bonds Available in Debt Service Funds Total Debt Applicable to Debt Limit Legal Debt Margin LEGAL DEBT MARGIN INFORMATION Last Ten Fiscal Years 2001 2002 2003 2004 $ 1,369,102,400 $ 1,743,136,300 $ 2,062,115,200 $ 2,464,564,300 27,382,048 34,862,726 41,242,304 49,291,286 2,675,000 (390,619) 2,565,000 (284,119) 2,445,000 (297,657) 10,595,000 (2,539,292) 2,284,381 2,280,881 2,147,343 8,055,708 $ 25,097,667 $ 32,581,845 $ 39,094,961 $ 41,235,578 NOTE (A): M.S.A. Section 475.53 (Limit on Net Debt) Subdivision 1. Generally, except of otherwise provided in Sections 475.51 to 475.75, no municipality, except a school district or a city of the first class, shall incur or be subject to a net debt in excess of 2% (3% starting 2008) of the market value of taxable property in the municipality." NOTE (B): M.S.A. Section 475.51 Definitions: Subdivision 4. "Net debt' means the amount remaining after deduction from its gross debt the aggregate of the principal of the following: (1) Obligations issued for improvements which are payable wholly or partly from the proceeds of special assessments levied upon property specially benefited thereby, including those which are general obligations of the municipality issuing them, if the municipality is entitled to reimbursement in whole or in part from the proceeds of the special assessments. (2) Warrants or orders having no definite or fixed maturity. (3) Obligations payable wholly from the income of revenue - producing conveniences. (4) Obligations issued to create or maintain a permanent improvement revolving fund. (5) Obligation issued for the acquisition, and betterment of public waterworks systems, and public lighting, heating or power systems and on any combination thereof or for any other public convenience from which a revenue is or may be derived. (6) Amount of all money and the face value of all securities held as a sinking fund for the extinguishment of obligations other than those deductible under this subdivision. M.S.A. Section 469.178, subdivision 1. (tax increment bonds) "... The bonds are not included for purposes of computing the net debt of any municipality. 112 Table 12 (Continued) 2005 2006 2007 2008 2009 2010 $2,654,161,900 $2,987,657,400 $3,419,040,600 $ 3,800,795,500 $3,850,591,200 $3,710,814,056 53,083,238 59,753,148 68,380,812 114,023,865 115,517,736 111,324,422 8,275,000 7,950,000 7,560,000 7,165,000 6,755,000 6,340,000 (1,155,148) (810,494) (834,155) (847,608) (837,100) (786,306) 7,119,852 7,139,506 6,725,845 6,317,392 5,917,900 5,553,694 $ 45,963,386 $ 52,613,642 $ 61,654,967 $ 107,706,473 $ 109,599,836 $ 105,770,728 113 CITY OF SHAKOPEE PLEDGED REVENUE COVERAGE Last Ten Fiscal Years Bonds Table 13 Debt Service Utility Less: Net Fiscal Service Operating Available Year Charges Expense Revenue 1,468,242 2.66 580,000 1,348,883 2001 $ 21,667,471 $ 16,153,413 $ 5,514,058 2002 21,148,771 16,343,532 4,805,239 2003 22,871,121 17,585,831 5,285,290 2004 25,473,439 19,778,149 5,695,290 2005 33,841,730 25,821,489 8,020,241 2006 38,445,403 31,436,969 7,008,434 2007 44,692,049 36,644,414 8,047,635 2008 45,499,791 38,689,351 6,810,440 2009 42,437,910 33,009,500 9,428,410 2010 45,586,795 36,375,440 9,211,355 1. Operating expense excludes depreciation and amortization. Debt Service Principal Interest Coverage $ 235,000 $ 797,759 5.34 340,000 1,468,242 2.66 580,000 1,348,883 2.74 640,000 1,307,626 2.92 765,000 1,074,487 4.36 785,000 1,174,711 3.58 640,000 1,574,925 3.63 670,000 1,523,198 3.11 710,000 1,012,874 5.47 765,000 939,426 5.40 114 115 CITY OF SHAKOPEE Table 14 DEMOGRAPHIC AND ECONOMIC STATISTICS Last Ten Calendar Years Fiscal School Unemployment Total Per Capita Personal Year Population (1) Enrollment (2) Rate (3) Employment Income (4) Income (5) 2001 22,192 3,892 4.0% 13,809 $ 33,401 $ 741,234,992 2002 23,900 4,487 4.0% 15,024 32,575 778,542,500 2003 24,967 4,790 4.3% 15,887 32,760 817,918,920 2004 28,913 5,121 3.9% 16,213 34,284 991,253,292 2005 31,000 6,247 3.6% 16,192 35,956 1,114,636,000 2006 32,800 6,643 3.7% 17,787 37,023 1,214,354,400 2007 33,460 6,905 4.6% 18,225 39,042 1,306,345,320 2008 33,660 7,163 6.7% 18,688 31,900 1,375,044,660 2009 33,860 7,465 7.8% 18,926 30,900 1,046,274,000 2010 37,076 7,814 7.0% 18,771 31,700 1,175,309,200 Source: 1. Metropolitan Council population estimates except for 2000 which is the official census figure. 2005 -2009 are the City's estimate. 2. Shakopee School District, SACS, Bloomington Lutheran 3. Minnesota Department of Employment and Economic Development 4. Bureau of Economic Analysis and MET Council Community Profile Dad 5. Per capita income times population 115 (THIS PAGE LEFT BLANK INTENTIONALLY) 116 CITY OF SHAKOPEE Table 15 PRINCIPAL EMPLOYERS Current Year and Nine Years Ago 6,611 Total Employment Source: Minnesota Department of Employment and Economic Development. 35.11% 6,252 45.01% 18,832 13,890 117 2010 2000 Total Total City City Taxpayer Type of Business Employees Rank Employment Employees Rank Employment ADC Manufacturing 1,400 1 7.43% 1,400 1 10.08% Valley Fair Amusement Park 1,200 2 6.37% 1,200 2 8.64% Seagate Manufacturing/Research 1,100 3 5.84% 1,200 3 8.64% Imagine Print Solutions Printing 524 4 2.78% Scott County Government 495 5 2.63% Kmart Distribution Center 424 6 2.25% 424 4 3.05% American Color - SVP Printing 415 7 2.20% 415 5 2.99% School District No. 720 Education 390 8 2.07% 390 6 2.81% St. Francis RMC Health Care 363 9 1.93% 363 7 2.61% CertainTeed Roofing Manufacturing 300 10 1.59% 300 8 2.16% Anchor Glass Glass Container Manufacturing 285 9 2.05% TORO Manufacturing 275 10 1.98% 6,611 Total Employment Source: Minnesota Department of Employment and Economic Development. 35.11% 6,252 45.01% 18,832 13,890 117 CITY OF SHAKOPEE 118 Table 16 FULL -TIME EQUIVALENT CITY GOVERNMENT EMPLOYEES BY FUNCTION/PROGRAM Last Ten Fiscal Years 2001 2002 2003 2004 2005 General Government: Administration 6 6 6 6 6 City Clerk 4 3 4 4 4 Finance 4 4 3 3 3 Planning 5 6 6 5 5 Facilities Maintenance 1 1 1 4 4 Information Technology 1 1 1 2 2 Public Safety: Police: Licensed 25 34 34 40 42 Other 6 7 7 7 9 Fire: Full time - - - - - Paid On Call 47 50 50 50 50 Building Inspection 7 7 7 8 8 Public Works: Engineering 9 9 9 9 9 Street 9 9 9 11 12 Shop 2 2 3 3 3 Park and Recreation: Park Maintenance 6 7 7 7 7 Recreation 9 8 8 8 10 Subtotal 141 154 155 167 174 Shakopee Public Utilities: Electric Water Other Subtotal Total Source: City departments 118 Table 16 (Continued) 2006 2007 2008 2009 2010 6 5 5 5 5 4 4 4 4 4 3 3 3 3 3 5 5 5 5 5 6 6 7 6 6 2 2 2 2 2 45 46 47 47 47 7 7 6 6 6 1 2 3 3 48 48 48 44 44 8 7 6 5 5 9 7 7 7 7 12 12 13 13 13 3 3 3 3 3 7 8 8 8 8 10 10 7 7 7 175 174 173 168 168 18 16 16 16 8 8 8 8 16 17 18 18 42 41 42 42 216 214 210 210 119 yll WelORy r_VIzITIM Source: City departments 120 Table 17 OPERATING INDICATORS BY FUNCTION/PROGRAM Last Ten Fiscal Years 2001 2002 2003 2004 2005 General Government Planning Number of Case Files 102 121 127 109 120 Number of Plats Filed 19 10 11 9 7 Number of Acres Platted 142 378 385 238 321 Public Safety Police Arrests N/A 1,348 1,147 1,248 1,451 Citations N/A 3,805 3,129 3,802 3,843 Calls for Service 13,213 13,939 14,799 16,062 17,363 Fire Calls for Service 488 446 482 479 539 Building Inspection Building Permits Issued 1,469 1,310 1,744 1,638 1,512 Number of Inspections 11,878 11,416 15,016 14,535 15,175 Single Family Homes Permitted 442 260 384 396 352 Public Works Engineering Amount of Construction (000) 7,048 14,160 9,569 17,927 13,178 Street Miles of Roadway 124 131 138 114 123 Park and Recreation Park Maintenance Acres Maintained 638 655 671 760 925 Recreation Program Participants N/A 9,911 10,194 9,693 9,842 Community Center Members N/A 520 556 541 516 Community Center Admissions N/A 70,088 77,014 75,018 77,543 Shakopee Public Utilities Electric Number of Metered Accounts - - - 14,698 KWH Sold (mw) - - - - 401 Peak Demand KW 71,100 67,000 74,700 70,000 86,500 Water Number of Metered Accounts - - - - 9,310 Gallons Pumped (mg) 1,422 1,364 1,629 1,716 1,762 Peak Demand (mg) 10.0 8.6 12.3 10.4 12.4 Source: City departments 120 Table 17 (Continued) 2006 2007 2008 2009 2010 91 67 68 35 33 10 3 2 2 1 155 38 50 34 6 1,770 2,199 1,881 1,913 1,962 4,970 6,073 4,058 6,127 5,528 18,333 19,606 19,057 17,909 17,831 494 609 538 517 557 1,131 1,194 1,019 1,102 1,083 9,671 8,174 5,946 9,726 8,048 223 138 94 314 160 10,279 4,730 1,351 1,885 3,114 153 154 154 154 154 930 930 933 933 933 9,928 10,847 11,410 10,377 13,001 578 597 613 823 2,534 91,776 100,044 100,397 109,257 117,336 15,275 15,436 15,625 15,984 16,139 371 397 393 376 395 94,100 93,058 86,877 85,603 93,027 9,717 9,924 10,156 10,470 10,648 1,931 1,909 1,775 1,866 1,718 13.4 15.0 13.6 12.8 10.0 121 CITY OF SHAKOPEE CAPITAL ASSET STATISTICS BY FUNCTION /PROGRAM Last Ten Fiscal Years 2001 2002 2003 2004 Police Stations 1 1 1 Patrol Zones 4 4 4 Patrol Units 11 12 12 Fire Stations 2 2 2 Street: Miles of Roadway 124 131 138 Traffic Signals 21 21 23 Parks: Acres 638 655 671 Ball Fields 42 42 42 Playgrounds 12 12 13 Electric: Number of Substations 4 4 4 Water: Miles of Water Mains Fire Hydrants Storage Capacity (mg) Source: City Departments 1 4 13 2 114 25 760 46 13 4 10 Table 18 2005 1 4 13 2 123 25 925 46 13 4 [[1] 122 Table 18 (Continued) 2006 2007 2008 2009 2010 1 1 1 1 1 4 4 4 4 4 15 15 15 15 15 2 2 2 2 2 153 154 154 154 154 25 25 26 27 27 1,015 1,015 1,019 1,024 1,024 47 47 49 49 52 18 22 24 24 24 4 4 4 4 4 145 145 145 146 146 1,750 1,750 1,751 1 1,850 10 10 10 10 10 123 KO-N1 r ' ' 1, ■ Expert advice. When you need it" City of Shakopee June 21, 2011 Kara Gaffy, CPA Audit Manager WV Expert advice. When you need it.' • Audit Process — Planning — Fieldwork • February and March — Draft CAFR — Final Reports — Board Presentation 2 1 KDV �` •� " µ " " Expert advice. When you need it.`" Independent Auditor's Report • Unqualified Opinion on the Basic Financial Statements • Comprehensive Annual Financial Report (CAFR) also reviewed for GFOA Certificate of Achievement for Excellence in Financial Reporting WV ,'•+ „ W N11• •' Expert advice. When you need it.'" Minnesota Legal Compliance • Compliance audit based on the Minnesota Legal Compliance Audit Guide for Local Governments covers seven areas of compliance: — — Deposits and Investments — - Conflicts of Interest — - Public Indebtedness — - Contracting and Bidding — - Claims and Disbursements — - Miscellaneous Provisions — - Tax Increment Financing • No findings 2 a la KD3 " 1~ • „ Expert advice. When you need it 4. Single Audit and GAS Report Report on Government Auditing Standards and Single Audit performed in accordance with the provisions of OMB Circular A -133 Findings: • Lack of Segregation of Accounting Duties • Improve Ice Arena Internal Controls KDV •` I •' 1 Expert advice. When you need it.`" General Fund Performance General Fund Bu. :et Actual Variance Revenue $17,806,060 $18,4 16,479 $610,419 Expenditures 19 791,420 18 724 835 1 066 585 Excess of Revenues Over (Under) Expenditures (1,985,360) (308,356) 1,677,004 Transfers In and Other Sources 2,044,400 2,239,806 195,406 Transfers Out 2 796 000 4 396 000 1 600 000 Net Transfers (751,600) (2,156,194) (1,404,594) Change in Fund balance (2,736,960) (2,464,550) 272,410 Beginning Fund Balance 11 502 80 11 502 80 - lndin_ Fund Balance $ 8,765,320 $ 9,037,730 $ 272,410 I(DV N Expert advice. When you need it ° N [General Fund' sropoopco s18,0oopuo S16,000,000 — —Hil st4,o6ga6o Slz000p0o $w000,oao $8.000.000 j — $6.000)X0 I III 71000,000 ■ 52000.000 ■ .. , II I -. 23306 1001 2008 2009 2010 11 Rams 313,750,642 $15,266076 135,07ap47 317,014,639 018,416,479 O 1 d6os _ 13,862,2511 16,129,007 16,189071 16130,691 18,774,835 D Tnse Babson 9,844;674 9,707,533 9,859,602 11,102280 9037,730 WV : APIry , Expert advice- When you need it. "' General Fund Revenues/Expenditurea) Per Capita $600 $201 © ® © © �" EMI ® © SAM i — --• . i - 1 Ii 32011 ' ■ sloe' ■ s ' ■ 2006 2007 21108 2009 7010 I ■ Rne.o •Rayedilae l ti 4 K • II Ilk • Expels advice. When you need it.`° lUireservedflInassigncdFand Malice as a Percent afExpenditures 10% 40% M v% 0% rx- - sx — 6a% 0% 210 2007 906 7019 7010 ' 4 l: Pei ( nlbice. When you need it.'" [Taxable Tu Capacity and CertihedLevyl S45.000.000 s ct000.000 315.000900 510,000,000 5n 000.000 $11.000.000 7 . ■ $10.000.000 MI 31.000.000 ■ ■ ■ ■ 2006 7007 2001 2009 - 2010 �Taaa1de 71nCaity 731611.556 576.074921 910.291.149 540954.725 515937.163 • Calif ad L..7 10951917 12.745,419 14277009 14953,677 14.715799 10 5 KDV ....4 �~ , n11• �t al Expert advice. When you need it.' 1Tax Qpadty Rate oado 35.000 © 31910 f 32630 317I01 30.000 25000 20.000 15.000 10000 Sa00 2006 7007 2008 2009 7010 KDV Expert advice. When you need it." 12010 General Fund Revenues) 12009 General Fund RevmuesJ IlAr es (3mpe Pew ad to SQa li�al Laeais �elela ID'1L Li■.11raaa " 546 Yvrn 1% li® lieeaa Aul )rte r■AAr . 7% Yuan 6Araanevmd_ PA Mos feu 7Qi 6 L ti ZSSYIrI. LLO'rrf.'t 807sLY Pt 9 tail/21 +I.+v R1 ea9..13 0 1 9 1 1 . 1 : 6 0 &t LtP r[/b6[£ EKY901 OY.'EG.'C o®in' • / 51111SCIE ELI VII'E (a6YKI5 IRYIILE 9a'IUh r1 do■ ndums loo'S 4 W U't Lt* 14SYL ILE3 I6L'Ias ........a l £{ 2,.a10■ ■ nice root toce MOE IC& i 0 CI U - UU U- .I I I �l M UMS ■ CetrearRS 000 000 l ' ` ..'71 p, +,nt nn.( rt•'r1A1 +�Iapv leada"1 , 7 NI' IMP AciN N.. x k %LS kr.J•Sa!FINF, 'WV \ 4 9•S MI 7651 gvn.Aw %oz i %VC i ®neo'Jlessco'J \ %I I IGB I %I.." m 4 1 %I lsuearraa at.....n acrdopnao Pnaciava(I 3 almaanv3 I 1 !PQ+d='Ji Pfd Izzowe9 60021 sa,ollPn3d:31 Pa4I 1E 0102 11 paa no. I Ij,% 'aajepv )tad \ { �' it. • A.CI)I KDv r<, . % ��N6 Expert advice. When you need it. 1 [Water Bu,dl sow .= 1 S1.000 .001) i 12.000,001 ' ' • As040m I ' • $1,004001 � Al ' i III S. 1(504000) - 2006 /007 7009 7019 2010 ■ Opalng R49449rs 2.3061,504 13,474.099 $3254717 33.5 $4295574 • Opa Brpms. 2346,953 1242,420 3,771556 7231,616 1,214,125 17 Open boxer 01660 204,16 771639 (119_169) 154651 1011.449 c Chowiu 67e1A>sb 7.999212 765,771 426,706 1,295.072 1453523 l 5 1' J V NI Expert advice. When you need it" Sewer F_d I $4:000.000 $3 ,500,000 $3000,000 $2,500,000 S2000,000 Ill 1 }00.000 , . sl $600000 , . ■ x504000) $(1.000.000) 700,1 7107 - - - NOS - — 200 - 7116 O OpQ4fus m® $7,77.442 12771.011 12,542564 11,441.644 $1,140.974 . OP 2774,734 294 ;955 3,33 759 3,399,117 3,413,1611 0Op Nm7 bac(Lm*) (25;792) (165,994) 1 45,9V (122994) 0 4lEmep u Na Ash 1.959,196 3.04.672 611,716 03.12 501,45 8 I(_DV . •. "W y " V1t•1 Expert advice. When you need it Storm Drainage Fund' 53.000000 — - 52500.000 $2.000.000 S1.500.000 - - $3.00000 x0 $(1.000.000) 2006 2001 2001 2009 2030 ■ Se n=Chalp $1J71,061 $1266357 312653'24 $1320.5 $3.137719 • Op• Expenses 1.522361 1.157,016 1515376 1261361 3.717291 31CIprr Ineme(Isz) (353300) (15776 (170.002) 16305 (604066) O6]nng in Net Amts 2321,091 132!959 1062116 6!3.617 299.132 � 1 Expert advice. When you need it." Debt Service Schedule !(Including Principal and Interest) ss 00000o $`500.000 — 33.500.000 – 53t000000 02.700050 – $2,000000 $1.100000 $1.004000 5100.00 I 2011 7012 2013 2014 2015 7016 2017 2013 2019 2020 70 221 2012 2023 2024 2025 2026 2027 207E 2029 2030 • inns In • GO. a.m. I 9 KDV r ,`� N1/4 I S IlL ales I.i wl�ll• vllae Expert advice. When you need it" Bonded General Obligation Dehll S30.0o0.000 s.:• s2s o90 000 57030.114 SSr.,;.:, f7047,139 Szo,000.000 .654718 ■ e: g. lrav'ys.a 43 515,000,000 __ , 5 , , 510.000.000 1 51%450,230 C7.11 S5.000003 — — I S. 2006 2981 7098 2009 2030 1 C• c It a_' Debt O Debt Seavice I Mawr a Net Deeded Dd* 1 1 1 KDV MITIr . ~ 411. _ . claw la wltaae• X1141 Expert advice. When you need it.' Minnesota Median City Bond Ratings' .lr. 1.. ur. I 3 .. t0'. J J J J naa n. Aa: Aa3• Al A' n; Itaal 10 I(DV .. „ •, Expert advice. When you need it 9i N 2009 General Fund Revenues and Expenditures Per Capita 2600 Swo 1 : . r 1101 . 52.00 • • a ' . _ _ii 1 II SI00 SO "Total ! .Imdim.v To levewu Tax Ronan • SW:op= _ WI $301 $406 • Savage 112 44 362 O Crystal 183 537 337 •Apple Valle/ 151 493 399 J WV Expert advice. When you need it."' L 2009 General Fond I Ex nditoresPer Capita 5300 $550 - IF $293 - - $150 - — - -- — slao uo l SO Gmml Go n Pale Safety Askic works Rmcri • Sialmpee $94 $252 $23 $51 • Savage 75 166 $1 37 O Cg real 97 737 49 86 • Apia Valet 62 197 71 92 11 • Expert advice. When you need it." 2009 Per Capita Information Governmental Fundy $2,500 52,000 S1,500 S1,000 $500 SO ■M Outstanding Debt Total Revenues* Tax Revenues* Capital Outlay ■ Shakopee $619 $694 $438 $53 ■ Savage 2,456 785 561 203 a Crystal 579 895 444 417 ■ Apple Valley 848 702 436 238 I(DV Expert advice. When you need it.." Questions? Kara Gaffy, CPA 320 - 229 -6104 kgaffy @kdv.com 12