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2006 CAFR CITY OF FRIDLEY, MINNESOTA Comprehensive Annual Financial Report For the Fiscal Year Ended December 31, 2006 Prepared by: Finance Department Richard D. Pribyl Finance Director - This page intentionally left blank - CITY OF FRIDLEY, MINNESOTA COMPREHENSIVE ANNUAL FINANCIAL REPORT YEAR ENDED DECEMBER 31, 2006 TABLE OF CONTENTS EXHIBITPAGE I. INTRODUCTORY SECTION Letter of Transmittal3 Certificate of Achievement for Excellence in Financial Reporting11 Elected and Appointed Officials13 City Administrative Organizational Structure 200614 II. FINANCIAL SECTION Independent Auditor's Report19 Management's Discussion and Analysis23 Basic Financial Statements: Government-Wide Financial Statements: Statement of Net AssetsA-135 Statement of ActivitiesA-236 Fund Financial Statements: Balance Sheet - Governmental FundsA-338 Statement of Revenues, Expenditures and Changes in Fund Balances - Governmental FundsA-440 Reconciliation of the Statement of Revenues, Expenditures and Changes in Fund Balances of Governmental Funds A-543 Statement of Net Assets - Proprietary FundsA-644 Statement of Revenues, Expenses and Changes in Fund Net Assets - Proprietary FundsA-746 Statement of Cash Flows - Proprietary FundsA-848 Statement of Fiduciary Net AssetsA-950 Notes to Financial Statements51 Required Supplementary Information: Budgetary Comparison Schedule - General FundB-184 Budgetary Comparison Schedule - Grant Management FundB-288 Budgetary Comparison Schedule - Note to RSI89 Combining and Individual Fund Statements and Schedules: Combining Balance Sheet - Nonmajor Governmental FundsC-196 Combining Statement of Revenues, Expenditures and Changes in Fund Balances - Nonmajor Governmental FundsC-297 CITY OF FRIDLEY, MINNESOTA COMPREHENSIVE ANNUAL FINANCIAL REPORT YEAR ENDED DECEMBER 31, 2006 TABLE OF CONTENTS EXHIBITPAGE Subcombining Balance Sheet - Nonmajor Special Revenue FundsC-3100 Subcombining Statement of Revenues, Expenditures and Changes in Fund Balances - Nonmajor Special Revenue FundsC-4102 Special Revenue Funds: Cable TV Fund: Comparative Balance SheetD-1104 Schedule of Revenues, Expenditures and Changes in Fund Balance - Budget and ActualD-2105 Solid Waste Abatement Fund: Comparative Balance SheetD-3106 Schedule of Revenues, Expenditures and Changes in Fund Balance - Budget and ActualD-4107 HRA Reimbursement Fund: Comparative Balance SheetD-5108 Schedule of Revenues, Expenditures and Changes in Fund Balance - Budget and ActualD-6109 Drug and Gambling Forfeiture Fund: Comparative Balance SheetD-7110 Schedule of Revenues, Expenditures and Changes in Fund Balance - Budget and ActualD-8111 F. C. C. Donations Fund: Comparative Balance SheetD-9112 Schedule of Revenues, Expenditures and Changes in Fund Balance - Budget and ActualD-10113 Police Activity Fund: Comparative Balance SheetD-11114 Schedule of Revenues, Expenditures and Changes in Fund Balance - Budget and ActualD-12115 Springbrook Nature Center Fund: Balance SheetD-13116 Schedule of Revenues, Expenditures and Changes in Fund Balance - Budget and ActualD-14117 Capital Project Fund: Capital Improvement Fund: Schedule of Revenues, Expenditures and Changes in Fund Balance - Budget and ActualE-1118 CITY OF FRIDLEY, MINNESOTA COMPREHENSIVE ANNUAL FINANCIAL REPORT YEAR ENDED DECEMBER 31, 2006 TABLE OF CONTENTS EXHIBITPAGE Internal Service Funds: Combining Statement of Net AssetsF-1120 Combining Statement of Revenues, Expenses and Changes in Net AssetsF-2121 Combining Statement of Cash FlowsF-3122 Employee Benefits Fund: Comparative Statement of Net AssetsF-4123 Comparative Statement of Revenues, Expenses and Changes in Net AssetsF-5124 Comparative Statement of Cash FlowsF-6125 Self Insurance Fund: Comparative Statement of Net AssetsF-7126 Comparative Statement of Revenues, Expenses and Changes in Net AssetsF-8127 Comparative Statement of Cash FlowsF-9128 Information Systems Fund: Comparative Statement of Net AssetsF-10129 Comparative Statement of Revenues, Expenses and Changes in Net AssetsF-11130 Comparative Statement of Cash FlowsF-12131 Housing and Redevelopment Authority (Component Unit): Balance Sheet - Governmental FundsG-1134 Statement of Revenues, Expenditures and Changes in Fund Balances - Governmental FundsG-2136 Subcombining Balance Sheet - Nonmajor Capital Project FundsG-3138 Subcombining Statement of Revenues, Expenditures and Changes in Fund Balances - Nonmajor Capital Project FundsG-4140 Agency Funds: Statement of Changes in Assets and LiabilitiesH-1144 CITY OF FRIDLEY, MINNESOTA COMPREHENSIVE ANNUAL FINANCIAL REPORT YEAR ENDED DECEMBER 31, 2006 TABLE OF CONTENTS EXHIBITPAGE III. STATISTICAL SECTION (Unaudited) Financial Trends: Net Assets by ComponentTable 1147 Changes in Net AssetsTable 2148 Fund Balances - Governmental FundsTable 3150 Changes in Fund Balances - Governmental FundsTable 4151 Revenue Capacity: Tax Capacity and Estimated Market Value of Taxable PropertyTable 5152 Direct and Overlapping Property Tax Capacity RatesTable 6154 Principal Property Tax PayersTable 7156 Debt Capacity: Property Tax Levies and CollectionsTable 8157 Ratios of Outstanding Debt by TypeTable 9158 Direct and Overlapping Govermental Activities DebtTable 10160 Demographic and Economic: Legal Debt Margin InformationTable 11161 Pledged Revenue CoverageTable 12162 Operating Information: Demographic and Economic StatisticsTable 13164 Principal EmployersTable 14165 Full-time-Equivalent City Government Employees by Function/ProgramTable 15166 Operating Indicators by Function/ProgramTable 16168 Capital Asset Statistics by Funciton/ProgramTable 17170 I. INTRODUCTORY SECTION 1 111 - This page intentionally left blank - 2 222 - This page intentionally left blank - 4 444 CITY OF FRIDLEY, MINNESOTA Report. The City provides a full range of services to its citizens. These services include, but are not limited to, police and fire protection; water and sanitary sewer utilities; the construction and maintenance of streets and infrastructure; recreational facilities; and general administrative services. The Housing and Redevelopment Authority (HRA) is included in the reporting entity as a component unit of the City, because the governing board is appointed by the City Council, and because of the City’s relationship of financial benefit or burden with the authority. The organization, form and contents of this report were prepared in accordance with the standards prescribed by the Governmental Accounting Standards Board (GASB), the Government Finance Officers Association of the United States and Canada (GFOA), the American Institute of Certified Public Accountants, the Minnesota Office of the State Auditor, and the City Charter. ECONOMIC CONDITION AND OUTLOOK BACKGROUND AND LOCATION The City of Fridley is a first ring suburban community with an estimated 2006 population of 26,679. The City is located 10 minutes north of downtown Minneapolis and 25 minutes northwest of downtown St. Paul. Incorporated in July of 1949, Fridley covers 10 square miles of area and is now home to some of the most important industries in the Midwest, nation, and the world. An industrial spine around the rail corridor has served the City well and has provided the city with nearly as many jobs as the number of citizens who reside in the community. Fridley is home to the largest number of employees in Anoka County. LOCAL ECONOMY The local economy has been a mixed picture over the past year. The number of manufacturing and service jobs has decreased. The unemployment rate for the City however, is still below that of the national average. The value of new construction for 2006 decreased significantly from 2005 levels. In 2006 however, there were eight new projects having a value greater than $500,000, compared to only six in 2005. Continued long-term growth is anticipated as Fridley continues to aggressively pursue redevelopment opportunities. Property values have continued to increase with an overall increase of 6.4% in estimated market value for all properties in Fridley, and a 5.5% increase in estimated market value for homesteaded residential property. MAJOR INITIATIVES For the Year The City has many accomplishments to report for 2006. The following list is a summary of the major initiatives completed throughout the year. 55 CITY OF FRIDLEY, MINNESOTA ECONOMIC CONDITION AND OUTLOOK (CONTINUED) 1.The City reconstructed 4 miles of streets throughout the City. This project work included new concrete curb and gutter, new base and asphalt, and water and sewer repairs as necessary. The final cost of these projects was approximately $3,150,000. 2.Wells #4 & 7 were repaired as part of the City’s preventive maintenance program. This program helps to ensure a constant water supply for the City. 3.Commons and Locke Park Water Treatment Plants were upgraded. 4.A salt shed was erected at the City’s Municipal Garage. 5.The Fire Department took possession of their new aerial fire truck. 6.Phase 1 to improve the irrigation at the Community Park ball fields was completed. For the Future The future for the City of Fridley will be filled with change and restructuring depending on future legislative actions that may change the state’s tax structure, municipal redevelopment methods, and revenue streams. Traditional level of service is a concern as the City looks at potential reductions in revenue from traditional redevelopment practices and local government aid actions at the State Capitol. The City will continue to investigate alternatives that will allow creative solutions to the delivery of services. The City of Fridley will continue developing the complimentary anchor to the Gateway East development with a project called Gateway West, which will likely provide an additional 16 single-family units when the project is completed. The importance of this small development is the balance and positive image it will provide as people enter the community on University Avenue from the south. The growing losses in the utility funds will need to be solved as reserves can only be tapped for so long. With the current Charter restriction on utility rates, cash is being depleted at an ever increasing rate. Some of the options being explored include, once again asking the voters to approve a rate higher than the inflation rate, changing the Charter to exclude utility rates from the fee restriction language, and seeking a legal opinion on whether the current restriction on utility rates is legal. Significant projects budgeted for 2007 in the five year capital improvement plan include: security upgrades to City Hall; an accelerated program to reconstruct streets; Phase II of irrigation upgrades at Community Park; and the annual well, reservoir, and pump house maintenance programs. 66 CITY OF FRIDLEY, MINNESOTA FINANCIAL INFORMATION INTERNAL CONTROLS In developing and improving the City’s accounting system, consideration is given to the adequacy of internal accounting controls. Internal accounting controls are designed to provide reasonable, but not absolute, assurance regarding the safeguarding of assets against loss from unauthorized use or disposition and the reliability of financial records for preparing financial statements and maintaining accountability for assets. The concept of reasonable assurance recognizes that the cost of a control should not exceed the benefits likely to be derived and the evaluation of costs and benefits requires estimates and judgments by management. All internal control evaluations occur within the above framework. We believe that the City’s internal accounting controls adequately safeguard assets and provide reasonable assurance of the proper recording of financial transactions. BUDGETARY CONTROLS A complete budgetary system of accounts is maintained for the General and Special Revenue Funds. Budgetary control is maintained in compliance with the City Charter requirements. The Charter provides that it is the duty of the City Manager to strictly enforce the provisions of the budget. The management policy of the City is such that the existence of a particular item or appropriation in the approved budget does not mean that it will or must be automatically expended. It is the policy of the City to control budgets at the expenditure category level. Budget adjustments between City divisions are made upon the approval of a resolution by the City Council. The City Charter provides that the City Council shall not have power to increase the total amount of the budget, whether by insertion of new items or otherwise, beyond the estimated revenue unless the actual revenue exceeds such revenue estimates, and in that event not beyond such actual revenue. There is a constant review process. Expenditures are not approved until it has been determined that 1) the expenditure is necessary, 2) adequate funds have been appropriated, and 3) funds are available. CASH MANAGEMENT All temporary cash surpluses during the year are invested in various securities that State statutes permit. The City’s policy is to invest all available monies at competitive interest rates in accordance with the City’s over-all fiscal plan coordinated with operating needs and programs projected over the ensuing 12-month period. Investment yields on investments held during the year ranged from 1.98% to 6.01%. 77 CITY OF FRIDLEY, MINNESOTA FINANCIAL INFORMATION (CONTINUED) RISK MANAGEMENT The Self-Insurance Fund was set up to account for all revenues and expenditures associated with the $50,000 deductible on the general liability policy. Self-insuring a larger deductible has reduced the annual premiums that allow us to directly benefit from our good experience rating. In the future an analysis will be made of the feasibility of self-insuring all or a portion of other policies. In 1990, $1,000,000 was transferred from the General Fund to the Self- Insurance Fund. OTHER INFORMATION PENSIONS City of Fridley employees are covered by one of three pension plans: 1. Fridley Fire Relief Association for Volunteer Firemen. 2. Public Employees Retirement Police and Fire Plan, covering the City’s full-time Firemen and Police Officers. 3. Coordinated Public Employees Retirement Plan, which covers other City civilian employees. The employees covered by the Coordinated Public Employees Retirement Plan are also covered by Social Security. The City is currently making all pension contributions required by law. For additional background information on the pension plans covering City employees, see Notes to the Financial Statements. INDEPENDENT AUDIT Section 7.13 of the City Charter requires an annual audit to be made of the books of account, financial records and transactions of all administrative departments of the City by a certified public accountant or the State Auditor’s Office of the State of Minnesota. The accounting firm of HLB Tautges Redpath, Ltd. was engaged by the City to render an opinion on the City’s financial statements. The auditor’s report on the basic financial statements and combining and individual fund statements and schedules is included in the Financial Section of this report. CERTIFICATE OF ACHIEVEMENT 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 Fridley, Minnesota, for its comprehensive annual financial report for the fiscal year ended 88 9 999 - This page intentionally left blank - 10 111000 11 111111 - This page intentionally left blank - 12 111222 CITY OF FRIDLEY, MINNESOTA ELECTED AND APPOINTED OFFICIALS DECEMBER 31, 2006 ELECTED OFFICIALS Term of Office Expires December Effective January 200 7 MayorScott J.Lund2008 Councilmember At LargeRobert L. Barnette2008 Councilmember, Ward IJames T. Saefke2010 Councilmember, Ward IIDolores M. Varichak2010 Councilmember, Ward IIIAnn R. Bolkcom 2010 Effective January 2006 MayorScott J.Lund2008 Councilmember At LargeRobert L. Barnette2008 Councilmember, Ward ISteven E. Billings2006 Councilmember, Ward IIRichard P. Wolfe2006 Councilmember, Ward IIIAnn R. Bolkcom2006 APPOINTED OFFICIALS City ManagerWilliam W. Burns City AttorneyFrederic W. Knaak Prosecuting AttorneyCarl J. Newquist City ClerkDebra A. Skogen Department Heads: Finance Director/TreasurerRichard D. Pribyl Director of Public Safety and Civil DefenseDonovan W. Abbott Fire ChiefJohn D. Berg Director of Public WorksJon H. Haukaas Director of Recreation and Natural ResourcesJack G. Kirk Director of Community DevelopmentScott J. Hickok Director of Human ResourcesDeborah K. Dahl 1133 CITY ADMINISTRATIVE ORGANIZATIONAL STRUCTURE 2006 City of Fridley Proposed Authorized General Fund Positions - 112 (A) CITY MANAGEMENT (3) City Manage r Secretary to the City Manager Non-General Fund CABLE TV FUND Cable Administrator FINANCE (23)POLICE (47)HUMAN RESOURCES (2) Finance Director - TreasurerPublic Safety DirectoHuman Resources Director r SecretarySecretarySecretary (2) Accountants OPERATIONS (31) ACCOUNTING (5)Captain Assistant Finance Director (6) Sergeants Payroll Technician(24) Patrol Officers Accounting Specialist TECHNICAL SUPPORT (14) (2) Acctg-Data Processing Clerks Captain ASSESSING (2) (1) Sergeant City Assesso r(5) Patrol Officers Appraiser Projects Coordinator Crime Prevention Specialist MIS (2) Office Supervisor MIS Coordinato r(4) Police Technicians MIS Specialist (1 FT, 4-.75FTE's w/ benefits) CITY CLERK - RECORDS (2)FIRE (9) City Cler k Fire Chie Licensing & Records Technicianf Secretary Assistant Chief Fire Marshal Non-General Fund(3) Full-time Firefighters LIQUOR (6) Liquor Operations ManageRENTAL INSPECTIONS (2) r Assistant Manager Rental Inspection Asst. (4) Lead Liquor Store Clerks Full-time Firefighter WATER ADMIN (2) Utility Billing Clerk Acctg-Data Processing Clerk (A) An "Authroized Position" is defined as one that works at least 32 hours a week and receives a full-time benefit package. 14 111444 PUBLIC WORKS (35)PARKS &COMMUNITY RECREATION (8)DEVELOPMENT (10) Director of Public Works Director, Parks & RecreationDirector of Communit Secretaryy Development Operations AnalystRecreation Office Coordinator (2) Program SupervisorsSecretary ENGINEERING (2) (1) Sr Citizens Program Supervisor Assistant Public Works DirectorBUILDING INSPECTION (3) Chief Building Official Engineering Tech Inspector Non-General FundBuilding Inspector PW MAINTENANCE (20)SPRINGBROOK NATURE Secretary CENTER (3) Secretary Nature Center DirectorPLANNING (2) Fleet Services Coord.Planning Coordinato Interpretive Specialistr (2) Mechanic SecretaryPlanner Street Superviso rNon-General Fund SOLID WASTE (1) (8) Public Service Worker Environmental Planner Parks Superviso r SECTION 8 HOUSING (1) (6) Public Service Worker Coordinator (.75 FTE) Non-General Fund WATER (5)HRA (1) Water Superviso r Assistant Executive Director (4) Public Service Worker SEWER (5) Sewer Supervisor (4) Public Service Worker 15 111555 - This page intentionally left blank - 16 111666 II. FINANCIAL SECTION 17 111777 - This page intentionally left blank - 18 111888 - This page intentionally left blank - 20 222000 - This page intentionally left blank - 22 222222 MANAGEMENT’S DISCUSSION AND ANALYSIS As management of the City of Fridley, Minnesota, we offer readers of the City of Fridley, Minnesota’s financial statements this narrative overview and analysis of the financial activities of the City for the fiscal year ended December 31, 2006. We encourage readers to consider the information presented here in conjunction with additional information that we have furnished in our letter of transmittal, which can be found on pages 3 through 9 of this report. Financial Highlights The assets of the City of Fridley, Minnesota exceeded its liabilities at the close of the most recent fiscal year by $60,678,419 (Net assets). Of this amount, $23,096,257 (unrestricted net assets) may be used to meet the government’s ongoing obligations to citizens and creditors in accordance with the City's fund designations and fiscal policies. During 2006, the City’s total net assets increased by $1,634,904. As of the close of the current fiscal year, the City of Fridley, Minnesota’s governmental funds reported combined ending fund balances of $19,342,653. Of this total amount, $11,858,461, or 61% is designated or reserved through legal restrictions and City Council authorization. At the end of the current fiscal year the general fund balance of $3,940,499, included $77,476 reserved and $3,863,023 designated. The City’s total debt increased by $616,062 during the current fiscal year, it went from $14,694,445 to $15,310,507. Overview of the Financial Statements The discussion and analysis are intended to serve as an introduction to the City of Fridley’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 of Fridley, Minnesota’s finances, in a manner similar to a private-sector business. The statement of net assets presents information on all of the City of Fridley, Minnesota’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 of Fridley, Minnesota is improving or deteriorating. 2233 Managements Discussion and Analysis ’ The statement of activities presents information showing how the City’s net assets changed during the most recent fiscal year. All changes in net assets are reported as soon as the underlying event giving rise to the change occurs, regardless of the timing of related cash flows. Thus, revenues and expenses are reported in this statement for some items that will only result in cash flows in future fiscal periods (e.g. uncollected taxes and earned but unused vacation leave). Both of the government-wide financial statements distinguish functions of the City of Fridley 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 of Fridley include general government, public safety, public works, community development, and recreation and naturalist. The business-type activities of the City of Fridley include liquor, water, sewer and storm water. The government-wide financial statements can be found on pages 35 through 37 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 of Fridley, 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 of Fridley can be divided into three categories: governmental funds, proprietary funds, and fiduciary funds. Governmental funds . Governmental funds are used to account for essentially the same functions reported as governmental activities in the government-wide financial statements. However, unlike the government-wide financial statements, governmental fund financial statements focus on near-term inflows and outflows of 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 government’s near-term financial requirements. Because the focus of governmental funds is narrower than that of the government-wide financial statements, it is useful to compare the information presented for governmental funds with similar information presented for governmental activities in the government-wide financial statement. By doing so, readers may better understand the long-term impact of the City's near term financial decisions. Both the governmental fund balance sheet and governmental fund statement of revenues, expenditures, and change in fund balances provide a reconciliation to facilitate this comparison between governmental funds and governmental activities. 2244 Managements Discussion and Analysis ’ The City of Fridley maintains six individual major governmental funds. Information is presented separately in the governmental fund balance sheet and in the governmental fund statement of revenues, expenditures, and changes in fund balances for the general fund, grant management fund, special assessment debt service fund, tax increment debt service fund, special assessment construction capital projects fund and capital improvements fund all of which are considered to be major funds. Data from the other governmental funds are combined into a single, aggregated presentation. Individual fund data for each of these non-major governmental funds is provided in the form of combining statements elsewhere in this report. The City of Fridley adopts an annual appropriated budget for its general fund, special revenue funds and capital improvements capital projects fund. A budgetary comparison statement has been provided for those funds to demonstrate compliance with this budget. The basic governmental fund financial statements can be found on pages 38 through 43 of this report. Proprietary funds . The City of Fridley maintains four enterprise funds and three internal service funds as a part of its proprietary fund type. Enterprise funds are used to report the same functions presented as business-type activities in the government-wide financial statements. The City of Fridley uses enterprise funds to account for its liquor, water, sewer, and storm water operations. The City of Fridley uses internal service funds to account for its employee benefits, self insurance and information systems. Because these services predominately benefit governmental rather than business-type functions, they have been included within governmental activities in the government-wide financial statements. Proprietary funds provide the same type of information as the government-wide financial statements, only in more detail. The proprietary fund financial statements provide separate information for the water, sewer, storm water and liquor operations, all of which are considered to be major funds of the City of Fridley. Conversely, the 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 44 through 49 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 statements because the resources of those funds are not available to support the City of Fridley’s own program. The accounting used for fiduciary funds is much like that used for proprietary funds. 2255 Managements Discussion and Analysis ’ The basic fiduciary fund financial statement can be found on page 50 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 51 through 80 of this report. Other information. The combining statements referred to earlier in connection with the non-major governmental funds are presented immediately following the required supplementary information on budgetary comparisons. Combining and individual fund statements and schedules can be found on pages 89 through 149 of this report. Government-wide Financial Analysis As noted earlier, net assets may serve over time as a useful indicator of a government's financial position. In the case of the City of Fridley, Minnesota, assets exceeded liabilities by $60,678,419 at the close of the most recent fiscal year. The largest portion of the City of Fridley, Minnesota’s net assets ($34,912,885 or 59 percent) reflects its investment in capital assets (e.g. land, buildings, machinery and equipment) less any related debt used to acquire those assets that is still outstanding. The City of Fridley uses these capital assets to provide services to citizens; consequently, these assets are not available for future spending. Although the City of Fridley, Minnesota’s investment in its capital assets is reported net of related debt, it should be noted that the resources needed to repay this debt must be provided from other sources, since the capital assets themselves cannot be used to liquidate these liabilities. CITY OF FRIDLEY, MINNESOTA’S NET ASSETS Governmental ActivitiesBusiness-TypeTotals 200520062005200620052006 Current and other assets$25,081,138$25,355,341$10,010,640$8,721,040$35,091,778$34,076,381 Capital assets20,263,11322,945,60520,265,01220,770,16740,528,12543,715,772 Total assets$45,344,251$48,300,946$30,275,652$29,491,207$75,619,903$77,792,153 Long-term liabilities outstanding$8,687,978$9,406,815$3,415,240$3,010,546$12,103,218$12,417,361 Other liabilities3,326,5143,525,7591,146,6561,170,6144,473,1704,696,373 Total liabilities$12,014,492$12,932,574$4,561,896$4,181,160$16,576,388$17,113,734 Net assets: Invested in capital assets, net of related debt$18,458,113$18,635,605$16,454,772$17,354,621$34,912,885$35,990,226 Restricted1,540,5311,591,936 - - 1,540,5311,591,936 Unrestricted13,331,11515,140,8319,258,9847,955,42622,590,09923,096,257 Total net assets$33,329,759$35,368,372$25,713,756$25,310,047$59,043,515$60,678,419 2266 Managements Discussion and Analysis ’ A portion of the of the City of Fridley, Minnesota’s net assets represents resources that are subject to external restrictions on how they may be used. The remaining balance of unrestricted net assets ($22,590,099) may be used to meet the City's ongoing obligations to citizens and creditors. At the end of the current fiscal year, the City of Fridley, Minnesota is 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. Governmental Activities Governmental activities increased the City of Fridley, Minnesota’s net assets by $2,038,613. Property taxes increased by $825,427 due to the City being able to levy back for lost local government aid and for the debt service levy related to the 2005 General Obligation Improvement Bonds. Investment earnings grew by $486,690 because of higher interest rates, and Community development expenses increased by $324,825 because of increased grant activity. City of Fridley, Minnesota's Changes in Net Assets Governmental ActivitiesBusiness-Type ActivitiesTotals 200520062005200620052006 Revenues: Program revenues: Charges for services$2,954,192$3,068,165$10,739,892$10,801,651$13,694,084$13,869,816 Operating grants and contributions1,121,7261,304,5106005141,122,3261,305,024 Capital grants and contributions1,657,1061,919,108 - - 1,657,1061,919,108 General revenues: - - Property taxes7,428,2268,253,653 - - 7,428,2268,253,653 Grants and contributions not restricted to specific programs3,365,7392,623,407 - - 3,365,7392,623,407 Unrestricted investment earnings511,464998,154168,445281,316679,9091,279,470 Gain on sale of property4343,357 - 5,0004348,357 Other - 1,603 - - - 1,603 Total revenues17,038,88718,171,95710,908,93711,088,48127,947,82429,260,438 Expenses: General government4,448,1754,177,829 - - 4,448,1754,177,829 Public safety5,514,3306,023,335 - - 5,514,3306,023,335 Public works4,105,8603,868,517 - - 4,105,8603,868,517 Community development793,8361,118,661 - - 793,8361,118,661 Recreation and naturalist767,5991,147,966 - - 767,5991,147,966 Interest on long-term debt443,533397,036 - - 443,533397,036 Liquor - - 4,919,4584,793,4194,919,4584,793,419 Water - - 2,070,0322,138,3712,070,0322,138,371 Sewer - - 3,570,1133,629,3613,570,1133,629,361 Storm water - - 320,596331,039320,596331,039 Total expenses 16,073,33316,733,34410,880,19910,892,19026,953,53227,625,534 Increase (decrease) in net assets before transfers965,5541,438,61328,738196,291994,2921,634,904 Transfers657,878600,000(657,878)(600,000) - - Increase in net assets1,623,4322,038,613(629,140)(403,709)994,2921,634,904 Net assets - January 131,706,32733,329,75926,342,89625,713,75658,049,22359,043,515 Net assets - December 31$33,329,759$35,368,372$25,713,756$25,310,047$59,043,515$60,678,419 2277 Managements Discussion and Analysis ’ Below are specific graphs which provide comparisons of the governmental activities revenues and expenditures: Governmental Activities - Revenues Unrestricted investment Other earnings Charges for services Grants and contributions not 0% 5% 17% restricted to specific programs 14% Operating grants and Gain on contributions sale of 0% 7% propert 11% Capital grants and contributions 46% Property taxes Governmental Activities - Expenses Interest on Recreation long-term debt and naturalist Community 3% 7% Developement General government 25% 7% 23% Public works 35% Public safety 2288 Managements Discussion and Analysis ’ Business-Type Activities Business-type activities decreased net assets by $403,709. Charges for utility services ($5,665,622) did not keep up with expenses for the utilities ($6,098,771). This is because the City Charter restricts the increase in utility rates to the rate of inflation or 5% whichever is lower, even though expenses for the utilities are increasing by a rate greater than inflation. Below are graphs showing the business-type activities revenue and expense comparisons: Storm water Water Liquor Sewer 2299 Managements Discussion and Analysis ’ Financial Analysis of the Government's Funds Governmental Funds . The focus of the City of Fridley, Minnesota’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 of Fridley, Minnesota’s financing requirements. In particular, unreserved fund balance may serve as a useful measure of a government’s net resources available for spending at the end of the fiscal year. At the end of the current fiscal year, the City of Fridley, Minnesota's governmental funds reported combined ending fund balances of $19,342,653. Approximately 93 percent of this amount ($17,942,272) constitutes unreserved fund balance. The remainder of the fund balance ($1,418,381) is reserved because it has already been committed 1) to provide for inventory($59,112), 2) to pay debt service ($721,866), 3) for loans receivable ($434,272) and 4) for police purposes ($203,131). The general fund’s fund balance decreased by $161,448 in 2006. This was significantly less than the decrease originally budgeted for. The special assessment debt service fund’s fund balance increased by $282,668 due to prepaid special assessments collected on the 2006 Street Reconstruction Project. The non-major special revenue fund’s fund balances decreased by $477,455 in 2006. This was mainly due to spending down of the police activity fund. Proprietary funds . The City of Fridley, Minnesota’s proprietary funds provide the same type of information found in the government-wide financial statements, but in more detail. The unrestricted net assets in the respective proprietary funds are liquor $931,161, water $2,455,866, sewer $3,804,729 and storm water $763,670. The liquor, water and sewer funds had decreases in net assets of $137,452, $112,104 and $158,923 respectively. The storm water fund had a net asset increase of $4,770. Budgetary Highlights General Fund The original budget was amended to move $473,142 in state aid credits from taxes to intergovernmental revenue. The budget for legal expenditures was increased by $28,534 because of increased prosecution costs during the year. The original budget for contingency was decreased by $135,000 during the year. This was due to its budget being allocated to budgets in other departments. Expenditures in total were less than the final budgetary estimates by $101,470. Significant variances include the Human Resource department which expended $13,081 less than anticipated, the Accounting department which expended $12,068 less than anticipated, the 3300 Managements Discussion and Analysis ’ Parks and Recreation department which expended $41,561 less than anticipated and the MIS department which expended $9,941 less than anticipated. Capital Asset and Debt Administration Capital assets . The City of Fridley, Minnesota’s, investment in capital assets for its governmental and business type activities as of December 31, 2006, amounts to $43,715,772 (net of accumulated depreciation). This investment in capital assets includes land, buildings and structures, improvements other than buildings, machinery and equipment, infrastructure and construction in progress. City of Fridley, Minnesota’s Capital Assets (Net of Depreciation ) Governmental ActivitiesBusiness-Type ActivitiesTotals 200520062005200620052006 Land$2,840,316$2,841,516$306,477$306,477$3,146,793$3,147,993 Buildings and structures3,317,9283,165,046610,9941,991,4883,928,9225,156,534 Improvements other than buildings1,071,5771,040,4746,446,7226,098,3397,518,2997,138,813 Machinery and equipment1,637,9352,413,806852,719735,5662,490,6543,149,372 Infrastructure8,318,76313,275,58611,517,92811,638,29719,836,69124,913,883 Construction in progress3,076,594209,177530,172 - 3,606,766209,177 Total Capital Assets$20,263,113$22,945,605$20,265,012$20,770,167$40,528,125$43,715,772 Additional information on the City of Fridley, Minnesota’s capital assets can be found in Note 4. Long-term debt . At the end of the current fiscal year, the City of Fridley, Minnesota had total bonded debt outstanding of $14,510,000, an increase of $555,000 from 2005. $4,310,000 of this is for general obligation improvement debt which is supported by special assessments and a property tax levy, an additional $6,780,000 is for general obligation tax increment debt which financed the City’s housing and redevelopment program, and $3,420,000 is general obligation utility revenue bonds which financed utility improvements. In 2006, the City issued $2,505,000 in general obligation improvement bonds. In addition, there is long-term debt in the amount of $804,961 for compensated absences. Additional information on the City of Fridley, Minnesota’s long-term debt can be found in Note 5. 3311 Managements Discussion and Analysis ’ City of Fridley’s Outstanding Debt General Obligation Improvement Bonds, General Obligation Tax Increment Bonds, General Obligation Revenue Bonds, and Compensated Absences (excluding bond discounts) are as follows: Governmental ActivitiesBusiness-Type ActivitiesTotals 200520062005200620052006 General Obligation Improvement Bonds$1,805,000$4,310,000$ - $ - $1,805,000$4,310,000 General Obligation Tax Increment Bonds8,335,0006,780,000 - - 8,335,0006,780,000 General Obligation Revenue Bonds - - 3,815,0003,420,0003,815,0003,420,000 Compensated Absences744,205804,961 - - 744,205804,961 Total$10,884,205$11,894,961$3,815,000$3,420,000$14,699,205$15,314,961 The City of Fridley has an Aa2 rating from Moody's Investors Service. State statutes limit the amount of general obligation debt a Minnesota city may issue to 2% of total Estimated Market Value. The current debt limitation for the City of Fridley, Minnesota is $49,393,402. None of the City's outstanding debt is counted within the statutory limitation. Requests for information. This financial report is designed to provide a general overview of the City of Fridley, Minnesota’s finances for all those with an interest in the government’s finances. Questions concerning any of the information provided in this report or requests for additional financial information should be addressed to the Finance Director, 6431 University Avenue NE, Fridley, Minnesota 55432. 32 BASIC FINANCIAL STATEMENTS 33 333333 - This page intentionally left blank - 34 333444 Exhibit A-1 CITY OF FRIDLEY, MINNESOTA STATEMENT OF NET ASSETS December 31, 2006 Component Unit Primary GovernmentHousing & Redevelopment GovernmentalBusiness-Type TotalsAuthority Assets:ActivitiesActivities2006200520062005 Cash and investments$21,992,963$6,127,631$28,120,594$30,302,081$17,073,927$15,739,617 Cash held in escrow - - - - - 146,324 Receivables: Accounts216,1481,595,0371,811,1851,691,72736,495443,309 Taxes195,417158195,575184,854146,88395,756 Special assessments1,638,17423,0141,661,1881,274,039 - - Mortgage - - - - 1,203,5771,119,820 Interest155,133 - 155,13367,0155,73720,076 Loan from component unit415,908 - 415,908480,123 - - Notes18,364 - 18,36427,546 - - Due from component unit146,811 - 146,81154,886 - - Due from other governments517,311 - 517,311141,137 - - Prepaid items - 226,307226,307216,828 - - Inventories - at cost59,112748,893808,005651,542 - - Land held for resale - - - - 1,123,6651,122,000 Capital assets (net of accumulated depreciation): Land2,841,516306,4773,147,9933,146,793 - - Buildings and structures3,165,0461,991,4885,156,5343,928,922 - - Improvements other than buildings1,040,4746,098,3397,138,8137,518,299 - - Machinery and equipment2,413,806735,5663,149,3722,490,654 - - Infrastructure13,275,58611,638,29724,913,88319,836,691 - - Construction in progress209,177 - 209,1773,606,766 - - Total assets48,300,94629,491,20777,792,15375,619,90319,590,28418,686,902 Liabilities: Due to primary government - - - - 146,81154,886 Accounts payable265,056364,250629,306698,334419,658260,063 Deposits payable 53,000 - 53,00032,760 - - Contracts payable98,7522,221100,973424,067 - - Due to other governments18,895322,920341,81589,629 - - Salaries payable327,09026,297353,387320,254 - - Accrued interest payable161,32249,926211,248212,272 - - Compensated absences payable: Due within one year663,146 - 663,146641,227 - - Due in more than one year141,815 - 141,815102,978 - - Unearned revenue113,498 - 113,498104,627 - - Loan payable to primary government: Due within one year - - - - 67,46764,215 Due in more than one year - - - - 348,441415,908 Bonds payable: Due within one year1,825,000405,0002,230,0001,950,000 - - Due in more than one year9,265,0003,010,54612,275,54612,000,240 - - Total liabilities12,932,5744,181,16017,113,73416,576,388982,377795,072 Net assets: Invested in capital assets, net of related debt18,635,60517,354,62135,990,22634,912,885 - - Restricted for: Debt service1,388,805 - 1,388,805852,407 - - Public safety203,131 - 203,131688,124 - - Tax increment purposes - - - - 1,191,5272,654,382 Unrestricted15,140,8317,955,42623,096,25722,590,09917,416,38015,237,448 Total net assets$35,368,372$25,310,047$60,678,419$59,043,515$18,607,907$17,891,830 The accompanying notes are an integral part of these financial statements. 35 333555 CITY OF FRIDLEY, MINNESOTA STATEMENT OF ACTIVITIES For The Year Ended December 31, 2006 Program Revenues Operating Charges ForGrants and ExpensesServicesContributions Functions/Programs Primary government: Governmental activities: General government$4,177,829$1,443,361$ - Public safety6,023,335609,721574,590 Public works3,868,517197,968277,261 Community development1,118,659470,733430,904 Parks, recreation and naturalist1,147,968346,38221,755 Interest on long-term debt397,036 - - Total governmental activities16,733,3443,068,1651,304,510 Business-type activities: Liquor4,793,4195,136,029 - Water2,138,3711,929,573 - Sewer3,629,3613,345,017 - Storm water331,039391,032514 Total business-type activities10,892,19010,801,651514 Total primary government$27,625,534$13,869,816$1,305,024 Component units: Housing and Redevelopment Authority$4,135,8999,600 - Total component units$4,135,899$9,600$0 General revenues: Property taxes Tax increment collections Grants and contributions not restricted to specific programs Unrestricted investment earnings Gain on sale of property Other Transfers Total general revenues and transfers Change in net assets Net assets - beginning Net assets - ending The accompanying notes are an integral part of these financial statements. 36 3366 Exhibit A-2 Net (Expense) Revenue and Changes in Net AssetsComponent Unit Primary GovernmentHousing & Redevelopment Capital TotalsAuthority Grants andGovernmentalBusiness-Type ContributionsActivitiesActivities2006200520062005 $ - ($2,734,468)$ - ($2,734,468)($3,177,133)$ - $ - 212,355(4,626,669) - (4,626,669)(4,124,479) - - 1,706,753(1,686,535) - (1,686,535)(2,280,553) - - - (217,022) - (217,022)103,516 - - - (779,831) - (779,831)(418,127) - - - (397,036) - (397,036)(443,533) - - 1,919,108(10,441,561)0(10,441,561)(10,340,309)00 - - 342,610342,610363,771 - - - - (208,798)(208,798)(298,186) - - - - (284,344)(284,344)(270,156) - - - - 60,50760,50764,864 - - 00(90,025)(90,025)(139,707)00 $1,919,108(10,441,561)(90,025)(10,531,586)(10,480,016)$0$0 -($4,126,299)($2,928,772) $0(4,126,299)(2,928,772) 8,253,653 - 8,253,6537,428,226393,974297,097 - - - - 3,091,4603,224,205 2,623,407 - 2,623,4073,365,73962,08967,633 998,154281,3161,279,470679,909742,335418,549 3,3575,0008,357434327,093 - 1,603 - 1,603 - 225,42538,169 600,000(600,000) - - - - 12,480,174(313,684)12,166,49011,474,3084,842,3764,045,653 2,038,613(403,709)1,634,904994,292716,0771,116,881 33,329,75925,713,75659,043,51558,049,22317,891,83016,774,949 $35,368,372$25,310,047$60,678,419$59,043,515$18,607,907$17,891,830 The accompanying notes are an integral part of these financial statements. 37 3377 CITY OF FRIDLEY, MINNESOTA BALANCE SHEET GOVERNMENTAL FUNDS December 31, 2006 Special GrantAssessment Management General FundDebt Service Assets Cash and investments$4,001,571$83,984$6,709,648 Receivables: Accounts99,18940 - Taxes182,418 - 3,257 Special assessments38,966 - 1,572,067 Interest155,133 - - Loan receivable from component unit - - 415,908 Developer note18,364 - - Due from other funds14,042 - - Due from component unit44,035 - - Due from other governments25,70633,062 - Inventories, at cost59,112 - - Total assets$4,638,536$117,086$8,700,880 Liabilities and Fund Balances Liabilities: Accounts payable$214,447$800$ - Deposits payable53,000 - - Contracts payable - - - Due to other governments12,6581,297 - Due to component unit - - - Due to other funds - - - Salaries payable238,1651,490 - Deferred revenue179,767113,4991,572,004 Total liabilities698,037117,0861,572,004 Fund balances: Reserved for: Inventory59,112 - - Long-term receivables18,364 - 415,908 Public safety - - - Debt service - - 721,866 Unreserved: Designated reported in: General Fund3,863,023 - - Special Revenue Funds - - - Capital Project Funds - - - Undesignated reported in: Special Revenue Funds - - - Debt Service Funds - - 5,991,102 Capital Project Funds - - - Total fund balances3,940,49907,128,876 Total liabilities and fund balances$4,638,536$117,086$8,700,880 The accompanying notes are an integral part of these financial statements. 38 333888 Exhibit A-3 Special AssessmentOther Tax Increment ConstructionCapitalGovernmentalIntra-Activity Debt ServiceCapital ProjectsImprovementsFundsEliminationsTotals Governmental Funds 20062005 $ - $1,428,760$5,069,805$1,245,251$ - $18,539,019$19,373,419 - 42,378 - 74,541 - 216,148190,033 - - 2,2257,517 - 195,417184,667 - 27,1401 - - 1,638,1741,224,066 - - - - - 155,13367,015 - - - - - 415,908480,123 - - - - - 18,36427,546 - - - - (14,042) - - 45088,288 - 13,606 - 146,37954,779 - - 436,50022,043 - 517,311137,791 - - - - - 59,11254,116 $450$1,586,566$5,508,531$1,362,958($14,042)$21,900,965$21,793,555 $ - $ - $ - $26,196$ - $241,443$334,548 - - - - - 53,00032,760 - 62,38136,371 - - 98,752134,456 - 3,955 - 985 - 18,89513,064 - - - - - - - 450 - - 13,592(14,042) - - - - - 6,557 - 246,212216,260 - 27,1401,7265,874 - 1,900,0101,445,580 45093,47638,09753,204(14,042)2,558,3122,176,668 - - - - - 59,11254,116 - - - - - 434,272507,669 - - - 203,131 - 203,131688,214 - - - - - 721,866389,197 - - - - - 3,863,0234,020,285 - - - 1,106,623 - 1,106,6231,086,076 - - 5,470,434 - - 5,470,4345,730,856 - - - - - - 12,919 - - - - - 5,991,1025,976,888 - 1,493,090 - - - 1,493,0901,150,667 01,493,0905,470,4341,309,754019,342,65319,616,887 $450$1,586,566$5,508,531$1,362,958($14,042)$21,900,965$21,793,555 Fund balance reported above$19,342,653$19,616,887 Amounts reported for governmental activities in the statement of net assets are different because: Capital assets used in governmental activities are not financial resources, and therefore, are not reported in the funds.22,619,69619,841,422 Other long-term assets are not available to pay for current-period expenditures and, therefore, are deferred in the funds.1,786,5121,340,953 Long-term liabilities, including bonds payable, are not due and payable in the current period and therefore are not reported in the funds.(11,251,322)(10,297,179) Internal service funds are used by management to charge the cost of certain activities to individual funds. The assets and liabilities are included in the governmental statement of net assets.2,870,8332,827,676 Net assets of governmental activities$35,368,372$33,329,759 The accompanying notes are an integral part of these financial statements. 39 333999 CITY OF FRIDLEY, MINNESOTA STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES GOVERNMENTAL FUNDS For The Year Ended December 31, 2006 Special GrantAssessment Debt ManagementService General Fund Revenues: Taxes$7,652,067$ - $193,486 Special assessments14,435 - 671,204 Licenses and permits683,227 - - Intergovernmental revenue1,352,275395,9349,803 Charges for services1,378,939 - - Fines and forfeits256,435 - - Investment income173,716 - 282,531 Interest on loan - - 23,213 Miscellaneous175,479 - - Total revenues11,686,573395,9341,180,237 Expenditures: Current: General government2,523,438 - - Public safety5,796,321 - - Public works2,944,911 - - Community development739,362374,179 - Parks, recreation and naturalist759,27821,755 - Debt service - - 67,916 Capital outlay372,481 - - Contingency - - - Total expenditures13,135,791395,93467,916 Excess (deficiency) of revenues over (under) expenditures(1,449,218)01,112,321 Other financing sources (uses): Bonds issued - - 592 Premium/(discount) on bonds issued - - - Proceeds from sale of capital assets10,054 - - Transfers in1,277,716 - - Transfers out - - (830,245) Total other financing sources (uses)1,287,7700(829,653) Net change in fund balance(161,448)0282,668 Fund balance - January 14,101,947 - 6,846,208 Fund balance - December 31$3,940,499$0$7,128,876 The accompanying notes are an integral part of these financial statements. 4400 Exhibit A-4 Special AssessmentOther Tax Increment ConstructionCapitalGovernmentalIntra-Activity Debt ServiceCapital ProjectsImprovementsFundsEliminations Totals Governmental Funds 20062005 $ - $ - $95,343$280,047$ - $8,220,943$7,397,381 - 5,905220 - - 691,764550,909 - - - 193,676 - 876,903865,848 - 165,640654,64685,611 - 2,663,9092,767,724 - 160,835 - 315,403 - 1,855,1771,736,181 - - - 5,100 - 261,535164,104 - 5,999303,23963,392 - 828,877411,333 - - - - - 23,21326,308 1,818,415 - 17,000143,762 - 2,154,6562,625,899 1,818,415338,3791,070,4481,086,991017,576,97716,545,687 - 316,291120,082607,692 - 3,567,5034,244,496 - - - 25,202 - 5,821,5235,204,551 - - - - - 2,944,9112,940,869 - - - - - 1,113,541671,173 - - - 337,361 - 1,118,394737,094 1,818,41530,842 - - - 1,917,1736,553,363 - 3,267,757645,788166,474 - 4,452,5003,112,700 - - - - - - 907 1,818,4153,614,890765,8701,136,729020,935,54523,465,153 0(3,276,511)304,578(49,738)0(3,358,568)(6,919,466) - 60,9702,443,438 - - 2,505,0006,450,000 - (30,720) - - - (30,720)(7,160) - - - - - 10,054 - - 3,588,684 - 100,000(4,366,400)600,000657,878 - - (3,008,438)(527,717)4,366,400 - - 03,618,934(565,000)(427,717)03,084,3347,100,718 0342,423(260,422)(477,455)0(274,234)181,252 - 1,150,6675,730,8561,787,209 - 19,616,88719,435,635 $0$1,493,090$5,470,434$1,309,754$0$19,342,653$19,616,887 The accompanying notes are an integral part of these financial statements. 4411 - This page intentionally left blank - 42 444222 Exhibit A-5 CITY OF FRIDLEY, MINNESOTA RECONCILIATION OF THE STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES OF GOVERNMENTAL FUNDS For The Year Ended December 31, 2006 20062005 Amounts reported for governmental activities in the statement of activities (Exhibit A-2) are different because: Net changes in fund balances - total governmental funds (Exhibit A-4)($274,234)$181,252 Governmental funds report capital outlays as expenditures. However, in the statement of activities the cost of those assets is allocated over their estimated useful lives and reported as depreciation expense. This is the amount by which capital outlays exceeded depreciation in the current period.2,778,2741,735,583 Revenues in the statement of activities that do not provide current financial resources are not reported as revenues in the funds.445,559359,726 The issuance of long-term debt (e.g., bonds, leases) provides current resources to governmental funds, while the repayment of the principal of financial long-term debt consumes the current financial resources of governmental funds. Neither transaction, however, has any effect on net assets. This amount is the net effect of these differences in the treatment of long-term debt and related items.(950,000)(355,000) Internal service funds are used by management to charge the cost of certain activities to individual funds. This amount is net revenue attributable to governmental activities.43,157(320,119) Accrued interest reported in the statement of activities does not require the use of current financial resources and, therefore, is not reported as expenditures in governmental funds.(4,143)21,990 Change in net assets of governmental activities (Exhibit A-2)$2,038,613$1,623,432 The accompanying notes are an integral part of these financial statements. 4433 CITY OF FRIDLEY, MINNESOTA STATEMENT OF NET ASSETS PROPRIETARY FUNDS December 31, 2006 Business-Type Activities - Enterprise Funds 609 Liquor601 Water Assets: Current assets: Cash and cash equivalents$566,536$1,909,747 Cash with escrow agent - - Accounts receivable320660,501 Taxes receivable: Unremitted - - Delinquent - - Special assessments receivable - 2,886 Due from component units - - Due from other governments - - Inventories, at cost732,31716,576 Prepaid items - - Total current assets1,299,173 2,589,710 Noncurrent assets: Capital assets: Land151,946154,531 Buildings and structures130,2113,107,420 Improvements other than buildings650,2456,464,973 Machinery and equipment208,9301,546,486 Infrastructure - 8,558,378 Construction in progress - - Total capital assets1,141,332 19,831,788 Less: Allowance for depreciation(565,855)(9,175,592) Net capital assets575,47710,656,196 Total noncurrent assets575,47710,656,196 Total assets1,874,65013,245,906 Liabilities: Current liabilities: Accounts payable310,06448,587 Accrued interest payable - 49,093 Contracts payable - 2,221 Due to other governments47,86224,935 Salaries payable10,0869,008 Payroll deductions payable - - Compensated absences payable - - Bonds payable - current - 305,000 Total current liabilities368,012 438,844 Noncurrent liabilities: Compensated absences - noncurrent - - Bonds payable - noncurrent - 3,010,487 Total noncurrent liabilities0 3,010,487 Total liabilities368,0123,449,331 Net assets: Invested in capital assets, net of related debt575,4777,340,709 Unrestricted931,1612,455,866 Total net assets$1,506,638$9,796,575 The accompanying notes are an integral part of these financial statements. 44 444444 Exhibit A-6 Governmental Activities - Business-Type Activities - Enterprise Funds Internal Service Funds 602 Sewer603 Storm WaterTotals 20062005 $3,013,603$637,745$6,127,631$7,641,186$3,453,944 - - - - - 827,636106,5801,595,0371,501,694 - - - - 55 - - 158158132 - - 20,12823,01449,973 - - - - - 432 - - - 3,346 - - - 748,893597,426 - 226,307 - 226,307216,828 - 4,067,546 764,611 8,721,040 10,010,640 3,454,376 - - 306,477306,477 - 8,770 - 3,246,4011,852,990 - 2,079,1161,872,81811,067,15211,023,280 - 907,97029,1252,692,5112,645,0001,334,694 6,615,4876,884,92622,058,79121,459,296 - - - - 530,172 - 9,611,343 8,786,869 39,371,332 37,817,215 1,334,694 (4,979,472)(3,880,246)(18,601,165)(17,552,203)(1,008,785) 4,631,8714,906,62320,770,16720,265,012325,909 4,631,8714,906,62320,770,16720,265,012325,909 8,699,4175,671,23429,491,20730,275,6523,780,285 5,491108364,250305,48823,613 - 83349,92655,093 - - - 2,221289,610 - 250,123 - 322,92076,243 - 7,203 - 26,29725,222 - - - - - 80,878 - - - - 663,146 - 100,000405,000395,000 - 262,817 100,941 1,170,614 1,146,656 767,637 - - - - 141,815 - 593,010,5463,415,240 - 0 59 3,010,546 3,415,240 141,815 262,817101,0004,181,1604,561,896909,452 4,631,8714,806,56417,354,62116,454,772325,909 3,804,729763,6707,955,4269,258,9842,544,924 $8,436,600$5,570,234$25,310,047$25,713,756$2,870,833 The accompanying notes are an integral part of these financial statements. 45 444555 CITY OF FRIDLEY, MINNESOT A STATEMENT OF REVENUES, EXPENSES AND CHANGES IN FUND NET ASSETS PROPRIETARY FUNDS For The Year Ended December 31, 2006 Business-Type Activities - Enterprise Funds 609 Liquor601 Water Sales$5,136,029$ - Cost of sales(3,926,720) - Gross profit1,209,3090 Operating revenues: Customer billings - 1,921,251 Charges for services - 7,578 Other revenues - 744 Total operating revenues0 1,929,573 Total gross profit and operating revenues1,209,309 1,929,573 Operating expenses: Personal services454,317650,022 Supplies and other charges: Disposal charges - - Other362,108777,724 Depreciation50,274591,367 Total operating expenses866,699 2,019,113 Operating income (loss)342,610 (89,540) Nonoperating revenues (expenses): Intergovernmental revenue - - Investment income19,93896,694 Interest expense - (119,258) Special assessments - - Gain (loss) on disposal of capital assets - - Total nonoperating revenues (expenses)19,938 (22,564) Income (loss) before transfers362,548 (112,104) Transfers: Transfers out(500,000) - Total transfers (500,000)0 Change in net assets(137,452)(112,104) Net assets - January 1 1,644,0909,908,679 Net assets - December 31$1,506,638$9,796,575 The accompanying notes are an integral part of these financial statements. 4466 Exhibit A-7 Governmental Activities - Business-Type Activities - Enterprise Funds Intra Activity Internal Service EliminationsFunds 602 Sewer603 Storm WaterTotals 20062005 $ - $ - $ - $5,136,029$5,283,229$ - - - - (3,926,720)(4,061,768) - 0001,209,3091,221,4610 3,345,017382,452 - 5,648,7205,435,361 - - - - 7,5787,578274,028 - 8,580 - 9,3249,675 - 3,345,017 391,032 0 5,665,622 5,452,614 274,028 3,345,017 391,032 0 6,874,931 6,674,075 274,028 586,214103,500 - 1,794,0531,714,999113,039 2,615,936 - - 2,615,9362,521,75778,190 121,52733,813 - 1,295,1721,337,024 - 305,684191,820 - 1,139,1451,105,451179,009 3,629,361 329,133 0 6,844,306 6,679,231 370,238 (284,344)61,899 0 30,625 (5,156)(96,210) - 514 - 514600 - 120,42144,263 - 281,316168,445146,064 - (1,906) - (121,164)(139,200) - - - - - 4,049 - 5,000 - - 5,000 - (6,697) 125,421 42,871 0 165,666 33,894 139,367 (158,923)104,770 0 196,291 28,738 43,157 - (100,000) - (600,000)(657,878) - 0 (100,000)0 (600,000)(657,878)0 (158,923)4,770 0 (403,709)(629,140)43,157 8,595,5235,565,464 - 25,713,75626,342,8962,827,676 $8,436,600$5,570,234$0$25,310,047$25,713,756$2,870,833 The accompanying notes are an integral part of these financial statements. 4477 CITY OF FRIDLEY, MINNESOTA STATEMENT OF CASH FLOWS PROPRIETARY FUNDS For The Year Ended December 31, 2006 Business-Type Activities - Enterprise Funds 609 Liquor601 Water Cash flows from operating activities: Receipts from customers and users$5,138,503$1,866,597 Receipts from interfund services provided - - Payment to suppliers(4,383,983)(1,056,106) Payment to employees(454,360)(649,367) Net cash flows from operating activities300,160161,124 Cash flows from noncapital financing activities: Intergovernmental revenue - - Transfers out(500,000) - Transfers in - - Special assessment collections - - Net cash flows from noncapital financing activities(500,000)0 Cash flows from capital and related financing activities: Acquisition of capital assets - (936,551) Payment from refunding escrow - - Principal paid on revenue bonds - (295,000) Interest and paying agent fees on revenue bonds - (123,024) Proceeds from sale of capital assets - - Net cash flows from capital and related financing activities0(1,354,575) Cash flows from investing activities: Investment income19,93896,694 Net increase (decrease) in cash and cash equivalents(179,902)(1,096,757) Cash and cash equivalents - January 1746,4383,006,504 Cash and cash equivalents - December 31$566,536 $1,909,747 Reconciliation of operating income (loss) to net cash provided (used) by operating activities: Operating income (loss) $342,610($89,540) Adjustments to reconcile operating income (loss) to net cash flows from operating activities: Depreciation50,274591,367 Changes in assets and liabilities: Decrease (increase) in receivables2,474(62,976) Decrease (increase) in prepaid items - - Decrease (increase) in inventories(142,159)(9,308) Increase (decrease) in payables46,961(268,419) Total adjustments(42,450)250,664 Net cash provided by operating activities$300,160$161,124 The accompanying notes are an integral part of these financial statements. 4488 Exhibit A-8 Governmental Activities - Business-Type Activities - Enterprise Funds Internal Service Funds 602 Sewer603 Storm WaterTotals 20062005 $3,330,538$403,004$10,738,642$10,792,925$ - - - - - 273,487 (2,506,930)(33,705)(7,980,724)(7,718,268)(113,197) (585,751)(103,500)(1,792,978)(1,715,987)(49,962) 237,857265,799964,9401,358,670110,328 - 514514600 - (100,000)(600,000)(699,566) - - - - 41,688 - - - - 4,049 - 0(99,486)(599,486)(653,229)0 (180,016)(527,734)(1,644,301)(1,442,404)(83,227) - - - 1,179,032 - - (100,000)(395,000)(1,590,000) - - (3,000)(126,024)(172,552) - 5,000 - 5,000 - (6,697) (175,016)(630,734)(2,160,325)(2,025,924)(89,924) 120,42144,263281,316168,445146,064 183,262(420,158)(1,513,555)(1,152,038)166,468 2,830,3411,057,9037,641,1868,793,2243,287,476 $3,013,603$637,745$6,127,631 $7,641,186 $3,453,944 ($284,344)$61,899$30,625($5,156)($96,210) 305,684191,8201,139,1451,105,451179,009 (14,479)11,972(63,009)54,480(325) (9,479) - (9,479)(6,682) - - - (151,467)7,131 - 240,47510819,125203,44627,854 522,201203,900934,315 1,363,826 206,538 $237,857$265,799$964,940$1,358,670$110,328 The accompanying notes are an integral part of these financial statements. 4499 Exhibit A-9 CITY OF FRIDLEY, MINNESOTA STATEMENT OF FIDUCIARY NET ASSETS December 31, 2006 20062005 Assets: Cash and investments$30,203$24,025 Receivables: Accounts2,4291,956 Taxes: Unremitted3553 Delinquent119102 Total assets32,78626,136 Liabilities: Due to other governments32,78626,136 The accompanying notes are an integral part of these financial statements. 50 555000 CITY OF FRIDLEY, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2006 1. Summary of Significant Accounting Policies The City of Fridley, Minnesota was incorporated July 1, 1949, under Chapter 410.03 of the Statutes of the State of Minnesota providing for a council-manager form of government under the “Home Rule Charter City” concept. The City provides the following services as authorized by its charter: general administrative services, public safety (police and fire), public improvements, planning and zoning, and culture and recreation. The financial statements of the City of Fridley, Minnesota have been prepared in conformity with generally accepted accounting principles as applied to governmental units by the Governmental Accounting Standards Board (GASB). The following is a summary of the significant accounting policies. A. Financial Reporting Entity As required by generally accepted accounting principles, the financial statements of the reporting entity include those of the City of Fridley, Minnesota (the primary government) and its component units. The component units discussed below are included in the City's reporting entity because of the significance of their operational or financial relationships with the City. Component Units In conformity with generally accepted accounting principles, the financial statements of the component units have been included in the financial reporting entity as discretely presented component units. Discretely Presented Component Unit - The Fridley Housing and Redevelopment Authority (HRA) is governed by commissioners appointed by the Fridley City Council. The HRA is responsible for providing housing and redevelopment assistance to the City and its residents. Funding for the various programs administered by the HRA is provided through the issuance of tax increment revenue bonds and general obligation tax increment bonds guaranteed by the City. Separate financial statements are not prepared for the HRA. B.Government-Wide and Fund Financial Statements The government-wide financial statements (i.e., the statement of net assets and the statement of changes in net assets) report information on all of the nonfiduciary activities of the primary government and its component units. For the most part, the effect of interfund activity has been removed from these statements.Governmental activities, which normally are supported by taxes and intergovernmental revenues, are reported separately from business-type activities, which rely to a significant extent on fees and charges for support. The statement of activities demonstrates the degree to which the direct expenses of a given function or business-type activity is offset by program revenues.Direct expenses are those that are clearly identifiable with a specific function or business-type activity.Program revenues include 1) charges to customers or applicants who purchase, use, or directly benefit from goods, services, or privileges provided by a given function or business-type activity and 2) grants and contributions that are restricted to meeting the operational or capital requirements of a particular function or business-type activity. Taxes and other items not included among program revenues are reported instead as general revenues. Separate financial statements are provided for governmental funds, proprietary funds, and fiduciary funds, even though the latter are excluded from the government-wide financial 5511 CITY OF FRIDLEY, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2006 statements. Major individual governmental funds and major individual enterprise funds are reported as separate columns in the fund financial statements. C. Measurement Focus, Basis of Accounting, and Financial Statement Presentation The government-wide financial statements are reported using the economic resources measurement focus and the accrual basis of accounting, as are the Proprietary Fund financial statements. Revenues are recorded when earned and expenses are recorded when a liability is incurred, regardless of the timing of related cash flows. Property taxes are recognized as revenues in the year for which they are levied. Grants and similar items are recognized as revenue as soon as all eligibility requirements imposed by the provider have been met. 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 government considers all revenues, except reimbursement grants, to be available if they are collected within 60 days of the end of the current fiscal period. Reimbursement grants are considered available if they are collected within one year of the end of the current fiscal period. Expenditures generally are recorded when a liability is incurred, as under accrual accounting. However, debt service expenditures, as well as expenditures related to compensated absences and claims and judgments, are recorded only when payment is due. Property taxes, special assessments, intergovernmental revenues, charges for services and interest associated with the current fiscal period are all considered to be susceptible to accrual and so have been recognized as revenues of the current fiscal period. Only the portion of special assessments receivable due within the current fiscal period is considered to be susceptible to accrual as revenue of the current period. All other revenue items are considered to be measurable and available only when cash is received by the government. The government reports the following major governmental funds: The general fund is the government’s primary operating fund. It accounts for all financial resources of the general government, except those required to be accounted for in another fund. Thegrant management special revenue fund administers grants received from a variety of intergovernmental agencies. In most cases, grant funds are provided on a reimbursement basis following proper documentation of expenditures, however, in some cases the money is provided in advance to spend on specific activities outlined in the grant. Thespecial assessment debt service fund services debt on the general obligation improvement bonds that were issued to finance construction of public improvements. Special assessment improvements are paid for completely or in part by property owners deemed to have benefited from such improvements. Thetax increment debt service fund services the debt of the tax increment bonds. Tax increment money is used to service the debt on redevelopment related bonds. Thespecial assessment construction capital projects fund is used to account for the construction of public improvements, such as residential streets, sidewalks, and storm 5522 CITY OF FRIDLEY, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2006 sewers or for the provision of services that are to be paid primarily by the benefited property owner. Thecapital improvements fund is used to account for the monies received from property taxes that are used to finance major improvements and the acquisition of assets that require a large capital outlay. The government reports the following major proprietary funds: Theliquor fund accounts for operations of the municipal liquor stores. Thewater fund accounts for the water service charges which are used to finance the water system operating expenses. Thesewer fund accounts for the sewer service charges which are used to finance the sanitary sewer system operating expenses. Thestorm water fund accounts for storm sewer charges which are used to finance the storm sewer operating expenses. Additionally, the government reports the following fund types: Internal Service Funds are used to account for employee fringe benefits, insurance deductibles and maintenance and upgrading of information systems that are provided on a cost reimbursement or fee basis to departments or agencies within the City. These funds are essential for segregating costs for determining the total cost of providing a service and for assuring that the goods and services provided are properly utilized. Agency Funds are used to account for monies on behalf of the Six Cities Watershed District and the North Metro Convention and Tourism Bureau. 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 Governmental Accounting Standards Board. 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 government 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 transactions that would be treated as revenues, expenditures or expenses if they involved external organizations, such as buying goods and services or payments in lieu of taxes, are similarly treated when they involve other funds of the City of Fridley. Elimination of these charges would distort the direct costs and program revenues reported for the various functions concerned. Amounts reported as program revenues include 1) charges to customers or applicants for goods, services, or privileges provided, 2) operating grants and contributions, and 3) capital grants and contributions, including special assessments. Internally dedicated resources are reported as general revenues rather than as program revenues. Likewise, general revenues include all taxes. 5533 CITY OF FRIDLEY, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2006 Proprietary funds distinguish operatingrevenues 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 liquor, water, sewer and storm water enterprise funds are charges to customers for sales and services.Operating expenses for enterprise funds include the cost of sales and services, administrative expenses, and depreciation on capital assets. All revenues and expenses not meeting this definition are reported as nonoperating revenues and expenses. When both restricted and unrestricted resources are available for an allowable use, it is the government’s policy to use restricted resources first, then unrestricted resources as they are needed. D. Budgets The City Charter grants the City Council full authority over the financial affairs of the City. The City Manager is charged with the responsibility of preparing the estimates of the annual budget and the enforcement of the provisions of the budget as specified in the City Charter. Upon adoption of the annual budget resolution by the Council, it becomes the formal appropriation budget for City operations. All budget adjustments must be approved by the Council. Budgets for the General, Special Revenue and Capital Improvement Capital Projects Funds are adopted on a basis consistent with accounting principles generally accepted in the United States of America. Budgeted expenditure appropriations lapse at year end. Encumbrance accounting, under which purchase orders, contracts, and other commitments for the expenditure of monies are recorded in order to reserve that portion of the appropriation, is not employed by the City because it is, at present, not considered necessary to assure effective budgetary control or to facilitate effective cash management. E. Legal Compliance Budgets The City follows these procedures in establishing the budgetary data reflected in the financial statements: 1. The City Manager submits to the City Council a proposed operating budget for the fiscal year commencing the following January 1. The operating budget includes expenditures and the means of financing them. 2. Public hearings are conducted to obtain taxpayer comments. 3. The budget is legally enacted through passage of a resolution. 4. The City Council may authorize transfer of budgeted amounts between departments within any fund. 5. Reported budget amounts are as originally adopted or as amended by Council approved transfers. The City Charter limits appropriations to the total estimated revenues and fund balances. If actual revenues exceed the original estimates, appropriations may be increased by the Council up to the amount of revenue increases. 5544 CITY OF FRIDLEY, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2006 6. All budget amounts lapse at the end of the year to the extent they have not been expended or encumbered. Encumbrances are reappropriated into the following year’s budget. 7. Annual budgets are legally adopted for the General Fund and Special Revenue Funds. Formal budgeting integration is employed as a management control device during the year for each of these funds. Formal budgetary integration is not employed for Debt Service Funds because effective budgetary control is achieved through the bond indenture provisions. Budgetary control for other Capital Projects Funds is accomplished through the use of project controls. 8. As required by the City Charter, budgetary control is maintained within department at the level of three major categories of expenditures: salaries and wages; ordinary expenses; and capital outlay. This is the level of control at which expenditures may not legally exceed appropriations. 9. The General Fund budget includes prior year encumbrances which were reappropriated to the current year. Expenditures for the items encumbered are included in the current year’s expenditures. F. Cash and Investments Cash balances from all funds are combined and invested to the extent available in certificates of deposit, U.S. government securities and other securities authorized by State Statute. Investment income is allocated to the respective funds on the basis of applicable cash balance participation by each fund. Investments are stated at fair value, based upon quoted market prices as of the balance sheet date. Investment income is accrued at the balance sheet date. The City provides temporary advances to funds that have insufficient cash balances by means of an advance from another fund shown as interfund receivables in the advancing fund, and an interfund payable in the fund with the deficit, until adequate resources are received. These interfund balances are eliminated on the government-wide financial statements. For purposes of the statement of cash flows the City considers all highly liquid investments with a maturity of three months or less when purchased to be cash equivalents. All of the cash and investments allocated to the proprietary funds have original maturities of 90 days or less. Therefore the entire balance in the Proprietary Funds is considered cash equivalents. Cash and investments held by escrow agent include balances held in segregated accounts that are established for specific purposes. 5555 CITY OF FRIDLEY, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2006 G. Receivables and Payables During the course of operations, numerous transactions occur between individual funds for goods provided or services rendered. Short-term interfund loans are classified as “interfund receivables/payables.” All short-term interfund receivables and payables at December 31, 2006 are planned to be eliminated in 2006. Any residual balances outstanding between the governmental activities and business-type activities are reported in the government-wide financial statements as “internal balances.” Uncollectible property taxes and special assessments are not material and therefore have not been reported. Because utility bills are considered liens on property, no estimated uncollectible amounts are established. Uncollectible amounts are not material for other receivables and have not been reported. H. Property Tax Revenue Recognition The City Council annually adopts a tax levy and certifies it to the County in December (levy/assessment date) of each year for collection in the following year. The County is responsible for billing and collecting all property taxes for itself, the City, the local School District and other taxing authorities. Such taxes become a lien on January 1 and are recorded as receivables by the City at that date. Real property taxes are payable (by property owners) on May 15 and October 15 of each calendar year. Personal property taxes are payable by taxpayers on February 28 and June 30 of each year. These taxes are collected by the County and remitted to the City on or before July 7 and December 2 of the same year. Delinquent collections for November and December are received the following January. The City has no ability to enforce payment of property taxes by property owners. The County possesses this authority. Government-Wide Financial Statements The City recognizes property tax revenue in the period for which the taxes were levied. Uncollectible property taxes are not material and have not been reported. Governmental Fund Financial Statements The City recognizes property tax revenue when it becomes both measurable and available to finance expenditures of the current period. In practice, current and delinquent taxes and State credits received by the City in July, December and January are recognized as revenue for the current year. Taxes collected by the County by December 31 (remitted to the City the following January) and taxes and credits not received at year end are classified as delinquent and due from County taxes receivable. The portion of delinquent taxes not collected by the City in January is fully offset by deferred revenue because they are not available to finance current expenditures. I. Market Value Homestead Credit Property taxes on residential agricultural homestead property (as defined by State Statutes) are partially reduced by market value homestead credit (MVHC). This credit is paid to the City by the State in lieu of taxes levied against homestead property. The State remits this credit through installments each year. The credit is recognized as revenue by the City at the time of collection. 5566 CITY OF FRIDLEY, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2006 J. Special Assessment Revenue Recognition Special assessments are levied against the benefited properties for the assessable costs of special assessment improvement projects in accordance with State Statutes. The City usually adopts the assessment rolls when the individual projects are complete or substantially complete. The assessments are collectible over a term of years generally consistent with the term of years of the related bond issue. Collection of annual installments is handled by the County in the same manner as property taxes. Property owners are allowed to prepay future installments without interest or prepayment penalties. Once a special assessment roll is adopted, the amount attributed to each parcel is a lien upon that property until full payment is made or the amount is determined to be excessive by the City Council or court action. If special assessments are allowed to go delinquent, the property is subject to tax forfeit sale. Proceeds of sales from tax forfeit properties are remitted to the City in payment of delinquent special assessments. Pursuant to State Statutes, a property shall be subject to a tax forfeit sale after three years unless it is homesteaded, agricultural or seasonal recreational land in which event the property is subject to such sale after five years. Government-Wide Financial Statements The City recognizes special assessment revenue in the period that the assessment roll was adopted by the City Council. Uncollectible special assessments are not material and have not been reported. Governmental Fund Financial Statements Revenue from special assessments is recognized by the City when it becomes measurable and available to finance expenditures of the current fiscal period. In practice, current and delinquent special assessments received by the City are recognized as revenue for the current year. Special assessments that are collected by the County by December 31 (remitted to the City the following January) are also recognized as revenue for the current year. All remaining delinquent, deferred and special deferred assessments receivable in governmental funds are completely offset by deferred revenues. K. Inventories Governmental Funds Inventories of the general fund are stated at cost, which approximates market, using the first-in, first out (FIFO) method. The primary government does not maintain material amounts of inventory within the other governmental funds. Inventories of governmental funds are recorded as expenditures when consumed rather than when purchased. Proprietary Funds Liquor fund inventories are valued on the average cost basis. Other proprietary funds inventory items are expensed at the time they are sold or used (consumption method). 5577 CITY OF FRIDLEY, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2006 L. Prepaid Items Certain payments to vendors reflect costs applicable to future accounting periods and are recorded as prepaid items in both government-wide and fund financial statements. M. Capital Assets Capital assets, which include property, plant, equipment and infrastructure assets (e.g., roads, bridges, 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 government as assets with an initial, individual cost of more than $5,000 (with the exception of computer equipment) (amount not rounded) 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. In the case of the initial capitalization of general infrastructure assets (i.e., those reported by governmental activities) the government chose to include all such items regardless of their acquisition date or amount. The City was able to estimate the historical cost for the initial reporting of these assets through back-trending (i.e., estimating the current replacement cost of the infrastructure to be capitalized and using an appropriate price-level index to deflate the cost of the infrastructure to be capitalized and using an appropriate price-level index to deflate the cost to the acquisition year or estimated acquisition year). The costs of normal maintenance and repairs that do not add to the value of the asset or materially extend assets lives are not capitalized. Major outlays for capital assets and improvements are capitalized as projects are constructed. Interest incurred during the construction phase of capital assets of business-type activities is included as part of the capitalized value of the assets constructed. For the year ended December 31, 2006, no interest was capitalized in connection with construction in progress. Property, plant and equipment of the primary government, and the component units, are depreciated using the straight line method over the following estimated useful lives: Assets Improvements other than building 20 – 25 years Buildings and structures 20 – 25 years Machinery and equipment 5 – 10 years Infrastructure 25 years 5588 CITY OF FRIDLEY, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2006 N. Compensated Absences All liabilities for compensated absences, both current and long-term, for annual leave, severance and separation pay are accounted for in the Employee Benefit Fund, an Internal Service Fund. Each year compensated absence expenditures and expenses are recorded in the Governmental and Proprietary Funds respectively, equivalent to the full amount accrued by fund employees during the year. These charges are offset by a corresponding transfer of assets from the home department funds to the Employee Benefit Fund to fund the liability. This liability represents the maximum possible dilution of Employee Benefit Fund assets by retirements or extended leaves by employees. The personnel ordinance limits the annual accumulation of benefits that can be accumulated from year-to-year. O. Long-Term Obligations In the government-wide financial statements and proprietary fund types in the fund financial statements, long-term debt and other long-term obligations are reported as liabilities in the applicable governmental activities, business-type activities, or proprietary fund type statement of net assets. Bond premiums and discounts, as well as issuance costs, are generally immaterial and are expensed in the year of bond issuance.Material premiums and discounts are deferred and amortized over the life of the bonds. In the fund financial statements, governmental fund types recognize bond premiums and discounts, as well as bond issuance costs, during the current period. The face amount of debt issued is reported as other financing sources. Premiums received on debt issuances are reported as other financing sources while discounts on debt issuances are reported as other financing uses. Issuance costs, whether or not withheld from the actual debt proceeds received, are reported as debt service expenditures. P. Fund Equity In the fund financial statements, governmental funds report reservations of fund balance for amounts not appropriable for expenditure or legally segregated for a specific future use. Designated fund balances represent tentative plans for future use of financial resources. Q. Interfund Transactions Interfund services provided and used are accounted for as revenues, expenditures or expenses. Transactions that constitute reimbursements to a fund for expenditures/expenses initially made from it that are properly applicable to another fund, are recorded as expenditures/expenses in the reimbursing fund and as reductions of expenditures/expenses in the fund that is reimbursed. Interfund loans are reported as an interfund loan receivable or payable which offsets the movement of cash between funds. All other interfund transactions are reported as transfers. 5599 CITY OF FRIDLEY, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2006 R. Use of Estimates The preparation of financial statements in accordance with generally accepted accounting principles (GAAP) requires management to make estimates that affect amounts reported in the financial statements during the reporting period. Actual results could differ from such estimates. S. Reconciliation of Government-Wide and Fund Financial Statements 1. Explanation of certain differences between the governmental fund balance sheet and the government-wide statement of net assets The governmental fund balance sheet includes reconciliation between fund balance – total governmental funds and net assets – governmental activities as reported in the government- wide statement of net assets. One element of that reconciliation explains that “long-term liabilities, including bonds payable, are not due and payable in the current period and therefore are not reported in the funds.” The details of this $11,251,322 difference are as follows: Bonds payable$11,090,000 Accrued interest payable161,322 Net adjustment to increase net changes in fund balances - total governmental funds to arrive at changes in net assets of governmental activities$11,251,322 2. Explanation of certain differences between the governmental fund statement of revenues, expenditures and changes in fund balances and the government-wide statement of activities The governmental fund statement of revenues, expenditures and changes in fund balances includes reconciliation between net changes in fund balances – total governmental funds and changes in net assets of governmental activities as reported in the government-wide statement of activities. One element of that reconciliation explains that “governmental funds report capital outlays as expenditures. However, in the statement of activities the cost of those assets is allocated over their estimated useful lives and reported as depreciation expense.” The details of this $2,778,274 difference are as follows: Loss on disposal of capital assets($45,839) Capital outlay4,385,115 Depreciation expense(1,561,002) Net adjustment to increase net changes in fund balances - total governmental funds to arrive at changes in net assets of governmental activities$2,778,274 6600 CITY OF FRIDLEY, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2006 Another element of that reconciliation states that “revenues on the statement of activities that do not provide current financial resources are not reported as revenues in the funds.” The details of this $445,559 difference are as follows: General property taxes deferred revenue: At December 31, 2005($117,988) At December 31, 2006150,698 Special assessments deferred revenue: At December 31, 2005(1,222,965) At December 31, 20061,635,814 Net adjustments to increase net changes in fund balances - total governmental funds to arrive at changes in net assets of governmental activities$445,559 Another element of that reconciliation states that “the issuance of long-term debt (e.g., bonds, leases) provides current financial resources to governmental funds, while the repayment of the principal on long-term debt consumes the current financial resources of governmental funds.” Neither transaction, however, has any effect on net assets. The details of this ($950,000) difference are as follows: Debt issued: Improvement bonds($2,505,000) Principal repayments: Tax increment bonds1,555,000 Net adjustment to decrease net changes in fund balances - total governmental funds to arrive at changes in net assets of governmental activities($950,000) T. Reclassifications Certain amounts presented in the prior year data have been reclassified in order to be consistent with the current year’s presentation. 6611 CITY OF FRIDLEY, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2006 2. Deposits and Investments A.Deposits In accordance with Minnesota Statutes, the City maintains deposits at those depository banks authorized by the City Council, all of which are members of the Federal Reserve System. Minnesota Statutes require that all City deposits be protected by insurance, surety bond, or collateral. The market value of collateral pledged must equal 110% of the deposits not covered by insurance or bonds. Minnesota Statutes require that securities pledged as collateral be held in safekeeping by the City Treasurer or in a financial institution other than that furnishing the collateral. Authorized collateral includes the following: a) United States government treasury bills, treasury notes, treasury bonds; b) Issues of United States government agencies and instrumentalities as quoted by a recognized industry quotation service available to the government entity; c) General obligation securities of any state or local government with taxing powers which is rated “A” or better by a national bond rating service, or revenue obligation securities of any state or local government with taxing powers which is rated “AA” or better by a national bond ratingservice; d) Unrated general obligation securities of a local government with taxing powers may be pledged as collateral against funds deposited by that same local government entity: e) Irrevocable standby letters of credit issued by Federal Home Loan Banks to a municipality accompanied by written evidence that the bank’s public debt is rated “AA” or better by Moody’s Investors Service, Inc. or Standard & Poor’s Corporation; and f) Time deposits that are fully insured by any Federal agency. At December 31, 2006 the carrying amount of the City’s deposits with financial institutions was $1,069,810, and the Fridley HRA was $98,221. Of these deposits, $0 were uncollateralized. B. Investments Minnesota Statutes authorize the City to invest in the following: a) Direct obligations or obligations guaranteed by the United States or its agencies, its instrumentalities or organizations created by an act of congress, excluding mortgage-backed securities defined as high risk. b) Shares of investment companies registered under the Federal Investment Company Act of 1940 and whose only investments are in securities described in (a) above, general obligation tax-exempt securities, or repurchase or reverse repurchase agreements. c) Obligations of the State of Minnesota or any of its municipalities as follows: 6622 CITY OF FRIDLEY, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2006 1) any security which is a general obligation of any state or local government with taxing powers which is rated “A” or better by a national bond rating service; 2) any security which is a revenue obligation of any state or local government with taxing powers which is rated “AA” or better by a national bond rating service; and 3) a general obligation of the Minnesota housing finance agency which is a moral obligation of the State of Minnesota and is rated “A” or better by a national bond rating agency. d) Bankers acceptance of United States banks eligible for purchase by the Federal Reserve System. e) Commercial paper issued by United States corporations or their Canadian subsidiaries, of the highest quality, and maturing in 270 days or less. f) Repurchase or reverse repurchase agreements with banks that are members of the Federal Reserve System with capitalization exceeding $10,000,000; a primary reporting dealer in U.S. government securities to the Federal Reserve Bank of New York; certain Minnesota securities broker-dealers; or, a bank qualified as a depositor. g) General obligation temporary bonds of the same governmental entity issued under section 429.091, subdivision 7; 469.178, subdivision 5; or 475.61, subdivision 6. As of December 31, 2006 the City had the following investments and maturities: Investment Maturities (in Years) FairLessOver Investment TypeRatingValueThan 11-56-1010 Years Federal Home Loan Mortgage Co.AAA$497,560$ - $497,560$ - $ - Federal Home Loan BankAAA15,531,3422,499,84013,031,502 - - Money marketN/A11,017,33211,017,332 - - - Total$27,046,234$13,517,172$13,529,062$0$0 Total investments$27,046,234 Deposits1,069,810 Petty cash4,550 Total cash and investments$28,120,594 As of December 31, 2006 the HRA had the following investments and maturities: Investment Maturities (in Years) FairLessOver Investment TypeRatingValueThan 11-56-1010 Years United States Treasury BondAAA$193,946$ - $ - $193,946$ - Money marketN/A16,781,76016,781,760 - - - Total$16,975,706$16,781,760$0$193,946$0 Total investments$16,975,706 Deposits98,221 Total cash and investments$17,073,927 6633 CITY OF FRIDLEY, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2006 C. Investment Risks The City’s investment policy is to follow Minnesota State Statutes as described above which reduces the City’s exposure to credit, custodial credit, and interest rate risks. Specific risk information for the City is as follows: Interest rate risk – The City’s investment policy requires the City to diversify its investment portfolio to eliminate the risk of loss resulting from over concentration of assets in a specific maturity. The policy also states the City’s investment portfolio will remain sufficiently liquid to enable the City to meet all operating requirements which might be reasonably anticipated. Credit risk – State law limits investments in commercial paper to the top rating issued by at least two of the nationally recognized statistical rating organizations. State law also limits investments in money market funds to those that meet the conditions of SEC rule 2a-7 and rated in one of the two highest rating categories by at least one NRSRO. The City invests in a Credit-Suisse money market fund which is managed pursuant to the requirements of Rule 2a-7 and seeks to maintain a one dollar share price. As of December 31, 2006, the City’s investments in the FHLMC and FHLB notes were all rated AAA by Standard and Poor’s. Concentration of credit risk – The City places no limit on the amount the City may invest in any one issuer. More than 5% of the City’s investments are in various holdings as follows: Federal Home Loan Bank Money market Concentration of credit risk – The HRA places no limit on the amount the HRA may invest in any one issuer. More than 5% of the HRA’s investments are in various holdings as follows: Money market 3. Receivables Significant receivables balances not expected to be collected within one year of December 31, 2006 are as follows: Primary Government Major Funds Special AssessmentCapital Nonmajor GeneralDebt ServiceImprovementsFundsTotal Special assessments receivable$26,977$1,086,760$1$18,790$1,132,528 Loans receivable9,182348,441 - - 357,623 Delinquent property taxes83,093 - 1,0174,59088,700 $119,252$1,435,201$1,018$23,380$1,578,851 6644 CITY OF FRIDLEY, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2006 HRA Component Unit Major Funds RevolvingNorthNonmajor LoanAreaFundsTotal Mortgage receivable$1,109,690$46,439$70,350$1,226,479 Allowance for uncollectible accounts(21,495) - (1,407)(22,902) $1,088,195$46,439$68,943$1,203,577 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 and unearned revenue reported in the governmental funds were as follows: UnavailableUnearnedTotal Delinquent property taxes receivable (General Fund)$140,801$ - $140,801 Delinquent property taxes receivable (Capital Improvements Fund)1,725 - 1,725 Delinquent property taxes receivable (Special Assessment Debt Service Fund)2,299 - 2,299 Delinquent property taxes receivable (Nonmajor Funds)5,874 - 5,874 Special assessments not yet due (General Fund)38,966 - 38,966 Special assessments not yet due (Special Assessment Construction Fund)27,140 - 27,140 Special assessments not yet due (Special Assessment Debt Service Fund)1,569,706 - 1,569,706 Special assessments not yet due (Capital Improvements Fund)1 - 1 Special assessments not yet due (Nonmajor Funds) - - - Unearned grant funds (Grant Management Fund) - 113,498113,498 Total deferred/unearned revenue for governmental funds$1,786,512$113,498$1,900,010 6655 CITY OF FRIDLEY, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2006 4. Capital Assets Capital asset activity for the year ended December 31, 2006 was as follows: BeginningEnding Primary Government BalanceIncreasesDecreasesBalance Governmental activities: Capital assets, not being depreciated: Land$2,840,316$1,200$ - $2,841,516 Construction in progress3,076,594131,818(2,999,235)209,177 Total capital assets, not being depreciated5,916,910133,018(2,999,235)3,050,693 Capital assets, being depreciated: Buildings and structures7,773,311151,680 - 7,924,991 Machinery and equipment7,396,7561,352,160(451,879)8,297,037 Improvements3,978,095177,841(18,846)4,137,090 Infrastructure24,222,8565,659,747(524,289)29,358,314 Total capital assets, being depreciated43,371,0187,341,428(995,014)49,717,432 Less accumulated depreciation for: Buildings and structures4,455,383304,562 - 4,759,945 Machinery and equipment5,758,821569,420(445,010)5,883,231 Improvements2,906,518208,944(18,846)3,096,616 Infrastructure15,904,093657,085(478,450)16,082,728 Total accumulated depreciation29,024,8151,740,011(942,306)29,822,520 Total capital assets being depreciated - net14,346,2035,601,417(52,708)19,894,912 Governmental activities capital assets - net$20,263,113$5,734,435($3,051,943)$22,945,605 6666 CITY OF FRIDLEY, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2006 BeginningEnding Primary Government BalanceIncreasesDecreasesBalance Business-type activities: Capital assets, not being depreciated: Land$306,477$ - $ - $306,477 Construction in progress530,172 - (530,172) - Total capital assets, not being depreciated836,6490(530,172)306,477 Capital assets, being depreciated: Buildings and structures1,852,9901,420,711(27,300)3,246,401 Improvements other than buildings11,023,28099,095(55,223)11,067,152 Machinery and equipment2,645,000106,727(59,216)2,692,511 Infrastructure21,459,297599,494 - 22,058,791 Total capital assets, being depreciated36,980,5672,226,027(141,739)39,064,855 Less accumulated depreciation for: Buildings and structures1,241,99640,217(27,300)1,254,913 Improvements other than buildings4,576,558447,478(55,223)4,968,813 Machinery and equipment1,792,281223,880(59,216)1,956,945 Infrastructure9,941,369479,125 - 10,420,494 Total accumulated depreciation17,552,2041,190,700(141,739)18,601,165 Total capital assets being depreciated - net19,428,3631,035,327020,463,690 Business-type activities capital assets - net$20,265,012$1,035,327($530,172)$20,770,167 Depreciation expense was charged to functions/programs of the primary government as follows: Governmental activities: General government$489,301 Public safety171,666 Public works, including depreciation of general infrastructure assets869,102 Community development2,947 Recreation and naturalist27,986 Capital assets held by the government's internal service funds are charged to the various functions based on their usage of the assets179,009 Total depreciation expense - governmental activities$1,740,011 Business-type activities: Liquor$50,274 Water591,367 Sewer305,684 Storm water191,820 Total depreciation expense - business-type activities1,139,145 Accumulated depreciation of transferred assets51,555 Total increases in accumulated depreciation$1,190,700 6677 CITY OF FRIDLEY, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2006 5. Long-Term Debt The City issues general obligation bonds to provide funds for the acquisition and construction of major capital facilities. The reporting entity’s long-term debt is segregated between the amounts to be repaid from governmental activities and amounts to be repaid from business-type activities. As of December 31, 2006, the governmental long-term bonded debt and loans of the financial reporting entity consisted of the following: Governmental Activities: $3,920,000 General Obligation Tax Increment Refunding Bonds of 2004 due in varying annual installments of $230,000 - $605,000 through February 1, 2012; interest at 2.00% - 4.35% February 1, 2012; interest at 5.10% - 5.65%.$3,225,000 $1,805,000 General Obligation Improvement Bonds of 2005 due in varying annual installments of $155,000 - $210,000 through February 1, 2016; interest at 2.80% - 3.750%.1,805,000 $4,645,000 General Obligation Tax Increment Refunding Bonds of 2005 due in varying annual installments of $1,090,000 - $1,160,000 through February 1, 2009; interest at 8.00%.3,555,000 $2,505,000 General Obligation Improvement Bonds of 2006 due in varying annual installments of $205,000 - $305,000 through February 1, 2017; interest at 4.00%2,505,000 Subtotal governmental activities11,090,000 Business-Type Activities: $620,000 General Obligation Water Revenue Bonds of 1992, Series B, due in varying annual installments of $35,000 - $55,000 through February 1, 2007; interest at 3.00% - 5.70%.$55,000 $1,180,000 General Obligation Water Revenue Bonds of 1998, due in varying annual installments of $90,000 - $130,000 through February 1, 2011.605,000 $1,790,000 General Obligation Water Revenue Bonds of 2004 due in varying annual installments of $50,000 - $230,000 through February 1, 2019; interest at 2.5% - 4.00%.1,790,000 $1,205,000 General Obligation Water and Storm Water Revenue Bonds of 2004 due in varying annual installments of $160,000 - $235,000 through February 1, 2012; interest at 2.0% - 3.25%.970,000 Unamortized discount(4,454) Subtotal business-type activities3,415,546 Total primary government$14,505,546 Component Units: $1,500,000 loan payable to primary government. Due in annual installments of $87,429, through February 1, 2012; interest at 5%.$415,908 6688 CITY OF FRIDLEY, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2006 Annual debt service requirements to maturity for general obligation bonds and loans are as follows: Primary GovernmentComponent Unit Governmental ActivitiesBusiness-Type ActivitiesHRA Year EndingG.O. ImprovementTax IncrementRevenue BondsLoan Payable December 31,PrincipalInterestPrincipalInterestPrincipalInterestPrincipalInterest 2007$155,000$159,523$1,670,000$199,488$405,000$113,348$67,467$19,963 2008365,000149,2631,710,000149,015300,000101,94370,88216,547 2009380,000136,0681,680,00096,495315,00091,72674,47012,959 2010395,000122,115545,00059,906320,00080,75678,2409,188 2011405,000107,494570,00038,003330,00068,95582,2015,227 2012425,00092,151605,00013,159345,00057,22942,6481,066 2013445,00075,875 - - 175,00048,779 - - 2014460,00058,736 - - 185,00042,836 - - 2015475,00040,825 - - 190,00036,413 - - 2016500,00021,938 - - 200,00029,388 - - 2017305,0006,100 - - 205,00021,844 - - 2018 - - - - 220,00013,600 - - 2019 - - - - 230,0004,600 - - Total$4,310,000$970,088$6,780,000$556,066$3,420,000$711,414$415,908$64,950 Long-term liability activity for the year ended December 31, 2006, was as follows: BeginningEndingDue Within BalanceAdditionsReductionsBalanceOne Year Governmental activities: Bonds payable: G.O. improvement bonds$1,805,000$2,505,000$ - $4,310,000$155,000 Tax increment bonds8,335,000 - (1,555,000)6,780,0001,670,000 Total bonds payable10,140,0002,505,000(1,555,000)11,090,0001,825,000 Compensated absences744,205753,626(692,870)804,961663,146 Total government activity long-term debt$10,884,205$3,258,626($2,247,870)$11,894,961$2,488,146 Business-type activities: Bonds payable: G.O. revenue bonds$3,815,000$ - ($395,000)$3,420,000$405,000 Component units: Loan payable$480,123$ - ($64,215)$415,908$67,467 Compensated absences are generally liquidated by the General Fund. The loan payable is liquidated by the HRA Revolving Loan Fund. All long-term bonded indebtedness outstanding at December 31, 2006 is backed by the full faith and credit of the City, including improvement and revenue bond issues. Delinquent assessments receivable at December 31, 2006 totaled $9,365. 6699 CITY OF FRIDLEY, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2006 6. Defined Benefit Pension Plans-Statewide A. Plan Description All full-time and certain part-time employees of the City of Fridley are covered by defined benefit plans administered by the Public Employees Retirement Association of Minnesota (PERA). PERA administers the Public Employees Retirement Fund (PERF) 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 Statute, Chapters 353 and 356. PERF members belong to either the Coordinated Plan or the Basic Plan. Coordinated Plan members are covered by Social Security and Basic Plan members are not. All new members must participate in the Coordinated Plan. All police officers, firefighters and peace officers who qualify for membership by statute are covered by the PEPFF. PERA provides retirement benefits as well as disability benefits to members, and benefits to survivors upon death of eligible members. Benefits are established by State Statute, and vest after three years of credited service. The defined retirement benefits are based on a member’s highest average salary for any five successive years of allowable service, age, and years of credit at termination of service. PERA issues a publicly available financial report that includes financial statements and required supplementary information for PERF and PEPFF. That report may be obtained on the web at mnpera.org, by writing to PERA at 60 Empire Drive #200, St. Paul, Minnesota, 55103-2088 or by calling (651)296-7460 or 1-800-652-9026. B. Funding Policy Minnesota Statutes Chapter 353 sets the rates for employer and employee contributions. These statutes are established and amended by the state legislature. The City makes annual contributions to the pension plans equal to the amount required by state statutes. PERF Basic Plan members and Coordinated Plan members were required to contribute 9.10% and 5.50%, respectively, of their annual covered salary. PEPFF members were required to contribute 7.0% of their annual covered salary in 2006. The City of Fridley, Minnesota is required to contribute the following percentages of annual covered payroll: 11.78% for Basic Plan PERF members, 6.0% for Coordinated Plan PERF members, and 10.5% for PEPFF members. The City’s contributions for the years ending December 31, 2006, 2005 and 2004 equal to the contractually required contributions for each year as set by state statute for PERF and PEPFF as follows: PERFPEPFF 2004$257,163$268,253 2005257,111271,444 2006283,926321,681 7700 CITY OF FRIDLEY, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2006 C. Public Employees Retirement Association (PERA) - Defined Contribution Plan Description All council members of the City of Fridley are covered by a defined contribution pension plan administered by the Public Employees Retirement Association of Minnesota (PERA). PERA administers the Public Employees Defined Contribution Plan (PEDCP) which is a multiple- employer deferred compensation plan. Benefit Provisions and Contribution Rates 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 income, 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 percent of salary which is matched by the elected official's employer. For ambulance service personnel, employer contributions are determined by the employer, and for salaried employees must be a fixed percentage of salary. Employer contributions for volunteer personnel may be a unit value for each call or period of alert duty. Employees who are paid for their services may elect to make member contributions in an amount not to exceed the employer share. 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 percent of employer contributions and four-tenths of one percent of the assets in each member's account. Total contributions made by the City during fiscal year 2006 were: Percentage of AmountCovered PayrollRequired EmployeesEmployerEmployeesEmployerRates PEDCP$1,984$1,9845.00%5.00%5.00% 7. Defined Contribution Pension Plan - Fridley Volunteer Firefighters Relief Association Plan Description The Fridley Volunteer Firefighters Relief Association (Association), is a single employer public employee retirement system that acts as a common investment administrator for all of the City’s firefighters. Pursuant to a 1987 amendment to its by-laws, the pension plan is a defined contribution plan, prior to 1987 the pension plan was a defined benefit pension plan. Benefits and contribution requirements are established by Association’s by-laws and can be amended by the Association’s Board of Trustees with approval from the City of Fridley, Minnesota. All provisions are within limitations established by Minnesota Statutes. 7711 CITY OF FRIDLEY, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2006 Type of Benefit The exclusive pension provided by the Association is a “Defined Contribution Lump Sum Service Pension,” as defined in Minnesota Statutes §424A.02, Subdivision 4. Contribution Made The City collected and remitted $169,765 and $163,880 in State Aid to the Association for 2006 and 2005, respectively. During 2006 and as of December 31, 2006, the Association held no securities issued by the City or other related parties. 8. Interfund Receivables, Payables and Transfers Interfund receivables and payables of the primary government at December 31, 2006 are as follows: InterfundInterfund ReceivablesPayables Due From/Due To: Major Funds: General Fund$14,042$ - Tax Increment Debt Service - 450 Nonmajor Governmental Funds: Special Revenue Funds: HRA Reimbursement Fund - 13,592 $14,042$14,042 Interfund payables and receivables are representative of lending/borrowing arrangements to cover deficit cash balances at the end of the fiscal year. 7722 CITY OF FRIDLEY, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2006 Interfund receivables and payables of the HRA component unit at December 31, 2006 are as follows: InterfundInterfund ReceivablesPayables Due From/Due To: General Fund$3,678,725$ - Capital Projects Funds: Lake Pointe - 1,080,303 Gateway East - 972,653 Gateway West - 1,469,109 57th Avenue Redevelopment - 124,760 Housing Programs - 31,900 $3,678,725$3,678,725 The above balances are not expected to be eliminated within one year of December 31, 2006. Interfund Transfers: Transfer InTransfer Out Governmental Funds: Major Funds: General Fund$1,277,716$ - Special Assessment Debt Service - 830,245 Capital Improvements - 3,008,438 Special Assessment Construction Capital Projects3,588,684 - Nonmajor Funds100,000527,717 Total governmental funds4,966,4004,366,400 Proprietary Funds: Enterprise: Liquor - 500,000 Storm Water - 100,000 Total proprietary funds0600,000 Total$4,966,400$4,966,400 Interfund transfers allow the City to allocate financial resources to the funds that receive benefit from services provided by another fund. Most of the City’s interfund transfers fall under that category. 7733 CITY OF FRIDLEY, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2006 9. Reserved Fund Balances The following reservations have been made of various fund balances of the primary government at December 31, 2006: General Fund: Reserved for: Inventory$59,112 Long-term receivables18,364 Total General Fund77,476 Special Revenue Funds: Reserved for police activity203,131 Debt Service Funds: Reserved for long-term receivable415,908 Reserved for debt service721,866 Total Debt Service Funds1,137,774 Total Governmental Funds$1,418,381 The HRA component unit had reserved fund balances at December 31, 2006: Reserved for: Debt service$3,000,000 Mortgage receivable1,226,479 $4,226,479 7744 CITY OF FRIDLEY, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2006 10. Designated Fund Balance The following designations have been made of various fund balances at December 31, 2006: General Fund: Working capital$3,863,023 Special Revenue Funds: Cable TV Fund: Cable TV operations890,564 Drug and Gambling Forfeiture Fund: Drug and gambling enforcement32,380 Spring Brook Nature Fund: Nature Center53,368 Solid Waste Abatement Fund: Solid Waste Abatement43,998 F.C.C. Donations: Fridley community center86,313 Total Special Revenue Funds1,106,623 Capital Projects Funds: Capital Improvements Fund: Future improvements5,470,434 Total of designated fund balances$10,440,080 7755 CITY OF FRIDLEY, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2006 11. Tax Increment Districts The HRA is the administering authority for the following Tax Increment Districts: FiscalRetained YearTax Capacity ValuesDisparityBy EstablishedDistrictDistrict NameCurrentOriginalCapturedAdjustmentsAuthority 19791Center City$686,716$118,515$568,201$ - $568,201 19812Moore Lake571,93833,732538,206 - 538,206 19823North Area1,631,85890,3461,541,512 - 1,541,512 19856Lake Pointe784,02883,780700,248 - 700,248 19867Winfield64,8903,58261,308 - 61,308 19899Onan/Old Central Avenue375,65542,646333,009 - 333,009 199211University/Osborne66,58626,47840,108 - 40,108 199212McGlynn's75,25041,25433,996 - 33,996 199513Satellite Lane Apartments53,0702,33450,736 - 50,736 199514Industrial Equities77,91817,02360,895 - 60,895 19971657th Avenue Replacement29,6207,77621,844 - 21,844 200017Gateway East53,0915,04248,049 - 48,049 1995HR1/04Housing Replacement5,9355435,392 - 5,392 1995HR1/05Housing Replacement2,4202702,150 - 2,150 1995HR1/06Housing Replacement6,1216865,435 - 5,435 1995HR1/Q2Housing Replacement2,3053181,987 - 1,987 1995HR1/Q3Housing Replacement2,0053931,612 - 1,612 1995HR1/Q4Housing Replacement6,6547815,873 - 5,873 1995HR1/S3Housing Replacement2,4275161,911 - 1,911 1995HR1/S4Housing Replacement2,5815632,018 - 2,018 1995HR1/S5Housing Replacement2,1653751,790 - 1,790 1995HR1/S6Housing Replacement1,9324431,489 - 1,489 1995HR1/T7Housing Replacement1,365640725725 Totals$4,506,530$478,036$4,028,494$ - $4,028,494 12. Commitments and Contingencies A. Risk Management The City is exposed to various risks of loss related to torts; theft of, damage to, and destruction of assets; errors and omissions; injuries to employees; and natural disasters. During 1987, the City established the Self Insurance Fund (an Internal Service Fund) to account for and finance its uninsured risks of loss. The Self Insurance Fund provides coverage for up to a maximum of $50,000 for each liability and property claim with an annual aggregate of $100,000 for all claims. The City purchases insurance through the League of Minnesota Cities Insurance Trust for claims in excess of coverage provided by the fund and for all other risks of loss. Workers compensation coverage is provided through a pooled self-insurance program through the League of Minnesota Cities Insurance Trust (LMCIT). The City pays an annual premium to the LMCIT. The City is subject to supplemental assessments if deemed necessary by the LMCIT. The LMCIT reinsures through Workers Compensation Reinsurance Association (WCRA) as required by law. For workers compensation, the City is subject to a $500 deductible. The City’s workers compensation coverage is retrospectively rated. With this type of coverage, final premiums are determined after loss experience is known. The amount of premium adjustment, if any, is considered immaterial and not recorded until received or paid. 7766 CITY OF FRIDLEY, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2006 The City continues to carry commercial insurance for all other risks of loss, including employee health and disability insurance. There were no significant reductions in insurance from the previous year or settlements in excess of insurance coverage for any of the past three fiscal years. In 1990, the General Fund contributed $1,000,000 to the Self Insurance Fund in lieu of the Self Insurance Fund charging losses back to each fund. There is no recorded liability for unpaid claims because the amount of such claims, if any, is considered to be immaterial. As of December 31, 2006, the Self Insurance Fund has accumulated equity in the amount of $1,637,315 to cover future claims and losses. B. Litigation The City attorney has indicated that existing and pending lawsuits, claims and other actions in which the City is a defendant are either covered by insurance; of an immaterial amount; or, in the judgment of the City attorney, remotely recoverable by plaintiffs. C. Federal and State Funds The City receives financial assistance from federal and state governmental agencies in the form of grants. The disbursement of funds received under these programs generally requires compliance with the terms and conditions specified in the grant agreements and are subject to audit by the grantor agencies. Any disallowed claims resulting from such audits could become a liability of the applicable fund. However, in the opinion of management, any such disallowed claims will not have a material effect on any of the financial statements of the individual fund types included herein or on the overall financial position of the City at December 31, 2006. D. Tax Increment Districts The City’s tax increment districts are subject to review by the State of Minnesota Office of the State Auditor (OSA). Any disallowed claims or misuse of tax increments could become a liability of the applicable fund. Management has indicated that they are not aware of any instances of noncompliance which would have a material effect on the financial statements. 7777 CITY OF FRIDLEY, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2006 E. Contingent Liability The HRA entered into various limited tax increment revenue notes with developers whereby the HRA shall pay the developers the lesser of the scheduled payment or available tax increment. Whether a payment will occur, and if so, the amount of the payment(s) are uncertain since all payments are dependent on the HRA receiving tax increments from the developer’s project. As such, this liability has not been recorded in the financial statements. The HRA has issued various Tax Increment Revenue Notes. These notes are not a general obligation of the HRA and are payable solely from available tax increments. Accordingly, these notes are not reflected in the financial statements of the HRA. A schedule of outstanding notes at December 31, 2006 is as follows: Original 12/31/06InterestMaturity NotePrincipalBalanceRateDate Medtronic$10,000,000$9,593,6416.75%August 1, 2025 Linn175,000149,5008.50%February 1, 2012 Banfill 683,156204,6758.00%August 1, 2007 F. Construction Commitments At December 31, 2006, the City had construction project contracts in progress. The commitments related to the remaining contract balances are summarized as follows: Remaining ProjectCommitment 85th Avenue Trail Project$72,468 2007-1 Street Reconstruction57,200 Fire Rescue Trucks125,190 Total$254,858 G. Commitments - HRA The HRA has pledged future tax increments to the City of Fridley, Minnesota for the City’s general obligation tax increment debt. 7788 CITY OF FRIDLEY, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2006 13. Leases A. Lease Expense The City leases space for one of its liquor stores. Total costs for this lease was $104,759 for the year ended December 31, 2006. The future minimum lease payments for this lease are as follows: Year Ending December 31,Amount 2007$95,850 200895,850 200998,200 2010109,981 2011109,981 2012109,981 2013109,981 201491,650 Total$821,474 B. Lease Revenue The City receives revenue from agreements for the lease of space above its water towers to communication companies. The space is used for antennas and other equipment (of the lessees) necessary to provide radio communications. For accounting purposes, the leases are considered operating leases. Lease revenue for the year ended December 31, 2006, totaled $112,327. Terms of each lease are as follows: Annual Lease AdjustmentExpirationRenewal LesseeFactor*DateOptions T-MobileGreater of 3% or CPI12/31/111 Five Year Renewal T-Mobile Highway 65Greater of 3% or CPI12/31/073 Five Year Renewals Cingular - GarageGreater of 5% or CPI08/25/083 Five Year Renewals Cingular - Marion HillsGreater of 5% or CPI06/30/103 Five Year Renewals Sprint - Highway 65Greater of 5% or CPI09/30/103 Five Year Renewals Sprint - Well #13Greater of 5% or CPI09/30/083 Five Year Renewals *Amounts for future lease receipts are unavailable because they are based on the Consumer Price Index. 7799 CITY OF FRIDLEY, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2006 14. Conduit Debt Obligation From time to time, the City has issued Industrial Revenue Bonds to provide financial assistance to private-sector entities for the acquisition and construction of industrial and commercial facilities deemed to be in the public interest. The bonds are secured by the property financed and are payable solely from payments received on the underlying mortgage loans. Upon repayment of the bonds, ownership of the acquired facilities transfers to the private-sector entity served by the bond issuance. Neither the City, the State, nor any political subdivision thereof is obligated in any manner for repayment of the bonds. Accordingly, the bonds are not reported as liabilities in the accompanying financial statements. As of December 31, 2006, there were 28 series of Industrial Revenue Bonds issued. The aggregate principal amount payable for the six series issued after July 1, 1995 is $18,952,976. The aggregate principal amount payable for the twenty-two series issued prior to July 1, 1995, could not be determined; however, their original issue amounts totaled $65.2 million. 15. Deficit Fund Balances At December 31, 2006, individual funds with a deficit fund balance are as follows: Component unit: Lake Pointe$823,052 Gateway East911,120 Gateway West1,557,934 57th Avenue Redevelopment129,349 16. Contingent Receivable In 1999, the HRA entered into an agreement with Medtronic for the sale of land from the HRA to Medtronic. The original principal amount of the receivable was $5,000,000. Interest is added quarterly at a rate of 8.25%. Payments on the note receivable are made in an amount equal to 11.11% of tax increment note payments received by Medtronic through 2012, and 22.22% of tax increment note payments receivable from 2012 through 2026. 8800 CITY OF FRIDLEY, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2006 17. Recently Issued Accounting Standards The Governmental Accounting Standards Boards (GASB) recently approved the following statements which were not implemented for these financial statements: Statement No. 45 Accounting and Financial Reporting by Employers for Post Employment Benefits Other Than Pension Plans.Implementation is required in three phases based on a government’s total annual revenues in the first fiscal year ending after June 15, 1999. This Statement is effective for periods beginning after December 15, 2006, for phase 1 governments (those with total annual revenues of $100 million or more); after December 15, 2007, for phase 2 governments (those with total annual revenues of $10 million or more but less than $100 million); and after December 15, 2008, for phase 3 governments (those with total annual revenues of less than $10 million). Early implementation is encouraged. The effect these standards may have on future financial statements is not determinable at this time. 18. Subsequent Event On April 9, 2007, the City of Fridley, Minnesota approved the sale of Series 2007A G.O. Improvement Bonds totaling $1,910,000. 8811 - This page intentionally left blank - 82 888222 REQUIRED SUPPLEMENTARY INFORMATION 83 888333 Exhibit B-1 Page 1 of 4 CITY OF FRIDLEY, MINNESOTA REQUIRED SUPPLEMENTARY INFORMATION BUDGETARY COMPARISON SCHEDULE - GENERAL FUND For The Year Ended December 31, 2006 With comparative actual amounts for the year ended December 31, 2005 2006 Variance with Final Budget - 2005 Budgeted AmountsActualPositiveActual OriginalFinalAmounts(Negative)Amounts Revenues: Taxes and special assessments: Current ad valorem taxes$8,189,475$7,716,333$7,552,898(163,435)$6,763,409 Delinquent ad valorem taxes38,00038,00091,65353,6538,266 Penalties and interest10,00010,0007,516(2,484)8,929 Special assessments4,5404,54014,4359,895608 Total taxes and special assessments8,242,0157,768,8737,666,502(102,371)6,781,212 Licenses and permits: Licenses: Rental101,600101,60087,307(14,293)74,149 Business110,200110,20081,137(29,063)94,704 All other30,00030,00030,97597528,670 Permits538,590538,590483,808(54,782)491,253 Total licenses and permits780,390780,390683,227(97,163)688,776 Intergovernmental revenue: Civil defense - - - - - Federal grants - 39,25245,6246,3725,387 State maintenance aid170,000170,000208,43438,434196,268 State credits - 473,142473,142 - 499,014 Local government aid - - - - 293,654 Other state grants - 7,29179,62772,33632,070 Police and fire pension401,972414,995483,75868,763464,956 Other62,26165,73361,690(4,043)83,828 Total intergovernmental revenue634,2331,170,4131,352,275181,8621,575,177 Charges for services: General government921,500921,500934,37312,873879,826 Public safety103,450103,450162,06858,618126,904 Public works7,8007,80019,00811,20814,103 Community development15,95015,95010,001(5,949)28,943 Recreation221,200221,200253,48932,289252,988 Total charges for services1,269,9001,269,9001,378,939109,0391,302,764 Fines and forfeits180,000180,000256,43576,435163,166 Investment income125,000125,000173,71648,716106,513 Miscellaneous revenue: Insurance and other reimbursements66,90081,45260,049(21,403)99,902 Gambling tax85,00085,00074,166(10,834)74,032 Donations10,00036,05928,663(7,396)24,477 Miscellaneous38,00038,16812,601(25,567)88,814 Total miscellaneous revenue199,900240,679175,479(65,200)287,225 Total revenues11,431,438 11,535,255 11,686,573 151,318 10,904,833 84 8844 Exhibit B-1 Page 2 of 4 CITY OF FRIDLEY, MINNESOTA REQUIRED SUPPLEMENTARY INFORMATION BUDGETARY COMPARISON SCHEDULE - GENERAL FUND For The Year Ended December 31, 2006 With comparative actual amounts for the year ended December 31, 2005 2006 Variance with Final Budget - 2005 Budgeted AmountsActualPositiveActual OriginalFinalAmounts(Negative)Amounts Expenditures: General government: Mayor and council: Personal services$77,299$79,961$79,961$ - $74,980 Supplies and other charges41,31638,65430,0648,59033,523 Total mayor and council118,615118,615110,0258,590108,503 Planning commission: Supplies and other charges - - - - - Other commissions: Supplies and other charges - - - - 56 City manager: Personal services200,442205,146205,146 - 195,244 Supplies and other charges68,28163,57753,33910,23852,098 Total City manager268,723268,723258,48510,238247,342 Human resources: Personal services157,983157,983154,4863,497146,621 Supplies and other charges24,87124,87115,2869,58533,011 Total human resources182,854182,854169,77213,082179,632 Legal: Supplies and other charges366,046394,580394,580 - 359,647 Elections: Personal services2,2932,2712,271 - 992 Supplies and other charges31,92538,12538,0923312,916 Total elections34,21840,39640,3633313,908 Accounting: Personal services621,770621,770615,3246,446564,552 Supplies and other charges86,77086,77082,4764,29499,452 Total accounting708,540708,540697,80010,740664,004 Assessing: Personal services168,228168,228165,0513,177149,311 Supplies and other charges11,15311,1538,5932,5606,379 Total assessing179,381179,381173,6445,737155,690 MIS: Personal services167,664170,043170,043 - 155,483 Supplies and other charges99,04396,66486,63910,02572,550 Total MIS266,707266,707256,68210,025228,033 City clerk/records: Personal services120,714124,302123,992310113,589 Supplies and other charges21,66218,07417,81026428,563 Total City clerk/records142,376142,376141,802574142,152 Nondepartmental: Personal services - 12,37312,373 - 6,471 Supplies and other charges58,97352,03951,20483550,084 Total nondepartmental58,97364,41263,57783556,555 85 8855 Exhibit B-1 Page 3 of 4 CITY OF FRIDLEY, MINNESOTA REQUIRED SUPPLEMENTARY INFORMATION BUDGETARY COMPARISON SCHEDULE - GENERAL FUND For The Year Ended December 31, 2006 With comparative actual amounts for the year ended December 31, 2005 2006 Variance with Final Budget - 2005 Budgeted AmountsActualPositiveActual OriginalFinalAmounts(Negative)Amounts Expenditures: (continued) General government: (continued) Municipal center: Personal services$34,062$30,573$30,573$ - $30,789 Supplies and other charges212,805186,192186,13557236,457 Total municipal center246,867216,765216,70857267,246 Total general government2,573,3002,583,3492,523,43859,9112,422,768 Expenditures: Public safety: Police: Personal services3,937,3293,985,6393,985,639 - 3,648,888 Supplies and other charges521,973548,153548,153 - 428,351 Total police4,459,3024,533,7924,533,79204,077,239 Fire: Personal services903,183968,644968,644 - 863,669 Supplies and other charges192,439159,379159,379 - 140,002 Total fire1,095,6221,128,0231,128,02301,003,671 Rental inspections: Personal services115,578104,360104,360 - 104,897 Supplies and other charges15,6775,7145,714 - 5,763 Total rental inspections131,255110,074110,0740110,660 Civil defense: Supplies and other charges19,29724,43224,432 - 12,981 Total public safety5,705,4765,796,3215,796,32105,204,551 Public works: Engineering: Personal services431,468408,613408,613 - 395,156 Supplies and other charges78,90068,42368,423 - 68,782 Total engineering510,368477,036477,0360463,938 Public works and parks: Personal services1,500,1451,482,2171,482,217 - 1,463,477 Supplies and other charges860,925985,658985,658 - 1,013,454 Total public works and parks2,361,0702,467,8752,467,87502,476,931 Total public works2,871,4382,944,9112,944,91102,940,869 Community development: Building inspection: Personal services207,490209,310209,310 - 208,538 Supplies and other charges121,140142,282142,282 - 111,324 Total building inspection328,630351,592351,5920319,862 86 8866 Exhibit B-1 Page 4 of 4 CITY OF FRIDLEY, MINNESOTA REQUIRED SUPPLEMENTARY INFORMATION BUDGETARY COMPARISON SCHEDULE - GENERAL FUND For The Year Ended December 31, 2006 With comparative actual amounts for the year ended December 31, 2005 2006 Variance with Final Budget - 2005 Budgeted AmountsActualPositiveActual OriginalFinalAmounts(Negative)Amounts Expenditures: (continued) Community development: (continued) Planning: Personal services$320,228$311,077$311,077$ - $298,200 Supplies and other charges51,20076,69376,693 - 53,111 Total planning371,428387,770387,7700351,311 Total community development700,058739,362739,3620671,173 Expenditures: Parks and recreation: Personal services577,520538,861518,08120,780496,326 Supplies and other charges253,283261,976241,19720,779240,768 Total parks and recreation830,803800,837759,27841,559737,094 Capital outlay: Public safety180,450167,242167,242 - 96,169 Public works193,000183,757183,757 - 163,521 Culture and recreation - 21,48221,482 - - Total capital outlay373,450372,481372,4810259,690 Contingency: Current: Supplies and other charges135,000 - - - 907 Total expenditures13,189,52513,237,26113,135,791101,47012,237,052 Excess (deficiency) of revenues over (under) expenditures(1,758,087)(1,702,006)(1,449,218)252,788(1,332,219) Other financing sources (uses): Proceeds from sale of capital assets15,00015,00010,054(4,946) - Transfers in1,259,1691,277,7161,277,716 - 1,273,883 Transfers out - - - - (3,551) Total other financing sources (uses)1,274,1691,292,7161,287,770(4,946)1,270,332 Net change in fund balance($483,918)($409,290)(161,448)$247,842(61,887) Fund balance - January 14,101,9474,163,834 Fund balance - December 31$3,940,499$4,101,947 87 8877 Exhibit B-2 CITY OF FRIDLEY, MINNESOTA REQUIRED SUPPLEMENTARY INFORMATION BUDGETARY COMPARISON SCHEDULE - GRANT MANAGEMENT FUND For The Year Ended December 31, 2006 With comparative actual amounts for the year ended December 31, 2005 2006 Variance with Final Budget - 2005 Budgeted AmountsActualPositiveActual OriginalFinalAmounts(Negative)Amounts Revenues: Intergovernmental: Federal grants$90,653$90,653$221,984$131,331$143,446 State grants - 304,778173,950(130,828)162,332 Other - - - - 38,225 Total intergovernmental90,653 395,431 395,934 503344,003 Miscellaneous revenue: Donations500500 - (500)53,540 Total revenues91,153 395,931 395,934 3 397,543 Expenditures: Current: Public Safety: Personal services - - - - 2,060 Supplies and other charges - - - - 52,334 Community Development: Personal services60,09764,29964,299 - 62,654 Supplies and other charges17,318309,880309,880 - 288,150 Recreation: Personal services13,74117,94217,942 - 15,649 Supplies and other charges - 3,8133,813 - 2,525 Total general government91,156395,934395,9340423,372 Total expenditures91,156 395,934 395,934 0 423,372 Excess (deficiency) of revenues over (under) expenditures(3)(3)03(25,829) Other financing sources (uses): Transfers in - - - - 25,829 Net change in fund balance($3)($3)0 $30 Fund balance - January 1 - - Fund balance - December 31$0$0 88 888888 CITY OF FRIDLEY, MINNESOTA REQUIRED SUPPLEMENTARY INFORMATION BUDGETARY COMPARISON SCHEDULE NOTE TO RSI December 31, 2006 Note A LEGAL COMPLIANCE – BUDGETS The General Fund and Grant Management Fund budgets are legally adopted on a basis consistent with accounting principles generally accepted in the United States of America. The legal level of budgetary control is at the expenditure category level. 89 888999 - This page intentionally left blank - 90 999000 COMBINING AND INDIVIDUAL FUND STATEMENTS AND SCHEDULES 91 999111 - This page intentionally left blank - 92 999222 NONMAJOR GOVERNMENTAL FUNDS 93 999333 - This page intentionally left blank - 94 999444 SPECIAL REVENUE FUNDS A Special Revenue Fund accounts for revenues derived from specific taxes or other earmarked revenue sources. They are usually required by statute or local ordinance and/or resolution to finance particular functions, activities or governments. 95 999555 Exhibit C-1 CITY OF FRIDLEY, MINNESOTA BALANCE SHEET NONMAJOR GOVERNMENTAL FUNDS December 31, 2006 With comparative totals for December 31, 2005 Nonmajor Special Revenue 20062005 Assets Cash and investments$1,245,251$1,785,565 Receivables: Accounts74,541145,060 Taxes7,5176,332 Due from component unit13,60611,940 Due from other governments22,04360,721 Total assets$1,362,958$2,009,618 Liabilities and Fund Balance Liabilities: Accounts payable$26,196$51,576 Due to other governments98583 Due to other funds13,592160,680 Salaries payable6,5576,074 Deferred revenue5,8743,996 Total liabilities53,204222,409 Fund balance (deficit): Reserved203,131688,214 Unreserved: Designated1,106,6231,086,076 Undesignated - 12,919 Total fund balance (deficit)1,309,7541,787,209 Total liabilities and fund balance$1,362,958$2,009,618 96 999666 Exhibit C-2 CITY OF FRIDLEY, MINNESOTA STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES NONMAJOR GOVERNMENTAL FUNDS For The Year Ended December 31, 2006 With comparative totals for the year ended December 31, 2005 Nonmajor Special Revenue 20062005 Revenues: Licenses and permits$193,676$177,072 Intergovernmental revenue85,611105,799 Taxes280,047270,309 Charges for services315,403303,390 Fines and forfeits5,100938 Investment income63,39232,820 Miscellaneous143,762542,821 Total revenues1,086,991 1,433,149 Expenditures: Current: General government607,692544,692 Public safety25,2021,452 Naturalist337,361308,486 Capital outlay166,474 - Total expenditures1,136,729854,630 Excess (deficiency) of revenues over (under) expenditures(49,738)578,519 Other financing sources (uses): Transfers out(527,717)(488,283) Transfers in100,000 - Total other financing sources (uses)(427,717)(488,283) Net change in fund balance(477,455)90,236 Fund balance - January 11,787,2091,696,973 Fund balance - December 31$1,309,754$1,787,209 9977 - This page intentionally left blank - 98 999888 NONMAJOR SPECIAL REVENUE FUNDS Special Revenue Funds are used to account for revenues derived from specific taxes or other earmarked revenue sources. They are usually required by statute, charter provision or local ordinance to finance particular governmental functions or activities. Cable TV Fund - This fund receives revenues from the issuance of a franchise agreement with the cable TV provider. These revenues are used for the operation and maintenance of a government access channel. Solid Waste Abatement Fund - This fund receives grants, recycling fees and yard waste fees. These revenues finance the City’s curbside recycling pickup and operation of the yard waste transfer site. HRA Reimbursement Fund - This fund receives revenues from the Housing and Redevelopment Authority. These revenues are used to reimburse the City for professional services provided by City staff for HRA related activities. Drug and Gambling Forfeiture Fund - This fund receives forfeited property in connection with illegal gambling or drug activity. Pursuant to Minnesota Statutes, the proceeds are disbursed between the investigating agency and the prosecuting agency. F.C.C. Donations Fund - This fund is used to account for donations received and used in improving and furnishing the Fridley Community Center. Police Activity Fund - This fund is used to account for the residual assets refunded to the City from the Public Employees Retirement Association’s police consolidation account. Springbrook Nature Center Fund - This fund was established in 2005 after a $275,000 referendum supporting the Springbrook Nature Center was approved by the voters in November of 2004. The revenues from the annual levy are used for the on-going operation of the nature center and the capital improvement projects required in the park. 99 999999 CITY OF FRIDLEY, MINNESOTA SUBCOMBINING BALANCE SHEET NONMAJOR SPECIAL REVENUE FUNDS December 31, 2006 With comparative totals for December 31, 2005 Solid Waste AssetsCable TVAbatement Cash and investments$841,937$22,667 Receivables: Accounts49,85024,191 Taxes - - Due from component unit - - Due from other governments - 21,143 Total assets$891,787$68,001 Liabilities and Fund Balance Liabilities: Accounts payable$14$21,983 Due to other governments - 876 Due to other funds - - Salaries payable1,2091,144 Deferred revenue - - Total liabilities1,22324,003 Fund balance: Reserved - - Unreserved: Designated for special revenue programs890,56443,998 Undesignated - - Total fund balance890,56443,998 Total liabilities and fund balance$891,787$68,001 110000 Exhibit C-3 Drug and Springbrook HRAGamblingF.C.C.Nature Center Totals Nonmajor Special ReimbursementForfeitureDonationsPolice ActivityFund Revenue Funds 20062005 $ - $33,166$86,313$203,131$58,037$1,245,251$1,785,565 - - - - 50074,541145,060 - - - - 7,5177,5176,332 13,606 - - - - 13,60611,940 - 900 - - - 22,04360,721 $13,606$34,066$86,313$203,131$66,054$1,362,958$2,009,618 $14$1,584$ - $ - $2,601$26,196$51,576 - 102 - - 798583 13,592 - - - - 13,592160,680 - - - - 4,2046,5576,074 - - - - 5,8745,8743,996 13,6061,6860012,68653,204222,409 - - - 203,131 - 203,131688,214 - 32,38086,313 - 53,3681,106,6231,086,076 - - - - - - 12,919 032,38086,313203,13153,3681,309,7541,787,209 $13,606$34,066$86,313$203,131$66,054$1,362,958$2,009,618 110011 CITY OF FRIDLEY, MINNESOTA SUBCOMBINING STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE NONMAJOR SPECIAL REVENUE FUNDS For The Year Ended December 31, 2006 With comparative totals for the year ended December 31, 2005 Solid Waste Cable TVAbatement Revenues: Licenses and permits$193,676$ - Intergovernmental revenue - 56,725 Taxes - - Charges for services700239,344 Fines and forfeits - - Investment income35,297 - Miscellaneous1,617136,683 Total revenues231,290432,752 Expenditures: Current: General government125,868448,523 Public Safety - - Naturalist - - Capital Outlay166,474 - Total expenditures292,342448,523 Excess (deficiency) of revenues over (under) expenditures(61,052)(15,771) Other financing sources (uses): Transfers out - - Transfers in - 100,000 Total other financing sources (uses)0100,000 Net change in fund balance(61,052)84,229 Fund balance - January 1951,616(40,231) Fund balance - December 31$890,564$43,998 110022 Exhibit C-4 Drug and Springbrook HRAGamblingF.C.C.Nature Center Totals Nonmajor Special ReimbursementForfeitureDonationsPolice ActivityFund Revenue Funds 20062005 $ - $ - $ - $ - $ - $193,676$177,072 28,886 - - - - 85,611105,799 - - - - 280,047280,047270,309 - - - - 75,359315,403303,390 - 5,100 - - - 5,100938 - - 3,78924,08622063,39232,820 - 4,961 - - 501143,762542,821 28,88610,0613,78924,086356,1271,086,9911,433,149 28,886 - 4,415 - - 607,692544,692 - 25,202 - - - 25,2021,452 - - - - 337,361337,361308,486 - - - - - 166,474 - 28,88625,2024,4150337,3611,136,729854,630 0(15,141)(626)24,08618,766(49,738)578,519 - - - (509,169)(18,548)(527,717)(488,283) - - - - - 100,000 - 000(509,169)(18,548)(427,717)(488,283) 0(15,141)(626)(485,083)218(477,455)90,236 - 47,52186,939688,21453,1501,787,2091,696,973 $0$32,380$86,313$203,131$53,368$1,309,754$1,787,209 110033 Exhibit D-1 CITY OF FRIDLEY, MINNESOTA SPECIAL REVENUE FUND - CABLE TV FUND COMPARATIVE BALANCE SHEET December 31, 2006 and 2005 Assets 20062005 Cash and investments$841,937$901,894 Accounts receivable49,85052,534 Total assets$891,787$954,428 Liabilities and Fund Balance Liabilities: Accounts payable$14$1,725 Salaries payable1,2091,087 Total liabilities1,2232,812 Fund balance: Unreserved: Designated for special revenue programs890,564951,616 Total liabilities and fund balance$891,787$954,428 104 111000444 Exhibit D-2 CITY OF FRIDLEY, MINNESOTA SPECIAL REVENUE FUND - CABLE TV FUND SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE - BUDGET AND ACTUAL For The Year Ended December 31, 2006 With comparative actual amounts for the year ended December 31, 2005 20062005 Budgeted AmountsActualActual OriginalFinalAmountsAmounts Revenues: Licenses - franchise fee$175,000$176,352$193,676$177,072 Charges for services1,0001,000700665 Investment income6,2006,20035,2979,744 Miscellaneous450,000450,0001,617450,000 Total revenues632,200 633,552 231,290 637,481 Expenditures: Current: General government: Personal services113,253114,605114,606108,816 Supplies and other charges15,50715,50711,26218,648 Capital outlay185,000185,000166,474 - Total expenditures313,760 315,112 292,342 127,464 Net change in fund balance$318,440$318,440(61,052)510,017 Fund balance - January 1951,616441,599 Fund balance - December 31$890,564$951,616 110055 Exhibit D-3 CITY OF FRIDLEY, MINNESOTA SPECIAL REVENUE FUND - SOLID WASTE ABATEMENT FUND COMPARATIVE BALANCE SHEET December 31, 2006 and 2005 Assets 20062005 Cash and investments$22,667$ - Accounts receivable24,19192,457 Due from other governments21,14360,721 Total assets$68,001$153,178 Liabilities and Fund Balance Liabilities: Accounts payable$21,983$43,589 Salaries payable1,1441,061 Due to other funds - 148,759 Due to other governments876 - Total liabilities24,003193,409 Fund balance: Unreserved: Undesignated43,998(40,231) Total liabilities and fund balance$68,001$153,178 106 111000666 Exhibit D-4 CITY OF FRIDLEY, MINNESOTA SPECIAL REVENUE FUND - SOLID WASTE ABATEMENT FUND SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE - BUDGET AND ACTUAL For The Year Ended December 31, 2006 With comparative actual amounts for the year ended December 31, 2005 20062005 Budgeted AmountsActualActual OriginalFinalAmountsAmounts Revenues: Intergovernmental revenue: State$60,000$60,000$56,725$60,721 Charges for services238,077238,077239,344231,877 Miscellaneous - 121,022136,68370,463 Total revenues298,077 419,099 432,752 363,061 Expenditures: Current: General government: Personal services56,38857,51357,51454,566 Supplies and other charges271,111391,008391,009336,131 Total expenditures327,499 448,521 448,523 390,697 Excess (deficiency) of revenues over (under) expneditures(29,422)(29,422)(15,771)(27,636) Other financing sources (uses): Transfers in - 100,000100,000 - Net change in fund balance($29,422)$70,57884,229(27,636) Fund balance (deficit) - January 1(40,231)(12,595) Fund balance (deficit) - December 31$43,998($40,231) 110077 Exhibit D-5 CITY OF FRIDLEY, MINNESOTA SPECIAL REVENUE FUND - HRA REIMBURSEMENT FUND COMPARATIVE BALANCE SHEET December 31, 2006 and 2005 Assets 20062005 Due from component unit$13,606$11,940 Total assets$13,606$11,940 Liabilities and Fund Balance Liabilities: Accounts payable$14$18 Due to other funds13,59211,922 Total liabilities13,60611,940 Fund balance - - Total liabilities and fund balance$13,606$11,940 108 111000888 Exhibit D-6 CITY OF FRIDLEY, MINNESOTA SPECIAL REVENUE FUND - HRA REIMBURSEMENT FUND SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE - BUDGET AND ACTUAL For The Year Ended December 31, 2006 With comparative actual amounts for the year ended December 31, 2005 20062005 Budgeted AmountsActualActual OriginalFinalAmountsAmounts Revenues: Intergovernmental revenue: Housing and Redevelopment Authority$ - $28,886$28,886$26,531 Expenditures: Current: General government: Supplies and other charges - 28,88628,88626,531 Net change in fund balance$0$000 Fund balance - January 1 - - Fund balance - December 31$0$0 110099 Exhibit D-7 CITY OF FRIDLEY, MINNESOTA SPECIAL REVENUE FUND - DRUG AND GAMBLING FORFEITURE FUND COMPARATIVE BALANCE SHEET December 31, 2006 and 2005 Assets 20062005 Cash and investments$33,166$47,604 Due from other governments900 - Total assets$34,066$47,604 Liabilities and Fund Balance Liabilities: Accounts payable$1,584$ - Due to other governments10283 Total liabilities1,68683 Fund balance: Unreserved: Designated for special revenue programs32,38047,521 Total liabilities and fund balance$34,066$47,604 110 111111000 Exhibit D-8 CITY OF FRIDLEY, MINNESOTA SPECIAL REVENUE FUND - DRUG AND GAMBLING FORFEITURE FUND SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE - BUDGET AND ACTUAL For The Year Ended December 31, 2006 With comparative actual amounts for the year ended December 31, 2005 20062005 Budgeted AmountsActualActual OriginalFinalAmountsAmounts Revenues: Fines and forfeits$ - $25,202$5,100$938 Miscellaneous - - 4,96120,426 Total revenues025,20210,06121,364 Expenditures: Current: Public Safety Supplies and other charges - 25,20225,2021,452 Net change in fund balance$0$0(15,141)19,912 Fund balance - January 147,52127,609 Fund balance - December 31$32,380$47,521 111111 Exhibit D-9 CITY OF FRIDLEY, MINNESOTA SPECIAL REVENUE FUND - F.C.C. DONATIONS FUND COMPARATIVE BALANCE SHEET December 31, 2006 and 2005 Assets 20062005 Cash and investments$86,313$86,939 Total assets$86,313$86,939 Liabilities and Fund Balance Liabilities$ - $ - Fund balance: Unreserved: Designated for special revenue programs86,31386,939 Total liabilities and fund balance$86,313$86,939 112 111111222 Exhibit D-10 CITY OF FRIDLEY, MINNESOTA SPECIAL REVENUE FUND - F.C.C. DONATIONS FUND SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE - BUDGET AND ACTUAL For The Year Ended December 31, 2006 With comparative actual amounts for the year ended December 31, 2005 20062005 Budgeted AmountsActualActual OriginalFinalAmountsAmounts Revenues: Investment income$ - $4,415$3,789$1,804 Expenditures: Current: General government: Supplies and other charges - 4,4154,415 - Net change in fund balance$0$0(626)1,804 Fund balance - January 186,93985,135 Fund balance - December 31$86,313$86,939 111133 Exhibit D-11 CITY OF FRIDLEY, MINNESOTA SPECIAL REVENUE FUND - POLICE ACTIVITY FUND COMPARATIVE BALANCE SHEET December 31, 2006 and 2005 Assets 20062005 Cash and investments$203,131$688,214 Total assets$203,131$688,214 Liabilities and Fund Balance Liabilities$ - $ - Fund balance: Reserved for police activity203,131688,214 Total liabilities and fund balance$203,131$688,214 114 111111444 Exhibit D-12 CITY OF FRIDLEY, MINNESOTA SPECIAL REVENUE FUND - POLICE ACTIVITY FUND SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE - BUDGET AND ACTUAL For The Year Ended December 31, 2006 With comparative actual amounts for the year ended December 31, 2005 20062005 Budgeted AmountsActualActual OriginalFinalAmountsAmounts Revenues: Investment income$5,000$5,000$24,086$21,272 Expenditures - - - - Excess (deficiency) of revenues over (under) expenditures5,0005,00024,08621,272 Other financing sources (uses): Transfers out: General Fund(509,169)(509,169)(509,169)(488,283) Net change in fund balance($504,169)($504,169)(485,083)(467,011) Fund balance - January 1688,2141,155,225 Fund balance - December 31$203,131$688,214 111155 Exhibit D-13 CITY OF FRIDLEY, MINNESOTA SPECIAL REVENUE FUND - SPRINGBROOK NATURE CENTER FUND COMPARATIVE BALANCE SHEET December 31, 2006 and 2005 Assets 20062005 Cash and investments$58,037$60,914 Receivables: Accounts50069 Taxes7,5176,332 Total assets$66,054$67,315 Liabilities and Fund Balance Liabilities: Accounts payable$2,601$6,244 Salaries payable4,2043,925 Due to other governments7 - Deferred Revenue5,8743,996 Total liabilities$12,686$14,165 Fund balance: Unreserved: Undesignated53,36853,150 Total liabilities and fund balance$66,054$67,315 116 111111666 Exhibit D-14 CITY OF FRIDLEY, MINNESOTA SPECIAL REVENUE FUND - SPRINGBROOK NATURE CENTER FUND SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE - BUDGET AND ACTUAL For The Year Ended December 31, 2006 With comparative actual amounts for the year ended December 31, 2005 20062005 Budgeted AmountsActualActual OriginalFinalAmountsAmounts Revenues: Intergovernmental revenue$ - $ - $ - $18,547 Taxes282,700282,700280,047270,309 Charges for service61,00071,26675,35970,848 Investment income - - 220 - Miscellaneous - - 5011,932 Total revenues343,700353,966356,127361,636 Expenditures Current: Naturalist: Personal services258,658264,231264,231240,626 Supplies and other charges68,43773,12973,13067,860 Total expenditures327,095 337,360 337,361 308,486 Excess of revenues over expenditures16,60516,60618,76653,150 Other financing sources (uses): Transfers out: General Fund - (18,548)(18,548) - Net change in fund balance$16,605($1,942)21853,150 Fund balance - January 153,150 - Fund balance - December 31$53,368$53,150 111177 Exhibit E-1 CITY OF FRIDLEY, MINNESOTA CAPITAL PROJECT FUND - CAPITAL IMPROVEMENT FUND SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE - BUDGET AND ACTUAL For The Year Ended December 31, 2006 With comparative actual amounts for the year ended December 31, 2005 20062005 Budgeted AmountsActualActual OriginalFinalAmountsAmounts Revenues: Taxes$100,230$94,439$95,343$346,468 Special assessments - - 220984 Intergovernmental revenue: State625,000843,146654,646742,745 Investment income193,633193,633303,239145,432 Miscellaneous10,00010,00017,00045,286 Total revenues928,863 1,141,218 1,070,448 1,280,915 Expenditures: Current: General government: Supplies and other charges3,000133,840120,082170,164 Capital outlay421,000663,769645,788499,767 Total expenditures424,000 797,609 765,870 669,931 Excess of revenues over expenditures504,863343,609304,578610,984 Other financing sources (uses): Bonds issued1,425,0001,425,0002,443,438 - Transfers out(3,165,000)(3,165,000)(3,008,438)(2,088,007) Total other financing sources (uses)(1,740,000)(1,740,000)(565,000)(2,088,007) Net change in fund balance($1,235,137)($1,396,391)(260,422)(1,477,023) Fund balance - January 15,730,8567,207,879 Fund balance - December 31$5,470,434$5,730,856 118 INTERNAL SERVICE FUNDS Internal Service Funds are used to account for goods and services that are provided on a cost reimbursement or fee basis to departments or agencies within the City. These funds are essential for segregating costs for determining the total cost of providing a service and for assuring that the goods and services provided are properly utilized. These funds are accounted for on a capital maintenance measurement focus and use the accrual basis of accounting. Employee Benefits Fund – This fund is used to account for the expenses associated with providing fringe benefits for employees. Self-Insurance Fund – This fund is used to account for all revenues and expenses associated with the $50,000 deductible in the City’s general liability policy. Information Systems Fund – This fund is used to account for all revenues and expenses associated with maintaining and upgrading the City’s computerized information systems. 121 111211199 Exhibit F-1 CITY OF FRIDLEY, MINNESOTA COMBINING STATEMENT OF NET ASSETS INTERNAL SERVICE FUNDS December 31, 2006 With comparative totals for December 31, 2005 703705 Employee704 Self Information BenefitsInsuranceSystems Totals Assets:20062005 Current assets: Cash and investments$1,020,363$1,640,024$793,557$3,453,944$3,287,476 Due from component unit432 - - 432107 Total current assets1,020,7951,640,024793,5573,454,3763,287,583 Capital assets, at cost: Machinery and equipment - - 1,334,6941,334,6941,472,977 Less: accumulated depreciation - - (1,008,785)(1,008,785)(1,051,286) Net capital assets00325,909325,909421,691 Total assets1,020,7951,640,0241,119,4663,780,2853,709,274 Liabilities: Current liabilities: Accounts payable2162,70920,68823,61358,298 Due to other governments - - - - 322 Payroll deductions payable80,878 - - 80,87878,773 Compensated absences payable - current portion663,146 - - 663,146641,227 Total current liabilities744,2402,70920,688767,637778,620 Noncurrent liabilities: Compensated absences payable141,815 - - 141,815102,978 Total liabilities886,0552,70920,688909,452881,598 Net assets: Invested in capital assets, net of related debt - - 325,909325,909421,691 Unrestricted134,7401,637,315772,8692,544,9242,405,985 Total net assets$134,740$1,637,315$1,098,778$2,870,833$2,827,676 122 111222200 Exhibit F-2 CITY OF FRIDLEY, MINNESOTA COMBINING STATEMENT OF REVENUES, EXPENSES AND CHANGES IN NET ASSETS INTERNAL SERVICE FUNDS For the year ended December 31, 2006 With comparative totals for the year ended December 31, 2005 703705 Employee704 Self Information BenefitsInsuranceSystems Totals 20062005 Operating revenues: Charges for services$109,106$ - $164,922$274,028$151,388 Operating expenses: Personal services113,039 - - 113,03957,796 Supplies and other charges1,55246,88329,75578,190316,591 Depreciation - - 179,009179,009171,377 Total operating expenses114,59146,883208,764370,238545,764 Operating income (loss)(5,485)(46,883)(43,842)(96,210)(394,376) Nonoperating revenues: Investment income40,95173,19631,917146,06473,823 Gain (loss) on disposal of capital assets - - (6,697)(6,697)434 Total nonoperating revenues40,95173,19625,220139,36774,257 Change in net assets35,46626,313(18,622)43,157(320,119) Net assets - January 199,2741,611,0021,117,4002,827,6763,147,795 Net assets - December 31$134,740$1,637,315$1,098,778$2,870,833$2,827,676 112211 Exhibit F-3 CITY OF FRIDLEY, MINNESOTA COMBINING STATEMENT OF CASH FLOWS INTERNAL SERVICE FUNDS For the year ended December 31, 2006 With comparative totals for the year ended December 31, 2005 Totals 705 703 Employee704 Self Information BenefitsInsuranceSystems 20062005 Cash flows from operating activities: Receipts from interfund services provided$108,565$ - $164,922$273,487$151,388 Payment to suppliers(1,336)(99,171)(12,690)(113,197)(298,391) Payment to employees(49,962) - - (49,962)(94,903) Net cash flows from operating activities57,267(99,171)152,232110,328(241,906) Cash flows from capital and related financing activities: Acquisition of capital assets - - (83,227)(83,227)(203,261) Proceeds from sale of capital assets - - (6,697)(6,697)434 Net cash flows from capital and and related financing activities 00(89,924)(89,924)(202,827) Cash flows from investing activities: Investment income40,95173,19631,917146,06473,823 Net increase (decrease) in cash and cash equivalents98,218(25,975)94,225166,468(370,910) Cash and cash equivalents - January 1922,1451,665,999699,3323,287,4763,658,386 Cash and cash equivalents - December 31$1,020,363 $1,640,024 $793,557 $3,453,944 $3,287,476 Reconciliation of operating income (loss) to net cash provided (used) by operating activities: Operating income (loss) ($5,485)($46,883)($43,842)($96,210)($394,376) Adjustments to reconcile operating income (loss) to net cash flows from operating activities: Depreciation - - 179,009179,009171,377 Changes in assets and liabilities: Decrease (increase) in receivables(325) - - (325)(107) Increase (decrease) in payables63,077(52,288)17,06527,854(18,800) Total adjustments62,752 (52,288)196,074 206,538 152,470 Net cash provided by operating activities$57,267($99,171)$152,232$110,328($241,906) 124 112222 Exhibit F-4 CITY OF FRIDLEY, MINNESOTA INTERNAL SERVICE FUND - EMPLOYEE BENEFITS FUND COMPARATIVE STATEMENT OF NET ASSETS December 31, 2006 and 2005 20062005 Assets: Cash and investments$1,020,363$922,145 Due from component unit432107 Total current assets1,020,795922,252 Liabilities: Current liabilities: Payroll deductions payable80,87878,773 Accounts payable216 - Compensated absences payable - current portion663,146641,227 Total current liabilities744,240720,000 Noncurrent liabilities: Compensated absences payable 141,815102,978 Total liabilities886,055822,978 Net assets: Unrestricted134,74099,274 Total net assets$134,740$99,274 125 111222533 Exhibit F-5 CITY OF FRIDLEY, MINNESOTA INTERNAL SERVICE FUND - EMPLOYEE BENEFITS FUND COMPARATIVE STATEMENT OF REVENUES, EXPENSES AND CHANGES IN NET ASSETS For the year ended December 31, 2006 With comparative amounts for the year ended December 31, 2005 20062005 Operating revenues$6,437$ - Operating expenses: Personal services10,3702,383 Supplies and other charges1,5523,390 Total operating expenses11,9225,773 Operating income (loss)(5,485)(5,773) Nonoperating revenues: Investment income40,95119,935 Change in net assets35,46614,162 Net assets - January 199,27485,112 Net assets - December 31$134,740$99,274 126 111222644 Exhibit F-6 CITY OF FRIDLEY, MINNESOTA INTERNAL SERVICE FUND - EMPLOYEE BENEFITS FUND COMPARATIVE STATEMENT OF CASH FLOWS For the year ended December 31, 2006 With comparative amounts for the year ended December 31, 2005 20062005 Cash flows from operating activities: Receipts from interfund services provided$5,896$ - Payment to suppliers($1,336)($3,497) Payment to employees52,707(39,490) Net cash flows from operating activities57,267(42,987) Cash flows from investing activities: Investment income40,95119,935 Net increase (decrease) in cash and cash equivalents98,218(23,052) Cash and cash equivalents - January 1922,145945,197 Cash and cash equivalents - December 31$1,020,363 $922,145 Reconciliation of operating income (loss) to net cash provided (used) by operating activities: Operating income (loss) ($5,485)($5,773) Adjustments to reconcile operating income (loss) to net cash flows from operating activities: Changes in assets and liabilities: (Increase) decrease in receivables(325)(107) Increase (decrease) in payables63,077(37,107) Total adjustments62,752 (37,214) Net cash provided (used) by operating activities$57,267($42,987) 127 111222755 Exhibit F-7 CITY OF FRIDLEY, MINNESOTA INTERNAL SERVICE FUND - SELF INSURANCE FUND COMPARATIVE STATEMENT OF NET ASSETS December 31, 2006 With comparative amounts for December 31, 2005 20062005 Assets: Current assets: Cash and investments$1,640,024$1,665,999 Liabilities: Current liabilities: Accounts payable2,70954,997 Net assets: Unrestricted1,637,3151,611,002 Total net assets$1,637,315$1,611,002 128 111222866 Exhibit F-8 CITY OF FRIDLEY, MINNESOTA INTERNAL SERVICE FUND - SELF INSURANCE FUND COMPARATIVE STATEMENT OF REVENUES, EXPENSES AND CHANGES IN NET ASSETS For The Year Ended December 31, 2006 With comparative amounts for the year ended December 31, 2005 20062005 Operating revenues$ - $ - Operating expenses: Personal services - 55,413 Supplies and other charges46,883291,678 Total operating expenses46,883347,091 Operating income (loss)(46,883)(347,091) Nonoperating revenues: Investment income73,19638,145 Change in net assets26,313(308,946) Net assets - January 11,611,0021,919,948 Net assets - December 31$1,637,315$1,611,002 129 111222977 Exhibit F-9 CITY OF FRIDLEY, MINNESOTA INTERNAL SERVICE FUND - SELF INSURANCE FUND COMPARATIVE STATEMENT OF CASH FLOWS For The Year Ended December 31, 2006 With comparative amounts for the year ended December 31, 2005 20062005 Cash flows from operating activities: Payment to suppliers($99,171)($241,806) Payments to employees - (55,413) Net cash flows from operating activities(99,171)(297,219) Cash flows from investing activities: Investment income73,19638,145 Net increase (decrease) in cash and cash equivalents(25,975)(259,074) Cash and cash equivalents - January 11,665,9991,925,073 Cash and cash equivalents - December 31$1,640,024 $1,665,999 Reconciliation of operating income (loss) to net cash provided (used) by operating activities: Operating income (loss) ($46,883)($347,091) Adjustments to reconcile operating income (loss) to net cash flows from operating activities: Changes in assets and liabilities: Increase (decrease) in payables(52,288)49,872 Total adjustments(52,288)49,872 Net cash provided (used) by operating activities($99,171)($297,219) 130 111322088 Exhibit F-10 CITY OF FRIDLEY, MINNESOTA INTERNAL SERVICE FUND - INFORMATION SYSTEMS FUND COMPARATIVE STATEMENT OF NET ASSETS December 31, 2006 With comparative amounts for December 31, 2005 20062005 Assets: Current assets: Cash and investments$793,557$699,332 Capital assets, at cost: Property and equipment1,334,6941,472,977 Less: accumulated depreciation(1,008,785)(1,051,286) Net capital assets325,909421,691 Total assets1,119,4661,121,023 Liabilities: Current liabilities: Accounts payable20,6883,301 Due to other governments - 322 Total liabilities20,6883,623 Net assets: Invested in capital assets, net of related debt325,909421,691 Unrestricted772,869695,709 Total net assets$1,098,778$1,117,400 131 111322199 Exhibit F-11 CITY OF FRIDLEY, MINNESOTA INTERNAL SERVICE FUND - INFORMATION SYSTEMS FUND COMPARATIVE STATEMENT OF REVENUES, EXPENSES AND CHANGES IN NET ASSETS For The Year Ended December 31, 2006 With comparative amounts for the year ended December 31, 2005 20062005 Operating revenues: Charges for services$164,922$151,388 Operating expenses: Supplies and other charges29,75521,523 Depreciation179,009171,377 Total operating expenses208,764192,900 Operating income (loss)(43,842)(41,512) Nonoperating revenues: Investment income31,91715,743 Gain (loss) on disposal of fixed assets(6,697)434 Total nonoperating revenues25,22016,177 Change in net assets(18,622)(25,335) Net assets - January 11,117,4001,142,735 Net assets - December 31$1,098,778$1,117,400 132 111333200 Exhibit F-12 CITY OF FRIDLEY, MINNESOTA INTERNAL SERVICE FUND - INFORMATION SYSTEMS FUND COMPARATIVE STATEMENT OF CASH FLOWS For The Year Ended December 31, 2006 With comparative amounts for the year ended December 31, 2005 20062005 Cash flows from operating activities: Receipts from interfund services provided$164,922$151,388 Payment to suppliers(12,690)(53,088) Net cash flows from operating activities152,23298,300 Cash flows from capital and related financing activities: Acquisition of capital assets(83,227)(203,261) Proceeds from sale of capital assets(6,697)434 Net cash flows from capital and relatd financing activities(89,924)(202,827) Cash flows from investing activities: Investment income31,91715,743 Net increase (decrease) in cash and cash equivalents94,225(88,784) Cash and cash equivalents - January 1699,332788,116 Cash and cash equivalents - December 31$793,557 $699,332 Reconciliation of operating income (loss) to net cash provided (used) by operating activities: Operating income (loss) ($43,842)($41,512) Adjustments to reconcile operating income (loss) to net cash flows from operating activities: Depreciation179,009171,377 Changes in assets and liabilities: Increase (decrease) in payables17,065(31,565) Total adjustments196,074 139,812 Net cash provided by operating activities$152,232$98,300 133 111333311 - This page intentionally left blank - 134 111333422 HOUSING AND REDEVELOPMENT AUTHORITY COMPONENT UNIT 135 111333533 CITY OF FRIDLEY, MINNESOTA BALANCE SHEET - GOVERNMENTAL FUNDS HOUSING AND REDEVELOPMENT AUTHORITY December 31, 2006 With comparative totals for December 31, 2005 North Area / Revolving Univ. Ind. General FundLoanPark Assets Cash and investments$5,812,379$3,189,730$2,198,077 Cash with escrow agent - - - Receivables: Accounts36,495 - - Interest5,737 - - Taxes: Unremitted1,735 - 192 Delinquent5,993 - 109,180 Mortgage: Deferred - 1,180,04046,439 Allowance for uncollectible accounts - (22,902) - Due from other funds3,678,725 - - Land held for resale235,000 - 192,000 Total assets$9,776,064$4,346,868$2,545,888 Liabilities and Fund Balance Liabilities: Accounts payable$7,134$35,947$38,529 Due to primary government58,073 - - Due to other funds - 31,900 - Deferred revenue240,993 - 301,180 Loan payable to primary government - 415,908 - Total liabilities306,200483,755339,709 Fund balance: Reserved for debt service3,000,000 - - Reserved for mortgage receivable - 1,180,04046,439 Unreserved, undesignated6,469,8642,683,0732,159,740 Total fund balance9,469,8643,863,1132,206,179 Total liabilities and fund balance$9,776,064$4,346,868$2,545,888 113344 Exhibit G-1 Other Governmental Lake PointeGateway EastGateway WestFunds Totals Governmental Funds 20062005 $585,139$61,533$ - $5,227,069$17,073,927$15,739,617 - - - - - 146,324 - - - - 36,495443,309 - - - - 5,73720,076 601 - - 5,5528,08025,279 2,8781 - 20,751138,80370,477 - - - - 1,226,4791,141,241 - - - - (22,902)(21,421) - - - - 3,678,7253,599,638 50,000 - 466,665180,0001,123,6651,122,000 $638,618$61,534$466,665$5,433,372$23,269,009$22,286,540 $328,489$ - $536$9,023$419,658$260,063 - - 88,288450146,81154,886 1,080,303972,6531,469,109124,7603,678,7253,599,638 52,8781466,666200,7511,262,4691,192,478 - - - - 415,908480,123 1,461,670972,6542,024,599334,9845,923,5715,587,188 - - - - 3,000,0003,000,000 - - - - 1,226,4791,141,241 (823,052)(911,120)(1,557,934)5,098,38813,118,95912,558,111 (823,052)(911,120)(1,557,934)5,098,38817,345,43816,699,352 $638,618$61,534$466,665$5,433,372$23,269,009$22,286,540 113355 CITY OF FRIDLEY, MINNESOTA STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES GOVERNMENTAL FUNDS HOUSING AND REDEVELOPMENT AUTHORITY For The Year Ended December 31, 2006 With comparative totals for the year ended December 31, 2005 RevolvingNorth Area / General FundLoanUniv. Ind. Park Revenues: Tax increment$ - $ - $1,006,289 Property taxes325,649 - - Investment income245,658133,01877,544 Intergovernmental revenue20,076 - - Mortgage interest earnings6,72643,902 - Rental9,600 - - Sale of real estate110,044 - - Miscellaneous1017,975 - Receipt from primary government - - - Total revenues717,763194,8951,083,833 Expenditures: Personal services93,734 - - Supplies and other charges275,37837,0042,359 Capital outlay235,819 - - Developer assistance - - 115,524 Interest expense - 23,213 - Payment to primary government - - 418,996 Total expenditures604,93160,217536,879 Excess (deficiency) of revenues over expenditures112,832134,678546,954 Other financing sources (uses): Transfers in - - - Transfers out - - - Total other financing sources (uses)000 Net change in fund balance112,832134,678546,954 Fund balance - January 19,357,0323,728,4351,659,225 Fund balance - December 31$9,469,864$3,863,113$2,206,179 113366 Exhibit G-2 Other Governmental Lake PointeGateway EastGateway WestFunds Totals Governmental Funds 20062005 $480,980$39,289$ - $1,564,902$3,091,460$3,224,205 - - - - 325,649294,364 24,1381,829 - 209,520691,707370,707 - 4,928 - 37,08562,08967,633 - - - - 50,62847,842 - - - - 9,6009,600 - - 217,049 - 327,093 - - - - 83,204101,18929,728 - - 124,236 - 124,2368,441 505,11846,046341,2851,894,7114,783,6514,052,520 - - - - 93,73479,984 2,54313,43356,16616,877403,760494,088 - - 421,131 - 656,950480,229 999,906 - - 26,0631,141,493225,906 - - - - 23,21326,308 - - - 1,399,4191,818,4151,698,857 1,002,44913,433477,2971,442,3594,137,5653,005,372 (497,331)32,613(136,012)452,352646,0861,047,148 - - - - - 35,000 - - - - - (35,000) 000000 (497,331)32,613(136,012)452,352646,0861,047,148 (325,721)(943,733)(1,421,922)4,646,03616,699,35215,652,204 ($823,052)($911,120)($1,557,934)$5,098,388$17,345,438$16,699,352 113377 CITY OF FRIDLEY, MINNESOTA SUBCOMBINING BALANCE SHEET NONMAJOR CAPITAL PROJECT FUNDS HOUSING AND REDEVELOPMENT AUTHORITY December 31, 2006 With comparative totals for December 31, 2005 Moore Lake University / Center CityAreaWinfieldOnanOsborne Assets Cash and investments$1,690,974$117,168$529,721$1,262,298$246,299 Receivables: Taxes: Unremitted2,7332,43464269 - Delinquent10,0368,2211702,1983 Mortgage: Deferred - - - - - Land held for resale - 105,000 - - - Total assets$1,703,743$232,823$529,955$1,264,765$246,302 Liabilities and Fund Balance Liabilities: Accounts payable$ - $ - $ - $ - $ - Due to primary government - 450 - - - Due to other funds - - - - - Deferred revenue10,036113,2211702,1983 Total liabilities10,036 113,671 170 2,198 3 Fund balance (deficit): Reserved for mortgage receivable - - - - - Unreserved, undesignated1,693,707119,152529,7851,262,567246,299 Total fund balance (deficit)1,693,707 119,152 529,785 1,262,567 246,299 Total liabilities and fund balance$1,703,743$232,823$529,955$1,264,765$246,302 113388 Exhibit G-3 Housing McGlynnSatellite Lane Business57th Avenue Replacement Totals Nonmajor Capital Project BakeriesApts.CenterRedevelopment#1 Funds 20062005 $158,166$335,091$662,635$4,430$220,287$5,227,069$4,738,662 - - 244245,55212,476 - - 10914 - 20,75122,299 - - - - - - 21,159 - - - - 75,000180,000180,000 $158,166$335,091$662,768$4,448$295,311$5,433,372$4,974,596 $ - $ - $ - $9,023$ - $9,023$ - - - - - - 4501,501 - - - 124,760 - 124,760124,760 - - 1091475,000200,751202,299 0 0 109 133,797 75,000 334,984 328,560 - - - - - - 21,159 158,166335,091662,659(129,349)220,3115,098,3884,624,877 158,166 335,091 662,659 (129,349)220,311 5,098,388 4,646,036 $158,166$335,091$662,768$4,448$295,311$5,433,372$4,974,596 113399 CITY OF FRIDLEY, MINNESOTA SUBCOMBINING STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE NONMAJOR CAPITAL PROJECT FUNDS HOUSING AND REDEVELOPMENT AUTHORITY For The Year Ended December 31, 2006 With comparative totals for the year ended December 31, 2005 Moore Lake University / Center CityAreaWinfieldOnanOsborne Revenues: Tax increment$509,729$491,154$55,156$299,659$35,671 Investment income59,15322,61220,75244,4179,472 Intergovernmental revenue17,78812,127 - - - Mortgage interest earnings - - - - - Other - - - 83,204 - Total revenues586,670525,89375,908427,28045,143 Expenditures: Supplies and other charges3,2192,4798881,1601,283 Developer assistance - - - - - Payment to primary government - 1,399,419 - - - Total expenditures3,2191,401,8988881,1601,283 Excess (deficiency) of revenues over (under) expenditures583,451(876,005)75,020426,12043,860 Fund balance - January 11,110,256995,157454,765836,447202,439 Fund balance (deficit) - December 31$1,693,707$119,152$529,785$1,262,567$246,299 114400 Exhibit G-4 Housing McGlynnSatelliteBusiness57th Avenue Replacement Totals Nonmajor Capital BakeriesLane Apts.CenterRedevelopment#1 Project Funds 20062005 $30,489$42,784$54,920$20,075$25,265$1,564,902$1,524,251 5,95212,79925,822 - 8,541209,52096,455 - 4,693 - - 2,47737,08537,567 - - - - - - 288 - - - - - 83,20416,508 36,44160,27680,74220,07536,2831,894,7111,675,069 1,2731,2181,0199003,43816,87716,997 - - - 26,063 - 26,063136,590 - - - - - 1,399,419101,501 1,2731,2181,01926,9633,4381,442,359255,088 35,16859,05879,723(6,888)32,845452,3521,419,981 122,998276,033582,936(122,461)187,4664,646,0363,226,055 $158,166$335,091$662,659($129,349)$220,311$5,098,388$4,646,036 114411 - This page intentionally left blank - 144 111444422 AGENCY FUNDS 145 111444533 Exhibit H-1 CITY OF FRIDLEY, MINNESOTA STATEMENT OF CHANGES IN ASSETS AND LIABILITIES AGENCY FUNDS December 31, 2006 BalanceBalance January 1,December 31, 2006AdditionsDeletions2006 Six Cities Watershed Assets: Cash and investments$24,025$30,358$24,180$30,203 Receivables: Taxes: Unremitted53355335 Delinquent10217 - 119 Total assets$24,180$30,410$24,233$30,357 Liabilities: Due to other governments$24,180$30,357$24,180$30,357 Hotel/Motel Tax Assets: Cash and investments($154)$1,956$1,802$ - Receivables: Accounts1,9562,4291,9562,429 Total assets$1,802$4,385$3,758$2,429 Liabilities: Due to other governments$1,802$2,429$1,802$2,429 Totals Assets: Cash and investments$23,871$32,314$25,982$30,203 Receivables: Accounts1,9562,4291,9562,429 Taxes: Unremitted53355335 Delinquent10217 - 119 Total assets$25,982$34,795$27,991$32,786 Liabilities: Due to other governments$25,982$32,786$25,982$32,786 The accompanying notes are an integral part of these financial statements. 146 111444644 III. STATISTICAL SECTION (UNAUDITED) 147 111444755 - This page intentionally left blank - 148 111444866 Table 1 CITY OF FRIDLEY, MINNESOTA NET ASSETS BY COMPONENT Last Four Fiscal Years(1) (Accrual Basis of Accounting) 2003200420052006 Governmental activities: Invested in capital assets, net of related debt$18,930,543$18,305,647$18,458,113$18,635,605 Restricted2,395,446 1,664,772 1,540,531 1,552,568 Unrestricted10,326,790 11,735,908 13,331,115 15,180,199 Total governmental activities net assets$31,652,779$31,706,327$33,329,759$35,368,372 Business-type activities: Invested in capital assets, net of related debt$17,003,867$14,528,247$16,454,772$17,354,621 Restricted - - - - Unrestricted9,663,80711,814,6499,258,9847,955,426 Total business-type activities net assets$26,667,674$26,342,896$25,713,756$25,310,047 Primary government: Invested in capital assets, net of related debt$35,934,410$32,833,894$34,912,885$35,990,226 Restricted2,395,446 1,664,772 1,540,531 1,552,568 Unrestricted19,990,597 23,550,557 22,590,099 23,135,625 Total primary government net assets$58,320,453$58,049,223$59,043,515$60,678,419 (1) The City implemented GASB Statement No. 34 for the fiscal year ended December 31, 2003. Therefore, information for years prior to 2003 is not available. 149 111444977 Table 2 Page 1 of 2 CITY OF FRIDLEY, MINNESOTA CHANGES IN NET ASSETS Last four fiscal years(1) (Accrual basis of accounting) 2003200420052006 Expenses Governmental activities: General government$3,944,682$3,513,065$4,448,175$4,177,829 Public safety5,166,9755,468,0145,514,3306,023,335 Public works3,749,4123,612,3184,105,8603,868,517 Community Development939,918602,335793,8361,118,661 Recreation and naturalist1,105,240993,570767,5991,147,966 Interest on long-term debt605,639544,478443,533397,036 Total governmental activities expenses15,511,86614,733,78016,073,33316,733,344 Business-type activities: Liquor5,010,6365,005,1984,919,4584,793,419 Water2,030,6542,086,5132,070,0322,138,371 Sanitary sewer3,419,1003,256,3713,570,1133,629,361 Storm water359,189334,906320,596331,039 Total business-type activities expenses10,819,57910,682,98810,880,19910,892,190 Total primary government expenses$26,331,445$25,416,768$26,953,532$27,625,534 Program revenues Governmental activities: Charges for services:$2,625,479$2,669,014$2,954,192$3,068,165 Operating grants and contributions1,481,7231,009,8611,121,7261,304,510 Capital grants and contributions1,012,151882,2921,657,1061,919,108 Total governmental activities program revenues5,119,3534,561,1675,733,0246,291,783 Business-type activities: Charges for services: Liquor5,364,5885,376,4285,283,2295,136,029 Water1,806,3581,763,6231,771,8461,929,573 Sanitary sewer3,183,2603,248,9523,299,9573,345,017 Storm water366,667381,360384,860391,032 Operating grants and contributions37,976208600514 Capital grants and contributions - - - - Total business-type activities program revenues10,758,84910,770,57110,740,49210,802,165 Total primary government program revenues$15,878,202$15,331,738$16,473,516$17,093,948 114488 Table 2 Page 2 of 2 CITY OF FRIDLEY, MINNESOTA CHANGES IN NET ASSETS Last four fiscal years(1) (Accrual basis of accounting) 2003200420052006 Net (expense) revenue: Governmental activities($10,392,513)($10,172,613)($10,340,309)($10,441,561) Business-type activities(60,730)87,583(139,707)(90,025) Total primary government net (expense) revenue(10,453,243)(10,085,030)(10,480,016)(10,531,586) General revenues and other changes in net assets Governmental activities: General property taxes$5,273,363$5,816,656$7,428,226$8,253,653 Grants not restricted to programs3,751,5603,436,4733,365,7392,623,407 Investment earnings423,215413,743511,464998,154 Gain on sale of property10,4686804343,357 Other - - - 1,603 Transfers - - - 600,000 Total governmental activities9,458,6069,667,55211,305,86312,480,174 Business-type activities: Investment earnings118,029146,248168,445281,316 Gain on Sale of Property6,530 - - 5,000 Other6,502 - - - Transfers - - - (600,000) Total business-type activities131,061146,248168,445(313,684) Total primary government$9,589,667$9,813,800$11,474,308$12,166,490 Change in net assets: Governmental activities($933,907)($505,061)$965,554$2,038,613 Business-type activities70,331233,83128,738(403,709) Total primary government($863,576)($271,230)$994,292$1,634,904 (1) The City implemented GASB Statement No. 34 for the fiscal year ended Deember 31, 2003. Therefore, information for years prior to 2003 is not available. 114499 Table 3 CITY OF FRIDLEY, MINNESOTA FUND BALANCES, GOVERNMENTAL FUNDS Last four fiscal years(1) (Modified accrual basis of accounting) 2003200420052006 General Fund: Reserved$43,502$83,822$81,662$77,476 Unreserved: General fund4,338,4634,080,0124,020,2853,863,023 Designated for employee benefits - - - - Designated for contingencies - - - - Undesignated - - - - Total general fund$4,381,965$4,163,834$4,101,947$3,940,499 All other governmental funds: Reserved for: Long-term receivables$645,330$541,244$480,123$415,908 Public safety - 1,155,225688,214203,131 Debt service609,992509,547389,197721,866 Unreserved, reported in: Special revenue funds2,172,012541,7481,098,9951,106,623 Capital projects funds6,490,4287,001,3906,881,5236,963,524 Debt service5,508,8085,522,6475,976,8885,991,102 Total all other governmental funds$15,426,570$15,271,801$15,514,940$15,402,154 (1) The City implemented GASB Statement No. 34 for the fiscal year ended Deember 31, 2003. Therefore, information for years prior to 2003 is not available. 115500 Table 4 CITY OF FRIDLEY, MINNESOTA CHANGES IN FUND BALANCES, GOVERNMENTAL FUNDS (1) Last four fiscal years 2003200420052006 Revenues: General property taxes$5,305,289$5,809,631$7,397,381$8,220,943 Special assessments470,648300,389550,909691,764 Licenses and permits722,541785,582865,848876,903 Intergovernmental4,075,0233,207,4822,767,7242,663,909 Charges for services1,500,4291,533,2531,736,1811,855,177 Fines and forfeits216,368176,878164,104261,535 Earnings on investments330,133325,307411,333828,877 Interest on loan32,05629,25326,30823,213 Other2,023,5442,085,0692,625,8992,154,656 Total revenues14,676,031 14,252,844 16,545,687 17,576,977 Expenditures: Current: General government3,569,9523,155,6174,244,4963,567,503 Public safety4,925,5255,156,5295,204,5515,821,523 Public works2,712,4212,608,3162,940,8692,944,911 Communitu development934,151593,393671,1731,113,543 Parks, recreation and naturalist1,068,875960,723737,0941,118,392 Debt service:1,810,1005,749,0136,553,3631,917,173 Capital outlay:1,705,270869,7703,112,7004,452,500 Contingency - - 907 - Total expenditures16,726,294 19,093,361 23,465,153 20,935,545 Revenues over (under) expenditures(2,050,263) (4,840,517) (6,919,466) (3,358,568) Other financing sources (uses): Refunding bond issues - 3,920,000 - - Bonds issued - - 6,450,0002,505,000 Premium/(discount) on bonds issue - (10,992)(7,160)(30,720) Proceeds from sale of capital assets - - - 10,054 Transfers in579,109558,609657,8784,966,400 Transfers out - - - (4,366,400) Total other financing sources (uses)579,109 4,467,617 7,100,718 3,084,334 Net change in fund balance($1,471,154)($372,900)$181,252($274,234) Debt service as a percentage of noncapital expenditures12.1%31.5%32.2%11.6% Debt service as percentage of total expenditures 10.8%30.1%27.9%9.2% (1) The City implemented GASB Statement No. 34 for the fiscal year ended December 31, 2003. Therefore, information for prior to 2003 is not available. 151 CITY OF FRIDLEY, MINNESOTA TAX CAPACITY VALUE AND ESTIMATED MARKET VALUE OF TAXABLE PROPERTY Last Ten Fiscal Years Commercial/ FiscalResidentialIndustrialPublicAll YearPropertyPropertyUtilityOther 1997 1998 1999 Information Not Availiable 2000 2001 2002 2003 2004$11,163,343$12,740,016$44,539$3,388,828 200512,619,94812,517,53246,5633,762,125 200614,320,78613,166,65746,8613,833,436 Source: Continuing Disclosure Document 154 111555422 Table 5 Less: TotalFiscalAdjustedTotalEstimatedTax Capacity TaxDisparityTax CapacityDirect TaxMarketas a Percent CapacityContributionValueRateValueof EMV $28,351,144$5,147,086$23,204,05815.242$1,172,250,900122.18% 26,292,5074,685,13421,607,37317.1191,228,849,200121.68% 24,858,8014,337,63220,521,16918.3261,293,664,300121.14% 25,967,4244,312,75921,654,66517.0701,335,542,900119.92% 29,851,6804,769,07425,082,60616.3501,518,347,800119.01% 22,380,1593,223,21419,156,94529.9061,688,141,100116.83% 25,007,7893,579,12821,428,66128.6161,958,021,100116.70% 27,336,7264,292,06123,044,66530.2482,149,055,100118.62% 28,946,1684,624,09124,322,07733.5652,278,619,300119.01% 31,367,7404,115,59527,252,14531.9412,469,670,100115.10% 155 111555533 CITY OF FRIDLEY MINNESOTA DIRECT AND OVERLAPPING PROPERTY TAX CAPACITY RATES Last Ten Fiscal Years SchoolSchoolSchool FiscalDistrictDistrictDistrict YearCityNo. 11No. 13No. 14 199616.565%64.387%60.182%71.790% 199715.242%55.588%84.748%66.129% 199817.119%51.824%68.491%69.402% 199918.326%54.856%68.837%67.728% 200017.070%51.792%66.685%61.655% 200116.350%52.281%47.452%45.466% 200229.906%29.082%38.614%17.855% 200328.616%26.941%20.303%29.966% 200430.248%21.050%22.833%22.683% 200533.565%21.492%19.993%21.606% 200631.941%20.046%19.571%20.830% Source: Continuing Disclosure Document Notes: (1) Vocational/Technical District #916 is included in District No. 16. (2) Six Cities Watershed District is included with School District No. 11. (3) Rice Creek Watershed District is included with School District No. 13, 14 and 16. (4) Stonybrook Creek Subwatershed is included with School District No. 11 and 14. 156 111555644 Table 6 SchoolTotalSchoolSchoolSchoolSchool DistrictSpecialDistrictDistrictDistrictDistrict (1)(2, 4)(3)(3, 4)(1, 3) No. 16No. 11No. 13No. 14No. 16 CountyDistricts 67.583%31.036%6.122%117.662%113.880%125.488%121.656% 61.268%30.091%6.044%108.218%137.656%119.067%114.551% 58.662%30.618%6.603%107.400%124.314%125.225%114.679% 61.111%32.265%6.603%114.104%128.158%127.049%120.765% 51.440%30.861%8.224%108.610%123.385%118.575%108.621% 39.458%28.859%8.218%106.287%101.819%99.833%94.139% 25.985%37.976%7.528%105.313%115.198%94.439%102.639% 22.054%37.714%7.666%102.483%96.360%105.925%98.111% 21.421%35.221%7.623%95.446%97.758%97.525%96.346% 16.118%33.080%8.085%96.945%96.329%97.942%92.454% 17.437%32.096%7.411%92.136%92.813%94.072%90.679% 157 111555755 Table 7 CITY OF FRIDLEY, MINNESOTA PRINCIPAL PROPERTY TAXPAYERS Current year and eight years ago 20061998 Percentage Percentage Taxableof Total CityTaxableof Total City CapacityCapacityCapacityCapacity TaxpayerValueRankValueValueRankValue Medtronic, Inc.$1,552,22014.95%$1,038,54623.95% Target Corporation640,758 2 2.04%1,287,786 1 4.90% Shamrock Investments536,082 3 1.71%436,706 3 1.66% Retail Trust IV (Wal-Mart/Sam's)338,972 4 1.08%396,260 5 1.51% Cummins Power (Onan)267,388 5 0.85% - 0 0.00% University Avenue Associates260,945 6 0.83%328,663 6 1.25% Maurice Fillister (Georgetown)254,562 7 0.81%79,214 8 0.30% Northwest Racquet & Swim Club250,590 8 0.80%418,050 4 1.59% Burlington Northern Railroad204,182 9 0.65%33,492 9 0.13% Riverpointe Apartments202,130 10 0.64%219,739 7 0.84% Total$4,507,82914.36%$4,238,45616.13% Total All Property$31,367,740$26,292,507 158 111555866 Table 8 CITY OF FRIDLEY, MINNESOTA PROPERTY TAX LEVIES AND COLLECTIONS Last ten fiscal years Collected Within The FiscalTaxesCollections Fiscal Year of the LevyTotal Collections to Date YearLeviedin EndedFor ThePercentageSubsequentPercentage 31-DecFiscal YearAmountof LevyYearsAmountof Levy 1997$3,891,612$3,809,41697.89%$22,115$3,831,53198.46% 19984,010,5703,935,00498.12%3,5843,938,58898.21% 19994,034,9194,064,819100.74%36,1684,100,987101.64% 20004,035,671 3,928,752 97.35%44,5653,973,31798.45% 20014,205,000 4,147,788 98.64%8,6234,156,41198.84% 20025,613,1315,579,77799.41%40,3545,620,131100.12% 20035,825,8555,763,09798.92%40,7805,803,87799.62% 20046,483,7456,310,42997.33%39,2106,349,63997.93% 20058,067,9497,699,29095.43%27,8697,727,15995.78% 20068,757,1888,517,85597.27%132,0478,649,90298.77% Source: City Finance Department. 159 111555977 CITY OF FRIDLEY, MINNESOTA RATIOS OF OUTSTANDING DEBT BY TYPE Last ten fiscal years Governmental Activities Percentage FiscalImprovementTax Incrementof Tax YearBondsBondsTotalCapacity 1997$1,510,000$13,665,000$15,175,00053.53% 19981,290,00013,760,00015,050,00057.24% 19991,070,00013,685,00014,755,00059.36% 2000845,00013,610,00014,455,00055.67% 2001615,00012,735,00013,350,00044.72% 2002465,00011,735,00012,200,00054.51% 2003315,00010,705,00011,020,00044.07% 2004190,0009,595,0009,785,00035.79% 20051,805,0008,335,00010,140,00035.03% 20064,310,0006,780,00011,090,00035.35% 115588 Table 9 Business Type Activities Total TotalSewer/WaterTotalPer PrimaryPer Tax CapacityPopulationBondsBusiness TypeCustomerGovernmentCapita $28,351,14428,419$4,705,000$4,705,000$577$19,880,000534 26,292,50728,3355,625,0005,625,00069020,675,000531 24,858,80128,6235,325,0005,325,00065020,080,000515 25,967,42427,4493,880,0003,880,00047318,335,000527 29,851,68027,8543,530,0003,530,00042816,880,000479 22,380,15927,8773,170,0003,170,00038315,370,000438 25,007,78927,4602,800,0002,800,00033813,820,000401 27,336,72627,4805,405,0005,405,00065715,190,000356 28,946,16827,0883,815,0003,815,00045813,955,000374 31,367,74026,6793,420,0003,420,00041514,510,000416 115599 Table 10 CITY OF FRIDLEY, MINNESOTA DIRECT AND OVERLAPPING GOVERNMENTAL ACTIVITIES DEBT December 31, 2006 Estimated EstimatedShare of DebtPercentageOverlapping Governmental UnitOutstandingApplicable*Debt Debt repaid with property taxes: Independent School District No. 11$187,579,5211.60%$3,001,272 Independent School District No. 1416,135,000 100.00%16,135,000 Independent School District No. 1696,030,000 36.80%35,339,040 Metro Council1,000,304,6421.19%11,903,625 Anoka County101,865,000 18.04%18,376,446 Vocational/Technical District No. 9161,290,000 2.21%28,509 Subtotal - overlapping debt84,783,892 City of Fridley - Direct debt14,510,000 $84,783,892 Total direct and overlapping debt 162 111666200 Table 11 CITY OF FRIDLEY, MINNESOTA LEGAL DEBT MARGIN INFORMATION Last ten fiscal years Market Value$2,469,670,100 Debt Limit 2% of Market Value$49,393,402 Amount of Debt Applicable to Debt Limit: Total Debt$14,510,000 Deductions: Tax Increment Redevelopment Bonds$6,780,000 Improvement Bonds4,310,000 Revenue Bonds3,420,00014,510,000 Total Amount of Debt Applicable to Debt Limit - Legal Debt Margin$49,393,402 Legal Debt Margin Calculation for the last 10 Fiscal Years Net DebtLegalAmount of Debt FiscalDebtApplicable toDebtApplicable to YearLimitLimitMarginDebt Limit 1997$23,445,018$ - $23,445,0180.00% 199825,870,264 - 25,870,2640.00% 199925,486,970 - 25,486,9700.00% 200026,327,646 - 26,327,6460.00% 200129,985,162 - 29,985,1620.00% 200233,380,154 - 33,380,1540.00% 200338,755,912 - 38,755,9120.00% 200442,589,016 - 42,589,0160.00% 200545,168,942 - 45,168,9420.00% 200649,393,402 - 49,393,4020.00% 116611 CITY OF FRIDLEY, MINNESOTA PLEDGED-REVENUE COVERAGE Last ten fiscal years Improvement BondsUtility Revenue Bonds SpecialUtility Less FiscalAssessmentServiceOperatingDebt Service YearCollectionsPrincipalInterestCoverageRevenuesExpenses 1997$554,656$190,000$81,1102.05$6,660,575$5,339,754 1998528,185 220,000 74,531 1.796,520,948 5,469,928 1999494,241 220,000 63,426 1.745,389,003 5,242,663 2000507,953 225,000 51,874 1.835,150,374 4,965,373 2001497,208230,00039,7701.844,994,6695,148,461 2002463,579150,00029,6082.585,016,2335,251,371 2003449,867150,00021,6082.625,330,6035,664,739 2004273,81390,00010,3582.735,371,6625,430,082 2005542,548190,0005,3402.785,435,3615,821,541 2006671,204 - 67,4669.955,648,7205,977,607 164 111666422 Table 12 Utility Revenue BondsTax Increment Bonds Net Tax Debt ServiceDebt Service AvaliableIncrement RevenuePrincipalInterestCoverageCollectionsPrincipalInterestCoverage $1,320,821$120,000$256,4593.51$3,131,920$385,000$911,5252.42 1,051,020 260,000 275,498 1.961,454,531 420,000 781,573 1.21 146,340 300,000 281,975 0.252,818,753 535,000 687,163 2.31 185,001 1,445,000 197,277 0.112,819,343 75,000 701,189 3.63 (153,792)350,000175,115-0.293,145,594875,000697,7012.00 (235,138)360,000158,422-0.452,564,0401,000,000654,6641.55 (334,136)370,000141,002-0.653,624,9681,030,000606,2912.22 (58,420)390,000334,960-0.083,078,4265,065,000546,9100.55 (386,180)1,590,000139,200-0.223,224,2045,905,000417,0260.51 (328,887)395,000121,164-0.642,649,0201,555,000262,9651.46 165 111666533 Table 13 CITY OF FRIDLEY, MINNESOTA DEMOGRAPHIC AND ECONOMIC STATISTICS Last ten fiscal years Per TotalCapita FiscalUnemploymentPer CapitaPersonal YearPopulationRateIncomeIncome 199728,4192.6%20,80820,808 199828,3352.1%22,40522,405 199928,6232.3%24,11324,113 200027,4492.8%25,35725,357 200127,8543.6%25,99525,995 200227,8774.4%28,32428,324 200327,4604.3%22,68722,687 200427,4805.0%25,16925,169 200527,0885.0%25,68225,682 200626,6794.6%26,38726,387 Sources: Metropolitan Council (population), Continuing Disclosure Document (unemployment rate) 164 Table 14 CITY OF FRIDLEY, MINNESOTA PRINCIPAL EMPLOYERS Current year and nine years ago(1) 20061997 Percentage Percentage of Total Cityof Total City EmployerEmployeesRankEmploymentEmployeesRankEmployment Medtronic, Inc.2,500110.58%4,000115.23% United Defense Systems1,8002 7.62%1,50025.71% 1,7273 7.31%1,26534.82% Cummins Power (Onan) Unity Medical Center1,4004 5.92%4297 1.63% Target6005 2.54%4128 1.57% Minco Products5006 2.12%7004 2.67% 3507 1.48%61552.34% Kurt Manufacturing Park Construction3008 1.27% - 0.00% Parsons Electric3009 1.27%4009 1.52% Wal-Mart26210 1.11% - 0.00% - 0.00%40010 1.52% Burlington McGlynn's - 0.00%5026 1.91% Total5,43941.21%3,82114.55% Total City Employment23,63526,257 Source: Continuing Disclosure Documents, Minnesota Department of Employment and Economic Development and the Met Council. 167 111666755 CITY OF FRIDLEY, MINNESOTA FULL-TIME EQUIVALENT CITY GOVERNMENT EMPLOYEES BY FUNCTION/PROGRAM Last Ten Fiscal Years Full-Time Equivalent Employees as of December 31, Function/Program1997199819992000 General government: City Administration5444 Finance22212121 Human Resource222 Community Development9999 Public safety: Police department48494949 Fire department7777 Public works: Administration6565 Engineering4444 Mechanic3323 Streets8999 Water5666 Sewer5555 Parks6666 Parks and recreation: Recreation and Naturalist8888 Total136138138138 Source: City Finance Department 168 111666866 Table 15 Full-Time Equivalent Employees as of December 31, 200120022003200420052006 344333 242424232323 222222 1010108810 505050464647 889889 555444 433222 333333 999999 666555 655555 667777 8895811 144143146130133140 169 111666977 CITY OF FRIDLEY, MINNESOTA OPERATING INDICATORS BY FUNCTION/PROGRAM Last Ten Fiscal Years Fiscal Year Function/Program199719981999 Police: Physical arrests2,0331,7901,850 Parking violationsN/AN/AN/A Traffic violationsN/AN/AN/A Fire: Emergency responsesN/A2,2862,267 Fires occurredN/A140121 Inspections (Fire and Rental)N/AN/AN/A Refuse collection: Recyclables collected (tons per day)6.806.896.90 Building inspection: Permits issued: Residential7372,9771,632 Commercial10111190 Total permit valuation$24,940,676$21,371,526$42,636,736 Other public works: Street resurfacing (miles) - 1.34.2 Water: ConnectionsN/A8,1588,181 Storage capacityN/A750,000750,000 Average daily demand (thousands of gallons)N/A550,000550,000 Peak daily demand (thousands of gallons) N/A900,000900,000 Sewer: ConnectionsN/A8,1708,190 Sources: Various City departments. No operating indicators were available for the Parks, recreation and naturalist function. 116688 Table 16 Fiscal Year 2000200120022003200420052006 1,3291,6451,4471,3339561,2051,576 1,344513635532644884572 1,7241,4352,2092,4292,1291,7894,445 2,2942,2932,5572,5492,4062,7192,568 113105144124137107127 3231,1451,4271,4251,6511,4671,015 6.896.806.756.706.706.696.95 836667730642624750768 967052659986115 $101,645,877$21,808,039$11,619,328$16,078,198$22,029,469$25,057,537$21,750,596 1.31.21.21.21.24.14.8 8,1958,2098,2548,2798,2888,2328,235 750,000750,000750,000750,000750,000750,000750,000 550,000550,000550,000550,000646,000550,000550,000 900,000900,000900,000900,0001,319,0001,000,00010,990,000 8,1858,2198,2638,2888,2978,2508,244 116699 CITY OF FRIDLEY, MINNESOTA CAPITAL ASSET STATISTICS BY FUNCTION/PROGRAM Last Ten Fiscal Years Fiscal Year Function/Program1997199819992000 Police: Stations1111 Squad cars11111111 Fire stations3333 Other public works: Streets (miles)126.1126.1126.1127.2 Highways (miles)10.810.810.810.8 Streetlights1,0421,0421,0541,054 Traffic signals35353535 Parks, recreation and naturalist: Acreage682682682682 Playgrounds29292929 Baseball/softball diamonds22222222 Soccer/football fields2222 Community centers1111 Water: Water mains (miles)112.8112.8112.9112.9 Fire hydrants1,0801,0801,084998 Storage capacity (thousands of gallons)3.5 million3.5 million3.5 million3.5 million Wastewater: Sanitary sewers (miles)103.0103.0103.0103.0 Storm sewers (miles)43.643.646.649.3 Sources: Various City departments. 117700 Table 17 Fiscal Year 200120022003200420052006 111111 111212121212 333333 127.2127.2127.2127.0127.0127.0 10.810.810.810.811.011.0 1,0541,0541,0541,0541,0551,055 353535353535 682682682682682682 292929292929 222222222222 222222 111111 112.9112.9112.9112.9112.9113.0 9989989989981,0121,013 3.5 million3.5 million3.5 million3.5 million2 million6.5 million 103.0103.0103.0103.0103.0103.0 49.349.349.349.350.052.0 117711 - This page intentionally left blank - 174 111777422