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2002 CAFR CITY OF FRIDLEY, MINNESOTA Comprehensive Annual Financial Report December 31, 2002 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, 2002 TABLE OF CONTENTS EXHIBIT PAGE INTRODUCTORY SECTION Elected and Appointed Officials 3 City Administrative Organizational Structure 2002 4 City Manager's Letter of Transmittal 7 Chief Executive Officer's Letter of Transmittal 9 Certificate of Achievement for Excellence in Financial Reporting 19 FINANCIAL SECTION Independent Auditor's Report 23 General Purpose Financial Statements-Combined Financial Statements: Combined Balance Sheet-All Fund Types and Account Groups and Discretely Presented Component Unit A-1 29 Combined Statement of Revenues, Expenditures and Changes in Fund Balance-All Governmental Fund Types and Expendable Trust Funds and Discretely Presented Component Unit A-2 36 Combined Statement of Revenues, Expenditures and Changes in Fund Balance- Budget and Actual -General, Special Revenue and Budgeted Capital Projects Fund Types A-3 38 Combined Statement of Revenues, Expenses and Changes in Retained Earnings-All Proprietary Fund Types A-4 40 Combined Statement of Cash Flows-All Proprietary Fund Types A-5 41 Notes to Financial Statements 43 Financial Statements of Individual Funds: General Fund: Comparative Balance Sheet B-1 74 Statement of Revenues, Expenditures and Changes in Fund Balance- Budget and Actual B-2 75 Schedule of Revenues and Other Financing Sources- Budget and Actual B-3 76 Schedule of Expenditures and Other Financing Uses-Budget and Actual B-4 79 CITY OF FRIDLEY, MINNESOTA COMPREHENSIVE ANNUAL FINANCIAL REPORT YEAR ENDED DECEMBER 31, 2002 TABLE OF CONTENTS EXHIBIT PAGE Special Revenue Funds: Combining Balance Sheet C-1 84 Combining Statement of Revenues, Expenditures and Changes in Fund Balance C-2 86 Cable TV Fund: Comparative Balance Sheet C-3 88 Statement of Revenues, Expenditures and Changes in Fund Balance- Budget and Actual C-4 89 Grant Management Fund: Comparative Balance Sheet C-5 90 Statement of Revenues, Expenditures and Changes in Fund Balance- Budget and Actual C-6 91 Solid Waste Abatement Fund: Comparative Balance Sheet C-7 92 Statement of Revenues, Expenditures and Changes in Fund Balance- Budget and Actual C-8 93 HRA Reimbursement Fund: Comparative Balance Sheet C-9 94 Statement of Revenues, Expenditures and Changes in Fund Balance- Budget and Actual C-10 95 Drug and Gambling Forfeiture Fund: Comparative Balance Sheet C-11 96 Statement of Revenues, Expenditures and Changes in Fund Balance- Budget and Actual C-12 97 Housing Revitalization Fund: Comparative Balance Sheet C-13 98 Statement of Revenues, Expenditures and Changes in Fund Balance- Budget and Actual C-14 99 CITY OF FRIDLEY, MINNESOTA COMPREHENSIVE ANNUAL FINANCIAL REPORT YEAR ENDED DECEMBER 31,2002 TABLE OF CONTENTS EXHIBIT PAGE Special Revenue Funds: (continued) Chemical Assessment Team Fund: Comparative Balance Sheet C-15 100 Statement of Revenues, Expenditures and Changes in Fund Balance- Budget and Actual C-16 101 F. C. C. Donations Fund: Comparative Balance Sheet C-17 102 Statement of Revenues, Expenditures and Changes in Fund Balance- Budget and Actual C-18 103 Police Activity Fund: Comparative Balance Sheet C-19 104 Statement of Revenues, Expenditures and Changes in Fund Balance- Budget and Actual C-20 105 Debt Service Funds: Combining Balance Sheet D-1 108 Combining Statement of Revenues, Expenditures and Changes in Fund Balance D-2 109 Capital Projects Funds: Combining Balance Sheet E-1 112 Combining Statement of Revenues, Expenditures and Changes in Fund Balance E-2 113 Capital Improvements Fund: Comparative Balance Sheet E-3 114 Statement of Revenues, Expenditures and Changes in Fund Balance- Budget and Actual E-4 115 CITY OF FRIDLEY, MINNESOTA COMPREHENSIVE ANNUAL FINANCIAL REPORT YEAR ENDED DECEMBER 31,2002 TABLE OF CONTENTS EXHIBIT PAGE Enterprise Funds: Combining Balance Sheet F-1 118 Combining Statement of Revenues, Expenses and Changes in Retained Earnings F-2 119 Combining Statement of Cash Flows F-3 120 Liquor Fund: Comparative Balance Sheet F-4 121 Comparative Statement of Revenues, Expenses and Changes in Retained Earnings F-5 122 Comparative Statement of Cash Flows F-6 123 Public Utilities Fund: Comparative Balance Sheet F-7 124 Comparative Statement of Revenues, Expenses and Changes in Retained Earnings F-8 126 Comparative Statement of Cash Flows F-9 127 Internal Service Funds: Combining Balance Sheet G-1 130 Combining Statement of Revenues, Expenses and Changes in Retained Earnings G-2 131 Combining Statement of Cash Flows G-3 132 Employee Benefits Fund: Comparative Balance Sheet G-4 133 Comparative Statement of Revenues, Expenses and Changes in Retained Earnings G-5 134 Comparative Statement of Cash Flows G-6 135 CITY OF FRIDLEY, MINNESOTA COMPREHENSIVE ANNUAL FINANCIAL REPORT YEAR ENDED DECEMBER 31,2002 TABLE OF CONTENTS EXHIBIT PAGE Internal Service Funds: (continued) Self Insurance Fund: Comparative Balance Sheet G-7 136 Comparative Statement of Revenues, Expenses and Changes in Retained Earnings G-8 137 Comparative Statement of Cash Flows G-9 138 Information Systems Fund: Comparative Balance Sheet G-10 139 Comparative Statement of Revenues, Expenses and Changes in Retained Earnings G-11 140 Comparative Statement of Cash Flows G-12 141 Trust and Agency Funds: Combining Balance Sheet H-1 144 Industrial Development Revenue Bond Trust Fund: Comparative Statement of Revenues, Expenditures and Changes in Fund Balance H-2 145 All Agency Funds: Combining Statement of Changes in Assets and Liabilities H-3 146 General Fixed Assets Account Group: Comparative Schedule of General Fixed Assets I-1 148 Schedule of Changes in General Fixed Assets-By Function and Activity 1-2 149 Schedule of General Fixed Assets- By Function and Activity 1-3 150 General Long Term Debt Account Group: Comparative Schedule of General Long Term Debt J-1 152 CITY OF FRIDLEY, MINNESOTA COMPREHENSIVE ANNUAL FINANCIAL REPORT YEAR ENDED DECEMBER 31,2002 TABLE OF CONTENTS EXHIBIT PAGE STATISTICAL SECTION: General Government Expenditures by Function - Last Ten Fiscal Years 1 155 General Revenues by Source- Last Ten Fiscal Years 2 156 Certified Property Tax Levies and Collections - Last Ten Fiscal Years 3 157 Estimated Market Value and Taxable Value of All Property- Last Ten Fiscal Years 4 158 Significant Minnesota Tax Policies 5 161 Tax Capacity Rates- Direct and Overlapping Governments-Last Ten Fiscal Years 6 162 Special Assessment Levies and Collections- Last Ten Fiscal Years 7 165 History of Certified Tax Levies and Tax Rates -Last Ten Fiscal Years 8 166 Ratio of Net General Bonded Debt to Taxable Value and Net Bonded Debt Per Capita- Last Ten Fiscal Years 9 168 Computation of Legal Debt Margin 10 170 Computation of Direct and Overlapping Bonded Debt and Comparative Debt Ratios 11 172 Ratio of Annual Debt Service Expenditures for General Bonded Debt to Total General Government Expenditures-Last Ten Fiscal Years 12 173 Revenue Bond Coverage-Last Ten Fiscal Years 13 174 Demographic Statistics-Last Ten Fiscal Years 14 175 Construction and Property Value- Last Ten Fiscal Years 15 176 Principal Taxpayers 16 177 Insurance Coverage 17 178 Miscellaneous Statistical Information 18 179 General Information 19 182 INTRODUCTORY SECTION 1 -This page intentionally left blank- 2 CITY OF FRIDLEY, MINNESOTA ELECTED AND APPOINTED OFFICIALS December 31,2002 ELECTED OFFICIALS Term of Office Expires December Mayor Scott J. Lund 2004 Councilmember At Large Robert R. Barnette 2004 Councilmember, Ward I Steven E. Billings 2006 Councilmember, Ward II Richard P. Wolfe 2006 Councilmember, Ward Ill Ann R. Bolkcom 2006 APPOINTED OFFICIALS City Manager William W. Burns City Attorney Frederic W. Knaak Prosecuting Attorney Carl J. Newquist City Clerk Debra A. Skogen Department Heads: Finance Director/Treasurer Richard D. Pribyl Director of Public Safety and Civil Defense David H. Sallman Fire Chief Charles J. McKusick Director of Public Works Jon H. Haukaas Director of Recreation and Natural Resources Jack G. Kirk Director of Community Development Scott J. Hickok Director of Human Resources Deborah K. Dahl 3 CITY ADMINISTRATIVE ORGANIZATIONAL STRUCTURE 2002 Total Authorized Postions (143) CITY MANAGEMENT(4) City Manager Secretary to the City Manager Management Assistant Cable Administrator FINANCE(24) POLICE (50) HUMAN RESOURCES(2) Finance Director-Treasurer Public Safety Director- Human Resources Director Secretary Secretary HR Assistant (2)Accountant OPERATIONS (29) Captain ACCOUNTING (7) (6) Sergeants Assistant Finance Director (23) Patrol Officers Payroll Technician (1 Patrol Officer is funded out of Grant Mgmt.) Accounting Specialist Utility Billing Clerk TECHNICAL SUPPORT(19) (3)Acctg-Data Processing Clerk Captain (1) Sergent ASSESSING (2) (6) Patrol Officers City Assessor Projects Coordinator Appraiser Crime Prevention Specialist Outreach Coordinator MIS (2) Office Supervisor MIS Coordinator (7) Police Technicians MIS Specialist (1 FT,6 PT benefitted) CSO Coordinator CITY CLERK-RECORDS (3) City Clerk FIRE (8) Receptionist-License Clerk Records Assistant Fire Chief Secretary LIQUOR(6) Ass't Chief for Operations Liquor Operations Manager Fire Marshal (5) Liquor Store Clerk Captain (3) Full-time Firefighters 4 PUBLIC WORKS(37) RECREATION & COMMUNITY NATURALIST(8) DEVELOPMENT(10) Director of Public Works Secretary Director of Recreation & Director of Community Operations Analyst Natural Resources Development Recreation Office Coordinator (2) Secretary ENGINEERING (3) (3) Program Supervisor Assistant Public Works Director Engineering Technician BUILDING INSPECTION (3) Engineering Tech Inspector NATURALIST(3) Chief Building Official Natural Res. Coordinator Building Inspector PW MAINTENANCE (31) Interpretive Specialist Secretary Superintendant Secretary Secretary PLANNING (4) Lead Mechanic Planning Coordinator (2) Mechanic, Level B (3) Planners Street Supervisor (8) Public Services Worker Water Supervisor (5) Public Services Worker Sewer Supervisor (4) Public Services Worker Park Supervisor (5) Public Services Worker 5 -This page intentionally left blank- 6 CITYOF FRIDLEY FRIDLEY MUNICIPAL CENTER•6431 UNIVERSITY AVE.N.E.FRIDLEY,MN 55432•(763)571-3450•FAX(763)571-1287 May 30, 2003 The Honorable Mayor and Members of the City Council City of Fridley Council Members: In accordance with the Charter, we hereby transmit the Comprehensive Annual Financial Report of the City of Fridley for the year ended December 31, 2002. The Report includes an excellent and comprehensive letter from Richard D. Pribyl, Director of Finance and Alan D. Folie, Assistant Finance Director, which provides a brief description of some of the activities in which the City is currently involved. Also highlighted in the letter are some of the more important financial management practices employed by the City's administrative staff. I would like to express my appreciation and commendation to them and the Finance Department staff for the manner in which the accounts are kept and the Report presented. I would also like to express appreciation for the commendable administrative financial management of the several departments and divisions by the respective department and division heads as revealed by this Report. Very truly yours, ec, - William W. Burns City Manager 7 -This page intentionally left blank- 8 CI1YOF FRIDLEY FRIDLEY MUNICIPAL CENTER•6431 UNIVERSITY AVE.N.E.FRIDLEY,MN 55432•(763)571-3450•FAX(763)571-1287 May 30, 2003 Dr.William W. Burns, City Manager Mayor Scott J. Lund and Council Members Fridley, Minnesota 55432 Dear Dr. Burns, Mayor Lund and Council Members: The Comprehensive Annual Financial Report of the City of Fridley, Minnesota, for the fiscal year ended December 31, 2002, is submitted herewith: The organization, form, and contents of this report were prepared in accordance with the standards prescribed by the Government Finance Officers Association of the United States and Canada, the American Institute of Certified Public Accountants, the Governmental Accounting Standards Board, and the Minnesota State Auditor's Office. The Government Finance Officers Association awards Certificates of Achievement for Excellence in Financial Reporting to those governments whose annual financial reports are judged to conform substantially to high standards of public financial reporting including generally accepted accounting principles promulgated by the Governmental Accounting Standards Board. The City of Fridley was awarded a Certificate of Achievement for Excellence in Financial Reporting for its annual financial report for the fiscal year 2001. It is our belief that the accompanying fiscal year 2002 financial report continues to meet program standards and it will be submitted to the Government Finance Officers Association for review. This report was prepared by the City's finance staff and consists of three sections: Section I is the introductory section and contains the table of contents, letter of transmittal, and other appropriate material. Section II is the financial section and contains the auditors' opinion, the combined financial statements, notes to the financial statements, combining statements, individual fund statements, and account group statements. Section III is the statistical section that includes the previous year's financial and non-financial data. Responsibility for both the accuracy of the presented data and the completeness and fairness of the presentation, including all disclosures, rests with the City. We believe that the data, as presented, is accurate in all material aspects, that it is presented in a manner designed to fairly set forth the financial • position and results of operations of the City as measured by the financial activity of its various funds, and that all disclosures necessary to enable the reader to gain the maximum understanding of the City's financial activity have been included. 9 -This page intentionally left blank- 10 CITY OF FRIDLEY,MINNESOTA The City's financial statements include all funds and account groups. Services provided by the City include police and fire protection; water and sanitary sewer utilities; the construction and maintenance of streets and infrastructure; recreational activities and cultural events. In addition to general government activities, the activities of the Fridley Housing and Redevelopment Authority (HRA) have been included since they serve the entire City and the City Council has the ability to control the actions of the HRA. However, the Fridley School Districts and the Fridley Volunteer Firefighters Relief Association have not met the established criteria for inclusion in the reporting entity, and accordingly are excluded from this report. GENERAL INFORMATION BACKGROUND AND LOCATION The City of Fridley is a first ring suburban community with an estimated 2002 population of 27,877. 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 11 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 Minneapolis - St. Paul and the surrounding metropolitan area has continued to experience a strong economy. Unemployment remains relatively low, though over the last year some major corporations, including Lau Industries (formerly Barry Blower), experienced some downturn in their markets and some employee layoff activity was a result. In the case of Lau Industries, they closed their local office and the City lost over 100 jobs as a result. Overall, the market place for local products and services remains strong. Continued long-term growth is anticipated as Fridley continues to aggressively pursue redevelopment opportunities. Phase I of the 1,000,000 s.f. Medtronic World Headquarter campus is complete and houses 1,000 employees currently. With Phase I, came 520,000 s.f. of new building valuation and a showplace setting along the intersection of Highway 1-694 and Highway 65. The estimated market value of the 3-phase project will be well over $100 million. At build-out of the campus, an additional 3,000 jobs will have been added to the City's already impressive employment figures. The existing Rice Creek Corporate campus is now being entirely renovated, internally to function as the World Headquarters for Medtronic Inc.'s Cardiac Division. MAJOR INITIATIVES During the year 2002, the City continued its focus on the quality of its housing stock and enjoyed much success with its programs. With programs such as the 6% Revolving Loan program, citizens with qualifying incomes were given an opportunity to enjoy the benefits of these loans for their home improvement projects. A total of 43 loans and grants were given with a total dollar amount of$537,631. Staff is very encouraged by the success of the programs and the enthusiasm of the public regarding the City's emphasis on re-investment in its community's housing stock. As a fully developed community, the City's number of new housing starts is low and may be unimpressive when compared to edge developments in the region; however, the City is proud of those housing starts it is seeing, and is equally as proud of the residential re-investment that is occurring. In 2002, the Building Department issued 884 permits. Permits were issued for 9 residential single-family units, 0 townhouse units, 2 multiple dwelling units, 19 residential garages, and 701 residential alterations 11 CITY OF FRIDLEY,MINNESOTA GENERAL INFORMATION (CONTINUED) or additions. In the area of commercial and industrial development, 90 permits were issued ranging from 1 new start to 11 wrecking and moving permits, with the remainder of activity including alterations and business sign applications. Internally, there were many items discussed at the 2003 budget work sessions. The gap between revenues and expenditures increased in the 2003 budget from the 2002 budget. This increase was due mainly to increasing costs for personnel. Much of the discussion at the work sessions focused on major expenditure proposals rather than budget detail. The budget sessions ended with an increase in property taxes and the planned use of$928,931 of reserves resulting in a balanced 2003 budget that Council adopted in December. PLANS FOR THE FUTURE The future for the City of Fridley may 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 embark on the complimentary anchor to the Gateway East development with a project called Gateway West, which will likely provide an additional 6-15 single-family units. The importance of this small development is the balance and positive image it will provide as people enter the community on University Avenue. Finally, a proposal by the North Star Corridor Development Authority proposes to connect Fridley to the region through the use of the existing Burlington Northern Santa Fe rail lines and new convenient passenger rail cars. The proposal would offer an alternative mode of transportation for residents who are commuting into Minneapolis or who now commute as far north as Rice, Minnesota. If the Fridley City Council ultimately approves the proposal, additional neighborhood and rail compatible development may occur on a remaining acreage near the station site. Implementation of a citywide imaging system continued during 2002. This project will increase the availability of data and the efficiency in which City staff can access it and respond to resident's requests. Significant projects budgeted for 2003 in the five year capital improvement plan include: resurfacing of the asphalt at the Municipal Garage; improving the police impound lot; a major street reconstruction project in Ward 1; and the annual well, reservoir and pump house maintenance programs. 12 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 2.0% to 6.0%. DEBT ADMINISTRATION Net general bonded debt per capita and the percentage of the net general bonded debt to taxable value are useful indicators of the City's debt position. At December 31, 2002 the City of Fridley's debt service funds provided sufficient capital to cover the net general bonded debt. The City has numerous debt issues outstanding totaling $15,370,000. Of this outstanding debt, $465,000 represents special assessment debt with government commitment, $11,735,000 represents general obligation tax increment refunding bonds, and $3,170,000 represents general obligation water, sewer and storm water revenue bonds. The City of Fridley has, since 1982, maintained a credit rating of Aa1 on its long-term bonds. 13 CITY OF FRIDLEY,MINNESOTA FINANCIAL INFORMATION (CONTINUED) FISCAL DISPARITIES The commonly referred to "Fiscal Disparity Law" was adopted by the Legislature in 1971. The area of the fiscal disparity district encompasses all the properties located within the seven-county metropolitan area. The law provides that 40% of all new commercial/industrial property valuations or growth be placed in an area wide"pool,"and shared according to specific criteria. TAX INCREMENT DISTRICTS The City Council took action on May 7, 1979 to form the first of twelve tax increment districts. In 1985, the individual districts were combined into one redevelopment district to more easily manage the overall activities. All of the districts have been established in economically depressed areas within the City. With the successful relationship that the City and the Housing and Redevelopment Authority have developed, many benefits have been derived. GENERAL GOVERNMENT FUNCTIONS The following schedule presents a summary of the General, Special Revenue, Debt Service, Capital Projects and Expendable Trust Funds' revenues for the fiscal year ended December 31, 2002. The most significant changes in revenues from the prior year were increases in taxes and special assessments and decreases in licenses and permits and investment income. Taxes and special assessments increased by $918,626 due to the elimination of Homestead and Agriculture Credit Aid (HACA) by the legislature. Licenses and permits decreased by $129,216 due to a decrease in the number of building permits issued in 2002. The investment income decrease of$523,173 was due to decreasing yields, as well as having less money to invest during the year. Percent of Increase/ Revenues Amount Total (Decrease) Taxes and special assessments $5,497,648 42.69% $918,626 Licenses and permits 647,676 5.03% (129,216) Intergovernmental 4,114,621 31.95% 81,718 Charges for services 1,531,782 11.89% 60,669 Fines and forfeits 203,588 1.58% (7,899) Investment income 594,087 4.61% (523,173) Miscellaneous 290,204 2.25% 73,183 Total $12,879,606 100.00% $473,909 The following schedule presents a summary of the General, Special Revenue, Debt Service, Capital Projects and Expendable Trust Funds'expenditures for the fiscal year ended December 31, 2002. The most significant change in expenditures from the prior year was a decrease in capital outlay. This decrease was due mainly to some large purchases in 2001 including the purchase of a new fire truck. 14 CITY OF FRIDLEY,MINNESOTA FINANCIAL INFORMATION (CONTINUED) Percent of Increase/ Expenditures Amount Total (Decrease) Current: General government $3,262,437 19.76% $258,052 Public safety 4,905,475 29.72% 437,528 Municipal center 225,068 1.36% (16,594) Public works 3,065,570 18.57% 199,342 Community development 710,780 4.31% 2,031 Recreation and naturalist 1,139,351 6.90% 33,293 Debt Service 1,836,471 11.12% (8,169) Capital outlay 1,362,733 8.26% (514,869) Total $16,507,885 100.00% $393,615 General Fund Balance The fund balance is used to provide working capital for the fund until tax settlements and state aids are received in July and December of each year, to provide funds for unknown events that could have an adverse effect on the fund, and to help finance future budgets. In 1990 the City Council adopted a formal policy designating portions of the general fund's fund balance for working capital, subsequent year's expenditures, contingencies and for replacement of fixed assets at the end of each fiscal year. ENTERPRISE OPERATIONS The Enterprise Funds account for the financing of services to the general public in which all or most of the costs involved are paid in the form of charges by the users of such services. In the City of Fridley, Enterprise Funds are used to account for the operation of the public utility system and two municipal liquor stores. Except for ownership, Enterprise Funds bear a close resemblance to privately owned utility or service enterprises. Liquor Fund The Liquor Fund was established to account for the operation and financing of the City-owned municipal liquor stores. The City operates two liquor stores, one at 6289 Highway 65 and one next to the Fridley Cub Foods Store. The City owns the store at the Highway 65 location and currently leases space for the other store. In 1984, the City changed its sales philosophy to the wholesale approach so that we could remain competitive with the three neighboring communities that use wholesale pricing. Retained earnings of the Liquor Fund were $1,924,672 on December 31, 2002 as compared to $1,975,567 at the close of the prior fiscal year. Income before operating transfers increased from $335,059 in 2001 to $349,105 in 2002. This increase is primarily due to the increase in sales at the store next to Cub Foods. Public Utilities Fund This fund accounts for the operation and financing of the City-owned sewer and water systems. The assets for the Water and Sewer Distribution system, originally financed by special assessments, were transferred from General Fixed Assets to the Public Utilities Fund in 1978. Additional Fixed Assets 15 CITY OF FRIDLEY,MINNESOTA FINANCIAL INFORMATION (CONTINUED) were transferred in 1979, 1984, 1989, 1990, 1991, 1992, 1993, 1994 and 1995. Those improvements to the utility system paid for or financed directly by the Public Utilities Fund have always been carried in the Public Utilities Fund and depreciated. Retained earnings on December 31, 2002 were $15,544,260 compared to$15,421,398 at the close of the prior fiscal year. 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 P.E.R.A. 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. This requirement has been complied with and the opinion of HLB Tautges Redpath, Ltd. is included in 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 December 31, 2001. In order to be awarded a Certificate of Achievement, a government must publish an easily readable and efficiently organized comprehensive annual financial report. This report must satisfy both generally accepted accounting principles and applicable legal requirements. A Certificate of Achievement is valid for a period of one year only. We believe our current comprehensive annual financial report continues to meet the Certificate of Achievement Program's requirements and we are submitting it to the GFOA to determine its eligibility for another certificate. 16 CITY OF FRIDLEY,MINNESOTA OTHER INFORMATION (CONTINUED) ACKNOWLEDGMENTS The preparation of this report on a timely basis could not have been accomplished without the efficient and dedicated services of all members of the Finance Department, with special recognition to Craig Ellestad, Paul Eisenmenger, Carol Meyer, and Marcy Everette and to our auditors HLB Tautges Redpath, Ltd. for their professional guidance. We would also like to express our appreciation to the Mayor and members of the City Council for their interest and support in planning and conducting the financial operations of the City in a responsible and progressive manner. Res ectfully submitted, _PA.10, .4k Richard D. Pribyl Alan D. olie Finance Director Assistant Finance Director 17 -This page intentionally left blank- 18 Certificate of Achievement for Excellence in Financial Reporting Presented to City of Fridley, Minnesota For its Comprehensive Annual Financial Report for the Fiscal Year Ended December 31, 2001 A Certificate of Achievement for Excellence in Financial Reporting is presented by the Government Finance Officers Association of the United States and Canada to government units and public employee retirement systems whose comprehensive annual financial reports(CAFRs)achieve the highest standards in government accounting and financial reporting. it eoi,% �i%1.��2C4s 1 Q -A ,�, .6 President s *Cr ite0401 Executive Director 19 -This page intentionally left blank- 20 FINANCIAL SECTION 21 • -This page intentionally left blank- 22 H LB Tautges Redpath, Ltd. Certified Public Accountants and Consultants INDEPENDENT AUDITOR'S REPORT To the Honorable Mayor and Members of the City Council City of Fridley, Minnesota We have audited the accompanying general purpose financial statements of the City of Fridley, Minnesota, as of and for the year ended December 31, 2002 as listed in the table of contents. These general purpose financial statements are the responsibility of the City of Fridley, Minnesota's management. Our responsibility is to express an opinion on these general purpose financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the general purpose financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the general purpose financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall general purpose financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the general purpose financial statements referred to above present fairly, in all material respects, the financial position of the City of Fridley, Minnesota, as of December 31, 2002, and the results of its operations and cash flows of its proprietary fund types for the year then ended in conformity with accounting principles generally accepted in the United States of America. In accordance with Government Auditing Standards, we have also issued a report dated May 22, 2003 on our consideration of the City of Fridley, Minnesota's internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, and grants. That report is an integral part of an audit performed in accordance with Government Auditing Standards and should be read in conjunction with this report in considering the results of our audit. 4810 White Bear Parkway,White Bear Lake, Minnesota 55110, USA Telephone: 651 426 7000 Fax: 651 426 5004 HLB Tautges Redpath,Ltd.is a member of tit is International. A world-wide organization of accounting firms and business advisers. 23 -This page intentionally left blank- 24 Our audit was performed for the purpose of forming an opinion on the general purpose financial statements taken as a whole. The combining, individual fund and account group financial statements and statistical information as listed in the table of contents are presented for purposes of additional analysis and are not a required part of the general purpose financial statements of the City of Fridley, Minnesota. Such information, except for that portion marked "unaudited," on which we express no opinion, has been subjected to the auditing procedures applied in the audit of the general purpose financial statements and, in our opinion, is fairly stated in all material respects, in relation to the general purpose financial statements taken as a whole. May 22, 2003 /f#14 T�f,.+4... 44,012e t1�. HLB TAUTGES REDPATH, LTD. Certified Public Accountants 25 -This page intentionally left blank- 26 COMBINED FINANCIAL STATEMENTS 27 -This page intentionally left blank- 28 Exhibit A-1 Page 1 of 4 CITY OF FRIDLEY, MINNESOTA COMBINED BALANCE SHEET-ALL FUND TYPES AND ACCOUNT GROUPS AND DISCRETELY PRESENTED COMPONENT UNIT December 31, 2002 Governmental Fund Types Special Debt Capital General Revenue Service Projects Assets Cash and investments $5,332,858 $2,852,954 $6,231,507 $6,491,895 Cash with escrow agent - - - - Receivables: Accounts 120,750 59,822 - - Taxes 173,267 - - 4,846 Special assessments 5,377 - 1,059,576 49,603 Mortgage - - - - Interest 119,602 - - - Loan receivable - - - - Loan receivable from component unit - - 654,793 - Developer note 55,092 - - - Due from other funds 1,891 - - - Due from component unit 1,210 2,190 - - Due from other governments 17,156 161,288 - 156,937 Inventories, at cost 45,221 - - - Prepaid items - - - - Property and equipment (Net of depreciation) - - - - Amount available in Debt Service Fund - - - - Amount to be provided for retirement of general long term debt - - - - Total assets $5,872,424 $3,076,254 $7,945,876 $6,703,281 See Accompanying Notes to Financial Statements 29 CITY OF FRIDLEY, MINNESOTA COMBINED BALANCE SHEET-ALL FUND TYPES AND ACCOUNT GROUPS AND DISCRETELY PRESENTED COMPONENT UNIT December 31, 2002 Fiduciary Proprietary Fund Types Fund Types Internal Trust and Enterprise Service Agency Assets Cash and investments $8,077,108 $3,820,946 $17,568 Cash with escrow agent - - - Receivables: Accounts 1,348,780 740 2,496 Taxes 420 - 453 Special assessments 112,512 - - Mortgage - - - Interest - - - Loan receivable - - - Loan receivable from component unit - - - Developer note - - - Due from other funds 752 - - Due from component unit - 274 - Due from other governments 3,315 - - Inventories, at cost 596,467 - - Prepaid items 228,462 - - Property and equipment (Net of depreciation) 20,421,975 462,425 - Amount available in Debt Service Fund - - - Amount to be provided for retirement of general long term debt - - - Total assets $30,789,791 $4,284,385 $20,517 See Accompanying Notes to Financial Statements 30 Exhibit A-1 Page 2 of 4 Account Groups Totals Primary Government Component Totals Reporting Entity General General Long (Memorandum Only) Unit (Memorandum Only) Fixed Assets Term Debt 2002 2001 HRA 2002 2001 $ - $ - $32,824,836 $34,734,368 $13,461,539 $46,286,375 $47,116,522 - - - - 463,637 463,637 912,134 - - 1,532,588 1,547,651 61,268 1,593,856 1,550,540 - - 178,986 177,152 54,432 233,418 237,819 - - 1,227,068 1,425,646 - 1,227,068 1,425,646 - - - - 1,596,966 1,596,966 2,171,954 - - 119,602 153,477 40,714 160,316 252,726 - - 654,793 707,497 - 654,793 707,497 - - 55,092 65,320 - 55,092 65,320 - - 2,643 77,432 2,281,038 2,283,681 2,363,536 - - 3,674 14,857 - 3,674 14,857 - - 338,696 222,474 - 338,696 222,474 - - 641,688 558,342 - 641,688 558,342 - - 228,462 186,484 - 228,462 186,484 42,347,327 - 63,231,727 63,267,332 - 63,231,727 63,267,332 - 6,888,526 6,888,526 9,595,015 - 6,888,526 9,595,015 - 5,311,474 5,311,474 3,754,985 - 5,311,474 3,754,985 $42,347,327 $12,200,000 $113,239,855 $116,488,032 $17,959,594 $131,199,449 $134,403,183 See Accompanying Notes to Financial Statements 31 -This page intentionally left blank- 32 Exhibit A-1 Page 3 of 4 CITY OF FRIDLEY, MINNESOTA COMBINED BALANCE SHEET-ALL FUND TYPES AND ACCOUNT GROUPS AND DISCRETELY PRESENTED COMPONENT UNIT December 31, 2002 Governmental Fund Types Special Debt Capital General Revenue Service Projects Liabilities,fund equity and other credits Liabilities Accounts payable $200,158 $97,733 $ - $894 Deposits payable 16,207 10,068 - - Contracts payable - - - 90,659 Salaries payable 409,031 12,164 - 318 Compensated absences payable - - - - Deferred revenue 113,237 232,708 1,057,350 53,347 Due to other funds 666 1,712 - - Due to primary government - - - - Due to other governments 17,415 1,282 - 3,197 Bonds payable - - _ - Loan payable to primary government - - - - Accrued interest payable - - _ - Total liabilities 756,714 355,667 1,057,350 148,415 Fund equity and other credits Contributed capital - - - - Investment in general fixed assets - - - - Retained earnings: Reserved - - - - Unreserved - - _ - Fund balance: Reserved 100,313 - 1,198,117 699,446 Unreserved: Designated 5,015,397 2,720,587 - 6,148,720 Undesignated - - 5,690,409 (293,300) Total fund equity and other credits 5,115,710 2,720,587 6,888,526 6,554,866 Total liabilities, fund equity and other credits $5,872,424 $3,076,254 $7,945,876 $6,703,281 See Accompanying Notes to Financial Statements 33 CITY OF FRIDLEY, MINNESOTA COMBINED BALANCE SHEET-ALL FUND TYPES AND ACCOUNT GROUPS AND DISCRETELY PRESENTED COMPONENT UNIT December 31,2002 Fiduciary Proprietary Fund Types Fund Types Internal Trust and Enterprise Service Agency Liabilities,fund equity and other credits Liabilities Accounts payable $229,749 $86,061 $ - Deposits payable - - - Contracts payable 61,345 - - Salaries payable 48,233 75,732 - Compensated absences payable - 838,905 - Deferred revenue - - 375 Due to other funds 86 - 179 Due to primary government - - - Due to other governments 73,664 - 19,963 Bonds payable 3,155,639 - - Loan payable to primary government - - - Accrued interest payable 64,623 - - Total liabilities 3,633,339 1,000,698 20,517 Fund equity and other credits Contributed capital 9,687,520 1,826,917 - Investment in general fixed assets - - - Retained earnings: Reserved - 404,327 - Unreserved 17,468,932 1,052,443 - Fund balance: Reserved - - - Unreserved: Designated - - - Undesignated - - - Total fund equity and other credits 27,156,452 3,283,687 0 Total liabilities,fund equity and other credits $30,789,791 $4,284,385 $20,517 See Accompanying Notes to Financial Statements 34 Exhibit A-1 Page 4 of 4 Account Groups Totals Primary Government Component Totals Reporting Entity General General Long (Memorandum Only) Unit (Memorandum Only) Fixed Assets Term Debt 2002 2001 HRA 2002 2001 $ - $ - $614,595 $725,295 $251,192 $865,787 $785,245 - - 26,275 42,246 - 26,275 42,246 - - 152,004 2,475 - 152,004 267,113 - - 545,478 459,639 4,474 549,952 461,286 - - 838,905 765,918 - 838,905 765,918 - - 1,457,017 1,582,700 32,873 1,489,890 1,626,635 - - 2,643 77,432 2,281,038 2,283,681 2,363,536 - - - - 3,674 3,674 14,857 - - 115,521 104,816 - 115,521 104,816 - 12,200,000 15,355,639 16,863,709 - 15,355,639 16,863,709 - - - - 654,793 654,793 707,497 - - 64,623 71,609 - 64,623 71,609 0 12,200,000 19,172,700 20,695,839 3,228,044 22,400,744 24,074,467 - - 11,514,437 11,884,427 - 11,514,437 11,884,427 42,347,327 - 42,347,327 42,383,633 - 42,347,327 42,383,633 - - 404,327 9,523,463 - 404,327 9,523,463 - - 18,521,375 9,157,029 - 18,521,375 9,157,029 - - 1,997,876 1,360,692 4,626,566 6,624,442 6,562,646 - - 13,884,704 13,063,664 - 13,884,704 13,063,664 - - 5,397,109 8,419,285 10,104,984 15,502,093 17,753,854 42,347,327 0 94,067,155 95,792,193 14,731,550 108,798,705 110,328,716 $42,347,327 $12,200,000 $113,239,855 $116,488,032 $17,959,594 $131,199,449 $134,403,183 See Accompanying Notes to Financial Statements 35 CITY OF FRIDLEY, MINNESOTA COMBINED STATEMENT OF REVENUES, EXPENDITURES,AND CHANGES IN FUND BALANCE -ALL GOVERNMENTAL FUND TYPES AND EXPENDABLE TRUST FUNDS AND DISCRETELY PRESENTED COMPONENT UNIT Year Ended December 31, 2002 Governmental Fund Types Special Debt Capital General Revenue Service Projects Revenues: Taxes $4,983,687 $ - $ - $81,970 Special assessments 1,545 - 408,668 21,778 Licenses and permits 476,600 171,076 - - Intergovernmental revenue 2,722,886 889,445 - 502,290 Charges for services 1,317,924 213,858 - - Fines and forfeits 183,170 20,418 - - Investment income 172,427 66,783 157,822 196,699 Miscellaneous 227,045 7,735 34,724 20,700 Total revenues 10,085,284 1,369,315 601,214 823,437 Expenditures: Current: General government 2,119,167 1,143,270 - - Public safety 4,853,040 52,435 - - Municipal center 225,068 - - - Public works 2,770,570 - - 295,000 Community development 710,780 - - - Recreation and naturalist 1,139,351 - - - Debt service - - 1,836,471 - Capital outlay 312,989 73,305 - 976,439 Total expenditures 12,130,965 1,269,010 1,836,471 1,271,439 Excess (deficiency)of revenues over(under)expenditures (2,045,681) 100,305 (1,235,257) (448,002) Other financing sources (uses): Sale of fixed assets 5,799 - - - Operating transfers in 1,016,300 141,611 - 2,903,770 Operating transfers out (25,059) (378,281) (3,037,473) (128,581) Operating transfers from component unit - - 1,655,063 - Operating transfers to component unit - - (88,822) - Operating transfers from primary government - - - - Operating transfers to primary government - - - - Total other financing sources (uses) 997,040 (236,670) (1,471,232) 2,775,189 Excess (deficiency)of revenues and other financing sources over(under)expenditures and other financing uses (1,048,641) (136,365) (2,706,489) 2,327,187 Fund balance-January 1 6,142,449 2,856,952 9,595,015 4,227,679 Prior period adjustment - - - - Fund balance-January 1 as restated 6,142,449 2,856,952 9,595,015 4,227,679 Residual equity transfer 21,902 - - - Fund balance-December 31 $5,115,710 $2,720,587 $6,888,526 $6,554,866 See Accompanying Notes to Financial Statements 36 Exhibit A-2 Fiduciary Fund Type Totals Primary Government Component Totals Reporting Entity Expendable (Memorandum Only) Unit (Memorandum Only) Trust 2002 2001 HRA 2002 2001 $ - $5,065,657 $4,151,530 $2,784,214 $7,849,871 $7,513,870 - 431,991 427,492 - 431,991 427,492 - 647,676 776,892 - 647,676 776,892 - 4,114,621 4,032,903 63,631 4,178,252 4,042,421 - 1,531,782 1,471,113 - 1,531,782 1,471,113 - 203,588 211,487 - 203,588 211,487 356 594,087 1,117,260 282,218 876,305 1,701,828 - - 290,204 217,023 222,873 513,077 620,049 356 12,879,606 12,405,700 3,352,936 16,232,542 16,765,152 - 3,262,437 3,004,385 454,561 3,716,998 3,576,184 - 4,905,475 4,467,947 - 4,905,475 4,467,947 - 225,068 241,662 - 225,068 241,662 - 3,065,570 2,863,228 - 3,065,570 2,863,228 - 710,780 708,749 - 710,780 708,749 - 1,139,351 1,106,058 - 1,139,351 1,106,058 - 1,836,471 1,844,640 34,724 1,871,195 1,881,904 - 1,362,733 1,877,602 1,236,583 2,599,316 2,639,650 0 16,507,885 16,114,271 1,725,868 18,233,753 17,485,382 356 (3,628,279) (3,708,571) 1,627,068 (2,001,211) (720,230) - 5,799 31,531 - 5,799 31,531 - 4,061,681 1,901,616 5,783 4,067,464 5,042,930 - (3,569,394) (1,458,947) (5,783) (3,575,177) (4,600,261) - 1,655,063 1,573,296 - 1,655,063 1,573,296 - (88,822) (88,822) - (88,822) (88,822) - - - 88,822 88,822 88,822 - - - (1,655,063) (1,655,063) (1,573,296) 0 2,064,327 1,958,674 (1,566,241) 498,086 474,200 356 (1,563,952) (1,749,897) 60,827 (1,503,125) (246,030) 21,546 22,843,641 24,593,538 14,536,523 37,380,164 37,501,194 - - - 134,200 134,200 125,000 21,546 22,843,641 24,593,538 14,670,723 37,514,364 37,626,194 (21,902) - - - - - $0 $21,279,689 $22,843,641 $14,731,550 $36,011,239 $37,380,164 See Accompanying Notes to Financial Statements 37 CITY OF FRIDLEY, MINNESOTA COMBINED STATEMENT OF REVENUES, EXPENDITURES,AND CHANGES IN FUND BALANCE -BUDGET AND ACTUAL GENERAL, SPECIAL REVENUE AND BUDGETED CAPITAL PROJECTS FUND TYPES Year Ended December 31, 2002 General Special Revenue Funds Variance Variance Favorable Favorable Budget Actual (Unfavorable) Budget Actual (Unfavorable) Revenues: Taxes $5,552,313 $4,983,687 ($568,626) $ - $ - $ - Special assessments 7,500 1,545 (5,955) - - - Licenses and permits 914,300 476,600 (437,700) 165,000 171,076 6,076 Intergovernmental revenue 2,169,701 2,722,886 553,185 888,781 889,445 664 Charges for services 1,332,313 1,317,924 (14,389) 206,140 213,858 7,718 Fines and forfeits 190,500 183,170 (7,330) 20,418 20,418 - Investment income 450,000 172,427 (277,573) 102,390 66,783 (35,607) Miscellaneous 169,582 227,045 57,463 22,700 7,735 (14,965) Total revenues 10,786,209 10,085,284 (700,925) 1,405,429 1,369,315 (36,114) Expenditures: Current: General government 2,296,934 2,119,167 177,767 1,150,641 1,143,270 7,371 Public safety 4,940,856 4,853,040 87,816 52,435 52,435 - Municipal center 247,693 225,068 22,625 - - - Public works 2,839,318 2,770,570 68,748 - - - Community development 738,851 710,780 28,071 - - - Recreation and naturalist 1,193,713 1,139,351 54,362 - - - Capital outlay 349,665 312,989 36,676 84,703 73,305 11,398 Total expenditures 12,607,030 12,130,965 476,065 1,287,779 1,269,010 18,769 Excess (deficiency)of revenues over(under)expenditures (1,820,821) (2,045,681) (224,860) 117,650 100,305 (17,345) Other financing sources (uses): Sale of fixed assets 30,000 5,799 (24,201) - - - Operating transfers in 1,016,300 1,016,300 - 141,611 141,611 - Operating transfers out (53,035) (25,059) 27,976 (378,281) (378,281) - Total other financing sources (uses) 993,265 997,040 3,775 (236,670) (236,670) 0 Excess (deficiency)of revenues and other financing sources over(under) expenditures and other financing uses ($827,5561 (1,048,641) ($221,085) ($119,020) (136,365) ($17,345) Fund balance-January 1 6,142,449 2,856,952 Residual equity transfer 21,902 - Fund balance-December 31 $5,115,710 $2,720,587 See Accompanying Notes to Financial Statements 38 Exhibit A-3 Totals Budgeted Capital Projects Funds (Memorandum Only) Variance Variance Favorable 2002 Favorable 2001 Budget Actual (Unfavorable) Budget Actual (Unfavorable) Actual $90,718 $81,970 ($8,748) $5,643,031 $5,065,657 ($577,374) $4,151,530 - 1,327 1,327 7,500 2,872 (4,628) 6,265 - - - 1,079,300 647,676 (431,624) 776,892 223,007 502,290 279,283 3,281,489 4,114,621 833,132 4,032,903 - - - 1,538,453 1,531,782 (6,671) 1,471,113 - - - 210,918 203,588 (7,330) 211,487 417,225 193,153 (224,072) 969,615 432,363 (537,252) 686,445 30,000 7,051 (22,949) 222,282 241,831 19,549 150,885 760,950 785,791 24,841 12,952,588 12,240,390 (712,198) 11,487,520 - - - 3,447,575 3,262,437 185,138 3,004,385 - - - 4,993,291 4,905,475 87,816 4,467,947 - - - 247,693 225,068 22,625 241,662 252,840 252,840 - 3,092,158 3,023,410 68,748 2,786,378 - - - 738,851 710,780 28,071 708,749 - - - 1,193,713 1,139,351 54,362 1,106,058 228,184 225,529 2,655 662,552 611,823 50,729 943,698 481,024 478,369 2,655 14,375,833 13,878,344 497,489 13,258,877 279,926 307,422 27,496 (1,423,245) (1,637,954) (214,709) (1,771,357) - - - 30,000 5,799 (24,201) 31,531 2,687,443 2,687,443 - 3,845,354 3,845,354 - 984,361 (128,581) (128,581) - (559,897) (531,921) 27,976 (1,216,447) 2,558,862 2,558,862 0 3,315,457 3,319,232 3,775 (200,555) $2,838,788 2,866,284 $27,496 $1,892,212 1,681,278 ($210,934) (1,971,912) 3,981,883 12,981,284 14,747,542 - 21,902 205,654 $6,848,167 $14,684,464 $12,981,284 See Accompanying Notes to Financial Statements 39 Exhibit A-4 CITY OF FRIDLEY, MINNESOTA COMBINED STATEMENT OF REVENUES, EXPENSES AND CHANGES IN RETAINED EARNINGS -ALL PROPRIETARY FUND TYPES Year Ended December 31, 2002 Proprietary Fund Types Totals Internal (Memorandum Only) Sales and cost of sales: Enterprise Service 2002 2001 Sales $5,296,231 $ - $5,296,231 $5,011,326 Cost of sales 4,182,313 - 4,182,313 3,907,397 Gross profit 1,113,918 0 1,113,918 1,103,929 Operating revenues: Water sales and sewer rents 5,016,233 - 5,016,233 4,994,669 Charges for services - 346,377 346,377 693,554 Other revenues 8,630 44,173 52,803 67,013 Total operating revenues 5,024,863 390,550 5,415,413 5,755,236 Operating expenses: Personal services 1,574,336 10,498 1,584,834 1,532,687 Supplies and other charges 3,281,145 194,769 3,475,914 4,222,413 Depreciation 1,087,862 124,991 1,212,853 1,201,881 Total operating expenses 5,943,343 330,258 6,273,601 6,956,981 Operating income(loss) 195,438 60,292 255,730 (97,816) Nonoperating revenues (expenses): Intergovernmental revenue 30,674 - 30,674 - Investment income 217,095 96,629 313,724 586,962 Debt service (159,526) - (159,526) (176,142) Special assessments 7,944 - 7,944 9,378 Gain (loss)on disposal of fixed assets (81,038) - (81,038) 7,400 Other revenues - - - 3,500 Total nonoperating revenues(expenses) 15,149 96,629 111,778 431,098 Income before operating transfers 210,587 156,921 367,508 333,282 Operating transfers: Operating transfer in - 74,881 74,881 7,331 Operating transfer out (508,609) (58,559) (567,168) (450,000) Total operating transfers (508,609) 16,322 (492,287) (442,669) Net income (loss) (298,022) 173,243 (124,779) (109,387) Credit arising from transfer of depreciation on contributed capital 369,989 - 369,989 370,970 Retained earnings-January 1 17,396,965 1,283,527 18,680,492 18,418,909 Retained earnings-December 31 $17,468,932 $1,456,770 $18,925,702 $18,680,492 See Accompanying Notes to Financial Statements 40 Exhibit A-5 CITY OF FRIDLEY, MINNESOTA COMBINED STATEMENT OF CASH FLOWS ALL PROPRIETARY FUND TYPES Year Ended December 31,2002 Proprietary Fund Types Totals Internal (Memorandum Only) Enterprise Service 2002 2001 Cash flows from operating activities: Operating income(loss) $195,438 $60,292 $255,730 ($97,816) Adjustments to reconcile operating income(loss)to net cash flows from operating activities: Depreciation 1,087,862 124,991 1,212,853 1,201,881 Change in assets and liabilities: Decrease (increase)in receivables (7,129) 38,657 31,528 50,596 Decrease (increase)in due from other funds 83 - 83 911 Decrease (increase)in due from component unit - (2) (2) 272 Decrease (increase)in due from other governments 805 4,290 5,095 (5,269) Decrease (increase)in inventories (75,469) - (75,469) 131,139 Decrease (increase)in prepaid items (41,978) - (41,978) (929) Increase (decrease) in payables (106,368) 90,540 (15,828) 74,607 Net cash flows from operating activities 1,053,244 318,768 1,372,012 1,355,392 Cash flows from noncapital financing activities: Intergovernmental revenue 30,674 - 30,674 - Operating transfers in (out) (508,609) 16,322 (492,287) (442,669) Special assessment collections 23,089 - 23,089 32,879 Other non-capital items - - - 3,500 Net cash flows from noncapital financing activities (454,846) 16,322 (438,524) (406,290) Cash flows from capital and related financing activities: Acquisition and construction of fixed assets (1,064,303) (243,057) (1,307,360) (984,332) Principal paid on revenue bonds (360,000) - (360,000) (350,000) Interest and paying agent fees on revenue bonds (157,597) - (157,597) (174,212) Proceeds from sale of fixed assets 12,768 - 12,768 19,134 Net cash flows from capital and related financing activities (1,569,132) (243,057) (1,812,189) (1,489,410) Cash flows from investing activities: Investment income 217,095 96,629 313,724 586,962 Net increase (decrease)in cash and cash equivalents (753,639) 188,662 (564,977) 46,654 Cash and cash equivalents-January 1 8,830,747 3,632,284 12,463,031 12,416,377 Cash and cash equivalents-December 31 $8,077,108 $3,820,946 $11,898,054 $12,463,031 See Accompanying Notes to Financial Statements 41 -This page intentionally left blank- 42 CITY OF FRIDLEY, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2002 1. Summary of Significant Accounting Policies The City of Fridley 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 accounting policies of the City of Fridley conform to generally accepted accounting policies applicable to governmental units. The following is a summary of the more significant policies: A. Principles used in the determination of the scope of the Governmental entity The City has implemented Government Accounting Standards Boards Statement 14, The Financial Reporting Entity. As required by Statement 14, these financial statements present the City and its component units. The component unit discussed below is included in the reporting entity because of the significance of their operation and financial relationship with the City. 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. Complete financial statements of the HRA may be obtained from William W. Burns, Executive Director, 6431 University Avenue NE, Fridley, Minnesota 55432. B. Fund Accounting The accounts of the City are organized on the basis of funds and account groups, each of which is considered a separate accounting entity. The operations of each fund are accounted for with a separate set of self-balancing accounts that comprise its assets, liabilities, fund equity, revenues and expenditures, or expenses, as appropriate. Government resources are allocated to and accounted for in individual funds based upon the purposes for which they are to be spent and the means by which spending activities are controlled. The various funds are grouped, in the financial statements in this report, into seven generic fund types and three broad categories as follows: GOVERNMENTAL FUNDS Governmental Funds include the General Fund, Special Revenue Funds, Debt Service Funds and Capital Projects Funds. The Governmental Fund measurement focus is based upon the determination of financial position and changes in financial position (sources, uses and balances of financial resources rather than upon net income determination). These funds are maintained on the modified accrual basis of accounting (explained further under Significant Accounting Policies). 43 CITY OF FRIDLEY, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2002 General Fund - The General Fund is the primary operating fund of the City. It is used to account for all financial resources except those required to be accounted for in another fund. Special Revenue Funds -Special Revenue Funds are used to account for the proceeds of certain specific revenue sources that are restricted to expenditures for specified purposes. Debt Service Funds - Debt Service Funds are used to account for the accumulation of resources for, and the payment of, general long-term debt principal, interest, and related costs. Capital Projects Funds - Capital Projects Funds are used for the acquisition or construction of major capital facilities other than those financed by Proprietary Funds. PROPRIETARY FUNDS Proprietary Funds include Enterprise Funds and Internal Service Funds. The Proprietary Fund measurement focus is based upon the determination of net income, financial position and changes in financial position. The accounting principles generally accepted in the United States of America here are those applicable to similar businesses in the private sector and thus these funds are maintained on the accrual basis of accounting. Enterprise Funds - Enterprise Funds are used to account for operations that are financed and operated in a manner similar to private business enterprises - where the intent is that the costs (expenses, including depreciation) of providing goods or services to the general public on a continuing basis be financed or recovered primarily through user charges. Internal Service Funds - Internal Service Funds are used to account for the financing of goods or services provided by one department to other departments of the City on a cost- reimbursement basis. FIDUCIARY FUNDS Fiduciary Funds include Expendable Trust and Agency Funds. The measurement focus of the Expendable Trust Funds is the same as Governmental Funds and is, therefore, maintained on the modified accrual basis of accounting. Trust Fund - The Trust Fund is used to account for assets held by the City in a trustee capacity for individuals, private organizations, other governments, and/or all other funds. The City's Trust Fund is classified as an Expendable Trust Fund and is accounted for in essentially the same manner as Governmental Funds. Agency Funds - Agency Funds are clearing type funds for the collection of taxes or deposits held in trust, on behalf of individuals, private organizations and other governments. The funds are custodial in nature (assets equal liabilities) and do not involve measurement of results of operation. 44 CITY OF FRIDLEY, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2002 C. Measurement Focus The accounting and reporting treatment applied to a fund is determined by its measurement focus. All Governmental Funds and Expendable Trust Funds are accounted for on a spending or "current financial resources" measurement focus. This means that only current assets and current liabilities are generally included on the balance sheets. (Their reported fund balance is considered a measure of"available spendable resources.") Governmental Fund operating statements present increases (revenues and other financing sources) and decreases (expenditures and other financing uses) in net current assets. Accordingly, they are said to present a summary of sources and uses of "available spendable resources"during a period. Fixed assets used in Governmental Fund type operations (general fixed assets) are recorded at historical costs and accounted for in the General Fixed Assets Account Group. Public domain ("infrastructure")general fixed assets consisting of roads, bridges, curbs and gutters, are capitalized along with other general fixed assets. No depreciation has been provided on general fixed assets. Long-term liabilities expected to be financed from Governmental Funds are accounted for in the General Long-Term Debt Account Group, not in the Governmental Funds. These two account groups are not "funds." They are concerned only with the measurement of financial position. They are not involved with measurement of results of operations. Noncurrent portions of long-term receivables due to Governmental Funds are reported on their balance sheets, in spite of their measurement focus. However, special reporting treatments are used to indicate in all Governmental Funds that they should not be considered "available spendable resources," since they do not represent net current assets. Recognition of revenues in these funds represented by noncurrent receivables is deferred until they become current receivables. Because of their spending measurement focus, expenditure recognition for Governmental Fund types excludes amounts represented by noncurrent liabilities. Since they do not affect net current assets, such long-term amounts are not recognized as Governmental Fund type expenditures or fund liabilities. They are instead reported as liabilities in the General Long-Term Debt Account Group. Proprietary Funds are accounted for on a cost of services or "capital maintenance" measurement focus. This means that all assets, including fixed assets, and all liabilities, including long-term liabilities, associated with their activity are included on their balance sheets. Their reported fund equity is segregated into contributed capital and retained earnings components. Proprietary Fund type operating statements present increases (revenues)and decreases (expenses)in net total assets. 45 CITY OF FRIDLEY, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2002 D. Basis of Accounting Basis of accounting refers to when revenues and expenditures or expenses are recognized in the accounts and reported in the financial statements. Basis of accounting relates to the timing of the measurements made, regardless of the measurement focus applied. Governmental Funds and Expendable Trust Funds are accounted for using the modified accrual basis of accounting. Their revenues are recognized when they become susceptible to accrual, i.e., both measurable and available. Substantially all revenues are accrued. Expenditures are generally recognized under the modified accrual basis of accounting when the related fund liability is incurred, except for principal and interest on general long- term debt which is recognized when due. Agency Fund assets and liabilities are accounted for on the modified accrual basis of accounting. Proprietary Funds are accounted for using the accrual basis of accounting. Revenues are recognized when they are earned, and expenses are recognized when they are incurred. The City has implemented Statement No. 20 of the Governmental Accounting Standards Board (GASB), Accounting and Financial Reporting for Proprietary Funds and Other Governmental Entities That Use Proprietary Fund Accounting. This statement provides guidance on business-type accounting and financial reporting for proprietary activities. Proprietary activities should apply to all applicable GASB pronouncements as well as the following pronouncements issued on or before November 30, 1989, unless those pronouncements conflict with or contradict GASB pronouncements: Statements of Interpretations of the Financial Accounting Standards Board (FASB), Accounting Principles Board Opinion, and Accounting Research Bulletins of the Committee on Accounting Procedures. In addition, a proprietary activity may elect to apply all FASB Statements and Interpretations issued after November 30, 1989, except for those that conflict with GASB pronouncements. The City has elected not to apply FASB Statements and Interpretations issued after November 30, 1989. E. Budgets and Budgetary Accounting 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. 46 CITY OF FRIDLEY, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2002 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. 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, Special Revenue Funds and Capital Improvement Capital Projects Fund. 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. (See Note 16 for further information on budgeted and unbudgeted Capital Projects Funds.) 8. 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. 9. 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. 10. 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. 47 CITY OF FRIDLEY, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2002 F. Assets, Liabilities and Fund Equity 1) Cash and Cash Equivalents,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. Investments with original maturities of three months or less are classified as cash equivalents. The City provides temporary advances to funds that have insufficient cash balances by means of an advance from the Internal Service and Enterprise Funds. This is classified as an interfund payable in the fund receiving the advance and as an offsetting interfund receivable in the Internal Service and Enterprise Funds. In accordance with authorized investment laws, the City invests in various mortgage- backed securities, such as collateralized mortgage obligations. These securities are reported at cost in the balance sheet. They are reported in aggregate as U.S. Government Agencies in the disclosure of custodial credit risk. (See Note 2 on Investments). 2) Receivables Property Taxes The property tax levy was set by the City Council in November and was certified to the County for collection the following year. In Minnesota, counties act as collection agents for all property taxes. The County spreads the levies over all taxable property in the City. Such taxes become receivables of the City as of January 1. Property taxes are payable in equal installments by property owners to the County as follows: Personal property- February 28 and June 30 Real property-May 15 and October 15 The County remits the collections to the City and other taxing districts four times a year, in January, April, July and December. During 2002 taxes were adjusted downward $3,275 by Anoka County due to abatements and court ordered settlements. Unpaid taxes at December 31 become liens on the respective property and are classified in the financial statements as delinquent taxes receivable. The receivable is fully offset by deferred revenue as it is not available to finance current expenditures. Property taxes on residential and 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. 48 CITY OF FRIDLEY, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2002 Special Assessments Receivable 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 (including interest) is handled by the County in the same manner as property taxes. Property owners are allowed to prepay total future installments without interest or prepayment penalties. Special assessments receivable includes the following components: Unremitted - amounts collected by Anoka County and not remitted to the City prior to year end. Delinquent-amounts billed to property owners but not paid. Deferred - assessment installments which will be billed to property owners in future years. 3) Inventories Inventory in the General Fund consists of expendable supplies held for consumption and is recorded at cost on a first in first out basis. The cost is recorded as an expenditure at the time individual inventory items are used. Reported inventories are equally offset by a fund balance reserve which indicates that they do not constitute "available spendable resources" even though they are a component of net current assets. Proprietary Funds inventory items are expensed at the time they are sold or used. (Consumption method). Liquor inventories are recorded on the average cost basis. 4) Property and Equipment/General Fixed Assets All fixed assets are recorded at historical cost or estimated historical cost, if the original cost was not available. Donated fixed assets are carried at the fair market value on the date donated. Additions to general fixed assets for general City purposes, including public domain (infrastructure) fixed assets are recorded as expenditures of the applicable fund in the year in which the fixed asset was purchased or constructed, and are capitalized in the General Fixed Asset Account Group. Depreciation is not recorded on these assets. 49 CITY OF FRIDLEY, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2002 Property and equipment of the Proprietary Funds are capitalized in these funds. Depreciation of exhaustible property and equipment of the Proprietary Funds is charged as an expense against their operations and accumulated depreciation is reported on Proprietary Fund balance sheets. Depreciation has been provided over the estimated useful lives using the straight line method. The estimated useful lives are as follows: Improvements Other Than Building 20 -50 years Buildings 20- 50 years Machinery and Equipment 5- 10 years Land N/A 5) 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. 6) Encumbrances Encumbrances represent purchase commitments. Encumbrances outstanding at year end are reported as reservations of fund balance since they do not constitute expenditures or liabilities. G. Revenues, Expenditures and Expenses The following transactions are accounted for as described below: General Property Taxes/Special Assessments - Revenue is recognized in the year of collection, with amounts due from the County and received early in the following year set up as receivable (unremitted receivables). Uncollected (delinquent) taxes and special assessments receivable are fully offset by deferred revenue until they become available to finance current expenditures. General property taxes and special assessments are recognized when cash is received to prevent overstating due to delinquencies. Principal Portion of Special Assessments - Revenue is recognized in the year the assessments are collected. Interest Revenue on Special Assessments Receivable - Interest revenue is recognized in the year of collection of the current principal installment. 50 CITY OF FRIDLEY, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2002 Intergovernmental Revenue - Intergovernmental revenue in the form of state aids are recorded as revenue when allocations are made by statutory formula. Other intergovernmental revenue received as reimbursements for specific purposes or projects are recognized based upon the expenditures incurred. Intergovernmental revenue received through abatements or shares are recorded in the year determined to be measurable and available. Investment Income- Interest is recorded as revenue in the year earned. Water and Sewer Service Charges - Revenue is recognized when earned with no allowance for uncollectibles as delinquent accounts are certified as a special assessment lien against the property billed. Unbilled service charges are included in receivables at year end. Other Revenues - Licenses, fines, penalties and miscellaneous revenues are recorded as revenues when received in cash because they are generally not measurable until actually received. Interest Expense on Bonded Indebtedness - Interest expense is recorded as an expenditure when paid in the Governmental Fund types and accrued when incurred in the Proprietary Fund types. Bond and Interest Payments Due January 1 - Expenditures are recognized when amounts are remitted to the paying agent(usually in December)for payment of bonds and interest. H. Comparative Data Comparative total data for the prior year have been presented in the accompanying combined financial statements in order to provide an understanding of changes in the City's financial position and operations. However, comparative (i.e., presentation of prior year totals by fund type) data have not been presented in all statements since their inclusion would make the statements unduly complex and difficult to read. Total columns on the combined statements are captioned "Memorandum Only" to indicate that they are presented only to facilitate financial analysis. Data in these columns do not present financial position, results of operations, or cash flows in conformity with accounting principles generally accepted in the United States of America. Interfund eliminations have not been made in the aggregation of this data. Use of Estimates The preparation of financial statements in accordance with accounting principles generally accepted in the United States of America (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. 51 CITY OF FRIDLEY, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2002 2. Deposits and Investments A. Deposits In accordance with applicable Minnesota Statutes, the City maintains deposits at depository banks authorized by the City Council. All such depositories are members of the Federal Reserve System. Minnesota Statutes require that all deposits be protected by insurance, surety bond or collateral. If collateral is pledged as protection for the deposits, State Statutes require that it be held by a third party in the City's name. The market value of the collateral must, at a minimum, be 110% of the deposits not covered by insurance or bonds (140% in the case of mortgage backed collateral). Repurchase agreements are intentionally overcollateralized at 105% to insure that the safety of investment principal is attained and losses do not occur from rapid overnight deterioration. Due to wire transfers and tax settlements credited by the bank at the end of the day, there were several occasions during the year where overnight deposits were undercollateralized. On each occasion, the uncollateralized balance was invested with another financial institution on the following day. Balances at December 31, 2002 are as follows: Bank Carrying Balances Amount City $151,794 $1,321,144 HRA 382,256 46,464 The entire bank balances are covered by Federal Depository Insurance or collateral held by the City/HRA's agent in the City/HRA's name. B. Investments The City is authorized by Minnesota Statutes to invest in the following: (a) Direct obligations or obligations guaranteed by the United States or its agencies. (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. (c) General obligations of the State of Minnesota or any of its municipalities. (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. 52 CITY OF FRIDLEY, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2002 (f) Repurchase or reserve 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, or certain Minnesota securities broker dealers. (g) Future contracts sold under authority of Minnesota Statutes 471.56, subd. 5. The City invests in collateralized mortgage obligations (a form of mortgage backed security). These securities allow cash flows to be split so that different classes of securities with different maturities and coupons may be created. The City, by policy, is only allowed to invest in these types of securities if they are classified as a Planned Amortization Class 1 (PAC 1)with a stated maturity of 3 years or less. The City's investments are categorized below to give an indication of the level of risk assumed at year end. The level of risk is defined by the following criteria set out by the Governmental Accounting Standards Board within Statement No. 3. Category 1 includes investments that are insured or registered for which the securities are held by the City or its agent in the City's name. Category 2 includes uninsured and unregistered investments for which the securities are held by the counterparty's trust department or agent in the City's name. Category 3 includes uninsured and unregistered investments for which the securities are held by the counterparty, or by its trust department or agent but not in the City's name. The fair value and credit risk of the investments held by the City at year end are as follows: Credit Risk Category Fair Value Securities Type 1 2 3 Amount U.S. government agencies or instrumentalities $17,513,423 $ - $ - $17,513,423 Investments not subject to categorization: Mutual funds 13,990,269 Total investments $31,503,692 53 CITY OF FRIDLEY, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2002 The fair value and credit risk of the investments held by the HRA at year end are as follows: Credit Risk Category Fair Value Securities Type 1 2 3 Amount Commercial paper $416,985 $ - $ - $416,985 U.S. government securities 224,817 - - 224,817 U.S. government agencies or instrumentalities 3,045,320 - - 3,045,320 $3,687,122 $0 $0 3,687,122 Investments not subject to categorization: Money market fund 46,653 Mutual fund 10,144,937 Total investments $13,878,712 3. Special Assessments Receivable Special assessments receivable at December 31, 2002 are as follows: Capital Special Special Improvements Assessment Public Assessment Capital Capital Utilities General Debt Service Projects Projects Enterprise Total Unremitted $ - $2,226 $65 $ - $12,622 $14,913 Delinquent 1,294 2,983 169 - 501 4,947 Deferred 4,083 1,054,367 3,192 46,177 99,389 1,207,208 Total $5,377 $1,059,576 $3,426 $46,177 $112,512 $1,227,068 54 CITY OF FRIDLEY, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2002 4. Due From Other Governments Amounts due from other governments at December 31, 2002 are as follows: General Fund: State of Minnesota: a) PERA and other reimbursements $342 b) Department of Revenue 741 Anoka County: a) Fines and forfeits 12,144 Other 3,929 Total General Fund $17,156 Special Revenue Funds: Anoka County: a)Community Development Block Grant 3,070 b)Recycling 56,265 c) Drug forfeitures 11,000 d)Youth tobacco prevention 7,719 Federal 75,580 Met Council -Section 8 7,654 Total Special Revenue Funds $161,288 Capital Projects Funds: Capital Improvement Fund: State of Minnesota: State Aid Maintenance $156,937 Enterprise Funds: City of Coon Rapids $3,315 55 CITY OF FRIDLEY, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2002 5. Changes in General Fixed Assets A summary of changes in general fixed assets are as follows: Balance Balance January 1, December 31, 2002 Additions Deletions Adjustments Reclassification 2002 Land $2,735,987 $27,500 $ - ($6,362) $85,157 $2,842,282 Buildings 6,984,054 199,667 - (39,503) 35,017 7,179,235 Improvements other than buildings 26,337,891 828,431 38,454 (718,151) 45,887 26,455,604 Machinery and equipment 6,325,702 302,264 63,202 (528,497) (166,061) 5,870,206 Total $42,383,634 $1,357,862 $101,656 ($1,292,513) $0 $42,347,327 The adjustments above are related to changes in the capitalization threshold policy from $2,000 to $5,000. 6. Summary of Proprietary Fund Property and Equipment A summary of Proprietary Fund type property, plant and equipment at December 31, 2002 follows: Internal Enterprise Service Funds Funds Public Information Liquor Utilities Systems Total Land $151,946 $154,531 $ - $306,477 Buildings 130,211 1,819,242 - 1,949,453 Improvements other than buildings 650,245 10,297,587 - 10,947,832 Machinery and equipment 204,876 1,944,570 1,140,240 3,289,686 Water and sewer lines - 19,615,610 - 19,615,610 1,137,278 33,831,540 1,140,240 36,109,058 Less: Accumulated depreciation (340,117) (14,206,726) (677,815) (15,224,658) Net property and equipment $797,161 $19,624,814 $462,425 $20,884,400 56 CITY OF FRIDLEY, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2002 7. Long-Term Debt The following is a summary of long-term debt transactions of the City for the year ended December 31, 2002: Proprietary General Long -Term Debt Account Group Funds General Obligation Bonds General Special Tax Obligation Assessment Increment Total Revenue Bonds Debt payable-January 1, 2002 $615,000 $12,735,000 $13,350,000 $3,530,000 Debt issued - - - - Debt retired (150,000) (1,000,000) (1,150,000) (360,000) Unamortized discount - - - (14,361) Debt payable- December 31, 2002 $465,000 $11,735,000 $12,200,000 $3,155,639 57 CITY OF FRIDLEY, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2002 Bonds payable at December 31, 2002 are comprised of the following individual issues (in thousands of dollars): General Long-Term Debt: $1,020,000 Special Assessment Bonds of 1991 due in varying annual installments of$35,000-$90,000 through February 1, 2005; interest at 5.60%-6.60%. $110 $855,000 General Obligation Special Assessment bonds of 1992, Series A, due in varying annual installments of$50,000-$95,000 through February 1,2004; interest at 3.00%-5.25%. 125 $150,000 Special Assessment Bonds of 1994 due in varying annual installments of$5,000-$60,000 through February 1, 2005; interest at 4.75%-6.10%. 80 $320,000 Special Assessment Bonds of 1996 due in varying annual installments of$30,000-$35,000 through February 1,2007; interest at 4.05%-4.95%. 150 $9,575,000 General Obligation Tax Increment Bonds of 1997 due in varying annual installments of$75,000-$1,175,000 through August 1,2009; interest at 4.60%-5.12%. 7,625 $4,185,000 General Obligation Tax Increment Refinancing Bonds of 1998, due in varying annual installments of$75,000-$62,000 through February 1,2012; interest at 5.10%-5.65%. 4,110 Subtotal General Long-Term Debt 12,200 Revenue Bonds: $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%. 265 $335,000 General Obligation Water, Sewer and Storm Water Revenue Bonds of 1994 due in varying annual installments of$5,000-$25,000 through February 1, 2005; interest at 4.75%-6.10%. 125 $2,615,000 General Obligation Water and Storm Water Revenue Bonds of 1996 due in varying annual installments of$65,000-$165,000 through February 1,2012; interest at 4.05%-5.30%. 1,775 $1,180,000 General Obligation Water Revenue Bonds of 1998,due in varying annual installments of$90,000-$130,000 through February 1,2011. 1,005 Unamortized discount (14) Subtotal Revenue Bonds 3,156 Total Bonds Payable $15,356 58 CITY OF FRIDLEY, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2002 The General Obligation Tax Increment Refunding Bonds are payable primarily from tax increment revenue with any deficiency to be provided by general property taxes. General Obligation Special Assessment Bonds are payable from assessments levied against benefited properties. While it is anticipated that the assessment will be adequate to make the required debt payments, the City is responsible for any deficiency that may occur. The General Obligation Revenue Bonds are payable from the net revenues of the City's water, sewer and storm water systems in addition to the general obligation pledge. Annual Requirements to Amortize Long-Term Debt December 31, 2002 General Obligation Bonds Year Ending Special Tax December 31, Assessment Increment-City Revenue Total 2003 $171,607 $1,636,291 $516,355 $2,324,253 2004 139,135 1,733,001 518,240 2,390,376 2005 136,810 1,734,334 523,656 2,394,800 2006 32,213 1,955,451 464,384 2,452,048 2007 32,213 1,955,451 464,384 2,452,048 2008-2012 835,644 5,732,892 1,119,504 7,688,040 $1,347,622 $14,747,420 $3,606,523 $19,701,565 $6,888,526 is available in the Debt Service Funds to service the Special Assessment and Redevelopment Bonds. $5,976,260 is available in the Public Utilities Enterprise Funds, to service the Water, Sewer and Storm Water Revenue Bonds. There are a number of limitations and restrictions contained in the various bond indentures. The City is in compliance with all significant limitations and restrictions. Legal Debt Margin - Under applicable State Statutes, the legal debt margin is 2% of the most recent market value less certain deductions. At December 31, 2002, the legal debt margin was $33,380,154. 8. Defined Benefit Pension Plans-Statewide A. Plan Description All full-time and certain part-time employees of the City are covered by defined benefit plans administered by the Public Employees Retirement Association of Minnesota (PERA). PERA administers the 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. 59 CITY OF FRIDLEY, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2002 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. The benefit provisions stated in the previous paragraphs of this section are current provisions and apply to active plan participants. Vested, terminated employees who are entitled to benefits but are not receiving them yet are bound by the provisions in effect at the time they last terminated their public service. PERA issues a publicly available financial report that includes financial statements and required supplementary information for PERF and PEPFF. That report may be obtained by writing to PERA, 60 Empire Drive#200, St. Paul, Minnesota, 55103-2088 or by calling (651)296-7460 or 1-800-652-9026. B. Funding Policy Minnesota Statutes Chapter 353 sets the rates for employer and employee contributions. These statutes are established and amended by the state legislature. The City makes annual contributions to the pension plans equal to the amount required by state statutes. PERF Basic Plan members and Coordinated Plan members are required to contribute 9.10%and 5.10%, respectively, of their annual covered salary. PEPFF members are required to contribute 6.20%of their annual covered salary. The City is required to contribute the following percentages of annual covered payroll: 11.78%for Basic Plan PERF members, 5.53%for Coordinated Plan PERF members, and 9.30%for PEPFF members. The City's contributions for the last three years which were equal to the contractually required contributions for each year as set by State Statute are as follows: PERF PEPFF 2000 $235,249 $226,412 2001 235,602 238,207 2002 256,281 236,696 C. Public Employees Retirement Association (PERA) -Defined Contribution Plan Description Three council members of the City of Fridley are covered by 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. 60 CITY OF FRIDLEY, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2002 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 six 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 2002 were: Percentage of Amount Covered Payroll Required Employees Employer Employees Employer Rates PEDCP $1,886 $1,886 5.00% 5.00% 5.00% 9. 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. All provisions are within limitations established by Minnesota Statutes. 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 remitted $100,931 and $97,542 in State Aid to the Association for 2002 and 2001, respectively. During 2002 and as of December 31, 2002, the Association held no securities issued by the City or other related parties. 61 CITY OF FRIDLEY, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2002 10. Interfund Receivables and Payables Interfund receivables and payables of the primary government at December 31, 2002 are as follows: Interfund Interfund Receivables Payables Due From/Due To: General Fund $1,891 $666 Special Revenue Fund: HRA Reimbursement Fund - 1,712 Enterprise Funds: Public Utilities Fund 752 - Liquor Fund - 86 Trust and Agency Funds: Hotel/Motel Tax Agency Fund - 179 $2,643 $2,643 Interfund receivables and payables of the HRA component unit at December 31, 2002 is as follows: Interfund Interfund Receivables Payables Due From/Due To: General Fund $2,281,038 $ - Capital Projects Funds: Lake Pointe - 1,080,302 57th Avenue Redevelopment - 124,760 Gateway East - 1,072,163 Gateway West - 3,813 $2,281,038 $2,281,038 62 CITY OF FRIDLEY, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2002 11. Reserved Fund Balances/Retained Earnings The following reservations have been made of various fund balances/retained earnings of the primary government at December 31, 2002: General Fund: Reserved for: Inventory $45,221 Long-term receivables 55,092 Total General Fund 100,313 Debt Service Funds: Reserved for debt service 543,324 Reserved for long-term receivable 654,793 Total Debt Service Funds 1,198,117 Capital Projects Funds: Reserved for encumbrances 699,446 Total Governmental Funds $1,997,876 Retained Earnings: Internal Service Funds: Employee Benefits Fund: Reserved for employee benefits $114,342 Reserved for equipment acquisition 289,985 404,327 Total Proprietary Funds $404,327 The HRA component unit had reserved fund balances at December 31, 2002: Reserved for: Mortgage receivable $1,626,566 Debt service 3,000,000 Total reserved fund balances $4,626,566 63 CITY OF FRIDLEY, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2002 12. Designated Fund Balance The following designations have been made of various fund balances at December 31, 2002: General Fund: Working capital $4,722,911 Subsequent year's expenditures 292,486 Total General Fund 5,015,397 Special Revenue Funds: Cable TV Fund: Cable TV operations 353,085 Solid Waste Abatement: Subsequent years expenditures 31,705 Solid waste abatement operations 21,167 HRA Reimbursement: Professional services 415 Drug and Gambling Forfeiture Fund: Drug and gambling enforcement 46,872 Housing Revitalization Program: Housing revitalization 250,000 F.C.C. Donations: Fridley community center 89,443 Police Activity: Public safety expenditures 1,927,900 Total Special Revenue Funds 2,720,587 Capital Projects Funds: Capital Improvements Fund: Replacement of fixed assets 284,898 Park improvements 1,560,157 Street improvements 4,303,665 Total Capital Projects Funds 6,148,720 Total of designated fund balances $13,884,704 64 CITY OF FRIDLEY, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2002 13. Contributed Capital A reconciliation of contributed capital is as follows: Self Information Public Insurance Systems Utilities Internal Internal Enterprise Service Service Fund Fund Fund Balance-January 1 $10,057,509 $1,000,000 $826,917 Increases: Current capital contributions - - - Decreases: Depreciation of contributed assets (369,989) - - Balance-December 31 $9,687,520 $1,000,000 $826,917 65 CITY OF FRIDLEY, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2002 14. Segment Information for Enterprise Funds The City maintains operating funds for Liquor and Public Utilities (water, sewer, storm sewer operations). Segment information for the year ended December 31, 2002 is as follows: Total Public Enterprise Liquor Utilities Funds Sales(less cost of sales of$4,182,313) $1,113,918 $ - $1,113,918 Operating revenues - 5,024,863 5,024,863 Operating expenses (776,079) (5,167,264) (5,943,343) Operating income (loss) 337,839 (142,401) 195,438 Nonoperating revenues (expenses)- net 11,266 3,883 15,149 Operating transfers in (out) (400,000) (108,609) (508,609) Net income (loss) ($50,895) ($247,127) ($298,022) Depreciation expense included in operating expenses $74,823 $1,013,039 $1,087,862 Property and equipment: Additions (including capital contributions) - 1,064,303 1,064,303 Working capital 1,127,511 8,392,605 9,520,116 Total assets 2,185,756 28,604,035 30,789,791 Bonds payable - 2,785,639 2,785,639 Fund equity: Contributed capital - 9,687,520 9,687,520 Retained earnings 1,924,672 15,544,260 17,468,932 Total fund equity $1,924,672 $25,231,780 $27,156,452 66 CITY OF FRIDLEY, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2002 15. Unbudgeted Capital Projects Funds The City does not budget all Capital Projects Funds, and accordingly, the applicable columns of the Combined Statement of Revenues, Expenditures and Changes in Fund Balance - Budget and Actual (Exhibit A-3) excludes amounts relating to unbudgeted funds. A reconciliation of actual results for budgeted and unbudgeted funds is as follows: Fund Other Balance Financing (Deficit) Sources December 31, Revenues Expenditures (Uses) 2002 All Capital Projects Funds $823,437 $1,271,439 $2,775,189 $6,554,866 Less unbudgeted funds: Special Assessments Fund (37,646) (793,070) (216,327) 293,301 Budgeted Capital Projects Funds $785,791 $478,369 $2,558,862 $6,848,167 16. 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. The City's workers compensation insurance policy is retrospectively rated. With this type of policy, final premiums are determined after loss experience is known. The amount of premium adjustment, if any, is not reasonably estimable and is not recorded until received or paid. 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, are considered to be immaterial. As of December 31, 2002, the Self Insurance Fund has accumulated equity in the amount of $2,016,920 to cover future claims and losses. 67 CITY OF FRIDLEY, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2002 17. Commitments and Continciencies A. 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. B. 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 is 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, 2002. C. 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. 68 CITY OF FRIDLEY, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2002 D. 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, 2002 is as follows: Original 12/31/2002 Interest Maturity Note Principal Balance Rate Date Medtronic $10,000,000 $10,855,469 6.75% August 1, 2025 Rylund 32,000 8,572 8.00% February 1, 2004 McGlynn's 701,172 760,487 9.50% February 1, 2009 Bob's Produce 90,936 12,579 9.50% December 31, 2002 Paschke 60,000 37,452 7.00% August 2, 2005 Linn 175,000 191,810 8.50% February 1, 2012 Onan Murphy 496,303 369,183 8.00% February 1, 2016 Banfill 683,156 834,984 8.00% August 1, 2007 18. Leases A. Lease Expense The City leases space for one of its liquor stores. Total costs for this lease was$74,126 for the year ended December 31, 2002. The future minimum lease payments for this lease is as follows: Year Ending December 31, 2003 $83,319 2004 85,404 2005 85,404 2006 95,850 2007 95,850 Thereafter 725,613 Total $1,171,440 69 CITY OF FRIDLEY, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2002 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 necessary to provide radio communications. For accounting purposes, the leases are considered operating leases. Lease revenue for the year ended December 31, 2002, totaled $74,350. Terms of each lease are as follows: Annual Lease Adjustment Expiration Renewal Lessee Factor* Date Options T-Mobile Greater of 3%or CPI 12/31/06 2 Five Year Renewals AT&T Wireless Greater of 5%or CPI 06/30/05 4 Five Year Renewals Qwest Wireless Greater of 3%or CPI 12/31/07 3 Five Year Renewals Sprint Hwy 65 Greater of 5%or CPI 09/30/05 4 Five Year Renewals Sprint Well#13 Greater of 5%or CPI 09/30/03 4 Five Year Renewals *Amounts for future lease receipts are unavailable because they are based on the Consumer Price Index. 19. 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, 2002, there were 28 series of Industrial Revenue Bonds issued. The aggregate principal amount payable for the six series issued after July 1, 1995 was $21,475,000. 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. 20. Prior Period Adjustment In 1999 the HRA deposited $134,200 in an escrow account anticipating future development in the North Area/University Industrial Park. This amount was shown as an expenditure in the 1999 financial statements. A project has not developed as of December 31, 2002 and therefore the January 1, 2002 fund balance has been increased by$134,200. 70 CITY OF FRIDLEY, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2002 21. Deficit Fund Balances At December 31, 2002, individual funds with a deficit fund balance is as follows: Capital Project Funds: Special Assessment Capital Project Fund $293,301 22. 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. 71 -This page intentionally left blank- 72 GENERAL FUND 73 Exhibit B-1 CITY OF FRIDLEY, MINNESOTA GENERAL FUND COMPARATIVE BALANCE SHEET December 31, 2002 and 2001 Assets 2002 2001 Cash and investments $5,332,858 $6,217,785 Receivables: Accounts 120,750 99,960 Taxes: Unremitted 65,407 43,860 Delinquent 107,860 127,208 Special assessments: Unremitted - 230 Delinquent 1,294 1,754 Deferred 4,083 2,197 Interest 119,602 153,477 Developer note 55,092 65,320 Due from other funds 1,891 76,598 Due from component unit 1,210 13,040 Due from other governments 17,156 36,945 Inventories, at cost 45,221 37,344 Total assets $5,872,424 $6,875,718 Liabilities and Fund Balance Liabilities: Accounts payable $200,158 $216,244 Deposits payable 16,207 19,463 Salaries payable 409,031 341,004 Deferred revenue 113,237 138,029 Due to other funds 666 706 Due to other governments 17,415 17,823 Total liabilities 756,714 733,269 Fund balance: Reserved for inventory 45,221 37,344 Reserved for long-term receivables 55,092 65,320 Unreserved: Designated for working capital 4,722,911 4,302,047 Designated for contingencies - 910,182 Designated for subsequent year's expenditures 292,486 827,556 Total fund balance 5,115,710 6,142,449 Total liabilities and fund balance $5,872,424 $6,875,718 74 Exhibit B-2 CITY OF FRIDLEY, MINNESOTA GENERAL FUND STATEMENT OF REVENUES, EXPENDITURES,AND CHANGES IN FUND BALANCE -BUDGET AND ACTUAL Year Ended December 31, 2002 With comparative actual amounts for year ended December 31,2001 2002 Variance Favorable 2001 Budget Actual (Unfavorable) Actual Revenues: Taxes $5,552,313 $4,983,687 ($568,626) $4,076,689 Special assessments 7,500 1,545 (5,955) 5,059 Licenses and permits 914,300 476,600 (437,700) 600,956 Intergovernmental revenue 2,169,701 2,722,886 553,185 3,361,703 Charges for services 1,332,313 1,317,924 (14,389) 1,262,412 Fines and forfeits 190,500 183,170 (7,330) 163,015 Investment income 450,000 172,427 (277,573) 334,828 Miscellaneous 169,582 227,045 57,463 112,320 Total revenues 10,786,209 10,085,284 (700,925) 9,916,982 Expenditures: Current: General government 2,296,934 2,119,167 177,767 1,967,881 Public safety 4,940,856 4,853,040 87,816 4,418,340 Municipal center 247,693 225,068 22,625 241,662 Public works 2,839,318 2,770,570 68,748 2,687,201 Community development 738,851 710,780 28,071 708,749 Recreation and naturalist 1,193,713 1,139,351 54,362 1,102,451 Capital outlay 349,665 312,989 36,676 387,927 Total expenditures 12,607,030 12,130,965 476,065 11,514,211 Excess(deficiency)of revenues over(under)expenditures (1,820,821) (2,045,681) (224,860) (1,597,229) Other financing sources (uses): Sale of fixed assets 30,000 5,799 (24,201) 31,531 Operating transfers in 1,016,300 1,016,300 - 876,005 Operating transfers out (53,035) (25,059) 27,976 (30,335) Total other financing sources (uses) 993,265 997,040 3,775 877,201 Excess(deficiency)of revenues and other financing sources over(under)expenditures and other financing uses ($827,556) (1,048,641) ($221,085) (720,028) Fund balance-January 1 6,142,449 6,862,477 Residual equity transfer 21,902 - Fund balance-December 31 $5,115,710 $6,142,449 75 Exhibit B-3 Page 1 of 2 CITY OF FRIDLEY, MINNESOTA GENERAL FUND SCHEDULE OF REVENUES AND OTHER FINANCING SOURCES -BUDGET AND ACTUAL Year Ended December 31, 2002 With comparative actual amounts for year ended December 31, 2001 2002 Variance Favorable 2001 Budget Actual (Unfavorable) Actual Taxes and special assessments: Current ad valorem taxes $5,507,313 $4,933,475 ($573,838) $4,058,126 Delinquent ad valorem taxes 20,000 39,348 19,348 8,471 Penalties and interest 15,000 10,864 (4,136) 10,071 Forfeited sale-taxes 10,000 - (10,000) 21 Special assessments 7,500 1,545 (5,955) 5,059 Total taxes and special assessments 5,559,813 4,985,232 (574,581) 4,081,748 Licenses and permits: Licenses: Contractor 52,000 45,906 (6,094) 46,689 Business 103,800 105,120 1,320 112,293 All other 50,000 27,508 (22,492) 28,521 Permits 708,500 298,066 (410,434) 413,453 Total licenses and permits 914,300 476,600 (437,700) 600,956 Intergovernmental revenue: Civil defense 4,000 3,283 (717) 4,933 Federal grants 3,104 3,104 - - State maintenance aid 190,000 193,784 3,784 213,996 State credits - 551,007 551,007 1,687,729 Local government aid 1,556,948 1,556,948 - 1,078,082 Other state grants 17,692 9,471 (8,221) 958 Police and fire pension 357,554 391,692 34,138 367,905 Other 40,403 13,597 (26,806) 8,100 Total intergovernmental revenue 2,169,701 2,722,886 553,185 3,361,703 Charges for services: General government 846,680 855,633 8,953 833,749 Public safety 209,833 185,508 (24,325) 121,673 Conservation of health 9,200 1,896 (7,304) 1,183 Recreation 266,600 274,887 8,287 305,807 Total charges for services 1,332,313 1,317,924 (14,389) 1,262,412 Fines and forfeits 190,500 183,170 (7,330) 163,015 Investment income 450,000 172,427 (277,573) 334,828 76 Exhibit B-3 Page 2 of 2 CITY OF FRIDLEY, MINNESOTA GENERAL FUND SCHEDULE OF REVENUES AND OTHER FINANCING SOURCES -BUDGET AND ACTUAL Year Ended December 31, 2002 With comparative actual amounts for year ended December 31, 2001 2002 Variance Favorable 2001 Budget Actual (Unfavorable) Actual Miscellaneous revenue: Insurance and other reimbursements $59,330 $88,777 $29,447 $61,342 Gambling tax 67,000 79,751 12,751 35,718 Donations 22,152 41,362 19,210 12,289 Miscellaneous 21,100 17,155 (3,945) 2,971 Total miscellaneous revenue 169,582 227,045 57,463 112,320 Total revenues 10,786,209 10,085,284 (700,925) 9,916,982 Other financing sources: Sale of fixed assets 30,000 5,799 (24,201) 31,531 Operating transfers in: Liquor Fund 400,000 400,000 - 300,000 Special Assessment Debt Service Fund 232,900 232,900 - 232,900 Police Activity Special Revenue Fund 303,400 303,400 - 193,105 Employee Benefit Internal Service Fund 80,000 80,000 - 150,000 Total other financing sources 1,046,300 1,022,099 (24,201) 907,536 Residual equity transfer - 21,902 21,902 - Total revenues and other financing sources $11,832,509 $11,129,285 ($703,224) $10,824,518 77 -This page intentionally left blank- 78 Exhibit B-4 Page 1 of 3 CITY OF FRIDLEY, MINNESOTA GENERAL FUND SCHEDULE OF EXPENDITURES AND OTHER FINANCING USES -BUDGET AND ACTUAL Year Ended December 31, 2002 With comparative actual amounts for year ended December 31,2001 2002 Variance Favorable 2001 Budget Actual (Unfavorable) Actual General government: Mayor and council: Personal services $72,121 $70,709 $1,412 $64,760 Supplies and other charges 59,495 44,233 15,262 37,745 Total mayor and council 131,616 114,942 16,674 102,505 Planning commission: Supplies and other charges 1,783 611 1,172 463 Other commissions: Supplies and other charges 3,357 119 3,238 878 City manager: Personal services 226,673 201,590 25,083 238,340 Supplies and other charges 78,282 78,282 - 62,412 Total City manager 304,955 279,872 25,083 300,752 Human resources: Personal services 137,543 137,543 - 123,500 Supplies and other charges 29,996 14,211 15,785 12,336 Total human resources 167,539 151,754 15,785 135,836 Legal: Supplies and other charges 315,832 315,832 - 249,646 Elections: Personal services 2,025 2,025 - - Supplies and other charges 30,163 30,163 - 38 Total elections 32,188 32,188 0 38 Accounting: Personal services 562,077 545,777 16,300 515,015 Supplies and other charges 117,934 117,934 - 84,987 Total accounting 680,011 663,711 16,300 600,002 Assessing: Personal services 146,828 126,008 20,820 136,616 Supplies and other charges 12,829 12,829 - 12,043 Total assessing 159,657 138,837 20,820 148,659 MIS: Personal services 139,122 139,122 - 125,393 Supplies and other charges 130,033 69,440 60,593 58,301 Total MIS 269,155 208,562 60,593 183,694 City clerk/records: Personal services 146,193 139,712 6,481 130,489 Supplies and other charges 25,748 22,832 2,916 23,921 Total City clerk/records 171,941 162,544 9,397 154,410 79 Exhibit B-4 Page 2 of 3 CITY OF FRIDLEY, MINNESOTA GENERAL FUND SCHEDULE OF EXPENDITURES AND OTHER FINANCING USES -BUDGET AND ACTUAL Year Ended December 31, 2002 With comparative actual amounts for year ended December 31,2001 2002 Variance Favorable 2001 Budget Actual (Unfavorable) Actual Nondepartmental: Personal services $3,232 $3,232 $ - $1,044 Supplies and other charges 55,668 46,963 8,705 89,954 Total nondepartmental 58,900 50,195 8,705 90,998 Total general government 2,296,934 2,119,167 177,767 1,967,881 Public safety: Police: Personal services 3,450,328 3,450,328 - 3,135,273 Supplies and other charges 389,496 389,496 - 350,463 Total police 3,839,824 3,839,824 0 3,485,736 Fire: Personal services 794,347 783,700 10,647 741,235 Supplies and other charges 174,558 151,712 22,846 140,296 Total fire 968,905 935,412 33,493 881,531 Rental inspections: Personal services 102,437 55,398 47,039 30,849 Supplies and other charges 14,061 12,426 1,635 6,214 Total rental inspections 116,498 67,824 48,674 37,063 Civil defense: Supplies and other charges 15,629 9,980 5,649 14,010 Total public safety 4,940,856 4,853,040 87,816 4,418,340 Municipal center: Personal services 32,609 24,678 7,931 23,802 Supplies and other charges 215,084 200,390 14,694 217,860 Total municipal center 247,693 225,068 22,625 241,662 Public works: Engineering: Personal services 437,520 437,520 - 398,465 Supplies and other charges 77,499 70,907 6,592 95,806 Total engineering 515,019 508,427 6,592 494,271 Public works and parks: Personal services 1,400,608 1,399,196 1,412 1,317,274 Supplies and other charges 923,691 862,947 60,744 875,656 Total public works and parks 2,324,299 2,262,143 62,156 2,192,930 Total public works 2,839,318 2,770,570 68,748 2,687,201 80 Exhibit B-4 Page 3 of 3 CITY OF FRIDLEY, MINNESOTA GENERAL FUND SCHEDULE OF EXPENDITURES AND OTHER FINANCING USES -BUDGET AND ACTUAL Year Ended December 31, 2002 With comparative actual amounts for year ended December 31, 2001 2002 Variance Favorable 2001 Budget Actual (Unfavorable) Actual Community development: Building inspection: Personal services $194,168 $194,168 $ - $182,096 Supplies and other charges 101,702 94,302 7,400 107,236 Total building inspection 295,870 288,470 7,400 289,332 Planning: Personal services 381,932 381,932 - 340,652 Supplies and other charges 61,049 40,378 20,671 78,765 Total planning 442,981 422,310 20,671 419,417 Total community development 738,851 710,780 28,071 708,749 Recreation and naturalist: Recreation: Personal services 594,156 579,764 14,392 557,456 Supplies and other charges 308,704 271,163 37,541 267,376 Total recreation 902,860 850,927 51,933 824,832 Naturalist: Personal services 226,552 226,552 - 207,285 Supplies and other charges 64,301 61,872 2,429 70,334 Total naturalist 290,853 288,424 2,429 277,619 Total recreation and naturalist 1,193,713 1,139,351 54,362 1,102,451 Capital outlay: Police 103,136 103,136 - 95,261 Fire - 31,900 Municipal center 18,450 18,450 - - Public works 216,056 179,380 36,676 253,160 Naturalist 12,023 12,023 - 7,606 Total capital outlay 349,665 312,989 36,676 387,927 Total expenditures 12,607,030 12,130,965 476,065 11,514,211 Operating transfers out: Grant Management Special Revenue Fund 31,594 3,618 27,976 30,335 Information Systems Internal Service Fund 21,441 21,441 - - Total operating transfers out 53,035 25,059 27,976 30,335 Total expenditures $12,660,065 $12,156,024 $504,041 $11,544,546 81 -This page intentionally left blank- 82 SPECIAL REVENUE FUNDS STATEMENTS 83 CITY OF FRIDLEY, MINNESOTA SPECIAL REVENUE FUNDS COMBINING BALANCE SHEET December 31,2002 With comparative totals for December 31, 2001 Cable Grant Solid Waste HRA Assets TV Management Abatement Reimbursement Cash and investments $330,460 $213,111 $4,961 $ - Accounts receivable 42,357 - 17,465 - Due from component unit - - - 2,190 Due from other governments - 94,023 56,265 - Total assets $372,817 $307,134 $78,691 $2,190 Liabilities and Fund Balance Liabilities: Accounts payable $7,424 $66,737 $22,817 $63 Deposits payable 10,068 - - - Salaries payable 2,240 6,922 3,002 - Deferred revenue - 232,708 - - Due to other funds - - - 1,712 Due to other governments - 767 - - Total liabilities 19,732 307,134 25,819 1,775 Fund balance: Unreserved: Designated for subsequent year's expenditures - - 31,705 - - Designated for special revenue programs 353,085 - 21,167 415 Undesignated - - - - Total fund balance 353,085 0 52,872 415 Total liabilities and fund balance $372,817 $307,134 $78,691 $2,190 84 Exhibit C-1 Drug and Chemical Gambling Housing Assessment F.C.C. Police Totals Forfeiture Revitalization Team Donations Activity 2002 2001 $37,079 $250,000 $ - $89,443 $1,927,900 $2,852,954 $2,888,159 - - - - - 59,822 63,540 - - - - - 2,190 1,545 11,000 - - - - 161,288 177,119 $48,079 $250,000 $0 $89,443 $1,927,900 $3,076,254 $3,130,363 $692 $ - $ - $ - $ - $97,733 $25,155 - - - - - 10,068 10,192 - - - - - 12,164 11,682 - - - - - 232,708 149,228 - - - - - 1,712 76,397 515 - - - - 1,282 757 1,207 0 0 0 0 355,667 273,411 - - - - - 31,705 15,020 46,872 250,000 - 89,443 1,927,900 2,688,882 2,873,153 - - - - - - (31,221) 46,872 250,000 0 89,443 1,927,900 2,720,587 2,856,952 $48,079 $250,000 $0 $89,443 $1,927,900 $3,076,254 $3,130,363 85 CITY OF FRIDLEY, MINNESOTA SPECIAL REVENUE FUNDS COMBINING STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE Year Ended December 31, 2002 With comparative totals for year ended December 31, 2001 Cable Grant Solid Waste HRA TV Management Abatement Reimbursement Revenues: Licenses and permits $171,076 $ - $ - $ - Intergovernmental revenue - 762,518 71,738 25,018 Charges for services 897 - 212,961 - Fines and forfeits - - - - Investment income 8,438 - - - Miscellaneous - 4,393 2,620 - Total revenues 180,411 766,911 287,319 25,018 Expenditures: Current: General government 129,151 656,318 332,610 25,191 Public safety - - - - Recreation and naturalist - - - - Capital outlay 7,667 65,638 - - Total expenditures 136,818 721,956 332,610 25,191 Excess (deficiency)of revenues over(under)expenditures 43,593 44,955 (45,291) (173) Other financing sources (uses): Operating transfers in - 12,227 129,384 - Operating transfers out - (72,202) - - Total other financing sources (uses) 0 (59,975) 129,384 0 Excess (deficiency)of revenues and other financing sources over(under) expenditures and other financing uses 43,593 (15,020) 84,093 (173) Fund balance-January 1 309,492 15,020 (31,221) 588 Fund balance-December 31 $353,085 $0 $52,872 $415 86 Exhibit C-2 Drug and Chemical Gambling Housing Assessment F.C.C. Police Totals Forfeiture Revitalization Team Donations Activity 2002 2001 $ - $ - $ - $ - $ - $171,076 $175,936 - 30,171 - - 889,445 656,200 - - - - - 213,858 208,701 20,418 - - - - 20,418 48,472 - - - 2,390 55,955 66,783 127,215 - 722 - - 7,735 4,300 20,418 0 30,893 2,390 55,955 1,369,315 1,220,824 - - - - 1,143,270 1,036,504 21,542 - 30,893 - - 52,435 49,607 - - - - - 3,607 - - - - 73,305 17,927 21,542 0 30,893 0 0 1,269,010 1,107,645 (1,124) 0 0 2,390 55,955 100,305 113,179 - - - - 141,611 108,356 (2,679) - - - (303,400) (378,281) (278,457) (2,679) 0 0 0 (303,400) (236,670) (170,101) (3,803) - - 2,390 (247,445) (136,365) (56,922) 50,675 250,000 - 87,053 2,175,345 2,856,952 2,913,874 $46,872 $250,000 $0 $89,443 $1,927,900 $2,720,587 $2,856,952 87 Exhibit C-3 CITY OF FRIDLEY, MINNESOTA CABLE TV SPECIAL REVENUE FUND COMPARATIVE BALANCE SHEET December 31,2002 and 2001 Assets 2002 2001 Cash and investments $330,460 $277,164 Accounts receivable 42,357 44,809 Total assets $372,817 $321,973 Liabilities and Fund Balance Liabilities: Accounts payable $7,424 $385 Deposits payable 10,068 10,192 Salaries payable 2,240 1,904 Total liabilities 19,732 12,481 Fund balance: Unreserved: Designated for special revenue programs 353,085 309,492 Total liabilities and fund balance $372,817 $321,973 88 Exhibit C-4 CITY OF FRIDLEY, MINNESOTA CABLE TV SPECIAL REVENUE FUND STATEMENT OF REVENUES, EXPENDITURES,AND CHANGES IN FUND BALANCE -BUDGET AND ACTUAL Year Ended December 31, 2002 With comparative actual amounts for year ended December 31,2001 2002 Variance Favorable 2001 Budget Actual (Unfavorable) Actual Revenues: Licenses-franchise fee $165,000 $171,076 $6,076 $175,936 Charges for services 840 897 57 941 Investment income 10,000 8,438 (1,562) 11,361 Total revenues 175,840 180,411 4,571 188,238 Expenditures: Current: General government: Personal services 99,524 99,524 - 66,521 Supplies and other charges 29,650 29,627 23 21,997 Capital outlay 19,065 7,667 11,398 - Total expenditures 148,239 136,818 11,421 88,518 Excess (deficiency)of revenues over(under)expenditures $27,601 43,593 $15,992 99,720 Fund balance-January 1 309,492 209,772 Fund balance-December 31 $353,085 $309,492 89 Exhibit C-5 CITY OF FRIDLEY, MINNESOTA GRANT MANAGEMENT SPECIAL REVENUE FUND COMPARATIVE BALANCE SHEET December 31, 2002 and 2001 Assets 2002 2001 Cash and investments $213,111 $66,525 Due from other governments 94,023 107,058 Total assets $307,134 $173,583 Liabilities and Fund Balance Liabilities: Accounts payable $66,737 $2,528 Salaries payable 6,922 6,590 Deferred revenue 232,708 149,228 Due to other governments 767 217 Total liabilities 307,134 158,563 Fund balance: Unreserved: Designated for subsequent year's expenditures - 15,020 Total liabilities and fund balance $307,134 $173,583 90 Exhibit C-6 CITY OF FRIDLEY, MINNESOTA GRANT MANAGEMENT SPECIAL REVENUE FUND STATEMENT OF REVENUES, EXPENDITURES,AND CHANGES IN FUND BALANCE -BUDGET AND ACTUAL Year Ended December 31, 2002 With comparative actual amounts for year ended December 31,2001 2002 Variance Favorable 2001 Budget Actual (Unfavorable) Actual Revenues: Intergovernmental revenue: Federal $307,104 $453,931 $146,827 $373,880 State 451,593 308,587 (143,006) 158,622 Miscellaneous 20,200 4,393 (15,807) 1,582 Total revenues 778,897 766,911 (11,986) 534,084 Expenditures: Current: General government: Personal services 173,987 173,987 - 321,564 Supplies and other charges 482,331 482,331 - 298,525 Capital outlay 65,638 65,638 - - Total expenditures 721,956 721,956 0 620,089 Excess (deficiency)of revenues over(under)expenditures 56,941 44,955 (11,986) (86,005) Other financing sources(uses): Operating transfers in (out): General Fund 3,618 3,618 - 30,335 Police Activity Special Revenue Fund - - - 78,021 Storm Water Enterprise Fund 8,609 8,609 - - Information Systems Internal Service Fund (72,202) (72,202) - (7,331) Total other financing sources (uses) (59,975) (59,975) 0 101,025 Excess (deficiency)of revenues and other financing sources over(under)expenditures and other financing uses ($3,034) (15,020) ($11,986) 15,020 Fund balance-January 1 15,020 - Fund balance-December 31 $0 $15,020 91 Exhibit C-7 CITY OF FRIDLEY, MINNESOTA SOLID WASTE ABATEMENT SPECIAL REVENUE FUND COMPARATIVE BALANCE SHEET December 31, 2002 and 2001 Assets 2002 2001 Cash $4,961 $ - Accounts receivable 17,465 18,731 Due from other governments 56,265 41,090 Total assets $78,691 $59,821 Liabilities and Fund Balance Liabilities: Accounts payable $22,817 $21,084 Salaries payable 3,002 2,360 Due to other funds - 67,598 Total liabilities 25,819 91,042 Fund balance: Unreserved: Designated for subsequent year's expenditures 31,705 - Designated for special revenue programs 21,167 - Undesignated - (31,221) Total fund balance 52,872 (31,221) Total liabilities and fund balance $78,691 $59,821 92 Exhibit C-8 CITY OF FRIDLEY, MINNESOTA SOLID WASTE ABATEMENT SPECIAL REVENUE FUND STATEMENT OF REVENUES, EXPENDITURES,AND CHANGES IN FUND BALANCE -BUDGET AND ACTUAL Year Ended December 31, 2002 With comparative actual amounts for year ended December 31, 2001 2002 Variance Favorable 2001 Budget Actual (Unfavorable) Actual Revenues: Intergovernmental revenue: State $74,000 $71,738 ($2,262) $74,680 Charges for services 205,300 212,961 7,661 207,760 Miscellaneous 2,500 2,620 120 2,718 Total revenues 281,800 287,319 5,519 285,158 Expenditures: Current: General government: Personal services 64,551 64,551 - 55,679 Supplies and other charges 275,407 268,059 7,348 262,144 Total expenditures 339,958 332,610 7,348 317,823 Excess(deficiency)of revenues over(under)expenditures (58,158) (45,291) 12,867 (32,665) Other financing sources (uses): Operating transfer in: Special Assessments Debt Service Fund 129,384 129,384 - - Excess (deficiency)of revenues and other financing sources over(under)expenditures and other financing uses $71,226 84,093 $12,867 (32,665) Fund balance (deficit)-January 1 (31,221) 1,444 Fund balance (deficit)-December 31 $52,872 ($31,221) 93 Exhibit C-9 CITY OF FRIDLEY, MINNESOTA HRA REIMBURSEMENT SPECIAL REVENUE FUND COMPARATIVE BALANCE SHEET December 31, 2002 and 2001 Assets 2002 2001 Due from component unit $2,190 $1,545 Total assets $2,190 $1,545 Liabilities and Fund Balance Liabilities: Accounts payable $63 $24 Salaries payable - 292 Due to other funds 1,712 641 Total liabilities 1,775 957 Fund balance: Unreserved: Designated for special revenue programs 415 588 Total liabilities and fund balance $2,190 $1,545 94 Exhibit C-10 CITY OF FRIDLEY, MINNESOTA HRA REIMBURSEMENT SPECIAL REVENUE FUND STATEMENT OF REVENUES, EXPENDITURES,AND CHANGES IN FUND BALANCE -BUDGET AND ACTUAL Year Ended December 31,2002 With comparative actual amounts for year ended December 31,2001 2002 Variance Favorable 2001 Budget Actual (Unfavorable) Actual Revenues: Intergovernmental revenue: Housing and Redevelopment Authority $25,191 $25,018 ($173) $9,882 Expenditures: Current: General government: Supplies and other charges 25,191 25,191 - 10,074 Excess (deficiency)of revenues over(under)expenditures $0 (173) ($173) (192) Fund balance-January 1 588 780 Fund balance-December 31 $415 $588 95 Exhibit C-11 CITY OF FRIDLEY, MINNESOTA DRUG AND GAMBLING FORFEITURE SPECIAL REVENUE FUND COMPARATIVE BALANCE SHEET December 31, 2002 and 2001 Assets 2002 2001 Cash and investments $37,079 $31,532 Due from other governments 11,000 19,143 Total assets $48,079 $50,675 Liabilities and Fund Balance Liabilities: Accounts payable $692 $ - Due to other governments 515 - Total liabilities 1,207 0 Fund balance: Unreserved: Designated for special revenue programs 46,872 50,675 Total liabilities and fund balance $48,079 $50,675 96 Exhibit C-12 CITY OF FRIDLEY, MINNESOTA DRUG AND GAMBLING FORFEITURE SPECIAL REVENUE FUND STATEMENT OF REVENUES, EXPENDITURES,AND CHANGES IN FUND BALANCE -BUDGET AND ACTUAL Year Ended December 31,2002 With comparative actual amounts for year ended December 31, 2001 2002 Variance Favorable 2001 Budget Actual (Unfavorable) Actual Revenues: Fines and forfeits $20,418 $20,418 $ - $48,472 Expenditures: Current: Public safety: Supplies and other charges 21,542 21,542 - 10,471 Capital outlay - - - 6,128 Total expenditures 21,542 21,542 0 16,599 Excess (deficiency)of revenues over(under)expenditures (1,124) (1,124) 0 31,873 Other financing sources (uses): Operating transfers in (out): Information Systems Internal Service Fund (2,679) (2,679) - - Excess (deficiency)of revenues and other financing sources over(under)expenditures and other financing uses ($3,803) (3,803) $0 31,873 Fund balance-January 1 50,675 18,802 Fund balance-December 31 $46,872 $50,675 97 Exhibit C-13 CITY OF FRIDLEY, MINNESOTA HOUSING REVITALIZATION SPECIAL REVENUE FUND COMPARATIVE BALANCE SHEET December 31, 2002 and 2001 Assets 2002 2001 Cash and investments $250,000 $250,000 Total assets $250,000 $250,000 Liabilities and Fund Balance Liabilities $ - $ - Fund balance: Unreserved: Designated for special revenue programs 250,000 250,000 Total liabilities and fund balance $250,000 $250,000 98 Exhibit C-14 CITY OF FRIDLEY, MINNESOTA HOUSING REVITALIZATION SPECIAL REVENUE FUND STATEMENT OF REVENUES, EXPENDITURES,AND CHANGES IN FUND BALANCE -BUDGET AND ACTUAL Year Ended December 31,2002 With comparative actual amounts for year ended December 31,2001 2002 Variance Favorable 2001 Budget Actual (Unfavorable) Actual Revenues $ - $ - $ - $ - Expenditures - - - - Excess(deficiency)of revenues over(under)expenditures $0 0 $0 0 Fund balance-January 1 250,000 250,000 Fund balance-December 31 $250,000 $250,000 99 Exhibit C-15 CITY OF FRIDLEY, MINNESOTA CHEMICAL ASSESSMENT TEAM SPECIAL REVENUE FUND COMPARATIVE BALANCE SHEET December 31, 2002 and 2001 Assets 2002 2001 Due from other governments $ - $9,828 Total assets $0 $9,828 Liabilities and Fund Balance Liabilities: Accounts payable $ - $1,134 Salaries payable - 536 Due to other funds - 8,158 Total liabilities 0 9,828 Fund balance: Unreserved: Undesignated - - Total liabilities and fund balance $0 $9,828 100 Exhibit C-16 CITY OF FRIDLEY, MINNESOTA CHEMICAL ASSESSMENT TEAM SPECIAL REVENUE FUND STATEMENT OF REVENUES, EXPENDITURES,AND CHANGES IN FUND BALANCE -BUDGET AND ACTUAL Year Ended December 31,2002 With comparative actual amounts for year ended December 31, 2001 2002 Variance Favorable 2001 Budget Actual (Unfavorable) Actual Revenues: Intergovernmental revenue: State $30,893 $30,171 ($722) $39,136 Miscellaneous - 722 722 - Total revenues 30,893 30,893 0 39,136 Expenditures: Current: Public safety: Personal services 2,291 2,291 - 10,741 Supplies and other charges 28,602 28,602 - 28,395 Total expenditures 30,893 30,893 0 39,136 Excess (deficiency)of revenues over(under)expenditures 0 0 0 0 Fund balance-January 1 - - Fund balance-December 31 $0 $0 101 Exhibit C-17 CITY OF FRIDLEY, MINNESOTA F.C.C. DONATIONS SPECIAL REVENUE FUND COMPARATIVE BALANCE SHEET December 31,2002 and 2001 Assets 2002 2001 Cash and investments $89,443 $87,593 Total assets $89,443 $87,593 Liabilities and Fund Balance Liabilities: Due to other governments $ - $540 Fund balance: Unreserved: Designated for special revenue programs 89,443 87,053 Total liabilities and fund balance $89,443 $87,593 102 Exhibit C-18 CITY OF FRIDLEY, MINNESOTA F.C.C. DONATIONS SPECIAL REVENUE FUND STATEMENT OF REVENUES, EXPENDITURES,AND CHANGES IN FUND BALANCE -BUDGET AND ACTUAL Year Ended December 31, 2002 With comparative actual amounts for year ended December 31, 2001 2002 Variance Favorable 2001 Budget Actual (Unfavorable) Actual Revenues: Investment income $2,390 $2,390 $ - $4,494 Expenditures: Current: Recreation and naturalist: Supplies and other charges - - - 3,607 Capital outlay - - - 11,799 Total expenditures 0 0 0 15,406 Excess (deficiency)of revenues over(under)expenditures $2,390 2,390 $0 (10,912) Fund balance-January 1 87,053 97,965 Fund balance- December 31 $89,443 $87,053 103 Exhibit C-19 CITY OF FRIDLEY, MINNESOTA POLICE ACTIVITY SPECIAL REVENUE FUND COMPARATIVE BALANCE SHEET December 31,2002 and 2001 Assets 2002 2001 Cash and investments $1,927,900 $2,175,345 Total assets $1,927,900 $2,175,345 Liabilities and Fund Balance Liabilities $ - $ - Fund balance: Unreserved: Designated for special revenue programs 1,927,900 2,175,345 Total liabilities and fund balance $1,927,900 $2,175,345 104 Exhibit C-20 CITY OF FRIDLEY, MINNESOTA POLICE ACTIVITY SPECIAL REVENUE FUND STATEMENT OF REVENUES, EXPENDITURES,AND CHANGES IN FUND BALANCE -BUDGET AND ACTUAL Year Ended December 31, 2002 With comparative actual amounts for year ended December 31, 2001 2002 Variance Favorable 2001 Budget Actual (Unfavorable) Actual Revenues: Investment income $90,000 $55,955 ($34,045) $111,360 Expenditures - - - - Excess(deficiency)of revenues over(under)expenditures 90,000 55,955 (34,045) 111,360 Other financing sources (uses): Operating transfer out: General Fund (303,400) (303,400) - (193,105) Grant Management Special Revenue Fund - - - (78,021) Total other financing sources (uses) (303,400) (303,400) 0 (271,126) Excess (deficiency)of revenues and other financing sources over(under)expenditures and other financing uses ($213,400) (247,445) ($34,045) (159,766) Fund balance-January 1 2,175,345 2,335,111 Fund balance-December 31 $1,927,900 $2,175,345 105 -This page intentionally left blank- 106 DEBT SERVICE FUNDS STATEMENTS 107 Exhibit 0-1 CITY OF FRIDLEY, MINNESOTA DEBT SERVICE FUNDS COMBINING BALANCE SHEET December 31,2002 and 2001 Special Tax Totals Assets Assessment Increment 2002 2001 Cash and investments $6,193,122 $38,385 $6,231,507 $8,884,314 Receivables: Special assessments: Unremitted 2,226 - 2,226 3,204 Delinquent 2,983 - 2,983 5,386 Deferred 1,054,367 - 1,054,367 1,224,896 Loan receivable from component unit 654,793 - 654,793 707,497 Total assets $7,907,491 $38,385 $7,945,876 $10,825,297 Liabilities and Fund Balance Liabilities: Deferred revenue $1,057,350 $ - $1,057,350 $1,230,282 Fund balance: Reserved for debt service 504,939 38,385 543,324 458,558 Reserved for long term receivable 654,793 - 654,793 707,497 Unreserved: Undesignated 5,690,409 - 5,690,409 8,428,960 Total fund balance 6,850,141 38,385 6,888,526 9,595,015 Total liabilities and fund balance $7,907,491 $38,385 $7,945,876 $10,825,297 108 Exhibit D-2 CITY OF FRIDLEY, MINNESOTA DEBT SERVICE FUNDS COMBINING STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE Year Ended December 31,2002 With comparative totals for year ended December 31,2001 Special Tax Totals Assessment Increment 2002 2001 Revenues: Special assessments $408,668 $ - $408,668 $407,575 Investment income 157,822 - 157,822 418,625 Interest on loan 34,724 - 34,724 37,263 Total revenues 601,214 0 601,214 863,463 Expenditures: Debt service: Principal retirement 150,000 1,000,000 1,150,000 1,105,000 Interest and fiscal charges 30,775 655,696 686,471 739,640 Total expenditures 180,775 1,655,696 1,836,471 1,844,640 Excess (deficiency)of revenues over(under)expenditures 420,439 (1,655,696) (1,235,257) (981,177) Other financing sources (uses): Operating transfers in (out): General Fund (232,900) - (232,900) (232,900) Solid Waste Abatement Special Revenue Fund (129,384) - (129,384) - Capital Improvements Capital Project Fund (2,587,443) - (2,587,443) (9,600) Special Assessments Capital Project Fund (87,746) - (87,746) - HRA Component Unit (88,822) 1,655,063 1,566,241 1,484,474 Total other financing sources (uses) (3,126,295) 1,655,063 (1,471,232) 1,241,974 Excess (deficiency)of revenues and other financing sources over(under)expenditures and other financing uses (2,705,856) (633) (2,706,489) 260,797 Fund balance-January 1 9,555,997 39,018 9,595,015 9,334,218 Fund balance-December 31 $6,850,141 $38,385 $6,888,526 $9,595,015 109 -This page intentionally left blank- 110 CAPITAL PROJECTS FUNDS STATEMENTS 111 Exhibit E-1 CITY OF FRIDLEY, MINNESOTA CAPITAL PROJECTS FUNDS COMBINING BALANCE SHEET December 31,2002 With comparative totals for December 31, 2001 Capital Special Totals Assets Improvements Assessments 2002 2001 Cash and investments $6,781,681 ($289,786) $6,491,895 $4,235,581 Receivables: Taxes: Unremitted 1,036 - 1,036 744 Delinquent 3,810 - 3,810 4,493 Special assessments: Unremitted 65 - 65 141 Delinquent 169 - 169 3,446 Deferred 3,192 46,177 49,369 56,735 Due from other governments 156,937 - 156,937 - Total assets $6,946,890 ($243,609) $6,703,281 $4,301,140 Liabilities and Fund Balance Liabilities: Accounts payable $894 $ - $894 $2,523 Contracts payable 90,659 - 90,659 2,475 Salaries payable - 318 318 382 Deferred revenue 7,170 46,177 53,347 64,675 Due to other governments - 3,197 3,197 3,406 Total liabilities 98,723 49,692 148,415 73,461 Fund balance: Reserved for encumbrances 699,446 - 699,446 91,973 Unreserved: Designated for fixed asset replacement 284,898 - 284,898 1,095,707 Designated for park improvements 1,560,157 - 1,560,157 1,560,602 Designated for street improvements 4,303,666 - 4,303,666 1,479,397 Undesignated - (293,301) (293,301) - Total fund balance 6,848,167 (293,301) 6,554,866 4,227,679 Total liabilities and fund balance $6,946,890 ($243,609) $6,703,281 $4,301,140 112 Exhibit E-2 CITY OF FRIDLEY, MINNESOTA CAPITAL PROJECTS FUNDS COMBINING STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE Year Ended December 31, 2002 With comparative totals for year ended December 31, 2001 Capital Special Totals Improvements Assessments 2002 2001 Revenues: Taxes and special assessments: Current ad valorem taxes $81,266 $ - $81,266 $74,682 Delinquent ad valorem taxes 704 - 704 159 Special assessments 1,327 20,451 21,778 14,858 Total taxes and special assessments 83,297 20,451 103,748 89,699 Intergovernmental revenue: State credits 9,073 - 9,073 15,000 State aid for construction 493,217 - 493,217 - Total intergovernmental revenue 502,290 0 502,290 15,000 Investment income 193,153 3,546 196,699 234,959 Miscellaneous revenue: Refunds and reimbursements 6,750 10,000 16,750 28,225 Other 301 3,649 3,950 34,915 Total miscellaneous revenue 7,051 13,649 20,700 63,140 Total revenues 785,791 37,646 823,437 402,798 Expenditures: Current: Public works 252,840 42,160 295,000 176,027 Capital outlay 225,529 750,910 976,439 1,471,748 Total expenditures 478,369 793,070 1,271,439 1,647,775 Excess (deficiency)of revenues over(under)expenditures 307,422 _ (755,424) (448,002) (1,244,977) Other financing sources (uses): Operating transfers in (out): Storm Water Fund 100,000 - 100,000 - Special Assessment Debt Service Fund 2,587,443 87,746 2,675,189 9,600 Capital Improvements Capital Projects Fund - 128,581 128,581 907,655 Special Assessments Capital Projects Fund (128,581) - (128,581) (907,655) Total other financing sources (uses) 2,558,862 216,327 2,775,189 9,600 Excess (deficiency)of revenues and other financing sources over(under)expenditures and other financing uses 2,866,284 (539,097) 2,327,187 (1,235,377) Fund balance-January 1 3,981,883 245,796 4,227,679 5,463,056 Fund balance-December 31 $6,848,167 ($293,301) $6,554,866 $4,227,679 113 Exhibit E-3 CITY OF FRIDLEY, MINNESOTA CAPITAL IMPROVEMENTS CAPITAL PROJECTS FUND COMPARATIVE BALANCE SHEET December 31, 2002 and 2001 Totals Assets 2002 2001 Cash and investments $6,781,681 $3,986,069 Receivables: Taxes: Unremitted 1,036 744 Delinquent 3,810 4,493 Special assessments: Unremitted 65 68 Delinquent 169 177 Deferred 3,192 4,256 Due from other governments 156,937 - Total assets $6,946,890 $3,995,807 Liabilities and Fund Balance Liabilities: Accounts payable $894 $2,523 Contracts payable 90,659 2,475 Deferred revenue 7,170 8,926 Total liabilities 98,723 13,924 Fund balance: Reserved for encumbrances 699,446 91,973 Unreserved: Designated for fixed asset replacement 284,898 1,095,707 Designated for park improvements 1,560,157 1,560,602 Designated for street improvements 4,303,666 1,233,601 Total fund balance 6,848,167 3,981,883 Total liabilities and fund balance $6,946,890 $3,995,807 114 Exhibit E-4 CITY OF FRIDLEY, MINNESOTA CAPITAL IMPROVEMENTS CAPITAL PROJECTS FUND STATEMENT OF REVENUES, EXPENDITURES,AND CHANGES IN FUND BALANCE -BUDGET AND ACTUAL Year Ended December 31, 2002 With comparative actual amounts for year ended December 31,2001 2002 Variance Favorable 2001 Budget Actual (Unfavorable) Actual Revenues: Taxes: Current ad valorem taxes $90,718 $81,266 ($9,452) $74,682 Delinquent ad valorem taxes - 704 704 159 Total taxes 90,718 81,970 (8,748) 74,841 Special assessments - 1,327 1,327 1,206 Intergovernmental revenue: State credits - 9,073 9,073 15,000 State aid for construction 223,007 493,217 270,210 - Total intergovernmental revenue 223,007 502,290 279,283 15,000 Investment income 417,225 193,153 (224,072) 224,402 Miscellaneous revenue: Other 30,000 7,051 (22,949) 34,265 Total revenues 760,950 785,791 24,841 349,714 Expenditures: Current: Public works 252,840 252,840 - 99,177 Capital outlay 228,184 225,529 2,655 537,844 Total expenditures 481,024 478,369 2,655 637,021 Excess (deficiency)of revenues over (under)expenditures 279,926 307,422 27,496 (287,307) Other financing sources (uses): Operating transfers in (out): Storm Water Fund 100,000 100,000 - - Special Assessment Debt Service Fund 2,587,443 2,587,443 - - Special Assessments Capital Projects Fund (128,581) (128,581) - (907,655) 2,558,862 2,558,862 0 (907,655) Excess(deficiency)of revenues and other financing sources over(under)expenditures and other financing uses $2,838,788 2,866,284 $27,496 (1,194,962) Fund balance-January 1 3,981,883 4,971,191 Residual equity transfers - 205,654 Fund balance -December 31 $6,848,167 $3,981,883 115 -This page intentionally left blank- 116 ENTERPRISE FUNDS STATEMENTS 117 Exhibit F-1 CITY OF FRIDLEY, MINNESOTA ENTERPRISE FUNDS COMBINING BALANCE SHEET December 31,2002 With comparative totals for December 31,2001 Public Totals Assets Liquor Utilities 2002 2001 Current assets: Cash and investments $796,447 $7,280,661 $8,077,108 $8,830,747 Accounts receivable 1,516 1,347,264 1,348,780 1,341,775 Taxes receivable: Unremitted - 213 213 81 Delinquent - 207 207 216 Special assessments receivable - 112,512 112,512 127,657 Due from other funds - 752 752 834 Due from other governments - 3,315 3,315 4,120 Inventories, at cost 590,632 5,835 596,467 520,998 Prepaid items - 228,462 228,462 186,484 Total current assets 1,388,595 8,979,221 10,367,816 11,012,912 Property and equipment, at cost: Property and equipment 1,137,278 33,831,540 34,968,818 34,248,907 Less: accumulated depreciation (340,117) (14,206,726) (14,546,843) (13,709,567) Net property and equipment 797,161 19,624,814 20,421,975 20,539,340 Total assets $2,185,756 $28,604,035 $30,789,791 $31,552,252 Liabilities and Fund Equity Current liabilities: Accounts payable $196,099 $33,650 $229,749 $406,043 Contracts payable - 61,345 61,345 - Salaries payable 17,063 31,170 48,233 37,661 Due to other funds 86 - 86 128 Due to other governments 47,836 25,828 73,664 68,627 Accrued interest payable - 64,623 64,623 71,609 Bonds payable-current - 370,000 370,000 360,000 Total current liabilities 261,084 586,616 847,700 944,068 Long-term liabilities: Bonds payable - 2,785,639 2,785,639 3,153,709 Total liabilities 261,084 3,372,255 3,633,339 4,097,777 Fund equity: Contributed capital - 9,687,520 9,687,520 10,057,510 Retained earnings: Unreserved 1,924,672 15,544,260 17,468,932 17,396,965 Total fund equity 1,924,672 25,231,780 27,156,452 27,454,475 Total liabilities and fund equity $2,185,756 $28,604,035 $30,789,791 $31,552,252 118 Exhibit F-2 CITY OF FRIDLEY, MINNESOTA ENTERPRISE FUNDS COMBINING STATEMENT OF REVENUES, EXPENSES AND CHANGES IN RETAINED EARNINGS Year Ended December 31, 2002 With comparative totals for year ended December 31,2001 Public Totals Liquor Utilities 2002 2001 Sales and cost of sales: Sales $5,296,231 $ - $5,296,231 $5,011,326 Cost of sales 4,182,313 - 4,182,313 3,907,397 Gross profit 1,113,918 0 1,113,918 1,103,929 Operating revenues: Water sales and sewer rents - 5,016,233 5,016,233 4,994,669 Other revenues - 8,630 8,630 8,911 Total operating revenues 0 5,024,863 5,024,863 5,003,580 Operating expenses: Personal services 420,103 1,154,233 1,574,336 1,524,258 Supplies and other charges: Disposal charges - 2,172,574 2,172,574 2,470,086 Other 281,153 827,418 1,108,571 920,568 Depreciation 74,823 1,013,039 1,087,862 1,050,852 Total operating expenses 776,079 5,167,264 5,943,343 5,965,764 Operating income (loss) 337,839 (142,401) 195,438 141,745 Non-operating revenues (expenses): Intergovernmental revenue - 30,674 30,674 - Investment income - 20,965 196,130 217,095 401,243 Debt service - (159,526) (159,526) (176,142) Special assessments - 7,944 7,944 9,378 Gain (loss)on disposal of fixed assets (9,699) (71,339) (81,038) 7,400 Other revenues - - - 3,500 Total non-operating revenues (expenses) 11,266 3,883 15,149 245,379 Income(loss) before operating transfers 349,105 (138,518) 210,587 387,124 Operating transfers in (out): General Fund (400,000) - (400,000) (300,000) Grant Management Special Revenue Fund - (8,609) (8,609) - Capital Improvements Capital Projects Fund - (100,000) (100,000) - Total operating transfers in (out) (400,000) (108,609) (508,609) (300,000) Net income (loss) (50,895) (247,127) (298,022) 87,124 Credit arising from transfer of depreciation on contributed capital - 369,989 369,989 370,065 Retained earnings-January 1 1,975,567 15,421,398 17,396,965 16,939,776 Retained earnings- December 31 $1,924,672 $15,544,260 $17,468,932 $17,396,965 119 Exhibit F-3 CITY OF FRIDLEY, MINNESOTA ENTERPRISE FUNDS COMBINING STATEMENT OF CASH FLOWS Year Ended December 31, 2002 With comparative totals for year ended December 31, 2001 Public Totals Liquor Utilities 2002 2001 Cash flows from operating activities: Operating income (loss) $337,839 ($142,401) $195,438 $141,745 Adjustments to reconcile operating income (loss) to net cash flows from operating activities: Depreciation 74,823 1,013,039 1,087,862 1,050,852 Change in assets and liabilities: Decrease (increase) in receivables 5,272 (12,401) (7,129) 68,391 Decrease (increase)in due from other funds - 83 83 911 Decrease (increase) in due from other governments - 805 805 (979) Decrease (increase)in inventories (76,905) 1,436 (75,469) 131,139 Decrease (increase)in prepaid items - (41,978) (41,978) (929) Increase (decrease) in payables (153,484) 47,116 (106,368) 107,390 Net cash flows from operating activities 187,545 865,699 1,053,244 1,498,520 Cash flows from noncapital financing activities: Intergovernmental revenue - 30,674 30,674 - Operating transfers in (out) (400,000) (108,609) (508,609) (300,000) Special assessment collections - 23,089 23,089 32,879 Other non-capital items - - - 3,500 Net cash flows from noncapital financing activities (400,000) (54,846) (454,846) (263,621) Cash flows from capital and related financing activities: Acquisition and construction of fixed assets - (1,064,303) (1,064,303) (742,985) Principal paid on revenue bonds - (360,000) (360,000) (350,000) Interest and paying agent fees on revenue bonds - (157,597) (157,597) (174,212) Proceeds from sale of fixed assets - 12,768 12,768 19,134 Net cash flows from capital and related financing activities 0 (1,569,132) (1,569,132) (1,248,063) Cash flows from investing activities: Investment income 20,965 196,130 217,095 401,243 Net increase (decrease)in cash and cash equivalents (191,490) (562,149) (753,639) 388,079 Cash and cash equivalents-January 1 987,937 7,842,810 8,830,747 8,442,668 Cash and cash equivalents-December 31 $796,447 $7,280,661 $8,077,108 $8,830,747 120 Exhibit F-4 CITY OF FRIDLEY, MINNESOTA LIQUOR ENTERPRISE FUND COMPARATIVE BALANCE SHEET December 31, 2002 and 2001 Assets 2002 2001 Current assets: Cash and investments $796,447 $987,937 Accounts receivable 1,516 6,788 Inventories, at cost 590,632 513,727 Total current assets 1,388,595 1,508,452 Property and equipment, at cost: Land 151,946 151,946 Buildings 130,211 130,211 Improvements other than buildings 650,245 661,315 Machinery and equipment 204,876 16,440 Office equipment and furniture - 240,870 Total property and equipment 1,137,278 1,200,782 Less: accumulated depreciation (340,117) (319,099) Net property and equipment 797,161 881,683 Total assets $2,185,756 $2,390,135 Liabilities and Fund Equity Current liabilities: Accounts payable $196,099 $347,381 Salaries payable 17,063 15,897 Due to other funds 86 91 Due to other governments 47,836 51,199 Total current liabilities 261,084 414,568 Fund equity: Retained earnings- unreserved 1,924,672 1,975,567 Total liabilities and fund equity $2,185,756 $2,390,135 121 Exhibit F-5 CITY OF FRIDLEY, MINNESOTA LIQUOR ENTERPRISE FUND COMPARATIVE STATEMENT OF REVENUES, EXPENSES AND CHANGES IN RETAINED EARNINGS Years ended December 31, 2002 and 2001 2002 2001 Sales and cost of sales: Sales $5,296,231 $5,011,326 Cost of sales 4,182,313 3,907,397 Gross profit 1,113,918 1,103,929 Operating expenses: Selling: Personal services 265,909 264,120 Supplies and other charges 44,441 51,572 Total selling expenses 310,350 315,692 Administration and overhead: Personal services 154,194 146,653 Supplies and other charges 236,712 277,621 Depreciation 74,823 77,337 Total administration and overhead 465,729 501,611 Total operating expenses 776,079 817,303 Operating income 337,839 286,626 Non-operating revenues (expenses): Investment income 20,965 31,878 Gain (loss)on disposal of fixed assets (9,699) 13,055 Other revenues - 3,500 Total non-operating revenues (expenses) 11,266 48,433 Income before operating transfers 349,105 335,059 Operating transfers in (out): General Fund (400,000) (300,000) Net income (loss) (50,895) 35,059 Retained earnings-January 1 1,975,567 1,940,508 Retained earnings-December 31 $1,924,672 $1,975,567 122 Exhibit F-6 CITY OF FRIDLEY, MINNESOTA LIQUOR ENTERPRISE FUND COMPARATIVE STATEMENT OF CASH FLOWS Years ended December 31,2002 and 2001 2002 2001 Cash flows from operating activities: Operating income $337,839 $286,626 Adjustments to reconcile operating income to net cash flows from operating activities: Depreciation 74,823 77,337 Changes in assets and liabilities: Decrease(increase) in receivables 5,272 (3,938) Decrease(increase) in inventories (76,905) 132,205 Increase(decrease) in payables (153,484) 117,676 Net cash flows from operating activities 187,545 609,906 Cash flows from noncapital financing activities: Operating transfers in (out) (400,000) (300,000) Other non-capital items - 3,500 Net cash flows from noncapital financing activities (400,000) (296,500) Cash flows from capital and related financing activities: Proceeds from sale of fixed assets - 13,055 Cash flows from investing activities: Investment income 20,965 31,878 Net increase(decrease) in cash and cash equivalents (191,490) 358,339 Cash and cash equivalents-January 1 987,937 629,598 Cash and cash equivalents-December 31 $796,447 $987,937 123 Exhibit F-7 Page 1 of 2 CITY OF FRIDLEY, MINNESOTA PUBLIC UTILITIES ENTERPRISE FUND COMPARATIVE BALANCE SHEET December 31,2002 and 2001 Assets 2002 2001 Current assets: Cash and investments $7,280,661 $7,842,810 Receivables: Accounts 1,347,264 1,334,987 Taxes: Unremitted 213 81 Delinquent 207 216 Special assessments receivable 112,512 127,657 Due from other funds 752 834 Due from other governments 3,315 4,120 Inventories, at cost 5,835 7,271 Prepaid items 228,462 186,484 Total current assets 8,979,221 9,504,460 Property and equipment, at cost: Land 154,531 154,531 Buildings 1,819,242 1,519,535 Improvements other than buildings 10,297,587 11,161,010 Machinery and equipment 1,944,570 2,160,829 Office equipment and furniture - 10,650 Water and sewer lines 19,615,610 18,041,570 Total property and equipment 33,831,540 33,048,125 Less: accumulated depreciation (14,206,726) (13,390,468) Net property and equipment 19,624,814 19,657,657 Total assets $28,604,035 $29,162,117 124 Exhibit F-7 Page 2 of 2 CITY OF FRIDLEY, MINNESOTA PUBLIC UTILITIES ENTERPRISE FUND COMPARATIVE BALANCE SHEET December 31, 2002 and 2001 Liabilities and Fund Equity 2002 2001 Current liabilities: Accounts payable $33,650 $58,662 Contracts payable 61,345 - Salaries payable 31,170 21,764 Due to other funds - 37 Due to other governments 25,828 17,428 Accrued interest payable 64,623 71,609 Bonds payable-current 370,000 360,000 Total current liabilities 586,616 529,500 Long-term liabilities: Bonds payable 2,785,639 3,153,709 Fund equity: Contributed capital 9,687,520 10,057,510 Retained earnings: Unreserved 15,544,260 15,421,398 Total fund equity 25,231,780 25,478,908 Total liabilities and fund equity $28,604,035 $29,162,117 125 Exhibit F-8 CITY OF FRIDLEY, MINNESOTA PUBLIC UTILITIES ENTERPRISE FUND COMPARATIVE STATEMENT OF REVENUES, EXPENSES AND CHANGES IN RETAINED EARNINGS Years ended December 31, 2002 and 2001 2002 2001 Operating revenues: Water $1,590,294 $1,644,814 Sewer 3,079,201 3,018,519 Storm sewer 346,738 331,336 Other revenues 8,630 8,911 Total operating revenues 5,024,863 5,003,580 Operating expenses: Personal services 1,154,233 1,113,485 Supplies and other charges: Disposal charges 2,172,574 2,470,086 Other 827,418 591,375 Depreciation: Purchased assets 643,050 603,450 Contributed assets 369,989 370,065 Total operating expenses 5,167,264 5,148,461 Operating income (loss) (142,401) (144,881) Nonoperating revenues (expenses): Intergovernmental revenue 30,674 - Investment income 196,130 369,365 Debt service (159,526) (176,142) Special assessments 7,944 9,378 Gain (loss)on disposal of fixed assets (71,339) (5,655) Total nonoperating revenues(expenses) 3,883 196,946 Income before operating transfers (138,518) 52,065 Operating transfers in (out): Grant Management Special Revenue Fund (8,609) - Capital Improvements Capital Projects Fund (100,000) - Total operating transfers in (out) (108,609) 0 Net income (loss) (247,127) 52,065 Credit arising from transfer of depreciation on contributed capital 369,989 370,065 Retained earnings-January 1 15,421,398 14,999,268 Retained earnings- December 31 $15,544,260 $15,421,398 126 Exhibit F-9 CITY OF FRIDLEY, MINNESOTA PUBLIC UTILITIES ENTERPRISE FUND COMPARATIVE STATEMENT OF CASH FLOWS Years ended December 31, 2002 and 2001 2002 2001 Cash flows from operating activities: Operating income (loss) ($142,401) ($144,881) Adjustments to reconcile operating income (loss)to net cash flows from operating activities: Depreciation 1,013,039 973,515 Change in assets and liabilities: Decrease(increase) in receivables (12,401) 72,329 Decrease(increase)in due from other funds 83 911 Decrease (increase) in due from other governments 805 (979) Decrease(increase) in inventories 1,436 (1,066) Decrease(increase)in prepaid items (41,978) (929) Increase (decrease)in payables 47,116 (10,286) Net cash flows from operating activities 865,699 888,614 Cash flows from noncapital financing activities: Intergovernmental revenue 30,674 - Operating transfers in (out) (108,609) - Special assessment collections 23,089 32,879 Net cash flows from noncapital financing activities (54,846) 32,879 Cash flows from capital and related financing activities: Acquisition and construction of fixed assets (1,064,303) (742,985) Principal paid on revenue bonds (360,000) (350,000) Interest and paying agent fees paid on revenue bonds (157,597) (174,212) Proceeds from sale of fixed assets 12,768 6,079 Net cash flows from capital and related financing activities (1,569,132) (1,261,118) Cash flows from investing activities: Investment income 196,130 369,365 Net increase (decrease)in cash and cash equivalents (562,149) 29,740 Cash and cash equivalents-January 1 7,842,810 7,813,070 Cash and cash equivalents- December 31 $7,280,661 $7,842,810 127 -This page intentionally left blank- 128 INTERNAL SERVICE FUNDS STATEMENTS 129 Exhibit G-1 CITY OF FRIDLEY, MINNESOTA INTERNAL SERVICE FUNDS COMBINING BALANCE SHEET December 31,2002 With comparative totals for December 31, 2001 Employee Self Information Totals Assets Benefits Insurance Systems 2002 2001 Current assets: Cash and investments $1,028,979 $2,070,870 $721,097 $3,820,946 $3,632,284 Accounts receivable - 740 - 740 39,397 Due from component unit - 274 - 274 272 Due from other governments - - - - 4,290 Total current assets 1,028,979 2,071,884 721,097 3,821,960 3,676,243 Property and equipment, at cost: Property and equipment - - 1,140,240 1,140,240 941,373 Less: accumulated depreciation - - (677,815) (677,815) (597,014) Net property and equipment 0 0 462,425 462,425 344,359 Total assets $1,028,979 $2,071,884 $1,183,522 $4,284,385 $4,020,602 Liabilities and Fund Equity Current liabilities: Accounts payable $ - $54,964 $31,097 $86,061 $75,330 Payroll deductions payable 75,732 - - 75,732 68,910 Compensated absences payable 838,905 - - 838,905 765,918 Total liabilities 914,637 54,964 31,097 1,000,698 910,158 Fund equity: Contributed capital - 1,000,000 826,917 1,826,917 1,826,917 Retained earnings: Reserved for employee benefits 114,342 - - 114,342 175,463 Reserved for equipment acquisition - - 289,985 289,985 - Unreserved - 1,016,920 35,523 1,052,443 1,108,064 Total fund equity 114,342 2,016,920 1,152,425 3,283,687 3,110,444 Total liabilities and fund equity $1,028,979 $2,071,884 $1,183,522 $4,284,385 $4,020,602 130 Exhibit G-2 CITY OF FRIDLEY, MINNESOTA INTERNAL SERVICE FUNDS COMBINING STATEMENT OF REVENUES, EXPENSES AND CHANGES IN RETAINED EARNINGS Year Ended December 31, 2002 With comparative totals for year ended December 31, 2001 Employee Self Information Totals Benefits Insurance Systems 2002 2001 Operating revenues: Charges for services $3,818 $168,567 $173,992 $346,377 $693,554 Insurance and other reimbursements - 11,458 32,715 44,173 58,102 Total operating revenues 3,818 180,025 206,707 390,550 751,656 Operating expenses: Personal services 10,498 - - 10,498 8,429 Supplies and other charges 1,058 122,045 71,666 194,769 831,759 Depreciation - - 124,991 124,991 151,029 Total operating expenses 11,556 122,045 196,657 330,258 991,217 Operating income (loss) (7,738) 57,980 10,050 60,292 (239,561) Nonoperating revenues: Investment income 26,617 52,094 17,918 96,629 185,719 Income(loss)before operating transfers 18,879 110,074 27,968 156,921 (53,842) Operating transfers in (out): General Fund (80,000) - 21,441 (58,559) (150,000) Grant Management Special Revenue Fund - - 72,202 72,202 7,331 Drug and Gambling Forfeiture Special Revenue Fund - - 2,679 2,679 - Total operating transfers in (out) (80,000) 0 96,322 16,322 (142,669) Net income (loss) (61,121) 110,074 124,290 173,243 (196,511) Credit arising from transfer of depreciation on contributed capital - - - - 905 Retained earnings-January 1 175,463 906,846 201,218 1,283,527 1,479,133 Retained earnings-December 31 $114,342 $1,016,920 $325,508 $1,456,770 $1,283,527 131 Exhibit G-3 CITY OF FRIDLEY, MINNESOTA INTERNAL SERVICE FUNDS COMBINING STATEMENT OF CASH FLOWS Year Ended December 31,2002 With comparative totals for year ended December 31, 2001 Employee Self Information Totals Benefits Insurance Systems 2002 2001 Cash flows from operating activities: Operating income(loss) ($7,738) $57,980 $10,050 $60,292 ($239,561) Adjustments to reconcile operating income(loss) to net cash flows from operating activities: Depreciation - - 124,991 124,991 151,029 Change in assets and liabilities: (Increase)decrease in accounts receivable - 38,657 - 38,657 (17,795) (Increase)decrease in due from component unit - (2) - (2) 272 (Increase)decrease in due from other governments - - 4,290 4,290 (4,290) Increase(decrease)in accounts payable - (15,147) 25,878 10,731 33,890 Increase(decrease)in due to other governments - - - - (33,995) Increase(decrease)in compensated absences payable 72,987 - - 72,987 (39,940) Increase(decrease)in payroll deductions payable 6,822 - - 6,822 7,262 Net cash flows from operating activities 72,071 81,488 165,209 318,768 (143,128) Cash flows from noncapital financing activities: Operating transfers in (out) (80,000) - 96,322 16,322 (142,669) Cash flows from capital and related financing activities: Acquisition of fixed assets - - (243,057) (243,057) (241,347) Cash flows from investing activities: Investment income 26,617 52,094 17,918 96,629 185,719 Net increase(decrease)in cash and cash equivalents 18,688 133,582 36,392 188,662 (341,425) Cash and cash equivalents-January 1 1,010,291 1,937,288 684,705 3,632,284 3,973,709 Cash and cash equivalents-December 31 $1,028,979 $2,070,870 $721,097 $3,820,946 $3,632,284 132 Exhibit G-4 CITY OF FRIDLEY, MINNESOTA EMPLOYEE BENEFITS INTERNAL SERVICE FUND COMPARATIVE BALANCE SHEET December 31,2002 and 2001 Assets 2002 2001 Cash and investments $1,028,979 $1,010,291 Total assets $1,028,979 $1,010,291 Liabilities and Fund Equity Current liabilities: Payroll deductions payable $75,732 $68,910 Compensated absences payable 838,905 765,918 Total liabilities 914,637 834,828 Fund equity: Retained earnings: Reserved for employee benefits 114,342 175,463 Total liabilities and fund equity $1,028,979 $1,010,291 133 Exhibit G-5 CITY OF FRIDLEY, MINNESOTA EMPLOYEE BENEFITS INTERNAL SERVICE FUND COMPARATIVE STATEMENT OF REVENUES, EXPENSES AND CHANGES IN RETAINED EARNINGS Years ended December 31,2002 and 2001 2002 2001 Operating revenues: Charges for services $3,818 $2,130 Operating expenses: General government: Personal services 10,498 8,429 Supplies and other charges 1,058 1,100 Total operating expenses 11,556 9,529 Operating income (loss) (7,738) (7,399) Nonoperating revenues: Investment income 26,617 52,537 Income before operating transfers 18,879 45,138 Operating transfers in (out): General Fund (80,000) (150,000) Net income (loss) (61,121) (104,862) Retained earnings-January 1 175,463 280,325 Retained earnings-December 31 $114,342 $175,463 134 Exhibit G-6 CITY OF FRIDLEY, MINNESOTA EMPLOYEE BENEFITS INTERNAL SERVICE FUND COMPARATIVE STATEMENT OF CASH FLOWS Years ended December 31, 2002 and 2001 2002 2001 Cash flows from operating activities: Operating income (loss) ($7,738) ($7,399) Change in assets and liabilities: Increase (decrease)in accounts payable - (8,720) Increase (decrease)in payroll deductions payable 6,822 7,262 Increase(decrease) in compensated absences payable 72,987 (39,940) Net cash flows from operating activities 72,071 (48,797) Cash flows from noncapital financing activities: Operating transfers in (out) (80,000) (150,000) Cash flows from investing activities: Investment income 26,617 52,537 Net increase (decrease)in cash and cash equivalents 18,688 (146,260) Cash and cash equivalents-January 1 1,010,291 1,156,551 Cash and cash equivalents- December 31 $1,028,979 $1,010,291 135 Exhibit G-7 CITY OF FRIDLEY, MINNESOTA SELF INSURANCE INTERNAL SERVICE FUND COMPARATIVE BALANCE SHEET December 31, 2002 and 2001 Assets 2002 2001 Cash and investments $2,070,870 $1,937,288 Accounts receivable 740 39,397 Due from component unit 274 272 Total assets $2,071,884 $1,976,957 Liabilities and Fund Equity Current liabilities: Accounts payable $54,964 $70,111 Fund equity: Contributed capital 1,000,000 1,000,000 Retained earnings: Unreserved 1,016,920 906,846 Total fund equity 2,016,920 1,906,846 Total liabilities and fund equity $2,071,884 $1,976,957 136 Exhibit G-8 CITY OF FRIDLEY, MINNESOTA SELF INSURANCE INTERNAL SERVICE FUND COMPARATIVE STATEMENT OF REVENUES, EXPENSES AND CHANGES IN RETAINED EARNINGS Years ended December 31, 2002 and 2001 2002 2001 Operating revenues: Charges for services $168,567 $574,969 Insurance reimbursements 11,458 53,812 Total operating revenues 180,025 628,781 Operating expenses: Supplies and other charges 122,045 807,307 Operating income (loss) 57,980 (178,526) Nonoperating revenues: Investment income 52,094 97,154 Net income (loss) 110,074 (81,372) Retained earnings-January 1 906,846 988,218 Retained earnings-December 31 $1,016,920 $906,846 137 Exhibit G-9 CITY OF FRIDLEY, MINNESOTA SELF INSURANCE INTERNAL SERVICE FUND COMPARATIVE STATEMENT OF CASH FLOWS Years ended December 31, 2002 and 2001 2002 2001 Cash flows from operating activities: Operating income (loss) $57,980 ($178,526) Change in assets and liabilities: (Increase)decrease in accounts receivable 38,657 (17,795) (Increase)decrease in due from component unit (2) 272 Increase (decrease)in accounts payable (15,147) 39,891 Net cash flows from operating activities 81,488 (156,158) Cash flows from investing activities: Investment income 52,094 97,154 Net increase (decrease) in cash and cash equivalents 133,582 (59,004) Cash and cash equivalents-January 1 1,937,288 1,996,292 Cash and cash equivalents-December 31 $2,070,870 $1,937,288 138 Exhibit G-10 CITY OF FRIDLEY, MINNESOTA INFORMATION SYSTEMS INTERNAL SERVICE FUND COMPARATIVE BALANCE SHEET December 31,2002 and 2001 Assets 2002 2001 Current assets: Cash and investments $721,097 $684,705 Due from other governments - 4,290 Total current assets 721,097 688,995 Property and equipment, at cost: Property and equipment 1,140,240 941,373 Less: accumulated depreciation (677,815) (597,014) Net property and equipment 462,425 344,359 Total assets $1,183,522 $1,033,354 Liabilities and Fund Equity Current liabilities: Accounts payable $31,097 $5,219 Fund equity: Contributed capital 826,917 826,917 Retained earnings: Reserved for equipment acquisition 289,985 - Unreserved, undesignated 35,523 201,218 Total fund equity 1,152,425 1,028,135 Total liabilities and fund equity $1,183,522 $1,033,354 139 Exhibit G-11 CITY OF FRIDLEY, MINNESOTA INFORMATION SYSTEMS INTERNAL SERVICE FUND COMPARATIVE STATEMENT OF REVENUES, EXPENSES AND CHANGES IN RETAINED EARNINGS Years ended December 31, 2002 and 2001 2002 2001 Operating revenues: Charges for services $173,992 $116,455 Other cities and county reimbursements 32,715 4,290 Total operating revenues 206,707 120,745 Operating expenses: General government: Supplies and other charges 71,666 23,352 Depreciation 124,991 151,029 Total operating expenses 196,657 174,381 Operating income (loss) 10,050 (53,636) Nonoperating revenues: Investment income 17,918 36,028 Income(loss) before operating transfers 27,968 (17,608) Operating transfers in (out): General Fund 21,441 Grant Management Special Revenue Fund 72,202 7,331 Drug and Gambling Forfeiture Special Revenue Fund 2,679 - Total operating transfers in (out) 96,322 7,331 Net income (loss) 124,290 (10,277) Credit arising from transfer of depreciation on contributed assets - 905 Retained earnings-January 1 201,218 210,590 Retained earnings- December 31 $325,508 $201,218 140 Exhibit G-12 CITY OF FRIDLEY, MINNESOTA INFORMATION SYSTEMS INTERNAL SERVICE FUND COMPARATIVE STATEMENT OF CASH FLOWS Years ended December 31, 2002 and 2001 2002 2001 Cash flows from operating activities: Operating income (loss) $10,050 ($53,636) Adjustments to reconcile operating income(loss)to net cash flows from operating activities: Depreciation 124,991 151,029 Change in assets and liabilities: Decrease (increase) in due from other governments 4,290 (4,290) Increase(decrease) in accounts payable 25,878 2,719 Increase (decrease) in due to other governments - (33,995) Net cash flows from operating activities 165,209 61,827 Cash flows from noncapital financing activities: Operating transfers in (out) 96,322 7,331 Cash flows from capital and related financing activities: Acquisition of fixed assets (243,057) (241,347) Cash flows from investing activities: Investment income 17,918 36,028 Net increase (decrease) in cash and cash equivalents 36,392 (136,161) Cash and cash equivalents-January 1 684,705 820,866 Cash and cash equivalents-December 31 $721,097 $684,705 141 -This page intentionally left blank- 142 TRUST AND AGENCY FUNDS STATEMENTS 143 Exhibit H-1 CITY OF FRIDLEY, MINNESOTA TRUST AND AGENCY FUNDS COMBINING BALANCE SHEET December 31,2002 With comparative totals for December 31, 2001 Expendable Agency Totals Assets Trust Funds 2002 2001 Cash and investments $ - $17,568 $17,568 $45,498 Receivables: Accounts - 2,496 2,496 2,979 Taxes: Unremitted - 78 78 64 Delinquent - 375 375 486 Total assets $0 $20,517 $20,517 $49,027 Liabilities and Fund Balance Liabilities: Deposits payable $ - $ - $ - $12,591 Deferred revenue - 375 375 486 Due to other funds - 179 179 201 Due to other governments - 19,963 19,963 14,203 Total liabilities 0 20,517 20,517 27,481 Fund balance: Unreserved: Undesignated - - - 21,546 Total liabilities and fund balance $0 $20,517 $20,517 $49,027 144 Exhibit H-2 CITY OF FRIDLEY, MINNESOTA INDUSTRIAL DEVELOPMENT REVENUE BOND TRUST FUND COMPARATIVE STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE Years ended December 31, 2002 and 2001 2002 2001 Revenues: Investment income $356 $1,633 Expenditures - - Excess of revenues over expenditures 356 1,633 Fund balance-January 1 21,546 19,913 Residual equity transfer (21,902) - Fund balance-December 31 $0 $21,546 145 Exhibit H-3 CITY OF FRIDLEY, MINNESOTA ALL AGENCY FUNDS COMBINING STATEMENT OF CHANGES IN ASSETS AND LIABILITIES Year ended December 31, 2002 Balance Balance January 1 Additions Deletions December 31 SIX CITIES WATERSHED AGENCY FUND Assets Cash and investments $11,361 $6,207 $ - $17,568 Taxes receivable: Unremitted 64 14 - 78 Delinquent 486 - 111 375 Total assets $11,911 $6,221 $111 $18,021 Liabilities Due to other governments $11,425 $6,221 $ - $17,646 Deferred revenue 486 - 111 375 Total liabilities $11,911 $6,221 $111 $18,021 HOTEL/MOTEL TAX AGENCY FUND Assets Accounts receivable $2,979 $ - $483 $2,496 Total assets $2,979 $0 $483 $2,496 Liabilities Due to other funds $201 $ - $22 $179 Due to other governments 2,778 - 461 2,317 Total liabilities $2,979 $0 $483 $2,496 Balance Balance January 1 Additions Deletions December 31 TOTAL-ALL AGENCY FUNDS Assets Cash and investments $11,361 $6,207 $ - $17,568 Receivables: Accounts 2,979 - 483 2,496 Taxes: Unremitted 64 14 - 78 Delinquent 486 111 375 Total assets $14,890 $6,221 $594 $20,517 Liabilities Due to other funds $201 $ - $22 $179 Due to other governments 14,203 6,221 461 19,963 Deferred revenue 486 - 111 375 Total liabilities $14,890 $6,221 $594 $20,517 146 GENERAL FIXED ASSETS ACCOUNT GROUP 147 Exhibit I-1 CITY OF FRIDLEY, MINNESOTA COMPARATIVE SCHEDULE OF GENERAL FIXED ASSETS December 31, 2002 and 2001 2002 2001 General fixed assets: Land $2,842,282 $2,735,987 Buildings 7,179,235 6,984,054 Improvements other than buildings 26,455,604 26,337,891 Machinery and equipment 5,870,206 6,325,701 Total general fixed assets $42,347,327 $42,383,633 Investment in general fixed assets from: General obligation bonds $ - $1,176,647 Federal and state aid 160,322 7,981,344 General Fund revenues 4,184,324 12,226,518 Special Revenue Fund revenues 227,111 1,810,327 Special assessments 37,707,018 13,553,928 Private gifts 68,552 911,881 Other sources - 4,722,988 Total investment in general fixed assets $42,347,327 $42,383,633 148 Exhibit 1-2 CITY OF FRIDLEY, MINNESOTA SCHEDULE OF CHANGES IN GENERAL FIXED ASSETS BY FUNCTION AND ACTIVITY For the year ended December 31,2002 General Fixed General Fixed Assets Assets Function and Activity 1/1/2002 Additions Deletions Adjustments 12/31/2002 General government: Cable TV $208,071 $5,013 $ - ($110,607) $102,477 Accounting 19,717 - 2,100 (3,854) 13,763 Elections 63,064 - - (63,064) - City clerk/records 141,139 - 2,940 (15,545) 122,654 Planning 35,845 14,734 3,494 = 47,085 Municipal center 3,703,251 72,870 - (42,856) 3,733,265 Total general government 4,171,087 92,617 8,534 (235,926) 4,019,244 Public safety: Public protection 899,901 103,136 35,587 (127,805) 839,645 Fire protection 2,448,319 - - (327,141) 2,121,178 Inspection services 7,164 - 2,741 (4,423) - Civil defense 93,474 - - - 93,474 Total public safety 3,448,858 103,136 38,328 (459,369) 3,054,297 Public works: Engineering 62,125 - - (9,125) 53,000 Street improvements 25,168,120 1,114,906 4,090 (56,715) 26,222,221 Traffic signal 270,682 - - (2,275) 268,407 Parks 5,842,518 47,203 50,704 (455,763) 5,383,254 Total public works 31,343,445 1,162,109 54,794 (523,878) 31,926,882 Recreation/naturalist: Recreation 2,113,064 - - (37,199) 2,075,865 Naturalist 1,307,180 - - (36,141) 1,271,039 Total recreation/naturalist 3,420,244 0 0 (73,340) 3,346,904 Total general fixed assets $42,383,634 $1,357,862 $101,656 ($1,292,513) $42,347,327 149 Exhibit 1-3 CITY OF FRIDLEY, MINNESOTA SCHEDULE OF GENERAL FIXED ASSETS BY FUNCTION AND ACTIVITY December 31, 2002 Improvements Machinery Other Than and Function and Activity Total Land Buildings Buildings Equipment General government: Cable TV $102,477 $ - $ - $ - $102,477 Accounting 13,763 - - - 13,763 Management information systems - - - - - Elections - - - - - City clerk/records 122,654 - - - 122,654 Planning 47,085 - - - 47,085 Municipal center 3,733,265 17,496 2,838,485 242,662 634,622 Total general government 4,019,244 17,496 2,838,485 242,662 920,601 Public safety: Public protection 839,645 101,243 738,402 Fire protection 2,121,178 65,158 707,728 33,498 1,314,794 Civil defense 93,474 - - 93,474 - Total public safety 3,054,297 65,158 707,728 228,215 2,053,196 Public works: Engineering 53,000 - - - 53,000 Street improvements 26,222,221 434,766 588,484 23,388,669 1,810,302 Traffic signal 268,407 - - 268,407 - Parks 5,383,254 2,017,036 616,368 1,886,408 863,442 Total public works 31,926,882 2,451,802 1,204,852 25,543,484 2,726,744 Recreation/naturalist: Recreation 2,075,865 - 1,915,499 6,500 153,866 Naturalist 1,271,039 307,826 512,671 434,743 15,799 Total recreation/naturalist 3,346,904 307,826 2,428,170 441,243 169,665 Total fixed assets $42,347,327 $2,842,282 $7,179,235 $26,455,604 $5,870,206 150 GENERAL LONG TERM DEBT ACCOUNT GROUP 151 Exhibit J-1 CITY OF FRIDLEY, MINNESOTA COMPARATIVE SCHEDULE OF GENERAL LONG TERM DEBT December 31, 2002 and 2001 2002 2001 Amount Available And To Be Provided For The Payment of General Long-Term Debt Amount available in Debt Service Funds $6,888,526 $9,595,015 Amount to be provided by future taxes 5,311,474 3,754,985 Total available and to be provided $12,200,000 $13,350,000 General long-term debt payable: General obligation special assessment improvement bonds $465,000 $615,000 General obligation tax increment refunding bonds 11,735,000 12,735,000 Total general long-term debt payable $12,200,000 $13,350,000 152 STATISTICAL SECTION 153 -This page intentionally left blank- 154 Table 1 CITY OF FRIDLEY, MINNESOTA GENERAL GOVERNMENT EXPENDITURES BY FUNCTION(') LAST TEN FISCAL YEARS (UNAUDITED) Fiscal General Public Municipal Public Community Recreation/ Debt Year Government Safety Center Works Development Naturalist Service Total 1993 $2,612,941 $3,413,297 $169,493 $2,376,990 $407,470 $720,759 $2,207,891 $11,908,841 1994 3,206,942 3,552,812 180,104 2,473,128 462,615 780,242 3,495,789 14,151,632 1995 3,954,875 3,821,230 195,949 2,375,472 530,230 850,329 5,636,711 17,364,796 1996 (2) 2,145,143 3,863,105 185,917 2,306,088 535,496 759,457 1,102,010 10,897,216 1997 2,488,576 4,109,283 214,490 2,625,869 572,817 813,356 10,635,507 21,459,898 1998 2,585,108 4,098,048 205,480 2,826,545 648,842 902,159 5,141,866 16,408,048 1999 2,585,352 4,243,682 235,308 2,879,627 721,120 996,584 1,029,680 12,691,353 2000 2,888,061 4,392,025 225,114 2,661,927 775,312 1,031,174 1,058,772 13,032,385 2001 3,004,385 4,467,947 241,662 2,863,228 708,749 1,106,058 1,844,640 14,236,669 2002 3,262,437 4,905,475 225,068 3,065,570 710,780 1,139,351 1,836,471 15,145,152 (')Includes General,Special Revenue,Capital Projects, Debt Service and Expendable Trust Funds and excludes capital outlay. (2)Prior to 1996,the HRA was included as a blended component unit of the City. 155 Table 2 CITY OF FRIDLEY, MINNESOTA GENERAL REVENUES BY SOURCE(') LAST TEN FISCAL YEARS (UNAUDITED) General Property Taxes& Inter- Fiscal Special Licenses governmental Charges For Miscellaneous Year Assessments &Permits Revenue Services Revenue Total 1993 $7,521,395 $410,135 $4,417,835 $928,736 $3,619,903 $16,898,004 1994 6,915,475 528,111 3,808,828 1,038,863 2,393,463 14,684,740 1995 6,966,331 554,182 4,003,592 1,015,048 2,547,453 15,086,606 1996 (2) 4,420,212 828,652 3,986,987 1,299,495 1,841,698 12,377,044 1997 4,312,005 792,622 5,410,058 1,313,705 2,176,543 14,004,933 1998 4,520,684 846,145 5,603,676 1,514,548 1,967,013 14,452,066 1999 4,475,051 937,084 5,417,384 1,291,819 1,437,381 13,558,719 2000 4,529,716 1,276,615 7,169,251 1,391,203 2,136,893 16,503,678 2001 4,579,022 776,892 4,032,903 1,471,113 1,545,770 12,405,700 2002 5,497,648 647,676 4,114,621 1,531,782 1,087,879 12,879,606 (1)Includes General, Special Revenue, Capital Projects, Debt Service and Expendable Trust Funds. (2)Prior to 1996, the HRA was included as a blended component unit of the City. 156 Table 3 CITY OF FRIDLEY, MINNESOTA CERTIFIED PROPERTY TAX LEVIES AND COLLECTIONS LAST TEN FISCAL YEARS (UNAUDITED) Collection Ratio of Certified Current Percent of Prior Total Outstanding Fiscal Tax Tax of Levy Year's Total Collections to Delinquent Year Levy Collections(1)(2) Collected Taxes Collections Tax Levy Taxes 1993 $4,626,465 $4,563,742 98.64% $162,911 $4,726,653 1.0217 :1 $217,536 1994 3,678,665 3,578,604 97.28% 6,764 3,585,368 0.9746 :1 32,416 (3) 1995 3,667,686 3,606,902 98.34% 105,526 3,712,428 1.0122 :1 84,303 1996 3,897,629 3,849,004 98.75% 21,977 3,870,981 0.9932 :1 72,063 1997 3,891,612 3,809,416 97.89% 22,115 3,831,531 0.9846 :1 120,696 1998 4,010,570 3,935,004 98.12% 3,584 3,938,588 0.9821 :1 83,110 1999 4,034,919 4,064,819 100.74% 36,168 4,100,987 1.0164 :1 36,583 2000 4,035,671 3,928,752 97.35% 44,565 3,973,317 0.9845 :1 118,399 2001 4,205,000 4,147,788 98.64% 8,623 4,156,411 0.9884 :1 132,403 2002 5,613,131 5,579,777 (4) 99.41% 40,354 5,620,131 1.0012 :5 112,252 (1)For years prior to 1994, the tax levy and collections include Homestead and Agricultural Aid Credit (HACA). Beginning in 1994, state law required the City to certify its tax levy after subtracting HACA. (2)Excludes collections from properties pledged to tax increment. (3)Taxes were adjusted $105,234 by Anoka County due to abatements, court ordered settlements and corrections of prior errors by the County. (4)Current tax collections include the market value homestead credit(MVHC). 157 CITY OF FRIDLEY, MINNESOTA ESTIMATED MARKET VALUE AND TAXABLE VALUE OF ALL PROPERTY LAST TEN FISCAL YEARS (UNAUDITED) Fiscal year payable 1993 1994 1995 1996 Assessment year 1992(1) 1993(1) 1994(1) 1995(1) Population,fiscal year 28,287 28,104 28,204 28,267 Real property: Estimated market value $1,064,099,200 $1,068,474,200 $1,090,023,902 $1,120,412,065 Taxable value: Homestead $6,980,161 $7,008,373 $7,374,709 $7,784,740 Excess and nonhomestead 19,609,068 19,250,219 19,253,892 19,554,250 Less fiscal disparities contribution (5,274,175) (5,000,902) (4,946,278) (4,974,987) Less tax increment value (2,536,327) (2,581,487) (2,642,692) (2,692,879) Taxable value $18,778,727 $18,676,203 $19,039,631 $19,671,124 Personal property: Estimated market value $23,184,800 $23,308,700 $19,952,700 $19,576,200 Taxable value $1,088,969 $1,071,329 $916,940 $916,940 Totals: Estimated market value $1,087,284,000 $1,091,782,900 $1,109,976,602 $1,139,988,265 Taxable value $19,867,696 $19,747,532 $19,956,571 $20,588,064 Per market value ratios: Taxable value .018:1 .018:1 .018:1 .018:1 Per capita valuations: Estimated market value $38,438 $38,848 $39,355 $40,329 Taxable value $702 $703 $708 $728 Real property: Taxable value Fiscal disparities distribution $3,463,663 $3,349,769 $2,827,323 $3,007,783 Notes: (1)The Minnesota Legislature enacted legislation which changed the method of computing property taxes in 1988, 1989, 1990 and 1993. Those changes have been reflected in the computation of the taxable value for taxes payable in 1989 through 2001. (2)The Anoka County Auditor's Office determines taxable values on January 2 of each year pursuant to State Statutes. The Total Taxable Value on January 2, 2000 upon which the 2001 levy was based was$21,808,988. 158 Table 4 1997 1998 1999 2000 2001 2002 1996(1) 1997°) 1998(1) 1999(1) 2000(1) 2001(1) 28,419 28,335 28,623 27,449 27,854 27,877 $1,152,674,700 $1,209,684,500 $1,274,348,500 $1,316,382,300 $1,499,258,100 $1,669,007,700 $8,199,059 $8,307,553 $8,556,633 $9,152,661 $10,201,895 $9,026,662 20,139,316 18,039,448 16,302,168 16,814,763 19,002,890 12,973,031 (5,147,086) (4,685,134) (4,337,632) (4,312,759) (4,769,074) 3,223,214 (2,760,628) (2,638,263) (2,381,402) (2,475,455) (3,272,618) 2,552,353 $20,430,661 $19,023,604 $18,139,767 $19,179,210 $21,163,093 $27,775,260 $19,576,200 $19,164,700 $19,315,800 $19,160,600 $19,089,700 $19,133,400 $916,940 $766,322 $673,798 $668,384 $645,895 $360,466 $1,172,250,900 $1,228,849,200 $1,293,664,300 $1,335,542,900 $1,518,347,800 $1,688,141,100 $21,347,601 $19,789,926 $18,813,565 $19,847,594 $21,808,988 $28,135,726 .018:1 .015:1 .015:1 .015:1 .014:1 .017:1 $41,249 $43,369 $45,197 $48,655 $54,511 $60,557 $751 $698 $657 $723 $783 $1,009 $3,222,432 $3,116,450 $2,941,279 $3,355,535 $3,677,471 $2,278,406 159 -This page intentionally left blank- 160 Table 5 CITY OF FRIDLEY, MINNESOTA SIGNIFICANT MINNESOTA TAX POLICIES December 31, 2002 GENERAL All non-exempt property in Minnesota is subject to taxation by local taxing districts. The tax levied on a property is determined by computing its tax capacity, which is the property's market value multiplied by the appropriate class rate. The taxes on a property are computed by multiplying the tax rate by the property's tax capacity. The tax rate is determined by the County Auditor, dividing each tax levy by the taxing jurisdiction's adjusted net tax capacity. Properties are physically reviewed by assessors at least once every four years. The assessors market value is multiplied by the appropriate class rates to arrive at the adjusted net tax capacity (taxable value). The class rates vary by class of property. Type of Property 2002 Class Rates Residential Homestead First$500,000 1.00% Over$500,000 1.25% Commercial/Industrial First$150,000 1.50% Over$150,000 2.00% Rentals Apartments: 4+ units 1.80% Less than 4 units 1.50% Title II, MFHA, Sect. 8 0.90% Property Tax Refund. Residential property tax credits are indexed by the percentage of net property tax to household income to the extent a homeowners property tax exceeds a percentage of household income. The percentage ranges from 1.0%for incomes below$1,189 up to 4%for incomes of$77,519. The maximum refund amount is$1,450. In 1989, the Minnesota Legislature also enacted a targeting property tax credit program. This program provides refunds to homestead property owners for part of their tax increase in excess of 12 percent, if the increase is at least$100. The refund is equal to 60 percent of the increase over 12 percent. The maximum refund is$1,000. Property Tax Deferred. In 1993, the Minnesota legislature enacted a law commonly known as "This Old House" which exempts from the property tax all or a portion of the value of improvements made to homes 35 years of age or older. Homestead property owners could exclude the property tax on those improvements for 10 years. At the end of 10 years, the value of the improvements is added to the market value of the home in equal installments every five years. There are limits to the dollar amount eligible for the tax exclusion: $25,000 on homes 45 to 69 years old; and $50,000 on homes 70 years or older. Only improvements adding $5,000 or more of market value are eligible. 161 CITY OF FRIDLEY, MINNESOTA TAX CAPACITY RATES DIRECT AND OVERLAPPING GOVERNMENTS LAST TEN FISCAL YEARS (UNAUDITED) School School School School Fiscal District District District District Year City No. 11 No. 13 No. 14 No. 16(1) 1993 15.390% 63.717% 68.142% 61.406% 58.922% 1994 16.005% 57.161% 69.161% 60.840% 53.355% 1995 16.098% 61.402% 77.730% 63.296% 58.566% 1996 16.565% 64.387% 60.182% 71.790% 67.583% 1997 15.242% 55.588% 84.748% 66.129% 61.268% 1998 17.119% 51.824% 68.491% 69.402% 58.662% 1999 18.326% 54.856% 68.837% 67.728% 61.111% 2000 17.070% 51.792% 66.685% 61.655% 51.440% 2001 16.350% 52.281% 47.452% 45.466% 39.458% 2002 29.906% 29.082% 38.614% 17.855% 25.985% 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. 162 Table 6 Total School School School School Special District District District District County Districts No. 11(2'4) No. 13 3) No. 14(3'4) No. 16(1'3) 32.779% 5.668% 116.910% 122.707% 115.221% 114.723% 32.680% 5.452% 110.879% 123.277% 114.956% 108.899% 32.765% 6.022% 115.811% 132.593% 118.159% 113.801% 31.036% 6.122% 117.662% 113.880% 125.488% 121.656% 30.091% 6.044% 108.218% 137.656% 119.067% 114.551% 30.618% 6.603% 107.400% 124.314% 125.225% 114.679% 32.265% 6.603% 114.104% 128.158% 127.049% 120.765% 30.861% 8.224% 108.610% 123.385% 118.575% 108.621% 28.859% 8.218% 106.287% 101.819% 99.833% 94.139% 37.976% 7.528% 105.313% 115.198% 94.439% 102.639% 163 -This page intentionally left blank- 164 Table 7 CITY OF FRIDLEY, MINNESOTA SPECIAL ASSESSMENT LEVIES AND COLLECTIONS LAST TEN FISCAL YEARS (UNAUDITED) Total Current Current Collections Delinquent Collections Outstanding Fiscal Assessments Assessments to Amount Assessments Total to Current Delinquent Year Due Collected Due Collected Collected Assessment Assessments 1993 $603,004 $553,927 91.86% $68,367 $622,294 103.20% $91,010 1994 581,591 536,450 92.24% 31,201 567,651 97.60% 118,994 1995 526,207 478,762 90.98% 8,123 486,885 92.53% 156,253 1996 483,347 461,929 95.57% 73,178 535,107 110.71% 104,909 1997 540,313 507,588 93.94% 47,068 554,656 102.65% 74,711 1998 524,560 483,721 92.21% 44,464 528,185 100.69% 70,596 1999 482,364 457,546 94.85% 36,695 494,241 102.46% 61,103 2000 489,933 473,705 96.69% 34,248 507,953 103.68% 33,050 2001 505,054 494,686 97.95% 2,522 497,208 98.45% 41,327 2002 461,603 438,607 95.02% 24,972 463,579 100.43% 39,009 165 CITY OF FRIDLEY, MINNESOTA HISTORY OF CERTIFIED TAX LEVIES AND TAX RATES LAST TEN FISCAL YEARS (UNAUDITED) 1993 1994(1) 1995(1) Certified tax levies: General Fund $4,535,276 $3,603,266 $3,592,295 Capital Improvement Fund 87,689 72,689 72,689 Subtotal 4,622,965 3,675,955 3,664,984 Enterprise Fund - - - Agency Fund 3,500 2,710 2,702 Total $4,626,465 $3,678,665 $3,667,686 Tax Capacity Rate: General Fund 15.153% 15.076% 15.778% Capital Improvement Fund 0.300% 0.314% 0.320% Enterprise Fund 0.000% 0.000% 0.000% Subtotal 15.453% 15.390% 16.098% Agency Fund 0.021% 0.022% 0.022% Total 15.474% 15.412% 16.120% Notes: (')Beginning in 1994,the State law required the City to certify its tax levy after subtracting Homestead and Agricultural Aid Credit(HACA). (2)For 2002 the levy includes the market value homestead credit. 166 Table 8 19961) 1997(1) 1998(1) 1999(1) 2000(1) 2001(1) 2002(2) $3,821,853 $3,806,950 $3,921,159 $3,947,133 $3,947,882 $4,117,233 $5,507,313 72,689 72,689 72,689 72,689 72,689 72,667 90,719 3,894,542 3,879,639 3,993,848 4,019,822 4,020,571 4,189,900 5,598,032 - 8,900 8,900 8,900 8,900 8,900 8,900 3,087 3,073 7,822 6,197 6,200 6,200 6,200 $3,897,629 $3,891,612 $4,010,570 $4,034,919 $4,035,671 $4,205,000 $5,613,132 16.258% 15.399% 16.807% 17.995% 16.761% 16.049% 29.421% 0.307% 0.294% 0.312% 0.331% 0.309% 0.283% 0.485% 0.000% 0.625% 0.516% 0.687% 0.613% 0.534% 0.762% 16.565% 16.318% 17.635% 19.013% 17.683% 16.866% 30.668% 0.024% 0.023% 0.067% 0.049% 0.045% 0.043% 0.059% 16.589% 16.341% 17.702% 19.062% 17.728% 16.909% 30.727% 167 Table 9 CITY OF FRIDLEY, MINNESOTA RATIO OF NET GENERAL BONDED DEBT TO TAXABLE VALUE AND NET BONDED DEBT PER CAPITA LAST TEN FISCAL YEARS (UNAUDITED) Ratio of Net General Net City Debt Bonded Debt General Total Gross Service Fund Special Net General to Total Bonded Fiscal Taxable Bonded Monies Assessment, Bonded Taxable Debt Year Population Value Debt Available and Revenue Debt Value Per Capita 1993 28,287 $19,867,696 $21,500,000 $ - $21,500,000 $ - $ - $ - 1994 28,104 19,747,532 19,600,000 - 19,600,000 - - - 1995 28,204 19,956,571 19,075,000 - 19,075,000 - - - 1996 28,267 20,588,064 20,100,000 - 20,100,000 - - - 1997 28,419 21,347,601 19,880,000 - 19,880,000 - - - 1998 28,335 19,789,926 20,675,000 - 20,675,000 - - - 1999 28,623 18,813,565 20,080,000 - 20,080,000 - - - 2000 27,449 19,847,594 18,335,000 - 18,335,000 - - - 2001 27,854 21,808,988 16,880,000 - 16,880,000 - - - 2002 27,877 28,135,726 15,370,000 - 15,370,000 - - - 168 -This page intentionally left blank- 169 Table 10 Page 1 of 2 CITY OF FRIDLEY, MINNESOTA COMPUTATION OF LEGAL DEBT MARGIN December 31,2002 (UNAUDITED) Market Value $1,669,007,700 (A)Debt Limit 2% of Market Value $33,380,154 Amount of Debt Applicable to Debt Limit: Total Debt $15,370,000 (B)Deductions: Tax Increment Redevelopment Bonds $11,735,000 Special Assessment Bonds 465,000 Revenue Bonds 3,170,000 15,370,000 Total Amount of Debt Applicable to Debt Limit - Legal Debt Margin $33,380,154 Notes: (A)M.S.A. Section 475.53 (see following page) (B)M.S.A. Section 475.51 (see following page) 170 Table 10 Page 2 of 2 CITY OF FRIDLEY MINNESOTA COMPUTATION OF LEGAL DEBT MARGIN (CONTINUED) December 31, 2002 (UNAUDITED) Note(A): M.S.A. Section 475.53 et seq. Limit on Net Debt "Subdivision 1. Generally, except as otherwise provided in sections 475.51 to 475.75, no municipality, except a school district or a city of the first class, shall incur or be subject to a net debt in excess of two percent of the market value of taxable property in the municipality." Note(B): M.S.A. Section 475.51 Definitions "Subdivision 4. "Net Debt" means the amount remaining after deducting from its gross debt the amount of current revenues which are applicable within the current fiscal year to the payment of any debt, and the aggregate of the principal of the following: (1) Obligations issued for improvements which are payable wholly or partly from the proceeds of special assessments levied upon property specially benefited thereby, including those which are general obligations of the municipality issuing them, the municipality is entitled to reimbursement in whole or in part from the proceeds of the special assessments. (2) Warrants or orders having no definite or fixed maturity. (3) Obligations payable wholly from the income from revenue producing conveniences. (4) Obligations issued to create or maintain a permanent improvement revolving fund. (5) Obligations issued for the acquisition and betterment of public waterworks systems, public lighting, heating or power systems, and any combination thereof, or for any other public convenience from which a revenue is or may be derived. (6) Debt service loans and capital loans made to a school district under the provisions of sections 124.42 and 124.431. (7) Amount of all money and the face value of all securities held as a debt service fund for the extinguishment of obligations other than those deductible under this subdivision. (8) Obligations to repay loans made under section 216C.37. (9) Obligations to repay loans made from money received from litigation or settlement of alleged violations of federal petroleum pricing regulations. (10) All other obligations which under the provisions of law authorizing their issuance are not to be included in computing the net debt of the municipality. 171 Table 11 CITY OF FRIDLEY, MINNESOTA COMPUTATION OF DIRECT AND OVERLAPPING BONDED DEBT AND COMPARATIVE DEBT RATIOS December 31,2002 (UNAUDITEDI Net Percent of Net General Debt Debt General Bonded Gross Service Net Applicable Bonded Debt Governmental Unit Debt Funds Debt to City Debt Per Capita Direct&overlapping debt: Direct debt: City of Fridley $15,370,000 $7,360,157 $8,009,843 100.00% $8,009,843 $288 Overlapping debt: School Districts: No. 11 219,612,177 47,012,261 172,599,916 1.60% 2,761,599 99 No. 14 17,120,000 - 17,120,000 100.00% 17,120,000 615 No. 16 27,145,000 2,343,000 24,802,000 36.80% 9,127,136 328 Metro Council 810,810,618 88,149,999 722,660,619 1.19% 8,599,661 309 Anoka County 93,445,000 9,241,380 84,203,620 18.04% 15,190,333 545 Vocational/Technical District No. 916 17,980,000 1,262,756 16,717,244 2.21% 369,451 13 Overlapping debt 1,186,112,795 148,009,396 1,038,103,399 53,168,180 1,909 Total direct and overlapping debt $1,201,482,795 $155,369,553 $1,046,113,242 $61,178,023 $2,196 172 Table 12 CITY OF FRIDLEY, MINNESOTA RATIO OF ANNUAL DEBT SERVICE EXPENDITURES FOR GENERAL BONDED DEBT TO TOTAL GENERAL GOVERNMENT EXPENDITURES LAST TEN FISCAL YEARS (UNAUDITED) Ratio to Total Total Debt Service Fiscal Debt General to General Year Principal Interest Service Expenditures(') Expenditure 1993 $925,000 $1,270,590 $2,195,590 $11,908,841 .1844:1 1994 2,305,000 1,147,551 3,452,551 14,151,632 .2440:1 1995 4,530,000 1,079,838 5,609,838 17,364,796 .3231:1 1996 175,000 896,011 1,071,011 10,897,216 .0983:1 1997 9,675,000 897,930 10,572,930 21,459,898 .4927:1 1998 4,310,000 796,329 5,106,329 16,408,048 .3112:1 1999 295,000 729,889 1,024,889 12,691,353 .0808:1 2000 14,455,000 753,063 15,208,063 13,032,385 1.1669:1 2001 13,350,000 737,471 14,087,471 14,236,669 .9895:1 2002 12,200,000 684,271 12,884,271 15,145,152 .8507:1 Notes: (')Includes General, Special Revenue, Debt Service and Capital Projects and Expendable Trust Funds and excludes capital outlay. (2)Prior to 1996, the HRA was included as a blended component unit of the City. 173 Table 13 CITY OF FRIDLEY, MINNESOTA REVENUE BOND COVERAGE LAST TEN FISCAL YEARS (UNAUDITED) Net Operating Revenue Direct Direct Available Fiscal Operating Operating For Debt Debt Service Requirements Year Revenue) Expenses(2) Service Principal Interest Total Coverage 1993 $3,557,088 $4,360,448 ($803,360) $45,000 $129,944 $174,944 $ - 1994 3,985,612 4,534,059 (548,447) 80,000 127,301 207,301 - 1995 4,476,900 5,283,552 (806,652) 85,000 142,943 227,943 - 1996 5,791,287 5,648,603 142,684 115,000 173,553 288,553 0.49 1997 6,660,575 5,339,754 1,320,821 120,000 256,459 376,459 3.51 1998 6,520,948 5,469,928 1,051,020 260,000 275,498 535,498 1.96 1999 5,389,003 5,242,663 146,340 5,325,000 281,975 5,606,975 0.03 2000 5,150,374 4,965,373 185,001 3,880,000 197,277 4,077,277 0.05 2001 4,994,669 5,148,461 (153,792) 3,530,000 175,115 3,705,115 (0.04) 2002 5,016,233 5,251,371 (235,138) 3,170,000 158,422 3,328,422 (0.07) Notes: (')Total operating revenue. (2)Total operating expenses including depreciation. 174 Table 14 CITY OF FRIDLEY, MINNESOTA DEMOGRAPHIC STATISTICS LAST TEN FISCAL YEARS (UNAUDITED) Annual Per Average Fiscal Capita Median School Unemployment Year Population(') Income) Age(4) Enrollment(3) Rate(5) 1993 28,287 $15,261 30.3 4,200 4.4% 1994 28,104 $15,535 30.5 3,942 3.4% 1995 28,204 $17,642 31.2 3,960 3.2% 1996 28,267 $18,672 32.5 4,249 3.4% 1997 28,419 $20,808 36.4 4,272 2.6% 1998 28,335 $22,405 36.3 3,524 2.1% 1999 28,623 $24,113 36.9 3,534 2.3% 2000 27,449 (2) $25,357 37.2 3,543 2.8% 2001 27,854 $25,995 36.2 3,888 3.6% 2002 27,877 $28,324 36.6 3,937 4.4% Notes: (1)Estimated (2)2000 Population Report- Bureau of the Census (3)Estimated -excludes Grace Parochial High School as it is not supported by property tax dollars. (4)1991 - 1994 amounts for Anoka County. (5)Minnesota Department of Economic Security-Twin Cities Labor Market (6)Maxfield Research 175 Table 15 CITY OF FRIDLEY, MINNESOTA CONSTRUCTION AND PROPERTY VALUE LAST TEN FISCAL YEARS (UNAUDITED) Commercial Construction Residential Construction Number Number Estimated Market Value Fiscal of of Taxable Non- Year Units Value Units Value Property Taxable) Total 1993 69 $6,778,632 474 $3,536,547 $1,087,284,000 $177,929,400 $1,265,213,400 1994 115 17,510,011 711 6,365,829 1,091,782,900 191,559,200 1,283,342,100 1995 116 18,280,651 608 7,618,320 1,109,976,602 185,043,100 1,295,019,702 1996 108 20,141,727 719 9,971,879 1,139,988,265 185,043,100 1,325,031,365 1997 101 16,046,463 737 8,894,213 1,208,684,500 191,559,200 1,400,243,700 1998 111 9,605,305 2,977 11,766,221 1,254,840,000 209,634,200 1,464,474,200 1999 90 27,149,247 1,632 15,487,489 1,293,664,300 208,033,400 1,501,697,700 2000 96 93,625,644 836 8,020,233 1,335,542,900 208,409,300 1,543,952,200 2001 70 11,362,547 667 10,445,492 1,470,697,000 205,912,700 1,676,609,700 2002 52 4,905,398 730 6,713,930 1,604,863,900 212,252,400 1,817,116,300 Note: (')Non-taxable property is reevaluated by the city assessors every six years 176 Table 16 CITY OF FRIDLEY, MINNESOTA PRINCIPAL TAXPAYERS December 31,2002 (UNAUDITED) Fiscal Year 2002 Percent 2001* of Total Taxable Taxable Rank Taxpayer Type of Business Valuation Valuation 1 Target Corporation Target discount store,warehouse and office $57,344,500 3.40% 2 Medtronic, Inc. Electro-medical devices 35,430,000 2.10% 3 Shamrock Investments Murphy Warehouses 20,177,000 1.20% 4 Springbrook Apartments Springbrook Apartments 20,094,000 1.19% 5 Cummins Power(Onan) Portable electric generators 14,659,400 0.87% 6 Burlington Northern Railroad Operating property 14,081,100 0.83% 7 Maurice Fillister(Georgetown) Georgetown apartments 13,578,000 0.80% 8 Retail Trust IV(Wal-Mart/Sam's) Wal-Mart/Sam's Club discount stores 12,582,400 0.75% 9 Northwest Racquet&Swim Club Health and Tennis Club 11,771,700 0.70% 10 Riverpointe Apartments Riverpointe Apartments 11,160,900 0.66% Total $210,879,000 12.49% 177 Table 17 CITY OF FRIDLEY, MINNESOTA INSURANCE COVERAGE December 31,2002 (UNAUDITED) Municipal Property&Crime: Property $29,718,442 Mobile Property (also referred to as Inland Marine): Scheduled Over$25,000 1,340,920 Unsched $25,000&Less 513,592 Crime (inside/outside&forgery) 100,000 Bonds 350,000 Boiler& Machinery: Equipment Breakdown Limit 31,572,954 Municipal Liability: Each occurrence limit $1,000,000 Automobile Liability: Liability $1,000,000 Personal Injury Protection Mn Statutory Coverage Uninsured/Underinsured Motorist 1,000,000 Deductibles on the above insurance are as follows: Each Occurrence Deductible 50,000 General Annual Aggregate Deductible 100,000 If the General Annual Aggregate Deductible is exceeded then the following deductible applies 1,000 Liquor Liability: Outdoor Signs-Cub 10,000 Outdoor Signs-Hwy 65 15,000 Money&Securities Inside/Outside the Premises-Hwy 65 10,000/5,500 Money&Securities Inside/Outside the Premises-Cub 50,000/25,000 Employee Dishonesty 10,000 Liability& Medical Expenses 1,000,000 General Aggregate Limit 2,000,000 Medical Payments limit 10,000 Hired & Non-owned Auto Liability 1,000,000 Liquor Liability-each occurrence 1,000,000 Liquor Liability-aggregate 2,000,000 Accident Plan for Volunteers: Accidental Death/Permanent Impairment 100,000 Weekly Disability (max of 26 weeks) 400 Medical Benefit 1,000 Total Limit of Liability per Accident 500,000 Worker's compensation: Bodily Injury-Each Occurrence 1,000,000 Bodily Injury by Disease-Agreement Limit 1,000,000 178 Table 18 CITY OF FRIDLEY, MINNESOTA MISCELLANEOUS STATISTICAL INFORMATION December 31, 2002 (UNAUDITED) Date of Incorporation (Village of Fridley) July 1, 1949 Date of Adoption of City Charter September 10, 1957 effective September 25, 1957 Form of Government Council/Manager Fiscal year begins January 1 Area of City 11 square miles Bond rating (Moody's Investors Service, Incorporated) Aa-1 Elections: Last election -General Federal, State&Local November 5, 2002 Registered voters 16,424 Number of votes cast 12,512 Percent(%)of registered voters voting 76.2% Population: 1950- Federal Census 3,796 1960- Federal Census 15,182 1970- Federal Census 29,233 1980- Federal Census 30,228 1990- Federal Census 28,335 1994- Estimated 28,104 1995- Estimated 28,204 1996- Estimated 28,267 1997- Estimated 28,419 1998- Estimated 28,335 1999- Estimated 28,623 2000- Federal Census 27,449 2001 - Estimated 27,854 2002- Estimated 27,877 Permanent Employees--As of December 31 1993 135 1994 140 1995 136 1996 136 1997 136 1998 140 1999 142 2000 138 2001 138 2002 139 179 Table 18 Continued CITY OF FRIDLEY, MINNESOTA MISCELLANEOUS STATISTICAL INFORMATION (CONTINUED) December 31, 2002 (UNAUDITED) Fire protection: Number of stations 3 Volunteer firefighters 27 Full-time firefighters 6 Fire rating Class 3 Police protection: Number of stations 1 Number of sworn officers 39 Number of street lights 1,054 Number of traffic signal installations 35 Number of other special signal installations 2 Number of civil defense warning sirens 8 Miles of streets and sidewalks (including State and County): City streets 127.20 Trunk highways 10.79 County roads 14.56 Sidewalks and bikeways 14.48 Miles of sewer: Storm 49.34 Sanitary 102.96 Miles of watermains 112.93 Municipal water system source City of Fridley Water Plant (13 wells)--capacity of 15.7 million gallons per day Number of water connections December 31 8,254 Daily average consumption (gallons) 5.2 million gallons Elevated stored capacity 3.5 million gallons Water storage reservoirs 3.0 million gallons Stand pipe 1.5 million gallons Number of fire hydrants 998 Municipal sewer system: Disposal --through Metropolitan Council Environmental Service Number of sewer connections December 31 8,263 Average daily flow(includes infiltration/inflow) 4.88 million gallons 180 Table 18 Continued CITY OF FRIDLEY, MINNESOTA MISCELLANEOUS STATISTICAL INFORMATION (CONTINUED) December 31, 2002 (UNAUDITED) Parks and recreation areas: Developed 420 Acres Undeveloped 262 Acres Total 682 Acres City and County Parks Schools Total Number of: Hockey rinks 6 2 8 General skating rinks 10 3 13 Playgrounds 29 4 33 Swimming beaches 1 0 1 Swimming pools 0 1 1 Picnic grounds 19 0 19 Day camp sites 1 0 1 Baseball diamonds 4 5 9 Softball diamonds 21 3 24 Outdoor basketball courts 19 4 23 Tennis courts 22 19 41 Horseshoe courts 16 0 16 Archery ranges 1 0 1 Permanent playground buildings 3 0 3 Permanent picnic shelters 15 0 15 Soccer/football fields 8 3 11 181 Table 19 CITY OF FRIDLEY, MINNESOTA GENERAL INFORMATION December 31, 2002 (UNAUDITED) Location -Transportation The City of Fridley, with a total land area of eleven square miles and an estimated population of 27,877, is located at the northern boundaries of Minneapolis and Columbia Heights, about eight miles from the Minneapolis central business district. Freight service is provided in the area by local and interstate truck lines and Burlington Northern Railroad. Commuter transportation is available through Metropolitan Transit Commission facilities. Highways serving Fridley include Interstate #694 (beltline around the metropolitan area) and State Highways. An International Airport, located approximately twenty-five miles south of Fridley, and private business aviation facilities located at the Anoka County and Crystal Airports, provide air transportation and are operated by the Metropolitan Airport Commission. Medical Facilities Medical facilities in Fridley include Health One Unity Hospital, a 275-bed hospital with an adjacent clinic (Unity Professional Building), Fridley Plaza Clinic, Fridley Medical Center, and Lynwood Health Care Center. Education Fridley is served by four school districts, a major portion of the City is located within Fridley Independent School District No. 14. The Fridley School District operates two elementary schools, a junior high and senior high school, employing 158 certified personnel in the education of about 2,596 students. Grace Parochial High School has an enrollment of approximately 1124. Portions of the Columbia Heights School District (13), the Spring Lake Park School District (16) and Anoka/Hennepin School District (11) also lie within the City of Fridley. Those districts have an estimated enrollment of 1341 students living within the City of Fridley. Colleges and universities, vocational-technical and specialized training schools are located throughout the metropolitan area within easy commuting distances of Fridley. Larger Employers Larger employers in the City of Fridley include: Full-Time Employer Product or Service Employees Medtronic, Inc. Electro-medical devices and headquarters 2,763 Cummins(Onan) Portable generators, electronic equipment 1,440 United Defense Systems Pumps and naval ordinance 1,401 Burlington Northern Railroad Railroad company 650 Minco Products Electronic devices -640 Unity Hospital Medical services 465 Parsons Electric Electric contractor 400 Target Stores, Warehouse Discount department store 387 Kurt Manufacturing Machine parts 350 McGlynn's Bakery 318 182