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2005 CAFR COMPREHENSIVE ANNUAL FINANCIAL REPORT 1 Ilk •a CITY OF FRIDLEY MINNESOTA FOR THE YEAR ENDED DECEMBER 31, 2005 M CITY OF FRIDLEY, MINNESOTA Comprehensive Annual Financial Report For the Fiscal Year Ended December 31, 2005 Prepared by: Finance Department Richard D. Pribyl Finance Director CITY OF FRIDLEY CITY OF FRIDLEY, MINNESOTA COMPREHENSIVE ANNUAL FINANCIAL REPORT YEAR ENDED DECEMBER 31, 2005 TABLE OF CONTENTS EXHIBIT PAGE I. INTRODUCTORY SECTION Letter of Transmittal 3 Certificate of Achievement for Excellence in Financial Reporting 11 Elected and Appointed Officials 13 City Administrative Organizational Structure 2005 14 II. FINANCIAL SECTION Independent Auditor's Report 19 Management's Discussion and Analysis 23 Basic Financial Statements: Government-Wide Financial Statements: Statement of Net Assets A-1 35 Statement of Activities A-2 36 Fund Financial Statements: Balance Sheet-Governmental Funds A-3 38 Statement of Revenues, Expenditures and Changes in Fund Balances- Governmental Funds A-4 40 Reconciliation of the Statement of Revenues, Expenditures and Changes in Fund Balances of Governmental Funds A-5 43 Statement of Net Assets-Proprietary Funds A-6 44 Statement of Revenues, Expenses and Changes in Fund Net Assets- Proprietary Funds A-7 46 Statement of Cash Flows- Proprietary Funds A-8 48 Statement of Fiduciary Net Assets A-9 50 Notes to Financial Statements 51 Required Supplementary Information: Budgetary Comparison Schedule- General Fund B-1 84 Budgetary Comparison Schedule- Grant Management Fund B-2 88 Budgetary Comparison Schedule- Note to RSI 89 Combining and Individual Fund Statements and Schedules: Combining Balance Sheet-Nonmajor Governmental Funds C-1 96 Combining Statement of Revenues, Expenditures and Changes in Fund Balances- Nonmajor Governmental Funds C-2 97 CITY OF FRIDLEY, MINNESOTA COMPREHENSIVE ANNUAL FINANCIAL REPORT YEAR ENDED DECEMBER 31, 2005 TABLE OF CONTENTS EXHIBIT PAGE Subcombining Balance Sheet- Nonmajor Special Revenue Funds C-3 100 Subcombining Statement of Revenues, Expenditures and Changes in Fund Balances-Nonmajor Special Revenue Funds C-4 102 Special Revenue Funds: Cable TV Fund: Comparative Balance Sheet D-1 104 Schedule of Revenues, Expenditures and Changes in Fund Balance- Budget and Actual D-2 105 Solid Waste Abatement Fund: Comparative Balance Sheet D-3 106 Schedule of Revenues, Expenditures and Changes in Fund Balance- Budget and Actual D-4 107 HRA Reimbursement Fund: Comparative Balance Sheet D-5 108 Schedule of Revenues, Expenditures and Changes in Fund Balance- Budget and Actual D-6 109 Drug and Gambling Forfeiture Fund: Comparative Balance Sheet D-7 110 Schedule of Revenues, Expenditures and Changes in Fund Balance- Budget and Actual D-8 111 F. C. C. Donations Fund: Comparative Balance Sheet D-9 112 Schedule of Revenues, Expenditures and Changes in Fund Balance- Budget and Actual D-10 113 Police Activity Fund: Comparative Balance Sheet D-11 114 Schedule of Revenues, Expenditures and Changes in Fund Balance- Budget and Actual D-12 115 Springbrook Nature Center Fund: Balance Sheet D-13 116 Schedule of Revenues, Expenditures and Changes in Fund Balance- Budget and Actual D-14 117 Capital Project Fund: Capital Improvement Fund: Schedule of Revenues, Expenditures and Changes in Fund Balance- Budget and Actual E-1 118 Internal Service Funds: Combining Statement of Net Assets F-1 120 Combining Statement of Revenues, Expenses and Changes in Net Assets F-2 121 Combining Statement of Cash Flows F-3 122 Employee Benefits Fund: Comparative Statement of Net Assets F-4 123 Comparative Statement of Revenues, Expenses and Changes in Net Assets F-5 124 Comparative Statement of Cash Flows F-6 125 CITY OF FRIDLEY, MINNESOTA COMPREHENSIVE ANNUAL FINANCIAL REPORT YEAR ENDED DECEMBER 31, 2005 TABLE OF CONTENTS EXHIBIT PAGE Self Insurance Fund: Comparative Statement of Net Assets F-7 126 Comparative Statement of Revenues, Expenses and Changes in Net Assets F-8 127 Comparative Statement of Cash Flows F-9 128 Information Systems Fund: Comparative Statement of Net Assets F-10 129 Comparative Statement of Revenues, Expenses and Changes in Net Assets F-11 130 Comparative Statement of Cash Flows F-12 131 Housing and Redevelopment Authority (Component Unit): Balance Sheet-Governmental Funds G-1 134 Statement of Revenues, Expenditures and Changes in Fund Balances-Governmental Funds G-2 136 Combining Balance Sheet- Nonmajor Governmental Funds G-3 138 Combining Statement of Revenues, Expenditures and Changes in Fund Balances- Nonmajor Governmental Funds G-4 139 Subcombining Balance Sheet- Nonmajor Capital Project Funds G-5 140 Subcombining Statement of Revenues, Expenditures and Changes in Fund Balances-Nonmajor Capital Project Funds G-6 142 Agency Funds: Statement of Changes in Assets and Liabilities H-1 146 Ill. STATISTICAL SECTION (Unaudited) Government-Wide Information: Government-Wide Expenses By Function 1 148 Government-Wide Revenues 2 150 General Government Expenditures by Function - Last Ten Fiscal Years 3 152 General Revenue by Source-Last Ten Fiscal Years 4 153 Certified Property Tax Levies and Collections- Last Ten Fiscal Years 5 155 Estimated Market Value and Taxable Value of All Property- Last Ten Fiscal Years 6 156 Significant Minnesota Tax Policies 7 159 Tax Capacity Rates- Direct and Overlapping Governments- Last Ten Fiscal Years 8 160 Special Assessment Levies and Collections-Last Ten Fiscal Years 9 163 History of Certified Tax Levies and Tax Rates- Last Ten Fiscal Years 10 164 CITY OF FRIDLEY, MINNESOTA COMPREHENSIVE ANNUAL FINANCIAL REPORT YEAR ENDED DECEMBER 31, 2005 TABLE OF CONTENTS EXHIBIT PAGE Ratio of Net General Bonded Debt to Taxable Value and Net Bonded Debt Per Capita - Last Ten Fiscal Years 11 167 Computation of Legal Debt Margin 12 168 Computation of Direct and Overlapping Bonded Debt and Comparative Debt Ratios 13 170 Ratio of Annual Debt Service Expenditures for General Bonded Debt to Total General Government Expenditures- Last Ten Fiscal Years 14 171 Revenue Bond Coverage- Last Ten Fiscal Years 15 172 Demographic Statistics- Last Ten Fiscal Years 16 173 Construction and Property Value-Last Ten Fiscal Years 17 174 Principal Taxpayers 18 175 Insurance Coverage 19 176 Miscellaneous Statistical Information 20 177 General Information 21 180 I. INTRODUCTORY SECTION 1 CITY OF FRIDLEY 2 CI1YOF FRIDLEY FRIDLEY MUNICIPAL CENTER • 6431 UNIVERSITY AVE.N.E.FRIDLEY,MN 55432 (763)571-3450 • FAX(763)571-1287 • TTD/ITY(763)572-3534 June 1, 2006 To the Citizens of the City of Fridley, Mayor, Council Members, and City Manager The Comprehensive Annual Financial Report of the City of Fridley, Minnesota, for the fiscal year ended December 31, 2005, is submitted herewith: 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. The Comprehensive Annual Financial Report is presented in three sections: Introductory, Financial, and Statistical. The Introductory Section includes this transmittal letter, the City's organizational chart, a list of principal officials, and a reproduction of the Certificate of Achievement for the prior year. The Financial Section includes: 1) independent auditor's opinion; 2) management's discussion and analysis; 3) government-wide and fund financial statements; 4) notes to the financial statements; 5) required supplemental information; 6) combining and individual fund statements and schedules; and, 7) the supplemental financial information. The Statistical Section includes tables and reports of various economic, social, financial and fiscal data designed to reflect trends and ratios. Generally accepted accounting principals require that management provide a narrative introduction, overview, and analysis to accompany the basic financial statements in the form of Management's Discussion and Analysis (MD&A). This letter of transmittal is designed to complement the MD&A and should be read in conjunction with it. The City of Fridley's MD&A can be found immediately following the report of the independent auditors. All City funds, departments, commissions and other organizations for which the City of Fridley is financially accountable are presented within the Comprehensive Annual Financial Report. The City provides a full range of services to its citizens. These services include, but are not limited to, police and fire protection; water and sanitary sewer utilities; the construction and maintenance of streets and infrastructure; recreational facilities; and general administrative 3 CITY OF FRIDLEY 4 CITY OF FRIDLEY, MINNESOTA services. The Housing and Redevelopment Authority (HRA) is included in the reporting entity as a component unit of the City, because the governing board is appointed by the City Council, and because of the City's relationship of financial benefit or burden with the authority. The organization, form and contents of this report were prepared in accordance with the standards prescribed by the Governmental Accounting Standards Board (GASB), the Government Finance Officers Association of the United States and Canada (GFOA), the American Institute of Certified Public Accountants, the Minnesota Office of the State Auditor, and the City Charter. ECONOMIC CONDITION AND OUTLOOK BACKGROUND AND LOCATION The City of Fridley is a first ring suburban community with an estimated 2005 population of 27,088. 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 The local economy has been a mixed bag over the past year. The number of manufacturing jobs has increased; however, the number of service jobs has decreased. The unemployment rate for the City however, is still below that of the national average. The value of new construction for 2005 increased significantly from 2004 levels. In 2005 there were six new projects having a value greater than $500,000, compared to only four in 2004. Continued long-term growth is anticipated as Fridley continues to aggressively pursue redevelopment opportunities. Property values have continued to increase with an overall increase of 6.8% in estimated market value for all properties in Fridley, and a 13.2% increase in estimated market value for homesteaded residential property. MAJOR INITIATIVES For the Year The City has many accomplishments to report for 2005. The following list is a summary of the major initiatives completed throughout the year. 5 CITY OF FRIDLEY, MINNESOTA ECONOMIC CONDITION AND OUTLOOK(CONTINUED) 1. The City reconstructed 3.8 miles of streets throughout the City. This project work included new concrete curb and gutter, new base and asphalt, and water and sewer repairs as necessary. The final cost of these projects was approximately $2,400,000. 2. Wells #3 & 6 were repaired as part of the City's preventive maintenance program. This program helps to ensure a constant water supply for the City. 3. The City continued installing AMR(automated meter reading)devices on some of its more difficult to read commercial meters. 4. The Police Department shooting range was improved. 5. The City took advantage of low interest rates and refinanced a 1997 bond issue. 6. The City maintained a Aal credit rating from Moody's Investors Service. For the Future The future for the City of Fridley will be filled with change and restructuring depending on future legislative actions that may change the state's tax structure, municipal redevelopment methods, and revenue streams. Traditional level of service is a concern as the City looks at potential reductions in revenue from traditional redevelopment practices and local government aid actions at the State Capitol. The City will continue to investigate alternatives that will allow creative solutions to the delivery of services. The City of Fridley will embark on the complimentary anchor to the Gateway East development with a project called Gateway West, which will likely provide an additional 16 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 from the south. 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 using new convenient passenger rail cars continues to move forward. The 2005 legislature approved funding for this effort to continue. The proposal would offer an alternative mode of transportation for residents who are commuting into the Minneapolis area from the north. Additional neighborhood and rail compatible development may occur on the remaining acreage near the Fridley station site. Significant projects budgeted for 2006 in the five year capital improvement plan include: the purchase of a combination pumper and ladder fire truck; an accelerated program to reconstruct 6 CITY OF FRIDLEY, MINNESOTA ECONOMIC CONDITION AND OUTLOOK(CONTINUED) streets; a reconditioning of the Commons Water Treatment Plant; and the annual well, reservoir, and pump house maintenance programs. 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%. 7 CITY OF FRIDLEY,MINNESOTA FINANCIAL INFORMATION (CONTINUED) RISK MANAGEMENT The Self-Insurance Fund was set up to account for all revenues and expenditures associated with the $50,000 deductible on the general liability policy. Self-insuring a larger deductible has reduced the annual premiums that allow us to directly benefit from our good experience rating. In the future an analysis will be made of the feasibility of self-insuring all or a portion of other policies. In 1990, $1,000,000 was transferred from the General Fund to the Self- Insurance Fund. OTHER INFORMATION PENSIONS City of Fridley employees are covered by one of three pension plans: 1. Fridley Fire Relief Association for Volunteer Firemen. 2. Public Employees Retirement Police and Fire Plan, covering the City's full-time Firemen and Police Officers. 3. Coordinated Public Employees Retirement Plan, which covers other City civilian employees. The employees covered by the Coordinated Public Employees Retirement Plan are also covered by Social Security. The City is currently making all pension contributions required by law. For additional background information on the pension plans covering City employees, see Notes to the Financial Statements. INDEPENDENT AUDIT Section 7.13 of the City Charter requires an annual audit to be made of the books of account, financial records and transactions of all administrative departments of the City by a certified public accountant or the State Auditor's Office of the State of Minnesota. The accounting firm of HLB Tautges Redpath, Ltd. was engaged by the City to render an opinion on the City's financial statements. The auditor's report on the basic financial statements and combining and individual fund statements and schedules is included in the Financial Section of this report. CERTIFICATE OF ACHIEVEMENT The Government Finance Officers Association of the United States and Canada (GFOA) awarded a Certificate of Achievement for Excellence in Financial Reporting to the City of Fridley, Minnesota, for its comprehensive annual financial report for the fiscal year ended 8 CITY OF FRIDLEY,MINNESOTA OTHER INFORMATION (CONTINUED) December 31, 2004. 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. 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, Mike Jeziorski, 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. Respectfully submitted, P. ale 44:0 Richard D. Pribyl Alan D. Folie Finance Director Assistant Finance Director 9 r a CITY OF FRIDLEY 10 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, 2004 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 fmancial reporting. GE OFFj ��I/1'_ " _ Y t COMMON S President M CANADA SEAL 4,k aKwo *Sr le019 Executive Director 11 CITY OF FRIDLEY 12 CITY OF FRIDLEY, MINNESOTA ELECTED AND APPOINTED OFFICIALS DECEMBER 31,2005 ELECTED OFFICIALS Term of Office Expires December Mayor Scott J. Lund 2008 Councilmember At Large Robert R. Barnette 2008 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. Bums 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 Donovan W.Abbott Fire Chief John D. Berg 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 13 CITY ADMINISTRATIVE ORGANIZATIONAL STRUCTURE 2005 City of Fridley Total Authorized Postions - 133 (A) CITY MANAGEMENT(3) City Manager Secretary to the City Manager Cable Administrator FINANCE(23) POLICE (46) HUMAN RESOURCES (2) Finance Director-Treasurer Public Safety Director Human Resources Director Secretary Secretary HR Assistant (2)Accountants OPERATIONS (30) ACCOUNTING (5) Captain Assistant Finance Director (6)Sergeants Payroll Technician (23)Patrol Officers Accounting Specialist (2)Acctg-Data Processing Clerks TECHNICAL SUPPORT(14) Captain ASSESSING(2) (1)Sergeant City Assessor (5)Patrol Officers Appraiser Projects Coordinator Crime Prevention Specialist MIS (2) Office Supervisor MIS Coordinator (4)Police Technicians MIS Specialist (1 FT,4 PT benefitted=3 FTE's) CITY CLERK-RECORDS (2) FIRE(8) City Clerk Licensing and Records Technician Fire Chief Secretary Assistant Chief Fire Marshal Non-General Fund (3) Full-time Firefighters LIQUOR(6) Rental Inspection Asst. Liquor Operations Manager (.75 FTE w/benefits) Assistant Manager (4) Liquor Store Clerks WATER ADMIN (2) Utility Billing Clerk Acctg-Data Processing Clerk (A)An "Authroized Position"is defined as one that works at least 32 hours a week and receives a full-time benefit package. 14 PUBLIC WORKS (35) RECREATION & COMMUNITY NATURALIST(8) DEVELOPMENT(8)(B) Director of Public Works Secretary Director of Recreation & Director of Community Operations Analyst Natural Resources Development Recreation Office Coordinator Secretary ENGINEERING (2) (3)Program Supervisors Assistant Public Works Director BUILDING INSPECTION (3) Engineering Tech Inspector Chief Building Official Building Inspector PW MAINTENANCE (30) NATURALIST(3) Secretary Secretary Natural Res. Coordinator Lead Mechanic Interpretive Specialist PLANNING (3) (2)Mechanic, Level B Secretary Planning Coordinator Street Supervisor Planning Assitant (8) Public Service Worker Environmental Coordinator Water Supervisor (4)Public Service Worker Sewer Supervisor (4)Public Service Worker Parks Supervisor (6)Public Service Worker (B)There are two full-time positions that report to the Community Development Director that are not funded from the City budget. They are: 1)Assistant Executive Director- HRA and 2) Housing Specialist. 15 { it � e lImmookommomOttmimmr CITY OF FRIDLEY 16 II. FINANCIAL SECTION 17 ',k I 3 1 CITY OF FRIDLEY 18 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 financial statements of the governmental activities, the business-type activities,the aggregate discretely presented component unit, each major fund, and the aggregate remaining fund information of the City of Fridley, Minnesota, as of and for the year ended December 31, 2005 which collectively comprise the City's basic financial statements as listed in the table of contents. These financial statements are the responsibility of the City of Fridley, Minnesota's management. Our responsibility is to express opinions on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the City of Fridley, Minnesota's internal control over financial reporting. Accordingly, we express no such opinion. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinions. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the governmental activities, the business-type activities, the aggregate discretely presented component unit, each major fund, and the aggregate remaining fund information of the City of Fridley, Minnesota, as of December 31, 2005, and the respective changes in financial position and where applicable, cash flows, thereof 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 10, 2006 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 grant agreements and other matters. The purpose of that report is to describe the 4810 White Bear Parkway White Bear Lake, Minnesota 55110 651 426 7000 651 426 5004 Fax www.hibtr.com 1303 South Frontage Road Suite 13 Hastings, Minnesota 55033 651 480 4990 651 426 5004 Fax HLB Tautges Redpath,Ltd is a member of El International,a world-wide organization of accounting firms and business advisors. 19 } yy 3 y- h v ` 3. CITY OF FRIDLEY 20 0 scope of our testing of internal control over financial reporting and compliance and the results of that testing and not to provide an opinion on the internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards and should be considered in conjunction with this report in considering the results of our audit. The Management's Discussion and Analysis and the budgetary comparison information as listed in the table of contents, are not a required part of the basic financial statements but are supplementary information required by accounting principles generally accepted in the United States of America. We have applied certain limited procedures, which consisted principally of inquiries of management regarding the methods of measurement and presentation of the required supplementary information. However,we did not audit the information and express no opinion on it. Our audit was made for the purpose of forming opinions on the financial statements that collectively comprise the City of Fridley, Minnesota's basic financial statements. The introductory section, combining and individual fund statements and schedules and statistical tables as listed in the table of contents are presented for purposes of additional analysis and are not a required part of the basic financial statements. The combining and individual fund statements and schedules have been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, are fairly stated in all material respects, in relation to the basic financial statements taken as a whole. The introductory section and statistical tables have not been subjected to the auditing procedures applied in the audit of the basic financial statements and accordingly, we express no opinion on them. /4A r4.44._ A-9m/7, c&. HLB TAUTGES REDPATH, LTD. White Bear Lake, Minnesota May 10, 2006 21 CITY OF FRIDLEY 22 MANAGEMENT'S DISCUSSION AND ANALYSIS As management of the City of Fridley, we offer readers of the City of Fridley's financial statements this narrative overview and analysis of the financial activities of the City for the fiscal year ended December 31, 2005. We encourage readers to consider the information presented here in conjunction with additional information that we have furnished in our letter of transmittal,which can be found on pages 3 through 9 of this report. Financial Highlights The assets of the City of Fridley exceeded its liabilities at the close of the most recent fiscal year by $59,043,515 (Net assets). Of this amount, $22,590,099 (unrestricted net assets) may be used to meet the government's ongoing obligations to citizens and creditors in accordance with the City's fund designations and fiscal policies. During 2005, the City's total net assets increased by$994,292. As of the close of the current fiscal year, the City of Fridley's governmental funds reported combined ending fund balances of$19,616,887. Of this total amount, $12,476,413, or 64% is designated or reserved through legal restrictions and City Council authorization. At the end of the current fiscal year the general fund balance of $4,101,947, included $81,662 reserved and$4,020,285 designated. The City's total debt, including compensated absences, decreased by $1,276,273 during the current fiscal year, from$15,970,718 to $14,694,445. Overview of the Financial Statements The discussion and analysis are intended to serve as an introduction to the City of Fridley's basic financial statements. The City's basic financial statements comprise three components: 1) government-wide financial statements, 2) fund financial statements, and 3) notes to the financial statements. This report also contains other supplementary information in addition to the basic financial statements themselves. Government-wide financial statements. The government-wide financial statements are designed to provide readers with a broad overview of the City of Fridley's finances, in a manner similar to a private-sector business. The statement of net assets presents information on all of the City of Fridley's assets and liabilities, with the difference between the two reported as net assets. Over time, increases or decreases in net assets may serve as a useful indicator of whether the financial position of the City of Fridley is improving or deteriorating. 23 Management's Discussion and Analysis The statement of activities presents information showing how the City's net assets changed during the most recent fiscal year. All changes in net assets are reported as soon as the underlying event giving rise to the change occurs, regardless of the timing of related cash flows. Thus, revenues and expenses are reported in this statement for some items that will only result in cash flows in future fiscal periods (e.g. uncollected taxes and earned but unused vacation leave). Both of the government-wide financial statements distinguish functions of the City of Fridley that are principally supported by taxes and intergovernmental revenues (governmental activities) from other functions that are intended to recover all or a significant portion of their costs through user fees and charges (business-type activities). The governmental activities of the City of Fridley include general government, public safety, public works, community development, and recreation and naturalist. The business-type activities of the City of Fridley include liquor, water, sewer and storm water. The government-wide financial statements can be found on pages 35 through 37 of this report. Fund financial statements. A fund is a grouping of related accounts that is used to maintain control over resources that have been segregated for specific activities or objectives. The City of Fridley, like other state and local governments, uses fund accounting to ensure and demonstrate compliance with finance-related legal requirements. All of the funds of the City of Fridley can be divided into three categories: governmental funds, proprietary funds, and fiduciary funds. Governmental funds. Governmental funds are used to account for essentially the same functions reported as governmental activities in the government-wide financial statements. However, unlike the government-wide financial statements, governmental fund financial statements focus on near-term inflows and outflows of spendable resources, as well as on balances of spendable resources available at the end of the fiscal year. Such information may be useful in evaluating a government's near-term financial requirements. Because the focus of governmental funds is narrower than that of the government-wide financial statements, it is useful to compare the information presented for governmental funds with similar information presented for governmental activities in the government-wide financial statement. By doing so, readers may better understand the long-term impact of the City's near term financial decisions. Both the governmental fund balance sheet and governmental fund statement of revenues, expenditures, and change in fund balances provide a reconciliation to facilitate this comparison between governmental funds and governmental activities. 24 Management's Discussion and Analysis The City of Fridley maintains six individual major governmental funds. Information is presented separately in the governmental fund balance sheet and in the governmental fund statement of revenues, expenditures, and changes in fund balances for the general fund, grant management fund, special assessment debt service fund, tax increment debt service fund, special assessment construction capital projects fund and capital improvements fund all of which are considered to be major funds. Data from the other governmental funds are combined into a single, aggregated presentation. Individual fund data for each of these non-major governmental funds is provided in the form of combining statements elsewhere in this report. The City of Fridley adopts an annual appropriated budget for its general fund, special revenue funds and capital improvements capital projects fund. A budgetary comparison statement has been provided for those funds to demonstrate compliance with this budget. The basic governmental fund financial statements can be found on pages 38 through 43 of this report. Proprietary funds. The City of Fridley maintains four enterprise funds and three internal service funds as a part of its proprietary fund type. Enterprise funds are used to report the same functions presented as business-type activities in the government-wide financial statements. The City of Fridley uses enterprise funds to account for its liquor, water, sewer, and storm water operations. The City of Fridley uses internal service funds to account for its employee benefits, self insurance and information systems. Because these services predominately benefit governmental rather than business-type functions, they have been included within governmental activities in the government-wide financial statements. Proprietary funds provide the same type of information as the government-wide financial statements, only in more detail. The proprietary fund financial statements provide separate information for the water, sewer, storm water and liquor operations, all of which are considered to be major funds of the City of Fridley. Conversely, the internal service funds are combined into a single, aggregated presentation in the proprietary fund financial statements. Individual fund data for the internal service funds is provided in the form of combining statements elsewhere in this report. The basic proprietary fund financial statements can be found on pages 44 through 49 of this report. Fiduciary funds. Fiduciary funds are used to account for resources held for the benefit of parties outside the government. Fiduciary funds are not reflected in the government-wide financial statements because the resources of those funds are not available to support the City of Fridley's own program. The accounting used for fiduciary funds is much like that used for proprietary funds. 25 Management's Discussion and Analysis The basic fiduciary fund financial statement can be found on page 50 of this report. Notes to the financial statements. The notes provide additional information that is essential to a full understanding of the data provided in the government—wide and fund financial statements. The notes to the financial statements can be found on pages 51 through 81 of this report. Other information. The combining statements referred to earlier in connection with the non-major governmental funds are presented immediately following the required supplementary information on budgetary comparisons. Combining and individual fund statements and schedules can be found on pages 91 through 146 of this report. Government-wide Financial Analysis As noted earlier, net assets may serve over time as a useful indictor of a government's financial position. In the case of the City of Fridley, assets exceeded liabilities by $59,043,515 at the close of the most recent fiscal year. The largest portion of the City of Fridley's net assets ($34,912,885 or 59 percent) reflects its investment in capital assets (e.g. land, buildings, machinery and equipment) less any related debt used to acquire those assets that is still outstanding. The City of Fridley uses these capital assets to provide services to citizens; consequently, these assets are not available for future spending. Although the City of Fridley's investment in its capital assets is reported net of related debt, it should be noted that the resources needed to repay this debt must be provided from other sources, since the capital assets themselves cannot be used to liquidate these liabilities. CITY OF FRIDLEY'S NET ASSETS Governmental Activities Business-Type Totals 2004 2005 2004 2005 2004 2005 Current and other assets $24,953,043 $25,081,138 $12,396,211 $10,010,640 $37,349,254 $35,091,778 Capital assets 18,495,647 20,263,113 19,928,180 20,265,012 38,423,827 40,528,125 Total assets $43,448,690 $45,344,251 $32,324,391 $30,275,652 $75,773,081 $75,619,903 Long-term liabilities outstanding $8,487,368 $8,687,978 $3,809,933 $3,415,240 $12,297,301 $12,103,218 Other liabilities 3,254,995 3,326,514 2,171,562 1,146,656 5,426,557 4,473,170 Total liabilities $11,742,363 $12,014,492 $5,981,495 $4,561,896 $17,723,858 $16,576,388 Net assets: Invested in capital assets,net of related debt $18,305,647 $18,458,113 $14,528,247 $16,454,772 $32,833,894 $34,912,885 Restricted 1,664,773 1,540,531 - - 1,664,773 1,540,531 Unrestricted 11,735,907 13,331,115 11,814,649 9,258,984 23,550,556 22,590,099 Total net assets $31,706,327 $33,329,759 $26,342,896 $25,713,756 $58,049,223 $59,043,515 26 Management's Discussion and Analysis A portion of the of the City of Fridley's net assets represents resources that are subject to external restrictions on how they may be used. The remaining balance of unrestricted net assets ($22,590,099) may be used to meet the City's ongoing obligations to citizens and creditors. At the end of the current fiscal year, the City of Fridley is able to report positive balances in all three categories of net assets, both for the government as a whole, as well as for its separate governmental and business-type activities. Governmental Activities Governmental activities increased the City of Fridley's net assets by $1,623,432, while the overall increase totaled $994,292. Key elements of this increase are as follows: City of Fridley's Changes in Net Assets Governmental Activities Business-Type Activities Totals 2004 2005 2004 2005 2004 2005 Revenues: Program revenues: Charges for services $2,669,014 $2,954,192 $10,770,363 $10,739,892 $13,439,377 $13,694,084 Operating grants and contributions 1,009,861 1,121,726 208 600 1,010,069 1,122,326 Capital grants and contributions 882,292 1,657,106 - - 882,292 1,657,106 General revenues: - - Property taxes 5,816,656 7,428,226 - - 5,816,656 7,428,226 Grants and contributions not restricted to specific programs 3,436,473 3,365,739 - - 3,436,473 3,365,739 Unrestricted investment earnings 413,743 511,464 146,248 168,445 559,991 679,909 Gain on sale of property 680 434 - - 680 434 Total revenues 14,228,719 17,038,887 10,916,819 10,908,937 25,145,538 27,947,824 Expenses: General government 3,513,065 4,448,175 - - 3,513,065 4,448,175 Public safety 5,468,014 5,514,330 - - 5,468,014 5,514,330 Public works 3,612,318 4,105,860 - - 3,612,318 4,105,860 Community development 602,335 793,836 - - 602,335 793,836 Recreation and naturalist 993,570 767,599 - - 993,570 767,599 Interest on long-term debt 544,478 443,533 - - 544,478 443,533 Liquor - - 5,005,198 4,919,458 5,005,198 4,919,458 Water - - 2,086,513 2,070,032 2,086,513 2,070,032 Sewer - - 3,256,371 3,570,113 3,256,371 3,570,113 Storm water - - 334,906 320,596 334,906 320,596 Total expenses 14,733,780 16,073,333 10,682,988 10,880,199 25,416,768 26,953,532 Increase(decrease)in net assets before transfers (505,061) 965,554 233,831 28,738 (271,230) 994,292 Transfers 558,609 657,878 (558,609) (657,878) - - Increase in net assets 53,548 1,623,432 (324,778) (629,140) (271,230) 994,292 Net assets-January 1 31,652,779 31,706,327 26,667,674 26,342,896 58,320,453 58,049,223 Net assets-December 31 $31,706,327 $33,329,759 $26,342,896 $25,713,756 $58,049,223 $59,043,515< 27 Management's Discussion and Analysis Below are specific graphs which provide comparisons of the governmental activities revenues and expenditures: Governmental Activities-Revenues Unrestricted investment earnings I Grants and contributions not 3% Charges for services restricted n specufic programs ��; v¢t �� r } i�g��,� 17/ 20% e S� i -gt :' n;. ✓', Operating aaa � f' • 'gaols and y#, ,� �� tributions y ,tip E tal e ' , % Gam on / n Ffn � 11' sale of property a , f �, £ /� - N � , may. v / ' r \ i ` ,. £7 •a 10% �� _ _ Capital grants and contributions 43% Property taxes Governmental Activities-Expenses Interest on Recreation long-term debt Community and naturalist Development 5� 3% 5 General government v ,,, Fry. 28% °,6,' 1.& N :tiny, _ eill 'g•t s , ,%f� 4y a,0%1: '/� ' f y// t f z : :<;4t2,1;51-,.,, ,,','-'� ? \ 26% public works 33% Public safety 28 Management's Discussion and Analysis Business-Type Activities Business-type activities decreased net assets by $629,140, compared to an overall increase of $994,292 in net assets of the City of Fridley. Below are graphs showing the business-type activities revenue and expense comparisons: Business-Type Activities-Revenues Unrestricted investment earnings Operating grants 2% I •and contributions v°fir lg"q/ , ,s 8 j 98% Charges for services Business-Type Activities-Expenses storm water 3% Water 19% b + 4 • 4 d 2 L 5%• X: 33% Sewer 29 Management's Discussion and Analysis Financial Analysis of the Government's Funds Governmental Funds. The focus of the City of Fridley's governmental funds is to provide information on near-term inflows, outflows, and balances of spendable resources. Such information is useful in assessing the City of Fridley's financing requirements. In particular, unreserved fund balance may serve as a useful measure of a government's net resources available for spending at the end of the fiscal year. At the end of the current fiscal year, the City of Fridley's governmental funds reported combined ending fund balances of $19,616,887. Approximately 92 percent of this total amount ($17,977,691) constitutes unreserved fund balance. The remainder of the fund balance ($1,639,196) is reserved because it has already been committed 1) to provide for inventory ($54,116), 2) to pay debt service ($389,197), 3) for loan receivable ($507,669) and 4) for police purposes ($688,214). The general fund's fund balance decreased by $61,887 in 2005. This was significantly less than the decrease budgeted for. The special assessment debt service fund's fund balance increased by $284,280 due to prepaid special assessments collected on the 2005 Street Reconstruction Project. The non-major special revenue fund's fund balances increased by $90,236 in 2005. This was mainly due to the signing of a new cable franchise agreement. Proprietary funds. The City of Fridley's proprietary funds provide the same type of information found in the government-wide financial statements,but in more detail. The unrestricted net assets in the respective proprietary funds are liquor $1,018,339, water $3,207,587, sewer $3,837,984 and storm water $1,195,074. The liquor, water, sewer and storm water funds had decreases in net assets of$124,134, $230,527, $214,311 and $60,168, respectively. Budgetary Highlights General Fund The original budget for elections was increased by $12,606 during the year. This was due to the city holding an election that was not planned for when the original budget was approved. The original budget for contingency was decreased by $99,093 during the year. This was due to its budget being allocated to budgets in other departments. Expenditures in total were less than the final budgetary estimates by $37,815. Significant variances include the City Council department which expended $5,496 less than anticipated, the Human Resources department which expended $4,784 less than anticipated, the 30 Management's Discussion and Analysis Assessing department which expended $7,139 less than anticipated and the MIS department which expended $12,753 less than anticipated. Capital Asset and Debt Administration Capital assets. The City of Fridley's, investment in capital assets for its governmental and business type activities as of December 31, 2005, amounts to $40,528,125 (net of accumulated depreciation). This investment in capital assets includes land, buildings and structures, improvements other than buildings, machinery and equipment, infrastructure and construction in progress. City of Fridley's Capital Assets (Net of Depreciation) Governmental Activities Business-Type Activities Totals 2004 2005 2004 2005 2004 2005 Land $2,824,016 $2,840,316 $306,477 $306,477 $3,130,493 $3,146,793 Buildings and structures 3,622,524 3,317,928 640,800 610,994 $4,263,324 $3,928,922 Improvements other than buildings 1,085,065 1,071,577 6,772,165 6,446,722 $7,857,230 $7,518,299 Machinery and equipment 1,788,395 1,637,935 694,845 852,719 $2,483,240 $2,490,654 Infrastructure 8,909,802 8,318,763 10,480,310 11,517,928 $19,390,112 $19,836,691 Construction in progress 265,845 3,076,594 1,033,583 530,172 $1,299,428 $3,606,766 Total Capital Assets $18,495,647 $20,263,113 $19,928,180 $20,265,012 $38,423,827 $40,528,125 Additional information on the City of Fridley's capital assets can be found in Note 4. Long-term debt. At the end of the current fiscal year, the City of Fridley had total bonded debt outstanding of$13,955,000, a decrease of$1,235,000 from 2004. $1,805,000 of this is for general obligation improvement debt which is supported by special assessments and a property tax levy, an additional $8,335,000 is for general obligation tax increment debt which financed the City's housing and redevelopment program, and $3,815,000 is general obligation utility revenue bonds which financed utility improvements. In 2005, the City issued $1,805,000 in general obligation improvement bonds and $4,645,000 in general obligation tax increment refunding. In addition, there is long-term debt in the amount of$744,205 for compensated absences. City of Fridley's Outstanding Debt General Obligation Improvement Bonds, General Obligation Tax Increment Bonds, General Obligation Revenue Bonds, and Compensated Absences: Governmental Activities Business-Type Activities Totals 2004 2005 2004 2005 2004 2005 General Obligation Improvement Bonds $ 190,000 $ 1,805,000 $ - $ - $ 190,000.00 $ 1,805,000.00 General Obligation Tax Increment Bonds 9,595,000 8,335,000 - - 9,595,000 8,335,000 General Obligation Revenue Bonds - - 5,405,000 3,815,000 5,405,000 3,815,000 Compensated Absences _ 785,785 744,205 - - 785,785 744,205 Total $ 10,570,785 $ 10,884,205 $ 5,405,000 $ 3,815,000 $ 15,975,785 $ 14,699,205 The City of Fridley has maintained a Aal rating from Moody's. 31 Management's Discussion and Analysis State statutes limit the amount of general obligation debt a Minnesota city may issue to 2% of total Estimated Market Value. The current debt limitation for the City of Fridley is $45,168,942. None of the City's outstanding debt is counted within the statutory limitation. Requests for information. This financial report is designed to provide a general overview of the City of Fridley's finances for all those with an interest in the government's finances. Questions concerning any of the information provided in this report or requests for additional financial information should be addressed to the Finance Director, 6431 University Avenue NE, Fridley, Minnesota 55432. 32 BASIC FINANCIAL STATEMENTS 33 CITY OF FRIDLEY 34 Exhibit A-1 CITY OF FRIDLEY,MINNESOTA STATEMENT OF NET ASSETS December 31,2005 Component Unit Primary Government Housing&Redevelopment Governmental Business-Type Totals Authority Assets: Activities Activities 2005 2004 2005 2004 Cash and investments $22,660,895 $7,641,186 $30,302,081 $31,251,482 $15,739,617 $14,832,443 Cash held in escrow - - - 1,178,641 146,324 142,929 Receivables: Accounts 190,033 1,501,694 1,691,727 1,670,447 443,309 443,309 Taxes 184,667 187 184,854 142,369 95,756 167,967 Special assessments 1,224,066 49,973 1,274,039 957,143 - - Mortgage - - - - 1,119,820 972,147 Interest 67,015 - 67,015 83,539 20,076 20,006 Loan from component unit 480,123 - 480,123 541,244 - - Notes 27,546 - 27,546 36,728 - - Due from component unit 54,886 - 54,886 61,273 - - Due from other governments 137,791 3,346 141,137 564,591 - - Due from primary government - - - - - 12,478 Prepaid items - 216,828 216,828 210,146 - - Inventories-at cost 54,116 597,426 651,542 651,651 - - Land held for resale - - - - 1,122,000 1,055,000 Capital assets (net of accumulated depreciation): Land 2,840,316 306,477 3,146,793 3,130,493 - - Buildings and structures 3,317,928 610,994 3,928,922 4,263,324 - - Improvements other than buildings 1,071,577 6,446,722 7,518,299 7,857,230 - - Machinery and equipment 1,637,935 852,719 2,490,654 2,483,240 - - Infrastructure 8,318,763 11,517,928 19,836,691 19,390,112 - - Construction in progress 3,076,594 530,172 3,606,766 1,299,428 - - Total assets 45,344,251 30,275,652 75,619,903 75,773,081 18,686,902 17,646,279 Liabilities: Due to primary government - - - - 54,886 61,273 Accounts payable 392,846 305,488 698,334 664,473 260,063 267,285 Deposits payable 32,760 - 32,760 32,777 - - Contracts payable 134,457 289,610 424,067 92,708 - - Due to other governments 13,386 76,243 89,629 100,007 - - Due to component unit - - - 12,478 - - Salaries payable 295,032 25,222 320,254 349,040 - 1,528 Accrued interest payable 157,179 55,093 212,272 267,614 - - Compensated absences payable: Due within one year 641,227 - 641,227 613,417 - - Due in more than one year 102,978 - 102,978 172,368 - - Unearned revenue 104,627 - 104,627 234,043 - - Loan payable to primary government: Due within one year - - - - 64,215 61,121 Due in more than one year - - - - 415,908 480,123 Bonds payable: Due within one year 1,555,000 395,000 1,950,000 3,060,000 - - Due in more than one year 8,585,000 3,415,240 12,000,240 12,124,933 - - Total liabilities 12,014,492 4,561,896 16,576,388 17,723,858 795,072 871,330 Net assets: Invested in capital assets,net of related debt 18,458,113 16,454,772 34,912,885 32,833,894 - - Restricted for: Debt service 852,407 - 852,407 498,037 - - Public safety 688,124 - 688,124 1,155,225 - - Tax increment purposes - - - 11,510 2,654,382 2,819,574 Unrestricted 13,331,115 9,258,984 22,590,099 23,550,557 15,237,448 13,955,375 Total net assets $33,329,759 $25,713,756 $59,043,515 $58,049,223 $17,891,830 $16,774,949 The accompanying notes are an integral part of these financial statements. 35 CITY OF FRIDLEY, MINNESOTA STATEMENT OF ACTIVITIES For The Year Ended December 31, 2005 Program Revenues Operating Charges For Grants and Expenses Services Contributions Functions/Programs Primary government: Governmental activities: General government $4,448,175 $1,263,265 $7,777 Public safety 5,514,330 569,993 582,213 Public works 4,105,860 189,766 216,080 Community development 793,836 599,870 297,482 Recreation and naturalist 767,599 331,298 18,174 Interest on long-term debt 443,533 - - Total governmental activities 16,073,333 2,954,192 1,121,726 Business-type activities: Liquor 4,919,458 5,283,229 - Water 2,070,032 1,771,846 - Sewer 3,570,113 3,299,957 - Storm water 320,596 384,860 600 Total business-type activities 10,880,199 10,739,892 600 Total primary government $26,953,532 $13,694,084 $1,122,326 , Component units: Housing and Redevelopment Authority $2,938,372 $9,600 $ - Total component units $2,938,372 $9,600 $0 General revenues: Property taxes Tax increment collections Grants and contributions not restricted to specific programs Unrestricted investment earnings Gain on sale of property Other Transfers Total general revenues and transfers Change in net assets Net assets-beginning Net assets-ending The accompanying notes are an integral part of these financial statements. 36 Exhibit A-2 Net(Expense) Revenue and Changes in Net Assets Component Unit Capital Primary Government Housing & Redevelopment Grants and Governmental Business-Type Totals Authority Contributions Activities Activities 2005 2004 2005 2004 $ - ($3,177,133) $ - ($3,177,133) ($2,403,309) $ - $ - 237,645 (4,124,479) - (4,124,479) (4,370,202) - - 1,419,461 (2,280,553) - (2,280,553) (2,170,968) - - - 103,516 - 103,516 (71,710) - - - (418,127) - (418,127) (611,946) - - (443,533) - (443,533) (544,478) - - 1,657,106 (10,340,309) 0 (10,340,309) (10,172,613) 0 0 - - 363,771 363,771 371,230 - - - - (298,186) (298,186) (322,890) - - - - (270,156) (270,156) (7,419) - - - - 64,864 64,864 46,662 - - 0 0 (139,707) (139,707) 87,583 0 0 $1,657,106 (10,340,309) (139,707) (10,480,016) (10,085,030) $0 $0 $ - ($2,928,772) ($3,099,422) $0 (2,928,772) (3,099,422) 7,428,226 - 7,428,226 5,816,656 297,097 262,429 - - - - 3,224,205 3,079,596 3,365,739 - 3,365,739 3,436,473 67,633 66,442 511,464 168,445 679,909 559,991 418,549 230,246 434 - 434 680 - - - - - - 38,169 86,402 657,878 (657,878) - - - - 11,963,741 (489,433) 11,474,308 9,813,800 4,045,653 3,725,115 1,623,432 (629,140) 994,292 (271,230) 1,116,881 625,693 31,706,327 26,342,896 58,049,223 58,320,453 16,774,949 16,149,256 $33,329,759 $25,713,756 $59,043,515 $58,049,223 $17,891,830 $16,774,949 The accompanying notes are an integral part of these financial statements. 37 CITY OF FRIDLEY,MINNESOTA BALANCE SHEET GOVERNMENTAL FUNDS December 31,2005 Special Grant Assessment General Management Debt Service Assets Cash and investments $4,117,867 $80,986 $6,365,041 Receivables: Accounts 44,973 - - Taxes 169,857 - - Special assessments 16,912 - 1,176,285 Interest 67,015 - - Loan receivable from component unit - - 480,123 Developer note 27,546 - - Due from other funds 160,680 - - Due from component unit 42,839 - - Due from other governments 15,051 62,019 - Inventories,at cost 54,116 - - Total assets $4,716,856 $143,005 $8,021,449 Liabilities and Fund Balances Liabilities: Accounts payable $241,036 $36,223 $ - Deposits payable 27,510 - - Contracts payable - - - Salaries payable 208,864 1,322 - Deferred revenue 125,352 104,626 1,175,241 Due to other funds - - - Due to other governments 12,147 834 - Due to component unit - - - Total liabilities 614,909 143,005 1,175,241 Fund balances: Reserved for: Inventory 54,116 - - Long-term receivables 27,546 - 480,123 Public safety - - - I Debt service - - 389,197 j Unreserved: Designated reported in: General Fund 4,020,285 - - Special Revenue Funds - - - Capital Project Funds - - - Undesignated reported in: Special Revenue Funds - - - Debt Service Funds - - 5,976,888 Capital Project Funds - - - Total fund balances 4,101,947 0 6,846,208 Total liabilities and fund balances $4,716,856 $143,005 $8,021,449 The accompanying notes are an integral part of these financial statements. 38 Exhibit A-3 Special Tax Assessment Other Infra- Totals Increment Construction Capital Governmental Activity Governmental Funds Debt Service Capital Projects Improvements Funds Eliminations 2005 2004 $ - $1,393,118 $5,630,842 $1,785,565 $ - $19,373,419 $18,799,975 - - - 145,060 - 190,033 123,190 - - 8,478 6,332 - 184,667 142,164 - 30,592 277 - - 1,224,066 898,429 - - - - - 67,015 83,539 - - - - - 480,123 541,244 - - - - - 27,546 36,728 - - 102,745 - (263,425) - - - - - 11,940 - 54,779 61,170 - - - 60,721 - 137,791 561,124 - - - - 54,116 47,094 $0 $1,423,710 $5,742,342 $2,009,618 ($263,425) $21,793,555 $21,294,657 $ - $ - $5,713 $51,576 $ - $334,548 $279,457 - 5,250 - - - 32,760 32,777 - 134,456 - - - 134,456 34,101 - - - 6,074 - 216,260 250,927 - 30,592 5,773 3,996 - 1,445,580 1,215,270 - 102,745 - 160,680 (263,425) - - - - - 83 - 13,064 34,012 - - - - - - 12,478 0 273,043 11,486 222,409 (263,425) 2,176,668 1,859,022 - - - - - 54,116 47,094 - - - - - 507,669 577,972 - - - 688,214 - 688,214 1,155,225 - - - - - 389,197 509,547 - - - - - 4,020,285 4,080,012 - - - 1,086,076 - 1,086,076 554,343 - - 5,730,856 - - 5,730,856 7,207,879 - - - 12,919 - 12,919 (12,595) - - - - - 5,976,888 5,522,647 - 1,150,667 - - - 1,150,667 (206,489) 0 1,150,667 5,730,856 1,787,209 0 19,616,887 19,435,635 $0 $1,423,710 $5,742,342 $2,009,618 ($263,425) $21,793,555 $21,294,657 Fund balance reported above $19,616,887 $19,435,635 Amounts reported for governmental activities in the statement of net assets are different because: Capital assets used in governmental activities are not financial resources,and therefore,are not reported in the funds. 19,841,422 18,105,839 Other long-term assets are not available to pay for current-period expenditures and, therefore,are deferred in the funds. 1,340,953 981,227 Long-term liabilities,including bonds payable,are not due and payable in the current period and therefore are not reported in the funds. (10,297,179) (9,964,169) Internal service funds are used by management to charge the cost of certain activities to individual funds.The assets and liabilities are included in the governmental statement of net assets 2,827,676 3,147,795 Net assets of governmental activities $33,329,759 $31,706,327 The accompanying notes are an integral part of these financial statements. 39 CITY OF FRIDLEY, MINNESOTA STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES GOVERNMENTAL FUNDS For The Year Ended December 31, 2005 Special i Grant Assessment 1 General Management Debt Service Revenues: Taxes $6,780,604 $ - $ - Special assessments 608 - 542,548 ' Licenses and permits 688,776 - - Intergovernmental revenue 1,575,177 344,003 - Charges for services 1,302,764 - - Fines and forfeits 163,166 - - Investment income 106,513 - 123,845 Interest on loan - - 26,308 Miscellaneous 287,225 53,540 - Total revenues 10,904,833 397,543 692,701 Expenditures: Current: General government 2,422,768 423,372 - Public safety 5,204,551 - - Public works 2,940,869 - - Community development 671,173 - - Recreation and naturalist 737,094 - - Debt service - - 195,976 Capital outlay 259,690 - - Contingency 907 - - Total expenditures 12,237,052 423,372 195,976 Excess(deficiency)of revenues over(under)expenditures (1,332,219) (25,829) 496,725 Other financing sources(uses): Refunding bonds issued - - - Bond proceeds - - 37,555 Premium/(discount)on bonds issued - - - Transfers in 1,273,883 25,829 - Transfers out (3,551) - (250,000) Total other financing sources (uses) 1,270,332 25,829 (212,445) Net change in fund balance (61,887) 0 284,280 Fund balance-January 1 4,163,834 - 6,561,928 Fund balance- December 31 $4,101,947 $0 $6,846,208 fxil,- ) - I), 231 Sp) The accompanying notes are an integral part of these financial statements. 40 Exhibit A-4 Special Tax Assessment Other Infra- Totals Increment Construction Capital Governmental Activity Governmental Funds Debt Service Capital Projects Improvements Funds Eliminations 2005 2004 $ - $ - $346,468 $270,309 $ - $7,397,381 $5,809,631 - 6,769 984 - - 550,909 300,389 - - - 177,072 - 865,848 785,582 - - 742,745 105,799 - 2,767,724 3,207,482 - 130,027 - 303,390 - 1,736,181 1,533,253 - - - 938 - 164,104 176,878 - 2,723 145,432 32,820 - 411,333 325,307 - - - - - 26,308 29,253 1,697,027 - 45,286 542,821 - 2,625,899 2,085,069 1,697,027 139,519 1,280,915 1,433,149 0 16,545,687 14,252,844 - 373,562 170,164 854,630 - 4,244,496 3,155,617 - - - - - 5,204,551 5,156,529 - - - - - 2,940,869 2,608,316 - - - - - 671,173 593,393 - - - - - 737,094 960,723 6,357,387 - - - - 6,553,363 5,749,013 - 2,353,243 499,767 - - 3,112,700 869,770 - - - - - 907 - 6,357,387 2,726,805 669,931 854,630 0 23,465,153 19,093,361 (4,660,360) (2,587,286) 610,984 578,519 0 (6,919,466) (4,840,517) - - - - - 3,920,000 4,645,000 1,767,445 - - - 6,450,000 - 3,850 (11,010) - - - (7,160) (10,992) - 2,188,007 - - (2,829,841) 657,878 558,609 - - (2,088,007) (488,283) 2,829,841 - - 4,648,850 3,944,442 (2,088,007) (488,283) 0 7,100,718 4,467,617 (11,510) 1,357,156 (1,477,023) 90,236 0 181,252 (372,900) 11,510 (206,489) 7,207,879 1,696,973 - 19,435,635 19,808,535 $0 $1,150,667 $5,730,856 $1,787,209 $0 $19,616,887 $19,435,635 The accompanying notes are an integral part of these financial statements. 41 1 ( '' , ,,,,,59,.,,,,,,z:,. ,. I 4) / 0 v CITY OF 1 FRIDLEY 42 Exhibit A-5 CITY OF FRIDLEY, MINNESOTA RECONCILIATION OF THE STATEMENT OF REVENUES, EXPENDITURES,AND CHANGES IN FUND BALANCES OF GOVERNMENTAL FUNDS For The Year Ended December 31, 2005 2005 2004 Amounts reported for governmental activities in the statement of activities (Exhibit A-2)are different because: Net changes in fund balances-total governmental funds (Exhibit A-4) $181,252 ($372,900) Governmental funds report capital outlays as expenditures. However, in the statement of activities the cost of those assets is allocated over their estimated useful lives and reported as depreciation expense. This is the amount by which capital outlays exceeded depreciation in the current period. 1,735,583 (723,839) Revenues in the statement of activities that do not provide current financial resources are not reported as revenues in the funds. 359,726 (83,988) The issuance of long-term debt(e.g., bonds, leases) provides current resources to governmental funds,while the repayment of the principal of financial long-term debt consumes the current financial resources of governmental funds. Neither transaction, however, has any effect on net assets. This amount is the net effect of these differences in the treatment of long-term debt and related items. (355,000) 1,235,000 Internal service funds are used by management to charge the cost of certain activities to individual funds. This amount is net revenue attributable to governmental activities. (320,119) (61,252) Accrued interest reported in the statement of activities does not require the use of current financial resources and, therefore, is not reported as expenditures in governmental funds. 21,990 60,527 Change in net assets of governmental activities (Exhibit A-2) $1,623,432 $53,548 The accompanying notes are an integral part of these financial statements. 43 CITY OF FRIDLEY, MINNESOTA STATEMENT OF NET ASSETS PROPRIETARY FUNDS December 31, 2005 Business-Type Activities- Enterprise Funds Liquor Water Assets: Current assets: Cash and cash equivalents $746,438 $3,006,504 Cash with escrow agent - - Accounts receivable 2,794 592,156 Taxes receivable: Unremitted - - Delinquent - - Special assessments receivable - 8,255 Due from component units - - Due from other governments - - Inventories, at cost 590,158 7,268 Prepaid items - - Total current assets 1,339,390 3,614,183 Noncurrent assets: Capital assets: Land 151,946 154,531 Buildings and structures 130,211 1,714,009 Improvements other than buildings 650,245 6,520,196 Machinery and equipment 208,930 1,517,948 Infrastructure - 8,551,553 Construction in progress - 530,172 Total capital assets 1,141,332 18,988,409 Less: Allowance for depreciation (515,581) (8,677,397) Net capital assets 625,751 10,311,012 Total noncurrent assets 625,751 10,311,012 Total assets 1,965,141 13,925,195 Liabilities: Current liabilities: Accounts payable 260,940 37,559 Contracts payable - 289,610 Salaries payable 10,129 8,353 Payroll deductions payable Compensated absences payable - - Due to other governments 49,982 17,648 Accrued interest payable - 53,426 Bonds payable-current - 295,000 Total current liabilities 321,051 701,596 Noncurrent liabilities: Compensated absences-noncurrent - - Bonds payable-noncurrent - 3,314,920 Total noncurrent liabilities 0 3,314,920 Total liabilities 321,051 4,016,516 Net assets: Invested in capital assets, net of related debt 625,751 6,701,092 Unrestricted 1,018,339 3,207,587 Total net assets $1,644,090 $9,908,679 The accompanying notes are an integral part of these financial statements. 44 Exhibit A-6 Governmental Business-Type Activities-Enterprise Funds Activities- Storm Totals Internal Service Sewer Water 2005 2004 Funds $2,830,341 $1,057,903 $7,641,186 $8,793,224 $3,287,476 - - - 1,178,641 - 809,811 96,933 1,501,694 1,547,257 - - 55 55 91 - - 132 132 114 - - 41,718 49,973 58,714 - - - - - 107 3,346 - 3,346 3,467 - - - 597,426 604,557 - 216,828 - 216,828 210,146 - 3,860,326 1,196,741 10,010,640 12,396,211 3,287,583 - - 306,477 306,477 - 8,770 - 1,852,990 1,852,991 - 1,980,021 1,872,818 11,023,280 10,914,591 - 888,997 29,125 2,645,000 2,382,699 1,472,977 6,550,550 6,357,193 21,459,296 19,981,803 - - - 530,172 1,033,583 - 9,428,338 8,259,136 37,817,215 36,472,144 1,472,977 (4,670,799) (3,688,426) (17,552,203) (16,543,964) (1,051,286) 4,757,539 4,570,710 20,265,012 19,928,180 421,691 4,757,539 4,570,710 20,265,012 19,928,180 421,691 8,617,865 5,767,451 30,275,652 32,324,391 3,709,274 6,989 - 305,488 344,702 58,298 - 289,610 58,607 - 6,740 - 25,222 23,813 - - - - - 78,773 - - - - 641,227 8,613 - 76,243 65,995 322 - 1,667 55,093 88,445 - 100,000 395,000 1,590,000 - 22,342 101,667 1,146,656 2,171,562 778,620 - - - - 102,978 - 100,320 3,415,240 3,809,933 - 0 100,320 3,415,240 3,809,933 102,978 22,342 201,987 4,561,896 5,981,495 881,598 4,757,539 4,370,390 16,454,772 14,528,247 421,691 3,837,984 1,195,074 9,258,984 11,814,649 2,405,985 $8,595,523 $5,565,464 $25,713,756 $26,342,896 $2,827,676 The accompanying notes are an integral part of these financial statements. 45 CITY OF FRIDLEY, MINNESOTA STATEMENT OF REVENUES, EXPENSES AND CHANGES IN FUND NET ASSETS PROPRIETARY FUNDS For The Year Ended December 31, 2005 Business-Type Activities- Enterprise Funds Liquor Water Sales $5,283,229 $ - Cost of sales (4,061,768) - Gross profit 1,221,461 0 Operating revenues: Customer billings - 1,762,995 Charges for services - 7,578 Other revenues - 1,273 Total operating revenues 0 1,771,846 Total gross profit and operating revenues 1,221,461 1,771,846 Operating expenses: Personal services 457,634 608,487 Supplies and other charges: Disposal charges - - Other 351,895 760,830 Depreciation 48,161 566,608 Total operating expenses 857,690 1,935,925 Operating income(loss) 363,771 (164,079) Nonoperating revenues (expenses): Intergovernmental revenue - - Investment income 12,095 72,199 Interest expense - (134,107) Bond issuance costs - - Special assessments - - Gain (loss)on disposal of capital assets - - Total nonoperating revenues(expenses) 12,095 (61,908) Income (loss)before transfers 375,866 (225,987) Transfers: Transfers in - 16,680 Transfers out (500,000) (21,220) Total transfers (500,000) (4,540) Change in net assets (124,134) (230,527) Net assets-January 1 1,768,224 10,139,206 Net assets- December 31 $1,644,090 $9,908,679 The accompanying notes are an integral part of these financial statements. 46 Exhibit A-7 Governmental Business-Type Activities- Enterprise Funds Activities- Storm Infra Activity Totals Internal Service Sewer Water Elimination 2005 2004 Funds $ - $ - $ - $5,283,229 $5,376,428 $ - - - (4,061,768) (4,188,290) - 0 0 0 1,221,461 1,188,138 0 3,299,957 372,409 - 5,435,361 5,371,662 - - - - 7,578 7,578 151,388 - 8,402 - 9,675 9,867 - 3,299,957 380,811 0 5,452,614 5,389,107 151,388 3,299,957 380,811 0 6,674,075 6,577,245 151,388 548,178 100,700 - 1,714,999 1,648,153 57,796 2,521,757 - - 2,521,757 2,307,279 - 194,914 29,385 - 1,337,024 1,121,487 316,591 305,213 185,469 - 1,105,451 1,103,723 171,377 3,570,062 315,554 0 6,679,231 6,180,642 545,764 (270,105) 65,257 0 (5,156) 396,603 (394,376) - 600 - 600 208 - 60,541 23,610 - 168,445 146,248 73,823 (51) (5,042) - (139,200) (196,501) - - - - - (41,950) - - 4,049 - 4,049 4,828 - - - - - (75,605) 434 60,490 23,217 0 33,894 (162,772) 74,257 (209,615) 88,474 0 28,738 233,831 (320,119) 25,008 - (41,688) - - - (29,704) (148,642) 41,688 (657,878) (558,609) - (4,696) (148,642) 0 (657,878) (558,609) 0 (214,311) (60,168) 0 (629,140) (324,778) (320,119) 8,809,834 5,625,632 - 26,342,896 26,667,674 3,147,795 $8,595,523 $5,565,464 $0 $25,713,756 $26,342,896 $2,827,676 The accompanying notes are an integral part of these financial statements. 47 CITY OF FRIDLEY, MINNESOTA STATEMENT OF CASH FLOWS PROPRIETARY FUNDS For The Year Ended December 31,2005 Business-Type Activities- Enterprise Funds Liquor Water Cash flows from operating activities: Receipts from customers and users $5,284,548 $1,777,301 Receipts from interfund services provided - - Payment to suppliers (4,475,112) (497,015) Payment to employees (458,832) (607,951) Net cash flows from operating activities 350,604 672,335 Cash flows from noncapital financing activities: Intergovernmental revenue - - Transfers out (500,000) (21,220) Transfers in - 16,680 Special assessment collections - - Net cash flows from noncapital financing activities (500,000) (4,540) Cash flows from capital and related financing activities: Acquisition of capital assets (14,589) (874,947) Proceeds from issuance of revenue bonds - - Payment to refunding escrow - - Payment from refunding escrow - 983,340 Bond issuance costs - - Principal paid on revenue bonds - (1,265,000) Interest and paying agent fees on revenue bonds - (160,688) Proceeds from sale of capital assets - - Net cash flows from capital and related financing activities (14,589) (1,317,295) Cash flows from investing activities: Investment income 12,095 72,199 Net increase (decrease)in cash and cash equivalents (151,890) (577,301) Cash and cash equivalents-January 1 898,328 3,583,805 Cash and cash equivalents-December 31 $746,438 $3,006,504 Reconciliation of operating income (loss)to net cash provided (used)by operating activities: Operating income(loss) $363,771 ($164,079) Adjustments to reconcile operating income (loss) to net cash flows from operating activities: Depreciation 48,161 566,608 Changes in assets and liabilities: Decrease (increase)in receivables (1,319) 5,454 Decrease (increase)in prepaid items - - Decrease (increase)in inventories 760 6,371 Increase(decrease)in payables (60,769) 257,981 Total adjustments (13,167) 836,414 Net cash provided by operating activities $350,604 $672,335 The accompanying notes are an integral part of these financial statements. 48 Exhibit A-8 Governmental Business-Type Activities- Enterprise Funds Activities- Storm Totals Internal Sewer Water 2005 2004 Service Fund $3,330,928 $400,148 $10,792,925 $10,659,646 $ - - - - 151,388 (2,716,774) (29,367) (7,718,268) (7,745,592) (298,391) (548,504) (100,700) (1,715,987) (1,678,617) (94,903) 65,650 270,081 1,358,670 1,235,437 (241,906) - 600 600 208 - (29,704) (148,642) (699,566) (599,589) - 25,008 - 41,688 40,980 - - 4,049 4,049 24,120 - (4,696) (143,993) (653,229) (534,281) 0 (302,064) (250,804) (1,442,404) (1,326,553) (203,261) - 3,001,650 - - - - (1,189,368) - - 195,692 1,179,032 - - - - - (41,950) - (10,000) (315,000) (1,590,000) (390,000) - (305) (11,559) (172,552) (153,955) - - 10,483 434 (312,369) (381,671) (2,025,924) (89,693) (202,827) 60,541 23,610 168,445 146,248 73,823 (190,874) (231,973) (1,152,038) 757,711 (370,910) 3,021,215 1,289,876 8,793,224 8,035,513 3,658,386 $2,830,341 $1,057,903 $7,641,186 $8,793,224 $3,287,476 ($270,105) $65,257 ($5,156) $396,603 ($394,376) 305,213 185,469 1,105,451 1,103,723 171,377 30,972 19,373 54,480 (105,889) (107) (6,682) - (6,682) (13,365) - - 7,131 (45,981) - 6,252 (18) 203,446 (99,654) (18,800) 335,755 204,824 1,363,826 838,834 152,470 $65,650 $270,081 $1,358,670 $1,235,437 ($241,906) The accompanying notes are an integral part of these financial statements. 49 Exhibit A-9 CITY OF FRIDLEY, MINNESOTA STATEMENT OF FIDUCIARY NET ASSETS December 31, 2005 2005 2004 Assets: Cash and investments $24,025 $20,580 Receivables: Accounts 1,956 1,590 Taxes: Unremitted 53 57 Delinquent 102 80 Total assets 26,136 22,307 Liabilities: Due to other governments 26,136 22,307 Net assets: Unreserved: Undesignated - - Total net assets $0 $0 The accompanying notes are an integral part of these financial statements. 50 CITY OF FRIDLEY, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2005 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 financial statements of the City of Fridley have been prepared in conformity with generally accepted accounting principles as applied to governmental units by the Governmental Accounting Standards Board (GASB). The following is a summary of the significant accounting policies. A. Financial Reporting Entity As required by generally accepted accounting principles,the financial statements of the reporting entity include those of the City of Fridley(the primary government)and its component units. The component units discussed below are included in the City's reporting entity because of the significance of their operational or financial relationships with the City. Component Units In conformity with generally accepted accounting principles, the financial statements of the component units have been included in the financial reporting entity as discretely presented component units. Discretely Presented Component Unit- The Fridley Housing and Redevelopment Authority (HRA) is governed by commissioners appointed by the Fridley City Council. The HRA is responsible for providing housing and redevelopment assistance to the City and its residents. Funding for the various programs administered by the HRA is provided through the issuance of tax increment revenue bonds and general obligation tax increment bonds guaranteed by the City. Separate financial statements are not prepared for the HRA. B. Government-Wide and Fund Financial Statements The government-wide financial statements(i.e., the statement of net assets and the statement of changes in net assets)report information on all of the nonfiduciary activities of the primary government and its component units. For the most part,the effect of interfund activity has been removed from these statements. Governmental activities, which normally are supported by taxes and intergovernmental revenues, are reported separately from business-type activities, which rely to a significant extent on fees and charges for support. The statement of activities demonstrates the degree to which the direct expenses of a given function or business-type activity is offset by program revenues. Direct expenses are those that are clearly identifiable with a specific function or business-type activity. Program revenues include 1)charges to customers or applicants who purchase, use, or directly benefit from goods, services, or privileges provided by a given function or business-type activity and 2)grants and contributions that are restricted to meeting the operational or capital requirements of a particular function or business-type activity. Taxes and other items not included among program revenues are reported instead as general revenues. 51 CITY OF FRIDLEY, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2005 Separate financial statements are provided for governmental funds, proprietary funds, and fiduciary funds, even though the latter are excluded from the government-wide financial statements. Major individual governmental funds and major individual enterprise funds are reported as separate columns in the fund financial statements. C. Measurement Focus, Basis of Accounting, and Financial Statement Presentation The government-wide financial statements are reported using the economic resources measurement focus and the accrual basis of accounting, as are the Proprietary Fund financial statements. Revenues are recorded when earned and expenses are recorded when a liability is incurred, regardless of the timing of related cash flows. Property taxes are recognized as revenues in the year for which they are levied. Grants and similar items are recognized as revenue as soon as all eligibility requirements imposed by the provider have been met. Governmental fund financial statements are reported using the current financial resources measurement focus and the modified accrual basis of accounting. Revenues are recognized as soon as they are both measurable and available. Revenues are considered to be available when they are collectible within the current period or soon enough thereafter to pay liabilities of the current period. For this purpose, the government considers all revenues, except reimbursement grants, to be available if they are collected within 60 days of the end of the current fiscal period. Reimbursement grants are considered available if they are collected within one year of the end of the current fiscal period. Expenditures generally are recorded when a liability is incurred, as under accrual accounting. However, debt service expenditures, as well as expenditures related to compensated absences and claims and judgments, are recorded only when payment is due. Property taxes, special assessments, intergovernmental revenues, charges for services and interest associated with the current fiscal period are all considered to be susceptible to accrual and so have been recognized as revenues of the current fiscal period. Only the portion of special assessments receivable due within the current fiscal period is considered to be susceptible to accrual as revenue of the current period. All other revenue items are considered to be measurable and available only when cash is received by the government. The government reports the following major governmental funds: The general fund is the government's primary operating fund. It accounts for all financial resources of the general government, except those required to be accounted for in another fund. The grant management special revenue fund administers grants received from a variety of intergovernmental agencies. In most cases, grant funds are provided on a reimbursement basis following proper documentation of expenditures, however, in some cases the money is provided in advance to spend on specific activities outlined in the grant. The special assessment debt service fund services debt on the general obligation improvement bonds that were issued to finance construction of public improvements. Special assessment improvements are paid for completely or in part by property owners deemed to have benefited from such improvements. 52 CITY OF FRIDLEY, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2005 The tax increment debt service fund services the debt of the tax increment bonds. Tax increment money is used to service the debt on redevelopment related bonds. The special assessment construction capital projects fund is used to account for the construction of public improvements, such as residential streets, sidewalks, and storm sewers or for the provision of services that are to be paid primarily by the benefited property owner. The capital improvements fund is used to account for the monies received from property taxes that are used to finance major improvements and the acquisition of assets that require a large capital outlay. The government reports the following major proprietary funds: The liquor fund accounts for operations of the municipal liquor stores. The water fund accounts for the water service charges which are used to finance the water system operating expenses. The sewer fund accounts for the sewer service charges which are used to finance the sanitary sewer system operating expenses. The storm water fund accounts for storm sewer charges which are used to finance the storm sewer operating expenses. Additionally,the government reports the following fund types: Internal Service Funds are used to account for employee fringe benefits, insurance deductibles and maintenance and upgrading of information systems that are provided on a cost reimbursement or fee basis to departments or agencies within the City. These funds are essential for segregating costs for determining the total cost of providing a service and for assuring that the goods and services provided are properly utilized. Agency Funds are used to account for monies on behalf of the Six Cities Watershed District and the North Metro Convention and Tourism Bureau. Private-sector standards of accounting and financial reporting issued prior to December 1, 1989, generally are followed in both the government-wide and proprietary-fund financial statements to the extent that those standards do not conflict with or contradict guidance of the Governmental Accounting Standards Board. Governments also have the option of following subsequent private-sector guidance for their business-type activities and enterprise funds, subject to this same limitation. The government has elected not to follow subsequent private-sector guidance. As a general rule the effect of interfund activity has been eliminated from the government- wide financial statements. Exceptions to this general rule are transactions that would be treated as revenues, expenditures or expenses if they involved external organizations, such as buying goods and services or payments in lieu of taxes, are similarly treated when they involve other funds of the City of Fridley. Elimination of these charges would distort the direct costs and program revenues reported for the various functions concerned. 53 CITY OF FRIDLEY, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2005 Amounts reported as program revenues include 1)charges to customers or applicants for goods, services, or privileges provided, 2)operating grants and contributions, and 3)capital grants and contributions, including special assessments. Internally dedicated resources are reported as general revenues rather than as program revenues. Likewise, general revenues include all taxes. Proprietary funds distinguish operating revenues and expenses from nonoperating items. Operating revenues and expenses generally result from providing services and producing and delivering goods in connection with a proprietary fund's principal ongoing operations. The principal operating revenues of the liquor, water, sewer and storm water enterprise funds are charges to customers for sales and services. Operating expenses for enterprise funds include the cost of sales and services, administrative expenses, and depreciation on capital assets. All revenues and expenses not meeting this definition are reported as nonoperating revenues and expenses. When both restricted and unrestricted resources are available for an allowable use, it is the government's policy to use restricted resources first,then unrestricted resources as they are needed. D. Budgets The City Charter grants the City Council full authority over the financial affairs of the City. The City Manager is charged with the responsibility of preparing the estimates of the annual budget and the enforcement of the provisions of the budget as specified in the City Charter. Upon adoption of the annual budget resolution by the Council, it becomes the formal appropriation budget for City operations. All budget adjustments must be approved by the Council. Budgets for the General, Special Revenue and Capital Improvement Capital Projects Funds are adopted on a basis consistent with accounting principles generally accepted in the United States of America. Budgeted expenditure appropriations lapse at year end. Encumbrance accounting, under which purchase orders, contracts, and other commitments for the expenditure of monies are recorded in order to reserve that portion of the appropriation, is not employed by the City because it is, at present, not considered necessary to assure effective budgetary control or to facilitate effective cash management. E. Legal Compliance Budgets The City follows these procedures in establishing the budgetary data reflected in the financial statements: 1. The City Manager submits to the City Council a proposed operating budget for the fiscal year commencing the following January 1. The operating budget includes expenditures and the means of financing them. 2. Public hearings are conducted to obtain taxpayer comments. 3. The budget is legally enacted through passage of a resolution. 54 CITY OF FRIDLEY, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2005 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 and Special Revenue Funds. Formal budgeting integration is employed as a management control device during the year for each of these funds. Formal budgetary integration is not employed for Debt Service Funds because effective budgetary control is achieved through the bond indenture provisions. Budgetary control for other Capital Projects Funds is accomplished through the use of project controls. 8. As required by the City Charter, budgetary control is maintained within department at the level of three major categories of expenditures: salaries and wages; ordinary expenses; and capital outlay. This is the level of control at which expenditures may not legally exceed appropriations. 9. The General Fund budget includes prior year encumbrances which were reappropriated to the current year. Expenditures for the items encumbered are included in the current year's expenditures. F. Cash and Investments Cash balances from all funds are combined and invested to the extent available in certificates of deposit, U.S. government securities and other securities authorized by State Statute. Investment income is allocated to the respective funds on the basis of applicable cash balance participation by each fund. Investments are stated at fair value, based upon quoted market prices as of the balance sheet date. Investment income is accrued at the balance sheet date. The City provides temporary advances to funds that have insufficient cash balances by means of an advance from another fund shown as interfund receivables in the advancing fund, and an interfund payable in the fund with the deficit, until adequate resources are received. These interfund balances are eliminated on the government-wide financial statements. For purposes of the statement of cash flows the City considers all highly liquid investments with a maturity of three months or less when purchased to be cash equivalents. All of the cash and investments allocated to the proprietary funds have original maturities of 90 days or less. Therefore the entire balance in the Proprietary Funds is considered cash equivalents. Cash and investments held by escrow agent include balances held in segregated accounts that are established for specific purposes. 55 CITY OF FRIDLEY, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2005 G. Receivables and Payables During the course of operations, numerous transactions occur between individual funds for goods provided or services rendered. Short-term interfund loans are classified as "interfund receivables/payables." All short-term interfund receivables and payables at December 31, 2005 are planned to be eliminated in 2006. Any residual balances outstanding between the governmental activities and business-type activities are reported in the government-wide financial statements as"internal balances." Uncollectible property taxes and special assessments are not material and therefore have not been reported. Because utility bills are considered liens on property, no estimated uncollectible amounts are established. Uncollectible amounts are not material for other receivables and have not been reported. H. Property Tax Revenue Recognition The City Council annually adopts a tax levy and certifies it to the County in December (levy/assessment date)of each year for collection in the following year. The County is responsible for billing and collecting all property taxes for itself,the City,the local School District and other taxing authorities. Such taxes become a lien on January 1 and are recorded as receivables by the City at that date. Real property taxes are payable (by property owners)on May 15 and October 15 of each calendar year. Personal property taxes are payable by taxpayers on February 28 and June 30 of each year. These taxes are collected by the County and remitted to the City on or before July 7 and December 2 of the same year. Delinquent collections for November and December are received the following January. The City has no ability to enforce payment of property taxes by property owners. The County possesses this authority. Government-Wide Financial Statements The City recognizes property tax revenue in the period for which the taxes were levied. Uncollectible property taxes are not material and have not been reported. Governmental Fund Financial Statements The City recognizes property tax revenue when it becomes both measurable and available to finance expenditures of the current period. In practice, current and delinquent taxes and State credits received by the City in July, December and January are recognized as revenue for the current year. Taxes collected by the County by December 31 (remitted to the City the following January)and taxes and credits not received at year end are classified as delinquent and due from County taxes receivable. The portion of delinquent taxes not collected by the City in January is fully offset by deferred revenue because they are not available to finance current expenditures. Market Value Homestead Credit Property taxes on residential agricultural homestead property(as defined by State Statutes) are partially reduced by market value homestead credit(MVHC). This credit is paid to the City by the State in lieu of taxes levied against homestead property. The State remits this credit through installments each year. The credit is recognized as revenue by the City at the time of collection. 56 CITY OF FRIDLEY, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2005 J. Special Assessment Revenue Recognition Special assessments are levied against the benefited properties for the assessable costs of special assessment improvement projects in accordance with State Statutes. The City usually adopts the assessment rolls when the individual projects are complete or substantially complete. The assessments are collectible over a term of years generally consistent with the term of years of the related bond issue. Collection of annual installments is handled by the County in the same manner as property taxes. Property owners are allowed to prepay future installments without interest or prepayment penalties. Once a special assessment roll is adopted,the amount attributed to each parcel is a lien upon that property until full payment is made or the amount is determined to be excessive by the City Council or court action. If special assessments are allowed to go delinquent,the property is subject to tax forfeit sale. Proceeds of sales from tax forfeit properties are remitted to the City in payment of delinquent special assessments. Pursuant to State Statutes, a property shall be subject to a tax forfeit sale after three years unless it is homesteaded, agricultural or seasonal recreational land in which event the property is subject to such sale after five years. Government-Wide Financial Statements The City recognizes special assessment revenue in the period that the assessment roll was adopted by the City Council. Uncollectible special assessments are not material and have not been reported. Governmental Fund Financial Statements Revenue from special assessments is recognized by the City when it becomes measurable and available to finance expenditures of the current fiscal period. In practice, current and delinquent special assessments received by the City are recognized as revenue for the current year. Special assessments that are collected by the County by December 31 (remitted to the City the following January)are also recognized as revenue for the current year. All remaining delinquent, deferred and special deferred assessments receivable in governmental funds are completely offset by deferred revenues. K. Inventories Governmental Funds Inventories of the general fund are stated at cost,which approximates market, using the first- in, first out(FIFO) method. The primary government does not maintain material amounts of inventory within the other governmental funds. Inventories of governmental funds are recorded as expenditures when consumed rather than when purchased. Proprietary Funds Liquor fund inventories are valued on the average cost basis. Other proprietary funds inventory items are expensed at the time they are sold or used (consumption method). 57 CITY OF FRIDLEY, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2005 L. Prepaid Items Certain payments to vendors reflect costs applicable to future accounting periods and are recorded as prepaid items in both government-wide and fund financial statements. M. Capital Assets Capital assets,which include property, plant, equipment and infrastructure assets(e.g., roads, bridges, sidewalks, and similar items), are reported in the applicable governmental or business-type activities columns in the government-wide financial statements. Capital assets are defined by the government as assets with an initial, individual cost of more than $5,000 (amount not rounded)and an estimated useful life in excess of one year. Such assets are recorded at historical cost or estimated historical cost if purchased or constructed. Donated capital assets are recorded at estimated fair market value at the date of donation. In the case of the initial capitalization of general infrastructure assets (i.e.,those reported by governmental activities)the government chose to include all such items regardless of their acquisition date or amount. The City was able to estimate the historical cost for the initial reporting of these assets through back-trending (i.e., estimating the current replacement cost of the infrastructure to be capitalized and using an appropriate price-level index to deflate the cost of the infrastructure to be capitalized and using an appropriate price-level index to deflate the cost to the acquisition year or estimated acquisition year). The costs of normal maintenance and repairs that do not add to the value of the asset or materially extend assets lives are not capitalized. Major outlays for capital assets and improvements are capitalized as projects are constructed. Interest incurred during the construction phase of capital assets of business- type activities is included as part of the capitalized value of the assets constructed. For the year ended December 31, 2005, no interest was capitalized in connection with construction in progress. Property, plant and equipment of the primary government, and the component units, are depreciated using the straight line method over the following estimated useful lives: Assets Improvements other than building 20—25 years Buildings and structures 20—25 years Machinery and equipment 5— 10 years Infrastructure 25 years 58 CITY OF FRIDLEY, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2005 N. Compensated Absences All liabilities for compensated absences, both current and long-term, for annual leave, severance and separation pay are accounted for in the Employee Benefit Fund, an Internal Service Fund. Each year compensated absence expenditures and expenses are recorded in the Governmental and Proprietary Funds respectively, equivalent to the full amount accrued by fund employees during the year. These charges are offset by a corresponding transfer of assets from the home department funds to the Employee Benefit Fund to fund the liability. This liability represents the maximum possible dilution of Employee Benefit Fund assets by retirements or extended leaves by employees. The personnel ordinance limits the annual accumulation of benefits that can be accumulated from year-to-year. O. Long-Term Obligations In the government-wide financial statements and proprietary fund types in the fund financial statements, long-term debt and other long-term obligations are reported as liabilities in the applicable governmental activities, business-type activities, or proprietary fund type statement of net assets. Bond premiums and discounts, as well as issuance costs, are generally immaterial and are expensed in the year of bond issuance. Material premiums and discounts are deferred and amortized over the life of the bonds. In the fund financial statements, governmental fund types recognize bond premiums and discounts, as well as bond issuance costs, during the current period. The face amount of debt issued is reported as other financing sources. Premiums received on debt issuances are reported as other financing sources while discounts on debt issuances are reported as other financing uses. Issuance costs, whether or not withheld from the actual debt proceeds received, are reported as debt service expenditures. P. Fund Equity In the fund financial statements, governmental funds report reservations of fund balance for amounts not appropriable for expenditure or legally segregated for a specific future use. Designated fund balances represent tentative plans for future use of financial resources. Q. Interfund Transactions Interfund services provided and used are accounted for as revenues, expenditures or expenses. Transactions that constitute reimbursements to a fund for expenditures/expenses initially made from it that are properly applicable to another fund, are recorded as expenditures/expenses in the reimbursing fund and as reductions of expenditures/expenses in the fund that is reimbursed. Interfund loans are reported as an interfund loan receivable or payable which offsets the movement of cash between funds. All other interfund transactions are reported as transfers. 59 CITY OF FRIDLEY, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2005 R. Use of Estimates The preparation of financial statements in accordance with generally accepted accounting principles (GAAP) requires management to make estimates that affect amounts reported in the financial statements during the reporting period. Actual results could differ from such estimates. S. RECONCILIATION OF GOVERNMENT-WIDE AND FUND FINANCIAL STATEMENTS 1. EXPLANATION OF CERTAIN DIFFERENCES BETWEEN THE GOVERNMENTAL FUND BALANCE SHEET AND THE GOVERNMENT-WIDE STATEMENT OF NET ASSETS The governmental fund balance sheet includes reconciliation between fund balance— total governmental funds and net assets—governmental activities as reported in the government-wide statement of net assets. One element of that reconciliation explains that"long-term liabilities, including bonds payable, are not due and payable in the current period and therefore are not reported in the funds." The details of this ($10,297,179) difference are as follows: Bonds payable ($10,140,000) Accrued interest payable (157,179) Net adjustment to decrease net changes in fund balances-total governmental funds to arrive at changes in net assets of governmental activities ($10,297,179) 60 CITY OF FRIDLEY, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2005 2. EXPLANATION OF CERTAIN DIFFERENCES BETWEEN THE GOVERNMENTAL FUND STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES AND THE GOVERNMENT-WIDE STATEMENT OF ACTIVITIES The governmental fund statement of revenues, expenditures and changes in fund balances includes reconciliation between net changes in fund balances—total governmental funds and changes in net assets of governmental activities as reported in the government-wide statement of activities. One element of that reconciliation explains that"governmental funds report capital outlays as expenditures. However, in the statement of activities the cost of those assets is allocated over their estimated useful lives and reported as depreciation expense." The details of this$1,735,583 difference are as follows: Contribution of capital assets $60,124 Loss on disposal of capital assets (56,030) Capital outlay 3,280,250 Depreciation expense (1,548,761) Net adjustment to increase net changes in fund balances-total governmental funds to arrive at changes in net assets of governmental activities $1,735,583 Another element of that reconciliation states that"revenues on the statement of activities that do not provide current financial resources are not reported as revenues in the funds." The details of this$359,726 difference are as follows: General property taxes deferred revenue: At December 31, 2004 ($87,143) At December 31, 2005 117,988 Special assessments deferred revenue: At December 31,2004 (894,084) At December 31, 2005 1,222,965 Net adjustments to increase net changes in fund balances-total governmental funds to arrive at changes in net assets of governmental activities $359,726 61 CITY OF FRIDLEY, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2005 Another element of that reconciliation states that"the issuance of long-term debt(e.g., bonds, leases)provides current financial resources to governmental funds, while the repayment of the principal on long-term debt consumes the current financial resources of governmental funds." Neither transaction, however, has any effect on net assets. The details of this ($355,000)difference are as follows: Debt issued: Tax increment bonds ($4,645,000) Improvement bonds (1,805,000) Principal repayments: Improvement bonds 190,000 Tax increment bonds 5,905,000 Net adjustment to decrease net changes in fund balances-total governmental funds to arrive at changes in net assets of governmental activities ($355,000) T. RECLASSIFICATIONS Certain amounts presented in the prior year data have been reclassified in order to be consistent with the current year's presentation. 2. Deposits and Investments A. Deposits In accordance with Minnesota Statutes, the City maintains deposits at those depository banks authorized by the City Council, all of which are members of the Federal Reserve System. Minnesota Statutes require that all City deposits be protected by insurance, surety bond, or collateral. The market value of collateral pledged must equal 110%of the deposits not covered by insurance or bonds. Minnesota Statutes require that securities pledged as collateral be held in safekeeping by the City Treasurer or in a financial institution other than that furnishing the collateral. Authorized collateral includes the following: a) United States government treasury bills,treasury notes,treasury bonds; b) Issues of United States government agencies and instrumentalities as quoted by a recognized industry quotation service available to the government entity; 62 CITY OF FRIDLEY, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2005 c) General obligation securities of any state or local government with taxing powers which is rated "A"or better by a national bond rating service, or revenue obligation securities of any state or local government with taxing powers which is rated "AA"or better by a national bond rating service; d) Unrated general obligation securities of a local government with taxing powers may be pledged as collateral against funds deposited by that same local government entity: e) Irrevocable standby letters of credit issued by Federal Home Loan Banks to a municipality accompanied by written evidence that the bank's public debt is rated"AA"or better by Moody's Investors Service, Inc. or Standard &Poor's Corporation; and f) Time deposits that are fully insured by any Federal agency. At December 31, 2005 the carrying amount of the City's deposits with financial institutions was$688,832, and the Fridley HRA was$365,508. Of these deposits, $0 were uncollateralized. B. Investments Minnesota Statutes authorize the City to invest in the following: a) Direct obligations or obligations guaranteed by the United States or its agencies, its instrumentalities or organizations created by an act of congress, excluding mortgage- backed securities defined as high risk. b) Shares of investment companies registered under the Federal Investment Company Act of 1940 and whose only investments are in securities described in (a)above, general obligation tax-exempt securities, or repurchase or reverse repurchase agreements. c) Obligations of the State of Minnesota or any of its municipalities as follows: 1) any security which is a general obligation of any state or local government with taxing powers which is rated "A" or better by a national bond rating service; 2) any security which is a revenue obligation of any state or local government with taxing powers which is rated"AA"or better by a national bond rating service;and 3) a general obligation of the Minnesota housing finance agency which is a moral obligation of the State of Minnesota and is rated"A"or better by a national bond rating agency. d) Bankers acceptance of United States banks eligible for purchase by the Federal Reserve System. e) Commercial paper issued by United States corporations or their Canadian subsidiaries, of the highest quality, and maturing in 270 days or less. f) Repurchase or reverse repurchase agreements with banks that are members of the Federal Reserve System with capitalization exceeding$10,000,000; a primary reporting dealer in U.S. government securities to the Federal Reserve Bank of New York; certain Minnesota securities broker-dealers; or, a bank qualified as a depositor. 63 CITY OF FRIDLEY, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2005 g) General obligation temporary bonds of the same governmental entity issued under section 429.091, subdivision 7;469.178, subdivision 5; or 475.61, subdivision 6. As of December 31, 2005 the City had the following investments and maturities: Investment Maturities(in Years) Fair Less Over Investment Type Rating Value Than 1 1-5 6-10 10 Years Federal Home Loan Mortgage Co. AAA $2,486,900 $1,989,940 $496,960 $ - $ - Federal Home Loan Bank AAA 18,421,962 5,943,450 12,478,512 - - Money market N/A 8,699,837 8,699,837 - - - Total $29,608,699 $16,633,227 $12,975,472 $0 $0 Total investments $29,608,699 Deposits 688,832 Petty cash 4,550 Total cash and investments $30,302,081 As of December 31, 2005 the HRA had the following investments and maturities: Investment Maturities(in Years) Fair Less Over Investment Type Rating Value Than 1 1-5 6-10 10 Years Federal Home Loan Mortgage Co. AAA $2,975,330 $1,979,690 $995,640 $ - $ - Federal Home Loan Bank AAA 2,975,940 2,975,940 - - - United States Treasury Bond AAA 203,260 - - 203,260 - Money market N/A 9,365,903 9,365,903 - - - Total $15,520,433 $14,321,533 $995,640 $203,260 $0 Total investments $15,520,433 Deposits 365,508 Total cash and investments $15,885,941 C. Investment Risks The City's investment policy is to follow Minnesota State Statutes as described above which reduces the City's exposure to credit, custodial credit, and interest rate risks. Specific risk information for the City is as follows: Interest rate risk—The City's investment policy requires the City to diversify its investment portfolio to eliminate the risk of loss resulting from over concentration of assets in a specific maturity. The policy also states the City's investment portfolio will remain sufficiently liquid to enable the City to meet all operating requirements which might be reasonably anticipated. 64 CITY OF FRIDLEY, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2005 Concentration of credit risk—The City places no limit on the amount the City may invest in any one issuer. More than 5% of the City's investments are in various holdings as follows: Federal Home Loan Mortgage Co. 8.40% Federal Home Loan Bank 62.22% Money market 29.38% Concentration of credit risk—The HRA places no limit on the amount the HRA may invest in any one issuer. More than 5%of the HRA's investments are in various holdings as follows: Federal Home Loan Mortgage Co. 19.17% Federal Home Loan Bank 19.17% Money market 60.35% 3. Receivables Significant receivables balances not expected to be collected within one year of December 31, 2005 are as follows: Primary Government Major Funds Special Assessment Capital Nonmajor General Debt Service Improvements Funds Total Special assessments receivable $11,421 $793,629 $149 $20,658 $825,857 Loans receivable 18,364 415,908 - - 434,272 Delinquent property taxes 80,028 - 4,098 2,974 87,100 $109,813 $1,209,537 $4,247 $23,632 $1,347,229 65 CITY OF FRIDLEY, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2005 Governmental funds report deferred revenue in connection with receivables for revenues that are not considered to be available to liquidate liabilities of the current period. Governmental funds also defer revenue recognition in connection with resources that have been received, but not yet earned. At the end of the current fiscal year, the various components of deferred revenue and unearned revenue reported in the governmental funds were as follows: Unavailable Unearned Total Delinquent property taxes receivable(General Fund) $108,441 $ - $108,441 Delinquent property taxes receivable(Capital Improvements Fund) 5,551 - 5,551 Delinquent property taxes receivable(Nonamjor Funds) 3,996 - 3,996 Special assessments not yet due(General Fund) 16,911 - 16,911 Special assessments not yet due(Special Assessment Debt Service Fund) 1,175,241 - 1,175,241 Special assessments not yet due(Capital Improvements Fund) 222 - 222 Special assessments not yet due(Nonmajor Funds) 30,592 - 30,592 Unearned grant funds(Grant Management Fund) - 104,626 104,626 Total deferred/unearned revenue for governmental funds $1,340,954 $104,626 $1,445,580 4. Capital Assets Capital asset activity for the year ended December 31, 2005 was as follows: Beginning Ending Primary Government Balance Increases Decreases Balance Governmental activities: Capital assets, not being depreciated: Land $2,824,016 $16,300 $ - $2,840,316 Construction in progress 265,845 2,810,749 3,076,594 3,076,594 Total capital assets,not being depreciated 3,089,861 2,827,049 0 5,916,910 Capital assets, being depreciated: Buildings and structures 7,773,311 - - 7,773,311 Machinery and equipment 7,271,410 521,076 (395,730) 7,396,756 Improvements 3,782,585 195,510 - 3,978,095 Infrastructure 24,671,275 - (448,419) 24,222,856 Total capital assets,being depreciated 43,498,581 716,586 (844,149) 43,371,018 Less accumulated depreciation for: Buildings and structures 4,150,787 304,596 - 4,455,383 Machinery and equipment 5,483,015 633,214 (357,408) 5,758,821 Improvements 2,697,520 208,998 - 2,906,518 Infrastructure 15,761,473 573,331 (430,711) 15,904,093 Total accumulated depreciation 28,092,795 1,720,139 (788,119) 29,024,815 Total capital assets being depreciated-net 15,405,786 (1,003,553) (56,030) 14,346,203 Governmental activities capital assets-net $18,495,647 $1,823,496 ($56,030) $20,263,113 I 66 CITY OF FRIDLEY, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2005 Beginning Ending Primary Government Balance Increases Decreases Balance Business-type activities: Capital assets,not being depreciated: Land $306,477 $ - $ - $306,477 Construction in progress 1,033,583 530,172 (1,033,583) 530,172 Total capital assets,not being depreciated 1,340,060 530,172 (1,033,583) 836,649 Capital assets,being depreciated: Buildings and structures 1,852,990 - - 1,852,990 Improvements other than buildings 10,914,590 145,896 (37,206) 11,023,280 Machinery and equipment 2,382,699 322,426 (60,125) 2,645,000 Infrastructure 19,981,803 1,477,494 - 21,459,297 Total capital assets,being depreciated 35,132,082 1,945,816 (97,331) 36,980,567 Less accumulated depreciation for: Buildings and structures 1,212,190 29,806 - 1,241,996 Improvements other than buildings 4,142,425 471,339 (37,206) 4,576,558 Machinery and equipment 1,687,854 164,432 (60,005) 1,792,281 Infrastructure 9,501,493 439,876 - 9,941,369 Total accumulated depreciation 16,543,962 1,105,453 (97,211) 17,552,204 Total capital assets being depreciated-net 18,588,120 840,363 (120) 19,428,363 Business-type activities capital assets-net $19,928,180 $1,370,535 ($1,033,703) $20,265,012 Depreciation expense was charged to functions/programs of the primary government as follows: Governmental activities: General government $339,939 Public safety 191,345 Public works, including depreciation of general infrastructure assets 925,483 Community development 2,947 Recreation and naturalist 29,041 Capital assets held by the government's internal service funds are charged to the various functions based on their usage of the assets 171,378 Total depreciation expense-governmental activities $1,660,133 Business-type activities: Liquor $48,162 Water 566,609 Sewer 305,213 Storm water 185,469 Total depreciation expense-business-type activities $1,105,453 67 CITY OF FRIDLEY, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2005 5. Long-Term Debt The City issues general obligation bonds to provide funds for the acquisition and construction of major capital facilities. The reporting entity's long-term debt is segregated between the amounts to be repaid from governmental activities and amounts to be repaid from business-type activities. As of December 31, 2005, the governmental long-term bonded debt and loans of the financial reporting entity consisted of the following: Governmental Activities: $3,920,000 General Obligation Tax Increment Refunding Bonds of 2004 due in varying annual installments of$230,000-$605,000 through February 1,2012;interest at 2.00%-4.35% February 1,2012;interest at 5.10%-5.65%. $3,690,000 $1,805,000 General Obligation Improvement Bonds of 2005 due in varying annual installments of $155,000-$210,000 through February 1,2016;interest at 2.80%-3.750%. 1,805,000 $4,645,000 General Obligation Tax Increment Refunding Bonds of 2005 due in varying annual installments of$1,090,000-$1,160,000 through February 1,2009;interest at 8.00%. 4,645,000 Subtotal governmental activities 10,140,000 Business-Type Activities: $620,000 General Obligation Water Revenue Bonds of 1992,Series B,due in varying annual installments of$35,000-$55,000 through February 1,2007;interest at 3.00%-5.70%. $110,000 $1,180,000 General Obligation Water Revenue Bonds of 1998,due in varying annual installments of$90,000-$130,000 through February 1,2011. 710,000 $1,790,000 General Obligation Water Revenue Bonds of 2004 due in varying annual installments of$50,000-$230,000 through February 1,2019;interest at 2.5%-4.00%. 1,790,000 $1,205,000 General Obligation Water and Storm Water Revenue Bonds of 2004 due in varying annual installments of$160,000-$235,000 through February 1,2012;interest at 2.0%-3.25%. 1,205,000 Unamortized discount (4,760) Subtotal business-type activities 3,810,240 Total primary government $13,950,240 Component Units: $1,500,000 loan payable to primary government. Due in annual installments of $87,429,through February 1,2012;interest at 5%. $480,123 Current Refunding On June 15, 2005, the City issued the $4,645,000 General Obligation Tax Increment Refunding Bonds, Series 2005B with an average interest rate of 2.96% to refund the 2006 through 2009 maturities aggregating $4,625,000 in principal amount of the City's $9,575,000 General Obligation Tax Increment Bonds, Series 1997A with an average interest rate of 5.1%. The net proceeds of $4,612,436 (after payment of $36,415 of issuance costs) plus an additional $16,142 of escrow 68 CITY OF FRIDLEY, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2005 interest earnings were used to retire all outstanding principal of the refunded bonds on August 1, 2005 (the call date). The City refunded the 1997A Bonds to reduce its total debt service payments over the next four years by $159,210 and to obtain an economic gain (difference between the present value of the debt service payments on the old and new debt)of$149,582. Annual debt service requirements to maturity for general obligation bonds and loans are as follows: Primary Government Component Unit Governmental Activities Business-Type Activities HRA Year Ending G.O.Improvement Tax Increment Revenue Bonds Loan Payable December 31, Principal Interest Principal Interest Principal Interest Principal Interest 2006 $ - $67,466 $1,555,000 $262,965 $395,000 $126,024 $64,215 $23,213 2007 155,000 57,653 1,670,000 199,488 405,000 113,348 67,467 19,963 2008 160,000 53,163 1,710,000 149,015 300,000 101,943 70,882 16,547 2009 165,000 48,368 1,680,000 96,495 315,000 91,726 74,470 12,959 i 2010 170,000 43,215 545,000 59,906 320,000 80,756 78,240 9,188 2011 175,000 37,694 570,000 38,003 330,000 68,955 82,201 5,227 2012 185,000 31,751 605,000 13,159 345,000 57,229 42,648 1,066 2013 190,000 25,375 - - 175,000 48,779 - - 2014 195,000 18,636 - - 185,000 42,836 - - 2015 200,000 - - - 190,000 36,413 - - 2016 210,000 - - - 200,000 29,388 - - 2017 - - - - 205,000 21,844 - - 2018 - - - - 220,000 13,600 - - 2019 - - - - 230,000 4,600 - - Total $1,805,000 $383,321 $8,335,000 $819,031 $3,815,000 $837,438 $480,123 $88,163 Long-term liability activity for the year ended December 31, 2005,was as follows: Beginning Ending Due Within Balance Additions Reductions Balance One Year Governmental activities: Bonds payable: G.O.improvement bonds $190,000 $1,805,000 ($190,000) $1,805,000 $ - Tax increment bonds 9,595,000 4,645,000 (5,905,000) 8,335,000 1,555,000 Total bonds payable 9,785,000 6,450,000 (6,095,000) 10,140,000 1,555,000 Compensated absences 785,785 599,567 (641,147) 744,205 641,227 Total government activity long-term debt $10,570,785 $7,049,567 ($6,736,147) $10,884,205 $2,196,227 Business-type activities: Bonds payable: G.O. revenue bonds $5,405,000 $ - ($1,590,000) $3,815,000 $395,000 Component units: Loan payable $541,244 $ - ($61,121) $480,123 $64,215 Compensated absences are generally liquidated by the General Fund. The loan payable is liquidated by the HRA Revolving Loan Fund. All long-term bonded indebtedness outstanding at December 31, 2005 is backed by the full faith and credit of the City, including improvement and revenue bond issues. Delinquent assessments receivable at December 31,2005 totaled $18,927. 69 CITY OF FRIDLEY, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2005 6. Defined Benefit Pension Plans-Statewide A. Plan Description All full-time and certain part-time employees of the City of Fridley are covered by defined benefit plans administered by the Public Employees Retirement Association of Minnesota (PERA). PERA administers the Public Employees Retirement Fund (PERF) and the Public Employees Police and Fire Fund (PEPFF) which are cost-sharing, multiple-employer retirement plans. These plans are established and administered in accordance with Minnesota Statute, Chapters 353 and 356. PERF members belong to either the Coordinated Plan or the Basic Plan. Coordinated Plan members are covered by Social Security and Basic Plan members are not. All new members must participate in the Coordinated Plan. All police officers, firefighters and peace officers who qualify for membership by statute are covered by the PEPFF. PERA provides retirement benefits as well as disability benefits to members, and benefits to survivors upon death of eligible members. Benefits are established by State Statute, and vest after three years of credited service. The defined retirement benefits are based on a member's highest average salary for any five successive years of allowable service, age, and years of credit at termination of service. PERA issues a publicly available financial report that includes financial statements and required supplementary information for PERF and PEPFF. That report may be obtained on the web at mnpera.org, by writing to PERA at 60 Empire Drive #200 , St. Paul, Minnesota, 55103-2088 or by calling (651)296-7460 or 1-800-652-9026. B. Funding Policy Minnesota Statutes Chapter 353 sets the rates for employer and employee contributions. These statutes are established and amended by the state legislature. The City makes annual contributions to the pension plans equal to the amount required by state statutes. PERF Basic Plan members and Coordinated Plan members were required to contribute 9.10%and 5.10%, respectively, of their annual covered salary. Contribution rates in the Coordinated Plan will increase in 2006 to 5.5%. PEPFF members were required to contribute 6.20%of their annual covered salary in 2005. That rate will increase to 7.0% in 2006. The City of Fridley 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. Employer contribution rates for the Coordinated Plan and PEPFF will increase to 6.0% and 10.5% respectively, effective January 1,2006. The City's contributions for the years ending December 2003, 2004 and 2005 equal to the contractually required contributions for each year as set by state statute for PERF and PEPFF as follows: PERF PEPFF 2003 $258,241 $255,993 2004 257,163 268,253 2005 257,111 271,444 70 CITY OF FRIDLEY, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2005 C. Public Employees Retirement Association (PERA) -Defined Contribution Plan Description All council members of the City of Fridley are covered by a defined contribution pension plan administered by the Public Employees Retirement Association of Minnesota (PERA). PERA administers the Public Employees Defined Contribution Plan (PEDCP) which is a multiple- employer deferred compensation plan. Benefit Provisions and Contribution Rates The PEDCP is a tax qualified plan under Section 401(a)of the Internal Revenue Code and all contributions by or on behalf of employees are tax deferred until time of withdrawal. Plan benefits depend solely on amounts contributed to the plan plus investment income, less administrative expenses. Minnesota Statutes, Chapter 353D.03, specifies the employee and employer contribution rates for those qualified personnel who elect to participate. An eligible elected official who decides to participate contributes 5 percent of salary which is matched by the elected official's employer. For ambulance service personnel, employer contributions are determined by the employer, and for salaried employees must be a fixed percentage of salary. Employer contributions for volunteer personnel may be a unit value for each call or period of alert duty. Employees who are paid for their services may elect to make member contributions in an amount not to exceed the employer share. Employer and employee contributions are combined and used to purchase shares in one or more of the seven accounts of the Minnesota Supplemental Investment Fund. For administering the plan, PERA receives 2 percent of employer contributions and four-tenths of one percent of the assets in each member's account. Total contributions made by the City during fiscal year 2005 were: Percentage of Amount Covered Payroll Required Employees Employer Employees Employer Rates PEDCP $1,928 $1,928 5.00% 5.00% 5.00% 7. Defined Contribution Pension Plan-Fridley Volunteer Firefighters Relief Association Plan Description The Fridley Volunteer Firefighters Relief Association (Association), is a single employer public employee retirement system that acts as a common investment administrator for all of the City's firefighters. Pursuant to a 1987 amendment to its by-laws, the pension plan is a defined contribution plan, prior to 1987 the pension plan was a defined benefit pension plan. Benefits and contribution requirements are established by Association's by-laws and can be amended by the Association's Board of Trustees with approval from the City of Fridley. All provisions are within limitations established by Minnesota Statutes. 71 CITY OF FRIDLEY, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2005 Type of Benefit The exclusive pension provided by the Association is a "Defined Contribution Lump Sum Service Pension,"as defined in Minnesota Statutes§424A.02, Subdivision 4. Contribution Made The City collected and remitted $163,880 and $175,552 in State Aid to the Association for 2005 and 2004, respectively. During 2005 and as of December 31, 2005,the Association held no securities issued by the City or other related parties. 8. Interfund Receivables, Payables and Transfers Interfund receivables and payables of the primary government at December 31, 2005 are as follows: Interfund Interfund Receivables Payables Due From/Due To: Major Funds: General Fund $160,680 $ - Capital Improvement Fund 102,745 - Nonmajor Governmental Funds: Special Revenue Funds: Solid Waste Abatement Fund - 148,758 HRA Reimbursement Fund - 11,922 Capital Project Funds: Special Assessment Construction Fund - 102,745 $263,425 $263,425 Interfund payables and receivables are representative of lending/borrowing arrangements to cover deficit cash balances at the end of the fiscal year. 72 CITY OF FRIDLEY, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2005 Interfund receivables and payables of the HRA component unit at December 31, 2005 are as follows: Interfund Interfund Receivables Payables Due From/Due To: General Fund $3,599,638 $ - Capital Projects Funds: Lake Pointe - 1,080,303 Gateway East - 972,653 Gateway West - 1,421,922 57th Avenue Redevelopment - 124,760 $3,599,638 $3,599,638 The above balances are not expected to be eliminated within one year of December 31, 2005. Interfund Transfers: Transfer In Transfer Out Governmental Funds: Major Funds: General Fund $1,273,883 $3,551 Grant Management 25,829 - Special Assessment Debt Service - 250,000 Capital Improvement - 2,088,007 Special Assessment Construction Capital Projects 2,188,007 - Nonmajor Funds - 488,283 Total governmental funds 3,487,719 2,829,841 Proprietary Funds: Enterprise: Liquor - 500,000 Water 16,680 21,220 Sewer 25,008 29,704 Storm Water - 148,642 Total proprietary funds 41,688 699,566 Total $3,529,407 $3,529,407 Interfund transfers allow the City to allocate financial resources to the funds that receive benefit from services provided by another fund. Most of the City's interfund transfers fall under that category. 73 CITY OF FRIDLEY, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2005 9. Reserved Fund Balances The following reservations have been made of various fund balances of the primary government at December 31, 2005: General Fund: Reserved for: Inventory $54,116 Long-term receivables 27,546 Total General Fund 81,662 Special Revenue Funds: Reserved for police activity 688,214 Debt Service Funds: Reserved for long-term receivable 480,123 Reserved for debt service 389,197 Total Debt Service Funds 869,320 Total Governmental Funds $1,639,196 The HRA component unit had reserved fund balances at December 31,2005: Reserved for: Debt service $3,000,000 Mortgage receivable 1,141,241 $4,141,241 74 CITY OF FRIDLEY, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2005 10. Designated Fund Balance The following designations have been made of various fund balances at December 31, 2005: General Fund: Working capital $4,020,085 Special Revenue Funds: Cable TV Fund: Cable TV operations 951,616 Drug and Gambling Forfeiture Fund: Drug and gambling enforcement 47,521 F.C.C. Donations: Fridley community center 86,939 Total Special Revenue Funds 1,086,076 Capital Projects Funds: Capital Improvements Fund: Future improvements 5,730,856 Total of designated fund balances $10,837,017 75 CITY OF FRIDLEY, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2005 11. Tax Increment Districts The HRA is the administering authority for the following Tax Increment Districts: Fiscal Retained Year Tax Capacity Values Disparity By Established District District Name Current Original Captured Adjustments Authority 1979 1 Center City $716,101 $118,515 $597,586 $ - $597,586 1981 2 Moore Lake 519,992 33,732 486,260 - 486,260 1982 3 North Area 1,549,304 90,346 1,458,958 (289,302) 1,169,656 1985 6 Lake Pointe 765,266 83,780 681,486 - 681,486 1986 7 Winfield 60,596 3,582 57,014 - 57,014 1989 9 Onan/Old Central Avenue 437,179 42,646 394,533 - 394,533 1992 11 University/Osborne 62,680 26,478 36,202 - 36,202 1992 12 McGlynn's 83,892 41,254 42,638 - 42,638 1995 13 Satellite Lane Apartments 50.002 2,334 47,668 - 47,668 1995 14 Industrial Equities 72,996 16,381 56,615 - 56,615 1997 16 57th Avenue Replacement 26,354 7,776 18,578 - 18,578 2000 17 Gateway East 46,167 5,042 41,125 - 41,125 1995 HR1/04 Housing Replacement 5,586 543 5,043 - 5,043 1995 HR1/05 Housing Replacement 2,242 270 1,972 - 1,972 1995 HR1/06 Housing Replacement 5,579 686 4,893 - 4,893 1995 HR1/Q2 Housing Replacement 2,182 318 1,864 - 1,864 1995 HR1/Q3 Housing Replacement 1,883 393 1,490 - 1,490 1995 HR1/Q4 Housing Replacement 5,886 781 5,105 - 5,105 1995 HR1/S3 Housing Replacement 2,200 516 1,684 - 1,684 1995 HR1/S4 Housing Replacement 2,273 563 1,710 - 1,710 1995 HR1/S5 Housing Replacement 1,975 375 1,600 - 1,600 1995 HR1/S6 Housing Replacement 1,794 443 1,351 - 1,351 Totals $4,422,129 $476,754 $3,945,375 ($289,302) $3,656,073 12. Commitments and Contingencies A. Risk Management The City is exposed to various risks of loss related to torts;theft of, damage to, and destruction of assets; errors and omissions; injuries to employees; and natural disasters. During 1987,the City established the Self Insurance Fund (an Internal Service Fund)to account for and finance its uninsured risks of loss. The Self Insurance Fund provides coverage for up to a maximum of$50,000 for each liability and property claim with an annual aggregate of$100,000 for all claims. The City purchases insurance through the League of Minnesota Cities Insurance Trust for claims in excess of coverage provided by the fund and for all other risks of loss. Workers compensation coverage is provided through a pooled self-insurance program through the League of Minnesota Cities Insurance Trust(LMCIT). The City pays an annual premium to the LMCIT. The City is subject to supplemental assessments if deemed necessary by the LMCIT. The LMCIT reinsures through Workers Compensation Reinsurance Association (WCRA)as required by law. For workers compensation, the City is subject to a $500 deductible. The City's workers compensation coverage is retrospectively rated. With this type of coverage, final premiums are determined after loss experience is known. The amount of premium adjustment, if any, is considered immaterial and not recorded until received or paid. 76 CITY OF FRIDLEY, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2005 The City continues to carry commercial insurance for all other risks of loss, including employee health and disability insurance. There were no significant reductions in insurance from the previous year or settlements in excess of insurance coverage for any of the past three fiscal years. In 1990, the General Fund contributed $1,000,000 to the Self Insurance Fund in lieu of the Self Insurance Fund charging losses back to each fund. There is no recorded liability for unpaid claims because the amount of such claims, if any, is considered to be immaterial. As of December 31, 2005, the Self Insurance Fund has accumulated equity in the amount of $1,611,002 to cover future claims and losses. B. Litigation The City attorney has indicated that existing and pending lawsuits, claims and other actions in which the City is a defendant are either covered by insurance; of an immaterial amount; or, in the judgment of the City attorney, remotely recoverable by plaintiffs. C. Federal and State Funds The City receives financial assistance from federal and state governmental agencies in the form of grants. The disbursement of funds received under these programs generally requires compliance with the terms and conditions specified in the grant agreements and are subject to audit by the grantor agencies. Any disallowed claims resulting from such audits could become a liability of the applicable fund. However, in the opinion of management, any such disallowed claims will not have a material effect on any of the financial statements of the individual fund types included herein or on the overall financial position of the City at December 31, 2005. D. Tax Increment Districts The City's tax increment districts are subject to review by the State of Minnesota Office of the State Auditor (OSA). Any disallowed claims or misuse of tax increments could become a liability of the applicable fund. Management has indicated that they are not aware of any instances of noncompliance which would have a material effect on the financial statements. 77 CITY OF FRIDLEY, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2005 E. Contingent Liability The HRA entered into various limited tax increment revenue notes with developers whereby the HRA shall pay the developers the lesser of the scheduled payment or available tax increment. Whether a payment will occur, and if so, the amount of the payment(s)are uncertain since all payments are dependent on the HRA receiving tax increments from the developer's project. As such, this liability has not been recorded in the financial statements. The HRA has issued various Tax Increment Revenue Notes. These notes are not a general obligation of the HRA and are payable solely from available tax increments.Accordingly, these notes are not reflected in the financial statements of the HRA. A schedule of outstanding notes at December 31, 2005 is as follows: Original 12/31/2005 Interest Maturity Note Principal Balance Rate Date Medtronic $10,000,000 $10,053,163 6.75%o August 1,2025 Linn 175,000 149,500 8.50% February 1, 2012 Banfill 683,156 252,242 8.00% August 1, 2007 F. Construction Commitments At December 31, 2005, the City had construction project contracts in progress. The commitments related to the remaining contract balances are summarized as follows: Remaining Project Commitment 85th Avenue Trail Project $72,468 Woodside Court Street Improvement 7,865 2005-1 Street Reconstruction 133,596 Locke Park Filter Plant Improvement 5,310 Commons Park 733,372 2006-1 Street Reconstruction 85,906 73 1/2 Avenue Improvement 23,870 Fire Truck 358,676 3MG Water Storage 2,437 Total $1,423,500 G. Commitments -HRA The HRA has pledged future tax increments to the City of Fridley for the City's general obligation tax increment debt. 78 CITY OF FRIDLEY, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2005 13. Leases A. Lease Expense The City leases space for one of its liquor stores. Total costs for this lease was$103,564 for the year ended December 31, 2005. The future minimum lease payments for this lease are as follows: Year Ending December 31, Amount 2006 $95,850 2007 95,850 2008 95,850 2009 98,200 2010 109,981 2011 109,981 2012 109,981 2013 109,981 2014 91,650 Total $917,324 B. Lease Revenue The City receives revenue from agreements for the lease of space above its water towers to communication companies. The space is used for antennas and other equipment(of the lessees) necessary to provide radio communications. For accounting purposes,the leases are considered operating leases. Lease revenue for the year ended December 31, 2005, totaled $115,285. 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 T-Mobile Highway 65 Greater of 3%or CPI 12/31/07 3 Five Year Renewals Cingular-Garage Greater of 5%or CPI 08/25/08 4 Five Year Renewals Cingular-Marion Hills Greater of 5%or CPI 06/30/10 4 Five Year Renewals Sprint- Highway 65 Greater of 5% or CPI 09/30/10 4 Five Year Renewals Sprint-Well#13 Greater of 5% or CPI 09/30/08 4 Five Year Renewals Global Signal-Well#13 Greater of 5%or CPI 08/19/10 4 Five Year Renewals *Amounts for future lease receipts are unavailable because they are based on the Consumer Price Index. 79 CITY OF FRIDLEY, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2005 14. Conduit Debt Obligation From time to time, the City has issued Industrial Revenue Bonds to provide financial assistance to private-sector entities for the acquisition and construction of industrial and commercial facilities deemed to be in the public interest. The bonds are secured by the property financed and are payable solely from payments received on the underlying mortgage loans. Upon repayment of the bonds, ownership of the acquired facilities transfers to the private-sector entity served by the bond issuance. Neither the City, the State, nor any political subdivision thereof is obligated in any manner for repayment of the bonds. Accordingly, the bonds are not reported as liabilities in the accompanying financial statements. As of December 31, 2005, there were 28 series of Industrial Revenue Bonds issued. The aggregate principal amount payable for the six series issued after July 1, 1995 is $19,684,697. The aggregate principal amount payable for the twenty-two series issued prior to July 1, 1995, could not be determined; however, their original issue amounts totaled $65.2 million. 15. Deficit Fund Balances At December 31, 2005, individual funds with a deficit fund balance are as follows: City: Special Assessment Funds: Solid Waste Abatement Fund $40,231 Component unit: Lake Pointe $325,721 Gateway East $943,733 Gateway West $1,421,922 57th Avenue Redevelopment $122,461 16. Contingent Receivable In 1999,the HRA entered into an agreement with Medtronic for the sale of land from the HRA to Medtronic. The original principal amount of the receivable was$5,000,000. Interest is added quarterly at a rate of 8.25%. Payments on the note receivable are made in an amount equal to 11.11%of tax increment note payments received by Medtronic through 2012, and 22.22% of tax increment note payments receivable from 2012 through 2026. 80 CITY OF FRIDLEY, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2005 17. Recently Issued Accounting Standards The Governmental Accounting Standards Boards (GASB) recently approved the following statements which were not implemented for these financial statements: Statement No.44 Economic Condition Reporting: The Statistical Section—an amendment to NCGA Statement 1. The provisions of this Statement are effective for statistical sections prepared for periods beginning after June 15, 2005. Statement No.45 Accounting and Financial Reporting by Employers for Post Employment Benefits Other Than Pension Plans. Implementation is required in three phases based on a government's total annual revenues in the first fiscal year ending after June 15, 1999. This Statement is effective for periods beginning after December 15, 2006,for phase 1 governments (those with total annual revenues of$100 million or more); after December 15, 2007,for phase 2 governments(those with total annual revenues of$10 million or more but less than $100 million); and after December 15, 2008, for phase 3 governments(those with total annual revenues of less than $10 million). Early implementation is encouraged. Statement No.46 Net Assets Restricted by Enabling Legislation—an amendment of GASB Statement 34. The provisions of this Statement are effective for financial statements for periods beginning after June 15, 2005. Statement No. 47 Accounting for Termination Benefits. The provisions of this Statement are effective for financial statements for periods beginning after June 15, 2005. The effect these standards may have on future financial statements is not determinable at this time. 81 r Fs CITY OF FRIDLEY 82 REQUIRED SUPPLEMENTARY INFORMATION 83 Exhibit B-1 Page 1 of 4 CITY OF FRIDLEY, MINNESOTA REQUIRED SUPPLEMENTARY INFORMATION BUDGETARY COMPARISON SCHEDULE -GENERAL FUND For The Year Ended December 31, 2005 With comparative actual amounts for the year ended December 31, 2004 2005 r Variance with Final Budget- 2004 Budgeted Amounts Actual Positive Actual Original Final Amounts (Negative) Amounts Revenues: Taxes and special assessments: Current ad valorem taxes $7,673,970 $6,899,956 $6,763,409 (136,547) $5,685,097 Delinquent ad valorem taxes 30,000 30,000 8,266 (21,734) 37,995 Penalties and interest 12,000 12,000 8,929 (3,071) 394 Special assessments 3,100 3,100 608 (2,492) 8,906 Total taxes and special assessments 7,719,070 6,945,056 6,781,212 (163,844) 5,732,392 ' Licenses and permits: Licenses: Contractor 101,580 101,580 74,149 (27,431) 76,308 Business 110,300 110,300 94,704 (15,596) 101,467 All other 29,000 29,000 28,670 (330) 32,331 Permits 372,300 372,300 491,253 118,953 392,131 Total licenses and permits 613,180 613,180 688,776 75,596 602,237 Intergovernmental revenue: Civil defense - - 8,377 ' Federal grants 3,200 5,116 5,387 271 7,949 State maintenance aid 204,000 204,000 196,268 (7,732) 171,674 State credits - 499,014 499,014 - 517,543 l Local government aid 293,654 293,654 293,654 - 942,038 Other state grants 1,000 1,000 32,070 31,070 3,033 Police and fire pension 382,282 393,914 464,956 71,042 469,885 Other - 8,496 83,828 75,332 8,912 Total intergovernmental revenue 884,136 1,405,194 1,575,177 169,983 2,129,411 Charges for services: General government 879,890 879,890 879,826 (64) 828,850 Public safety 166,985 171,409 126,904 (44,505) 125,399 ' Public works 12,000 12,000 14,103 2,103 8,021 Community development 47,100 47,100 28,943 (18,157) 20,294 Recreation 304,400 214,700 252,988 38,288 306,582 Total charges for services 1,410,375 1,325,099 1,302,764 (22,335) 1,289,146 Fines and forfeits 180,000 180,000 163,166 (16,834) 173,694 Investment income 150,000 150,000 106,513 (43,487) 88,773 Miscellaneous revenue: Insurance and other reimbursements 60,700 65,634 99,902 34,268 125,345 Gambling tax 74,000 74,000 74,032 32 84,955 Donations 10,000 21,967 24,477 2,510 89,838 Miscellaneous 11,000 14,200 88,814 74,614 83,095 Total miscellaneous revenue 155,700 175,801 287,225 111,424 383,233 1 Total revenues 11,112,461 10,794,330 10,904,833 110,503 10,398,886 1 84 Exhibit B-1 Page 2 of 4 CITY OF FRIDLEY, MINNESOTA REQUIRED SUPPLEMENTARY INFORMATION BUDGETARY COMPARISON SCHEDULE -GENERAL FUND For The Year Ended December 31, 2005 With comparative actual amounts for the year ended December 31,2004 2005 Variance with Final Budget- 2004 Budgeted Amounts Actual Positive Actual Original Final Amounts (Negative) Amounts Expenditures: General government: Mayor and council: Personal services $74,680 $74,980 $74,980 $ - $72,347 Supplies and other charges 42,849 39,019 33,523 5,496 29,099 Total mayor and council 117,529 113,999 108,503 5,496 101,446 Planning commission: Supplies and other charges 200 200 - 200 1 Other commissions: Supplies and other charges - 56 56 - 52 City manager: Personal services 193,788 195,244 195,244 - 186,875 Supplies and other charges 62,490 52,098 52,098 - 51,871 Total City manager 256,278 247,342 247,342 0 238,746 Human resources: Personal services 147,120 147,120 146,621 499 143,206 Supplies and other charges 25,765 37,296 33,011 4,285 17,705 Total human resources 172,885 184,416 179,632 4,784 160,911 Legal: Supplies and other charges 347,237 359,647 359,647 - 303,761 Elections: Personal services - 992 992 - 2,322 Supplies and other charges 1,302 12,916 12,916 - 31,492 Total elections 1,302 13,908 13,908 0 33,814 Accounting: Personal services 592,867 566,624 564,552 2,072 582,715 Supplies and other charges 86,030 99,453 99,452 1 74,608 Total accounting 678,897 666,077 664,004 2,073 657,323 Assessing: Personal services 152,163 152,163 149,311 2,852 146,865 Supplies and other charges 10,666 10,666 6,379 4,287 7,538 Total assessing 162,829 162,829 155,690 7,139 154,403 MIS: Personal services 152,975 155,483 155,483 - 147,159 Supplies and other charges 98,974 85,303 72,550 12,753 60,362 Total MIS 251,949 240,786 228,033 12,753 207,521 City clerk/records: Personal services 109,917 113,589 113,589 - 108,324 Supplies and other charges 21,072 28,563 28,563 - 22,855 Total City clerk/records 130,989 142,152 142,152 0 131,179 Nondepartmental: Personal services 40,000 6,472 6,471 1 32,049 Supplies and other charges 53,783 50,084 50,084 - 15,613 Total nondepartmental 93,783 56,556 56,555 1 47,662 85 Exhibit B-1 Page 3 of 4 CITY OF FRIDLEY, MINNESOTA REQUIRED SUPPLEMENTARY INFORMATION BUDGETARY COMPARISON SCHEDULE -GENERAL FUND For The Year Ended December 31, 2005 With comparative actual amounts for the year ended December 31,2004 2005 Variance with Final Budget- 2004 Budgeted Amounts Actual Positive Actual Original Final Amounts (Negative) Amounts Expenditures: (continued) General government: (continued) Municipal center: Personal services $32,267 $30,789 $30,789 $ - $31,365 Supplies and other charges 204,380 236,457 236,457 - 210,572 Total municipal center 236,647 267,246 267,246 0 241,937 Total general government 2,450,525 2,455,214 2,422,768 32,446 2,278,756 Expenditures: Public safety: Police: Personal services 3,664,752 3,648,888 3,648,888 - 3,473,578 Supplies and other charges 372,725 428,351 428,351 - 393,207 Total police 4,037,477 4,077,239 4,077,239 0 3,866,785 Fire: Personal services 781,285 863,669 863,669 - 871,591 Supplies and other charges 171,016 140,002 140,002 - 287,404 Total fire 952,301 1,003,671 1,003,671 0 1,158,995 Rental inspections: Personal services 106,079 104,897 104,897 - 111,051 Supplies and other charges 15,582 5,763 5,763 - 9,117 Total rental inspections 121,661 110,660 110,660 0 120,168 Civil defense: Supplies and other charges 15,517 15,517 12,981 2,536 10,581 Total public safety 5,126,956 5,207,087 5,204,551 2,536 5,156,529 Public works: Engineering: Personal services 414,457 395,157 395,156 1 391,410 Supplies and other charges 72,290 68,782 68,782 - 66,137 Total engineering 486,747 463,939 463,938 1 457,547 Public works and parks: Personal services 1,417,421 1,463,477 1,463,477 - 1,358,898 Supplies and other charges 852,215 1,013,455 1,013,454 1 791,871 , Total public works and parks 2,269,636 2,476,932 2,476,931 1 2,150,769 Total public works 2,756,383 2,940,871 2,940,869 2 2,608,316 Community development: Building inspection: Personal services 199,994 208,538 208,538 - 190,367 Supplies and other charges 89,880 111,324 111,324_ - 104,424 Total building inspection 289,874 319,862 319,862 0 294,791 86 Exhibit B-1 Page 4 of 4 CITY OF FRIDLEY, MINNESOTA REQUIRED SUPPLEMENTARY INFORMATION BUDGETARY COMPARISON SCHEDULE -GENERAL FUND For The Year Ended December 31, 2005 With comparative actual amounts for the year ended December 31,2004 2005 Variance with Final Budget- 2004 Budgeted Amounts Actual Positive Actual Original Final Amounts (Negative) Amounts Expenditures: (continued) Community development: (continued) Planning: Personal services $308,973 $298,200 $298,200 $ - $267,996 Supplies and other charges 46,134 53,111 53,111 - 30,606 Total planning 355,107 351,311 351,311 0 298,602 Total community development 644,981 671,173 671,173 0 593,393 Expenditures: Recreation and naturalist: Recreation: Personal services 541,137 496,429 496,326 103 465,274 Supplies and other charges 260,988 241,113 240,768 345 224,904 Total recreation 802,125 737,542 737,094 448 690,178 Naturalist: Personal services 216,097 - - - 218,317 Supplies and other charges 54,377 - - - 52,228 Total naturalist 270,474 0 0 0 270,545 Total recreation and naturalist 1,072,599 737,542 737,094 448 960,723 Capital outlay: Public safety 99,900 96,169 96,169 - 117,752 Public works 160,000 165,904 163,521 2,383 105,363 Total capital outlay 259,900 262,073 259,690 2,383 223,115 Contingency: Current: Supplies and other charges 100,000 907 907 - - Total expenditures 12,411,344 12,274,867 12,237,052 37,815 11,820,832 Excess (deficiency)of revenues over (under)expenditures (1,298,883) (1,480,537) (1,332,219) 148,318 (1,421,946) Other financing sources(uses): Proceeds from sale of fixed assets 25,000 25,000 - (25,000) - Transfers in 1,273,883 1,273,883 1,273,883 - 1,161,293 Transfers out - (6,750) (3,551) 3,199 (3,388) Total other financing sources(uses) 1,298,883 1,292,133 1,270,332 (21,801) 1,157,905 Net change in fund balance $0 ($188,404) (61,887) $126,517 (264,041) Fund balance-January 1 4,163,834 4,427,875 Fund balance-December 31 $4,101,947 $4,163,834 87 Exhibit B-2 CITY OF FRIDLEY, MINNESOTA REQUIRED SUPPLEMENTARY INFORMATION BUDGETARY COMPARISON SCHEDULE -GRANT MANAGEMENT FUND For The Year Ended December 31, 2005 With comparative actual amounts for the year ended December 31, 2004 2005 Variance with Final Budget- 2004 Budgeted Amounts Actual Positive Actual Original Final Amounts (Negative) Amounts Revenues: Intergovernmental: Federal grants $102,704 $102,704 $143,446 $40,742 $169,308 State grants - 335,187 162,332 (172,855) 102,008 Other - - 91,765 91,765 29,225 Total intergovernmental 102,704 437,891 397,543 (40,348) 300,541 Miscellaneous revenue: Donations - - - - 427 Total revenues 102,704 437,891 397,543 (40,348) 300,968 Expenditures: Current: General government: Personal services 78,089 84,839 80,361 4,478 109,697 Supplies and other charges 7,824 343,011 343,011 - 203,268 Total general government 85,913 427,850 423,372 4,478 312,965 Total expenditures 85,913 427,850 423,372 4,478 312,965 Excess (deficiency)of revenues over (under)expenditures 16,791 10,041 (25,829) (35,870) (11,997) Other financing sources(uses): Transfers in - 29,028 25,829 (3,199) 11,997 1 Net change in fund balance $16,791 $39,069 0 ($39,069) 0 Fund balance-January 1 - - Fund balance-December 31 $0 $0 88 CITY OF FRIDLEY, MINNESOTA REQUIRED SUPPLEMENTARY INFORMATION BUDGETARY COMPARISON SCHEDULE NOTE TO RSI December 31, 2005 Note A LEGAL COMPLIANCE—BUDGETS The General Fund and Grant Management Fund budgets are legally adopted on a basis consistent with accounting principles generally accepted in the United States of America. The legal level of budgetary control is at the expenditure category level. 89 � yak ‘44. CITY OF FRIDLEY 90 COMBINING AND INDIVIDUAL FUND STATEMENTS AND SCHEDULES 91 „,„ CITY OF FRIDLEY 92 NONMAJOR GOVERNMENTAL FUNDS 93 iiellfii3O $8°4* , N. a" CITY OF FRIDLEY 94 SPECIAL REVENUE FUNDS A Special Revenue Fund accounts for revenues derived from specific taxes or other earmarked revenue sources. They are usually required by statute or local ordinance and/or resolution to finance particular functions, activities or governments. 95 Exhibit C-1 CITY OF FRIDLEY, MINNESOTA BALANCE SHEET NONMAJOR GOVERNMENTAL FUNDS December 31, 2005 With comparative totals for December 31, 2004 Nonmajor Special Revenue 2005 2004 Assets Cash and investments $1,785,565 $1,698,554 Receivables: Accounts 145,060 64,547 Taxes 6,332 - Due from component unit 11,940 5,996 Due from other governments 60,721 61,029 Total assets $2,009,618 $1,830,126 Liabilities and Fund Balance Liabilities: Accounts payable $51,576 $32,705 Deposits payable - 10,025 Salaries payable 6,074 2,377 Deferred revenue 3,996 - Due to other funds 160,680 88,002 Due to other governments 83 44 Total liabilities 222,409 133,153 Fund balance (deficit): Reserved 688,214 1,155,225 Unreserved: Designated 1,086,076 554,343 Undesignated 12,919 (12,595) Total fund balance (deficit) 1,787,209 1,696,973 Total liabilities and fund balance $2,009,618 $1,830,126 96 Exhibit C-2 CITY OF FRIDLEY, MINNESOTA STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES NONMAJOR GOVERNMENTAL FUNDS For The Year Ended December 31, 2005 With comparative total for the year ended December 31, 2004 Nonmajor Special Revenue 2005 2004 Revenues: Licenses and permits $177,072 $183,345 Intergovernmental revenue 105,799 88,649 Taxes 270,309 - Charges for services 303,390 228,420 Fines and forfeits 938 3,184 Investment income 32,820 30,262 Miscellaneous 542,821 1,740 Total revenues 1,433,149 535,600 Expenditures: Current: General government 854,630 532,246 Excess (deficiency)of revenues over (under)expenditures 578,519 3,354 Other financing sources(uses): Transfers out (488,283) (478,393) Net change in fund balance 90,236 (475,039) Fund balance-January 1 1,696,973 2,172,012 Fund balance- December 31 $1,787,209 $1,696,973 97 �� ry y � Y CITY OF FRIDLEY 98 NONMAJOR SPECIAL REVENUE FUNDS Special Revenue Funds are used to account for revenues derived from specific taxes or other earmarked revenue sources. They are usually required by statute, charter provision or local ordinance to finance particular governmental functions or activities. Cable TV Fund -This fund receives revenues from the issuance of a franchise agreement with the cable TV provider. These revenues are used for the operation and maintenance of a government access channel. Solid Waste Abatement Fund -This fund receives grants, recycling fees and yard waste fees. These revenues finance the City's curbside recycling pickup and operation of the yard waste transfer site. HRA Reimbursement Fund -This fund receives revenues from the Housing and Redevelopment Authority. These revenues are used to reimburse the City for professional services provided by City staff for HRA related activities. Drug and Gambling Forfeiture Fund -This fund receives forfeited property in connection with illegal gambling or drug activity. Pursuant to Minnesota Statutes, the proceeds are disbursed between the investigating agency and the prosecuting agency. F.C.C. Donations Fund -This fund is used to account for donations received and used in improving and furnishing the Fridley Community Center. Police Activity Fund -This fund is used to account for the residual assets refunded to the City from the Public Employees Retirement Association's police consolidation account. Springbrook Nature Center Fund -This fund was established in 2005 after a$275,000 referendum supporting the Springbrook Nature Center was approved by the voters in November of 2004. The revenues from the annual levy are used for the on-going operation of the nature center and the capital improvement projects required in the park. 99 CITY OF FRIDLEY, MINNESOTA SUBCOMBINING BALANCE SHEET NONMAJOR SPECIAL REVENUE FUNDS December 31, 2005 With comparative totals for December 31, 2004 Cable Solid Waste Assets TV Abatement Cash and investments $901,894 $ - Receivables: Accounts 52,534 92,457 Taxes - - Due from component unit - - Due from other governments - 60,721 Total assets $954,428 $153,178 Liabilities and Fund Balance Liabilities: Accounts payable $1,725 $43,589 Deposits payable - - Salaries payable 1,087 1,062 Due to other funds - 148,758 Due to other governments - - Deferred revenue - - Total liabilities 2,812 193,409 Fund balance: Reserved - - Unreserved: Designated for special revenue programs 951,616 - Undesignated - (40,231) Total fund balance 951,616 (40,231) Total liabilities and fund balance $954,428 $153,178 100 Exhibit C-3 Totals Drug and Nonmajor HRA Gambling F.C.C. Police Springbrook Special Revenue Funds Reimbursement Forfeiture Donations Activity Nature Center 2005 2004 $ - $47,604 $86,939 $688,214 $60,914 $1,785,565 $1,698,554 - - - - 69 145,060 64,547 - - - 6,332 6,332 - 11,940 - - - - 11,940 5,996 - 60,721 61,029 $11,940 $47,604 $86,939 $688,214 $67,315 $2,009,618 $1,830,126 $18 $ - $ - $ - $6,244 $51,576 $32,705 - - - - - - 10,025 - - - - 3,925 6,074 2,377 11,922 - - - - 160,680 88,002 - 83 - - - 83 44 - - - - 3,996 3,996 - 11,940 83 0 0 14,165 222,409 133,153 - - - 688,214 - 688,214 1,155,225 - 47,521 86,939 - - 1,086,076 554,343 - - - - 53,150 12,919 (12,595) 0 47,521 86,939 688,214 53,150 1,787,209 1,696,973 $11,940 $47,604 $86,939 $688,214 $67,315 $2,009,618 $1,830,126 101 CITY OF FRIDLEY, MINNESOTA SUBCOMBINING STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE NONMAJOR SPECIAL REVENUE FUNDS For The Year Ended December 31, 2005 With comparative totals for the year ended December 31, 2004 Cable Solid Waste TV Abatement Revenues: Licenses and permits $177,072 $ - Intergovernmental revenue - 60,721 Taxes - - Charges for services 665 231,877 Fines and forfeits - - Investment income 9,744 - Miscellaneous 450,000 70,463 Total revenues 637,481 363,061 Expenditures: Current: General government 127,464 390,697 Excess (deficiency)of revenues over(under)expenditures 510,017 (27,636) Other financing sources(uses): Transfers out - - Net change in fund balance 510,017 (27,636) Fund balance-January 1 441,599 (12,595) Fund balance- December 31 $951,616 ($40,231) 102 Exhibit C-4 Totals Drug and Nonmajor HRA Gambling F.C.C. Police Springbrook Special Revenue Funds Reimbursement Forfeiture Donations Activity Nature Center 2005 2004 $ - $ - $ - $ - $ - $177,072 $183,345 26,531 - - - 18,547 105,799 88,649 - - - - 270,309 270,309 - - - - - 70,848 303,390 228,420 - 938 - - - 938 3,184 - - 1,804 21,272 - 32,820 30,262 - 20,426 - - 1,932 542,821 1,740 26,531 21,364 1,804 21,272 361,636 1,433,149 535,600 26,531 1,452 - - 308,486 854,630 532,246 0 19,912 1,804 21,272 53,150 578,519 3,354 - - - (488,283) - (488,283) (478,393) - 19,912 1,804 (467,011) 53,150 90,236 (475,039) - 27,609 85,135 1,155,225 - 1,696,973 2,172,012 $0 $47,521 $86,939 $688,214 $53,150 $1,787,209 $1,696,973 103 Exhibit D-1 CITY OF FRIDLEY, MINNESOTA SPECIAL REVENUE FUND -CABLE TV FUND COMPARATIVE BALANCE SHEET December 31, 2005 and 2004 Assets 2005 2004 Cash and investments $901,894 $411,867 Accounts receivable 52,534 44,234 Total assets $954,428 $456,101 Liabilities and Fund Balance Liabilities: Accounts payable $1,725 $3,461 Deposits payable - 10,025 Salaries payable 1,087 1,016 Total liabilities 2,812 14,502 Fund balance: Unreserved: Designated for special revenue programs 951,616 441,599 Total liabilities and fund balance $954,428 $456,101 104 Exhibit D-2 CITY OF FRIDLEY, MINNESOTA SPECIAL REVENUE FUND -CABLE TV FUND SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE - BUDGET AND ACTUAL For The Year Ended December 31, 2005 With comparative actual amounts for the year ended December 31, 2004 2005 2004 Budgeted Amounts Actual Actual Original Final Amounts Amounts Revenues: Licenses -franchise fee $175,000 $177,265 $177,072 $183,345 Charges for services 1,000 1,000 665 699 Investment income 6,000 6,000 9,744 6,256 Miscellaneous - - 450,000 - Total revenues 182,000 184,265 637,481 190,300 Expenditures: Current: General government: Personal services 109,299 109,299 108,816 104,878 Supplies and other charges 16,383 18,648 18,648 44,176 Total expenditures 125,682 127,947 127,464 149,054 Net change in fund balance $56,318 $56,318 510,017 41,246 Fund balance-January 1 441,599 400,353 Fund balance- December 31 $951,616 $441,599 I 105 Exhibit D-3 CITY OF FRIDLEY, MINNESOTA SPECIAL REVENUE FUND -SOLID WASTE ABATEMENT FUND COMPARATIVE BALANCE SHEET December 31, 2005 and 2004 1 Assets 2005 2004 Accounts receivable $92,457 $20,313 Due from other governments 60,721 61,029 Total assets $153,178 $81,342 Liabilities and Fund Balance Liabilities: Accounts payable $43,589 $10,458 Salaries payable 1,061 1,361 Due to other funds 148,759 82,074 Due to other governments - 44 Total liabilities 193,409 93,937 Fund balance: Unreserved: Undesignated (40,231) (12,595) Total liabilities and fund balance $153,178 $81,342 106 Exhibit D-4 CITY OF FRIDLEY, MINNESOTA SPECIAL REVENUE FUND -SOLID WASTE ABATEMENT FUND SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE - BUDGET AND ACTUAL For The Year Ended December 31,2005 With comparative actual amounts for the year ended December 31, 2004 2005 2004 Budgeted Amounts Actual Actual Original Final Amounts Amounts Revenues: Intergovernmental revenue: State $55,239 $55,239 $60,721 $68,714 Charges for services 227,251 312,064 231,877 227,721 Miscellaneous 800 800 70,463 1,440 Total revenues 283,290 368,103 363,061 297,875 Expenditures: Current: General government: Personal services 64,075 64,075 54,566 63,576 Supplies and other charges 251,319 336,132 336,131 266,740 Total expenditures 315,394 400,207 390,697 330,316 Net change in fund balance ($32,104) ($32,104) (27,636) (32,441) Fund balance(deficit)-January 1 (12,595) 19,846 Fund balance(deficit)- December 31 ($40,231) ($12,595) 107 Exhibit D-5 CITY OF FRIDLEY, MINNESOTA SPECIAL REVENUE FUND -HRA REIMBURSEMENT FUND COMPARATIVE BALANCE SHEET December 31, 2005 and 2004 Assets 2005 2004 Due from component unit $11,940 $5,996 Total assets $11,940 $5,996 Liabilities and Fund Balance Liabilities: Accounts payable $18 $68 Due to other funds 11,922 5,928 Total liabilities 11,940 5,996 Fund balance - - Total liabilities and fund balance $11,940 $5,996 108 Exhibit D-6 CITY OF FRIDLEY, MINNESOTA SPECIAL REVENUE FUND -HRA REIMBURSEMENT FUND SCHEDULE OF REVENUES, EXPENDITURES,AND CHANGES IN FUND BALANCE -BUDGET AND ACTUAL For The Year Ended December 31, 2005 With comparative actual amounts for the year ended December 31, 2004 2005 2004 Budgeted Amounts Actual Actual Original Final Amounts Amounts Revenues: Intergovernmental revenue: Housing and Redevelopment Authority $ - $26,531 $26,531 $19,935 Expenditures: Current: General government: Supplies and other charges - 26,531 26,531 19,935 Net change in fund balance $0 $0 0 0 Fund balance-January 1 - - Fund balance-December 31 $0 $0 109 Exhibit D-7 CITY OF FRIDLEY, MINNESOTA SPECIAL REVENUE FUND -DRUG AND GAMBLING FORFEITURE FUND COMPARATIVE BALANCE SHEET December 31, 2005 and 2004 Assets 2005 2004 Cash and investments $47,604 $46,327 Due from other governments - - Total assets $47,604 $46,327 Liabilities and Fund Balance Liabilities: Accounts payable $ - $18,718 Due to other governments 83 - Total liabilities 83 18,718 Fund balance: Unreserved: Designated for special revenue programs 47,521 27,609 Total liabilities and fund balance $47,604 $46,327 110 Exhibit D-8 CITY OF FRIDLEY, MINNESOTA SPECIAL REVENUE FUND -DRUG AND GAMBLING FORFEITURE FUND SCHEDULE OF REVENUES, EXPENDITURES,AND CHANGES IN FUND BALANCE - BUDGET AND ACTUAL For The Year Ended December 31, 2005 With comparative actual amounts for the year ended December 31, 2004 2005 2004 Budgeted Amounts Actual Actual Original Final Amounts Amounts Revenues: Fines and forfeits $ - $21,363 $938 $3,184 Miscellaneous - - 20,426 300 Total revenues 0 21,363 21,364 3,484 Expenditures: Current: General government: Supplies and other charges - 1,452 1,452 27,649 Net change in fund balance $0 $19,911 19,912 (24,165) Fund balance-January 1 27,609 51,774 Fund balance- December 31 $47,521 $27,609 111 Exhibit D-9 CITY OF FRIDLEY, MINNESOTA SPECIAL REVENUE FUND -F.C.C. DONATIONS FUND COMPARATIVE BALANCE SHEET December 31, 2005 and 2004 Assets 2005 2004 Cash and investments $86,939 $85,135 Total assets $86,939 $85,135 Liabilities and Fund Balance Liabilities $ - $ - Fund balance: Unreserved: Designated for special revenue programs 86,939 85,135 Total liabilities and fund balance $86,939 $85,135 112 Exhibit D-10 CITY OF FRIDLEY, MINNESOTA SPECIAL REVENUE FUND - F.C.C. DONATIONS FUND SCHEDULE OF REVENUES, EXPENDITURES,AND CHANGES IN FUND BALANCE -BUDGET AND ACTUAL For The Year Ended December 31, 2005 With comparative actual amounts for the year ended December 31, 2004 2005 2004 Budgeted Amounts Actual Actual Original Final Amounts Amounts Revenues: Investment income $ - $ - $1,804 $1,405 Expenditures: Current: General government: Supplies and other charges - - - 5,292 Net change in fund balance $0 $0 1,804 (3,887) Fund balance-January 1 85,135 89,022 Fund balance - December 31 $86,939 $85,135 113 Exhibit D-11 CITY OF FRIDLEY, MINNESOTA SPECIAL REVENUE FUND -POLICE ACTIVITY FUND COMPARATIVE BALANCE SHEET December 31, 2005 and 2004 Assets 2005 2004 Cash and investments $688,214 $1,155,225 Total assets $688,214 $1,155,225 Liabilities and Fund Balance Liabilities $ - $ - Fund balance: Reserved for police activity 688,214 1,155,225 Total liabilities and fund balance $688,214 $1,155,225 114 Exhibit D-12 CITY OF FRIDLEY, MINNESOTA SPECIAL REVENUE FUND -POLICE ACTIVITY FUND SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE -BUDGET AND ACTUAL For The Year Ended December 31, 2005 With comparative actual amounts for the year ended December 31, 2004 2005 2004 Budgeted Amounts Actual Actual Original Final Amounts Amounts Revenues: Investment income $23,000 $23,000 $21,272 $22,601 Expenditures - - - - Excess (deficiency)of revenues over(under)expenditures 23,000 23,000 21,272 22,601 Other financing sources (uses): Transfers out: General Fund (488,283) (488,283) (488,283) (478,393) Net change in fund balance ($465,283) ($465,283) (467,011) (455,792) Fund balance-January 1 1,155,225 1,611,017 Fund balance- December 31 $688,214 $1,155,225 115 Exhibit D-13 CITY OF FRIDLEY, MINNESOTA SPECIAL REVENUE FUND -SPRINGBROOK NATURE CENTER FUND COMPARATIVE BALANCE SHEET December 31, 2005 Assets 2005 Cash and investments $60,914 Receivables: Accounts 69 Taxes 6,332 Total assets $67,315 Liabilities and Fund Balance Liabilities: Accounts payable $6,244 Salaries payable 3,925 Deferred Revenue 3,996 Total liabilities $14,165 Fund balance: Unreserved: Undesignated 53,150 Total liabilities and fund balance $67,315 116 Exhibit D-14 CITY OF FRIDLEY, MINNESOTA SPECIAL REVENUE FUND -SPRINGBROOK NATURE CENTER FUND SCHEDULE OF REVENUES, EXPENDITURES,AND CHANGES IN FUND BALANCE - BUDGET AND ACTUAL For The Year Ended December 31, 2005 2005 Budgeted Amounts Actual Original Final Amounts Revenues: Intergovernmental revenue $ - $18,547 $18,547 Taxes - 256,453 270,309 Charges for service - 58,500 70,848 Miscellaneous - 1,780 1,932 Total revenues 0 335,280 361,636 Expenditures Current: General government: Personal services - - 240,626 Supplies and other charges - - 67,860 Total expenditures 0 0 308,486 Net change in fund balance $0 $335,280 53,150 Fund balance-January 1 - Fund balance- December 31 $53,150 117 Exhibit E-1 CITY OF FRIDLEY, MINNESOTA CAPITAL PROJECT FUND -CAPITAL IMPROVEMENT FUND SCHEDULE OF REVENUES, EXPENDITURES,AND CHANGES IN FUND BALANCE -BUDGET AND ACTUAL For The Year Ended December 31, 2005 With comparative actual amounts for the year ended December 31, 2004 2005 2004 Budgeted Amounts Actual Actual Original Final Amounts Amounts Revenues: Taxes $378,879 $353,326 $346,468 $86,145 Special assessments - - 984 1,275 Intergovernmental revenue: State 875,000 1,230,553 742,745 688,881 Investment income 139,129 139,129 145,432 109,774 Miscellaneous 10,000 10,000 45,286 25,697 Total revenues 1,403,008 1,733,008 1,280,915 911,772 Expenditures: Current: General government: Supplies and other charges 3,000 170,165 170,164 2,225 Capital outlay 1,087,000 1,027,000 499,767 14,250 Total expenditures 1,090,000 1,197,165 669,931 16,475 Excess (deficiency)of revenues over(under)expenditures 313,008 535,843 610,984 895,297 Other financing sources (uses): Transfers out (1,920,000) (2,250,000) (2,088,007) (469,710) Net change in fund balance ($1,606,992) ($1,714,157) (1,477,023) 425,587 Fund balance -January 1 7,207,879 6,782,292 Fund balance- December 31 $5,730,856 $7,207,879 118 INTERNAL SERVICE FUNDS Internal Service Funds are used to account for goods and services that are provided on a cost reimbursement or fee basis to departments or agencies within the City. These funds are essential for segregating costs for determining the total cost of providing a service and for assuring that the goods and services provided are properly utilized. These funds are accounted for on a capital maintenance measurement focus and use the accrual basis of accounting. Employee Benefits Fund—This fund is used to account for the expenses associated with providing fringe benefits for employees. Self-Insurance Fund—This fund is used to account for all revenues and expenses associated with the$50,000 deductible in the City's general liability policy. Information Systems Fund—This fund is used to account for all revenues and expenses associated with maintaining and upgrading the City's computerized information systems. 119 Exhibit F-1 CITY OF FRIDLEY, MINNESOTA COMBINING STATEMENT OF NET ASSETS i INTERNAL SERVICE FUNDS 1 December 31, 2005 With comparative totals for December 31, 2004 Employee Self Information Totals Benefits Insurance Systems 2005 2004 Assets: Current assets: Cash and investments $922,145 $1,665,999 $699,332 $3,287,476 $3,658,283 Due from component unit 107 - - 107 103 Total current assets 922,252 1,665,999 699,332 3,287,583 3,658,386 Capital assets, at cost: Machinery and equipment - - 1,472,977 1,472,977 1,331,455 Less: accumulated depreciation - - (1,051,286) (1,051,286) (941,647) Net capital assets 0 0 421,691 421,691 389,808 Total assets 922,252 1,665,999 1,121,023 3,709,274 4,048,194 Liabilities: Current liabilities: Accounts payable - 54,997 3,301 58,298 40,314 Due to other governments - - 322 322 - r Payroll deductions payable 78,773 - - 78,773 74,300 Compensated absences payable- current portion 641,227 - - 641,227 613,417 Total current liabilities 720,000 54,997 3,623 778,620 728,031 Noncurrent liabilities: Compensated absences payable 102,978 - - 102,978 172,368 Total liabilities 822,978 54,997 3,623 881,598 900,399 Net assets: Invested in capital assets, net of related debt - - 421,691 421,691 389,808 , Unrestricted 99,274 1,611,002 695,709 2,405,985 2,757,987 Total net assets $99,274 $1,611,002 $1,117,400 $2,827,676 $3,147,795 120 Exhibit F-2 CITY OF FRIDLEY, MINNESOTA COMBINING STATEMENT OF REVENUES, EXPENSES AND CHANGES IN NET ASSETS INTERNAL SERVICE FUNDS For The Year Ended December 31, 2005 With comparative totals for the year ended December 31, 2004 Employee Self Information Totals Benefits Insurance Systems 2005 2004 Operating revenues: Charges for services $ - $ - $151,388 $151,388 $152,067 Operating expenses: Personal services 2,383 55,413 - 57,796 7,518 Supplies and other charges 3,390 291,678 21,523 316,591 105,379 Depreciation - - 171,377 171,377 160,285 Total operating expenses 5,773 347,091 192,900 545,764 273,182 Operating income (loss) (5,773) (347,091) (41,512) (394,376) (121,115) Nonoperating revenues: Investment income 19,935 38,145 15,743 73,823 59,183 Gain (loss)on disposal of capital assets - - 434 434 680 Total nonoperating revenues 19,935 38,145 16,177 74,257 59,863 Change in net assets 14,162 (308,946) (25,335) (320,119) (61,252) Net assets-January 1 85,112 1,919,948 1,142,735 3,147,795 3,209,047 Net assets- December 31 $99,274 $1,611,002 $1,117,400 $2,827,676 $3,147,795 121 Exhibit F-9 CITY OF FRIDLEY, MINNESOTA INTERNAL SERVICE FUND -SELF INSURANCE FUND COMPARATIVE STATEMENT OF CASH FLOWS For The Year Ended December 31, 2005 With comparative amounts for the year ended December 31,2004 2005 2004 Cash flows from operating activities: Payments to employees ($55,413) $ Payment to suppliers (241,806) (85,547) Net cash flows from operating activities (297,219) (85,547) Cash flows from investing activities: Investment income 38,145 31,349 Net increase (decrease)in cash and cash equivalents (259,074) (54,198) Cash and cash equivalents-January 1 1,925,073 1,979,271 Cash and cash equivalents- December 31 $1,665,999 $1,925,073 I Reconciliation of operating income (loss)to net cash provided (used)by operating activities: Operating income (loss) ($347,091) ($90,094) Adjustments to reconcile operating income (loss) to net cash flows from operating activities: Changes in assets and liabilities: increase (decrease)in payables 49,872 4,547 Total adjustments 49,872 4,547 Net cash provided (used)by operating activities ($297,219) ($85,547) I 128 Exhibit F-10 CITY OF FRIDLEY, MINNESOTA INTERNAL SERVICE FUND -INFORMATION SYSTEMS FUND COMPARATIVE STATEMENT OF NET ASSETS December 31, 2005 With comparative amounts for December 31, 2004 2005 2004 Assets: Current assets: Cash and investments $699,332 $788,116 Capital assets, at cost: Property and equipment 1,472,977 1,331,455 Less: accumulated depreciation (1,051,286) (941,647) Net capital assets 421,691 389,808 Total assets 1,121,023 1,177,924 mei Liabilities: Current liabilities: Accounts payable 3,301 35,189 Due to other governments 322 - Total liabilities 3,623 35,189 Net assets: Invested in capital assets, net of related debt 421,691 389,808 Unrestricted 695,709 752,927 Total net assets $1,117,400 $1,142,735 129 Exhibit F-11 CITY OF FRIDLEY, MINNESOTA INTERNAL SERVICE FUND -INFORMATION SYSTEMS FUND COMPARATIVE STATEMENT OF REVENUES, EXPENSES AND CHANGES IN NET ASSETS For The Year Ended December 31, 2005 With comparative amounts for the year ended December 31, 2004 2005 2004 Operating revenues: Charges for services $151,388 $152,067 Operating expenses: Supplies and other charges 21,523 12,830 Depreciation 171,377 160,285 Total operating expenses 192,900 173,115 Operating income(loss) (41,512) (21,048) Nonoperating revenues: Investment income 15,743 12,114 Gain (loss)on disposal of fixed assets 434 680 Total nonoperating revenues 16,177 12,794 Change in net assets (25,335) (8,254) Net assets-January 1 1,142,735 1,150,989 Net assets- December 31 $1,117,400 $1,142,735 130 Exhibit F-12 CITY OF FRIDLEY, MINNESOTA INTERNAL SERVICE FUND -INFORMATION SYSTEMS FUND COMPARATIVE STATEMENT OF CASH FLOWS For The Year Ended December 31, 2005 With comparative amounts for the year ended December 31, 2004 2005 2004 Cash flows from operating activities: Receipts from interfund services provided $151,388 $152,067 Payment to suppliers (53,088) (12,843) Net cash flows from operating activities 98,300 139,224 Cash flows from capital and related financing activities: Acquisition of capital assets (203,261) (128,181) Proceeds from sale of capital assets - 434 29,822 Net cash flows from capital and relatd financing activities (202,827) (98,359) Cash flows from investing activities: Investment income 15,743 12,114 Net increase (decrease)in cash and cash equivalents (88,784) 52,979 Cash and cash equivalents -January 1 788,116 735,137 Cash and cash equivalents- December 31 $699,332 $788,116 Reconciliation of operating income(loss)to net cash provided (used) by operating activities: Operating income (loss) _ ($41,512) ($21,048) Adjustments to reconcile operating income (loss) to net cash flows from operating activities: Depreciation 171,377 160,285 Changes in assets and liabilities: Increase (decrease)in payables (31,565) (13) Total adjustments 139,812 160,272 Net cash provided by operating activities $98,300 $139,224 131 aY ■ Ilk II t , CITY OF FRIDLEY __ 132 HOUSING AND REDEVELOPMENT AUTHORITY COMPONENT UNIT 133 CITY OF FRIDLEY, MINNESOTA BALANCE SHEET-GOVERNMENTAL FUNDS HOUSING AND REDEVELOPMENT AUTHORITY December 31, 2005 With comparative totals for December 31,2004 North Area/ Revolving Univ. Ind. General Loan Park Assets Cash and investments $5,809,538 $3,147,684 $1,455,649 Cash with escrow agent - - 146,324 Receivables: Accounts 869 - - Interest 20,076 - - Taxes: Unremitted 2,593 - 8,510 Delinquent 4,787 - 39,482 Mortgage: Deferred - 1,049,331 49,072 Allowance for uncollectible accounts - (20,987) - Due from primary government - - - Due from other funds 3,599,638 - - Land held for resale - - 192,000 Total assets $9,437,501 $4,176,028 $1,891,037 �,I Liabilities and Fund Balance Liabilities: Accounts payable $22,626 $ - $ - Due to primary government 53,055 - 330 Due to other funds - - - Deferred revenue 4,788 - 231,482 Loan payable to primary government - 480,123 - Total liabilities 80,469 480,123 231,812 Fund balance: Reserved for debt service 3,000,000 - - Reserved for mortgage receivable - 1,049,331 49,072 Unreserved, undesignated 6,357,032 2,646,574 1,610,153 Total fund balance 9,357,032 3,695,905 1,659,225 Total liabilities and fund balance $9,437,501 $4,176,028 $1,891,037 1 134 Exhibit G-1 Other Totals Lake Gateway Gateway Governmental Governmental Funds Pointe East West Funds 2005 2004 $543,472 $28,920 $ - $4,754,354 $15,739,617 $14,832,443 - - 146,324 142,929 442,440 - - - 443,309 443,309 - - - - 20,076 20,006 1,700 - - 12,476 25,279 100,222 3,909 - - 22,299 70,477 67,745 - - - 42,838 1,141,241 1,001,747 - - - (434) (21,421) (29,600) - - - - - 12,478 - - - - 3,599,638 3,074,382 50,000 - 700,000 180,000 1,122,000 1,055,000 $1,041,521 $28,920 $700,000 $5,011,533 $22,286,540 $20,720,661 $233,030 $ - $4,407 $260,063 $268,814 - 1,501 54,886 61,272 1,080,303 972,653 1,421,922 124,760 3,599,638 3,074,382 53,909 - 700,000 202,299 1,192,478 1,122,745 - - - - 480,123 541,244 1,367,242 972,653 2,121,922 332,967 5,587,188 5,068,457 - - - - 3,000,000 3,281,746 - - 42,838 1,141,241 1,001,747 (325,721) (943,733) (1,421,922) 4,635,728 12,558,111 11,368,711 (325,721) (943,733) (1,421,922) 4,678,566 16,699,352 15,652,204 $1,041,521 $28,920 $700,000 $5,011,533 $22,286,540 $20,720,661 135 CITY OF FRIDLEY, MINNESOTA STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES GOVERNMENTAL FUNDS HOUSING AND REDEVELOPMENT AUTHORITY For The Year Ended December 31, 2005 With comparative totals for the year ended December 31, 2004 North Area/ Revolving Univ. Ind. General Loan Park Revenues: Tax increment $ - $ - $1,029,350 Property taxes 294,364 - - Investment income 148,883 75,402 44,115 Intergovernmental revenue 22,218 - - Mortgage interest earnings 4,374 43,180 - Rental 9,600 - - Sale of real estate - - - Miscellaneous - - Receipt from primary government - - - Total revenues 479,439 118,582 1,073,465 Expenditures: Personal services 79,984 - - Supplies and other charges 276,476 19,743 2,414 Capital outlay - - - Developer assistance - - 89,316 Interest expense - 26,308 - Payment to primary government - 1,597,356 Total expenditures 356,460 46,051 1,689,086 Excess (deficiency)of revenues over expenditures 122,979 72,531 (615,621) Other financing sources(uses): Transfers in 15,000 - - Transfers out (15,000) (20,000) - Total other financing sources (uses) 0 (20,000) 0 Net change in fund balance 122,979 52,531 (615,621) Fund balance-January 1 9,234,053 3,643,374 2,274,846 Fund balance- December 31 $9,357,032 $3,695,905 $1,659,225 136 Exhibit G-2 Other Totals Lake Gateway Gateway Governmental Governmental Funds Pointe East West Funds 2005 2004 $634,997 $35,607 $ - $1,524,251 $3,224,205 $3,078,426 - - 294,364 262,092 5,202 341 - 96,764 370,707 185,347 - 7,848 - 37,567 67,633 66,442 - - - 288 47,842 44,899 - - - - 9,600 9,600 - - - - - 46,627 - - - 29,728 29,728 11,420 - - 8,441 - 8,441 28,355 640,199 43,796 8,441 1,688,598 4,052,520 3,733,208 - - - 79,984 92,760 5,128 1,200 152,188 36,939 494,088 342,887 - - 480,229 - 480,229 334,684 - - 136,590 225,906 729,825 - - - - 26,308 29,252 - - 101,501 1,698,857 1,679,614 5,128 1,200 632,417 275,030 3,005,372 3,209,022 635,071 42,596 (623,976) 1,413,568 1,047,148 524,186 - - - 20,000 35,000 103,486 - - - (35,000) (103,486) 0 0 0 20,000 0 0 635,071 42,596 (623,976) 1,433,568 1,047,148 524,186 (960,792) (986,329) (797,946) 3,244,998 15,652,204 15,128,018 ($325,721) ($943,733) ($1,421,922) $4,678,566 $16,699,352 $15,652,204 137 Exhibit G-3 CITY OF FRIDLEY, MINNESOTA COMBINING BALANCE SHEET-HOUSING AND REDEVELOPMENT AUTHORITY NONMAJOR GOVERMENTAL FUNDS December 31, 2005 With comparative totals for December 31, 2004 Special Totals Revenue/ Nonmajor Housing Capital Governmental Funds ■ Programs Projects 2005 2004 Assets Cash and investments $15,692 $4,738,662 $4,754,354 $3,310,598 Receivables: Taxes: Unremitted - 12,476 12,476 7,631 Delinquent - 22,299 22,299 13,405 Mortgage: Deferred 21,679 21,159 42,838 59,992 Allowance for uncollectible accounts (434) - (434) (600) Land held for resale - 180,000 180,000 180,000 Total assets $36,937 $4,974,596 $5,011,533 $3,571,026 Liabilities and Fund Balance Liabilities: Accounts payable $4,407 $ - $4,407 $992 Due to primary government - 1,501 1,501 6,871 Due to other funds - 124,760 124,760 124,760 Deferred revenue - 202,299 202,299 193,405 Total liabilities 4,407 328,560 332,967 326,028 Fund balance: Reserved for mortgage receivable 21,679 21,159 42,838 59,992 Unreserved, undesignated 10,851 4,624,877 4,635,728 3,185,006 Total fund balance 32,530 4,646,036 4,678,566 3,244,998 Total liabilities and fund balance $36,937 $4,974,596 $5,011,533 $3,571,026 138 Exhibit G-4 CITY OF FRIDLEY, MINNESOTA COMBINING STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES -HOUSING AND REDEVELOPMENT AUTHORITY NONMAJOR GOVERNMENTAL FUNDS For The Year Ended December 31, 2005 With comparative totals for the year ended December 31, 2004 Special Totals Revenue/ Nonmajor Housing Capital Governmental Funds Programs Projects 2005 2004 Revenues: Tax increment $ - $1,524,251 $1,524,251 $1,553,125 Investment income 309 96,455 96,764 35,288 Intergovernmental revenue - 37,567 37,567 43,053 Mortgage interest earnings - 288 288 442 Miscellaneous 13,220 16,508 29,728 9,550 Total revenues 13,529 1,675,069 1,688,598 1,641,458 Expenditures: Supplies and other charges 19,942 16,997 36,939 36,666 Developer assistance - 136,590 136,590 231,285 Payment to primary government - 101,501 101,501 1,383,417 Total expenditures 19,942 255,088 275,030 1,651,368 Excess (deficiency)of revenues over expenditures (6,413) 1,419,981 1,413,568 (9,910) Other financing sources (uses): Transfer in 20,000 - 20,000 10,000 Transfer out - - - (2,140) Total other financing sources 20,000 0 20,000 7,860 Net change in fund balance 13,587 1,419,981 1,433,568 (2,050) Fund balance-January 1 18,943 3,226,055 3,244,998 3,247,048 Fund balance- December 31 $32,530 $4,646,036 $4,678,566 $3,244,998 139 I CITY OF FRIDLEY, MINNESOTA SUBCOMBINING BALANCE SHEET NONMAJOR CAPITAL PROJECT FUNDS HOUSING AND REDEVELOPMENT AUTHORITY December 31, 2005 With comparative totals for December 31, 2004 Center Moore University/ City Lake Area Winfield Onan Osborne Assets Cash and investments $1,108,462 $987,415 $454,601 $835,282 $202,436 1 Receivables: Taxes: Unremitted 1,794 9,242 164 1,165 3 Delinquent 8,015 10,150 289 2,859 5 Mortgage: Deferred - - - - - Land held for resale - 105,000 - - - Total assets $1,118,271 $1,111,807 $455,054 $839,306 $202,444 Liabilities and Fund Balance Liabilities: Accounts payable $ - $ - $ - $ - $ - Due to primary government - 1,501 - - - Due to other funds - - - - - Deferred revenue 8,015 115,149 289 2,859 5 Total liabilities 8,015 116,650 289 2,859 5 Fund balance (deficit): Reserved for mortgage receivable - - - - - Unreserved, undesignated 1,110,256 995,157 454,765 836,447 202,439 Total fund balance(deficit) 1,110,256 995,157 454,765 836,447 202,439 Total liabilities and fund balance $1,118,271 $1,111,807 $455,054 $839,306 $202,444 1 140 Exhibit G-5 Totals Nonmajor McGlynn Satellite Business 57th Avenue Housing Capital Project Funds Bakeries Lane Apts. Center Redevelopment Replace. #1 2005 2004 $122,998 $276,033 $561,683 $2,286 $187,466 $4,738,662 $3,303,506 - - 94 14 - 12,476 7,631 - 791 169 21 - 22,299 13,405 - - 21,159 - - 21,159 46,636 - - - - 75,000 180,000 180,000 $122,998 $276,824 $583,105 $2,321 $262,466 $4,974,596 $3,551,178 $ - $ - $ - $ - $ - $ - $87 - - - - - 1,501 6,871 - - - 124,760 - 124,760 124,760 - 791 169 22 75,000 202,299 193,405 0 791 169 124,782 75,000 328,560 325,123 - - 21,159 - - 21,159 46,636 122,998 276,033 561,777 (122,461) 187,466 4,624,877 3,179,419 122,998 276,033 582,936 (122,461) 187,466 4,646,036 3,226,055 $122,998 $276,824 $583,105 $2,321 $262,466 $4,974,596 $3,551,178 141 CITY OF FRIDLEY, MINNESOTA SUBCOMBINING STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE NONMAJOR CAPITAL PROJECT FUNDS HOUSING AND REDEVELOPMENT AUTHORITY For The Year Ended December 31, 2005 With comparative totals for the year ended December 31, 2004 Center Moore University/ City Lake Area Winfield Onan Osborne Revenues: Tax increment $551,162 $453,187 $52,278 $262,515 $32,923 Investment income 20,501 18,334 10,075 18,086 4,404 Intergovernmental revenue 19,253 13,371 - - - Mortgage interest earnings - 288 - - - Other - 16,508 - - - Total revenues 590,916 501,688 62,353 280,601 37,327 Expenditures: Supplies and other charges 2,063 2,458 863 1,110 1,262 Developer assistance - - - 121,025 - Payment to primary government - 101,501 - - - Total expenditures 2,063 103,959 863 122,135 1,262 Excess (deficiency)of revenues over(under)expenditures 588,853 397,729 61,490 158,466 36,065 Other financing sources (uses): Transfers out - - - - - Net change in fund balance 588,853 397,729 61,490 158,466 36,065 1 Fund balance-January 1 521,403 597,428 393,275 677,981 166,374 Fund balance (deficit)-December 31 $1,110,256 $995,157 $454,765 $836,447 $202,439 142 Exhibit G-6 Totals Nonmajor McGlynn Satellite Business Commercial 57th Avenue Housing Capital Project Funds Bakeries Lane Apts. Center Railway Redevelopment Replace.#1 2005 2004 $39,347 $40,065 $52,032 $ - $17,821 $22,921 $1,524,251 $1,553,125 2,473 5,977 12,371 - 42 4,192 96,455 35,288 - 4,943 - - - - 37,567 43,053 - - - - - - 288 442 - - - - - - 16,508 41,820 50,985 64,403 0 17,863 27,113 1,675,069 1,631,908 1,252 1,160 863 - 872 5,094 16,997 19,919 - - - - 15,565 - 136,590 231,285 - - - - - - 101,501 1,383,417 1,252 1,160 863 0 16,437 5,094 255,088 1,634,621 40,568 49,825 63,540 0 1,426 22,019 1,419,981 (2,713) - - - - - - - (2,139) 40,568 49,825 63,540 0 1,426 22,019 1,419,981 (4,852) 82,430 226,208 519,396 - (123,887) 165,447 3,226,055 3,230,907 $122,998 $276,033 $582,936 $0 ($122,461) $187,466 $4,646,036 $3,226,055 143 b"Y b CITY OF FRIDLEY 144 AGENCY FUNDS 145 Exhibit H-1 CITY OF FRIDLEY, MINNESOTA STATEMENT OF CHANGES IN ASSETS AND LIABILITIES AGENCY FUNDS December 31, 2005 Balance Balance January 1, December 31, 2005 Additions Deletions 2005 Six Cities Watershed Assets: Cash and investments $20,580 $26,324 $22,879 $24,025 Receivables: Taxes: Unremitted 57 53 57 53 Delinquent 80 102 80 102 Total assets $20,717 $26,479 $23,016 $24,180 Liabilities: Due to other governments $20,717 $24,180 $20,717 $24,180 Hotel/Motel Tax Assets: Receivables: Accounts $1,590 $1,956 $1,590 $1,956 Liabilities: Due to other governments $1,590 $1,956 $1,590 $1,956 Totals Assets: Cash and investments $20,580 $26,324 $22,879 $24,025 Receivables: Accounts 1,590 1,956 1,590 1,956 Taxes: Unremitted 57 53 57 53 Delinquent 80 102 80 102 Total assets $22,307 $28,435 $24,606 $26,136 Liabilities: Due to other governments $22,307 $26,136 $22,307 $26,136 146 III. STATISTICAL SECTION (UNAUDITED) 147 CITY OF FRIDLEY, MINNESOTA GOVERNMENT-WIDE EXPENSES BY FUNCTION 2005 (UNAUDITED) Fiscal General Public Public Community Recreation and Year* Government Safety Works Development Naturalist 2003 $3,944,682 $5,166,975 $3,749,412 $939,918 $1,105,240 2004 3,513,065 5,468,014 3,612,318 602,335 993,570 2005 4,448,175 5,514,330 4,055,860 793,836 767,599 *Government-wide expenses are not available for years prior to 2003. 148 Table 1 Interest on Long-Term Storm Debt Liquor Water Sewer Water Total $605,639 $5,010,636 $2,030,654 $3,419,100 $359,189 $26,331,445 544,478 5,005,198 2,086,513 3,256,371 334,906 25,416,768 443,533 4,919,458 2,070,032 3,570,113 320,596 26,903,532 149 CITY OF FRIDLEY, MINNESOTA GOVERNMENT-WIDE REVENUES 2005 (UNAUDITED) Program Revenues Charges Operating Capital Fiscal For Grants and Grants and Year* Services Contributions Contributions 2003 $13,346,352 $1,519,699 $1,012,151 2004 13,439,377 1,010,069 882,292 2005 13,694,084 1,122,326 1,657,106 *Government-wide revenues are not available for years prior to 2003. 150 Table 2 General Revenues Grants and Contributions Not Restricted Unrestricted Property Tax to Specific Investment Taxes Increments Program Earnings Other Total $5,273,363 $ - $3,751,560 $541,244 $23,500 $25,467,869 5,816,656 - 3,436,473 559,991 680 25,145,538 7,428,226 - 3,365,739 679,909 434 27,947,824 151 Table 3 CITY OF FRIDLEY, MINNESOTA GENERAL GOVERNMENT EXPENDITURES BY FUNCTION(1) LAST TEN FISCAL YEARS (UNAUDITED) Fiscal General Public Public Community Recreation! Debt Year Government Safety Works Development Naturalist Service Total 1996 2 $2,331,060 $3,863,105 $2,306,088 $535,496 $759,457 $1,102,010 $10,897,216 1997 2,703,066 4,109,283 2,625,869 572,817 813,356 10,635,507 21,459,898 1998 2,790,588 4,098,048 2,826,545 648,842 902,159 5,141,866 16,408,048 1999 2,820,660 4,243,682 2,879,627 721,120 996,584 1,029,680 12,691,353 2000 3,113,175 4,392,025 2,661,927 775,312 1,031,174 1,058,772 13,032,385 2001 3,246,046 4,467,947 2,863,228 708,749 1,106,058 1,844,640 14,236,668 2002 3,487,505 4,905,475 3,065,570 710,780 1,139,351 1,836,471 15,145,152 2003 3,569,952 4,925,525 2,712,421 934,151 1,068,875 1,810,100 15,021,024 2004 3,155,617 5,156,529 2,608,316 593,393 960,723 5,749,013 18,223,591 2005 4,244,496 5,204,551 2,940,869 671,173 737,094 6,553,363 20,351,546 (')Includes General, Special Revenue, Capital Projects, Debt Service Funds and excludes capital outlay. (2)Prior to 1996, the HRA was included as a blended component unit of the City. 152 Table 4 CITY OF FRIDLEY, MINNESOTA GENERAL REVENUE 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 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 1,545,769 12,405,699 2002 5,497,648 647,676 4,114,622 1,531,782 1,088,236 12,879,964 2003 5,775,937 722,541 4,075,023 1,500,429 2,602,101 14,676,031 2004 6,110,020 785,582 3,207,482 1,533,253 2,616,507 14,252,844 2005 7,948,290 865,848 2,767,724 1,736,181 3,227,644 16,545,687 (')Includes General, Special Revenue, Capital Projects and Debt Service Funds. (2)Prior to 1996,the HRA was included as a blended component unit of the City. ■ 153 I CITY OF FRIDLEY 154 Table 5 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) Collected Taxes Collections Tax Levy Taxes 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 :1 132,404 2002 5,613,131 5,579,777 99.41% 40,354 5,620,131 1.0012 :1 112,252 2003 5,825,855 5,763,097 (2) 98.92% 40,780 5,803,877 0.9962 :1 80,324 2004 6,483,745 6,310,429 (2) 97.33% 39,210 6,349,639 0.9793 :1 87,336 2005 7,792,949 7,699,290 (2) 98.80% 27,869 7,727,159 0.9916 :1 129,513 ('Excludes collections from properties pledged to tax increment. (2)Current tax collections include the market value homestead credit(MVHC). 155 CITY OF FRIDLEY, MINNESOTA ESTIMATED MARKET VALUE AND TAXABLE VALUE OF ALL PROPERTY LAST TEN FISCAL YEARS (UNAUDITED) Fiscal year payable 1996 1997 1998 1999 Assessment year 1995 1996 1997 1998 Population,fiscal year 28,267 28,419 28,335 28,623 Real property: Estimated market value $1,120,412,065 $1,152,674,700 $1,209,684,500 $1,274,348,500 Taxable capacity value: Homestead $7,784,740 $8,199,059 $8,307,553 $8,556,633 Excess and nonhomestead 19,554,250 20,139,316 18,039,448 16,302,168 Less fiscal disparities contribution (4,974,987) (5,147,086) (4,685,134) (4,337,632) Less tax increment value (2,692,879) (2,760,628) (2,638,263) (2,381,402) Taxable value $19,671,124 $20,430,661 $19,023,604 $18,139,767 Personal property: Estimated market value $19,576,200 $19,576,200 $19,164,700 $19,315,800 Taxable capacity value $916,940 $916,940 $766,322 $673,798 Totals: Estimated market value $1,139,988,265 $1,172,250,900 $1,228,849,200 $1,293,664,300 Taxable value $20,588,064 $21,347,601 $19,789,926 $18,813,565 Per market value ratios: Taxable value .018:1 .018:1 .015:1 .015:1 Per capita valuations: Estimated market value $40,329 $41,249 $43,369 $45,197 Taxable value $728 $751 $698 $657 Real property: Taxable value Fiscal disparities distribution $3,007,783 $3,222,432 $3,116,450 $2,941,279 Notes: (')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, 2004 upon which the 2005 levy was based was$20,713,677. 156 Table 6 2000 2001 2002 2003 2004 2005 1999 2000 2001 2002 2003 2004(1) 27,449 27,854 27,877 27,460 27,480 27,088 $1,316,382,300 $1,499,258,100 $1,669,007,700 $1,938,795,600 $2,129,450,800 $2,258,447,100 $9,152,661 $10,201,895 $9,026,662 $9,962,555 $11,163,343 $12,619,948 1 6,814,763 19,002,890 12,973,031 14,662,701 15,783,274 15,925,055 (4,312,759) (4,769,074) (3,223,214) (3,579,128) (4,292,061) (4,624,091) (2,475,455) (3,272,618) (2,552,353) (3,810,890) (4,216,629) (3,608,400) $19,179,210 $21,163,093 $16,224,126 $17,235,238 $18,437,927 $20,312,512 $19,160,600 $19,089,700 $19,133,400 $19,225,500 $19,604,300 $20,172,200 $668,384 $645,895 $360,466 $382,533 $390,109 $401,165 $1,335,542,900 $1,518,347,800 $1,688,141,100 $1,958,021,100 $2,149,055,100 $2,278,619,300 $19,847,594 $21,808,988 $16,584,592 $17,617,771 $18,828,036 $20,713,677 .015:1 .014:1 .010:1 .010:1 .010:1 .009:1 $48,655 $54,511 $60,557 $71,304 $78,204 $84,119 $723 $783 $595 $642 $685 $765 $3,355,535 $3,677,471 $2,278,406 $2,572,562 $2,703,374 $2,729,105 157 CITY OF FRIDLEY 158 Table 7 CITY OF FRIDLEY, MINNESOTA SIGNIFICANT MINNESOTA TAX POLICIES December 31, 2005 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 assessor's 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 2005 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 1.25% Less than 4 units 1.25% Low Income Rental Housing .75% Property Tax Refund. Residential property tax credits are indexed by the percentage of net property tax to household income to the extent a homeowner's 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. 159 CITY OF FRIDLEY, MINNESOTA TAX CAPACITY RATES DIRECT AND OVERLAPPING GOVERNMENTS LAST TEN FISCAL YEARS (UNAUDITEDI School School School School Fiscal District District District District Year City No. 11 No. 13 No. 14 No. 16(1) 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% 2003 28.616% 26.941% 20.303% 29.966% 22.054% 2004 30.248% 21.050% 22.833% 22.683% 21.421% 2005 33.565% 21.492% 19.993% 21.606% 16.118% Notes: (1)Vocational/Technicai District#916 is included in District No. 16. (2)Six Cities Watershed District is included with School District No. 11. r (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. 160 Table 8 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) 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% 37.714% 7.666% 102.483% 96.360% 105.925% 98.111% 35.221% 7.623% 95.446% 97.758% 97.525% 96.346% 33.080% 8.085% 96.945% 96.329% 97.942% 92.454% 161 CITY OF FRIDLEY 162 Table 9 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 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 2003 418,432 398,545 95.25% 32,364 430,909 102.98% 26,530 2004 307,622 288,404 93.75% 19,821 308,225 100.20% 18,091 2005 337,211 296,742 88.00% 8,929 305,671 90.65% 39,895 163 CITY OF FRIDLEY, MINNESOTA HISTORY OF CERTIFIED TAX LEVIES AND TAX RATES 1 LAST TEN FISCAL YEARS (UNAUDITED) 1996(1) 1997(1) 1998(1) 1999(1) Certified tax levies: General Fund $3,821,853 $3,806,950 $3,921,159 $3,947,133 Special Revenue Fund - - - - Capital Improvement Fund 72,689 72,689 72,689 72,689 Subtotal 3,894,542 3,879,639 3,993,848 4,019,822 Enterprise Fund - 8,900 8,900 8,900 Agency Fund 3,087 3,073 7,822 6,197 Total $3,897,629 $3,891,612 $4,010,570 $4,034,919 Tax Capacity Rate General Fund 16.258% 15.399% 16.807% 17.995% Special Revenue Fund - - - - Capital Improvement Fund 0.307% 0.294% 0.312% 0.331% Enterprise Fund _ 0.000% 0.625% 0.516% 0.687% Subtotal 16.565% 16.318% 17.635% 19.013% Agency Fund 0.024% 0.023% 0.067% 0.049% Total 16.589% 16.341% 17.702% 19.062% 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(MVHC). 164 Table 10 2000w1w 2001(1) 2002(1) 2003(2) 2004(2) 2005(2) $3,947,882 $4,117,233 $5,507,313 $5,717,783 $6,372,785 $7,398,970 - - - - - 275,000.00 72,689 72,667 90,719 92,972 95,860 378,879 4,020,571 4,189,900 5,598,032 5,810,755 6,468,645 8,052,849 8,900 8,900 8,900 8,900 8,900 8,900 6,200 6,200 6,200 6,200 6,200 6,200 $4,035,671 $4,205,000 $5,613,132 $5,825,855 $6,483,745 $8,067,949 16.761% 16.049% 29.421% 28.152% 29.800% 30.851% - - - - 1.147% 0.309% 0.283% 0.485% 0.464% 0.448% 1.580% 0.613% 0.534% 0.762% 0.734% 0.706% 0.672% 17.683% 16.866% 30.668% 29.350% 30.954% 34.250% 0.045% 0.043% 0.059% 0.057% 0.054% 0.050% 17.728% 16.909% 30.727% 29.407% 31.008% 34.300% , 1 165 S h Ey tea: At CITY OF FRIDLEY 166 Table 11 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 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 - - - 2003 27,460 17,617,771 13,820,000 - 13,820,000 - - - 2004 27,480 18,828,036 15,190,000 - 15,190,000 - - - ! 2005 27,088 20,713,677 13,955,000 - 13,955,000 - - - 167 Table 12 Page 1 of 2 CITY OF FRIDLEY, MINNESOTA COMPUTATION OF LEGAL DEBT MARGIN December 31, 2005 (UNAUDITED) Market Value $2,258,447,100 (A)Debt Limit 2% of Market Value $45,168,942 Amount of Debt Applicable to Debt Limit: Total Debt $13,955,000 (B)Deductions: Tax Increment Redevelopment Bonds $8,335,000 Improvement Bonds 1,805,000 Revenue Bonds 3,815,000 13,955,000 Total Amount of Debt Applicable to Debt Limit -0- Legal Debt Margin $45,168,942 Notes: (A)M.S.A. Section 475.53 (see following page) (B)M.S.A. Section 475.51 (see following page) 168 Table 12 Page 2 of 2 CITY OF FRIDLEY MINNESOTA COMPUTATION OF LEGAL DEBT MARGIN (CONTINUED) YEAR ENDED DECEMBER 31, 2005 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. 169 Table 13 CITY OF FRIDLEY, MINNESOTA COMPUTATION OF DIRECT AND OVERLAPPING BONDED DEBT AND COMPARATIVE DEBT RATIOS December 31,2005 (UNAUDITED) 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: i Direct debt: City of Fridley $13,955,000 $6,155,280 $7,799,720 100.00% $7,799,720 $288 Overlapping debt: School Districts: No. 11 177,417,115 - 177,417,115 1.60% 2,838,674 105 1 No. 14 16,605,000 - 16,605,000 100.00% 16,605,000 613 r No. 16 21,875,000 - 21,875,000 36.80% 8,050,000 297 Metro Council 1,025,002,184 99,356,050 925,646,134 1.19% 11,015,189 407 Anoka County 85,166,720 - 85,166,720 18.04% 15,364,076 567 Vocational/Technical 1,390,000 - 1,390,000 2.21% 30,719 1 District No.916 Overlapping debt 1,327,456,019 99,356,050 1,228,099,969 53,903,658 1,990 Total direct and overlapping debt $1,341,411,019 $105,511,330 $1,235,899,689 $61,703,378 $2,278 I I 170 Table 14 CITY OF FRIDLEY, MINNESOTA RATIO OF ANNUAL DEBT SERVICE EXPENDITURES FOR GENERAL BONDED DEBT TO TOTAL GENERAL GOVERNMENT EXPENDITURES LAST TEN FISCAL YEARS (UNAUDITED) r Ratio to Total Total Debt Service Fiscal Debt General to General Year Principal Interest Service Expenditures(1) Expenditure 1996(2) $175,000 $896,011 $1,071,011 $10,897,216 10% 1997 9,675,000 897,930 10,572,930 21,459,898 49% 1998 4,310,000 796,329 5,106,329 16,408,048 31% 1999 295,000 729,889 1,024,889 12,691,353 8% 2000 300,000 753,063 1,053,063 13,032,385 8% 2001 1,105,000 737,471 1,842,471 14,236,668 13% 2002 1,150,000 684,271 1,834,271 15,145,152 12% 2003 1,180,000 627,899 1,807,899 14,814,303 12% 2004 5,155,000 561,045 5,716,045 18,444,394 31% 2005 6,095,000 422,366 6,517,366 20,352,455 32% Notes: (1)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. 171 Table 15 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 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 5,242,663 146,340 300,000 281,975 581,975 0.25 2000 5,150,374 4,965,373 185,001 1,445,000 197,277 1,642,277 0.11 2001 4,994,669 5,148,461 (153,792) 350,000 175,115 525,115 (0.29) 2002 5,016,233 5,251,371 (235,138) 360,000 158,422 518,422 (0.45) 2003 5,330,603 5,664,741 (334,138) 370,000 141,002 511,002 (0.65) 2004 5,371,662 5,430,082 (58,420) 390,000 334,960 724,960 (0.08) 2005 5,435,361 5,821,541 (386,180) 1,590,000 139,200 1,729,200 (0.22) Notes: (')"total operating revenue. (2)Total operating expenses including depreciation. f I 172 Table 16 CITY OF FRIDLEY, MINNESOTA DEMOGRAPHIC STATISTICS LAST TEN FISCAL YEARS (UNAUDITED) Annual Per Average Fiscal Capita Median School Unemployment Year Population(') Income Age Enrollment(4) Rate(5) 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% ' 2003 27,460 22,687 37.1 3,824 4.3% 2004 27,480 25,169 37.4 3,824 5.0% 2005 27,088 25,682 37.8 3,824 5.0% Notes: (1)Estimated (2)2000 Population Report- Bureau of the Census (3)Maxfield Research (4)Estimated-excludes Totino Grace Parochial High School, as it is not supported by property tax dollars. (5)Minnesota Department of Economic Security-Twin Cities Labor Market ■ 173 Table 17 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(1) Total 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 2003 65 7,852,931 642 8,225,267 1,809,222,900 211,029,800 2,020,252,700 2004 99 15,466,115 624 6,563,354 2,008,163,200 308,042,173 2,316,205,373 2005 86 17,749,556 750 7,307,981 2,175,174,400 311,172,767 2,486,347,167 Note: (1)Non-taxable property is reevaluated by the city assessors every six years 174 Table 18 CITY OF FRIDLEY, MINNESOTA PRINCIPAL TAXPAYERS December 31,2004 (UNAUDITED) Fiscal Year 2005 Percent 2004 of Total Taxable Taxable Rank Taxpayer Type of Business Valuation Valuation 1 Medtronic, Inc. Electro-medical devices $74,304,400 3.26% 2 Target Corporation Target discount store,warehouse and office 38,252,100 1.68% 3 Shamrock Investments Murphy Warehouses 25,582,600 1.12% 4 University Avenue Associates Springbrook Apartments 20,706,600 0.91% 5 Maurice Fillister(Georgetown) Georgetown apartments 20,364,900 0.89% 6 Retail Trust IV(Wal-Mart/Sam's) Wal-Mart/Sam's Club discount stores 15,963,500 0.70% 7 Riverpointe Apartments Riverpointe Apartments 15,388,400 0.68% 8 Cummins Power(Onan) Portable electric generators 13,406,900 0.59% 9 Northwest Racquet&Swim Club Health and Tennis Club 11,766,300 0.52% 10 Burlington Northern Railroad Operating property 10,812,900 0.47% Total $246,548,600 10.82% 175 Table 19 CITY OF FRIDLEY, MINNESOTA INSURANCE COVERAGE December 31, 2005 (UNAUDITED) Municipal Property, Crime & Bond: Property $34,712,484 Mobile Property(also refered to as Inland Marine). Scheduled Over$25,000 1,575,743 Unscheduled$25,000& Less 556,910 Crime(inside/outside&forgery). 100,000 Bonds 350,000 Municipal Liability: Each Occurance Limit $1,000,000 Automobile Liability: Liability $1,000,000 Personal Injury Protection Mn Statutory Coverage Uninsured/Underinsured Motorist Mn Statutory Coverage 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 Boiler& Machinery: Equipment Breakdown Limit 32,612,181 Liquor Liability: Outdoor Signs-Cub 10,000 Outdoor Signs- Hwy 65 15,000 Money&Securities Inside/Outside the Premises-Hwy 65 20,000/10,000 Money&Securities Inside/Outside the Premises-Cub 30,000/20,000 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 occurance 1,000,000 Liquor Liability-Aggregate 2,000,000 Accident Plan for Volunteers: Coverage A-Acciental Death/Permanent Impairment 100,000 Coverage B- Permanent Impairement Benefit 100,000 Coverage C-Weekly Disability (max of 26 weeks) 400 Coverage D-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 1,000,000 176 Table 20 CITY OF FRIDLEY, MINNESOTA MISCELLANEOUS STATISTICAL INFORMATION December 31, 2005 (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 8,2005 Registered voters 15,817 Number of votes cast 4,326 Percent(%)of registered voters voting 27.4% 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 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 2003- Estimated 27,460 2004- Estimated 27,480 2005- Estimated 27,088 Permanent Employees--As of December 31 1996 136 1997 136 1998 140 1999 142 2000 138 2001 138 2002 139 2003 129 2004 135 2005 131 177 Table 20 Continued CITY OF FRIDLEY, MINNESOTA MISCELLANEOUS STATISTICAL INFORMATION (CONTINUED) December 31, 2005 (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 38 Number of street lights 1,055 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 Trunk highways 11 County roads 15 Sidewalks and bikeways 14 Miles of sewer: Storm 50 Sanitary 103 Miles of watermains 113 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 8,481 Daily average consumption (gallons) 5.2 million gallons Elevated stored capacity 2.0 million gallons Water storage reservoirs 3.0 million gallons Stand pipe 1.5 million gallons Number of fire hydrants 1,012 Municipal sewer system: Disposal --through Metropolitan Council Environmental Service Number of sewer connections December 31 8,250 Average daily flow(includes infiltration/inflow) 4.62 million gallons 178 Table 20 Continued CITY OF FRIDLEY, MINNESOTA MISCELLANEOUS STATISTICAL INFORMATION (CONTINUED) December 31, 2005 (UNAUDITED) Parks and recreation areas: Developed 420 Acres Undeveloped 262 Acres Total 682 Acres City and County Parks Schools Total Number of: Hockey rinks 5 2 7 General skating rinks 10 2 12 Playgrounds 29 2 31 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 11 179 Table 21 CITY OF FRIDLEY, MINNESOTA GENERAL INFORMATION December 31, 2005 (UNAUDITED) Location -Transportation The City of Fridley, with a total land area of eleven square miles and an estimated population of 27,088, 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 ilFridley 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 159 certified personnel in the education of about 2,645 students. Totino Grace Parochial High School has an enrollment of approximately 1150. 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 1179 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. Major Employers Major employers in the City of Fridley include: Employer Product or Service Employees Medtronic, Inc. Electro-medical devices and headquarters 2,500 United Defense Systems Pumps and naval ordinance 1,800 Cummins Power(Onan) Portable generators, electronic equipment 1,727 Unity Hospital Medical and surgical services 1,400 Target Discount department store 600 Minco Products Electronic devices 500 Tiro Industries Manufacture personal care products 400 Kurt Manufacturing Manufacture precision parts 350 Park Construction Highway, street and bridge construction 300 Parsons Electric Electric contractor 300 180