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2016 CAFR City of Fridley, Minnesota CITY OF FRIDLEY, MINNESOTA Comprehensive Annual Financial Report December 31, 2016 Prepared by: Finance Department Shelly Peterson Finance Director ŷźƭ ƦğŭĻ źƓƷĻƓƷźƚƓğƌƌǤ ƌĻŅƷ ĬƌğƓƉ CITY OF FRIDLEY, MINNESOTA COMPREHENSIVE ANNUAL FINANCIAL REPORT YEAR ENDED DECEMBER 31, 2016 TABLE OF CONTENTS EXHIBITPAGE I. INTRODUCTORY SECTION Letter of Transmittal3 Certificate of Achievement 11 Elected and Appointed Officials13 City Administrative Organizational Structure 201614 II. FINANCIAL SECTION Independent Auditor's Report19 Management's Discussion and Analysis23 Basic Financial Statements: Government-Wide Financial Statements: Statement of Net PositionA-137 Statement of ActivitiesA-238 Fund Financial Statements: Balance Sheet - Governmental Funds A-340 Statement of Revenues, Expenditures and Changes in Fund Balances - Governmental FundsA-442 Reconciliation of the Statement of Revenues, Expenditures and Changes in Fund Balances of Governmental Funds to the Statement of ActivitiesA-545 Statement of Net Position - Proprietary Funds A-646 Statement of Revenues, Expenses and Changes in Fund Net Position - Proprietary FundsA-748 Statement of Cash Flows - Proprietary Funds A-850 Statement of Fiduciary Net Position A-952 Notes to Financial Statements53 Required Supplementary Information: Budgetary Comparison Schedule - General Fund B-198 Schedule of Funding Progress - Retiree Health Plan B-2102 Schedule of Proportionate Share of Net Pension Liability - General Employees Retirement FundB-3103 Schedule of Pension Contributions - General Employees Retirement Fund B-4104 Schedule of Proportionate Share of Net Pension Liability - Public Employees Police and Fire FundB-5105 Schedule of Pension Contributions - Public Employees Police and Fire Fund B-6106 Notes to RSI107 CITY OF FRIDLEY, MINNESOTA COMPREHENSIVE ANNUAL FINANCIAL REPORT YEAR ENDED DECEMBER 31, 2016 TABLE OF CONTENTS EXHIBITPAGE Combining and Individual Fund Statements and Schedules: Combining Balance Sheet - Nonmajor Governmental Funds C-1112 Combining Statement of Revenues, Expenditures and Changes in Fund Balances - Nonmajor Governmental Funds C-2113 Subcombining Balance Sheet - Nonmajor Special Revenue Funds C-3116 Subcombining Statement of Revenues, Expenditures and Changes in Fund Balances - Nonmajor Special Revenue Funds C-4118 Subcombining Balance Sheet - Nonmajor Capital Project Funds C-5122 Subcombining Statement of Revenues, Expenditures and Changes in Fund Balances - Nonmajor Capital Project Funds C-6124 Special Revenue Funds: Schedule of Revenues, Expenditures and Changes in Fund Balance - Budget and Actual: D-1128 Cable TV Fund Springbrook Nature Center Fund D-2129 Grant Management Fund D-3130 Solid Waste Abatement Fund D-4131 Police Activity FundD-5132 Internal Service Funds: Combining Statement of Net Position E-1134 Combining Statement of Revenues, Expenses and Changes in Net Position E-2135 Combining Statement of Cash Flows E-3136 Housing and Redevelopment Authority (Component Unit): Balance Sheet - Governmental Funds F-1138 Statement of Revenues, Expenditures and Changes in Fund Balances - Governmental Funds F-2140 Subcombining Balance Sheet - Nonmajor Capital Project Funds F-3142 Subcombining Statement of Revenues, Expenditures and Changes in Fund Balances - Nonmajor Capital Project Funds F-4144 Agency Funds: Combining Statement of Assets and Liabilities G-1148 Statement of Changes in Assets and Liabilities G-2149 CITY OF FRIDLEY, MINNESOTA COMPREHENSIVE ANNUAL FINANCIAL REPORT YEAR ENDED DECEMBER 31, 2016 TABLE OF CONTENTS EXHIBITPAGE III. STATISTICAL SECTION (Unaudited) Financial Trends: Net Position by ComponentTable 1154 Changes in Net PositionTable 2156 Fund Balances - Governmental Funds Table 3160 Changes in Fund Balances - Governmental Funds Table 4162 Revenue Capacity: Tax Capacity Value and Estimated Market Value of Taxable Property Table 5164 Direct and Overlapping Property Tax Capacity Rates Table 6166 Principal Property Taxpayers Table 7168 Property Tax Levies and Collections Table 8169 Debt Capacity: Ratios of Outstanding Debt by Type Table 9170 Direct and Overlapping Govermental Activities Debt Table 10171 Legal Debt Margin Information Table 11173 Pledged Revenue Coverage Table 12174 Demographic and Economic: Demographic and Economic Statistics Table 13176 Principal EmployersTable 14177 Full-Time Equivalent City Government Employees by Function/Program Table 15178 Operating Information: Operating Indicators by Function/Program Table 16180 Capital Asset Statistics by Function/Program Table 17182 ŷźƭ ƦğŭĻ źƓƷĻƓƷźƚƓğƌƌǤ ƌĻŅƷ ĬƌğƓƉ I. INTRODUCTORY SECTION ŷźƭ ƦğŭĻ źƓƷĻƓƷźƚƓğƌƌǤ ƌĻŅƷ ĬƌğƓƉ City of Fridley, 6431 University Avenue NE, Fridley, MN 55432 Finance Department • 763-571-3450 • Fax 763-571-1287 • www.FridleyMN.gov 2017 To the Citizens ofthe Cityof Fridley, Mayor and Council Members The Comprehensive Annual Financial Report oftheCity ofFridley, Minnesota, for the fiscal year ended December 31, 2016, 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. Generally accepted accounting principles 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 services. The Housing and Redevelopment Authority (HRA) is included in the reportingentity 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 inaccordance 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. PROFILE OF THE CITY The City of Fridley is a first ring suburban community with an estimated 2016 population of 29,142. The City is located 10 minutes north of downtown Minneapolis and 25 minutes northwest of downtown St. Paul. Incorporated in July of 1949, Fridley covers 10 square miles of area and is now home to some of the most important industries in the Midwest, nation, and the world. An industrial spine around the rail corridor has served the City well and has provided the city with nearly as many jobs as the number of citizens who reside in the community. Fridley is home to the largest number of employees in Anoka County. LOCAL ECONOMY The local economy is showing signs of steady improvement over the past year. New construction and renovation continues to gain traction as activity has steadily increased over the past few years, unemployment numbers have improved, and property values appear to have bottomed out and have rebounded with increases over the past several years. New construction continued to remain solid in Fridley in 2016. Total Construction was valued at approximately 73.6 million for 2016. This is $13 Million more than experienced in 2015. There were many significant projects during 2016, which included Building II in the Cielo Multi-Family Development valued at $15,332,538. In the Northern Stacks Development two additional buildings were added with a combined value of 13,636,491. Northern Stacks also had an interior permit issued with a value of $1,005,000. A hotel was added to the City's compliment of businesses valued at $5,120,000. As we have always said, development begets development and we are seeing many more projects over the horizon. A third Cielo Building and over 750 units of Market Rate and Mixed income Multi-Family units are being planned and will likely break ground in 2017. The estimated market value for all properties in Fridley increased 8% from January 1, 2016 to January 1, 2017. This increase in valuation is consistent with other municipalities in the Minneapolis-St. Paul metropolitan area. LONG-TERM FINANCIAL PLANNING We are a mature City and as such, we are continually met with financial and redevelopment challenges. It is highly important to protect the property values of our aging housing stock for our homeowners in addition to maintaining the tax base of the City. Our property maintenance code enforcement helps to improve the quality of both residents and businesses of the City. The City is working on a 2040 financial management plan that emphasizes low tax rates, infrastructure investment and a good standing within our financial community. The City continues to focus on quality of life improvements throughout Fridley. These initiatives include revitalizing our parks andpublic areas, maintaining and improving current City services and increasing the communication between City representatives and the public. The City is working closely with state government, federal government and neighboringcommunities to improve the area’s state and county transportation network, which includes upgraded highways and local roads. Funding for these transportation improvementscomelargelyfromstate,countyand federalsources with additional funding from assessments to citizens properties. MAJOR INITIATIVES For the Year 2016continuedwithitsfastpace of ity initiated projects alongwithpartnering withdeveloperstobringsubstantialredevelopmentprojectstofruition.Current projects include: The Street Programcontinued the on-goingefforts of reconstructing city streets along with select utilitiesin the project area. The 2016 Street Programincludedvarious street sections in thePlymouth neighborhood in addition to thecompletion of the 2015 street programintheSummit Manorneighborhood. These projects provided a $3 million investment in the City’s streets and utilities. Ground broke in the fall of 2015 on anew interpretivecenter at the Springbrook Nature Center. Work was completed withthefacility and it opened in the springof 2016. The buildingcostwas approximately$5.4 millionand was fundedentirely through a grantand donations. Work will continue into2017 on phase II ofthis projectwhich includes an outdoor playarea, amphitheater and landscaping. The City enteredits sixth year ofaten year campaign toreplace the City’s approximately 7,500manual read watermeters with automatic meter reading(AMR) water meters. Public Works staff is undertaking the change-outin house, which saves on contractual costs. The City is using bond proceeds to accelerate the project and plans on having the majority of AMR’s installed by the end of 2018. TheHRAcontinued work on a number of redevelopment projects in 2016. Phase 2of theCieloapartmentredevelopment project began the summer of 2016. The apartments are filling quickly with renters. This project will eventually contain 254 apartment units in 3 separate buildings. A new TIF district #23 was also created and namedLocke Point Park. Thisis private development tooccur adjacenttothe new Civic Campus. Phase III of Northern Stacks beganin the fall of2016 and is expected to be complete in spring of 2017. 5.In 2016, the City council selected the location of a new civic campus and authorized architectural work to begin. This campus will include City Hall, Police, Fire and Public Works all on one campus. Construction will be in full swing beginning in the spring of 2017 and is scheduled for completion late 2018. The cost to date for this project is approximately $1.3 million. This project will be funded through $49.1 million in general obligation capital improvement plan bonds. For the Future As Fridley becomes a fully developed community with a stable population, the ability to maintain, improve, or expand the types of services provided to our residents continues to evolve and present new challenges. The 2017 budget reflects the changes necessitated by the City’s maturity, current and future fiscal restraints, and it attempts to respond to market pressure and citizen-driven requests through certain innovative but fiscally sound public service policies. The City is unique in that it has a charter levy limitation which restricts the increase of the operational levy by the percent change in the Consumer Price Index. That restriction resulted in no change to the 2017 operational levy over the prior year. With no change in the operational levy from the prior year the City continued to look at new opportunities for cost reductions and efficiencies. The 2017 General Fund budget does not include any major new initiatives or services. One such example of cost savings in the 2017 budget was in deferment of equipment. The City has taken a strategic approach to the planning and acquisition of equipment. Issuing debt in the form of capital equipment certificates has been eliminated from the current Capital Investment Plan (CIP) but we continue to re-evaluate replacement of equipment where extending the useful life could be achieved through renovation or reuse. Another opportunity for efficiencies has been in the Police Department as they continue their restructuring which began in 2015. With several more retirements in top level positions occurring in 2017, the Police Department will be eliminating one non-sworn position and adding an additional lieutenant position. This restructuring takes advantage of natural attrition and allows the Department to better respond to the public safety needs of the community. The 2017 General Fund budget also includes the restructuring of a part-time position to full-time in the Planning division of Community Development. This position had been reduced to part-time several years ago but is needed to keep up with the demands on services. The Finance Department eliminated a position which helped offset the additional staffing. RELEVANT FINANCIAL POLICIES Indeveloping 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 recordingoffinancial transactions. Budgets for the General, Special Revenue and Capital Improvement Capital Projects Funds are adopted on an annual basis. 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 budgetdoes not mean that it will or must be automatically expended. Budget adjustments between Citydivisions are made upon the approval of a resolution bythe City Council. The City Charter provides that the City Council shall not have powerto increase the total amount of the budget, whetherby 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 isnecessary, 2) adequate funds have been appropriated, and 3) funds are available. Asrequired by the City Charter, budgetary control is maintained within each departmentatthe department level. This is the level of control at which expenditures may not legally exceed appropriations. The purpose of the fund balance policy is to establish appropriate fund balance levels for each fund that is primarily supported by property tax revenues or user fees. These policies will ensure that adequate resources are available to meet cash flow needs forcarrying out the regular operations of the City. The funds addressed in this policy includethe General Fund, Solid Waste Abatement Fund, Springbrook Nature Center Fund and EnterpriseFunds. In 2016, all the funds addressed by this policy, with the exception of the Sewer and Liquor Enterprise Funds, met the fund balance guidelines. The Utility EnterpriseFunds have implemented multi-year plans to ensure long-term sustainability.The Sewer Enterprise Funds is expected to meet minimum fund balance requirements within the next couple years. The Liquor Fund has recently gone through an extensive revitalization to improve long-term viability. This fund is expected to meet the minimum fund balance requirements in 2017 and moving forward. The purpose of the investment policy is to develop an overall program for cash investments, designed and managed with a highdegree of professionalism, worthy of the public trust; to establish that elected and appointed officials and employees are custodians of a portfolio which shall be subject to public review; to establish cash investment objectives, delegation of authority, standards of prudence, internal controls, authorized investments, selection process for investments, and broker representations. The investment policy outlines the investing philosophy and practices of the City of Fridley and the Fridley Housing and Redevelopment Authority, and has been developed to serve as a reference point for the management of City assets. It is the policy of the City to invest public funds in a manner whichwill provide for safety, liquidity, and yield in that order of importance. Investments will conform to all federal, state and local regulations governing the investment of public funds. 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 Redpath and Company 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. AWARDS AND ACKNOWLEDGEMENTS The Government Finance Officers Association of the United Statesand Canada (GFOA) awarded a Certificate of Achievement for Excellence in Financial Reporting to the City of Fridley for its comprehensive annual financial report for the fiscal year ended December31, 2015. 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 that our current comprehensive annual financial report continues to meet the Certificate of Achievement Program’s requirements and are submitting it to the GFOA to determine its eligibility for another certificate. 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 Korrie Johnson, Carol Meyer, Greg Tirevold and to our auditors Redpath and Company for their professional guidance. I would also like to ŷźƭ ƦğŭĻ źƓƷĻƓƷźƚƓğƌƌǤ ƌĻŅƷ ĬƌğƓƉ ŷźƭ ƦğŭĻ źƓƷĻƓƷźƚƓğƌƌǤ ƌĻŅƷ ĬƌğƓƉ CITY OF FRIDLEY, MINNESOTA ELECTED AND APPOINTED OFFICIALS December 31, 2016 ELECTED OFFICIALS Term of Office Expires December MayorScott J.Lund2016 Councilmember At LargeRobert L. Barnette2016 Councilmember, Ward IJames T. Saefke2018 Councilmember, Ward IIDolores M. Varichak2018 Councilmember, Ward IIIAnn R. Bolkcom 2018 APPOINTED OFFICIALS City ManagerWally Wysopal City AttorneyDarcy M. Erickson Prosecuting AttorneyCarl J. Newquist City ClerkDebra A. Skogen Department Heads: Finance Director/TreasurerShelly Peterson Director of Public Safety and Civil DefenseBrian Weierke Fire ChiefJohn D. Berg Director of Public WorksJames P. Kosluchar Director of Parks and RecreationJack G. Kirk Director of Community DevelopmentScott J. Hickok Director of Human ResourcesDeborah K. Dahl ƦğŭĻ͵ ƓĻǣƷ ƷŷĻ ƚƓ ğƩĻ /ŷğƩƷ 5ĻƦğƩƷƒĻƓƷƭ hƩŭğƓźǩğƷźƚƓğƌ wĻĭƩĻğƷźƚƓ CƩźķƌĻǤ ε ƩĻŅƌĻĭƷĻķ͵ tğƩƉƭ ğƓķ ƚŅ ğĭĭǒƩğƷĻƌǤ ƚƩƉƭ /źƷǤ ЋЉЊЏ tǒĬƌźĭ ĬĻ ƓƚƷ 5ĻǝĻƌƚƦƒĻƓƷͲ ƒğǤ ƷźƷƌĻƭ hƓƌǤ ğƓķ /ƚƒƒǒƓźƷǤ ƩĻƌğƷźƚƓƭŷźƦƭ 5ĻƭźŭƓ /ƚƓĭĻƦƷǒğƌ wĻƦƚƩƷźƓŭ DĻƓĻƩğƌ bh9ʹ Ћ tğŭĻ /ŷğƩƷ hƩŭğƓźǩğƷźƚƓğƌ CƩźķƌĻǤ ƩĻŅƌĻĭƷĻķ͵ ƚŅ ğĭĭǒƩğƷĻƌǤ /źƷǤ ЋЉЊЏ ĬĻ ƓƚƷ ƒğǤ ƷźƷƌĻƭ hƓƌǤ ğƓķ ƩĻƌğƷźƚƓƭŷźƦƭ 5ĻƭźŭƓ /ƚƓĭĻƦƷǒğƌ wĻƦƚƩƷźƓŭ DĻƓĻƩğƌ bh9ʹ ŷźƭ ƦğŭĻ źƓƷĻƓƷźƚƓğƌƌǤ ƌĻŅƷ ĬƌğƓƉ II. FINANCIAL SECTION ŷźƭ ƦğŭĻ źƓƷĻƓƷźƚƓğƌƌǤ ƌĻŅƷ ĬƌğƓƉ INDEPENDENT AUDITOR'S REPORT To the Honorable Mayor and Members of the City Council City of Fridley, Minnesota Report on the Financial Statements We have audited the accompanying financial statements of the governmental activities, the business- type activities, the 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, 2016, and the related notes to the financial statements, which collectively comprise the City’s basic financial statements as listed in the table of contents. Management’s Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. Auditor’s Responsibility 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 from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions. 4810 White Bear Parkway, St. Paul, MN, 55110 651.426.7000 www.redpathcpas.com Opinions In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities, the business-type activities, the discretely presented component unit, each major fund, and the aggregate remaining fund information of the City of Fridley, Minnesota, as of December 31, 2016, and the respective changes in financial position, and, where applicable, cash flows thereof for the year then ended in accordance with accounting principles generally accepted in the United States of America. Report on Summarized Comparative Information We have previously audited the City of Fridley, Minnesota’s 2015 financial statements, and we expressed an unmodified audit opinion on the respective financial statements of the governmental activities, the business-type activities, the discretely presented component unit, each major fund, and the aggregate remaining fund information in our report dated June 1, 2016. In our opinion, the summarized comparative information presented herein as of and for the year ended December 31, 2015 is consistent, in all material respects, with the audited financial statements from which it has been derived. Other Matters Required Supplementary Information Accounting principles generally accepted in the United States of America require that the , the budgetary comparison information, the schedules of management’s discussion and analysis pension contributions, and the schedules of proportionate share of pension liability, as listed in the table of contents, be presented to supplement the basic financial statements. Such information, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board, who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management’s responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance. Other Information Our audit was conducted 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 financial statements and schedules, and statistical section are presented for purposes of additional analysis and are not a required part of the basic financial statements. The combining and individual fund financial statements and schedules are the responsibility of management and were derived from and relate directly to the underlying accounting and other records used to prepare the basic financial statements. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the basic financial statements or to the basic financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the combining and individual fund financial statements and schedules are fairly stated in all material respects in relation to the basic financial statements as a whole. The introductory and statistical sections have not been subjected to the auditing procedures applied in the audit of the basic financial statements and, accordingly, we do not express an opinion or provide any assurance on them. Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated May 9, 2017, 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 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 internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the City of Fridley, Minnesota’s internal control over financial reporting and compliance. REDPATH AND COMPANY, LTD. St. Paul, Minnesota May 9, 2017 ŷźƭ ƦğŭĻ źƓƷĻƓƷźƚƓğƌƌǤ ƌĻŅƷ ĬƌğƓƉ 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, 2016. 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 $62,794,247 (net position). Of this amount, $22,743,244 (unrestricted net position) 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. Net position of the government-wide financial statements was negatively impacted in the current year by $12,046,279 due to assumption changes and investment earnings. This is more fully described on page 27. During 2016, the City’s total net position increased by $5,403,501. As of the close of the current fiscal year, the City of Fridley’s governmental funds reported combined ending fund balances of $24,170,342. Of this total amount, $1,933,446, or 7.99% is restricted through legal restrictions or third-party agreements. At the end of the current fiscal year the general fund balance of $9,171,436 included $51,305 in non-spendable, $35,903 in restricted, and $9,084,228 in unassigned fund balance. The City’s total debt increased by $4,323,054 during the current fiscal year. Total debt outstanding at December 31, 2016 is $13,921,935. 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. Managements Discussion and Analysis ’ 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 position presents information on all of the City of Fridley’s assets and liabilities, with the difference between the two reported as net position. Over time, increases or decreases in net position may serve as a useful indicator of whether the financial position of the City of Fridley is improving or deteriorating. The statement of activities presents information showing how the City’s net position changed during the most recent fiscal year.All changes in net position 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 37 through 39 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 Managements Discussion and Analysis ’ 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. The City of Fridley maintains three 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, debt service fund and street improvement capital projects 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, the Cable TV, Solid Waste Abatement, Grant Management, Springbrook Nature Center, and Police Activity special revenue funds. 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 40 through 45 of this report. Proprietary funds . The City of Fridley maintains four enterprise funds and two 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 and self-insurance. 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. Managements Discussion and Analysis ’ The basic proprietary fund financial statements can be found on pages 46 through 51 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. The basic fiduciary fund financial statement can be found on page 52 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 53 through 96 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 112 through 149 of this report. Government-wide Financial Analysis As noted earlier, net position may serve over time as a useful indicator of a government's financial position. In the case of the City of Fridley, assets exceeded liabilities by $62,794,247 at the close of the most recent fiscal year. A significant portion of the City of Fridley's net position ($37,846,020 or 60.27 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. Managements Discussion and Analysis ’ City of Fridley’s Net Position Governmental ActivitiesBusiness-TypeTotals 201620152016201520162015 Current and other assets$31,007,912$30,605,448$15,959,324$9,443,082$46,967,236$40,048,530 Capital assets27,042,58621,151,84319,825,53219,493,59246,868,11840,645,435 Total assets$58,050,498$51,757,291$35,784,856$28,936,674$93,835,354$80,693,965 Total deferred outflows of resources15,318,3072,037,863 - - 15,318,3072,037,863 Long-term liabilities outstanding$29,327,109$15,917,754$10,896,725$5,338,225$40,223,834$21,255,979 Other liabilities1,882,5971,452,9081,407,4071,305,5573,290,0042,758,465 Total liabilities$31,209,706$17,370,662$12,304,132$6,643,782$43,513,838$24,014,444 Total deferred inflows of resources2,845,5761,326,638 - - 2,845,5761,326,638 Net position: Net investment in capital assets$23,932,586$16,811,842$13,913,434$14,234,711$37,846,020$31,046,553 Restricted2,204,9832,233,179 - - 2,204,9832,233,179 Unrestricted13,175,95416,052,8339,567,2908,058,18122,743,24424,111,014 Total net position$39,313,523$35,097,854$23,480,724$22,292,892$62,794,247$57,390,746 The City adopted new accounting guidance, GASB Statement No. 68, Accounting and Financial Reporting for Pensions – an Amendment of GASB Statement No. 27. Essentially, the standard required the unfunded portion of defined benefit pension plans to be reported by all participating employers. Recording the net pension liability and the pension related deferred outflows and inflows of resources do not change the City’s future funding requirements or obligations under the plans, which are determined by Minnesota statutes. Net position was negatively impacted by $12,046,279 at December 31, 2016 due to the assumption changes and investment earnings projections from the Public Employees Retirement Association’s own actuarial study. Pension-related amounts included in the above schedule related to the standard are as follows: Deferred outflows of resources$15,318,307 Deferred inflows of resources(2,845,576) Noncurrent liabilities(24,519,010) Total($12,046,279) A portion of the of the City of Fridley’s net position represents resources that are subject to external restrictions on how they may be used. The remaining balance of $22,743,244 in unrestricted net position 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 position, both for the government as a whole, as well as for its separate governmental and business-type activities. Managements Discussion and Analysis ’ Governmental Activities Governmental activities increased the City of Fridley’s net position by $4,215,669. Capital grants and contributions increased by $3,926,523 due to an increase in capital grant funding related to park capital. Non restricted grants increased $438,226 and property taxes increased $427,230 largely from two bonds. Public Safety expenditures increased by $2,264,508 primarily due to the new GASB 68 pension reporting. City of Fridley’s Changes in Net Position Governmental ActivitiesBusiness-Type ActivitiesTotals 201620152016201520162015 Revenues: Program revenues: Charges for services$4,248,195$4,109,621$15,393,228$14,198,795$19,641,423$18,308,416 Operating grants and contributions1,077,5591,139,38567,551 - 1,145,1101,139,385 Capital grants and contributions6,296,5322,370,009186,791421,9906,483,3232,791,999 General revenues: Property taxes12,222,93711,795,707 - - 12,222,93711,795,707 Grants and contributions not restricted to specific programs1,763,6141,325,388 - 2,4131,763,6141,327,801 Unrestricted investment earnings254,379157,28195,71342,722350,092200,003 Gain (loss) on sale of property11,00567,581 - 10,67211,00578,253 Other354,572418,6401,85816,331356,430434,971 Total revenues26,228,79321,383,61215,745,14114,692,92341,973,93436,076,535 Expenses: General government4,398,3704,156,904 - - 4,398,3704,156,904 Public safety10,313,1638,048,655 - - 10,313,1638,048,655 Public works4,975,3405,127,667 - - 4,975,3405,127,667 Community development1,126,8351,107,348 - - 1,126,8351,107,348 Recreation and naturalist1,440,2321,353,320 - - 1,440,2321,353,320 Interest on long-term debt97,684144,064 - - 97,684144,064 Liquor - - 5,043,7034,914,7865,043,7034,914,786 Water - - 3,076,4933,101,3563,076,4933,101,356 Sewer - - 5,068,1465,040,8615,068,1465,040,861 Storm water - - 1,030,467785,6261,030,467785,626 Total expenses 22,351,62419,937,95814,218,80913,842,62936,570,43333,780,587 Increase (decrease) in net position before transfers3,877,1691,445,6541,526,332850,2945,403,5012,295,948 Transfers338,500338,600(338,500)(338,600) - - Increase in net position4,215,6691,784,2541,187,832511,6945,403,5012,295,948 Net position - January 1, as previously reported35,097,85442,182,00022,292,89221,781,19857,390,74663,963,198 Prior period adjustment - (8,868,400) - - - (8,868,400) Net position - January 1, as restated35,097,85433,313,60022,292,89221,781,19857,390,74655,094,798 Net position - December 31$39,313,523$35,097,854$23,480,724$22,292,892$62,794,247$57,390,746 Managements Discussion and Analysis ’ Below are specific graphs which provide comparisons of the governmental activities revenues and expenses: Managements Discussion and Analysis ’ Business-Type Activities Business-type activities increased net position by $1,187,832. There was an increase in gross profits for the Liquor fund and rate increases in the Water and Sanitary Sewer funds. Business-Type of Activities – Program Revenues vs Operating Expenses Managements 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, unrestricted 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 $24,170,342. The General Fund’s fund balance increased by $227,486 in 2016. This was much better than the decrease of $695,500 anticipated with the 2016 revised budget. Building permit and plan review revenue increased as construction continued at a fast pace in 2016, exceeding budget estimates. Personal services expenditures also were below budget due to some vacancies in police, engineering and finance. The Debt Service Fund decreased $133,304 in 2016. The excess of revenues over expenditures was not enough to cover the monthly operating transfers. The Street Improvements Fund has an assigned fund balance of $2,796,801 and is identified as a major fund. The fund balance has increased $259,613 in 2016 due to a transfer in from closing out the streets fund. The Park Improvements Fund has an assigned fund balance of $1,470,300 and is identified as a major fund. The fund balance in this fund decreased $210,660 in 2016 due to project costs for the Springbrook Nature Center. Non-major special revenue funds increased by $55,106 in 2016. This was due to less expenditures in 2016. Non-major capital project funds decreased by $719,494 in 2016. This was partially due to a movement of LGA from the Capital Equipment Fund to the General Fund, in addition to activity beginning at the new Civic Campus. 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 position in the respective proprietary funds are liquor $406,170, water $3,500,396, sewer $3,130,609 and storm water $2,657,749. The liquor, water, sewer and storm water funds had an increase in net position of $93,299, $339,221, $349,072 and $513,305, respectively. Managements Discussion and Analysis ’ Budgetary Highlights General Fund The original revenue and expenditure budgets were amended ($568,400) primarily to account for a transfer out of $900K to other funds. This budget amendment was partially offset by budget amendments to increase building permit revenue and decrease personal services due to staff vacancies. Operating expenditures in total were less than the final budgetary estimates by $688,720. The City Manager department was under budget by $30,580 due to a reduction in legal and professional services. The Finance department was under budget by $71,605 primarily due to mid-year vacancies. Non-departmental was under budget by $52,023 as salary adjustments were less than projected. Public safety was under budget by $ 92,696 due to vacancies in Community Service Officer staffing. Public works was under budget by $189,518 primarily due to a reduction in supplies and contractual services. Community development did not need outside consulting services and as a result was under budget by $47,832. Parks and recreation required less program staffing which provided a savings of $46,470 in temporary salary expenditures. A contingency for emergencies was budgeted in the amount of $120,000 for which no expenditures were incurred during 2016. Total revenues were more than the final budgetary estimates by $234,266. Licenses and permits were over budget by $72,654 due to new construction and re- development. Intergovernmental revenues were over budget by $39,932 due to receiving more fire state aid than was anticipated. Charges for services were over budget by $38,575 due to an increase in Police security services. Investment income exceeded budget estimates by $54,972 due to an increase in the market value of investments at year-end offsetting a large market value loss recorded at the end of 2015. Total miscellaneous revenues were over budget by $62,185 due to an insurance reimbursement. 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, 2016, amounts to $46,868,118 (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. Managements Discussion and Analysis ’ City of Fridley’s Capital Assets (Net of Depreciation ) Governmental ActivitiesBusiness-Type ActivitiesTotals 201520162015201620152016 Land$2,814,016$2,814,016$306,477$306,477$3,120,493$3,120,493 Buildings and structures 962,7956,165,729 1,271,5921,525,550 2,234,387 7,691,279 Improvements other than buildings1,764,251 1,673,375 6,165,4585,663,575 7,929,709 7,336,950 Machinery and equipment 3,311,7823,275,578 799,512 823,160 4,111,294 4,098,738 Infrastructure10,359,28811,275,93810,152,22411,490,77920,511,51222,766,717 Construction in progress 1,939,7111,837,950 798,329 15,991 2,738,040 1,853,941 Total Capital Assets$21,151,843$27,042,586$19,493,592$19,825,532$40,645,435$46,868,118 Additional information on the City of Fridley’s capital assets can be found in Note 5. Long-term debt . At the end of the current fiscal year, the City of Fridley had total bonded debt outstanding of $13,921,935, an increase of $4,323,054 from 2015. $1,980,000 of this is for general obligation improvement debt which is supported by special assessments and a property tax levy, an additional $1,130,000 is for general obligation equipment certificate debt which financed the City’s capital equipment purchases, and $10,811,935 is general obligation utility revenue bonds which financed utility improvements. In addition, there is long-term debt in the amount of $1,028,656 for compensated absences. Additional information on the City of Fridley’s long-term debt can be found in Note 6. City of Fridley’s Outstanding Debt General Obligation Improvement Bonds, General Obligation Equipment Certificates, General Obligation Revenue Bonds, and Compensated Absences (excluding bond discounts) are as follows: Governmental ActivitiesBusiness-Type ActivitiesTotals 201520162015201620152016 General Obligation Improvement Bonds$3,010,000$1,980,000$ - $ - $3,010,000$1,980,000 General Obligation Revenue Bonds - - 5,260,000 10,811,935 5,260,00010,811,935 General Obligation Equipment Certificates1,330,0001,130,000 - - 1,330,000 1,130,000 Compensated Absences 1,003,9781,028,656 - - 1,003,978 1,028,656 Total$5,343,978$4,138,656$5,260,000$10,811,935$10,603,978$14,950,591 The City of Fridley has an Aa1 rating, which was reaffirmed by Moody’s Investors Service in May of 2016. Managements Discussion and Analysis ’ State statutes limit the amount of general obligation debt a Minnesota city may issue to 3% of total Estimated Market Value. The current debt limitation for the City of Fridley is $61,464,679. Only $1,130,000 of the City’s outstanding debt is counted within the statutory limitation because all other debt is either wholly or partially repaid by revenues other than general property tax levies. 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. BASIC FINANCIAL STATEMENTS ŷźƭ ƦğŭĻ źƓƷĻƓƷźƚƓğƌƌǤ ƌĻŅƷ ĬƌğƓƉ Exhibit A-1 CITY OF FRIDLEY, MINNESOTA STATEMENT OF NET POSITION December 31, 2016 With comparative totals for December 31, 2015 Primary GovernmentComponent Unit GovernmentalBusiness-TypeTotalHousing & Redevelopment Authority ActivitiesActivities2016201520162015 Assets: Cash and investment$24,271,956$9,493,320$33,765,276$30,670,172$7,912,241$8,436,987 s - 1,717,7141,717,714 - - - Cash with escrow agen t Receivables: Accounts545,8363,161,4483,707,2843,007,13555,26362,166 Taxes246,031 - 246,031249,47113,65912,059 Special assessments2,173,37438,8442,212,2181,918,012 - - Mortgage - - - - 1,003,227825,129 Interest88,148 - 88,14883,13843,71326,169 Due from component unit1,613,599 - 1,613,5991,558,849 - - Due from other governments1,882,779282,7032,165,4821,693,380 - - Internal balances127,634(127,634) - - - - Prepaid items7,250343,091350,34112,296530 - Inventories - at cost51,3051,049,8381,101,143856,077 - - Land held for resale - - - - 4,509,3693,390,611 Capital assets (net of accumulated depreciation): Land2,814,016306,4773,120,4933,120,4932,023,5112,023,511 Buildings and structures6,165,7291,525,5507,691,2792,234,387 - - Improvements other than buildings1,673,3755,663,5757,336,9507,929,709 - - Machinery and equipment3,275,578823,1604,098,7384,111,294 - - Infrastructure11,275,93811,490,77922,766,71720,511,512 - - Construction in progress1,837,95015,9911,853,9412,738,040 - - Total assets58,050,49835,784,85693,835,35480,693,96515,561,51314,776,632 Deferred outflows of resources: Related to pensions15,318,307 - 15,318,3072,037,863 - - Liabilities: Due to primary government - - - - 1,613,9061,558,849 Accounts payable802,194522,0151,324,209921,725479,872350,672 Deposits payable 85,186 - 85,18632,650 - - Contracts payable398,44569,546467,991639,432 - - Due to other governments180,148637,560817,708698,0999,51020,120 Salaries payable370,03439,771409,805330,366 - - Accrued interest payable38,123137,850175,973135,835 - - Compensated absences payable: Due within one year822,678 - 822,678816,389 - - Due in more than one year205,978 - 205,978187,589 - - Other post employment benefits payable: Due in more than one year669,44384,790754,233711,775 - - Unearned revenue8,4676659,132358 - - Bonds payable: Due within one year1,730,0002,600,0004,330,0001,840,000 - - Due in more than one year1,380,0008,211,9359,591,9357,758,881 - - Net pension liability Due in more than one year24,519,010 - 24,519,0109,941,345 - - Total liabilities31,209,70612,304,13243,513,83824,014,4442,103,2881,929,641 Deferred inflows of resources: Related to pensions2,845,576 - 2,845,5761,326,638 - - Net position: Net investment in capital assets23,932,58613,913,43437,846,02031,046,5532,023,5112,023,511 Restricted for: Debt service2,092,036 - 2,092,0362,141,163 - - Tax increment purposes - - - - 805,929672,875 Police forfeitures4,404 - 4,404 - - - Cable television equipment72,640 - 72,64072,640 - - Donations35,903 - 35,90319,376 - - Unrestricted13,175,9549,567,29022,743,24424,111,01410,628,78510,150,605 Total net position$39,313,523$23,480,724$62,794,247$57,390,746$13,458,225$12,846,991 The accompanying notes are an integral part of these financial statements. CITY OF FRIDLEY, MINNESOTA STATEMENT OF ACTIVITIES For The Year Ended December 31, 2016 With comparative totals for the year ended December 31, 2015 Program Revenues OperatingCapital Charges ForGrants andGrants and ExpensesServicesContributionsContributions Functions/Programs Primary government: Governmental activities: General government$4,398,370$2,031,207$95,748$95,947 Public safety10,313,163742,523559,990 - Public works4,975,34032,522421,8212,761,587 Community development1,126,8351,108,177 - - Parks and recreation1,440,232333,766 - 3,438,998 Interest on long-term debt97,684 - - - Total governmental activities22,351,6244,248,1951,077,5596,296,532 Business-type activities: Liquor5,043,7035,439,423 - - Water3,076,4933,330,350 - - Sewer5,068,1465,298,99564,644 - Storm water1,030,4671,324,4602,907186,791 Total business-type activities14,218,80915,393,22867,551186,791 Total primary government$36,570,433$19,641,423$1,145,110$6,483,323 Component unit: Housing and Redevelopment Authority$5,790,219$245,513$3,906,701$ - Total component unit$5,790,219$245,513$3,906,701$ - General revenues: Property taxes Tax increment collections Grants and contributions not restricted to specific programs Unrestricted investment earnings Net change in the fair market value of investments Gain on sale of property Insurance and other reimbursements Other Transfers Total general revenues and transfers Change in net position Net position - January 1, as previously reported Prior period adjustment Net position - January 1, as restated Net position - December 31 The accompanying notes are an integral part of these financial statements. Exhibit A-2 Net (Expense) Revenue and Changes in Net PositionComponent Unit Primary GovernmentHousing & GovernmentalBusiness-TypeTotalRedevelopment Authority ActivitiesActivities2016201520162015 ($2,175,468)$ - ($2,175,468)($2,154,601)$ - $ - (9,010,650) - (9,010,650)(6,920,131) - - (1,759,410) - (1,759,410)(2,189,829) - - (18,658) - (18,658)87,186 - - 2,332,532 - 2,332,532(997,504) - - (97,684) - (97,684)(144,064) - - (10,729,338) - (10,729,338)(12,318,943) - - - 395,720395,720342,054 - - - 253,857253,857136,767 - - - 295,493295,493(231,182) - - - 483,691483,691530,517 - - - 1,428,7611,428,761778,156 - - (10,729,338)1,428,761(9,300,577)(11,540,787)$ - $ - ($1,638,005)($3,319,831) (1,638,005)(3,319,831) 12,222,937 - 12,222,93711,795,707394,500358,303 - - - - 1,640,5321,560,658 1,763,614 - 1,763,6141,327,801 - - 186,37882,007268,385302,430111,59677,088 68,00113,70681,707(102,427)(45,772)(8,114) 11,005 -11,00578,253 - - - - - 6,115 - - 354,5721,858356,430428,856148,383112,048 338,500(338,500) - - - - 14,945,007(240,929)14,704,07813,836,7352,249,2392,099,983 4,215,6691,187,8325,403,5012,295,948611,234(1,219,848) 35,097,85422,292,89257,390,74663,963,19812,846,99114,066,839 - - - (8,868,400) - - 35,097,85422,292,89257,390,74655,094,79812,846,99114,066,839 $39,313,523$23,480,724$62,794,247$57,390,746$13,458,225$12,846,991 The accompanying notes are an integral part of these financial statements. CITY OF FRIDLEY, MINNESOTA BALANCE SHEET GOVERNMENTAL FUNDS December 31, 2016 With comparative totals for December 31, 2015 GeneralDebt Service Assets Cash and investments$9,381,729$5,489,461 Receivables: Accounts27,591 - Taxes214,79723,358 Special assessments43,708727,167 Interest88,148 - Due from other funds48,764 - Due from component unit2,0751,611,524 Due from other governments81,027 - Prepaid items - - Inventories, at cost51,305 - $9,939,144$7,851,510 Total assets Liabilities, Deferred Inflows of Resources, and Fund Balances Liabilities: Accounts payable$121,863$ - Deposits payable52,250 - Contracts payable943 - Due to other governments176,308 - Due to other funds - - Salaries payable249,665 - Unearned revenue - - Total liabilities601,029 - Deferred inflows of resources: Unavailable revenue166,679847,478 Fund balance: Nonspendable51,305 - Restricted35,9031,830,650 Committed - - Assigned - 5,173,382 Unassigned9,084,228 - Total fund balance9,171,4367,004,032 $9,939,144$7,851,510 Total liabilities, deferred inflows of resources, and fund balance The accompanying notes are an integral part of these financial statements. Exhibit A-3 Other StreetGovernmentalIntra-Activity ImprovementsPark ImprovementsFundsEliminationsTotals Governmental Funds 20162015 $1,635,092$1,166,572$3,938,847$ - $21,611,701$22,511,442 22,200371,189104,629 - 525,609136,720 801337,663 - 246,031249,471 1,306,024 - 96,475 - 2,173,3741,885,428 - - - - 88,14883,138 - - - (48,764) - - - - - - 1,613,5991,558,849 1,711,787 - 89,965 - 1,882,7791,598,223 - - 2,250 - 2,25012,296 - - - - 51,30553,969 $4,675,183$1,537,894$4,239,829($48,764)$28,194,796$28,089,536 $385,138$14,525$149,277$ - $670,803$474,642 - 32,936 - - 85,18632,650 188,49920,000189,003 - 398,445562,761 335 - 3,505 - 180,14823,961 - - 48,764(48,764) - - - - 11,946 - 261,611202,769 - - 8,467 - 8,467 - 573,97267,461410,962(48,764)1,604,6601,296,783 1,304,410133101,094 - 2,419,7942,101,158 - - - - 51,30566,265 - - 66,893 - 1,933,4461,827,948 - - 2,555,650 - 2,555,6502,709,638 2,796,8011,470,3001,132,804 - 10,573,28711,272,588 - - (27,574) - 9,056,6548,815,156 2,796,8011,470,3003,727,773 - 24,170,34224,691,595 $4,675,183$1,537,894$4,239,829($48,764)$28,194,796$28,089,536 Fund balance reported above$24,170,342$24,691,595 Amounts reported for governmental activities in the statement of net position are different because: Capital assets used in governmental activities are not financial resources and, therefore, are not reported in the funds.27,042,58621,151,843 Other long-term assets are not available to pay for current-period expenditures and, therefore, are reported as unavailable revenue in the funds.2,419,7942,101,158 Long-term liabilities, including bonds payable, are not due and payable in the current period and, therefore, are not reported in the funds.(3,817,566)(5,027,991) 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 position.(10,501,633)(7,818,751) Net position of governmental activities$39,313,523$35,097,854 The accompanying notes are an integral part of these financial statements. CITY OF FRIDLEY, MINNESOTA CITY OF FRIDLEY, MINNESOTA STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES GOVERNMENTAL FUNDS For The Year Ended December 31, 2016 With comparative totals for the year ended December 31, 2015 Debt ServiceStreet Improvements General Revenues: Taxes$10,585,617$1,258,153$9 Special assessments14,513235,541600,214 Licenses and permits1,150,954 - - Intergovernmental revenue1,262,432 -1,418,794 Charges for services2,029,775 - - Fines and forfeits186,418 - - Investment income: Interest and dividends80,32450,63814,757 Net change in the fair value of investments24,64817,4859,184 Contributions and donations - - - Miscellaneous: Other226,585 -95,947 Total revenues15,561,2661,561,8172,138,905 Expenditures: Current: General government2,895,659 - - Public safety7,405,104 - - Public works2,824,319 - - Community development942,768 - - Parks and recreation891,730 - - Debt service -1,345,121 - Capital outlay - -2,342,741 Total expenditures14,959,5801,345,1212,342,741 Excess (deficiency) of revenues over (under) expenditures601,686216,696(203,836) Other financing sources (uses): Proceeds from sale of capital assets - - - Transfers in532,900 -557,849 Transfers out(907,100)(350,000)(94,400) Total other financing sources (uses)(374,200)(350,000)463,449 Net change in fund balance227,486(133,304)259,613 Fund balance - January 1, as previously reported8,943,9507,137,3362,537,188 Prior period adjustment - - - Fund balance - January 1, as restated8,943,9507,137,3362,537,188 Fund balance - December 31$9,171,436$7,004,032$2,796,801 The accompanying notes are an integral part of these financial statements. Exhibit A-4 Other Governmental Intra-Activity Park ImprovementsFundsEliminations Totals Governmental Funds 20162015 $ -$400,432$ -$12,244,211$11,805,580 -15,454 -865,722542,248 -291,941 -1,442,8951,549,785 3,463,9981,185,114 -7,330,3384,375,972 -562,890 -2,592,6652,374,896 -26,217 -212,635184,940 3,48637,173 -186,378216,794 6,7779,907 -68,001(59,513) 491,656 - -491,65663,725 6,95766,533 -396,022365,988 3,972,8742,595,661 -25,830,52321,420,415 -1,029,218 -3,924,8773,777,688 -131,947 -7,537,0517,319,564 - - -2,824,3193,575,252 - - -942,7681,081,549 -449,714 -1,341,4441,288,684 - - -1,345,1211,350,356 4,258,5342,017,094 -8,618,3693,645,425 4,258,5343,627,973 -26,533,94922,038,518 (285,660)(1,032,312) -(703,426)(618,103) -43,673 -43,67393,670 75,000882,100(1,909,349)138,500338,600 -(557,849)1,909,349 - - 75,000367,924 -182,173432,270 (210,660)(664,388) -(521,253)(185,833) 1,680,9604,392,161 -24,691,59524,806,833 - - - -70,595 1,680,9604,392,161 -24,691,59524,877,428 $1,470,300$3,727,773$ -$24,170,342$24,691,595 The accompanying notes are an integral part of these financial statements. ŷźƭ ƦğŭĻ źƓƷĻƓƷźƚƓğƌƌǤ ƌĻŅƷ ĬƌğƓƉ Exhibit A-5 CITY OF FRIDLEY, MINNESOTA RECONCILIATION OF THE STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES OF GOVERNMENTAL FUNDS TO THE STATEMENT OF ACTIVITIES For The Year Ended December 31, 2016 With comparative amounts for the year ended December 31, 2015 20162015 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)($521,253)($185,833) 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.5,890,7431,435,484 Revenues in the statement of activities that do not provide current financial resources are not reported as revenues in the funds.318,636(328,914) 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 position. This amount is the net effect of these differences in the treatment of long-term debt and related items.1,230,0001,190,000 Internal service funds are used by management to charge the cost of certain activities to individual funds. This amount is net expenditures attributable to governmental activities.(2,682,882)(302,249) Other post employment benefits in the statement of activities does not require the use of current financial resources and, therefore, is not reported as expenditures in governmental funds.(37,012)(40,526) 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.17,43716,292 Change in net position of governmental activities (Exhibit A-2)$4,215,669$1,784,254 The accompanying notes are an integral part of these financial statements. CITY OF FRIDLEY, MINNESOTA STATEMENT OF NET POSITION PROPRIETARY FUNDS December 31, 2016 With comparative totals for Enterprise Funds for December 31, 2015 Business-Type Activities - Enterprise Funds Assets:LiquorWater Current assets: Cash and investments$169,069$5,622,690 Cash with escrow agent -1,717,714 Accounts receivable -1,308,402 Special assessments receivable -15,302 Due from other governments -300 Prepaid items - - Inventories - at cost662,581387,257 Total current assets831,650 9,051,665 Noncurrent assets: Capital assets: Land151,946154,531 Buildings and structures182,5953,442,889 Improvements other than buildings886,3279,665,662 Machinery and equipment229,1262,000,033 Infrastructure -11,810,156 Construction in process -14,180 Total capital assets1,449,994 27,087,451 Less: Allowance for depreciation(849,452)(15,860,331) Net capital assets600,54211,227,120 Total noncurrent assets600,54211,227,120 Total assets1,432,19220,278,785 Deferred outflows of resources: Related to pensions - - Liabilities: Current liabilities: Accounts payable335,459161,389 Accrued interest payable -129,063 Contracts payable -69,546 Due to other governments56,091243,266 Salaries payable10,82713,236 Payroll deductions payable - - Compensated absences payable - - Bonds payable - current -2,545,000 Unearned revenue665 - Total current liabilities403,042 3,161,500 Noncurrent liabilities: Other post employment benefits22,43834,932 Compensated absences - noncurrent - - Bonds payable - noncurrent -7,601,935 Net pension liability - - Total noncurrent liabilities22,438 7,636,867 Total liabilities425,48010,798,367 Deferred inflows of resources: Related to pensions - - Net position: Net investment in capital assets600,5425,980,022 Unrestricted406,1703,500,396 Total net position$1,006,712$9,480,418 Net position reported above Adjustment to report the cumulative internal balance for the net effect activity between the internal service fund and the enterprise funds over time Net position of business-type activities (Exhibit A-1) The accompanying notes are an integral part of these financial statements. Exhibit A-6 Governmental Activities - Business-Type Activities - Enterprise FundsTotals Internal Service Funds SewerStorm Water20162015 $1,677,086$2,024,475$9,493,320$5,663,387$2,660,255 - - 1,717,714 - - 1,501,021352,0253,161,4482,870,41520,227 -23,54238,84432,584 - 4,623277,780282,70395,157 - 343,091 -343,091 -5,000 - -1,049,838802,108 - 3,525,821 2,677,822 16,086,958 9,463,651 2,685,482 - -306,477306,477 - 8,770 -3,634,2543,296,669 - 2,906,3532,066,53415,524,87615,453,166 - 986,439378,9213,594,5193,406,907 - 7,289,1238,270,92927,370,20825,415,901 - -1,81115,991798,329 - 11,190,68510,718,19550,446,32548,677,449 - (7,700,075)(6,210,935)(30,620,793)(29,183,857) - 3,490,6104,507,26019,825,53219,493,592 - 3,490,6104,507,26019,825,53219,493,592 - 7,016,4317,185,08235,912,49028,957,2432,685,482 - - - -15,318,307 20,9514,216522,015445,149131,391 5,0213,766137,85080,275 - - -69,54676,671 - 338,203 -637,560674,138 - 6,5029,20639,77128,966 - - - - -108,423 - - - -822,678 30,00025,0002,600,000610,000 - - -665358 - 400,677 42,188 4,007,407 1,915,557 1,062,492 24,5352,88584,79079,344 - - - - -205,978 350,000260,0008,211,9354,648,881 - - - - -24,519,010 374,535 262,885 8,296,725 4,728,225 24,724,988 775,212305,07312,304,1326,643,78225,787,480 - - - -2,845,576 3,110,6104,222,26013,913,43414,234,711 - 3,130,6092,657,7499,694,9248,078,750(10,629,267) $6,241,219$6,880,009$23,608,358$22,313,461($10,629,267) $23,608,358$22,313,461 (127,634)(20,569) $23,480,724 $22,292,892 The accompanying notes are an integral part of these financial statements. CITY OF FRIDLEY, MINNESOTA STATEMENT OF REVENUES, EXPENSES AND CHANGES IN FUND NET POSITION PROPRIETARY FUNDS For The Year Ended December 31, 2016 With comparative totals for the year ended December 31, 2015 Business-Type Activities - Enterprise Funds LiquorWater Sales$5,439,423$ - Cost of sales(3,976,342) - Gross profit1,463,081 - Operating revenues: Customer billings -3,315,113 Charges for services -50 Other revenues -15,187 Total operating revenues -3,330,350 Total gross profit and operating revenues1,463,0813,330,350 Operating expenses: Personal services502,985641,659 Supplies and other charges: Disposal charges - - Other441,3671,269,691 Depreciation85,817824,553 Total operating expenses1,030,1692,735,903 Operating income (loss)432,912 594,447 Nonoperating revenues (expenses): Intergovernmental revenue - - Investment income: Interest and dividends(1,584)46,954 Net change in the fair value of investments664,561 Insurance reimbursement - - Interest expense -(212,405) Gain (loss) on sale of capital assets - - Bond issuance costs -(94,336) Other405 - Total nonoperating revenues (expenses)(1,113)(255,226) Income (loss) before transfers, capital contributions and special items431,799339,221 Transfers, capital contributions and special items: Transfers in - - Transfers out(338,500) - Capital contributions - - Total contributions and transfers(338,500) - Change in net position93,299 339,221 Net position - January 1913,4139,141,197 Net position - December 31$1,006,71$9,480,41 28 changes in net position reported above Adjustment to report the cumulative internal balance for the net effect of activity between the internal service funds and the enterprise funds over time. Changes in net position of business-type activities (Exhibit A-2) The accompanying notes are an integral part of these financial statements. Exhibit A-7 Business-Type Activities - Enterprise FundsGovernmental Activities SewerStorm WaterTotalsInternal Service Funds 20162015 $ - $ - $5,439,423$5,256,840$ - - - (3,976,342)(3,909,856) - - - 1,463,0811,346,984 - 5,298,9951,324,4099,938,5178,936,287 - - - 50 - 1,254,426 - 5115,2385,668 - 5,298,995 1,324,460 9,953,805 8,941,955 1,254,426 5,298,995 1,324,460 11,416,886 10,288,939 1,254,426 327,980444,3841,917,0081,856,7223,976,760 3,957,102 - 3,957,1023,688,859 - 436,721303,8452,451,6242,792,180392,990 298,194273,1381,481,7021,379,686 - 5,019,997 1,021,367 9,807,436 9,717,447 4,369,750 278,998 303,093 1,609,450 571,492 (3,115,324) 64,644189,698254,34293,40368,629 14,23122,40682,00758,31927,633 3,3245,75513,706(15,597)7,956 - - - 6,11520,227 (12,125)(9,100)(233,630)(194,757) - - - - 10,672 - - - (94,336) - - - 1,4531,85810,216932 70,074 210,212 23,947 (31,629)125,377 349,072 513,305 1,633,397 539,863 (2,989,947) - - - 154,194200,000 - - (338,500)(492,794) - - - - 331,000 - - - (338,500)(7,600)200,000 349,072 513,305 1,294,897 532,263 (2,789,947) 5,892,1476,366,70422,313,46121,781,198(7,839,320) $6,241,21$6,880,00$23,608,35$22,313,461($10,629,267 998) $1,294,897$532,263 (107,065)(20,569) $1,187,832 $511,694 The accompanying notes are an integral part of these financial statements. CITY OF FRIDLEY, MINNESOTA STATEMENT OF CASH FLOWS PROPRIETARY FUNDS For The Year Ended December 31, 2016 With comparative totals for Enterprise Funds for the year ended December 31, 2015 Business-Type Activities - Enterprise Funds LiquorWater Cash flows from operating activities: Receipts from customers and users$5,445,845$3,156,934 Receipts from interfund services provided - - Payment to suppliers(4,480,741)(1,391,546) Payment to employees(498,317)(636,360) Operating contribution405 - Net cash flows from operating activities467,1921,129,028 Cash flows from noncapital financing activities: Operating grants - - Intergovernmental revenue - - Transfers in - - Transfers out(338,500) - Net cash flows from noncapital financing activities(338,500) - Cash flows from capital and related financing activities: Acquisition of capital assets(95,859)(1,162,008) Proceeds from sale of capital assets - - Capital grants and contributions - - Principal received on special assessments - - Insurance reimbursement - - Proceeds from sale of bonds, net of issue costs -6,072,714 Principal paid on revenue bonds -(555,000) Interest and paying agent fees on revenue bonds -(154,143) Net cash flows from capital and related financing activities(95,859)4,201,563 Cash flows from investing activities: Investment income(1,518)51,515 Net increase (decrease) in cash and cash equivalents31,3155,382,106 Cash and cash equivalents - January 1137,7541,958,298 Cash and cash equivalents - December 31$169,069$7,340,404 Reconciliation of operating income (loss) to net cash provided (used) by operating activities: Operating income (loss) $432,912$594,447 Adjustments to reconcile operating income (loss) to net cash flows from operating activities: Depreciation85,817824,553 Operating contribution405 - Changes in assets and liabilities: Decrease (increase) in receivables6,115(173,416) Decrease (increase) in prepaid items - - Decrease (increase) in inventories(35,090)(212,640) Decrease (increase) in deferred outflows of resources - - Increase (decrease) in payables(23,274)96,084 Increase (decrease) in unearned revenue307 - Increase (decrease) in deferred inflows of resources - - Total adjustments34,280534,581 Net cash provided by operating activities$467,192$1,129,028 The accompanying notes are an integral part of these financial statements. Exhibit A-8 Business-Type Activities - Enterprise FundsGovernmental Activities - Totals SewerStorm WaterInternal Service Funds 20162015 $5,169,349$1,323,358$15,095,486$14,386,677$ - - - - -1,254,426 (4,762,258)(308,181)(10,942,726)(9,958,003)(268,533) (325,438)(440,642)(1,900,757)(1,897,970)(1,126,131) - -4055,600 - 81,653574,5352,252,4082,536,304(140,238) 64,6442,90767,551 - - - - - -68,629 - - -154,194200,000 - -(338,500)(492,794) - 64,6442,907(270,949)(338,600)268,629 (48,440)(511,330)(1,817,637)(2,038,945) - - - -10,672 - - - -333,413 - -1,4531,4534,616 - - - -6,115932 - -6,072,714 - - (30,000)(25,000)(610,000)(585,000) - (12,500)(9,412)(176,055)(203,060) - (90,940)(544,289)3,470,475(2,472,189)932 17,55528,16195,71342,72235,589 72,91261,3145,547,647(231,763)164,912 1,604,1741,963,1615,663,3875,895,1502,495,343 $1,677,086$2,024,475$11,211,034 $5,663,387 $2,660,255 $278,998$303,093$1,609,450$571,492($3,115,324) 298,194273,1381,481,7021,379,686 - - -4055,600 - (129,646)(1,102)(298,049)187,524 - (343,091) -(343,091) -(5,000) - -(247,730)(73,267) - - - - -(13,280,444) (22,802)(594)49,414464,91114,741,592 - -307358 - - - - -1,518,938 (197,345)271,442 642,958 1,964,812 2,975,086 $81,653$574,535$2,252,408$2,536,304($140,238) The accompanying notes are an integral part of these financial statements. Exhibit A-9 CITY OF FRIDLEY, MINNESOTA STATEMENT OF FIDUCIARY NET POSITION December 31, 2016 With comparative amounts for December 31, 2015 20162015 Assets: Cash and investments$7,294$9,599 Receivables: Accounts3,8162,765 Total assets$11,110$12,364 Liabilities: Accounts payable$7,294$9,599 Due to other governments3,8162,765 Total liabilities$11,110$12,364 The accompanying notes are an integral part of these financial statements. CITY OF FRIDLEY, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2016 1. Summary of Significant Accounting Policies The City of Fridley, Minnesota was incorporated July 1, 1949, under Chapter 410.03 of the Statutes of the State of Minnesota providing for a council-manager form of government under the “Home Rule Charter City” concept. The City provides the following services as authorized by its charter: general administrative services, public safety (police and fire), public improvements, planning and zoning, and culture and recreation. The financial statements of the City of Fridley, Minnesota have been prepared in conformity with generally accepted accounting principles as applied to governmental units by the Governmental Accounting Standards Board (GASB). The following is a summary of the significant accounting policies. A. Financial Reporting Entity As required by generally accepted accounting principles, the financial statements of the reporting entity include those of the City of Fridley, Minnesota (the primary government) and its component units. The component units discussed below are included in the City's reporting entity because of the significance of their operational or financial relationships with the City. Component Units In conformity with generally accepted accounting principles, the financial statements of the component units have been included in the financial reporting entity as discretely presented component units. Discretely Presented Component Unit - The Fridley Housing and Redevelopment Authority (HRA) is governed by commissioners appointed by the Fridley City Council. The HRA is responsible for providing housing and redevelopment assistance to the City and its residents. Funding for the various programs administered by the HRA is provided through the issuance of tax increment revenue bonds and general obligation tax increment bonds guaranteed by the City. Separate financial statements are not prepared for the HRA. B.Government-Wide and Fund Financial Statements The government-wide financial statements (i.e., the statement of net position and the statement of activities) report information on all of the nonfiduciary activities of the primary government and its component units. For the most part, the effect of interfund activity has been removed from these statements.Governmental activities, which normally are supported by taxes and intergovernmental revenues, are reported separately from business-type activities, which rely to a significant extent on fees and charges for support. The statement of activities demonstrates the degree to which the direct expenses of a given function or business-type activity is offset by program revenues.Direct expenses are those that are clearly identifiable with a specific function or business-type activity.Program revenues include 1) charges to customers or applicants who purchase, use, or directly benefit from goods, services, or privileges provided by a given function or business-type activity and 2) grants and contributions that are restricted to meeting the operational or capital requirements of a particular function or business-type activity. Taxes and other items not included among program revenues are reported instead as general revenues. Separate financial statements are provided for governmental funds, proprietary funds, and fiduciary funds, even though the latter are excluded from the government-wide financial CITY OF FRIDLEY, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2016 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. TheDebt 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. TheStreet Improvements Fund is used to account for repairs and replacements of city streets and street related equipment such as signs and street lights. ThePark Improvements Fund is used to account for repairs and replacements of city park equipment or park related improvements. The government reports the following major proprietary funds: TheLiquor Fund accounts for operations of the municipal liquor stores. CITY OF FRIDLEY, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2016 TheWater Fund accounts for the water service charges which are used to finance the water system operating expenses. TheSewer Fund accounts for the sewer service charges which are used to finance the sanitary sewer system operating expenses. TheStorm Water Fund accounts for storm sewer charges which are used to finance the storm sewer operating expenses. Additionally, the government reports the following fund types: Internal Service Funds are used to account for employee fringe benefits, pension benefits, and insurance deductibles 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 North Metro Convention and Tourism Bureau and various senior citizen organization. As a general rule the effect of interfund activity has been eliminated from the government-wide financial statements. Exceptions to this general rule are transactions that would be treated as revenues, expenditures or expenses if they involved external organizations, such as buying goods and services or payments in lieu of taxes, are similarly treated when they involve other funds of the City of Fridley. Elimination of these charges would distort the direct costs and program revenues reported for the various functions concerned. Amounts reported as program revenues include 1) charges to customers or applicants for goods, services, or privileges provided, 2) operating grants and contributions, and 3) capital grants and contributions, including special assessments. Internally dedicated resources are reported as general revenues rather than as program revenues. Likewise, general revenues include all taxes. Proprietary funds distinguish operatingrevenues and expenses from nonoperating items. Operating revenues and expenses generally result from providing services and producing and delivering goods in connection with a proprietary fund’s principal ongoing operations. The principal operating revenues of the liquor, water, sewer and storm water enterprise funds are charges to customers for sales and services.Operating expenses for enterprise funds include the cost of sales and services, administrative expenses, and depreciation on capital assets. All revenues and expenses not meeting this definition are reported as nonoperating revenues and expenses. When both restricted and unrestricted resources are available for an allowable use, it is the government’s policy to use restricted resources first, then unrestricted resources as they are needed. D. Budgets The City Charter grants the City Council full authority over the financial affairs of the City. The City Manager is charged with the responsibility of preparing the estimates of the annual budget and the enforcement of the provisions of the budget as specified in the City Charter. Upon CITY OF FRIDLEY, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2016 adoption of the annual budget resolution by the Council, it becomes the formal appropriation budget for City operations. All budget adjustments must be approved by the Council. Budgets for the General, Special Revenue and Capital Improvement Capital Projects Funds are adopted on a basis consistent with accounting principles generally accepted in the United States of America. Budgeted expenditure appropriations lapse at year end. Encumbrance accounting, under which purchase orders, contracts, and other commitments for the expenditure of monies are recorded in order to reserve that portion of the appropriation, is not employed by the City because it is, at present, not considered necessary to assure effective budgetary control or to facilitate effective cash management. E. Legal Compliance Budgets The City follows these procedures in establishing the budgetary data reflected in the financial statements: 1. The City Manager submits to the City Council a proposed operating budget for the fiscal year commencing the following January 1. The operating budget includes expenditures and the means of financing them. 2. Public hearings are conducted to obtain taxpayer comments. 3. The budget is legally enacted through passage of a resolution. 4. The City Council may authorize transfer of budgeted amounts between departments within any fund. 5. Reported budget amounts are as originally adopted or as amended by Council approved transfers. The City Charter limits appropriations to the total estimated revenues and fund balances. If actual revenues exceed the original estimates, appropriations may be increased by the Council up to the amount of revenue increases. 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 for the following Special Revenue Funds: Cable TV Fund, Grant Management Fund, Solid Waste Abatement Fund, Springbrook Nature Fund, and the Police Activity Fund. Formal budgeting integration is employed as a management control device during the year for each of these funds. Formal budgetary integration is not employed for Debt Service Funds because effective budgetary control is achieved through the bond indenture provisions. Budgetary control for other Capital Projects Funds is accomplished through the use of project controls. 8. As required by the City Charter, budgetary control is maintained within department at the departmental level. 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. CITY OF FRIDLEY, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2016 There was one Special Revenue Fund (Police Activity Fund) whose expenditures exceeded budgeted appropriations in 2016 by $84,668. 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. Restricted cash balances relate to unspent bond proceeds. Investments are stated at fair value, except for investments in external investment pools that meet GASB 79 requirements, which are stated at amortized cost. Investment income is accrued at the balance sheet date. 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, 2016 are planned to be eliminated in 2016. 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 CITY OF FRIDLEY, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2016 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 inflows of resources because they are not available to finance current expenditures. I. 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 inflows of resources. CITY OF FRIDLEY, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2016 J. 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). K. 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. Prepaid items are reported using the consumption method and recorded as expenditures/expenses at the time of consumption. L. Capital Assets Capital assets, which include property, plant, equipment and infrastructure assets (e.g., roads, bridges, sidewalks, and similar items), and intangible assets such as easements are reported in the applicable governmental or business-type activities columns in the government-wide financial statements. Capital assets are defined by the government as assets with an initial, individual cost of more than $5,000 (with the exception of computer equipment) (amount not rounded) and an estimated useful life in excess of one year. Such assets are recorded at historical cost or estimated historical cost if purchased or constructed. Donated capital assets are recorded at estimated fair market value at the date of donation. In the case of the initial capitalization of general infrastructure assets (i.e., those reported by governmental activities) the government chose to include all such items regardless of their acquisition date or amount. The City was able to estimate the historical cost for the initial reporting of these assets through back-trending (i.e. estimating the current replacement cost of the infrastructure to be capitalized and using an appropriate price-level index to deflate the cost of the infrastructure to be capitalized 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, 2016, no interest was capitalized in connection with construction in progress. CITY OF FRIDLEY, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2016 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 M. 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. N. 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 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 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. O. Fund Balance Classifications In the fund financial statements, governmental funds report fund balance in classifications that disclose constraints for which amounts in those funds can be spent. These classifications are as follows: Nonspendable- consists of amounts that are not in spendable form, such as prepaid items. Restricted - consists of amounts related to externally imposed constraints established by creditors, grantors or contributors; or constraints imposed by state statutory provisions. Committed - consists of internally imposed constraints. These constraints are established by Resolution of the City Council. CITY OF FRIDLEY, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2016 Assigned- consists of internally imposed constraints. These constraints reflect the specific purpose for which it is the City’s intended use. Pursuant to City Council Resolution, the City Manager and/or the Finance Director are authorized to establish assignments of fund balance. Unassigned - is the residual classification for the general fund and also reflects negative residual amounts in other funds. When both restricted and unrestricted resources are available for use, it is the City’s policy to first use restricted resources, and then use unrestricted resources as they are needed. When committed, assigned or unassigned resources are available for use, it is the City’s policy to use resources in the following order: 1) committed 2) assigned and 3) unassigned. P. 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. Q. 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. R. Deferred Outflows/Inflows of Resources In addition to assets, the statement of financial position will sometimes report a separate section for deferred outflows of resources. This separate financial statement element, deferred outflows of resources, represents a consumption of net position that applies to a future period(s) and so willnot be recognized as an outflow of resources (expense/expenditure) until then. The government has one item that qualifies for reporting in this category. It is the pension related deferred outflows of resources reported in the government-wide Statement of Net Position and the proprietary funds Statement of Net Position. In addition to liabilities, the statement of financial position will sometimes report a separate section for deferred inflows of resources. This separate financial statement element, deferred inflows of resources, represents an acquisition of net position that applies to a future period(s) and so will not be recognized as an inflow of resources (revenue) until that time. The government has pension related deferred inflows of resources reported in the government-wide Statement of Net Position and the proprietary funds Statement of Net Position. The City also has a type of item, which arises only under a modified accrual basis of accounting that qualifies for reporting in this category. Accordingly, the item, unavailable revenue, is reported only in the governmental fund balance sheet. The governmental funds report unavailable revenues from the following sources: property taxes and special assessments. CITY OF FRIDLEY, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2016 S. Defined Benefit Pension Plans Pensions. For purposes of measuring the net pension liability, deferred outflows/inflows of resources, and pension expense, information about the fiduciary net position of the Public Employees Retirement Association (PERA) and additions to/deductions from PERA’s fiduciary net position have been determined on the same basis as they are reported by PERA except that PERA’s fiscal year end is June 30. For this purpose, plan contributions are recognized as of employer payroll paid dates and benefit payments and refunds are recognized when due and payable in accordance with the benefit terms. Investments are reported at fair value. T. 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 position The governmental fund balance sheet includes reconciliation between fund balance – total governmental funds and net position – governmental activities as reported in the government-wide statement of net position. 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 ($3,817,566) difference are as follows: Bonds payable($3,110,000) Accrued interest payable(38,123) Other post employment benefits payable(669,443) Net adjustment to increase net changes in fund balances - total governmental funds to arrive at changes in net position of governmental activities($3,817,566) CITY OF FRIDLEY, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2016 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 position 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 $5,090,743 difference are as follows: Net book value of capital asset disposals($32,668) Capital outlay8,618,369 Capital outlay not capitalized(519,262) Capital contributions33,242 Depreciation expense(2,208,938) Net adjustment to increase net changes in fund balances - total governmental funds to arrive at changes in net position of governmental activities$5,890,743 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 $318,636 difference are as follows: Unavailable revenue - general property taxes: At December 31, 2015($163,153) At December 31, 2016141,879 Unavailable revenue - special assessments: At December 31, 2015(1,880,978) At December 31, 20162,166,391 Unavailable revenue - interest on loan to HRA: At December 31, 2015(57,027) At December 31, 2016111,524 Net adjustments to decrease net changes in fund balances - total governmental funds to arrive at changes in net position of governmental activities$318,636 CITY OF FRIDLEY, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2016 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 position. The details of this $1,230,000 difference are as follows: Principal repayments: G.O. Improvement bonds$1,230,000 T. Restricted Assets There were no restricted cash balances at December 31, 2016. U. Reclassifications Certain amounts presented in the prior year data have been reclassified in order to be consistent with the current year’s presentation. V. Comparative Totals The basic financial statements, required supplementary information, combining and individual fund financial statements and schedules, and supplementary financial information include certain prior-year summarized comparative information in total but not at the level of detail required for a presentation in conformity with generally accepted accounting principles. Accordingly, such information should be read in conjunction with the City’s financial statements for the year ended December 31, 2015, from which the summarized information was derived. 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; CITY OF FRIDLEY, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2016 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. Custodial Credit Risk – Deposits: Custodial credit risk is the risk that in the event of a bank failure, the City’s deposits may not be returned to it. State Statutes require that insurance, surety bonds or collateral protect all City deposits. The market value of collateral pledged must equal 110% of deposits not covered by insurance or bonds. As of December 31, 2016, the bank balance of the City’s deposits was covered by federal depository insurance or covered by perfected collateral pledged and held in the City’s name. 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. CITY OF FRIDLEY, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2016 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, 2016 the City had the following investments and maturities: Investment Maturities (in Years) FairLessOver Investment TypeRatingValueThan 11-56-1010 Years Federal Farm Credit BankAAA$500,130$ - $500,130$ - $ - Federal Home Loan BankAAA2,490,840 - 2,490,840 - - Federal National Mortgage AssociationAAA4,560,659748,9053,811,754 - - Federal Home Loan Mortgage CorporationAAA499,175 - 499,175 - - Local government bondsAaa-A15,702,850 - 4,497,8621,204,988 - PEFCOAAA505,620505,620 - - - Brokered CDsN/R9,884,4434,486,8635,397,580 - - Money marketN/R3,676,6703,676,670 - - - Total$27,820,387$9,418,058$17,197,341$1,204,988$ - Total investments$27,820,387 Deposits7,664,847 Petty cash5,050 Total cash and investments$35,490,284 Following is a reconciliation to the City’s cash and investment balances as of December 31, 2016: Cash and investments - primary government: Governmental and business-type (statement A-1)$35,482,990 Fiduciary (statement A-9)7,294 $35,490,284 As of December 31, 2016 the HRA had the following investments and maturities: Investment Maturities (in Years) FairLessOver Investment TypeRatingValueThan 11-56-1010 Years Federal National Mortgage AssociationAAA$1,396,826$ - $1,396,826$ - $ - FICO StripsAAA1,038,2511,038,251 - - - Federal Home Loan BankAAA480,302 - 480,302 - - Aaa - A Local government bonds3,630,448236,3163,394,132 - - 1 Money marketN/R802,935802,935 - - - Total$7,348,762$2,077,502$5,271,260$ - $ - Total investments$7,348,762 Deposits563,479 Total cash and investments$7,912,241 The City categorizes its fair value measurements within the fair value hierarchy established by generally accepted accounting principles. The hierarchy is based on the valuation inputs used to measure the fair value of the asset. The hierarchy has three levels. Level 1 investments are valued using inputs that are based on quoted prices in active markets for identical assets. Level 2 investments are valued using inputs that are based on quoted prices for similar assets or inputs that are observable, either directly or indirectly. Level 3 investments are valued using inputs that are unobservable. CITY OF FRIDLEY, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2016 The City has the following recurring fair value measurements as of December 31, 2016: Fair Value Measurement Using Investment Type12/31/2016Level 1Level 2Level 3 Investments at fair value: Federal Farm Credit Bank$500,130$ - $500,130$ - Federal Home Loan Bank2,490,840 - 2,490,840 - Federal National Mortgage Association4,560,659 - 4,560,659 - Federal Home Loan Mortgage Corporation505,620 - 505,620 - Local government bonds499,175 - 499,175 - PEFCO5,702,850 - 5,702,850 - Brokered CDs9,884,443 - 9,884,443 - Total/Subtotal24,143,717$ - $24,143,717$ - Investments not categorized: External investment pool - US Bank Fund1,112,050 External investment pool - PFM Bank Fund2,312,600 PMA (4M) - Money Market252,020 Total$27,820,387 The HRA has the following recurring fair value measurements as of December 31, 2016: Fair Value Measurement Using Investment Type12/31/2016Level 1Level 2Level 3 Investments at fair value: Federal Home Loan Bank$980,422$ - $980,422$ - Federal National Mortgage Association1,396,826 - 1,396,826 - FICO Strips1,038,251 - 1,038,251 - Brokered CD's3,130,328 - 3,130,328 - Total/Subtotal6,545,827$ - $6,545,827$ - Investments not categorized: External investment pool - US Bank Fund 189,096 External investment pool - PFM Bank Fund613,839 Total$7,348,762 The City’s external investment pool investment PFM Fund is rated AAAm by Standard and Poor’s and the fair value of the position in the pool is the same as the value of pool shares. The pool is managed to maintain a portfolio weighted average maturity of no greater than 60 days and seeks to maintain a constant net asset value (NAV) per share of $1. The pool measures their investments in accordance with Government Accounting Standards Board Statement No. 79, at amortized cost. The PFM Fund has no redemption requirements. C. Investment Risks Custodial credit risk – investments – For investments in securities, custodial credit risk is the risk that in the event of failure of the counterparty to a transaction, the City will not be able to recover the value of its investment securities that are in the possession of an outside party. Investments in investment pools and money markets are not evidenced by securities that exist in physical or book entry form, and therefore are not subject to custodial credit risk disclosures. The City policy is to limit its exposure by holding investments in securities with a major bank’s corporate trust department. Investments are delivered to the City’s trust account and then payment is released to the broker-dealer. CITY OF FRIDLEY, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2016 Interest rate risk – Interest rate risk is the risk that changes in interest rates of debt investments could adversely affect the fair value of an investment. The City’s investment policy requires the City to diversify its investment portfolio to eliminate the risk of loss resulting from over concentration of assets in a specific maturity. The policy also states the City’s investment portfolio will remain sufficiently liquid to enable the City to meet all operating requirements which might be reasonably anticipated. Credit Risk– Credit risk is the risk that an issuer or other counterparty to an investment will be unable to fulfill its obligation to the holder of the investment. State law limits investments to commercial paper to those rated in the highest quality category by at least two nationally recognized rating agencies; in any security of the State of Minnesota or any of its municipalities which is rated “A” or better by a national bond rating service for general obligation and rated “AA” or better for a revenue obligation; a general obligation of the Minnesota Housing Finance Agency to those rated “A” or better by a national bond rating agency; mutual funds or money market funds whose investments are restricted to securities described in MS 118A.04. The City’s investment policy does not place further restrictions on investment options. Concentration of credit risk (City) – Concentration of credit risk is the risk of loss that may be attributed to the magnitude of a government’s investment in a single issuer. The City places no limit on the amount the City may invest in any one issuer. Investments in a single issuer exceeding 5% of the City’s overall investment portfolio are in various holdings as follows: Federal Home Loan Bank8.95% Federal National Mortgage Association16.39% Local government bonds20.50% Concentration of credit risk (HRA) – Concentration of credit risk is the risk of loss that may be attributed to the magnitude of a government’s investment in a single issuer. The HRA places no limit on the amount the HRA may invest in any one issuer. Investments in a single issuer exceeding 5% of the HRA’s overall investment portfolio are in various holdings as follows: Federal Home Loan Bank6.54% Federal National Mortgage Association19.01% FICO Strips14.13% Local government bonds49.40% CITY OF FRIDLEY, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2016 3. Receivables Significant receivables balances not expected to be collected within one year of December 31, 2016 are as follows: Primary Government Major FundsNonmajor GeneralDebt ServiceFundsTotal Special assessments receivable$33,630$570,416$1,105,256$1,709,302 Delinquent property taxes106,06112,7064,033122,800 $139,691$583,122$1,109,289$1,832,102 HRA Component Unit Major Funds RevolvingGeneral LoanFundTotal Mortgage receivable$1,005,294$ - $1,005,294 Allowance for uncollectible accounts(2,067) - (2,067) Delinquent tax increment - 4,6644,664 $1,003,227$4,664$1,007,891 4. Unavailable Revenues Governmental funds report deferred inflows of resources in connection with receivables that are not considered to be available to liquidate liabilities of the current period. At the end of the current fiscal year, the various components of unavailable revenue reported in the governmental funds were as follows: PropertySpecial Interest on TaxesAssessmentsLoan to HRATotal Major funds: General$124,056$42,623$ - $166,679 Debt Service13,001 722,953111,524847,478 Street Improvements71 1,304,339 - 1,304,410 Park Improvements133 - - 133 Nonmajor 4,61896,476 - 101,094 Total unavailable revenue$141,879$2,166,391$111,524$2,419,794 CITY OF FRIDLEY, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2016 5. Capital Assets Capital asset activity for the year ended December 31, 2016 was as follows: BeginningEnding BalanceIncreasesDecreasesBalance Primary Government Governmental activities: Capital assets, not being depreciated: Land$2,814,016$ - $ - $2,814,016 Construction in progress1,939,7111,764,648(1,866,409)1,837,950 Total capital assets, not being depreciated4,753,7271,764,648(1,866,409)4,651,966 Capital assets, being depreciated: Buildings and structures8,189,7985,379,436 - 13,569,234 Machinery and equipment10,168,719831,583(636,879)10,363,423 Improvements6,919,527254,381 - 7,173,908 Infrastructure33,314,9781,766,252(6,943,026)28,138,204 Total capital assets, being depreciated58,593,0228,231,652(7,579,905)59,244,769 Less accumulated depreciation for: Buildings and structures7,227,003176,502 - 7,403,505 Machinery and equipment6,856,937837,577(606,669)7,087,845 Improvements5,155,276345,257 - 5,500,533 Infrastructure22,955,690849,602(6,943,026)16,862,266 Total accumulated depreciation42,194,9062,208,938(7,549,695)36,854,149 Total capital assets being depreciated - net16,398,1166,022,714(30,210)22,390,620 Governmental activities capital assets - net$21,151,843$7,787,362($1,896,619)$27,042,586 BeginningEnding Primary GovernmentBalanceIncreasesDecreasesBalance Business-type activities: Capital assets, not being depreciated: Land$306,477$ - $ - $306,477 Construction in progress798,32914,181(796,519)15,991 Total capital assets, not being depreciated1,104,80614,181(796,519)322,468 Capital assets, being depreciated: Buildings and structures3,296,669337,585 - 3,634,254 Improvements other than buildings15,453,16697,382(25,672)15,524,876 Machinery and equipment3,406,907206,706(19,094)3,594,519 Infrastructure25,415,9011,954,307 - 27,370,208 Total capital assets, being depreciated47,572,6432,595,980(44,766)50,123,857 Less accumulated depreciation for: Buildings and structures2,025,07783,628 - 2,108,705 Improvements other than buildings9,287,708599,267(25,672)9,861,303 Machinery and equipment2,607,395183,058(19,094)2,771,359 Infrastructure15,263,677615,749 - 15,879,426 Total accumulated depreciation29,183,8571,481,702(44,766)30,620,793 Total capital assets being depreciated - net18,388,7861,114,278 - 19,503,064 Business-type activities capital assets - net$19,493,592$1,128,459($796,519)$19,825,532 Component Unit Capital assets, not being depreciated: Land$2,023,511$ - $ - $2,023,511 CITY OF FRIDLEY, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2016 Depreciation expense was charged to functions/programs of the primary government as follows: Governmental activities: General government$218,440 Public safety446,073 Public works, including depreciation of general infrastructure assets1,510,363 Community Development7,092 Park and recreation26,970 Total depreciation expense - governmental activities$2,208,938 Business-type activities: Liquor$85,817 Water824,553 Sewer298,194 Storm water273,138 Total increases in accumulated depreciation$1,481,702 CITY OF FRIDLEY, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2016 6. 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, 2016, the governmental long-term bonded debt and loans of the financial reporting entity consisted of the following: Governmental Activities: $1,915,000 General Obligation Improvement Bonds, Series 2008A due in varying annual installments of $165,000 - $225,000 through February 1, 2019; interest at 2.95% - 4.00%.$645,000 $1,910,000 General Obligation Improvement Bonds, Series 2007A due in varying annual installments of $155,000 - $230,000 through August 1, 2018; interest at 3.50% - 3.85%.450,000 $1,215,000 General Obligation Improvement Bonds, Series 2010C due in varying annual installments of $55,000 - $135,000 through February 1, 2021; interest at 2.00% - 3.00%.580,000 $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%.- $2,505,000 General Obligation Improvement Bonds of 2006 due in varying annual installments of $205,000 - $305,000 through February 1, 2017; interest at 4.00%.305,000 $550,000 General Obligation Equipment Certificates, Series 2010B due in varying annual installments of $50,000 - $70,000 through February 1, 2020; interest at 2.00% - 3.00%265,000 . $1,280,000 General Obligation Equipment Certificates, Series 2012A due in varying annual installments of $135,000 - $150,000 through February 1, 2022; interest at 1.00% - 1.65%865,000 Subtotal governmental activities$3,110,000 Business-Type Activities: $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 2.50% - 4.00%.$655,000 $3,725,000 General Obligation Water Revenue Bonds of 2008B due in varying annual installments of $240,000 - $315,000 through February 1, 2023; interest at 2.95% - 4.50%.1,945,000 $2,810,000 General Obligation Utility Revenue Bonds of 2010A due in varying annual installments of $160,000 - $265,000 through February 1, 2026; interest at 2.50% - 3.50%2,050,000 $5,995,000 General Obligation Water Revenue Bonds of 2016A due in varying annual installments of $275,000 - $575,000 through February 1, 2031; interest at 2.00% - 2.25%5,995,000 Unamortized premium166,935 Subtotal business-type activities10,811,935 Total primary government$13,921,935 CITY OF FRIDLEY, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2016 Annual debt service requirements to maturity for general obligation bonds and loans are as follows: Primary Government Governmental ActivitiesBusiness-Type Activities Year EndingG.O. ImprovementG.O. Equipment CertificatesRevenue Bonds December 31,PrincipalInterestPrincipalInterestPrincipalInterest 2017$1,525,000$43,132$205,000$17,205$2,600,000$261,888 2018125,000 11,775 205,000 13,855 915,000 180,688 2019130,000 7,950 210,000 10,371 945,000 155,763 2020135,000 3,975 215,000 6,570 730,000 134,838 202165,000 975 145,0003,526755,000 118,038 2022 - - 150,0001,238770,000 100,763 2023 - - - - 790,000 82,794 2024 - - - - 510,000 67,044 2025 - - - - 525,000 53,525 2026 - - - - 535,000 39,363 2027 - - - - 300,000 29,213 2028 - - - - 310,000 23,113 2029 - - - - 315,000 16,862 2030 - - - - 320,000 10,513 2031 - - - - 325,000 3,656 Total$1,980,000$67,807$1,130,000$52,765$10,645,000$1,278,061 Long-term liability activity for the year ended December 31, 2016, was as follows: BeginningEndingDue Within BalanceAdditionsReductionsBalanceOne Year Governmental activities: Bonds payable: G.O. improvement bonds$3,010,000$ - ($1,030,000)$1,980,000$1,525,000 G.O. equipment certificates1,330,000 - (200,000)1,130,000205,000 Total bonds payable4,340,000 - (1,230,000)3,110,0001,730,000 Compensated absences1,003,978896,868(872,190)1,028,656822,678 Total governmental activities long-term debt$5,343,978$896,868($2,102,190)$4,138,656$2,552,678 Business-type activities: Bonds payable: G.O. revenue bonds$5,258,881$6,168,246($615,192)$10,811,935$2,600,000 Compensated absences are generally liquidated by the Employee Benefits Fund. All long-term bonded indebtedness outstanding at December 31, 2016 is backed by the full faith and credit of the City, including improvement and revenue bond issues. Delinquent assessments receivable at December 31, 2016 totaled $2,166,391. CITY OF FRIDLEY, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2016 Crossover Refunding Series 2016A Bonds On June 2, 2016, the City issued $5,995,000 in General Obligation Water Revenue Bonds, Series 2016A with an average interest rate of 2.02%. $1,680,000 of the proceeds will be used to advance refund $1,700,000 of outstanding 2008B Series Bonds with an average interest rate of 3.73%. The net proceeds were used to purchase U.S. government securities in the amount of $1,717,714.Those securities were deposited in an irrevocable trust with an escrow agent to provide for the interest on the refunding bonds through the crossover date and called principal on the refunded bonds on February 1, 2017. The City advance refunded the 2008B General Obligation Water Revenue Bonds to reduce its total debt service payments during the years 2017 through 2023 by $156,890 and to obtain an economic gain (difference between the present value of the debt service payments on the old and new debt) of $147,595. The City is responsible for the debt service of the refunded bonds through the crossover date (February 1, 2017) and the debt service of the refunding bonds after the crossover date. The debt service of the refunding bonds before the crossover date is payable from the escrow account. Assets held in the escrow agent total $1,717,714 at December 31, 2016. The refunding portion of the 2016A bonds are crossover refunding bonds whereby the City and the escrow agent are responsible for the debt service payments as follows: Debt Service Commitment Year EndingRefunded RefundingEscrow December 31,Bonds TotalBonds TotalAccountCity 2017$1,984,949$22,307$1,722,307$284,949 2018 - 298,600 - 298,600 2019 - 298,300 - 298,300 2020 - 297,900 - 297,900 2021 - 302,400 - 302,400 2022 - 301,700 - 301,700 2023 - 300,900 - 300,900 Total$1,984,949$1,822,107$1,722,307$2,084,749 CITY OF FRIDLEY, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2016 Revenues Pledged Revenue PledgedCurrent Year Percent ofDebt servicePrincipalPledged Use oftotalas a % ofTerm ofRemainingand InterestRevenue Bond IssueProceedsTypedebt servicenet revenuesPledgePrincipalpaidreceived 2012ACapital EquipmentProperty Taxes100%2013-$865,000$151,630$ - 2022 2010BCapital EquipmentProperty Taxes100%2011-265,00068,700234,359 2020 2010CStreet ImprovementsProperty Taxes and100%2011-580,000139,20073,355 Special Assessments2021 2008AStreet ImprovementsProperty Taxes and100%2008-645,000229,800467,074 Special Assessments2019 2007AStreet ImprovementsProperty Taxes and100%2007-450,000231,153401,579 Special Assessments2018 2006AStreet ImprovementsProperty Taxes and100%2007-305,000308,000248,047 Special Assessments2017 2005AStreet ImprovementsProperty Taxes and100%2006- - 213,9381,419 Special Assessments2016 2016A Water Revenue BondsInfrastructure ImprovementsWater Customer100%0.00%2016-5,995,000 - 3,381,865 Net Revenue2031 Water, Sewer and 2010A Utility Revenue BondsInfrastructure ImprovementsStorm Customer100%2.30%2011-2,050,000237,52510,306,831 Net Revenue2026 2008B Water Revenue BondsInfrastructure ImprovementsWater Customer100%9.60%2008-1,945,000324,6973,381,865 Net Revenue2023 2004 Water Revenue BondsInfrastructure ImprovementsWater Customer100%6.78%2004-655,000229,3883,381,865 Net Revenue2019 7. Defined Benefit Pension Plans A. Plan Description The City participates in the following cost-sharing multiple-employer defined benefit pension plans administered by the Public Employees Retirement Association of Minnesota (PERA). PERA’s defined benefit pension plans are established and administered in accordance with Minnesota Statutes, Chapters 353 and 356. PERA’s defined benefit pension plans are tax qualified plans under Section 401 (a) of the Internal Revenue Code. 1. General Employees Retirement Fund (GERF) All full-time (with the exception of employees covered by PEPFF) and certain part-time employees of the City are covered by the General Employees Retirement Fund (GERF). GERF 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. The Basic Plan was closed to new members in 1967. All new members must participate in the Coordinated Plan. CITY OF FRIDLEY, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2016 2. Public Employees Police and Fire Fund (PEPFF) The PEPFF, originally established for police officers and firefighters not covered by a local relief association, now covers all police officers and firefighters hired since 1980. Effective July 1, 1999, the PEPFF also covers police officers and firefighters belonging to a local relief association that elected to merge with and transfer assets and administration to PERA. B. Benefits Provided PERA provides retirement, disability, and death benefits. Benefit provisions are established by state statute and can only be modified by the state legislature. Benefit increases are provided to benefit recipients each January. Increases are related to the funding ratio of the plan. Members in plans that are at least 90 percent funded for two consecutive years are given 2.5% increases. Members in plans that have not exceeded 90% funded, or have fallen below 80%, are given 1% increases. The benefit provisions stated in the following paragraphs of this section are current provisions and apply to active plan participants. Vested, terminated employees who are entitled to benefits but are not receiving them yet are bound by the provisions in effect at the time they last terminated their public service. 1. GERF Benefits 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. Two methods are used to compute benefits for PERA's Coordinated and Basic Plan members. The retiring member receives the higher of a step-rate benefit accrual formula (Method 1) or a level accrual formula (Method 2). Under Method 1, the annuity accrual rate for a Basic Plan member is 2.2% of average salary for each of the first ten years of service and 2.7% for each remaining year. The annuity accrual rate for a Coordinated Plan member is 1.2% of average salary for each of the first ten years and 1.7% for each remaining year. Under Method 2, the annuity accrual rate is 2.7% of average salary for Basic Plan members and 1.7% for Coordinated Plan members for each year of service. For members hired prior to July 1, 1989, a full annuity is available when age plus years of service equal 90 and normal retirement age is 65. For members hired on or after July 1, 1989, normal retirement age is the age for unreduced Social Security benefits capped at 66. 2. PEPFF Benefits Benefits for the PEPFF members first hired after June 30, 2010, but before July 1, 2014, vest on a prorated basis from 50% after five years up to 100% after ten years of credited service. Benefits for PEPFF members first hired after June 30, 2014, vest on a prorated basis from 50% after ten years up to 100% after twenty years of credited service. The annuity accrual rate is 3% of average salary for each year of service. For PEPFF members who were first hired prior to July 1, 1989, a full annuity is available when age plus years of service equal at least 90. CITY OF FRIDLEY, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2016 C. Contributions Minnesota Statutes Chapter 353 sets the rates for employer and employee contributions. Contribution rates can only be modified by the state legislature. 1. GERF Contributions Basic Plan members and Coordinated Plan members were required to contribute 9.1% and 6.50%, respectively, of their annual covered salary in calendar year 2016. The City was required to contribute 11.78% of pay for Basic Plan members and 7.50% for Coordinated Plan members in calendar year 2016. The City’s contributions to the GERF for the year ended December 31, 2016, were $458,639. The City’s contributions were equal to the required contributions as set by state statute. 2. PEPFF Contributions Plan members were required to contribute 10.8% of their annual covered salary in calendar year 2016. The City was required to contribute 16.20% of pay for PEPFF members in calendar year 2016. The City’s contributions to the PEPFF for the year ended December 31, 2016, were $606,767. The City’s contributions were equal to the required contributions as set by state statute. D. Pension Costs 1. GERF Pension Costs At December 31, 2016, the City reported a liability of $8,265,655 for its proportionate share of the GERF’s net pension liability. The City’s net pension liability reflected a reduction due to the State of Minnesota’s contribution of $6 million to the fund in 2016. The State of Minnesota is considered a non-employer contributing entity and the state’s contribution meets the definition of a special funding situation. The State of Minnesota’s proportionate share of the net pension liability associated with the City totaled $107,922. The net pension liability was measured as of June 30, 2016, and the total pension liability used to calculate the net pension liability was determined by an actuarial valuation as of that date. The City’s proportion of the net pension liability was based on the City’s contributions received by PERA during the measurement period for employer payroll paid dates from July 1, 2015, through June 30, 2016, relative to the total employer contributions received from all of PERA’s participating employers. At June 30, 2016, the City’s proportion was .1018% which was an increase of .0014% from its proportion measured as of June 30, 2015. For the year ended December 31, 2016, the City recognized pension expense of $1,097,266 for its proportionate share of the GERF’s pension expense. In addition, the City recognized an additional $32,179 as pension expense (and grant revenue) for its proportionate share of the State of Minnesota’s contribution of $6 million to the General Employees Fund. CITY OF FRIDLEY, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2016 At December 31, 2016, the City reported its proportionate share of the GERF’s deferred outflows of resources and deferred inflows of resources related to pensions from the following sources: Deferred OutflowsDeferred Inflows of Resourcesof Resources Differences between expected and actual economic experience$ - $671,462 Changes in actuarial assumptions1,618,423 - Difference between projected and actual investment earnings1,568,857 - Changes in proportion 52,008197,295 Contributions paid to PERA subsequent to the measurement date231,035 - Total$3,470,323$868,757 $231,035 reported as deferred outflows of resources related to pensions resulting from City contributions subsequent to the measurement date will be recognized as a reduction of the net pension liability in the year ended December 31, 2017. Other amounts reported as deferred outflows and inflows of resources related to pensions will be recognized in pension expense as follows: Pension Year EndedExpense December 31,Amount 2017$628,217 2018628,215 2019815,529 2021298,570 2020 - Thereafter - 2. PEPFF Pension Costs At December 31, 2016, the City reported a liability of $16,253,355 for its proportionate share of the PEPFF’s net pension liability. The net pension liability was measured as of June 30, 2015, and the total pension liability used to calculate the net pension liability was determined by an actuarial valuation as of that date. The City’s proportion of the net pension liability was based on the City’s contributions received by PERA during the measurement period for employer payroll paid dates from July 1, 2015, through June 30, 2016, relative to the total employer contributions received from all of PERA’s participating employers. At June 30, 2016, the City’s proportion was .4050% which was a decrease of .0120% from its proportion measured as of June 30, 2015. The City also recognized $36,450 for the year ended December 31, 2016, as revenue (and grant revenue) for its proportionate share of the State of Minnesota’s on-behalf contributions to the PEPFF. Legislation passed in 2013 required the State of Minnesota to begin contributing $9 million to the PEPFF each year, starting in fiscal year 2014. For the year ended December 31, 2016, the City recognized pension expense of $2,820,749 for its proportionate share of the PEPFF’s pension expense. CITY OF FRIDLEY, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2016 At December 31, 2016, the City reported its proportionate share of the PEPFF’s deferred outflows of resources and deferred inflows of resources related to pensions from the following sources: Deferred OutflowsDeferred Inflows of Resourcesof Resources Differences between expected and actual economic experience$ - $1,864,567 Changes in actuarial assumptions8,944,931 - Difference between projected and actual investment earnings2,480,376 - Changes in proportion 115,204112,252 Contributions paid to PERA subsequent to the measurement date307,473 - Total$11,847,984$1,976,819 $307,473 reported as deferred outflows of resources related to pensions resulting from City contributions subsequent to the measurement date will be recognized as a reduction of the net pension liability in the year ended December 31, 2017. Other amounts reported as deferred outflows and inflows of resources related to pensions will be recognized in pension expense as follows: Pension Year EndedExpense December 31,Amount 2017$2,062,779 20182,062,779 20192,062,778 20201,862,334 20211,513,022 Thereafter - E. Actuarial Assumptions The total pension liability in the June 30, 2016, actuarial valuation was determined using the following actuarial assumptions: Inflation 2.50% per year Active Member Payroll Growth 3.25% per year Investment Rate of Return 7.50% Salary increases were based on a service-related table. Mortality rates for active members, retirees, survivors and disabilitants were based on RP-2014 tables for the General Employees Plan and RP-2000 tables for the Police and Fire Plan for males or females, as appropriate, with slight adjustment. Cost of living benefit increases for retirees are assumed to be one percent per year for all future years for the General Employees Plan and Police and Fire Plan. CITY OF FRIDLEY, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2016 Actuarial assumptions used in the June 30, 2016 valuation were based on the results of actuarial experience studies. The most recent four-year experience study in the General Employees Plan was completed in 2015. The experience study for Police and Fire Plan was for the period July 1, 2004 through June 30, 2009. The most recent five-year experience study for the Police and Fire Plan was completed in 2016, but the results were not adopted at the time of valuation. The following changes in actuarial assumptions occurred in 2016: General Employees Fund The assumed post-retirement benefit increase rate was changed from 1.0% per year through 2035 and 2.5% per year thereafter to 1.0% per year for all future years. The assumed investment return was changed from 7.9% to 7.5%. The single discount rate was changed from 7.9% to 7.5%. Other assumptions were changed pursuant to the experience study dated June 30, 2015. The assumed future salary increases, payroll growth, and inflation were decreased by 0.25% to 3.25% for payroll growth and 2.50% for inflation. Police and Fire Fund The assumed post-retirement benefit increase rate was changed from 1.0% per year through 2037 and 2.5% thereafter to 1.0% per year for all future years. The assumed investment return was changed from 7.9% to 7.5%. The single discount rate changed from 7.9% to 5.6%. The assumed future salary increases, payroll growth, and inflation were decreased by 0.25% to 3.25% for payroll growth and 2.50% for inflation. The long-term expected rate of return on pension plan investments is 7.5%. The State Board of Investment, which manages the investments of PERA, prepares an analysis of the reasonableness on a regular basis of the long-term expected rate of return using a building-block method in which best-estimate ranges of expected future rates of return are developed for each major asset class. These ranges are combined to produce an expected long-term rate of return by weighting the expected future rates of return by the target asset allocation percentages. The target allocation and best estimates of geometric real rates of return for each major asset class are summarized in the following table: TargetLong-Term Expected Asset ClassAllocationReal Rate of Return Domestic Stocks45%5.50% International Stocks15%6.00% Bonds18%1.45% Alternative Assets20%6.40% Cash2%0.50% Total100% F. Discount Rate The discount rate used to measure the total pension liability in 2016 was 7.50%, a reduction from 7.9% used in 2015. The projection of cash flows used to determine the discount rate assumed that contributions from plan members and employers will be made at rates set in Minnesota Statutes. Based on these assumptions, the fiduciary net position of the General Employees Fund CITY OF FRIDLEY, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2016 was projected to be available to make all projected future benefit payments of current plan members. Therefore, the long-term expected rate of return on pension plan investments was applied to all periods of projected benefit payments to determine the total pension liability. In the Police and Fire Fund, the fiduciary net position was projected to be available to make all projected future benefit payments of current plan members through June 30, 2056. Beginning in fiscal years ended June 30, 2057 for the Police and Fire Fund when projected benefit payments exceed the funds’ projected fiduciary net position, benefit payments were discounted at the municipal bond rate of 2.85% based on an index of 20-year general obligation bonds with an average AA credit rating at the measurement date. An equivalent single discount rate of 5.60% for the Police and Fire Fund was determined that produced approximately the same present value of projected benefits when applied to all years of projected benefits as the present value of projected benefits using 7.50% applied to all years of projected benefits through the point of asset depletion and 2.85% after. G. Pension Liability Sensitivity The following presents the City’s proportionate share of the net pension liability for all plans it participates in, calculated using the discount rate disclosed in the preceding paragraph, as well as what the City’s proportionate share of the net pension liability would be if it were calculated using a discount rate 1 percentage point lower or 1 percentage point higher than the current discount rate: 1% Decrease in1% Increase in Discount Rate (6.5%)Discount Rate (7.5%)Discount Rate (8.5%) City's proportionate share of the GERF net pension liability$11,739,680$8,265,655$5,404,004 1% Decrease in1% Increase in Discount Rate (4.6%)Discount Rate (5.6%)Discount Rate (6.6%) City's proportionate share of the PEPFF net pension liability$22,752,540$16,253,355$10,943,027 H. Pension Plan Fiduciary Net Position Detailed information about each pension plan’s fiduciary net position is available in a separately- issued PERA financial report that includes financial statements and required supplementary information. That report may be obtained on the Internet at www.mnpera.org. I. Pension Expense Pension expense recognized by the City for the fiscal year ended December 31, 2016 is as follows: GERF$1,129,445 PEPFF2,820,749 Total$3,950,194 CITY OF FRIDLEY, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2016 8. Defined Contribution Plan Five Council members of the City of Fridley are covered by the Public Employees Defined Contribution Plan (PEDCP), a multiple-employer deferred compensation plan administered by PERA. The PEDCP is a tax qualified plan under Section 401(a) of the Internal Revenue Code and all contributions by or on behalf of employees are tax deferred until time of withdrawal. Plan benefits depend solely on amounts contributed to the plan plus investment earnings, less administrative expenses. Minnesota Statutes, Chapter 353D.03, specifies plan provisions, including the employee and employer contribution rates for those qualified personnel who elect to participate. An eligible elected official who decides to participate contributes 5% of salary which is matched by the elected official's employer. 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% of employer contributions and twenty-five hundredths of 1% (.0025) of the assets in each member's account annually. Total contributions made by the City during fiscal year 2016 were: Contribution AmountPercentage of Covered PayrollRequired Employer Employee(Pension Expense)EmployeeEmployerRate $2,138$2,1385%5%5% 9. Defined Contribution Pension Plan - Fridley Volunteer Firefighters Relief Association Plan Description The Fridley Volunteer Firefighters Relief Association (Association), is a single employer public employee retirement system that acts as a common investment administrator for all of the City’s firefighters. Pursuant to a 1987 amendment to its by-laws, the pension plan is a defined contribution plan, prior to 1987 the pension plan was a defined benefit pension plan. Benefits and contribution requirements are established by the Association’s by-laws and can be amended by the Association’s Board of Trustees with approval from the City of Fridley, Minnesota. All provisions are within limitations established by Minnesota Statutes. 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 $148,297 and $142,002 in State Aid to the Association for 2016 and 2015, respectively. This transaction is recorded as revenue and expenditures in the City’s financial statements. CITY OF FRIDLEY, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2016 During 2016 and as of December 31, 2016, the Association held no securities issued by the City or other related parties. 10. Other Post-Employment Benefits A. Plan Description In addition to providing the pension benefits described in Note 7, the City provides post- employment health care benefits (as defined in paragraph B) for retired employees and police and firefighters disabled in the line of duty, through a single-employer defined benefit plan. The termPlan refers to the City’s requirement by State Statute to provide retirees with access to health insurance. The OPEB plan is administered by the City. The authority to provide these benefits is established in Minnesota Statutes Sections 471.61 Subd. 2a, and 299A.465. The benefits, benefit levels, employee contributions and employer contributions are governed by the City and can be amended by the City through its personnel manual and collective bargaining agreements with employee groups. The Plan is not accounted for as a trust fund, as an irrevocable trust has not been established to account for the Plan. The Plan does not issue a separate report. B. Benefits Provided Retirees The City is required by State Statute to allow retirees to continue participation in the City’s group health insurance plan if the individual terminates service with the City through service retirement or disability retirement. Covered spouses may continue coverage after the retiree’s death. The surviving spouse of an active employee may continue coverage in the group health insurance plan after the employee’s death. All health care coverage is provided through the City’s group health insurance plans. The retiree is required to pay 100% of their premium cost for the City-sponsored group health insurance plan in which they participate. The premium is a blended rate determined on the entire active and retiree population. Since the projected claims costs for retirees exceed the blended premium paid by retirees, the retirees are receiving an implicit rate subsidy (benefit). The coverage levels are the same as those afforded to active employees. Upon a retiree reaching 65 years of age, Medicare becomes the primary insurer. The monthly retiree premiums effective January 1, 2016 were: SingleMarried Regular$853$2,422 HRA6571,860 HSA 6231,761 CITY OF FRIDLEY, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2016 C. Participants As of the actuarial valuation dated January 1, 2014, participants consisted of: Retired participants and beneficiaries currently receiving benefits - Active employees66 Waiving Coverage60 Total126 Participating employers1 D. Funding Policy The additional cost of using a blended rate for actives and retirees is currently funded on a pay- as-you-go basis. The City Council may change the funding policy at any time. E. Annual OPEB Costs and Net OPEB Obligation The City’s annual other post employment benefit (OPEB) cost is calculated based on the annual required contribution (ARC) of the employer, an amount actuarially determined in accordance with the parameters of GASB Statement No. 45. The ARC represents a level of funding that, if paid on an ongoing basis, is projected to cover normal cost each year and amortize any unfunded actuarial liabilities (or funding excess) over a period not to exceed 30 years. The net OPEB obligation as of December 31, 2016, was calculated as follows: Annual required contribution (ARC)$69,055 Interest on net OPEB obligation28,472 Adjustment to ARC(41,162) Annual OPEB cost56,365 Contributions made during the year(13,907) Increase in net OPEB obligation42,458 Net OPEB obligation - beginning of year711,775 Net OPEB obligation - end of year$754,233 For the governmental activities, other post-employment benefits are generally liquidated through the General Fund. CITY OF FRIDLEY, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2016 The City’s annual OPEB cost, the percentage of annual OPEB cost contributed to the Plan and the net OPEB obligation for 2014 to 2016 was as follows: Percentage of Fiscal YearAnnual OPEBEmployer Annual OPEB CostNet OPEB EndedCostContributionsContributedObligation December 31, 2014$52,295$3,1496.0%$665,099 December 31, 201554,3837,70714.2%711,775 December 31, 201656,36513,90724.7%754,233 F. Funded Status and Funding Progress The City currently has no assets that have been irrevocably deposited in a trust for future health benefits; therefore, the actuarial value of assets is zero. The funded status of the Plan was as follows: Unfunded ActuarialActuarialUAAL as a ActuarialActuarialAccruedAccruedFundedCoveredPercentage of ValuationValue of AssetsLiability (AAL)*Liability (UAAL)RatioPayrollCovered Payrol Date(a)(b)(b-a)(a/b)(c) ( (b-a) / c) anuary 1, 2014$ - $494,791$494,7910.0%n/an/a J *Using the projected unit credit actuarial cost method. G. Actuarial Methods and Assumptions Actuarial valuations of an ongoing plan involve estimates of the value of reported amounts and assumptions about the probability of occurrence of events far into the future. Examples include assumptions about future employment, mortality and the health care cost trend. Amounts determined regarding the funded status of the plan and the annual required contributions (ARC) of the employer are subject to continual revision as actual results are compared with past expectations and new estimates are made about the future. The schedule of funding progress, presented as required supplementary information following the notes to financial statements, presents multi-year trend information that shows whether the actuarial value of plan assets is increasing or decreasing over time relative to the actuarial accrued liabilities for benefits. Projections of benefits for financial reporting purposes are based on the substantive plan (the plan as understood by the employer and plan members) and include the types of benefits provided at the time of each valuation and the historical pattern of sharing of benefit costs between the employer and plan members to that point. The actuarial methods and assumptions used include techniques that are designed to reduce the effect of short-term volatility in actuarial accrued liabilities and the actuarial value of assets, consistent with the long-term perspective of the calculations. In the January 1, 2014 actuarial valuation, the Projected Unit Credit Actuarial cost method was used. The actuarial assumptions included a 4.0% investment rate of return (net of administrative expenses) and an initial annual health care cost trend rate of 7.5% reduced by 0.31% each year CITY OF FRIDLEY, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2016 to arrive at an ultimate health care cost trend rate of 5.0%, which includes a 3% inflation assumption. The actuarial value of assets was $0. The plan’s unfunded actuarial accrued liability is being amortized as a level dollar amount over a 30-year open period. The remaining amortization period at December 31, 2014, was 30 years. 11. Interfund Receivables, Payables and Transfers Interfund payables and receivables are representative of lending/borrowing arrangements to cover deficit cash balances at the end of the fiscal year. Interfund receivables and payables of the City are as follows: InterfundInterfund ReceivablesPayables Due From/Due To: Major Funds: General Fund$48,764$ - Nonmajor Governmental Funds: Special Revenue Funds: Drug & Gambling Forfeiture Fund - 19,667 Police Activity Fund - 29,097 $48,764$48,764 Interfund receivables and payables of the HRA component unit at December 31, 2016 are as follows: InterfundInterfund ReceivablesPayables Due From/Due To: General Fund$7,186,707$ - Capital Projects Funds: Lake Pointe - 325,303 Gateway East - 361,653 Gateway West - 400,109 Gateway Northeast - 3,858,678 BAE Hazardous Sub District - 2,230,406 Northstar Transit Station - 10,558 $7,186,707$7,186,707 The above balances are not expected to be eliminated within one year of December 31, 2016. CITY OF FRIDLEY, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2016 Interfund Transfers: Transfer InTransfer Out Governmental Funds: Major Funds: General Fund (1) (2) (3) (4) (5)$532,900$907,100 Special Assessment Debt Service (1) - 350,000 Street Improvements (1) (8)557,84994,400 Park Improvements (6)75,000 - Nonmajor Funds (2) (3) (7) (8) 882,100557,849 Total governmental funds2,047,8491,909,349 Internal Service Funds: Employee Benefits (4)100,000 - Self Insurance (5)100,000 - Total internal service funds200,000 - Proprietary Funds: Liquor (1) (6) (7) - 338,500 Total proprietary funds - 338,500 Total$2,247,849$2,247,849 (1) Transfer of $532,900 to finance General Fund (2) Transfer to Building Improvement Fund for new civic campus (3) Transfer to finance IT Improvement Fund (4) Transfer to Employee Benefit Fund to cover health insurance premiums (5) Transfer to Self Insurance Fund to cover the City's general liability policy (6) Transfer to Park Improvement Fund (7) Transfer to Capital Equipment Fund (8) Transfers to other funds to close out 2011 Street Improvement Fund Interfund transfers allow the City and HRA to allocate financial resources to the funds that receive benefit from services provided by another fund. Most of the interfund transfers fall under that category. CITY OF FRIDLEY, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2016 12. Fund Balance A. CLASSIFICATIONS At December 31, 2016, a summary of the governmental fund balance classifications are as follows: DebtStreetParkOtherTotalComponent General FundServiceImprovementsImprovementsGovernmentalCityUnit Nonspendable: Inventory$51,305$ - $ - $ - $ - $51,305$ - Mortgage loan receivable - - - - - - 1,003,757 Total nonspendable51,305 - - - - 51,3051,003,757 Restricted for: Donations35,903 - - - - 35,903 - Debt service - 1,830,650 - - - 1,830,650 - Tax increment - - - - - - 805,929 Cable television equipment - - - - 66,89366,893 - Total restricted35,9031,830,650 - - 66,8931,933,446805,929 Committed to: Cable television programming - - - - 1,461,0701,461,070 - Recycling programs - - - - 89,71889,718 - Nature Center activities - - - - 204,743204,743 - Public improvements - - - - 27,56527,565 - Police activity - - - - 4,4044,404 - Capital equipment - - - - 768,150768,150 - Housing loan program - - - - - - 2,010,310 Total committed - - - - 2,555,6502,555,6502,010,310 Assigned to: Capital improvements - 5,173,3822,796,8011,470,3001,132,80410,573,287 - Total assigned - 5,173,3822,796,8011,470,3001,132,80410,573,287 - Unassigned9,084,228 - - - (27,574)9,056,6543,098,434 Total$9,171,436$7,004,032$2,796,801$1,470,300$3,727,773$24,170,342$6,918,430 B. MINIMUM UNASSIGNED FUND BALANCE POLICY The City Council has formally adopted a policy regarding the minimum unassigned fund balance for the General Fund. The most significant revenue source of the General Fund is property taxes. This revenue source is received in two installments during the year – June and December. As such, it is the City’s goal to begin each fiscal year with sufficient working capital to fund operations between each semi-annual receipt of property taxes. The City’s policy for unassigned funds in the General Fund is equal to 35% - 50% of the following year General Fund expenditures. At December 31, 2016, the unassigned fund balance of the General Fund was $9,084,228, compared to its targeted unassigned fund balance of between $5,650,050 and $8,071,500. CITY OF FRIDLEY, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2016 13. Tax Increment Districts The HRA is the administering authority for the following Tax Increment Districts: FiscalRetained YearDisparityBy Tax Capacity Values EstablishedDistrictDistrict NameCurrentOriginalCapturedAdjustmentsAuthority 19856 Lake Pointe$835,840$326,940$508,900$ - $508,900 199211 University/Osborne76,278 26,478 49,800 - 49,800 199212 McGlynn's69,446 41,254 28,192 - 28,192 199513 Satellite Lane Apartments34,528 1,403 33,125 - 33,125 200017 Gateway East34,049 3,365 30,684 - 30,684 200718 Gateway West27,645 5,042 22,603 - 22,603 200719 Main Street171,812 45,628 126,184 - 126,184 201320 TIF 20 HSS 20A602,696 - 602,696 - 602,696 1995HR1/Q3Housing Replacement1,778 236 1,542 - 1,542 1995HR1/S3Housing Replacement1,974 310 1,664 - 1,664 1995HR1/S4Housing Replacement2,191 338 1,853 - 1,853 1995HR1/S5Housing Replacement1,412 225 1,187 - 1,187 1995HR1/S6Housing Replacement1,581 266 1,315 - 1,315 1995HR1/V6Housing Replacement3,232 316 2,916 - 2,916 1995HR1/T7Housing Replacement1,838 384 1,454 - 1,454 1995HR1/V9Housing Replacement1,870 286 1,584 - 1,584 1995HR1/W1Housing Replacement1,502 357 1,145 - 1,145 1995HR1/W2Housing Replacement1,339 286 1,053 - 1,053 1995HR1/W6Housing Replacement5,308 516 4,792 - 4,792 1995HR1/W7Housing Replacement1,921 170 1,751 - 1,751 1995HR1/X2Housing Replacement30,952 32,040 (1,088) - (1,088) 1995HR1/X8Housing Replacement2,211 503 1,708 - 1,708 1995HR1/Y2Housing Replacement1,750 302 1,448 - 1,448 1995HR1/Y1Housing Replacement 1,740 335 1,405 - 1,405 1995HR1/X2Northstar Transit Station1,208,374 1,221,288 (12,914) - (12,914) Totals$3,123,267$1,708,268$1,414,999$ - $1,414,999 14. 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. 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 $2,500 deductible. Property and casualty insurance coverage is provided through a pooled self-insurance program through 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 commercial companies for claims in excess of various amounts. For property (other than vehicles for which the City is self-insured) and casualty coverage, the City has a $75,000 deductible per occurrence with a $150,000 annual maximum. This deductible gets paid out of the Self-Insurance Fund as necessary. CITY OF FRIDLEY, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2016 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, 2016, the Self Insurance Fund has accumulated equity in the amount of $1,223,927 to cover future claims and losses. B. Litigation The City attorney and management 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 and management, 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, 2016. 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. E. Tax Abatements – Pay-As-You-Go Tax Increment The City provides tax abatements pursuant to Minnesota Statutes 469.174 to 469.1794 (Tax Increment Financing) through a pay-as-you-go note program. Tax increment financing (TIF) can be used to encourage private development, redevelopment, renovation and renewal, growth in low-to-moderate-income housing, and economic development within the City. TIF captures the increase in tax capacity and property taxes from development or redevelopment to provide funding for the related project. CITY OF FRIDLEY, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2016 The City has three tax increment pay-as-you-go agreements. The agreements are not a general obligation of the City and are payable solely from available tax increment. Accordingly, these agreements are not reflected in the financial statements of the City. Details of the pay-as-you-go notes are as follows: TIF District #6, Lake Pointe (Medtronic): Issued in 2001 in the principal sum of $20,000,000 with an interest rate of 6.75% per annum. Principal and interest shall be paid on August 1, 2001 and each February 1 and August 1 thereafter to and including March 1, 2026. Payments are payable solely from available tax increment derived from the developed/redeveloped property and paid to the City.The pay-as- you-go note provides for payment to the developer equal to 90% of all tax increment received in the prior six months. The payment reimburses the developer for public improvements. The City shall have no obligation to pay any unpaid balance of principal or accrued interest that may remain after the final payment on March 1, 2026. The current year abatement (TIF note payments) amounted to $528,968. At December 31, 2016, the principal amount outstanding on the note was $20,000,000 TIF District #19, Mainstreet: Issued in 2008 in the principal sum of $1,500,000 with an interest rate of 7.00% per annum. Principal and interest shall be paid on August 1, 2009 and each February 1 and August 1 thereafter to and including February 1, 2025. Payments are payable solely from available tax increment derived from the developed/redeveloped property and paid to the City. The pay-as- you-go note provides for payment to the developer equal to 90% of all tax increment received in the prior six months. The payment reimburses the developer for certain public redevelopment costs. The current year abatement (TIF note payments) amounted to $94,734. At December 31, 2016, the principal amount outstanding on the note was $1,500,000. TIF District #20, BAE Hazardous Substance: Issued in 2016 in the principal sum of $8,842,565 with an interest rate of 5.75% per annum. Principal and interest shall be paid on August 1, 2016 and each February 1 and August 1 thereafter to and including February 1, 2042. Payments are payable solely from available tax increment derived from the developed/redeveloped property and paid to the City.The pay-as- you-go note provides for payment to the developer equal to 90% of all tax increment received in the prior six months. The payment reimburses the developer for street, utilities, right-of-way, land acquisition, and other public improvements.The City shall have no obligation to pay any unpaid balance of principal or accrued interest that may remain after the final payment on February 1, 2042. The current year abatement (TIF note payments) amounted to $349,941. At December 31, 2016, the principal amount outstanding on the note was $8,741,633. F. Construction Commitments At December 31, 2016, the City had construction project contracts in progress. The commitments related to the remaining contract balances amounted to $2,122,157. . CITY OF FRIDLEY, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2016 15. Leases A. Lease Expense The City leases space for one of its liquor stores. Total costs for this lease was $196,381 for the year ended December 31, 2016. The future minimum lease payments for this lease are as follows: Year Ending December 31,Amount 2017$126,778 2018105,649 Total$232,427 B. Lease Revenue The City receives revenue from agreements for the lease of space above its water towers to communication companies. The space is used for antennas and other equipment necessary to provide radio communications. For accounting purposes, the leases are considered operating leases. Lease revenue for the year ended December 31, 2016, totaled $367,529. Terms of each lease are as follows: Next (passive) Annual LeaseRenewal Renewal TermFinal Lease Lessee / LocationAdjustment Factor*DateDurationDate T-Mobile - TH65 Tower #2Greater of 3% or CPI-U12/31/20165 Years31-Dec-16 TTM - Commons Tower #1Greater of 4% or CPI-U11/17/20195 Years17-Nov-34 TTM - TH65 Tower #2Greater of 4% or CPI-U11/17/20195 Years17-Nov-34 Clearwire - Commons Tower #1Greater of 4% or CPI-U2/22/20205 Years22-Feb-35 AT&T - Marion HillsGreater of 5% or CPI-U7/1/20205 Years1-Jul-25 T-Mobile - Commons Tower #1Greater of 2% or CPI-U up to 5%3/27/20205 Years28-Mar-30 Verizon - Commons Tower #13%6/6/20185 Years6-Jun-38 Clearwire - Marion HillsGreater of 4% or CPI-U2/22/20205 Years22-Feb-35 Clearwire - TH65 Tower #2Greater of 4% or CPI-U2/22/20205 Years22-Feb-35 T-Mobile - Marion HillsGreater of 2% or CPI-U up to 5%9/30/20165 Years30-Sep-21 Sprint - TH65 Tower #2Greater of 5% or CPI-U10/1/20205 Years1-Oct-25 Crown Castle - Well #13Greater of 5% or CPI-U11/6/20185 Years6-Nov-23 AT&T - Public Works GarageGreater of 5% or CPI-U11/30/20185 Years30-Nov-28 *Amounts for future lease receipts are unavailable because they are based on the Consumer Price Index. 16. 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 CITY OF FRIDLEY, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2016 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, 2016, there were 32 series of Industrial Revenue Bonds issued. The aggregate principal amount payable for the eight series issued after July 1, 1995 is $23,911,776. 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. 17. Deficit Fund Balances At December 31, 2016, individual funds with a deficit fund balance are as follows: Primary government: Nonmajor Special Revenue Fund: Drug and Gambling Forfeiture($27,574) Component unit: Lake Pointe(357,041) Gateway East(352,674) Gateway West(388,193) Main Street(5,041) Gateway NorthEast(3,824,922) BAE(78,783) BAE Hazardous Sub District(2,211,649) Northstar Transit Station(10,848) 18. 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 and the outstanding balance at December 31, 2016 is $3,660,965. 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 2013, and 22.22% of tax increment note payments receivable from 2013 through 2026. In 2014, the HRA entered into an agreement with Cielo Partners LLC for the sale of land from the HRA to Cielo Partners LLC for the sum of $1.00. Per the agreement Cielo Partners LLC is to complete certain performance obligations to complete the site improvements. If these performance obligations are not met then Cielo Partners LLC will be obligated to pay the HRA for an amount up to $1,700,000. The HRA believes that these obligations will be met and therefore has chosen not to record a receivable for the sale of land to Cielo Partners LLC. CITY OF FRIDLEY, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2016 19. 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. 73 Accounting and Financial Reporting for Pensions and Related Assets That Are Not within the Scope of GASB Statement 68, and Amendments to Certain Provisions of GASB Statements 67 and 68. The provisions in Statement 73 are effective for fiscal years beginning after June 15, 2015 – except those provisions that address employers and governmental nonemployer contributing entities for pensions that are not within the scope of Statement 68, which are effective for fiscal years beginning after June 15, 2016. Statement No. 74 Financial Reporting for Postemployment Benefit Plans Other Than Pension Plans. The provisions in Statement 74 are effective for fiscal years beginning after June 15, 2016. Statement No. 75 Accounting and Financial Reporting for Postemployment Benefits Other Than Pensions. The provisions in Statement 75 are effective for fiscal years beginning after June 15, 2017. Statement No. 80 Blending Requirements for Certain Component Units. The provisions of this Statement are effective for reporting periods beginning after June 15, 2016. Statement No. 81 Irrevocable Split-Interest Agreements. The provisions of this Statement are effective for reporting periods beginning after December 15, 2016. Statement No. 82 Pension Issues – an amendment of GASB Statement No. 67, No. 68 and No. 73.The provisions of this Statement are effective for reporting periods beginning after June 15, 2016, except for the requirements of this Statement for the selection of assumptions in a circumstance in which an employer’s pension liability is measured as of a date other than the employer’s most recent fiscal year-end. In that circumstance, the requirements for the selection of assumptions are effective for that employer in the first reporting period in which the measurement date of the pension liability is on or after June 15, 2017. Statement No. 83 Certain Asset Retirement Obligations. The provisions of this Statement are effective for reporting periods beginning after June 15, 2018. Statement No. 84 Fiduciary Activities. The provisions of this Statement are effective for reporting periods beginning after December 15, 2018. Statement No. 85 Omnibus 2017. The provisions of this Statement are effective for reporting periods beginning after June 15, 2017. The effect these standards may have on future financial statements is not determinable at this time, but it is expected that Statement No. 75 will have a material impact. CITY OF FRIDLEY, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2016 20. Change in Accounting Principle/Prior Period Adjustment On January 1, 2016, the HRA recorded prior period adjustments in the General, Gateway NorthEast and BAE Hazardous Sub District Funds. Interest on previously reported interfund loans was unrecorded. As a result, beginning fund balance in each fund has been restated as follows: BAE GatewayHazardous General FundNorthEastSub District Fund balance - January 1, 2016, as previously reported$9,479,020($3,198,327)($1,312,372) Prior period adjustment: Interest on interfund loan495,754(466,325)(29,429) Net position/fund balance - January 1, 2016 as restated$9,974,774($3,664,652)($1,341,801) For the year ended December 31, 2015, the City implemented GASB Statement No. 68, Accounting and Financial Reporting for Pensions – an Amendment of GASB Statement No. 27. GASB 68 addresses accounting and financial reporting for pension plans that are provided to employees of state and local governments. The standard requires the City to record its share of the net pension liability of defined benefit plans, as well as any corresponding deferred inflows and outflows of resources. See Note 7 for further information. The standard required retroactive implementation which resulted in a restatement of net position as of December 31, 2014. Certain amounts necessary to fully restate 2014 financial information are not determinable, therefore, prior year comparative amounts have not been restated. On January 1, 2015 the City also recorded a prior period adjustment in the Park Improvements Fund. Revenues and fund balance previously reported were understated due to grant expenditures that had occurred but had not been submitted for reimbursement. Details of the prior period adjustment are as follows: InternalGovernmental ServicesFund Governmental Employee Park ActivitiesBenefitsImprovement Net position/fund balance - January 1, 2015, as previously reported$42,182,000$70,686$1,770,140 Prior period adjustment: Grant revenue70,595 - 70,595 Deferred outflows of resources - pension related502,848502,848 - Net pension liability(9,441,843)(9,441,843) - Net position/fund balance - January 1, 2015 as restated$33,313,600($8,868,309)$1,840,735 CITY OF FRIDLEY, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2016 21. Subsequent Events On February 2, 2017, the City of Fridley issued General Obligation Capital Improvement Bonds, Series 2017A in the amount of $49,130,000. The proceeds will be used for the relocation and expansion of the Fridley Municipal Center and Public Works Facility and to combine them into one campus. REQUIRED SUPPLEMENTARY INFORMATION 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, 2016 With comparative actual amounts for the year ended December 31, 2015 2016 Variance with Final Budget - 2015 Budgeted AmountsActualPositiveActual OriginalFinalAmounts(Negative)Amounts Revenues: Taxes and special assessments: Current ad valorem taxes$10,537,800$10,537,800$10,537,098($702)$10,415,715 Delinquent ad valorem taxes-net of abatements50,00050,00037,271(12,729)31,340 Penalties and interest25,00025,00011,248(13,752)22,825 Special assessments19,40014,90014,513(387)21,009 Total taxes and special assessments10,632,20010,627,70010,600,130(27,570)10,490,889 Licenses and permits: Licenses: Rental162,000182,700170,650(12,050)165,486 Business74,90081,00084,4323,43289,560 All other27,80030,00028,660(1,340)32,625 Permits639,000784,600867,21282,612979,863 Total licenses and permits903,7001,078,3001,150,95472,6541,267,534 Intergovernmental revenue: Federal grants48,10028,90064,22035,32037,532 State maintenance aid380,000466,200389,834(76,366)430,699 Local grants253,500250,000250,000 - 5,784 Other state grants8,000 - 44,17644,176 - Police and fire pension471,100477,400514,20236,802498,643 Total intergovernmental revenue1,160,7001,222,5001,262,43239,932972,658 Charges for services: General government967,600953,200953,961761839,789 Public safety371,100382,700417,32334,623402,298 Public works421,500389,700369,138(20,562)367,126 Community development53,20039,30058,06518,76553,716 Recreation219,800226,300231,2884,988238,282 Total charges for services2,033,2001,991,2002,029,77538,5751,901,211 Fines and forfeits180,000192,900186,418(6,482)155,499 Investment income: Interest and dividends95,00050,00080,32430,32482,641 Net change in the fair market value of investments - - 24,64824,648(23,249) Total investment income95,00050,000104,97254,97259,392 Miscellaneous revenue: Insurance and other reimbursements92,50070,00097,65027,65069,038 Gambling tax56,00058,00062,2074,20764,864 Donations19,50028,70044,22115,52113,625 Miscellaneous15,0007,70022,50714,80765,339 Total miscellaneous revenue183,000164,400226,58562,185212,866 Total revenues15,187,800 15,327,000 15,561,266 234,266 15,060,049 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, 2016 With comparative actual amounts for the year ended December 31, 2015 2016 Variance with Final Budget - 2015 Budgeted AmountsActualPositiveActual OriginalFinalAmounts(Negative)Amounts Expenditures: General government: City management: Mayor and council: Current: Personal services$99,700$99,700$96,616$3,084$94,728 Supplies and other charges33,80040,80035,4035,39734,564 Total mayor and council133,500140,500132,0198,481129,292 City manager: Current: Personal services282,500282,500271,97310,527264,655 Supplies and other charges103,700103,70083,64720,05358,080 Total city manager386,200386,200355,62030,580322,735 Human resources: Current: Personal services208,000208,000209,941(1,941)202,380 Supplies and other charges41,30050,40049,0461,35459,902 Total human resources249,300258,400258,987(587)262,282 Elections: Current: Personal services55,40055,60050,8754,725272 Supplies and other charges8,4009,90010,092(192)6,460 Total elections63,80065,50060,9674,5336,732 City clerk/records: Personal services96,20096,200105,069(8,869)91,333 Supplies and other charges10,50013,4005,6547,7462,651 Total city clerk/records106,700109,600110,723(1,123)93,984 Legal: Current: Supplies and other charges432,400450,400430,80519,595368,650 Total city management1,371,9001,410,6001,349,12161,4791,183,675 Finance: Accounting: Current: Personal services623,200574,200539,96134,239617,944 Supplies and other charges85,700108,30075,52032,78081,923 Total accounting708,900682,500615,48167,019699,867 Assessing: Current: Personal services270,100270,100270,687(587)252,555 Supplies and other charges9,40021,30016,8604,4404,709 Total assessing279,500291,400287,5473,853257,264 MIS: Current: Personal services229,200229,500232,527(3,027)213,127 Supplies and other charges84,70082,10078,3403,76088,331 Total MIS313,900311,600310,867733301,458 Total finance1,302,3001,285,5001,213,89571,6051,258,589 Nondepartmental: Current: Personal services60,00060,000 - 60,000 - Supplies and other charges17,50012,40020,377(7,977)15,514 Total nondepartmental77,50072,40020,37752,02315,514 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, 2016 With comparative actual amounts for the year ended December 31, 2015 2016 Variance with Final Budget - 2015 Budgeted AmountsActualPositiveActual OriginalFinalAmounts(Negative)Amounts Expenditures: (continued) General government: (continued) Municipal center: Current: Personal services$95,500$125,800$131,373($5,573)$104,100 Supplies and other charges218,500193,500180,89312,607201,477 Total municipal center314,000319,300312,2667,034305,577 Total general government3,065,7003,087,8002,895,659192,1412,763,355 Public safety: Police: Police protection: Current: Personal services5,476,7005,226,4005,208,51517,8855,098,094 Supplies and other charges580,500631,000562,35868,642572,721 Total police protection6,057,2005,857,4005,770,87386,5275,670,815 Civil defense: Current: Supplies and other charges17,00022,90015,6417,25912,289 Capital outlay - - - - - Total civil defense17,00022,90015,6417,25912,289 Total police6,074,2005,880,3005,786,51493,7865,683,104 Fire: Fire protection: Current: Personal services1,077,3001,103,9001,087,08416,8161,072,489 Supplies and other charges328,300335,300352,132(16,832)332,866 Total fire protection1,405,6001,439,2001,439,216(16)1,405,355 Rental inspections: Current: Personal services152,900166,000169,017(3,017)149,918 Supplies and other charges17,20012,30010,3571,9438,994 Total rental inspections170,100178,300179,374(1,074)158,912 Total public safety7,649,9007,497,8007,405,10492,6967,247,371 Public works: Engineering: Current: Personal services307,000213,400176,32437,076150,333 Supplies and other charges93,40078,60094,396(15,796)113,420 Capital outlay - - - - - Total engineering400,400292,000270,72021,280263,753 Public works and parks: Current: Personal services1,734,6001,761,0001,753,9617,0391,661,196 Supplies and other charges961,100960,900799,638161,262880,663 Total public works and parks2,695,7002,721,9002,553,599168,3012,541,859 Total public works3,096,1003,013,9002,824,319189,5812,805,612 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, 2016 With comparative actual amounts for the year ended December 31, 2015 2016 Variance with Final Budget - 2015 Budgeted Amounts ActualPositiveActual OriginalFinalAmounts(Negative)Amounts Expenditures: (continued) Community development: Building inspection: Current: Personal services$295,900$312,400$296,575$15,825$295,632 Supplies and other charges167,300137,400129,1528,248247,728 Total building inspection463,200449,800425,72724,073543,360 Planning: Current: Personal services466,200468,600469,532(932)478,524 Supplies and other charges68,60072,20047,50924,69159,665 Total planning534,800540,800517,04123,759538,189 Total community development998,000990,600942,76847,8321,081,549 Parks and recreation: Current: Personal services644,000659,300643,16816,132625,280 Supplies and other charges274,100278,900248,56230,338253,752 Total parks and recreation918,100938,200891,73046,470879,032 Contingency: Current: Supplies and other charges120,000120,000 - 120,000 - Total expenditures15,847,80015,648,30014,959,580688,72014,776,919 Excess (deficiency) of revenues over (under) expenditures(660,000)(321,300)601,686922,986283,130 Other financing sources (uses): Transfers in532,900532,900532,900 - 569,600 Transfers out - (907,100)(907,100) - (226,410) Total other financing sources532,900(374,200)(374,200) - 343,190 Net change in fund balance($127,100)($695,500)227,486$922,986626,320 Fund balance - January 18,943,9508,317,630 Fund balance - December 31$9,171,436$8,943,950 Exhibit B-2 CITY OF FRIDLEY, MINNESOTA REQUIRED SUPPLEMENTARY INFORMATION SCHEDULE OF FUNDING PROGRESS - RETIREE HEALTH PLAN For The Year Ended December 31, 2016 Unfunded ActuarialActuarialUAAL as a ActuarialActuarialAccruedAccruedFundedCoveredPercentage of ValuationValue of AssetsLiability (AAL)*Liability (UAAL)RatioPayrollCovered Payroll Date(a)(b)(b-a)(a/b)(c) ( (b-a) / c) January 1, 2014$ - $494,791$494,7910.0%$8,855,2965.6% January 1, 2011$ - $616,348$616,3480.0%$8,186,0317.5% January 1, 2008$ - $1,910,670$1,910,6700.0%$9,303,57620.5% *Using the projected unit credit actuarial cost method. Note, the first OPEB actuarial valuation was conducted as of January 1, 2008. There is no data available prior to the first valuation. Exhibit B-3 CITY OF FRIDLEY, MINNESOTA REQUIRED SUPPLEMENTARY INFORMATION SCHEDULE OF PROPORTIONATE SHARE OF NET PENSION LIABILITY* - GENERAL EMPLOYEES RETIREMENT FUND For The Year Ended December 31, 2016 City's State'sProportionateCity's Proportionate Share of the NetProportionate City'sCity'sShare (Amount) Pension Liability and Share of the ProportionateProportionateof the Netthe State's ProportionateNet PensionPlan Fiduciary ShareShare (Amount)Pension Share of the NetLiability as aNet Position as (Percentage) ofof the NetLiabilityPension LiabilityPercentage of itsa Percentage Measurement Fiscal Yearthe Net PensionPensionAssociated with Associated with CoveredCoveredof the Total DateEndingLiabilityLiability (a)City (b)City (a+b)Payroll (c)Payroll ((a+b)/c)Pension Liability June 30, 2015December 31, 20150.1004%$5,203,249$ - $5,203,249$5,903,61188.1%78.2% June 30, 2016December 31, 20160.1018%8,265,655107,9228,373,5776,281,307133.3%68.9% * The schedule is provided prospectively beginning with the City's fiscal year ended December 31, 2015 and is intended to show a ten year trend. Additional years will be reported as they become available. Exhibit B-4 CITY OF FRIDLEY, MINNESOTA REQUIRED SUPPLEMENTARY INFORMATION SCHEDULE OF PENSION CONTRIBUTIONS* - GENERAL EMPLOYEES RETIREMENT FUND For The Year Ended December 31, 2016 StatutorilyContributions inContributionContributions as a Required Relation to theDeficiencyCoveredPercentage of Fiscal YearContributionStatutorily Required(Excess)PayrollCovered Ending(a)Contribution (b)(a-b)(c)Payroll (b/c) December 31, 2015$466,069$466,069$ - $6,214,2537.5% December 31, 2016458,639458,639 - 6,115,1877.5% * The schedule is provided prospectively beginning with the City's fiscal year ended December 31, 2015 and is intended to show a ten year trend. Additional years will be reported as they become available. Exhibit B-5 CITY OF FRIDLEY, MINNESOTA REQUIRED SUPPLEMENTARY INFORMATION SCHEDULE OF PROPORTIONATE SHARE OF NET PENSION LIABILITY* - PUBLIC EMPLOYEES POLICE AND FIRE FUND For The Year Ended December 31, 2016 Proportionate Share Proportionateof the Net PensionPlan Fiduciary ProportionShare (Amount)Liability as aNet Position as (Percentage) ofof the NetPercentage of itsa Percentage Measurement Fiscal Yearthe Net PensionPensionCoveredCoveredof the Total DateEndingLiabilityLiability (a)Payroll (b)Payroll (a/b)Pension Liability June 30, 2015December 31, 20150.4170%$4,738,096$3,821,428124.0%86.6% June 30, 2016December 31, 20160.4050%16,253,3553,898,494416.9%63.9% * The schedule is provided prospectively beginning with the City's fiscal year ended December 31, 2015 and is intended to show a ten year trend. Additional years will be reported as they become available. Exhibit B-6 CITY OF FRIDLEY, MINNESOTA REQUIRED SUPPLEMENTARY INFORMATION SCHEDULE OF PENSION CONTRIBUTIONS* - PUBLIC EMPLOYEES POLICE AND FIRE FUND For The Year Ended December 31, 2016 StatutorilyContributions inContributionContributions as a Required Relation to theDeficiencyCoveredPercentage of Fiscal YearContributionStatutorily Required(Excess)PayrollCovered Ending(a)Contribution (b)(a-b)(c)Payroll (b/c) December 31, 2015$644,283$644,283$ - $3,977,05616.2% December 31, 2016606,767606,767 - 3,745,475 16.2% * The schedule is provided prospectively beginning with the City's fiscal year ended December 31, 2015 and is intended to show a ten year trend. Additional years will be reported as they become available. CITY OF FRIDLEY, MINNESOTA REQUIRED SUPPLEMENTARY INFORMATION BUDGETARY COMPARISON SCHEDULE NOTES TO RSI December 31, 2016 A. LEGAL COMPLIANCE – BUDGETS The General Fund budget is 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. B. PENSION INFORMATION PERA – General Employees Retirement Fund 2016 Changes Changes in Actuarial Assumptions: - The assumed post-retirement benefit increase rate was changed from 1.0% per year through 2035 and 2.5% per year thereafter to 1.0% per year for all future years. - The assumed investment return was changed from 7.9% to 7.5%. The single discount rate was changed from 7.9% to 7.5%. - Other assumptions were changed pursuant to the experience study dated June 30, 2015. The assumed future salary increases, payroll growth, and inflation were decreased by 0.25% to 3.25% for payroll growth and 2.50% for inflation. PERA – Public Employees Police and Fire Fund 2016 Changes Changes in Actuarial Assumptions: - The assumed post-retirement benefit increase rate was changed from 1.0% per year through 2037 and 2.5% thereafter to 1.0% per year for all future years. - The assumed investment return was changed from 7.9% to 7.5%. The single discount rate changed from 7.9% to 5.6%. - The assumed future salary increases, payroll growth, and inflation were decreased by 0.25% to 3.25% for payroll growth and 2.50% for inflation. ŷźƭ ƦğŭĻ źƓƷĻƓƷźƚƓğƌƌǤ ƌĻŅƷ ĬƌğƓƉ COMBINING AND INDIVIDUAL FUND STATEMENTS AND SCHEDULES NONMAJOR GOVERNMENTAL FUNDS 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. CAPITAL PROJECT FUNDS The Capital Project Funds are used to account for the resources expended to acquire permanent or long-term assets. Exhibit C-1 CITY OF FRIDLEY, MINNESOTA COMBINING BALANCE SHEET NONMAJOR GOVERNMENTAL FUNDS December 31, 2016 With comparative amounts for the year ended December 31, 2015 Total Nonmajor Governmental Special RevenueCapital ProjectFunds 20162015 Assets Cash and investments$1,708,142$2,230,705$3,938,847$4,594,151 Receivables: Accounts104,629 - 104,62998,148 Taxes7,663 - 7,6638,178 Special assessments - 96,47596,47587,719 Due from other governments89,965 - 89,965112,247 Prepaid items2,250 - 2,250 - Total assets$1,912,64$2,327,18$4,239,82$4,900,44 9093 Liabilities, Deferred Inflows of Resources, and Fund Balance Liabilities: Accounts payable$39,218$110,059$149,277$318,802 Contracts payable - 189,003189,003 - Due to other governments3823,1233,50513,613 Due to other funds48,764 - 48,76473,673 Salaries payable11,946 - 11,9469,165 Unearned revenue8,467 - 8,467 - Total liabilities108,777302,185410,962415,253 Deferred inflows of resources: Unavailable revenue4,61896,476101,09493,029 Total deferred inflows of resources4,61896,476101,09493,029 Fund balance: Restricted66,893 - 66,89372,640 Committed1,759,935795,7152,555,6502,709,638 Assigned - 1,132,8041,132,8041,653,036 Unassigned(27,574) - (27,574)(43,153) Total fund balance1,799,2541,928,5193,727,7734,392,161 Total liabilities, deferred inflows of resources, and fund balance$1,912,649$2,327,180$4,239,829$4,900,443 Exhibit C-2 CITY OF FRIDLEY, MINNESOTA COMBINING STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES NONMAJOR GOVERNMENTAL FUNDS For The Year Ended December 31, 2016 With comparative amounts for the year ended December 31, 2015 Special CapitalTotal Nonmajor RevenueProjectGovernmental Funds 20162015 Revenues: Taxes$350,432$50,000$400,432$394,817 15,45415,45411,704 Special assessments - Licenses and permits291,941 - 291,941282,251 Intergovernmental revenue110,1211,074,9931,185,1141,487,857 Charges for services540,19822,692562,890473,685 Fines and forfeits26,217 - 26,21729,441 Investment income: Interest and dividends17,59519,57837,17334,954 Net change in the fair value of investments5,0964,8119,907(10,057) Miscellaneous45,42321,11066,533151,612 Total revenues1,387,023 1,208,638 2,595,661 2,856,264 Expenditures: Current: General government750,256278,9621,029,2181,000,540 Public safety131,947 - 131,94772,193 Parks and recreation449,714 - 449,714409,652 Capital outlay - 2,017,0942,017,0941,813,326 Total expenditures1,331,9172,296,0563,627,9733,295,711 Excess (deficiency) of revenues over (under) expenditures55,106 (1,087,418)(1,032,312)(439,447) Other financing sources (uses): Proceeds from sale of capital assets - 43,67343,67393,670 Transfers in - 882,100882,100401,410 Transfers out - (557,849)(557,849)(19,400) Total other financing sources (uses) - 367,924 367,924 475,680 Net change in fund balance55,106 (719,494)(664,388)36,233 Fund balance - January 11,744,1482,648,0134,392,1614,355,928 Fund balance - December 31 $1,799,254$1,928,519$3,727,773$4,392,161 ŷźƭ ƦğŭĻ źƓƷĻƓƷźƚƓğƌƌǤ ƌĻŅƷ ĬƌğƓƉ 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. Grant Management Fund – This fund administers grants received from a variety of intergovernmental agencies, which the amounts are restricted. 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. 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. 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. Police Activity Fund - This fund is used to track the revenue and expenditures of externally funded police positions. 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. CITY OF FRIDLEY, MINNESOTA SUBCOMBINING BALANCE SHEET NONMAJOR SPECIAL REVENUE FUNDS December 31, 2016 With comparative amounts for the year ended December 31, 2015 Solid Waste AssetsCable TVAbatement Cash and investments$1,456,438$29,869 Receivables: Accounts76,40727,662 Taxes - - Due from other governments - 56,015 Prepaid items - - Total assets$1,532,845$113,546 Liabilities, Deferred Inflows of Resources, and Fund Balance Liabilities: Accounts payable$1,468$23,079 Due to other governments - - Due to other funds - - Salaries payable3,414749 Unearned revenue - - Total liabilities4,88223,828 Deferred inflows of resources: Unavailable revenue - - Total deferred inflows of resources - - Fund balance: Restricted66,893 - Committed1,461,07089,718 Unassigned - - Total fund balance1,527,96389,718 Total liabilities, deferred inflows of resources, and fund balance$1,532,845$113,546 Exhibit C-3 Drug and Gambling Springbrook Nature ForfeiturePolice ActivityCenter Totals Nonmajor Special Revenue Funds 20162015 $ - $ - $221,835$1,708,142$1,665,588 560 - - 104,62998,148 - - 7,6637,6638,178 - 33,950 - 89,965112,247 - 2,250 - 2,250 - $560$36,200$229,498$1,912,649$1,884,161 $ - $473$14,198$39,218$51,865 - - 382382 - 19,66729,097 - 48,76473,673 - 2,2265,55711,9469,165 8,467 - - 8,467 - 28,13431,79620,137108,777134,703 - - 4,6184,6185,310 - - 4,6184,6185,310 - - - 66,89372,640 - 4,404204,7431,759,9351,714,661 (27,574) - - (27,574)(43,153) (27,574)4,404204,7431,799,2541,744,148 $560$36,200$229,498$1,912,649$1,884,161 CITY OF FRIDLEY, MINNESOTA SUBCOMBINING STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES NONMAJOR SPECIAL REVENUE FUNDS For The Year Ended December 31, 2016 With comparative totals for the year ended December 31, 2015 GrantSolid Waste Cable TVManagementAbatement Revenues: Taxes$ - $ - $ - Licenses and permits291,941 - - Intergovernmental revenue - 4,37395,748 Charges for services - - 296,409 Fines and forfeits - - - Investment income: Interest and dividends16,037 - - Net change in the fair value of investments4,758 - - Miscellaneous - - 26,724 Total revenues312,7364,373418,881 Expenditures: Current: General government313,4734,373415,051 Public safety - - - Parks and recreation - - - Capital outlay - - - Total expenditures313,4734,373415,051 Excess (deficiency) of revenues over (under) expenditures(737) -3,830 Other financing sources (uses): Transfers in - - - Transfers out - - - Total other financing sources (uses) - - - Net change in fund balance(737) -3,830 Fund balance - January 11,528,700 -85,888 Fund balance - December 31$1,527,963$ -$89,718 Exhibit C-4 Drug and GamblingSpringbrook ForfeiturePolice ActivityNature Center Totals Nonmajor Special Revenue Funds 20162015 $ - $ - $350,432$350,432$344,817 - - - 291,941282,251 - - 10,000110,121197,380 - 141,311102,478540,198444,385 26,217 - - 26,21729,441 - - 1,55817,59517,413 - - 3385,096(4,911) - - 18,69945,423107,840 26,217141,311483,5051,387,0231,418,616 - 17,359 - 750,256792,607 10,638121,309 - 131,94772,193 - - 449,714449,714409,652 - - - - 135,423 10,638138,668449,7141,331,9171,409,875 15,5792,64333,79155,1068,741 - - - - 101,410 - - - - (19,400) - - - - 82,010 15,5792,64333,79155,10690,751 (43,153)1,761170,9521,744,1481,653,397 ($27,574)$4,404$204,743$1,799,254$1,744,148 ŷźƭ ƦğŭĻ źƓƷĻƓƷźƚƓğƌƌǤ ƌĻŅƷ ĬƌğƓƉ NONMAJOR CAPITAL PROJECT FUNDS The Special Assessment Construction Capital Projects Fund - is established 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. Building Improvements Fund - is established to account for repair or replacement of major buildings or building related improvements. Information System Improvement Fund- is established to account for the purchase of new equipment and replacement equipment such as computers, local area and wide area network equipment, printers, peripheral devices, telecommunications improvements, copiers and software. The Capital Equipment Fund - is used to account for the purchase and repair of major capital equipment. CITY OF FRIDLEY, MINNESOTA SUBCOMBINING BALANCE SHEET NONMAJOR CAPITAL PROJECT FUNDS December 31, 2016 With comparative totals for the year ended December 31, 2015 Special AssessmentBuilding AssetsConstructionImprovements Cash and investments$30,689$968,678 Receivables: Special assessments96,475 - Total assets$127,164$968,678 Liabilities, Deferred Inflows of Resources, and Fund Balance Liabilities: Accounts payable$ - $106,840 Contracts payable - 189,003 Due to other governments3,123 - Total liabilities3,123295,843 Deferred inflows of resources: Unavailable revenue96,476 - Total deferred inflows of resources96,476 - Fund balance: Committed27,565 - Assigned - 672,835 Total fund balance27,565672,835 Total liabilities, deferred inflows of resources, and fund balance$127,164$968,678 Exhibit C-5 Information System ImprovementCapital Equipment Totals Nonmajor Capital Project Funds 20162015 $463,188$768,150$2,230,705$2,928,563 - - 96,47587,719 $463,188$768,150$2,327,180$3,016,282 $3,219$ - $110,059$266,937 - - 189,003 - - - 3,12313,613 3,219 - 302,185280,550 - - 96,47687,719 - - 96,47687,719 - 768,150795,715994,977 459,969 - 1,132,8041,653,036 459,969768,1501,928,5192,648,013 $463,188$768,150$2,327,180$3,016,282 CITY OF FRIDLEY, MINNESOTA SUBCOMBINING STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES NONMAJOR CAPITAL PROJECT FUNDS For The Year Ended December 31, 2016 With comparative totals for the year ended December 31, 2015 Special Assessment ConstructionBuilding Capital ProjectsImprovements Revenues: Taxes$ - $ - Special assessments15,454 - Intergovernmental revenue - - Charges for services2,377 - Investment income: Interest and dividends45014,760 Net change in the fair value of investments - 4,589 Miscellaneous - - Total revenues18,28119,349 Expenditures: Current: General government8,97117,732 Capital outlay - 1,278,227 Total expenditures8,9711,295,959 Excess (deficiency) of revenues over (under) expenditures9,310(1,276,610) Other financing sources (uses): Proceeds from sale of capital assets - - Transfers in - 500,000 Transfers out(557,849) - Total other financing sources (uses)(557,849)500,000 Net change in fund balance(548,539)(776,610) Fund balance - January 1576,1041,449,445 Fund balance - December 31$27,565$672,835 Exhibit C-6 Information System ImprovementCapital Equipment Totals Nonmajor Capital Project Funds 20162015 $50,000$ - $50,000$50,000 - - 15,45411,704 149,993925,0001,074,9931,290,477 20,315 - 22,69229,300 2,2962,07219,57817,541 - 2224,811(5,146) 21,110 - 21,11043,772 243,714927,2941,208,6381,437,648 107,837144,422278,962207,933 86,599652,2682,017,0941,677,903 194,436796,6902,296,0561,885,836 49,278130,604(1,087,418)(448,188) - 43,67343,67393,670 207,100175,000882,100300,000 - - (557,849) - 207,100218,673367,924393,670 256,378349,277(719,494)(54,518) 203,591418,8732,648,0132,702,531 $459,969$768,150$1,928,519$2,648,013 ŷźƭ ƦğŭĻ źƓƷĻƓƷźƚƓğƌƌǤ ƌĻŅƷ ĬƌğƓƉ INDIVIDUAL BUDGET TO ACTUAL STATEMENTS SPECIAL REVENUE FUNDS Exhibit D-1 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, 2016 With comparative actual amounts for the year ended December 31, 2015 2016 2015 Budgeted AmountsActualActual OriginalFinalAmountsAmounts Revenues: Licenses - franchise fee$290,000$284,000$291,941$282,251 Charges for services1,000 - - 1,144 Investment income: Interest and dividends10,00010,00016,03716,129 Net change in the fair value of investments - - 4,758(4,394) Miscellaneous - - - 35,213 Total revenues301,000 294,000 312,736 330,343 Expenditures: Current: General government: Personal services174,100174,400258,882230,696 Supplies and other charges114,600140,60054,59131,910 Total expenditures288,700 315,000 313,473 262,606 Excess (deficiency) of revenues over (under) expenditures$12,300($21,000)(737)67,737 Fund balance - January 11,528,7001,460,963 Fund balance - December 31$1,527,963$1,528,700 Exhibit D-2 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, 2016 With comparative actual amounts for the year ended December 31, 2015 20162015 Budgeted AmountsActualActual OriginalFinalAmountsAmounts Revenues: Taxes$350,700$352,300$350,432$344,817 Intergovernmental revenue - - 10,000 - Charges for service86,30091,000102,47898,565 Investment income: Interest and dividends - 1,0001,5581,284 Net change in the fair value of investments - - 338(517) Miscellaneous - 11,10018,69938,698 Total revenues437,000455,400483,505482,847 Expenditures: Current: Parks, recreation and naturalist Personal services345,500348,600342,115323,866 Supplies and other charges82,800101,300107,59985,786 Total expenditures428,300 449,900 449,714 409,652 Excess (deficiency) of revenues over (under) expenditures8,700 5,500 33,79173,195 Other financing sources: Transfers out - - - (19,400) Net change in fund balance$8,700$5,50033,791 53,795 Fund balance - January 1170,952117,157 Fund balance - December 31$204,743$170,952 Exhibit D-3 CITY OF FRIDLEY, MINNESOTA SPECIAL REVENUE FUND - GRANT MANAGEMENT FUND SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE - BUDGET AND ACTUAL For The Year Ended December 31, 2016 With comparative actual amounts for the year ended December 31, 2015 2016 2015 Budgeted AmountsActualActual OriginalFinalAmountsAmounts Revenues: Intergovernmental: Federal grants$ - $ - $ - $18,969 State grants - - 4,37383,542 Miscellaneous - - - 11,119 Total revenues - - 4,373 113,630 Expenditures: Current: Community development: Personal services - - - 23,189 Supplies and other charges - - 4,37391,851 Total expenditures - - 4,373 115,040 Excess (deficiency) of revenues over (under) expenditures - - - (1,410) Other financing sources: Transfers in - - - 1,410 Transfers out - - - - Total other financing sources - - - 1,410 Net change in fund balance$ - $ - - - Fund balance - January 1 - - Fund balance - December 31$ - $ - 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, 2016 With comparative actual amounts for the year ended December 31, 2015 20162015 Budgeted AmountsActualActual OriginalFinalAmountsAmounts Revenues: Intergovernmental revenue: State$95,000$101,000$95,748$94,869 Charges for services304,400299,300296,409292,352 Miscellaneous10,00022,00026,72422,810 Total revenues409,400 422,300 418,881 410,031 Expenditures: Current: General government: Personal services59,00059,00058,59849,732 Supplies and other charges346,100356,100356,453361,155 Total expenditures405,100 415,100 415,051 410,887 Excess (deficiency) of revenues over (under) expenditures$4,300$7,2003,830(856) Fund balance - January 185,88886,744 Fund balance - December 31$89,718$85,888 Exhibit D-5 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, 2016 With comparative actual amounts for the year ended December 31, 2015 20162015 Budgeted AmountsActualActual OriginalFinalAmountsAmounts Revenues: Charges for services$137,100$137,000$141,311$52,324 Total revenues137,100 137,000 141,311 52,324 Expenditures: Current: General government: Supplies and other charges5,3005,30017,3594,074 Public safety: Personal services128,700128,700121,30948,777 Total expenditures134,000 134,000 138,668 52,851 Excess (deficiency) of revenues over (under) expenditures3,1003,0002,643(527) Other financing sources: Transfers in - - - 100,000 Net change in fund balance$3,100$3,0002,64399,473 Fund balance - January 11,761(97,712) Fund balance - December 31$4,404$1,761 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 and pension 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. Exhibit E-1 CITY OF FRIDLEY, MINNESOTA COMBINING STATEMENT OF NET POSITION INTERNAL SERVICE FUNDS December 31, 2016 EmployeeSelf BenefitsInsurance Totals 2016 Assets: Cash and investments$1,330,380$1,329,875$2,660,255 Accounts receivable - 20,22720,227 Prepaid items - 5,0005,000 Total assets1,330,3801,355,1022,685,482 Deferred outflows of resources: Pension related15,318,307 - 15,318,307 Liabilities: Current liabilities: Accounts payable216131,175131,391 Payroll deductions payable108,423 - 108,423 Compensated absences payable - current portion822,678 - 822,678 Total current liabilities931,317131,1751,062,492 Noncurrent liabilities: Compensated absences payable205,978 - 205,978 Net pension liability24,519,010 - 24,519,010 Total liabilities25,656,305131,17525,787,480 Deferred inflows of resources: Pension related2,845,576 - 2,845,576 Net position: Unrestricted(11,853,194)1,223,927(10,629,267) Total net position($11,853,194)$1,223,927($10,629,267) Exhibit E-2 CITY OF FRIDLEY, MINNESOTA COMBINING STATEMENT OF REVENUES, EXPENSES AND CHANGES IN NET POSITION INTERNAL SERVICE FUNDS For The Year Ended December 31, 2016 Employee BenefitsSelf Insurance Totals 2016 Operating revenues: Charges for services$1,091,972$162,454$1,254,426 Operating expenses: Personal services3,976,760 - 3,976,760 Supplies and other charges2,072390,918392,990 Total operating expenses3,978,832390,9184,369,750 Operating income (loss)(2,886,860)(228,464)(3,115,324) Nonoperating revenues: Investment income: Interest and dividends13,32014,31327,633 Net change in the fair value of investments3,8944,0627,956 Intergovernmental68,629 -68,629 Insurance reimbursement -20,22720,227 Miscellaneous -932932 Total nonoperating revenues85,84339,534125,377 Income (loss) before transfers(2,801,017)(188,930)(2,989,947) Other financing sources: Transfers in100,000100,000200,000 Change in net position(2,701,017)(88,930)(2,789,947) Net position - January 1(9,152,177)1,312,857(7,839,320) Net position - December 31($11,853,194)$1,223,927($10,629,267) Exhibit E-3 CITY OF FRIDLEY, MINNESOTA COMBINING STATEMENT OF CASH FLOWS INTERNAL SERVICE FUNDS For The Year Ended December 31, 2016 Employee BenefitsSelf Insurance Totals 2016 Cash flows from operating activities: Receipts from interfund services provided$1,091,972$162,454$1,254,426 Payment to suppliers(2,108)(266,425)(268,533) Payment to employees(1,126,131) - (1,126,131) Net cash flows from operating activities(36,267)(103,971)(140,238) Cash flows from noncapital financing activities: Intergovernmental revenue68,629 - 68,629 Transfers in100,000100,000200,000 Net cash flows from noncapital financing activities 168,629100,000268,629 Cash flows from capital and related financing activities: Insurance reimbursement -932932 Cash flows from investing activities: Investment income17,21418,37535,589 Net increase (decrease) in cash and cash equivalents149,57615,336164,912 Cash and cash equivalents - January 11,180,8041,314,5392,495,343 Cash and cash equivalents - December 31$1,330,380 $1,329,875 $2,660,255 Reconciliation of operating income (loss) to net cash provided (used) by operating activities: Operating income (loss) ($2,886,860)($228,464)($3,115,324) Adjustments to reconcile operating income (loss) to net cash flows from operating activities: Changes in assets and liabilities: Decrease (increase) in prepaid items -(5,000)(5,000) Decrease (increase) in deferred outflows of resources(13,280,444) - (13,280,444) Increase (decrease) in payables14,612,099129,49314,741,592 Increase (decrease) in deferred inflows of resources1,518,938 - 1,518,938 Total adjustments2,850,593 124,493 2,975,086 Net cash provided by operating activities($36,267)($103,971)($140,238) HOUSING AND REDEVELOPMENT AUTHORITY COMPONENT UNIT CITY OF FRIDLEY, MINNESOTA BALANCE SHEET - GOVERNMENTAL FUNDS HOUSING AND REDEVELOPMENT AUTHORITY December 31, 2016 With comparative totals for December 31, 2015 GeneralHousing LoanLake PointeGateway West Assets Cash and investments$4,660,898$2,015,514$217,158$12,265 Receivables: Accounts55,263 - - - Taxes8,557 -471 - Mortgage: Deferred -1,005,294 - - Allowance for uncollectible accounts -(2,067) - - Interest43,713 - - - Due from other funds7,186,707 - - - Prepaid expenses530 - - - Land held for resale4,312,395 -40,7702,340 Total assets$16,268,063$3,018,741$258,399$14,605 Liabilities, Deferred Inflows of Resources, and Fund Balance Liabilities: Accounts payable$8,357$5,204$248,709$ - Due to primary government1,613,906 - - - Due to other governments - - 606349 Due to other funds - - 325,303400,109 Total liabilities1,622,2635,204574,618400,458 Deferred inflows of resources: Unavailable revenue4,317,685 - 40,8222,340 Total deferred inflows of resources4,317,685 - 40,8222,340 Fund balance (deficit): Nonspendable5301,003,227 - - Restricted - - - - Committed - 2,010,310 - - Unassigned10,327,585 - (357,041)(388,193) Total fund balance (deficit)10,328,1153,013,537(357,041)(388,193) Total liabilities, deferred inflows of resources, and fund balance$16,268,063$3,018,741$258,399$14,605 Exhibit F-1 BAEOther HousingGatewayHazardousGovernmentalIntra - Activity ReplacementNorthEast BAESub DistrictFundsEliminations Totals Governmental Funds 20162015 $180,475$33,756$89,941$18,815$683,419$ - $7,912,241$8,436,987 - - - - - - 55,26362,166 - - 2,0291,4751,127 - 13,65912,059 - - - - - - 1,005,294848,005 - - - - - - (2,067)(22,876) - - - - - - 43,71326,169 - - - - - (7,186,707) - - - - - - - - 530 - 153,864 - - - - - 4,509,3693,390,611 $334,339$33,756$91,970$20,290$684,546($7,186,707)$13,538,002$12,753,121 $ - $ - $169,266$ - $48,336$ - $479,872$350,672 - - - - - - 1,613,9061,558,849 1,946 - 1,4871105,012 - 9,51020,120 - 3,858,678 - 2,230,406372,211(7,186,707) - - 1,9463,858,678170,7532,230,516425,559(7,186,707)2,103,2881,929,641 153,864 - - 1,423150 - 4,516,2843,398,726 153,864 - - 1,423150 - 4,516,2843,398,726 - - - - - - 1,003,757825,129 178,529 - - - 627,400 - 805,929672,875 - - - - - - 2,010,3102,188,718 - (3,824,922)(78,783)(2,211,649)(368,563) - 3,098,4343,738,032 178,529(3,824,922)(78,783)(2,211,649)258,837 - 6,918,4307,424,754 $334,339$33,756$91,970$20,290$684,546($7,186,707)$13,538,002$12,753,121 Fund balance reported above$6,918,430$7,424,754 Amounts reported for governmental activities in the statement of net position are different because: Capital assets used in governmental activities are not financial resources, and therefore, are not reported in the funds2,023,5112,023,511 Other long-term assets are not available to pay for current-period expenditures and, therefore, are reported as unavailable revenue4,516,2843,398,726 Net position of governmental activities$13,458,225$12,846,991 CITY OF FRIDLEY, MINNESOTA STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES GOVERNMENTAL FUNDS HOUSING AND REDEVELOPMENT AUTHORITY For The Year Ended December 31, 2016 With comparative totals for the year ended December 31, 2015 GeneralHousing LoanLake PointeGateway West Revenues: Tax increment$ - $ - $591,895$20,868 Property taxes395,955 - - - Investment income: Interest and dividends67,99829,9732529 Net change in the fair value of investments(25,864)(12,578)1(137) Mortgage interest earnings201,15734,756 - - Rental9,600 - - - Intergovernmental2,670,406 - - - Sale of real estate117,537 - - - Miscellaneous127,03821,345 - - Total revenues3,563,82773,496591,89821,260 Expenditures: Personal services142,257 - - - Supplies and other charges343,32773,80634,044423 Developer assistance2,670,406 - 528,968 - Interest expense54,496 - - - Total expenditures3,210,48673,806563,012423 Excess (deficiency) of revenues over (under) expenditures353,341(310)28,88620,837 Other financing sources: Transfers in - - - - Transfers out - - - - Total other financing sources (uses) - - - - Net change in fund balance353,341(310)28,88620,837 Fund balance (deficit) - January 1, as previously reported9,479,0203,013,847(385,927)(409,030) Prior period adjustment495,754 - - - Fund balance (deficit) - January 1, as restated9,974,7743,013,847(385,927)(409,030) Fund balance (deficit) - December 31$10,328,115$3,013,537($357,041)($388,193) Exhibit F-2 BAEOther HousingGatewayHazardousGovernmentalIntra-Activity ReplacementNorthEast BAESub DistrictFundsEliminations Totals Governmental Funds 20162015 $30,162$ - $392,264$346,167$258,921$ - $1,640,277$1,565,206 - - - - - - 395,955357,968 2,2872,644 - - 8,163 - 111,59677,088 (1,024)(1,107)(92)(1,386)(3,585) - (45,772)(8,114) - - - - - - 235,91337,748 - - - - - - 9,60010,400 - - - - - - 2,670,406999,973 - - - - - - 117,537237,424 - - - - - - 148,383112,048 31,4251,537392,172344,781263,499 - 5,283,8953,389,741 - - - - - - 142,257152,290 6,7777,62772,60437,22238,995 - 614,8251,133,364 - - 349,9411,130,43097,739 - 4,777,4842,745,831 - 154,180 - 46,977 - - 255,65352,653 6,777161,807422,5451,214,629136,734 - 5,790,2194,084,138 24,648(160,270)(30,373)(869,848)126,765 - (506,324)(694,397) - - - - - - - 332,717 - - - - - - - (332,717) - - - - - - - - 24,648(160,270)(30,373)(869,848)126,765 - (506,324)(694,397) 153,881(3,198,327)(48,410)(1,312,372)132,072 - 7,424,7548,119,151 - (466,325) - (29,429) - - - - 153,881(3,664,652)(48,410)(1,341,801)132,072 - 7,424,7548,119,151 $178,529($3,824,922)($78,783)($2,211,649)$258,837$ - $6,918,430$7,424,754 Amounts reported for governmental activities in the statement of activities (Exhibit A-2) are different because: Net changes in fund balances - total above($506,324)($694,397) Revenues in the statement of activities that do not provide current financial resources are not reported as revenues in the funds.1,117,558(525,451) Changes in net position of governmental activities (Exhibit A-2)$611,234($1,219,848) CITY OF FRIDLEY, MINNESOTA SUBCOMBINING BALANCE SHEET NONMAJOR CAPITAL PROJECT FUNDS HOUSING AND REDEVELOPMENT AUTHORITY December 31, 2016 With comparative totals for December 31, 2015 University / McGlynn Gateway EastOsborneBakeries Assets Cash and investments$10,117$310,625$146,830 Taxes receivable -63 - Total assets$10,117$310,688$146,830 Liabilities, Deferred Inflows of Resources, and Fund Balance Liabilities: Accounts payable$ - $ - $ - Due to other governments1,1381,0471,028 Due to other funds361,653 - - Total liabilities362,791 1,047 1,028 Deferred inflows of resources: Unavailable revenue - 33 - Total deferred inflows of resources - 33 - Fund balance (deficit): Restricted - 309,608145,802 Unassigned(352,674) - - Total fund balance (deficit)(352,674)309,608 145,802 Total liabilities, deferred inflows of resources, and fund balance$10,117$310,688$146,830 Exhibit F-3 Northstar Transit Satellite Lane Apts.Main StreetStation Total Nonmajor Capital Project Funds 20162015 $172,227$43,620$ -$683,419$582,699 842222 -1,127949 $173,069$43,842$ -$684,546$583,648 $ -$48,266$70$48,336$45,261 1,0655142205,01214,361 - -10,558372,211391,761 1,065 48,780 10,848 425,559 451,383 14103 -150193 14103 -150193 171,990 - -627,400518,994 -(5,041)(10,848)(368,563)(386,922) 171,990 (5,041)(10,848)258,837 132,072 $173,069$43,842$ -$684,546$583,648 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, 2016 With comparative totals for the year ended December 31, 2015 University / McGlynn Gateway EastOsborneBakeries Revenues: Tax increment$30,357$50,540$29,970 Investment income: Interest and dividends2643,9291,804 Net change in the fair value of investments(97)(1,688)(800) Total revenues30,52452,78130,974 Expenditures: Supplies and other charges1,2476,2654,122 Developer assistance - - - Total expenditures1,2476,2654,122 Excess (deficiency) of revenues over (under) expenditures29,27746,51626,852 Other financing sources: Transfers in - - - Transfers out - - - Total other financing sources (uses) - - - Net change in fund balance29,27746,51626,852 Fund balance (deficit) - January 1(381,951)263,092118,950 Fund balance (deficit) - December 31($352,674)$309,608$145,802 Exhibit F-4 Northstar Transit Satellite Lane Apts.Station Main StreetTotals Nonmajor Capital Project Funds 20162015 $38,976$109,078$ - $258,921$264,411 2,09274 - 8,1634,670 (941)(24)(35)(3,585)(708) 40,127109,128(35)263,499268,373 5,08911,77410,49838,99552,780 - 97,739 - 97,73990,640 5,089109,51310,498136,734143,420 35,038(385)(10,533)126,765124,953 - - - - 242,976 - - - - (17,487) - - - - 225,489 35,038(385)(10,533)126,765350,442 136,952(4,656)(315)132,072(218,370) $171,990($5,041)($10,848)$258,837$132,072 ŷźƭ ƦğŭĻ źƓƷĻƓƷźƚƓğƌƌǤ ƌĻŅƷ ĬƌğƓƉ AGENCY FUNDS Agency Funds account for assets held by a governmental unit in a trustee capacity or as an agent for individuals, private organizations, other governmental units, and/or other funds. Exhibit G-1 CITY OF FRIDLEY, MINNESOTA COMBINING STATEMENT OF ASSETS AND LIABILITIES AGENCY FUNDS December 31, 2016 With comparative totals for December 31, 2015 Totals Agency Funds Senior Citizens Hotel/Motel TaxOrganizations 20162015 Assets: Cash and investments$ -$7,294$7,294$9,599 Receivables: Accounts3,816 -3,8162,765 Total assets$3,816$7,294$11,110$12,364 Liabilities: Accounts payable$ -$7,294$7,294$9,599 Due to other governments3,816 -3,8162,765 Total liabilities$3,816$7,294$11,110$12,364 Exhibit G-2 CITY OF FRIDLEY, MINNESOTA COMBINING STATEMENT OF CHANGES IN ASSETS AND LIABILITIES AGENCY FUND For The Year Ended December 31, 2016 BalanceBalance January 1,December 31, 2016AdditionsDeletions2016 Hotel/Motel Tax Assets: Cash and investments$ - $68,513$68,513$ - Receivables: Accounts2,7655,1574,1063,816 Total assets$2,765$73,670$72,619$3,816 Liabilities: Due to other governments$2,765$65,933$64,882$3,816 Senior Citizens Organizations Assets: Cash and investments$9,599$8,840$11,145$7,294 Liabilities: Accounts payable$9,599$20,028$22,333$7,294 ŷźƭ ƦğŭĻ źƓƷĻƓƷźƚƓğƌƌǤ ƌĻŅƷ ĬƌğƓƉ III. STATISTICAL SECTION (UNAUDITED) ŷźƭ ƦğŭĻ źƓƷĻƓƷźƚƓğƌƌǤ ƌĻŅƷ ĬƌğƓƉ Statistical Section (Unaudited) This part of the City of Fridley's statistical comprehensive annual financial report presents detailed information as a context for understanding what the information in the financial statements, note disclosures, and required supplementary information says about the City's overall financial health. ContentsPage Financial Trends154 These schedules contain trend information to help the reader understand how the City's financial performance and well-being have changed over time. Revenue Capacity164 These schedules contain information to help the reader assess the factors affecting the City's ability to generate its property tax. Debt Capacity170 These schedules present information to help the reader assess the affordability of the City's current levels of outstanding debt and the City's ability to issue additional debt in the future. Demographic and Economic Information176 These schedules offer demographic and economic indicators to help the reader understand the environment within which the City's financial activities take place and to help make comparisons over time and with other governments. Operating Information180 These schedules contain information about the City's operations and resources to help the reader understand how the City's financial information relates to the services the City provides and the activities it performs. Sources: Unless otherwise noted, the information in these schedules is derived from the comprehensive annual financial reports for the relevant year. The City implemented Statement 34 in 2003; the City has chosen to provide information for that year forward. Ultimately, these schedules will contain information for the last ten years. CITY OF FRIDLEY, MINNESOTA NET POSITION BY COMPONENT Last ten fiscal years (Accrual Basis of Accounting) 200720082009 Governmental activities: Net investment in capital assets$18,245,265$17,490,936$16,141,958 Restricted 1,711,255 2,193,410 2,790,220 Unrestricted 17,244,490 18,845,006 20,276,252 Total governmental activities net position$37,201,010$38,529,352$39,208,430 Business-type activities: Net investment in capital assets$16,951,085$16,381,443$15,036,932 Restricted - - - Unrestricted7,722,4587,869,1858,308,078 Total business-type activities net position$24,673,543$24,250,628$23,345,010 Primary government: Net investment in capital assets$35,196,350$33,872,379$31,178,890 Restricted 1,711,255 2,193,410 2,790,220 Unrestricted 24,966,948 26,714,191 28,584,330 Total primary government net position$61,874,553$62,779,980$62,553,440 Note: GASB 68 was implemented in 2015. Net position was restated for 2014 to reflect the reporting of net position liability and pension related deferred outflows of resources. Net position for years prior to 2014 was not restated. Table 1 2010201120122013201420152016 $15,546,219$14,554,639$14,139,656$13,842,497$14,186,359$16,811,842$23,932,586 3,392,3823,401,776 3,294,952 3,050,204 2,673,982 2,233,179 2,204,983 23,020,46721,293,470 24,238,79824,551,73025,321,65916,052,83313,175,954 $40,241,465$40,967,488$41,673,406$41,444,431$42,182,000$35,097,854$39,313,523 $15,105,503$14,342,934$13,560,980$12,910,117$13,053,816$14,234,711$13,913,434 - - - - - - - 7,647,8487,387,6348,235,9488,417,0858,727,3828,058,1819,567,290 $22,753,351$21,730,568$21,796,928$21,327,202$21,781,198$22,292,892$23,480,724 $30,651,722$28,897,573$27,700,636$26,752,614$27,240,175$31,046,553$37,846,020 3,392,3823,401,776 3,294,952 3,050,2042,673,9822,233,1792,204,983 30,408,10128,941,318 32,474,746 32,968,81534,049,04124,111,01422,743,244 $62,994,816$62,698,056$63,470,334$62,771,633$63,963,198$57,390,746$62,794,247 CITY OF FRIDLEY, MINNESOTA CHANGES IN NET POSITION Last ten fiscal years (Accrual basis of accounting) 200720082009 Expenses Governmental activities: General government$4,074,480$3,646,436$3,324,698 Public safety6,260,8066,774,6106,847,571 Public works4,208,7654,771,7485,065,178 Community development863,8501,479,4551,036,549 Parks and recreation 1,312,5021,303,0631,605,306 Interest on long-term debt416,850377,884342,555 Total governmental activities expenses17,137,25318,353,19618,221,857 Business-type activities: Liquor4,920,5114,937,7764,654,811 Water2,279,0342,378,1012,423,129 Sanitary sewer3,798,0534,065,8994,350,576 Storm water381,944373,989399,349 Total business-type activities expenses11,379,54211,755,76511,827,865 Total primary government expenses$28,516,795$30,108,961$30,049,722 Program revenues Governmental activities: Charges for services: General government$1,468,699$1,600,769$1,733,160 Public safety709,209759,892690,115 Public works49,39964,04223,034 Community development656,674510,908523,508 Parks and recreation 381,432376,621347,044 Operating grants and contributions930,593818,805930,765 Capital grants and contributions834,7482,078,5721,476,989 Total governmental activities program revenues5,030,7546,209,6095,724,615 Business-type activities: Charges for services: Liquor5,252,9105,275,4674,973,000 Water1,990,0472,110,6212,419,400 Sanitary sewer3,461,6153,873,8063,784,000 Storm water392,016404,562457,862 Operating grants and contributions - - - Capital grants and contributions - - - Total business-type activities program revenues11,096,58811,664,45611,634,262 Total primary government program revenues$16,127,342$17,874,065$17,358,877 Table 2 Page 1 of 2 2010201120122013201420152016 $3,272,470$3,321,402$3,155,983$3,434,479$4,092,123$4,156,904$4,398,370 6,756,6986,720,6416,999,5547,101,3317,570,3228,048,65510,313,163 5,916,7765,023,0805,420,2715,928,3315,959,5955,127,6674,975,340 966,909973,198880,414935,716898,4551,107,3481,126,835 1,521,1061,387,1331,355,5711,456,8411,513,1351,353,3201,440,232 268,892263,075232,318218,610179,420144,06497,684 18,702,85117,688,52918,044,11119,075,30820,213,05019,937,95822,351,624 4,542,1804,568,2824,354,9094,148,4474,596,3164,914,7865,043,703 2,438,3992,688,8462,647,1762,815,5882,902,4193,101,3563,076,493 4,617,9914,750,4674,653,4344,974,5254,988,5875,040,8615,068,146 421,630785,861602,923587,036597,915785,6261,030,467 12,020,20012,793,45612,258,44212,525,59613,085,23713,842,62914,218,809 $30,723,051$30,481,985$30,302,553$31,600,904$33,298,287$33,780,587$36,570,433 $1,755,123$1,886,783$1,979,737$2,025,108$2,079,719$1,905,021$2,031,207 717,003796,308862,584864,435683,418619,630742,523 66,938378,14228,14499,28927,31253,58932,522 501,897570,685554,129582,280798,3921,194,5341,108,177 364,093325,682369,899326,067327,508336,847333,766 939,1231,148,3151,030,8871,095,7241,837,8601,139,3851,077,559 1,952,9341,374,6511,564,1461,747,3031,220,9032,370,0096,296,532 6,297,1116,480,5666,389,5266,740,2066,975,1127,619,01511,622,286 4,855,8804,893,4364,705,5234,308,7914,786,9875,256,8405,439,423 2,390,8362,418,2262,773,1012,788,1462,913,7172,907,1233,330,350 4,052,8004,245,6544,549,2544,572,7984,754,4924,809,6795,298,995 421,815457,083571,707613,818732,9611,225,1531,324,460 - - - 50,000 - - 67,551 - - - - 440,627421,990186,791 11,721,33112,014,39912,599,58512,333,55313,628,78414,620,78515,647,570 $18,018,442$18,494,965$18,989,111$19,073,759$20,603,896$22,239,800$27,269,856 CITY OF FRIDLEY, MINNESOTA CHANGES IN NET POSITION Last ten fiscal years (Accrual basis of accounting) 200720082009 Net (expense) revenue: Governmental activities($12,106,499)($12,143,587)($12,497,242) Business-type activities(282,954)(91,309)(193,603) Total primary government net (expense) revenue($12,389,453)($12,234,896)($12,690,845) General revenues and other changes in net position Governmental activities: General property taxes$8,986,924$9,068,718$9,175,888 Grants not restricted to programs3,152,4213,240,0813,390,633 Investment earnings1,111,116687,66596,817 Gain on sale of property59,438(24,802)12,982 Other29,238267 - Transfers600,000500,000500,000 Total governmental activities13,939,13713,471,92913,176,320 Business-type activities: Grants not restricted to programs - - - Investment earnings245,172168,39425,908 Gain on sale of property1,278 -(237,923) Other - - - Transfers(600,000)(500,000)(500,000) Total business-type activities(353,550)(331,606)(712,015) Total primary governmen$13,585,587$13,140,323$12,464,305 t Change in net position: Governmental activities$1,832,638$1,328,342$679,078 Business-type activities(636,504)(422,915)(905,618) $1,196,134$905,427($226,540) Total primary government Note: GASB 68 was implemented in 2015. Pension expense for years prior to 2015 was not restated. Table 2 Page 2 of 2 2010201120122013201420152016 ($12,405,740)($11,207,963)($11,654,585)($12,335,102)($13,237,938)($12,318,943)($10,729,338) (298,869)(779,057)341,143(192,043)543,547778,1561,428,761 ($12,704,609)($11,987,020)($11,313,442)($12,527,145)($12,694,391)($11,540,787)($9,300,577) $10,141,119$10,126,395$10,654,542$11,003,455$11,521,196$11,795,707$12,222,937 2,718,9791,095,4701,030,1231,033,8141,476,6641,325,3881,763,614 208,565347,184269,240(216,821)634,411157,281254,379 20,11214,93756,59835,680 - 67,58111,005 - - - - 93,236418,640354,572 350,000350,000350,000250,000250,000338,600338,500 13,438,77511,933,98612,360,50312,106,12813,975,50714,103,19714,945,007 - - - - - 2,413 - 57,098106,27465,537(52,346)148,24842,72295,713 112 - 9,680 - - 10,672 - - - - 24,66312,20116,3311,858 (350,000)(350,000)(350,000)(250,000)(250,000)(338,600)(338,500) (292,790)(243,726)(274,783)(277,683)(89,551)(266,462)(240,929) $13,145,985$11,690,260$12,085,720$11,828,445$13,885,956$13,836,735$14,704,078 $1,033,035$726,023$705,918($228,974)$737,569$1,784,254$4,215,669 (591,659)(1,022,783)66,360(469,726)453,996511,6941,187,832 $441,376($296,760)$772,278($698,700)$1,191,565$2,295,948$5,403,501 Table 3 Page 1 of 2 CITY OF FRIDLEY, MINNESOTA FUND BALANCES - GOVERNMENTAL FUNDS (1) Last ten fiscal years (Modified accrual basis of accounting) 2007200820092010 General Fund: Reserved$65,528$48,561$58,928$59,755 Unreserved: General fund5,206,7784,538,2244,600,9885,725,464 Designated for employee benefits - - - - Designated for contingencies - - - - Undesignated - - - - Nonspendable - - - - Restricted - - - - Unassigned - - - - Total general fund$5,272,306$4,586,785$4,659,916$5,785,219 All other governmental funds: Reserved for: Long-term receivables$348,441$277,560$ - $ - Public safety20,72625,590 - - Debt service1,214,5191,564,2171,734,6242,066,732 Unreserved, reported in: Special revenue funds1,189,1401,258,9261,329,6471,407,400 Capital projects funds5,223,5635,944,5565,056,1485,796,931 Debt service6,201,3505,976,5115,801,6865,983,425 Restricted - - - - Committed - - - - Assigned - - - - Unassigned - - - - Total all other governmental funds$14,197,739$15,047,360$13,922,105$15,254,488 In 2011, the City adopted the provisions of Governmental Accounting Standards Board Statement No. 54, Fund Balance Reporting and Governmental Fund Type Definitions. Table 3 Page 2 of 2 201120122013201420152016 $ - $ - $ - $ - $ - $ - - - - - - - - - - - - - - - - - - - - - - - - - 65,27166,15250,36660,12366,26551,305 -20,81040,01215,17619,37635,903 6,708,2847,582,3607,997,0368,242,3318,858,3099,084,228 $6,773,555$7,669,322$8,087,414$8,317,630$8,943,950$9,171,436 $ - $ - $ - $ - $ - $ - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 2,529,8733,093,3022,233,6642,071,2591,808,5721,903,290 2,209,0672,328,5832,124,9442,566,1012,709,6382,549,903 11,108,00311,783,59611,618,83511,949,55511,272,58810,573,287 (98,164)(97,712)(98,566)(97,712)(43,153)(27,574) $15,748,779$17,107,769$15,878,877$16,489,203$15,747,645$14,998,906 CITY OF FRIDLEY, MINNESOTA CHANGES IN FUND BALANCES - GOVERNMENTAL FUNDS Last ten fiscal years 200720082009 Revenues: General property taxes$8,927,963$9,052,719$9,072,267 Special assessments635,817589,790665,038 Licenses and permits1,080,787946,285965,363 Intergovernmental1,872,6432,742,9813,140,553 Charges for services1,830,4162,015,7962,021,708 Fines and forfeits298,359316,646255,014 Earnings on investments920,850560,62974,840 Interest on loan19,96216,5476,939 Other2,288,3092,220,2762,043,252 Total revenues 17,875,106 18,461,669 18,244,974 Expenditures: Current: General government3,893,9523,338,2283,086,441 Public safety5,999,5576,323,9106,446,714 Public works3,025,1573,406,4683,376,641 Community development861,8721,189,033895,057 Parks and recreation1,194,2901,366,1541,301,140 Debt service: Principal1,825,0002,075,0002,215,000 Interest 359,010379,340366,500 Bond issuance costs42,9869,1391,801 Capital outlay3,114,2032,684,9382,144,649 Total expenditures 20,316,027 20,772,210 19,833,943 Revenues over (under) expenditures (2,440,921) (2,310,541) (1,588,969) Other financing sources (uses): Refunding bond issues - - - Bonds issued1,910,0001,915,000 - Premium/(discount) on bonds issue - - - Proceeds from sale of capital assets58,31313,10136,845 Insurance and other reimbursements - - - Transfers in600,0003,926,5632,500,421 Transfers out -(3,380,023)(2,000,421) Total other financing sources (uses) 2,568,313 2,474,641 536,845 Net change in fund balance$127,392$164,100($1,052,124) Debt service as a percentage of noncapital expenditures12.9%13.6%14.6% Debt service as percentage of total expenditures 11.0%11.9%13.0% Table 4 2010201120122013201420152016 $10,178,369$10,113,120$10,732,129$11,024,785$11,554,557$11,805,580$12,244,211 622,100672,929763,920834,120938,290542,248865,722 973,9851,085,1001,104,5041,123,6351,171,3651,549,7851,442,895 3,310,6312,853,1712,649,2072,643,7283,208,4424,375,9727,330,338 2,080,3492,206,7642,353,8882,545,9082,518,0622,374,8962,592,665 240,880258,372255,622218,194226,922184,940212,635 176,257297,290236,226(185,473)565,245157,281254,379 - - - - - - - 1,992,971325,284322,354295,409314,416429,713887,678 17,812,03019,575,542 18,417,850 18,500,306 20,497,299 21,420,415 25,830,523 3,010,8353,165,1113,503,3263,279,6573,732,0563,777,6883,924,877 6,329,3546,284,6586,422,6466,794,5247,165,6787,319,5647,537,051 3,111,9183,061,1003,047,3003,530,9394,635,7523,575,2522,824,319 967,487979,042772,070817,895894,7851,081,549942,768 1,292,7831,195,4101,252,0891,305,1581,422,4051,288,6841,341,444 2,445,000800,000940,000980,0001,150,0001,190,0001,230,000 287,961271,969232,318227,326190,890152,894112,421 45,0942,79947,016 - 3,1507,4622,700 1,812,087964,4101,639,7732,536,2861,290,0083,645,4258,618,369 16,724,49919,302,519 17,856,538 19,471,785 20,484,724 22,038,518 26,533,949 1,087,531273,023 561,312 (971,479) 12,575 (618,103) (703,426) - - - - - - - 1,765,000 - 1,280,000 - - - - 53,163 - - - - - - 16,50015,09663,44535,67936,83693,67043,673 - - - - - - - 1,235,467380,000350,000250,0008,253,6161,065,4102,047,849 (885,467) - - (125,000)(7,462,485)(726,810)(1,909,349) 395,0962,184,663 1,693,445 160,679 827,967 432,270 182,173 $2,457,686$1,482,627$2,254,757($810,800)$840,542($185,833)($521,253) 15.9%6.8%7.2%6.8%7.0%7.3%7.5% 14.4%6.4%6.8%6.2%6.6%6.1%5.1% CITY OF FRIDLEY, MINNESOTA TAX CAPACITY VALUE AND ESTIMATED MARKET VALUE OF TAXABLE PROPERTY Last ten fiscal years Commercial/ FiscalResidentialIndustrialPublicAll YearPropertyPropertyUtilityOther 2007$15,074,008$14,500,008$46,953$4,236,896 200815,334,12615,809,59442,7384,370,011 200914,716,96716,788,86038,6804,455,969 201013,494,27916,457,27537,3084,523,767 201112,175,45215,182,22741,2364,396,579 1 2012 10,246,61414,710,92640,3304,271,859 1 2013 8,713,05313,207,35145,3064,286,829 1 2014 7,885,29812,520,98144,6484,362,496 1 2015 9,538,48412,771,82949,8684,737,031 1 2016 9,488,68613,688,86758,6994,958,693 Source: Continuing Disclosure Document 1 After 2011 the State implemented the Homestead Market Value Exclusion program for residential properties. Beginning in 2012 the HMVE program excludes a portion of the market value prior to the tax calculation. 2 Property values are determined on January 2 of the preceeding year. Table 5 Add:Less: Totalfor Area-wideFiscalAdjustedTotalEstimatedTax Capacity TaxValues andDisparityTax CapacityDirect TaxMarketas a Percent 2 Value of EMV CapacityIncrementContributionValueRate $33,857,865$ - $5,516,351$28,341,51431.349%$2,616,727,300119.46% 35,556,469 - 5,252,63730,303,83230.324%2,701,388,800117.33% 36,000,4761,514,7305,757,07331,758,13328.640%2,698,943,700113.36% 34,512,6292,478,3716,128,31830,862,68232.258%2,561,173,300111.83% 31,795,4942,505,5176,212,40628,088,60536.986%2,352,567,900113.20% 29,269,7292,851,4595,629,37426,491,81439.615%2,278,659,000110.49% 26,252,5392,844,6895,373,20223,724,02647.362%2,057,500,500110.66% 24,813,4232,799,1714,509,58723,103,00748.577%1,948,580,100107.40% 27,097,2122,934,0454,358,57025,672,68743.508%2,146,063,300105.55% 28,194,9452,986,8384,681,35026,500,4330.000%2,207,363,400106.39% CITY OF FRIDLEY, MINNESOTA DIRECT AND OVERLAPPING PROPERTY TAX CAPACITY RATES Last ten fiscal years SchoolSchoolSchool FiscalDistrictDistrictDistrict YearCityNo. 11No. 13No. 14 200731.349%19.353%17.183%24.175% 200830.324%16.983%15.942%26.033% 200928.640%18.263%23.411%31.172% 201032.258%19.939%24.398%38.795% 201136.486%24.023%18.596%40.631% 201239.615%23.325%24.024%43.862% 201347.362%26.801%27.449%50.112% 201448.577%28.265%24.824%49.552% 201543.508%22.482%32.562%48.422% 201644.960%20.885%29.442%54.252% Source: Anoka County Property Records and Taxation Department Notes: (1) Coon Creek Watershed District is included with School District No. 11. (2) Rice Creek Watershed District is included with School District No. 13, 14 and 16. Table 6 SpecialSpecialTotal Tax Capacity Rates By School Districts SchoolDistrictsDistrictsSchoolSchoolSchoolSchool DistrictwithwithDistrictDistrictDistrictDistrict (1)(1)(2)(2)(2) No. 16No. 11No. 13No. 14No. 16 CountyCoon CreekRice Creek 25.779%30.696%6.829%N/A88.666%87.770%94.762%96.366% 26.213%31.078%7.803%N/A86.608%87.135%97.226%97.406% 27.155%32.078%8.783%N/A86.183%92.840%100.601%96.584% 31.654%35.189%9.089%N/A94.964%100.897%115.294%108.153% 33.959%39.884%10.533%N/A113.226%109.392%131.427%124.755% 39.443%41.146%10.176%N/A111.953%114.961%134.799%130.380% 44.440%44.411%14.189%N/A128.022%129.850%152.513%146.841% 44.562%43.239%9.559%10.296%129.640%126.936%151.664%146.674% 40.045%38.123%8.591%9.079%112.704%123.272%139.410%130.755% 39.609%38.894%9.688%9.622%114.427%122.918%147.728%133.085% Table 7 CITY OF FRIDLEY, MINNESOTA PRINCIPAL PROPERTY TAXPAYERS Current year and nine years ago 20162007 Percentage Percentage Taxableof Total CityTaxableof Total City CapacityCapacityCapacityCapacity TaxpayerValueRankValueValueRankValue Medtronic, Inc.$1,673,43415.94%$1,696,37815.01% Target Corporation657,066 2 2.33%738,254 2 2.18% BNSF Railraod455,694 31.62%229,045 10 0.68% BAE (Fridley Land/N.Stacks)399,802 4 1.42%310,914 6 0.92% Wal-Mart/Sam's338,536 51.20%352,806 4 1.04% Shamrock Investments294,180 6 1.04%585,950 3 1.73% Georgetown Apartments268,328 70.95%266,750 9 0.79% Springbrook Apartments 266,475 8 0.95%268,063 8 0.79% River Pointe Apartments206,791 9 0.73%211,524 0.62% Onan Corp (Cummins Power)95,010 100.34%346,400 5 0.00% ZCOF (Fridley Market)N/A0.00%N/A0.00% Lifetime FitnessN/A0.00%273,016 7 0.81% Industrial EquitiesN/A0.00%N/A0.00% Total$4,655,31616.52%$5,279,10014.57% Total All Property$28,194,945$33,857,865 Table 8 CITY OF FRIDLEY, MINNESOTA PROPERTY TAX LEVIES AND COLLECTIONS Last ten fiscal years Collected Within The FiscalTaxesCollections YearLeviedinFiscal Year of the LevyTotal Collections to Date EndedFor ThePercentageSubsequentPercentage 1 Years Dec. 31Fiscal YearAmountof LevyAmountof Levy 2007$8,772,149$8,614,53798.20%$157,612$8,772,149100.00% 20089,188,5928,958,98697.50%226,6979,185,68399.97% 20099,110,8478,856,38497.21%252,6759,109,05999.98% 20109,707,0759,503,50997.90%199,0529,702,56199.95% 201110,014,0719,897,61098.84%112,18210,009,79299.96% 201210,703,73910,699,02599.96%(1,798)10,697,22799.94% 201311,252,48111,247,94399.96%(9,425)11,238,51899.88% 201411,511,28811,372,81298.80%121,79211,482,07899.75% 201511,734,60711,657,85599.35%28,12411,685,97999.59% 201612,200,83512,172,55599.77%N/A12,172,55599.77% 1 Includes repayment of property taxes abatements Source: City Finance Department Table 9 CITY OF FRIDLEY, MINNESOT A RATIOS OF OUTSTANDING DEBT BY TYP E Last Ten fiscal years Business Type Governmental ActivitiesActivities Total Percentage FiscalImprovementTax IncrementEquipmentRevenuePrimaryof PersonalPer 11 IncomeCapita YearBondsBondsCertificatesTotalBondsGovernment 2007$6,065,000$5,110,000$ - $11,175,000$3,015,000$14,190,0001.99%$420 20087,615,0003,400,000 - 11,015,0006,440,00017,455,0002.46%416 20097,080,0001,720,000 - 8,800,0005,865,00014,665,0002.13%333 20107,570,000 - 550,0008,120,0008,160,00016,280,0002.19%298 20116,770,000 - 550,0007,320,0007,625,00014,945,0002.00%266 20125,880,000 - 1,780,0007,660,0007,070,00014,730,0001.96%278 20134,955,000 - 1,725,0006,680,0006,413,15413,093,1541.69%240 20144,000,000 - 1,530,0005,530,0005,845,00011,375,0001.58%198 20153,010,000 - 1,330,0004,340,0005,260,0009,600,0001.31%152 20161,980,000 - 1,130,0003,110,00010,645,00013,755,0001.67%107 1 Demographic information can be found on Table 13 Table 10 CITY OF FRIDLEY, MINNESOTA DIRECT AND OVERLAPPING GOVERNMENTAL ACTIVITIES DEBT December 31, 2016 Estimated EstimatedShare of DebtPercentageOverlapping 1 Applicable Governmental UnitOutstanding Debt Debt repaid with property taxes: Independent School District No. 11$69,965,0001.60%$1,119,440 Independent School District No. 1314,085,000 31.46%4,431,141 Independent School District No. 1475,795,000 100.00%75,795,000 Independent School District No. 16138,580,000 36.80%50,997,440 Metro Council1,449,121,482 1.19%17,244,546 Anoka County116,115,411 18.04%20,947,220 Vocational/Technical District No. 91680,750,000 2.21%1,784,575 Subtotal - overlapping debt172,319,362 City of Fridley - Direct debt13,755,000100.00%13,755,000 Total direct and overlapping debt$186,074,362 Sources: Continuing Disclosure Document 1 Overlapping governments are those that coincide, at least in part, with the geographic boundaries of the City. This schedule estimates the portion of the outstanding debt of those overlapping governments that is borne by the residents and businesses of the City. This process recognizes that, when considering the City's ability to issue and repay long-term debt, the entire debt burden borne by the residents and businesses should be taken into account. However, this does not imply that every taxpayer is a resident, and therefore responsible for repaying the debt, of each overlapping government. ŷźƭ ƦğŭĻ źƓƷĻƓƷźƚƓğƌƌǤ ƌĻŅƷ ĬƌğƓƉ Table 11 CITY OF FRIDLEY, MINNESOTA LEGAL DEBT MARGIN INFORMATION Last ten fiscal years Market Value$2,207,363,400 Debt Limit 3% of Market Value$66,220,902 Amount of Debt Applicable to Debt Limit: Total Debt13,755,000 Deductions: Improvement Bonds$1,980,000 Revenue Bonds10,645,00012,625,000 Total Amount of Debt Applicable to Debt Limit1,130,000 Legal Debt Margin$65,090,902 Legal Debt Margin Calculation for the last 10 Fiscal Years Net DebtLegalAmount of Debt FiscalDebtApplicable toDebtApplicable to YearLimitLimitMarginDebt Limit 2007$52,334,546$ - $49,393,4020.00% 200854,027,776 - 52,334,5460.00% 200980,968,311 - 54,027,7760.00% 201076,835,199550,00076,285,1990.72% 201170,577,037550,00070,027,0370.78% 201268,359,7701,780,00066,579,7702.60% 201361,725,0151,725,00060,000,0152.79% 201458,457,4031,530,00056,927,4032.62% 201564,381,8991,330,00063,051,8992.07% 201666,220,9021,130,00065,090,9021.71% Note: State statutes limit the amount of general obligation debt a Minnesota City may issue to 3% of total estimated market value; prior to 2008, the State Statute debt limit was 2%. CITY OF FRIDLEY, MINNESOTA PLEDGED-REVENUE COVERAGE Last ten fiscal years Improvement BondsEquipment Certificates SpecialProperty Debt ServiceDebt Service FiscalAssessmentTax YearCollectionsPrincipalInterestCoverageCollectionsPrincipalInterestCoverage 2007$602,988$155,000$160,4231.91$ - $ - $ - - 2008561,221365,000230,3250.94 - - - - 2009658,406535,000270,0050.82 - - - - 2010555,997725,000252,8990.57 - - - - 2011504,053800,000258,1350.4869,881 - 13,8345.05 2012659,666890,000229,5030.59 70,66850,00013,4501.11 2013376,026925,000198,4130.33 233,74955,00025,7632.89 2014932,078955,000166,2350.83 234,357195,00025,6531.06 2015 - 990,000129,8150.00 231,31060,00010,0503.30 2016 - 1,030,00092,0900.00 234,35960,0008,7003.41 Table 12 Utility Revenue BondsTax Increment Bonds Utility Less Net Tax Debt ServiceDebt Service ServiceOperatingAvailableIncrement RevenuesExpensesRevenuePrincipalInterestCoverageCollectionsPrincipalInterestCoverage $5,832,904$6,350,572($517,668)$305,000$108,351-1.25$3,586,097$1,670,000$199,4881.92 6,379,9846,631,304(251,320)300,000149,481-0.563,329,2891,710,000149,0151.79 6,611,6116,951,906(340,295)575,000221,449-0.432,016,5801,680,00096,4951.14 6,855,4417,236,513(381,072)515,000241,508-0.501,742,8161,720,00035,0630.99 7,118,1547,952,911(834,757)535,000272,264-1.0369,881 - 13,8345.05 7,864,4066,341,5441,522,862555,000255,0541.88 - - - - 7,961,7386,839,8521,121,886655,000235,4741.26 - - - - 8,363,4156,987,0951,376,320570,000223,4591.73 - - - - 8,936,2877,405,5961,530,691585,000203,0601.94 - - - - - - - 610,000181,6100.00 - - - - Table 13 CITY OF FRIDLEY, MINNESOTA DEMOGRAPHIC AND ECONOMIC STATISTICS Last ten fiscal years Total Per Capita FiscalUnemploymentPersonalPersonal Year PopulationRateIncomeIncome 200726,6034.8%$712,747,576$26,792 200826,4595.7%708,889,52826,792 200926,4227.9%688,160,99026,045 201027,2087.3%744,138,80027,350 201127,5155.5%745,518,92527,095 201227,5915.6%749,702,65227,172 201327,7854.4%774,145,67027,862 201427,9524.2%720,406,89625,773 201528,5473.9%747,503,19526,185 201629,1423.9%824,602,03228,296 Sources: Metropolitan Council (population), Continuing Disclosure Document (unemployment rate) Table 14 CITY OF FRIDLEY, MINNESOTA PRINCIPAL EMPLOYERS Current year and nine years ago 20162007 Percentage Percentage of Total Cityof Total City EmployerEmployeesRankEmploymentEmployeesRankEmployment 3,464115.25%110.58% Medtronic, Inc.2,500 1,21025.33%37.31% Cummins Power (Onan)1,727 1,13835.01%45.92% Unity Medical Center1,400 69643.06%52.54% Target600 60052.64%27.62% BAE Systems1,800 58062.55%N/A ISD #14 (Fridley Schools) 51572.27%62.12% Minco Products500 31281.37%101.11% Wal-Mart262 30091.32%91.27% Park Construction300 295101.30%71.48% Kurt Manufacturing350 N/AN/A Lofthouse Bakery N/A81.27% Parsons Electric300 Total9,11040.12%9,73941.21% Total City Employment22,70923,635 Source: Fridley Community Development Dept, MN Department of Employment and Economic Development CITY OF FRIDLEY, MINNESOTA FULL-TIME EQUIVALENT CITY GOVERNMENT EMPLOYEES BY FUNCTION/PROGRAM Last ten fiscal years Full-Time Equivalent Employees as of December 31, Function/Program2007200820092010 General government: City administration3333 Finance22221919 Human resource2222 Community development7977 Public safety: Police department44444542 Fire department9888 Public works: Administration2222 Engineering4444 Mechanic3333 Streets9999 Water5555 Sewer5555 Parks7777 Parks and recreation: Parks and recreation8888 Total130131127124 Source: City Finance Department 1 Prior to 2013 positions at 32 hours or more per week were counted as 1 full-time equivalent. As of 2013 these figures represent all permanent staff. Table 15 Full-Time Equivalent Employees as of December 31, 1111 2013201420152016 20112012 334.04.74.75.0 192018.016.016.016.0 222.02.02.02.0 778.29.89.69.6 434450.651.652.652.6 887.87.67.07.0 221.20.61.51.5 335.05.01.81.8 334.54.03.83.8 999.08.58.58.5 777.06.55.85.8 557.07.07.87.8 555.05.03.73.7 888.09.69.09.0 124126137.3137.9133.8134.1 CITY OF FRIDLEY, MINNESOTA OPERATING INDICATORS BY FUNCTION/PROGRAM Last ten fiscal years Fiscal Year Function/Program2007200820092010 Police: Physical arrests1,2901,3571,3051,318 Parking violations792419382778 Traffic violations4,0354,9942,9342,929 Fire: Emergency responses2,8042,8272,8642,772 Fires occurred109116141116 Commercial inspections4,5171,2391,021868 Community development: Rental inspections1,176755888597 Refuse collection: Recyclables collected (tons per day)6.966.126.475.89 Recyclables collected (pounds per person)N/AN/AN/AN/A Building inspection: Permits issued: Residential1,2061,4441,5991,905 Commercial366418386434 Total permit valuation$47,871,624$39,105,158$45,564,657$30,441,199 Other public works: Street resurfacing (miles)3.74.14.94.9 Recreation Total participation hoursN/AN/AN/AN/A Total senior program participation hoursN/AN/AN/AN/A Springbrook Nature Ctr program participants20,24520,89420,93723,987 Water: Connections8,2308,2338,2318,226 Storage capacity (gallons)6,500,0006,500,0006,500,0006,500,000 Average daily demand (gallons)4,270,0004,270,0003,458,4823,014,425 Peak daily demand (gallons)10,990,00010,800,00019,350,8928,119,207 Sewer: Connections8,2388,2428,2388,237 Sources: Various City departments. Table 16 Fiscal Year 201120122013201420152016 1,1451,1331,3441,2561,386752 665283562373278922 2,8602,5902,8263,2452,5922,601 2,9232,9063,0033,0893,0473,268 114121119110103127 8901,0161,1101,5051,663789 7831,1171,1451,4281,8811,559 5.705.816.216.226.335.99 N/AN/A164.67164.59165.96156.54 2,2321,6062,1911,9744,6422,227 446386440492642599 $39,902,641$35,763,059$40,697,477$47,109,811$60,598,103$73,636,057 2.23.13.83.32.92.2 N/A302,500305,975310,000311,500313,000 N/A68,70069,81870,00062,21870,000 24,23124,26623,41923,86020,40415,609 8,2228,2278,2308,2438,2458,374 6,500,0006,500,0006,500,0006,500,0006,500,0006,500,000 3,730,0003,993,2854,227,9752,517,8082,968,9013,560,000 6,622,0008,661,0009,009,0007,439,0006,803,0006,392,000 8,2328,2368,2398,2528,2548,279 Table 17 CITY OF FRIDLEY, MINNESOTA CAPITAL ASSET STATISTICS BY FUNCTION/PROGRAM Last ten fiscal years Fiscal Year Function/Program2007200820092010201120122013201420152016 Police: Stations1111111111 Squad cars12121212121212151313 Fire stations3333333333 Other public works: Streets (miles)125.3125.3125.3125.3125.3125.3125.3125.3125.5125.5 Highways (miles)10.310.310.310.310.310.310.310.310.310.3 Streetlights1,0591,0591,0591,0591,0591,0591,0591,0591,0591,059 Traffic signals36363636363636363636 Parks and recreation: Acreage682682682682682682682682682682 Playgrounds29292929292929292929 Baseball/softball diamonds22222222222222222222 Soccer/football fields2222222222 Community centers1111111111 Water: Water mains (miles)113.0113.0113.0113.0113.0113.0113.0113.0113.2113.2 Fire hydrants1,0131,0131,0131,0131,0131,0131,0131,0131,0131,013 Storage capacity (million gallons)6.56.56.56.56.56.56.56.56.56.5 Wastewater: Sanitary sewers (miles)103.0103.0103.0103.0103.0103.0103.0103.0103.0103.0 Storm sewers (miles)52.052.052.052.052.052.052.052.052.052.2 Sources: Various City departments.