Loading...
HomeMy WebLinkAbout3.e. Presentation and Acceptance of 2011 Comprehensive Annual Financial Report (CAFR) �ROSEMOLINT EXECUTIVE SUMMARY CITY COUNCIL City Council Meeting Date: May 15, 2012 AGENDA ITEM: Presentation and Acceptance of 2011 AGENDA SECTION: Comprehensive Annual Financial Report presentations CAFR PREPARED BY: Jeff May, Finance Director AGENDA NO. �,� ATTACHMENTS: Resolution, CAFR APPROVED BY: RECOMMENDED ACTION: Motion to adopt a Resolution Accepting the 2011 Comprehensive Annual Financial Report. ISSUE Review and accept the 2011 CAFR. BACKGROUND A representative from oux audit firm, Baker Tilly Virchow Krause, LLP, will be here on Tuesday evening, May 15`�, to review the City of Rosemount's 2011 CAFR. 'The representative will give a brief presentation, highlighting items that may be worthy of youx attention and will also be available to answer any questions that you may have. After you have reviewed your CAFR, if Xou have no further use fot i� plp ease return it to me so I can use it as an extra co�,v for �eo�le or organizations that may request them. Thank you!! SUMMARY Recommend the above motion to accept the 2011 CAFR. CITY OF ROSEMOUNT DAKOTA COUNTY, MINNESOTA RESOLUTION 2012 - A RESOLUTION ACCEPTING THE 2011 COMPREHENSIVE ANNUAL FINANCIAL REPORT WHEREAS, the City of Rosemount has been presented its 2011 Comprehensive Annual Financial Report, prepared with the assistance of our audit firm of Baker Tilly Virchow Krause, LLP. NOW, THEREFORE, BE IT RESOLVED, that the City Council of the City of Rosemount, accepts its 2011 Comprehensive Annual Financial Report, prepared with the assistance of our audit firm of Baker Tilly Virchow Krause, LLP. ADOPTED this 15 day of May, 2012. Wifliam H. Droste, Mayor ATTEST: Amy Domeier, City Clerk City of Rosemount Review of: 2011 Audit and Financial Ratios May 15, 2012 This report is intended solely for the use of the City Council and Management. Baker Tilly Virchow Krause, LLP, is an independently owned and managed member of Baker Tilly International.© 2010 Baker Tilly Virchow Krause, LLP Agenda > Status of Engagements > Review of Financial Statement Audit, Including Required Communications and Other Matters > Review of Financial Ratios > Questions 2 Status of Engagements > Audit of Financial Statements –Finalized review/reports last week –dated May 8, 2012 –Electronic filing of reports to State Auditor’s Office will occur after approval tonight > Audit of Compliance with State Statutes –Separate report issues –no findings > Audit of Federal Award Programs –not required this year 3 Required Audit Communications >> Auditors’ responsibilityAudit adjustments –Findings similar to prior year, which –Two material audit adjustments are common for cities your size –Passed adjusting entries > No changes to planned scope and > No disagreements with timing management > Accounting policies > No consultations with other accountants –Implemented GASB No. 54 >> Accounting estimatesManagement representations –Depreciable lives for capital assets–Letter has been provided >> Financial statement disclosures are Independence neutral, clear and consistent > Other findings or issues in normal > No difficulties in performing the auditcourse of audit > Also included various informational matters in letter 4 Financial Statements (CAFR) Financial Statements (CAFR) > Independent Auditors’ Report –Unqualified opinion –Modified language for supplemental info > Management’s Discussion and Analysis > Statement of Net Assets –Assets increased 2% to $209 million (78% relates to capital assets) –Liabilities decreased 7% to $24.9 million –Net assets (equity) increased by 3.5% »Unrestricted equity increase was 1.1% or approximately $400,000 > Statement of Activities –Figures consistent with prior year > Modified Accrual Fund Statements 5 Financial Statements (CAFR), cont. Financial Statements (CAFR), cont. > Financial Statements for Proprietary/Enterprise Funds –Balance sheet –unrestricted equity was approximately $6.5 million for water utility, $6.3 million for sewer utility, and $4.7 million for the storm water utility –Income statement –overall net income was approximately $73,000 before transfers –Cash flows statement –net operating cash flow was approximately $2.1 million > Footnotes –Standard disclosures –Pages 32-33 and 48 include information related to new fund balance reporting standard »Page 33 notes that General Fund has sufficient amount of unassigned equity to cover working capital needs for first half of 2012 > Budget to Actual Schedule for General Fund –Revenues exceeded budget by $350,549 –Expenditures exceeded budget by $251,011 after transfers of excess fund balance > Statistical Schedules 6 Financial Ratios Note: Averages presented in graphs were derived from information on the State Auditor’s website for cities of similar size across the State of Minnesota. 7 Governmental Funds Revenues 8 Governmental Funds Expenditures (excluding capital outlay) 9 Various PerCapitaRatios 10 Other Ratios of Interest 11 Questions? 12 Ryan Engelstad, CPA, Senior Manager Ryan.Engelstad@bakertilly.com 612 876 4613 225 South 6th Street, Suite 2300 Minneapolis, MN 55402 13 Management's Discussion and Analysis (Unaudited) As management of the City of Rosemount (the City), we offer readers of the City's financial statements this narrative overview and analysis of the financial activities of the City for the fiscal year ended December 31, 2011. We encourage readers to consider the information presented here in conjunction with the City’s financial statements following this section. Financial Highlights The assets of the City exceeded it’s liabilities at the close of the most recent fiscal year by $184,424,155 (net assets). Of this amount, $34,545,125 (unrestricted net assets) may be used to meet the government's ongoing obligations to citizens and creditors. The City's total net assets increased by $6,325,127. Most of this increase is attributable to an increase of our capital assets which were primarily funded by developers. At year end, unassigned fund balance for the General Fund was $5,700,071, or 54 percent of the total General Fund expenditures budgeted for the upcoming year. Comparison of this balance to prior years’ balances is illustrated on the table on page 8. The City's total debt decreased by $2,525,000 (10.5 percent) during the current year. The reason for this decrease was that there was only one new debt issuance for new development, offset by calls on five separate debt issues in addition to the normally scheduled payments on existing debt. Overview of the Financial Statements This discussion and analysis is intended to serve as an introduction to the City's basic financial statements. The City's basic financial statements comprise three components: 1) government-wide financial statements, 2) fund financial statements, and 3) notes to the financial statements. This report also contains other supplementary information in addition to the basic financial statements themselves. Government-wide financial statements . The government-wide financial statements are designed to provide readers with a broad overview of the City's finances, in a manner similar to a private-sector business. The statement of net assets presents information on all of the City's assets and liabilities, with the difference between the two reported as net assets. Over time, increases or decreases in net assets may serve as a useful indicator of whether the financial position of the City is improving or deteriorating. The statement of activities presents information showing how the government's net assets changed during the most recent fiscal year. All changes in net assets are reported as soon as the underlying event giving rise to the change occurs, regardless of the timing of related cash flows. Thus, revenues and expenses are reported in this statement for some items that will only result in cash flows in future fiscal periods (e.g., uncollected taxes and earned but unused vacation leave). Both the government-wide financial statements distinguish functions of the City that are principally supported by taxes and intergovernmental revenues (governmental activities) from other functions that are intended to recover all or a significant portion of their costs through user fees and charges (business-type activities). The governmental activities of the City include general government, public safety, public works, recreation, and community development. The business- type activities of the City include water, sewer, storm water and an ice arena. The government-wide financial statements include not only the City itself, but also a legally separate port authority, which functions as the economic development arm of the City, and therefore has been blended in with the primary government. The government-wide financial statements can be found on pages 11-12 of this report. Page 2 Fund financial statements . A fund is a grouping of related accounts that is used to maintain control over resources that have been segregated for specific activities or objectives. The City, like other state and local governments, uses fund accounting to ensure and demonstrate compliance with finance-related legal requirements. All of the funds of the City can be divided into three categories: governmental funds, proprietary funds, and fiduciary funds. 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 the 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 financing requirements. Because the focus of governmental funds is narrower than that of the government-wide financial statements, it is useful to compare the information presented for governmental funds with similar information presented for governmental activities in the government-wide financial statements. By doing so, readers may better understand the long-term impact of the government's near-term financing decisions. Both the governmental fund balance sheet and governmental fund statement of revenues, expenditures, and changes in fund balances provide a reconciliation to facilitate this comparison between governmental funds and governmental activities. 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, capital projects fund, and the Port Authority TIF fund all of which are considered major funds. Data from the three other governmental funds are combined into a single, aggregated presentation. Individual fund data for each of these nonmajor governmental funds is provided in the form of combining statements elsewhere in this report. The City adopts an annual appropriated budget for its general fund. A budgetary comparison statement has been provided for the general fund to demonstrate compliance with this budget. The basic governmental fund financial statements can be found on pages 13-15 of this report. Proprietary funds. The City maintains two different types of proprietary funds. Enterprise funds are used to report the same functions presented as business-type activities in the government-wide financial statements. The City uses enterprise funds to account for its public utilities and ice arena operations. The internal service fund is an accounting device to accumulate and allocate costs internally among the City's various functions. The City uses its internal service fund to account for insurance premiums and deductibles and to accumulate resources for the risk of uninsured loss. Because this service predominantly benefits governmental rather than business-type functions, it has 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 each of the public utilities, which are considered to be major funds of the City, and information on the ice arena fund, which is considered a non-major fund. The internal service fund is also presented separately in the proprietary fund financial statements. The basic proprietary fund financial statements can be found on pages 16-19 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's own programs. The City had one fiduciary fund for the year ended December 31, 2011. Page 3 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 21-56 of this report. Other information. The combining statements referred to earlier in connection with nonmajor governmental funds are presented following the basic financial statements. Combining and individual fund statements and schedules can be found on pages 60-64 of this report. Government-wide Financial Analysis As noted earlier, net assets may serve over time as a useful indicator of a government's financial position. In the case of the City, assets exceeded liabilities by $184,424,155 at the close of the most recent fiscal year. The largest portion of the City's net assets (78 percent) reflects its investment in capital assets (e.g., land, buildings, machinery and equipment, infrastructure) less any related debt used to acquire those assets that is still outstanding. The City uses these capital assets to provide services to citizens; consequently, these assets are not for future spending. Although the City's investment in capital assets is reported net of related debt, it should be noted that the resources needed to repay this debt must be provided from other sources, since the capital assets themselves cannot be used to liquidate these liabilities. City of Rosemount's Net Assets Governmental Business-Type 2011 Governmental Business-Type 2010 Activities Activities Totals Activities Activities Totals Current and other assets $ 27,564,908 $ 18,299,956 $ 45,864,864 $ 22,970,463 $ 20,482,019 $ 43,452,482 Capital assets 68,169,312 95,281,215 163,450,527 65,328,286 95,986,089 161,314,375 Total assets 95,734,220 113,581,171 209,315,391 88,298,749 116,468,108 204,766,857 Long-term liabilities outstanding 17,907,196 4,769,809 22,677,005 17,996,519 7,148,694 25,145,213 Other liabilities 1,870,813 343,418 2,214,231 1,287,485 235,131 1,522,616 Total liabilities 19,778,009 5,113,227 24,891,236 19,284,004 7,383,825 26,667,829 Net assets: Invested in capital assets, net of related debt 53,419,036 90,695,202 144,114,238 49,563,765 89,025,234 138,588,999 Restricted 5,764,792 - 5,764,792 5,361,675 5,361,675 - Unrestricted 16,772,383 17,772,742 34,545,125 14,089,305 20,059,049 34,148,354 Total net assets $ 75,956,211 $ 108,467,944 $ 184,424,155 $ 69,014,745 $ 109,084,283 $ 178,099,028 An additional portion of the City’s net assets (3 percent) represents resources that are subject to external restrictions on how they may be used. The remaining balance of unrestricted net assets ($34,545,125) may be used to meet the government’s ongoing obligations to citizens and creditors. At the end of the current fiscal year, the City is able to report positive balances in all three categories of net assets, both for the government as a whole, as well as for its separate governmental and business-type activities. Page 4 Governmental activities . Governmental activities increased the City’s net assets by $6,941,466, accounting for 110 percent of the total growth in the government’s net assets. This compares to an increase (from governmental activities) of $8,049,379 in 2010. Revenues decreased by approximately $1,100,000 related to capital grant proceeds in 2011. Expenses stayed relatively flat with a decrease of approximately $280,000; however that was offset by a net decrease in transfers from business-type activities of $295,000. Business-type activities . Business-type activities decreased the City’s net assets by $616,399, accounting for a 10 percent decrease of the total growth in the government’s net assets. This compares to a decrease of $1,381,188 in 2010. The primary reasons for the current year decrease was a decrease in the net transfers to governmental activities of $295,000 and an increase in capital revenue of approximately $315,000 related to special assessments on new utility projects. Elements of these changes are as follows: City’s Changes in Net Assets Business-Business- Governmental Type 2011 Governmental Type 2010 Activities Activities Totals Activities Activities Totals Revenues: Program revenues: Charges for services $ 2,392,179 $ 4,759,365 $ 7,151,544 $ 2,107,966 $ 4,718,952 $ 6,826,918 Operating grants and contributions 459,054 459,054 604,560 604,560 Capital grants and contributions 4,214,641 544,395 4,759,036 5,350,232 229,858 5,580,090 General revenues: Property taxes 11,202,224 11,202,224 11,280,620 11,280,620 Other taxes 262,783 262,783 264,808 264,808 Investment income 243,193 377,868 621,061 164,474 315,928 480,402 Other 334,263 334,263 429,150 429,150 Total revenues 19,108,337 5,681,628 24,789,965 20,201,810 5,264,738 25,466,548 Expenses: General government 2,612,911 2,612,911 2,671,886 2,671,886 Public safety 3,763,742 3,763,742 3,819,520 3,819,520 Public works 4,336,345 4,336,345 4,326,903 4,326,903 Recreation 1,496,068 1,496,068 1,477,525 1,477,525 Community development 9,069 9,069 149,701 149,701 Interest on long-term debt 637,609 637,609 690,896 690,896 Water 1,792,613 1,792,613 1,861,467 1,861,467 Sewer 2,386,660 2,386,660 2,305,503 2,305,503 Storm water 950,114 950,114 1,010,678 1,010,678 Arena 479,707 479,707 484,278 484,278 Total expenses 12,855,744 5,609,094 18,464,838 13,136,431 5,661,926 18,798,357 Increase in net assets before transfers and extraordinary item 6,252,59372,5346,325,127 7,065,379(397,188)6,668,191 Transfers 688,873 (688,873) 984,000 (984,000) Increase in net assets 6,941,466 (616,339) 6,325,127 8,049,379 (1,381,188) 6,668,191 Net assets – Beginning of Year 69,014,745 109,084,283 178,099,028 60,965,366 110,465,471 171,430,837 $ 184,424,155 $ 69,014,745 $ 109,084,283 $ 178,099,028 Net assets – End of Year $ 75,956,211 $ 108,467,944 Page 5 Expenses and Program Revenues – Governmental Activities Expenses Revenue 4.5 4 3.5 3 2.5 Millions 2 1.5 1 0.5 0 General GovernmentPublic SafetyPublic WorksRecreationCommunityInterest on long-term Developmentdebt Revenues by Source – Governmental Funds Investment income and Special assessments miscellaneous 2.7% Fines and forfeitures8.4% 0.7% Licenses and permits 2.1% Public charges for services 12.1% Taxes 61.0% Intergovernmental 13.0% Page 6 Expenses and Program Revenues – Business-Type Activities Expenses Revenue 2.5 2 1.5 Millions 1 0.5 0 WaterSewerStorm waterIce Arena Revenues by Source – Proprietary Funds Investment income Surcharges and penalties 6.7% 5.2% Special assessments 9.6% Connection fees 6.0% Water meters 0.5% Charges for services 72.0% Financial Analysis of the Government’s Funds As noted earlier, the City uses fund accounting to ensure and demonstrate compliance with finance-related legal requirements. Governmental funds. The focus of the City’s governmental funds is to provide information on near-term inflows, outflows, and balances of spendable resources. Such information is useful in assessing the City’s financing requirements. In particular, unassigned fund balance may serve as a useful measure of a government’s net resources available for spending at the end of the fiscal year. Page 7 As of the end of the current fiscal year, the City’s governmental funds reported combined ending fund balances of $21,813,153, an increase of $3,310,931 in comparison with the prior year. $5,700,071 constitutes unassigned fund balance, which is available for spending at the government’s discretion (this amount is entirely in the General Fund and is typically available to meet cash flow needs). A small amount ($85,067) is classified as nonspendable in the General Fund, $5,459,533 is classified as restricted to meet debt service requirements and the remainder of the fund balance is considered to be assigned and unavailable for discretionary spending. The General Fund is the chief operating fund of the City. At the end of the current fiscal year, unassigned fund balance of the General Fund was $5,700,071, while total fund balance reached $7,679,486. The following table shows year-end General Fund balances as compared to the adopted expenditure budget of the following year: Fund Balance Year Budget Amount Percent of Next Budget 2002 $ 6,501,600 $ 5,126,656 70% 2003 7,338,100 4,061,256 55% 2004 7,409,400 4,383,289 55% 2005 7,996,100 4,511,547 53% 2006 8,516,300 4,806,577 52% 2007 9,181,100 5,747,445 54% 2008 10,574,900 5,688,243 55% 2009 10,384,800 5,693,475 55% 2010 10,466,000 5,731,123 55% 2011 10,480,400 5,700,071 * 54% 2012 10,531,800 * This amount represents the unassigned General Fund balance During the current fiscal year, unassigned fund balance in the General Fund decreased by $31,052. The decrease was intentional as the City has determined, through the adoption of a formal Fund Balance Policy, it would like to maintain a maximum unassigned fund balance of 55 percent of the next General Fund operating expenditure budget. Forty to fifty percent normally provides adequate working capital to finance General Fund operations until property taxes and state aids are received. The desired unassigned fund balance level also provides a certain amount of comfort that unforeseen emergencies can be addressed without causing an immediate financial crisis. As of December 31, 2011, 100 percent of the unassigned fund balance of the General Fund has been designated to meet working capital needs. The debt service fund balance decreased by $1,391,488 due to two bond calls that occurred in 2011 (in addition to the normal debt payments). The capital projects fund balance increased by $3,943,048 due to the issuance of bonds approximating $2 million, the timing of project payments, and an increase in spending for the year (three large improvement projects were started in 2011). The Port Authority TIF fund balance increased by $247,773 due to limited spending. Proprietary funds The City’s proprietary funds provide the same type of information found in the government-wide statements, but in more detail. Unrestricted net assets of the utility funds at the end of the year amounted to $17,502,715 while the arena fund had unrestricted net assets amounting to $270,027. The decrease in total net assets for the utility funds was $626,801 and the increase in total net assets for the arena fund was $10,462. Page 8 General Fund Budgetary Highlights There were no significant variances between final budgeted revenues and actual amounts. All revenue areas experienced either small surpluses or deficits that led to the final surplus amount. The largest variance was in the area of taxes and that was because we discontinued budgeting anything for delinquent taxes received. The hope was that the delinquent collections would offset any current tax delinquencies and it ended up that the current collections were high combined with a healthy delinquent collection. Overall, total department expenditures ended up being less than one percent under budget with most being slightly less than budgeted for and a few being just slightly over budget. The Council line item (on a budgetary basis) actual amount exceeded budget due to a year-end assignment/encumbrance (for future health insurance costs), the Fire Department budget was over by less than one percent because of fire call pay, the Fleet Maintenance Department budget was over by five percent because of larger than normal equipment repairs because of the harsh winter, the Street Maintenance Department budget was over by one percent because of the contracted snow removal costs because of the harsh winter, and the Parks Maintenance Department budget was over by less than one percent because of an overage in the part-time salaries (more utilization of part-timers than in past years). Capital Asset and Debt Administration Capital assets The City’s investment in capital assets for its governmental and business-type activities as of December 31, 2011, amounts to $163,450,527 (net of accumulated depreciation). This investment in capital assets includes land, buildings and structures, machinery and equipment, water, sewer, and storm water systems, infrastructure and construction in progress. Major capital assets events during the current fiscal year included the following: Of the capital asset additions totaling $7,124,402 for the year, developers paid for approximately $2,100,000 of them. City of Rosemount’s Capital Assets (net of depreciation) Governmental Business-Type Activities Activities Totals Land $ 10,498,466 $ 2,643,767 $ 13,142,233 Land improvements 2,212,864 - 2,212,864 Buildings 14,505,832 11,085,341 25,591,173 Machinery and equipment 9,121,191 2,743,682 11,864,873 Mains and lines - 121,954,750 121,954,750 Infrastructure 48,308,900 - 48,308,900 Construction in progress 2,726,013 2,617,034 5,343,047 Accumulated depreciation (19,203,954) (45,763,359) (64,967,313) Total capital assets $ 68,169,312 $ 95,281,215 $ 163,450,527 Additional information on the City's capital assets can be found in Note IV.C. on pages 38-40 of this report. Long-term debt At the end of the current fiscal year, the City had total bonded debt outstanding of $21,520,000 (including debt recorded in the Port Authority). Of this amount, $4,765,000 was for general obligation improvement debt which has financed special assessment construction as part the continuing development within the City. An additional $8,765,000 was general obligation debt issued by the Port Authority which financed the City's economic development and redevelopment programs. Another $4,585,000 was general obligation revenue bond debt issued to add to and improve the water and storm water utility systems within the City. The remaining $2,885,000 was general obligation and general obligation refunding debt. In addition, the City had $520,000 of equipment certificates outstanding at December 31, 2011. The City's total debt decreased by $2,525,000, or 10.5 percent, during the current fiscal year. The reason for this decrease was that there was only one new debt issuance for new development, offset by calls on five separate debt issues in addition to the normally scheduled payments on existing debt. Page 9 Cities in Minnesota may issue general obligation debt up to a maximum of three percent of the total estimated market value of property within the city, per state statutes. The current debt limit for the City is $61,610,466. Of the City's $21,520,000 in outstanding general obligation debt at the current fiscal year end, $1,799,274 is subject to the restrictions placed by state statute. The City received a bond rating upgrade from Aa3 to Aa2 in 2010. These excellent ratings have had a positive effect on the sale of the City’s bonds. Additional information on the City's long-term debt can be found in Note IV.E. on pages 43-46 of this report. Economic Factors Dakota County's unemployment rate ended the year at 5.2 percent, which compares favorably with the state unemployment rate of 5.8 percent, and the national unemployment rate of 8.3 percent. City building permits were up slightly in quantity but down slightly in value in 2011, as compared to 2010. A total of 868 permits with a total valuation of $28,753,846 were issued in 2011. Requests for Information This financial report is designed to provide a general overview of the City'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 th information should be addressed to the Finance Director, City of Rosemount, 2875 145 Street West, Rosemount, Minnesota 55068-4997. Page 10