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3.b. Presentation and Acceptance of 2013 Comprehensive Annual Financial Report (CAFR)
��SEMOU 1 EXECUTIVE SUMMARY CITY COUNCIL City Council Meeting Date: June 3, 2014 AGENDA ITEM: Presentation and Acceptance of 2013 AGENDA SECTION: Comprehensive Annual Financial Report Presentations (CAFR) PREPARED BY: Jeff May, Finance Director AGENDA NO. 3 b ATTACHMENTS: Resolution, PowerPoint Presentation, CAFR, Independent Auditor's Report, APPROVED BY: Communication to those Charged with Governance and Management Memo RECOMMENDED ACTION: Motion to adopt a Resolution Accepting the 2013 Comprehensive Annual Financial Report. ISSUE Review and accept the 2013 CAFR. BACKGROUND A representative from our audit firm, Baker Tilly Virchow Krause, LLP, will be here on Tuesday evening, June 3 "', to review the City of Rosemount's 2013 CAFR. The representative will give a brief presentation, highlighting items that may be worthy of your attention and will also be available to answer any questions that you may have SUMMARY Recommend the above motion to accept the 2013 CAFR. CITY OF ROSEMOUNT DAKOTA COUNTY, MINNESOTA RESOLUTION 2014 - A RESOLUTION ACCEPTING THE 2013 COMPREHENSIVE ANNUAL FINANCIAL REPORT WHEREAS, the City of Rosemount has been presented its 2013 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 2013 Comprehensive Annual Financial Report, prepared with the assistance of our audit firm of Baker Tilly Virchow Krause, LLP. ADOPTED this 3`d day of June, 2014. William H. Droste, Mayor ATTEST: Jeffrey A. May, Deputy City Clerk CITY OF ROSEMOUNT DAKOTA COUNTY, MINNESOTA RESOLUTION 2014 - A RESOLUTION ACCEPTING THE 2013 COMPREHENSIVE ANNUAL FINANCIAL REPORT WHEREAS, the City of Rosemount has been presented its 2013 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 2013 Comprehensive Annual Financial Report, prepared with the assistance of our audit firm of Baker Tilly Virchow Krause, LLP. ADOPTED this 3rd day of June, 2014. William H. Droste, Mayor ATTEST: Jeffrey A. May, Deputy City Clerk City of Rosemount Review of 2013 Audit June 3, 2014 �AKER TILLY VIRCHOW KRAUSE, LLP )ort is intended solely for the use of the City Council and Management. Candor. Insight. Results. Baker Tilly Virchow Krause, LLP, is an independently owned and managed member of Baker Tilly International. © 2010 Baker Tilly Virchow Krause, LLP Required Auditor Communications Recap of the Audited Financial Statements (CAFR) Recap of MN Legal Compliance Testing Questions BAKER TI LLY VIRCHOW KRAUSE, LLP Candor. Insight. Results. > Auditors' responsibility — Findings similar to prior year, which are common for cities your size No changes to planned scope and timing Accounting policies — Implemented GASBs No. 61 and 65 Accounting estimates — Depreciable lives for capital assets Financial statement disclosures are neutral, clear and consistent No difficulties in performing the audit Audit adjustments B? AKER TILLY VIRCHOW KRAUSE, LLP Candor. Insight. Results. No disagreements with management No consultations with other accountants Management representations — Letter has been provided Independence Other findings or issues in normal course of audit Also included various informational matters in letter — Investment maturities / policy — Whistleblower system — New standards — GASB No. 68 — GASB revisiting Statement No. 34 Financial Statements (CAFR) BAKER TI LLY VIRCHOW KRAUSE, LLP Candor. Insight. Results. Independent Auditors' Report — Unmodified opinion Management's Discussion and Analysis Statement of Net Position — Assets increased 1.5% to $216 million (80% relates to book value of capital assets) — Liabilities decreased 9% to $20 million — Total net position (equity) increased by 2.6% Unrestricted equity decreased by 2.1 % or approximately $740,000 Statement of Activities — Figures consistent with prior year with exception of losses on investments of $849,000 — Overall decrease in net income of $750,000 compared to 2012 due to investment losses Modified Accrual Fund Statements — Substantial increase in intergovernmental revenues due to municipal state aid for public works projects totaling $1.6 million Financial Statements (CAFR), cont. Financial Statements for Enterprise Funds I BAKER TI LLY VIRCHOW KRAUSE, LLP Candor. Insight. Results. — Balance sheet — unrestricted equity was approximately $6.3 million for water utility, $6.7 million for sewer utility, and $5.3 million for the storm water utility $1.9 million decrease in liabilities resulting from the pay off of the 2005C bonds — Income statement — overall net loss was approximately $750,000 before capital contributions and transfers (roughly $400,000 was related to investment losses) — Cash flows statement — net operating cash flow was approximately $1.8 million (primary difference from income statement is the add back of $2.3 million of depreciation expense) Footnotes — Standard disclosures Budget to Actual Results for the General Fund — Revenues were below budget by $80,742 or less than 1% (would have been a surplus of $276,282 without the unrealized investment losses of $357,024) — Expenditures were below budget by $215,042 or 2% (relates to various departments) Statistical Schedules Following areas tested with regards to relevant state statutes: Contracting and bidding Deposits and investments Conflicts of interest Public indebtedness Claims and disbursements Tax increment financing Miscellaneous provisions Candor. Insight. Results. One finding noted with regards to insufficient collateral being pledged by one depository resulting in approximately $10,000 of City funds not being insured /collateralized. 6 Br AKER TILLY VIRCHOW KRAUSE, LLP Candor. Insight. Results. Questions? Ryan Engelstad, CPA, Partner 612 876 4613 225 South 6th Street, Suite 2300 Minneapolis, MN 55402 BAKER T I L LY VIRCHOW KRAUSE, LLP Candor. Insight. Results. COMPREHENSIVE I_1 Ll I Llq l � FINANCIAL REPORT FOR THE YEAR ENDED DECEMBER 31, 2013 4ROSEMOUNT MINNESOTA CITY OF ROSEMOUNT, MINNESOTA CITY OF ROSEMOUNT, MINNESOTA COMPREHENSIVE ANNUAL FINANCIAL REPORT FOR THE YEAR ENDED DECEMBER 31, 2013 PREPARED BY THE DEPARTMENTS OF ADMINISTRATION AND FINANCE DWIGHT D. JOHNSON, City Administrator JEFFREY A. MAY, Finance Director CITY OF ROSEMOUNT COMPREHENSIVE ANNUAL FINANCIAL REPORT As of and for the Year Ended December 31, 2013 TABLE OF CONTENTS Page INTRODUCTORY SECTION Letter of Transmittal i GFOA Certificate of Achievement vii Organizational Chart viii List of Elected and Appointed Officials, Consultants and Advisors ix FINANCIAL SECTION Independent Auditors' Report 1 - 3 Management's Discussion and Analysis 4-12 Basic Financial Statements: Government -wide Financial Statements: Statement of Net Position 13 Statement of Activities 14 Fund Financial Statements: Balance Sheet — Governmental Funds 15 Statement of Revenues, Expenditures and Changes in Fund Balances - Governmental Funds 16 Reconciliation of the Statement of Revenues, Expenditures and Changes in Fund Balances of Governmental Funds to the Statement of Activities 17 Statement of Net Position — Proprietary Funds 18 Statement of Revenues, Expenses, and Changes in Net Position - Proprietary Funds 19 Statement of Cash Flows — Proprietary Funds 20-21 Notes to the Financial Statements 22-54 Required Supplementary Information: Schedule of Revenues Compared to Budget (Budgetary Basis) — Budget and Actual — General Fund 55 Schedule of Expenditures and Other Uses (Budgetary Basis) — Budget and Actual — General Fund 56 Notes to Required Supplementary Information 57 Supplementary Information: Combining and Individual Fund Statements and Schedules: Combining Balance Sheet — Nonmajor Governmental Funds 58 Combining Statement of Revenues, Expenditures and Changes in Fund Balances — Nonmajor Governmental Funds 59 Schedules of Revenues, Expenditures and Changes in Fund Balances (Budgetary Basis) — Budget and Actual: Building CIP Capital Project Sub -Fund 60 Street CIP Capital Project Sub -Fund 61 Equipment CIP Capital Project Sub -Fund 62 CITY OF ROSEMOUNT COMPREHENSIVE ANNUAL FINANCIAL REPORT As of and for the Year Ended December 31, 2013 TABLE OF CONTENTS STATISTICAL SECTION (Unaudited) Net Position by Component 64 Changes in Net Position 66 Fund Balances, Governmental Funds 67 Changes in Fund Balances, Governmental Funds 68 Assessed Value (or Tax Capacity) and Estimated Market Value of All Taxable Property 69 Property Tax Rates — All Direct and Overlapping Governmental Units 70 Principal Property Tax Payers 71 Property Tax Levies and Collections 72 Ratios of Outstanding Debt by Type 73 Ratios of Net General Bonded Debt Outstanding 74 Direct and Overlapping Governmental Activities Debt 75 Legal Debt Margin Information 76 Pledged- Revenue Coverage 77 Demographic and Economic Statistics 78 Principal Employers 79 Full- Time /Permanent Part -Time City Government Employees by Function /Program 80 Operating Indicators by Function /Program 81 Capital Asset Statistics by Function /Program 82 4.zROSEMOUNT MINNESOTA May 12, 2014 To the Honorable Mayor, Council Members, and the Citizens of the City of Rosemount Minnesota statutes require that all cities issue an annual financial report on its financial position and activity prepared in accordance with generally accepted accounting principles (GAAP), and audited in accordance with generally accepted auditing standards by a firm of licensed certified public accountants or the Office of the State Auditor. Pursuant to that requirement, we hereby issue the comprehensive annual financial report of the City of Rosemount (the City) for the fiscal year ended December 31, 2013. This report consists of management's representations concerning the finances of the City. Consequently, management assumes full responsibility for the completeness and reliability of all of the financial information presented in this report. To provide a reasonable basis for making these representations, management of the City has established a comprehensive internal control framework that is designed to protect the government's assets from loss, theft, or misuse and to compile sufficient reliable information for the preparation of the City's financial statements in conformity with GAAP. Because the cost of internal controls should not outweigh their benefits, the City's comprehensive framework of internal controls has been designed to provide reasonable rather than absolute assurance that the financial statements will be free from material misstatement. As management, we assert that, to the best of our knowledge and belief, this financial report is complete and reliable in all material respects. The City of Rosemount's financial statements have been audited by Baker Tilly Virchow Krause, LLP, a firm of licensed certified public accountants. The goal of the independent audit was to provide reasonable assurance that the financial statements of the City for the fiscal year ended December 31, 2013, are free of material misstatement. The independent audit involved examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements; assessing the accounting principles used and significant estimates made by management; and evaluating the overall financial statement presentation. The independent auditor concluded, based upon the audit, that there was a reasonable basis for rendering an unqualified opinion that the City's financial statements for the fiscal year ended December 31, 2013, are fairly presented in conformity with GAAP. The independent auditor's report is presented as the first component of the financial section of this report. GAAP requires that management provide a narrative introduction, overview, and analysis to accompany the basic financial statement 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 Rosemount's MD &A can be found immediately following the report of the independent auditors. SPIRIT OF PRIDE AND PROGRESS Rosemount City Hall • 2875 145th Striet West • Rosemount, MN 55068 -4997 651 - 423 -4411 • TDD /TTY 651 - 423 -6219 • Fax 651- 423 -5203 www.ci.rosemount.mn.us Profile of the Government The City was established as a municipal corporation in 1858, and became a statutory City in 1974. The City has a Mayor - Council form of government, with the four Council members being elected to overlapping four -year terms of office and the Mayor serving a four -year term coinciding with the terms of two of the Council members. This term for the Mayor was a change instituted in 1996. Prior to that, the Mayor was elected every two years. The City Council is responsible, among other things, for passing ordinances, adopting the budget, appointing committees and hiring the City's chief administrative officer. The City's chief administrative officer is the City Administrator, who is appointed by and serves at the discretion of the City Council. The City Administrator is responsible for carrying out the policies and ordinances of the City Council, for overseeing the day -to -day operations of the City and for appointing the heads of the City's various departments, with the City Council's final approval. The City of Rosemount is a growing southern suburb in the Minneapolis /St. Paul metropolitan area, located in Dakota County. The City encompasses approximately 36 square miles. The City is one of the fastest growing communities in the seven - county Minneapolis /St. Paul metropolitan area as demonstrated by the following population trend: Rosemount has an extensive system of State and County highways and 106 miles of city streets that continue to contribute to the community's growth. This extensive highway network and large tracts of attractive, developable land have made the City an ideal location for residential development and increasingly commercial /industrial development. There is over 1,000 acres of industrial and commercially zoned property ready for development. There is also well over 1,200 acres of property within the Municipal Service Area (MUSA) to permit future residential growth. Rail, air, barge and freeway access provides Rosemount's economic community with an expedient transportation system. Four major highways link Rosemount to Minneapolis, St. Paul and the rest of the metropolitan area. The City provides a full range of services, including police and fire protection; the construction and maintenance of highways, streets, and other infrastructure; water, sewer, and storm water services; and recreational activities and cultural events. Certain economic development services are provided through the Rosemount Port Authority. The Port Authority's financial data has been presented in this financial report as a blended component unit. The annual budget serves as the foundation for the City's financial planning and control. All departments of the City submit requests for appropriation to the City Administrator on or before May 1st of each year. The City Administrator uses these requests as the starting point for developing a proposed budget. The City Administrator then presents this proposed budget to the Council for review and adoption of a preliminary levy by September 15th. The council holds a public hearing on the proposed budget and must adopt a final budget and levy by no later than December 20th, prior to the close of the City's fiscal year. Population Percent Population increase increase 2013 Staff Estimate 22,711 837 3.83% 2010 Census 21,874 7,255 50% 2000 Census 14,619 5,997 70% 1990 Census 8,622 3,539 70% 1980 Census 5,083 1,049 26% 1970 Census 4,034 - - Rosemount has an extensive system of State and County highways and 106 miles of city streets that continue to contribute to the community's growth. This extensive highway network and large tracts of attractive, developable land have made the City an ideal location for residential development and increasingly commercial /industrial development. There is over 1,000 acres of industrial and commercially zoned property ready for development. There is also well over 1,200 acres of property within the Municipal Service Area (MUSA) to permit future residential growth. Rail, air, barge and freeway access provides Rosemount's economic community with an expedient transportation system. Four major highways link Rosemount to Minneapolis, St. Paul and the rest of the metropolitan area. The City provides a full range of services, including police and fire protection; the construction and maintenance of highways, streets, and other infrastructure; water, sewer, and storm water services; and recreational activities and cultural events. Certain economic development services are provided through the Rosemount Port Authority. The Port Authority's financial data has been presented in this financial report as a blended component unit. The annual budget serves as the foundation for the City's financial planning and control. All departments of the City submit requests for appropriation to the City Administrator on or before May 1st of each year. The City Administrator uses these requests as the starting point for developing a proposed budget. The City Administrator then presents this proposed budget to the Council for review and adoption of a preliminary levy by September 15th. The council holds a public hearing on the proposed budget and must adopt a final budget and levy by no later than December 20th, prior to the close of the City's fiscal year. The appropriated budget is prepared by fund, department and function. The City's department heads may make transfers of appropriations within a department; transfers of appropriation between departments require approval of the City Council. Budget -to- actual comparisons are provided in this report for each individual governmental fund for which an appropriated annual budget has been adopted. For the general fund, this comparison is presented on pages 55 -56 as part of the Required Supplementary Information. Factors Affecting Financial Condition The information presented in the financial statements is perhaps best understood when it is considered from the broader perspective of the specific environment within which the City operates. Local economy Rosemount continues to have a significant amount of land available for future development. The City is urbanized in the western portion of the community with new neighborhoods centrally located. New residential development is located where the City conducted an environmental review process in 2007, an GUAR, which provided 1,200 acres for residential and commercial development with City sewer and water. The City completed a similar environmental review for 5,000 acres owned by the University of Minnesota. The City has been working with the University over the last several years to make some of their landholdings available for urban development. The fifteen largest taxpayers comprise a mix of residential, industrial, commercial and utilities that represent approximately 20.01 % of the City's tax base. Labor market data is very impressive for the State, Minneapolis /St. Paul metropolitan area and Dakota County, in which Rosemount is located. 2013 labor force numbers were 2,965,891; 1,870,263; and 233,584 respectively with unemployment rates of 4.6 %; 4.3% and 4.1 % to match. These figures compare quite favorably with national figures. Community leadership has preserved 467 beautiful acres of land for 28 parks. Residents can enjoy a round of golf on a 27 -hole public course. Bordered by the scenic Mississippi River, Rosemount also contains 270 acres of the Spring Lake Regional Park Preserve. Rosemount's Community Center, a part of the Army National Guard's regional headquarters, provides a variety of indoor recreation opportunities and meeting spaces, including an ice arena, gymnasium, auditorium and banquet facility. Given the underlying strength of the economy in the seven county metropolitan area, the diversification of tax and employment bases and Rosemount's desirable location, the future outlook is very optimistic. Long -term financial planning Growth and development is guided by the City's adopted Comprehensive Plan. The City adopted the 2030 Plan in 2009 in accordance with State law which projects population and job increases for the next 20 years. The Plan anticipates up to 6,500 more acres of urbanized growth, encompassing residential, commercial and industrial growth. The Comprehensive Plan continues to promote orderly development and growth which will perpetuate a sound tax base. The Plan will be updated in the next few years. Other factors New housing starts continued to increase over the previous year with a total of 96 new dwelling units. The predominate housing style is single family detached housing and almost all new units are located in new neighborhoods versus developed lots gone into foreclosure. The City continues to maintain interest with national and regional builders. In total there were 371 lots approved with 209 available for immediate development. Total construction valuation continued to increase led by the increase in existing values and the number of new residential units. The significant commercial expansion was the fall addition to the existing Fairview Clinic. On the industrial side, there were numerous projects occurring at the Flint Hills Refinery which prompted almost six million dollars in valuation. In total the building valuation for all construction in 2013 was $42,084,362, approximately $3,000,000 more than in 2012. Planning approvals for two new senior housing projects will bring a needed housing style to the community and increase permit revenues and tax base. Additional growth is anticipated in the single family neighborhoods centered on Akron Avenue. Mobile Technology Staff continues to upgrade and modify the existing Cartegraph and GIS systems in an effort to improve efficiency and effectiveness. In 2013, we implemented a new process for gate valve inspections that is similar to the processes used for sewer jetting, hydrant flushing and sump inspections. We also implemented the use of iPads to document playground and building inspections. Having a robust database of significant, up -to -date information for all of our utility and park assets allows us to be more efficient in our daily operations, as well as more effective with our long -term planning. Capital Improvement Projects The Public Works Department coordinated and / or completed several improvement projects in 2013: • Pump recondition at Well 9 • SCADA system updates at several lift station, well and tower sites • Hydrant painting (approximately 120 hydrants) • Interior and exterior painting at Fire Station 2 • Roof replacement on Public Works north building • Shelter painting at Central Park, Connemara Park and Meadows Park • Basketball court resurfacing at Meadows Park • New playground equipment and borders at Jaycee Park 2013 Street Improvements The 2013 Street Improvement Project included mill and overlay improvements to 1.6 miles along 155th Street West between Shannon Parkway and Chippendale Avenue, Danville Avenue from CSAH 46 to Upper 156th Street West, and the streets in the Carrollton Addition. Construction Projects The Engineering Division coordinated the work on several construction projects in 2013: • Prestwick Place 7th Addition —This neighborhood includes 37 single - family homes and is the continuation of the development of Prestwick Place, located near the northwest corner of CSAH 42 and Akron Avenue. • Greystone 2nd Addition — This neighborhood includes 31 single - family homes and is the continuation of the Greystone development, located on the east side of Akron Avenue, north of CSAH 42. • 149th Street West — This project involves the construction of a frontage road along the north side of CSAH 42, from Business Parkway to Biscayne Avenue. This frontage road was constructed to provide access to future commercial business in the area. • Trunk Highway 3 Underpass — This project includes the construction of a pedestrian underpass under TH3, approximately 360 feet north of 142nd Street, which connects the Rosemount High School property to the GlenRose of Rosemount neighborhood and nearby Erickson Park, Police Department The Police Department is a full - service agency providing professional law enforcement services to the community. The Department is committed to ensuring a safe community through partnerships and relationships with citizens, businesses and community organizations. Specific service functions within the Police Department are described below. • Patrol Unit — Uniformed patrol is the core function of the Police Department and most visible to the community. Officers provide uniformed, 24 -hour patrol, in assigned geographic areas allowing officers to develop relationships with community members to understand service needs and develop long -term solutions. Officers respond to calls- for - service, conduct preliminary investigations, investigate traffic accidents, and enforce traffic and criminal laws. Patrol provides assistance to the iv Fire Department and Emergency Medical Service (EMS). Officers are assigned to the various specialty units of Use -of -Force team, Multi- agency Assistance Group (MAAG) tactical officers, Crime Scene Technician, Crisis Intervention Team (CIT), and Field Training Officers. Criminal Investigations Unit — The Investigations Unit consists of two full -time investigators with a primary responsibility to investigate criminal and social service related cases beyond the patrol unit. The investigators receive specialized training in various aspects of criminal investigation and partner with police agencies at the local, county, state and federal level. In addition, the Investigations Unit is supported by many criminal justice agencies and the private business community to address specialized needs such as child protection services or loss prevention computer forensics. Registered predatory offenders are a priority for the City of Rosemount. The Investigations Unit conducts compliance checks on all registered offenders within the city limits twice a year. Community Resource Unit and Outreach Programs ➢ School Partnerships — Two officers are assigned to work in the Rosemount High School, Rosemount Middle School and St. Joseph's Elementary School as School Resource Officers (SRO). The SROs' main duties are education, prevention and intervention. Additionally, they conduct criminal investigations for activities that occur within the schools or involve students who attend the schools. Officers work cooperatively with school social worker to make classroom presentations across all grades. Specific topics include Bullying Prevention, Internet Safety and Substance Abuse Awareness. The DARE (Drug Abuse Resistance Education) program is presented to students at St. Joseph's Elementary. ➢ Night to Unite — Police, Fire, Public Works, City Council members and various City staff participate in this nationwide event on the first Tuesday of August to meet with hundreds of community members throughout various neighborhoods in the City. The event provides the opportunity to develop strong relationships with the community, understand neighborhood issues, and provide a nexus for City and community members to collaboratively develop solutions to address crime or quality of life issues within their neighborhoods. ➢ Public Safety in the Park —,The Police Department partners with other City departments and community organizations to engage citizens and provide resources at various park locations. ➢ Child Safety Seat Clinics and Checks — The Police Department partners with the Dakota County CAP agency to provide training to the community on the proper installation and use of child restraint seats. ➢ Community Partnerships and Presentations — The Police Department engages in community outreach through various events and presentations on crime prevention and service delivery as requested by community members and organizations. The weekly Coffee with a Cop is held at coffee shops and restaurants providing an opportunity for citizens to gather with their police officers and provide a forum to ask questions and seek information. An annual Citizen's Academy is held to educate community members on the various aspects of the Police Department and the police profession. Patrol officers will participate in various gatherings such as Cub Scouts at individual community member's request. ➢ Multi- Housing Unit — The Community Resource Officers lead the Crime Free Multi- Housing program which facilitates education opportunities for rental property owners, managers and residents. The Police Department partners with various Dakota County law enforcement agencies and many other criminal justice and public health organizations to provide the highest quality of services to ensure the safety of the citizens of Rosemount. These joint efforts include a joint tactical team, joint negotiations team, drug task force, countywide dispatch center and the Dakota County Domestic Preparedness Committee. The Police Department has representation on the governing boards for each of these entities ensuring that local interests are met while Police Department personnel participate in a broader response capability throughout Dakota County and the metropolitan area. • The Police Department, along with other City staff, places a strong emphasis on traffic enforcement through education, engineering, enforcement, and emergency services — the Four E's of Traffic v the Dakota County Traffic Safety Project. The Project concentrates traffic enforcement and education efforts in different areas of the County on various weeks throughout the year. All agencies collaborate toward traffic enforcement in selected areas. In 1999, a Family Resource Center building in Rosemount began operations. The 360° Communities organization (formerly the Community Action Council [CAC]) and other service providers utilize this building to work with families in need in our community. The City constructed the building with funding coming entirely from grants and donations and leases the building to 360° Communities to house their Rosemount operations. City's financial policies During the current year, none of the City's financial polices had a significant impact on the financial statements. Awards and Acknowledgements The Government Finance Officers Association of the United States and Canada (GFOA) awarded a Certificate of Achievement for Excellence in Financial Reporting to the City of Rosemount for its comprehensive annual financial report (CAFR) for the fiscal year ended December 31, 2012. This was the seventeenth consecutive year that the City has achieved this prestigious award. 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 we 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 the Finance Department. We would like to express our appreciation to all members of City staff who assisted and contributed to the preparation of this report. We would also like to express our appreciation to the Mayor and the members of the City Council for their interest and support in planning and conducting the financial operations of the City in a responsible and progressive manner. ectfuII ubm' d, J rey A. Way Finance Director vi uJ Government Finance Officers Association Certificate of Achievement for Excellence in Financial Reporting Presented to City of Rosemount Minnesota For its Comprehensive Annual Financial Report for the Fiscal Year Ended December 31, 2012 Executive Director /CEO City of Rosemount Organizational Chart CITY OF ROSEMOUNT CITY OFFICIALS As of and for the Year Ended December 31, 2013 ELECTED OFFICIALS: Mayor Bill Droste Council member Mark DeBettignies Council member Vanessa Demuth Council member Kim Shoe - Corrigan Council member Jeff Weisensel APPOINTED OFFICIALS: City Administrator Finance Director Assistant City Administrator City Engineer Community Development Director Police Chief Fire Chief Parks and Recreation Director CONSULTANTS AND ADVISORS: Legal Auditing Fiscal Engineering ix Term of Office Four Years Four Years Four Years Four Years Four Years Dwight D. Johnson Jeffrey A. May Em my Foster Andrew Brotzler Kim Lindquist Eric Werner Richard Schroeder Dan Schultz Term Expires December 31, 2014 December 31, 2014 December 31, 2016 December 31, 2014 December 31, 2016 Kennedy & Graven Fluegel Law Firm, P.A. Baker Tilly Virchow Krause, LLP Springsted, Inc. Ehlers & Associates, Inc. WSB & Associates THIS PAGE WAS LEFT BLANK INTENTIONALLY BAKER T I L LY VIRCHOW KRAUSE, LLP Baker Tilly Virchow Krause, LLP 225 S Sixth Sr, Sre 2300 Minneapolis, MN 55402 -4661 tel 612 816 4500 fax 612 238 8900 INDEPENDENT AUDITORS' REPORT bakertilly.com To The Honorable Mayor and Members of the City Council City of Rosemount, Minnesota Report on the Financial Statements We have audited the accompanying financial statements of the governmental activities, the business -type activities, each major fund, and the aggregate remaining fund information of the City of Rosemount, Minnesota (the City), as of and for the year ended December 31, 2013, 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. Auditors' Responsibility Our responsibility is to express opinions on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. 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 auditors' 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 City'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 City'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. �aeoe�dem memee� m BAKER TILLY INTERNATIONAL Page 1 An Affirmarive Action Equal Opportunity Employer 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, each major fund, and the aggregate remaining fund information of the City of Rosemount, Minnesota, as of December 31, 2013 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. Emphasis of Matter As discussed in Note I, the City adopted the provisions of GASB Statement No. 61, The Financial Reporting Entity: Omnibus — an Amendment of GASB Statements No. 14 and No. 34, effective January 1, 2013. Our opinions are not modified with respect to this matter. As discussed in Note I, the City adopted the provisions of GASB Statement No. 65, Items Previously Reported as Assets and Liabilities, effective January 1, 2013. Our opinions are not modified with respect to this matter. Other Matters Required Supplementary Information Accounting principles generally accepted in the United States of America require that the management's discussion and analysis, budgetary comparison information, and schedule of funding progress 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. Supplementary Information Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the City's basic financial statements. The combining and individual fund financial statements as listed in the table of contents are presented for purposes of additional analysis and are not a required part of the basic financial statements. Such information is the responsibility of management and was derived from and relates directly to the underlying accounting and other records used to prepare the basic financial statements. The 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 as listed in the table of contents are fairly stated in all material respects, in relation to the basic financial statements as a whole. Other Information Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the City's basic financial statements. The introductory and statistical sections are presented for purposes of additional analysis and are not a required part of the basic financial statements. Such information has 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 it. Page 2 Prior -Year Comparative Information We have previously audited the City's 2012 financial statements, and we expressed unmodified audit opinions on the respective financial statements of the governmental activities, the business -type activities, each major fund, and the aggregate remaining fund information in our report dated May 13, 2013. In our opinion, the summarized comparative information presented herein as of and for the year ended December 31, 2013, is consistent, in all material respects, with the audited financial statements from which it has been derived. jj,� Minneapolis, Minnesota May 12, 2014 Page 3 THIS PAGE WAS LEFT BLANK INTENTIONALLY 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, 2013. 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 its liabilities and deferred inflows of resources at the close of the most recent fiscal year by $195,141,065 (net position). Of this amount, $34,474,768 (unrestricted net position) may be used to meet the government's ongoing obligations to citizens and creditors. • The City's total net position increased by $4,984,200. Most of this increase is attributable to an increase of our capital assets which included significant funding by developers along with a decrease in our long -term debt obligations. • At year end, unassigned fund balance for the General Fund was $6,001,628, 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 10. • The City's total debt decreased by $1,895,000 (approximately 10 percent) during the current year. The reason for this decrease was that there was only one new debt issuance for new development, offset by a call on one debt issue 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 position presents information on all of the City's assets and liabilities /deferred inflows of resources, 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 is improving or deteriorating. The statement of activities presents information showing how the government'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 /vested but unused vacation and sick 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 13 -14 of this report. Page 4 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 15 -17 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 18 -21 of this report. Page 5 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 22 -54 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 58 -62 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, assets exceeded liabilities and deferred inflows of resources by $195,141,065 at the close of the most recent fiscal year. The largest portion of the City's net position (79 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 available 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. Current and other assets Capital assets Total assets Long -term liabilities outstanding Other liabilities Total liabilities Deferred inflows of resources Net position: Net investment in capital assets Restricted Unrestricted Total net position City of Rosemount's Statement of Net Position Governmental Business -Type 2013 Governmental Business -Type 2012 Activities Activities Totals Activities Activities Totals $ 25,856,944 $ 19,008,677 $ 44,865,621 $ 25,253,028 $ 19,665,889 $ 44,918,917 73,044,716 97,705,585 1701750,301 70,161,203 97,287,487 167,448,690 98,901,660 116,714,262 215,615,922 95,414,231 116,953,376 212,367,607 16,258,300 2,148,312 18,406,612 16,255,911 3,978,507 20,234,418 1,288,416 203,702 1,492,118 1,479,817 225,864 1,705,681 17,546,716 2,352,014 19,898,730 17,735,728 4,204,371 21,940,099 576,127 - 576,127 270,643 - 270,643 57,746,938 95,770,585 153,517,523 54,828,890 93,501,405 148,330,295 7,148,774 - 7,148,774 6,608,554 - 6,608,554 15,883,105 18,591,663 34,474,768 15,970,416 19,247,600 35,218,016 $ 80,778,817 $ 114,362,248 $ 195,141,065 $ 77,407,860 $ 112,749,005 $ 190,156,865 An additional portion of the City's net position (4 percent) represents resources that are subject to external restrictions on how they may be used. The remaining balance representing unrestricted net position ($34,474,768 or 17 %) 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 position, both for the government as a whole, as well as for its separate governmental and business -type activities. Page 6 Governmental activities. Governmental activities increased the City's net position by $3,370,957, accounting for 68 percent of the total growth in the government's net position. This compares to an increase (from governmental activities) of $1,451,649 in 2012. Revenues increased by approximately $350,000 related to capital grant proceeds for public works projects and another $300,000 related to conservation and economic development but decreased by approximately $450,000 for changes in the fair value of investments in 2013. The primary factor for the overall increase in net position from 2012 was that the amount of net transfers to business -type activities decreased by approximately $1,900,000 due to the nature of the capital projects during 2013. Business -type activities. Business -type activities increased the City's net position by $1,613,243, accounting for 32 percent of the total growth in the government's net position. This compares to an increase of $4,281,061 in 2012. The primary reasons for the smaller current year increase was a decrease in the net transfers from governmental activities of approximately $1,900,000 and a decrease in the fair value of investments of approximately $400,000. Elements of these changes are as follows: City's Changes in Net Position Page 7 Business- Business- Governmental Type 2013 Governmental Type 2012 Activities Activities Totals Activities Activities Totals Revenues: Program revenues: Charges for services $ 3,001,040 $ 5,321,421 $ 8,322,461 $ 2,881,953 $ 5,602,284 $ 8,484,237 Operating grants and contributions 323,471 323,471 375,913 375,913 Capital grants and contributions 4,290,657 1,103,363 5,394,020 3,667,542 863,077 4,530,619 General revenues: Property taxes 11,160,682 11,160,682 11,039,475 11,039,475 Other taxes 259,064 259,064 242,491 242,491 Interest earnings 121,886 209,227 331,113 123,122 245,279 368,401 Change in fair value of investments (458,073) (391,121) (849,194) 13,188 11,573 24,761 Other 129,006 129,006 140,865 140,865 Total revenues 18,827,733 6,242,890 25,070,623 18,484,549 6,722,213 25,206,762 Expenses: General government 2,583,271 2,583,271 2,701,234 2,701,234 Public safety 4,051,642 4,051,642 3,872,633 3,872,633 Public works 5,448,047 5,448,047 4,341,203 4,341,203 Recreation 1,586,449 1,586,449 2,405,676 2,405,676 Economic development 3,267 3,267 Interest on long -term debt 517,067 517,067 541,386 541,386 Water 1,903,275 1,903,275 1,827,543 1,827,543 Sewer 2,425,486 2,425,486 2,317,324 2,317,324 Storm water 989,574 989,574 968,935 968,935 Arena 578,345 578,345 498,118 498,118 Total expenses 14,189,743 5,896,680 20,086,423 13,862,132 5,611;920 19,474,052 Increase in net position before transfers 4,637,990 346,210 4,984,200 4,622,417 1,110,293 5,732,710 Transfers (1,267,033) 1,267,033 (3,170,768) 3,170,768 Increase in net position 3,370,957 1,613,243 4,984,200 1,451,649 4,281,061 5,732,710 Net position - Beginning of Year 77,407,860 112,749,005 190,156,865 75,956,211 108,467,944 184,424,155 Net position - End of Year $ 80,778,817 $ 114,362,248 $ 195,141,065 $ 77,407,860 $ 112,749,005 $ 190,156,865 Page 7 Millions 7 Expenses and Program Revenues — Governmental Activities General Government Public Safety Public Works Recreation Community Interest on long Aerm Development debt Revenues by Source — Governmental Funds S cial assessments Investment income and Fines and forfeitures „ -.1 Licenses and per 2.8% Public charges for services 12.7% Intergovernmental 12.3% Taxes 59.9% ElExpenses Ill Page 8 Millions Expenses and Program Revenues — Business -Type Activities Water Sewer Storm water Ice Arena Revenues by Source — Proprietary Funds Surcharges and penalties Connection fees 5.8% 7.6 %1 \—Charges for services 85.7% 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 9 As of the end of the current fiscal year, the City's governmental funds reported combined ending fund balances of $20,429,786, an increase of $612,516 in comparison with the prior year. $6,001,628 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 ($77,266) is classified as nonspendable in regards to prepaid items, $5,601,198 is classified as restricted to meet debt service requirements and the remainder of the fund balance is considered to be committed or 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 $6,001,628, while total fund balance reached $8,361,151. The following table shows year -end General Fund balances as compared to the adopted expenditure budget of the following year: Year Budget 2003 $ 7,338,100 2004 7,409,400 2005 7,996,100 2006 8,516,300 2007 9,181,100 2008 10,574,900 2009 10,384,800 2010 10,466,000 2011 10,480,400 2012 10,531,800 2013 10,728,600 2014 11,098,600 * This amount represents the unassigned General Fund balance Fund Balance Amount Percent of Next Budget $ 4,061,256 55% 4,383,289 55% 4,511,547 53% 4,806,577 52% 5,747,445 54% 5,688,243 55% 5,693,475 55% 5,731,123 55% 5,700,071 54% 5,905,056 55% 6,001,628 54% During the current fiscal year, unassigned fund balance in the General Fund increased by $96,572. The increase was intentional as the City has determined, through the adoption of a formal Fund Balance Policy, it would like to maintain an 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, 2013, 100 percent of the unassigned fund balance of the General Fund has been designated to meet working capital needs. The debt service fund balance increased by $361,696 primarily due to additional transfers in from capital project funds following the closing of certain projects. The capital projects fund balance increased by $13,455 staying virtually constant from 2012 to 2013. The Port Authority TIF fund balance increased by $158,602 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 position of the utility funds at the end of the year amounted to $18,363,226 while the arena fund had an unrestricted net position amounting to $228,437. The increase in total net position for the utility funds was $1,703,675 (of which $3,259,043 related to capital contributions into the utility funds and $1,000,004 of net cash transfers out of the utility funds) and the decrease in total net position for the arena fund was $90,432 which included net transfers in of $111,500. Page 10 General Fund Budgetary Highlights There were a few significant variances between final budgeted revenues and actual amounts. General government charges for services exceeded budget by approximately $100,000 due to a significant increase in plan checking fees related to volume of activity. Interest earnings were approximately $54,000 short of budget and the fair value of investments at year -end showed a $357,000 decrease in value due to market conditions. All other revenue areas experienced either small surpluses or deficits that led to the final surplus amount. Overall, total department expenditures ended up being a little over two percent under budget with most being slightly less than budgeted and a few being just slightly over budget. 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, 2013, amounts to $170,750,301 (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 $7,501,314 for the year, developers paid for approximately $1.4 million of them. City of Rosemount's Capital Assets (net of depreciation) Additional information on the City's capital assets can be found in Note IV.C. on pages 38 -39 of this report. Long -term debt At the end of the current fiscal year, the City had total bonded debt outstanding of $17,230,000 (including debt recorded in the Port Authority). Of this amount, $5,795,000 was for general obligation improvement debt which has financed special assessment construction as part the continuing development within the City. An additional $7,160,000 was general obligation debt issued by the Port Authority which financed the City's economic development and redevelopment programs. Another $1,935,000 was general obligation revenue bond debt issued to add to and improve the water and storm water utility systems within the City. The remaining $2,255,000 was general obligation and general obligation refunding debt. In addition, the City had $85,000 of equipment certificates outstanding at December 31, 2013. The City's total debt decreased by $1,895,000, or approximately 10 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 a call on one debt issue in addition to the normally scheduled payments on existing debt. Page 11 Governmental Business -Type Activities Activities Totals Land $ 11,103,466 $ 2,643,767 $ 13,747,233 Land improvements 3,293,796 - 3,293,796 Buildings 14,192, 515 11,085,341 25,277, 856 Machinery and equipment 9,718,650 3,299,133 13,017,783 Mains and lines - 129,479,662 129,479,662 Infrastructure 54,055,341 - 54,055,341 Construction in progress 1,983,060 1,519,915 3,502,975 Accumulated depreciation (21,302,112) (50,322,233) (71,624,345) Total capital assets $ 73,044,716 $ 97,705,585 $ 170,750,301 Additional information on the City's capital assets can be found in Note IV.C. on pages 38 -39 of this report. Long -term debt At the end of the current fiscal year, the City had total bonded debt outstanding of $17,230,000 (including debt recorded in the Port Authority). Of this amount, $5,795,000 was for general obligation improvement debt which has financed special assessment construction as part the continuing development within the City. An additional $7,160,000 was general obligation debt issued by the Port Authority which financed the City's economic development and redevelopment programs. Another $1,935,000 was general obligation revenue bond debt issued to add to and improve the water and storm water utility systems within the City. The remaining $2,255,000 was general obligation and general obligation refunding debt. In addition, the City had $85,000 of equipment certificates outstanding at December 31, 2013. The City's total debt decreased by $1,895,000, or approximately 10 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 a call on one debt issue in addition to the normally scheduled payments on existing debt. Page 11 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 $56,006,315. Of the City's $17,230,000 in outstanding general obligation debt at the current fiscal year end, $2,340,000 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 42 -44 of this report. Economic Factors • Dakota County's unemployment rate ended the year at 4.1 percent, which compares favorably with the state unemployment rate of 4.6 percent, and the national unemployment rate of 6.5 percent. • City building permits were up slightly in quantity and in value in 2013, as compared to 2012. A total of 2,471 permits with a total valuation of $42,084,362 were issued in 2013. 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 information should be addressed to the Finance Director, City of Rosemount, 2875 145th Street West, Rosemount, Minnesota 55068 -4997. Page 12 THIS PAGE WAS LEFT BLANK INTENTIONALLY Page 13 CITY OF ROSEMOUNT STATEMENT OF NET POSITION As of December 31, 2013 (With Summarized Information as of December 31, 2012) Total Assets 98,901,660 116,714,262 215,615,922 212,367,607 LIABILITIES Accounts payable 767,340 Business - 909,528 1,156,086 Accrued payroll and payroll taxes Governmental Type Totals 137,130 Activities Activities 2013 2012 ASSETS Noncurrent liabilities Cash and investments $ 21,509,833 $ 16,951,333 $ 38,461,166 $ 38,238,857 Receivables Due in more than one year 14,215,915 1,510,922 15,726,837 Taxes 696,006 - 696,006 688,481 Delinquent taxes 126,838 - 126,838 134,869 Accounts 490,838 983,670 1,474,508 1,512,346 Special assessments 2,707,146 442,030 3,149,176 3,206,692 Due from other governmental units 256,017 413,736 669,753 821,737 Internal balances (103,908) 103,908 - - Prepaid items 174,174 114,000 288,174 315,935 Capital assets Restricted for debt service 7,148,774 - 7,148,774 Land 11,103,466 2,643,767 13,747,233 13,142,233 Construction in progress 1,983,060 1,519,915 3,502,975 3,783,527 Land improvements 3,293,796 - 3,293,796 2,425,671 Buildings 14,192,515 11,085,341 25,277,856 24,958,177 Machinery and equipment 9,718,650 3,299,133 13,017,783 12,079,512 Infrastructure 54, 055,341 129,479,662 183, 535, 003 178, 858,371 Less: accumulated depreciation (21,302,112) (50,322,233) (71,624,345) (67,798,801) Total Assets 98,901,660 116,714,262 215,615,922 212,367,607 LIABILITIES Accounts payable 767,340 142,188 909,528 1,156,086 Accrued payroll and payroll taxes 134,947 36,043 170,990 137,130 Other accrued liabilities and deposits 386,129 25,471 411,600 412,465 Noncurrent liabilities Due within one year 2,042,385 637,390 2,679,775 2,920,691 Due in more than one year 14,215,915 1,510,922 15,726,837 17,313,727 Total Liabilities 17,546,716 2,352,014 19,898,730 21,940,099 DEFERRED INFLOWS OF RESOURCES Unearned revenue 576,127 - 576,127 270,643 Total Deferred Inflows of Resources 576,127 - 576,127 270,643 NET POSITION Net investment in capital assets 57,746,938 95,770,585 153,517,523 148,330,295 Restricted for debt service 7,148,774 - 7,148,774 6,608,554 Unrestricted 15,883,105 18,591,663 34,474,768 35,218,016 Total Net Position $ 80,778,817 $ 114,362,248 $ 195,141,065 $ 190,156,865 See accompanying notes to financial statements. Page 13 CITY OF ROSEMOUNT STATEMENT OF ACTIVITIES For the Year Ended December 31, 2013 (With Summarized Information for the Year Ended December 31, 2012) Net (Expense) Revenue and Program Revenues Changes in Net Position Operating Capital Primary Government Charges for Grants and Grants and Governmental Business -Type Totals Functions /Programs Expenses Services Contributions Contributions Activities Activities 2013 2012 Primary Government: Governmental activities: General government Public safety Public works Culture, education and recreation Conservation and economic development Interest and fiscal charges Total Governmental Activities Business -Type activities Water Sewer Storm Water Arena Total Business -Type Activities Total Primary Government $ 2,583,271 $ 2,465,695 $ - $ $ (117,576) $ 4,051,642 139,432 263,805 (3,648,405) 5,448,047 53,813 32,790 3,967,849 (1,393,595) 1,586,449 342,100 6,241 - (1,238,108) 3,267 - 20,635 322,808 340,176 517,067 - 259,064 (517,067) 14,189,743 3,001,040 323,471 4,290,657 (6,574,575) 1,903,275 2,167,709 371,582 2,425,486 1,716,022 83,484 989,574 1,061,632 648,297 578,345 376,058 - 5,896,680 5,321,421 - 1,103,363 $ 20,086,423 $ 8,322,461 $ 323,471 $ 5,394,020 General revenues: Taxes Property taxes, levied for general purposes Property taxes, levied for debt service Othertaxes Interest earnings Change in fair value of investments Miscellaneous Gain on sale of capital assets Transfers Total general revenues and transfers Change in net position Net position - beginning Net Position - Ending $ (117,576) $ (368,016) (3,648,405) (3,413,508) (1,393,595) (614,251) (1,238,108) (2,038,915) 340,176 39,352 (517,067} (541,386) (6,574,575) (6,936,724) 636,016 636,016 747,587 (625,980) (625,980) (402,172) 720,355 720,355 653,214 (202,287) (202,287) (145,188) $ 77,407,860 $ 112,749,005 $ 190,156,865 $ 184,424,155 $ 80,778,817 $ 114,362,248 $ 195,141,065 $ 190,156,865 See accompanying notes to financial statements. Page 14 528,104 528,104 853,441 (6,574,575) 528,104 (6,046,471) (6,083,283) 10,123,158 - 10,123,158 10,001,071 1,037,524 1,037,524 1,038,404 259,064 259,064 242,491 121,886 209,227 331,113 368,401 (458,073) (391,121) (849,194) 24,761 116,123 116,123 127,617 12,883 - 12,883 13,248 (1,267,033) 1,267,033 9,945,532 1,085,139 11, 030, 671 11, 815, 993 3,370,957 1,613,243 4,984,200 5,732,710 $ 77,407,860 $ 112,749,005 $ 190,156,865 $ 184,424,155 $ 80,778,817 $ 114,362,248 $ 195,141,065 $ 190,156,865 See accompanying notes to financial statements. Page 14 CITY OF ROSEMOUNT BALANCE SHEET - GOVERNMENTAL FUNDS As of December 31, 2013 ASSETS Cash and investments Receivables from: Taxes Accounts Special assessments Delinquent special assessments Due from other governmental units Prepaid items Total assets LIABILITIES, DEFERRED INFLOWS OF RESOURCES, AND FUND BALANCES Liabilities Accounts payable Accrued payroll and payroll taxes Deposits payable Advances from other funds Total liabilities Deferred Inflows of Resources Unavailable revenue Unearned revenue Total deferred inflows of resources Fund Balances Nonspendable Restricted Committed Assigned Unassigned Total fund balances Port Other Total Authority Governmental Governmental General Debt Service Capital Projects TIF Funds Funds $ 8,205,058 $ 4,902,036 $ 6,405,787 $ 1,041,820 $ 215,210 $ 20,769,911 818,446 - 4,398 822,844 90,170 - 400,668 - 490,838 4,898 1,699,216 990,773 2,694,887 152 5,686 6,421 12,259 9,565 - 246,452 256,017 67,266 10,000 77,266 $ 9,195,555 $ 6,606,938 $ 8,060,101 $ 1,046,218 $ 215,210 $ 25,124,022 $ 328,849 $ $ 426,702 $ $ 1,179 $ 756,730 134,947 - - 134,947 177,050 - 177,050 - 103,908 103,908 640,846 530,610 1,179 1,172,635 193,558 1,756,655 995,261 2,945,474 295,303 280,824 576,127 193,558 2,051,958 1,276,085 3,521,601 67,266 - 10,000 - 77,266 - 4,554,980 - 1,046,218 - 5,601,198 - - - - 214,031 214,031 2,292,257 6,243,406 - 8,535,663 6,001,628 - - - 6,001,628 8,361,151 4,554,980 6,253,406 1,046,218 214,031 20,429,786 Total liabilities, deferred inflows of resources, and fund balances $ 9,195,555 $ 6,606,938 $ 8,060,101 $ 1,046,218 $ 215,210 Amounts reported for governmental activities in the statement of net position are different because: Capital assets used in governmental funds are not financial resources and, therefore, are not reported in the funds. 73,044,716 Some receivables that are not currently available are reported as deferred inflows of resources in the fund financial statements but are recognized as revenue when earned in the government -wide statements. 2,945,474 Internal service funds are reported in the statement of net position as governmental activities. 826,220 Some liabilities, including long -term debt, are not due and payable in the current period and, therefore, are not reported in the funds. See Note II.A. (16,467,379) NET POSITION OF GOVERNMENTAL ACTIVITIES $ 80,778,817 See accompanying notes to financial statements. Page 15 CITY OF ROSEMOUNT STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES - GOVERNMENTAL FUNDS For the Year Ended December 31, 2013 Net Change in Fund Balances FUND BALANCES - Beginning 56,039 361,696 13,455 158,602 22,724 612,516 8,305,112 4,193,284 6,239,951 887,616 191,307 19,817,270 FUND BALANCES - ENDING $ 8,361,151 $ 4,554,980 $ 6,253,406 $ 1,046,218 $ 214,031 $ 20,429,786 See accompanying notes to financial statements. Page 16 Port Other Total Authority Governmental Governmental General Debt Service Capital Projects TIF Funds Funds REVENUES Taxes $ 8,865,223 $ 377,394 $ 1,214,000 $ 660,130 $ 58,000 $ 11,174,747 Intergovernmental 318,986 - 1,969,295 - - 2,288,281 Public charges for services 1,021,977 1,342,825 - 5,760 2,370,562 Licenses and permits 522,131 - - - 522,131 Fines and forfeitures 106,617 - - 106,617 Special assessments 4,470 1,235,573 299,016 - - 1,539,059 I nterest earnings 91,017 - 17,751 - - 108,768 Change in fair value of investments (357,024) - (101,048) - - (458,072) Miscellaneous 83,335 24,302 890,600 979 490 999,706 Total Revenues 10,656,732 1,637,269 5,632,439 661,109 64,250 18,651,799 EXPENDITURES Current: General government 2,311,356 - - 153,647 41,526 2,506,529 Public safety 3,604,213 27,999 - - 3,632,212 Public works 3,250,244 - 35,013 - - 3,285,257 Parks and recreation 1,321,946 - - - - 1,321,946 Capital Outlay 1,865 - 7,627,079 - - 7,628,944 Debt Service: Principal retirement - 1,470,000 - 75,000 - 1,545,000 Interest and fiscal charges - 237,666 - 273,860 - 511,526 Total Expenditures 10,489,624 1,707,666 7,690,091 502,507 41,526 20,431,414 Excess (deficiency) of revenues over expenditures 167,108 (70,397) (2,057,652) 158,602 22,724 (1,779,615) OTHER FINANCING SOURCES (USES) Issuance of long -term debt - - 1,500,000 - - 1,500,000 Sale of capital assets - - 3,627 - - 3,627 Transfers in 3,931 432,093 894,467 - - 1,330,491 Transfers out (115,000) (326,987) - - (441,987) Total Other Financing Sources (Uses) (111,069) 432,093 2,071,107 - - 2,392,131 Net Change in Fund Balances FUND BALANCES - Beginning 56,039 361,696 13,455 158,602 22,724 612,516 8,305,112 4,193,284 6,239,951 887,616 191,307 19,817,270 FUND BALANCES - ENDING $ 8,361,151 $ 4,554,980 $ 6,253,406 $ 1,046,218 $ 214,031 $ 20,429,786 See accompanying notes to financial statements. Page 16 CITY OF ROSEMOUNT 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, 2013 Net change in fund balances - total governmental funds $ 612,516 Amounts reported for governmental activities in the statement of activities are different because: Governmental funds report capital outlays as expenditures. However, in the statement of net position the cost of these assets is capitalized and they are depreciated over their estimated useful lives with depreciation expense reported in the statement of activities. Capital outlay is reported as an expenditure in the fund financial statements but is capitalized in the government -wide financial statements 7,628,944 Less: Some items reported as capital outlay but not capitalized (757,844) Depreciation is reported in the government -wide statements (1,844,933) Utility infrastructure constructed by capital projects funds not reported as governmental activities (2,155,537) In the statement of activities, the gain of $16,510 on the disposal of capital assets is reported. In the fund financial statements, proceeds from the sale of capital assets ($3,627) are reported because the proceeds increase financial resources 12,883 Internal service funds are reported in the statement of activities. (34,185) Receivables not currently available are reported as unavailable revenue in the fund financial statements but are recognized as revenue when earned in the government -wide financial statements. (102,362) Issuing debt provides current financial resources to governmental funds, but issuing debt increases long -term liabilities in the statement of net position. This is the amount of debt issued during the year. (1,500,000) Repayment of debt principal is an expenditure in the governmental funds, but the repayment reduces long -term liabilities in the statement of net position. This is the amount of principal payments paid. 1,545,000 Governmental funds report the effect of issuance costs, premiums, discounts, and similar items when debt is first issued, whereas these amounts were deferred and amortized in the statement of activities. (7,687) Some expenses in the statement of activities do not require the use of current financial resources and, therefore, are not reported as expenditures in the governmental funds. This is the change in the following liabilities. Compensated absences (39,702) Accrued interest on debt 13,864 CHANGE IN NET POSITION OF GOVERNMENTAL ACTIVITIES $ 3,370,957 See accompanying notes to financial statements. Page 17 CITY OF ROSEMOUNT STATEMENT OF NET POSITION - PROPRIETARY FUNDS As of December 31, 2013 Non - current assets: 66,625 Business -Type Activities - Enterprise Funds 16,207 142,188 Advance to other funds - 147,203 - 3,740 147,203 Governmental - Accrued interest 18,210 - 7,261 Land Activities - 547,158 1,095,981 261,893 Storm Non -major 391,185 Internal Service 894,545 Water Sewer Water Arena Totals Fund ASSETS 11,085,341 Mains and lines 20,641,282 17,160,934 25,686,157 - Current assets: Other improvements 16,528,701 36,927,459 12,535,129 - 65,991,289 Cash and investments $ 5,917,878 $ 6,103,280 $ 4,712,332 $ 217,843 $ 16,951,333 $ 739,922 Customer accounts receivable 401,562 357,250 201,700 23,158 983,670 - Special assessments receivable 174,956 127,894 139,180 - 442,030 28,616,541 Due from other governments - - 381,380 32,356 413,736 - Prepaid and other assets 6,872 97,747 4,333 5,048 114,000 96,908 Total current assets 6,501,268 6,686,171 5,438,925 278;405 18,904,769 836,830 Non - current assets: 66,625 8,445 50,911 16,207 142,188 Advance to other funds - 147,203 - 3,740 147,203 Property and equipment: - Accrued interest 18,210 - 7,261 Land 1,000,628 547,158 1,095,981 261,893 2,643,767 Construction in progress 391,185 234,185 894,545 Total current liabilities 1,519,915 Buildings 6,794,504 401,414 1,489,523 2,399,900 11,085,341 Mains and lines 20,641,282 17,160,934 25,686,157 - 63,488,373 Other improvements 16,528,701 36,927,459 12,535,129 - 65,991,289 Machinery and equipment 1,887,695 656,782 627,352 127,304 3,299,133 Less accumulated depreciation (13,402,311) (27,458,594) (8,435,430) (1,025,898) (50,322,233) Net property and equipment 33,841,684 28,469,338 33,893,257 1,501,306 97,705,585 Total non - current assets 33,841,684 28,616,541 33,893,257 1,501,306 97,852,788 Total Assets 40,342,952 35,302,712 39,332,182 1,779,711 116,757,557 836,830 LIABILITIES Current liabilities Accounts payable 66,625 8,445 50,911 16,207 142,188 10,610 Accrued liabilities 22,608 5,657 3,740 4,038 36,043 - Accrued interest 18,210 - 7,261 - 25,471 Current portion of long term obligations 261,893 36,893 324,337 14,267 637,390 - Total current liabilities 369,336 50,995 386,249 34,512 841,092 10,610 Noncurrent liabilities: Accrued compensated absences 39,967 39,968 15,531 15,456 110,922 - General obligation debt 765,000 - 635,000 - 1,400,000 Advances from other funds 43,295 43,295 Total noncurrent liabilities 848,262 39,968 650,531 15,456 1,554,217 - Total Liabilities 1,217,598 90,963 1,036,780 49,968 2,395,309 10,610 NET POSITION Net investment in capital assets 32,851,684 28,469,338 32,948,257 1,501,306 95,770,585 - Unrestricted 6,273,670 6,742,411 5,347,145 228,437 18,591,663 826,220 TOTAL NET POSITION $ 39,125,354 $ 35,211,749 $ 38,295,402 $ 1,729,743 $ 114,362,248 $ 826,220 See accompanying notes to financial statements. Page 18 CITY OF ROSEMOUNT STATEMENT OF REVENUES, EXPENSES, AND CHANGES IN NET POSITION PROPRIETARY FUNDS For the Year Ended December 31, 2013 OPERATING REVENUES Charges for services Water meters Miscellaneous Total Operating Revenues OPERATING EXPENSES Personnel services Supplies Professional services and charges Other services and charges Metro sewer charges Depreciation Total Operating Expenses Operating Income (Loss) NONOPERATING REVENUES (EXPENSES) Connection fees Taxes Interest earnings Change in fair value of investments Loss from disposal of capital assets Surcharges and penalties Interest expense and fiscal agent fees Total Nonoperating Revenues Income (loss) before contributions and transfers Capital contributions, including special assessments Transfers in Transfers out Change in Net Position TOTAL NET POSITION - Beginning Business -TvDe Activities - Storm Water Sewer Water rise Funds Governmental Activities - Non -major Internal Service Arena Totals Funds $ 1,624,298 $ 1,577,454 $ 983,316 $ 376,058 $ 4,561,126 $ - 46,529 - - - 46,529 - 128 - - 355 128 52,280 1,670,955 1,577,454 983,316 376,058 4,607,783 52,280 438,768 438,599 182,767 198,934 1,259,068 - 221,460 11,789 9,438 21,183 263,870 40,191 132,714 25,721 51,298 38,781 248,514 30,289 283,489 75,096 80,234 262,375 701,194 267,592 - 1,007,195 - - 1,007,195 - 773,852 864,548 635,291 57,072 2,330,763 985,931 1,850,283 2,422,948 959,028 578,345 5,810,604 338,072 (179,328) (845,494) 24,288 (202,287) (1,202,821) (285,792) 206,625 126,000 72,360 404,985 - - - - - - 245,000 58,227 86,448 64,197 355 209,227 6,607 (125,524) (177,284) (88,313) - (391,121) - (143) - - (143) 290,129 12,568 5,956 308,653 (52,992) (2,538) (30,546) - (86,076) - 376,322 45,194 23,654 355 445,525 251,607 196,994 (800,300) 47,942 (201,932) (757,296) (34,185) 985,931 556,742 1,716,370 - 3,259,043 24,443 10,806 214,214 115,000 364,463 (494,194) (116,948) (638,325) (3,500) (1,252,967) 713,174 (349,700) 1,340,201 (90,432) 1,613,243 (34,185) 38,412,180 35,561,449 36,955,201 1,820,175 112,749,005 860,405 TOTAL NET POSITION - ENDING $ 39,125,354 $ 35,211,749 $ 38,295,402 $ 1,729,743 $ 114,362,248 $ 826,220 See accompanying notes to financial statements. Page 19 CASH FLOWS FROM OPERATING ACTIVITIES Cash received from customers Cash paid to suppliers for goods and services Cash paid for employees Net Cash Flows From (Used by) Operating Activities CASH FLOWS FROM NONCAPITAL FINANCING ACTIVITIES Property taxes Repayment of advance to other funds Advance to other funds Repayment of advance to other governmental units Transfers from other funds Transfers to other funds Net Cash Flows From (Used by) Noncapital Financing Activities CITY OF ROSEMOUNT STATEMENT OF CASH FLOWS PROPRIETARY FUNDS For the Year Ended December 31, 2013 Business -Type Activities - Enterprise Funds Governmental Activities - Water Sewer Storm Non major Internal Utility Utility Water Arena Totals Service Fund $ 2,154,424 $ 1,693,058 $ 1,056,700 $ 348,545 $ 5,252,727 $ 52,280 (612,948) (1,132,680) (113,824) (325,939) (2,185,391) (339,860) (438,768) (438,599) (182,767) (198,934) (1,259,068) - 1,102,708 121,779 760,109 (176,328) 1,808,268 (287,580) CASH FLOWS FROM INVESTING ACTIVITIES - - - - 245,000 25,372 Marketable securities purchased 25,372 - (7,462) - - (7,462) - - 99,483 - 99,483 24,443 10,806 214,214 115,000 364,463 - (494,194) (116,948) (638,325) (3,500) (1,252,967) - (477,213) (80,770) (324,628) 111,500 (771,111) 245,000 CASH FLOWS FROM INVESTING ACTIVITIES Marketable securities purchased (2,862,833) (3,683,618) (1,429,339) (7,975,790) (150,000) Marketable securities sold 2,026,000 3,346,000 1,092,000 6,464,000 48,000 Interest earnings 58,227 86,448 64,197 355 209,227 6,607 Net Cash Flows From (Used by) Investing Activities (778,606) (251,170) (273,142) 355 (1,302,563) (95,393) CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES Debt retired (1,540,000) - (310,000) - (1,850,000) - Interest paid (77,048) (2,538) (30,692) (110,278) Capital contributions 210,817 127,050 286,318 - 624,185 Acquisition and construction of capital assets - (1,466) (105,822) (107,288) Net Cash Flows From (Used by) Capital and Related Financing Activities (1,406,231) 123,046 (160,196) (1,443,381) Net Increase (Decrease) in Cash and Cash Equivalents CASH AND CASH EQUIVALENTS - Beginning of Year CASH AND CASH EQUIVALENTS - END OF YEAR RECONCILIATION OF CASH AND CASH EQUIVALENTS Cash and Investments per Statement of Net Position Less: Non Cash Equivalents Cash and Cash Equivalents Per Statement of Cash Flows (1,559,342) (87,115) 2,143 (64,473) (1,708,787) (137,973) 3,515,223 938,210 1,061,054 282,316 5,796,803 479,895 $ 1,955,881 $ 851,095 $ 1,063,197 $ 217,843 $ 4,088,016 $ 341,922 $ 5,917,878 $ 6,103,280 $ 4,712,332 $ 217,843 $ 16,951,333 $ 739,922 (3,961,997) (5,252,185) (3,649,135) - (12,863,317) (398,000) $ 1,955,881 $ 851,095 $ 1,063,197 $ 217,843 $ 4,088,016 $ 341,922 Page 20 RECONCILIATION OF OPERATING INCOME (LOSS) TO NET CASH FLOWS FROM (USED BY) OPERATING ACTIVITIES Operating income (loss) Non - operating income Adjustments to Reconcile Operating Loss to Net Cash Flows From (Used by) Operating Activities Noncash items included in income Depreciation Change in assets and liabilities Accounts receivable Other receivables Prepaid items Accounts payable Other current liabilities Accrued liabilities Business -Type Activities - Enterprise Funds Water Sewer Storm Non major Utility Utility Water Arena Totals Governmental Activities - Internal Service Funds $ (179,328) $ (845,494) $ 24,288 $ (202,287) $ (1,202,821) (285,792) 496,754 138,568 78,316 - 713,638 773,852 864,548 635,291 57,072 2,330,763 (13,285) (22,964) (4,932) - (41,181) - - (27,513) (27,513) - 5,489 (4,990) 11,770 1,269 13,538 866 5,895 (16,758) 13,468 (5,904) (3,299) (2,654) 6,983 98 (226) (177) 6,678 6,348 8,771 2,134 1,212 18,465 NET CASH FLOWS FROM (USED BY) OPERATING ACTIVITIES $ 1,102,708 $ 121,779 $ 760,109 $ (176,328) $ 1,808,268 $ (287,580) Non -cash capital, investing and financing activities: The Water Utility received contributed plant of $786,539 during the year. The Sewer Utility received contributed plant of $511,996 during the year. The Storm Water Utility received contributed plant of $1,343,182 during the year. Unrealized losses on investments were $125,524 for the Water Utility, $177,284 for the Sewer Utility, and $88,313 for the Storm Water Utility for the year. See accompanying notes to financial statements. Page 21 THIS PAGE WAS LEFT BLANK INTENTIONALLY CITY OF ROSEMOUNT INDEX TO NOTES TO FINANCIAL STATEMENTS As of and for the Year Ended December 31, 2013 NOTE Page Summary of Significant Accounting Policies 23 A. Reporting Entity 23 B. Government -Wide and Fund Financial Statements 24 C. Measurement Focus, Basis of Accounting, 37 and Financial Statement Presentation 26 D. Assets, Liabilities, Deferred Inflows of Resources, and Net Position or Equity 28 1. Deposits and Investments 28 2. Receivables 29 3. Inventories and Prepaid Items 30 4. Capital Assets 30 5. Compensated Absences 31 6. Long -Term Obligations /Conduit Debt 31 7. Deferred Inflows of Resources 31 8. Equity Classifications 32 9. Prior Period Information 33 10. Basis for Existing Rates 33 Reconciliation of Government -Wide and Fund Financial Statements 34 A. Explanation of Certain Differences Between the Governmental Funds Balance Sheet and the Statement of Net Position 34 III. Stewardship, Compliance, and Accountability 34 A. Budgetary Information 34 IV. Detailed Notes on All Funds 35 A. Deposits and Investments 35 B. Receivables 37 C. Capital Assets 38 D. Interfund Receivables /Payables and Transfers 40 E. Long -Term Obligations 42 F. Net Position /Fund Balances 45 V. Other Information 48 A. Employees' Retirement System 48 B. Risk Management 52 C. Commitments and Contingencies 53 D. Related Organization 53 E. Effect of New Accounting Standards on Current - Period Financial Statements 54 Page 22 CITY OF ROSEMOUNT NOTES TO FINANCIAL STATEMENTS As of and for the Year Ended December 31, 2013 NOTE I - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The City of Rosemount, Minnesota (the "City") was formed and operates pursuant to applicable Minnesota laws and statutes. The governing body consists of a five - member City Council elected at large by voters of the City. City Council members serve four -year staggered terms and the mayor serves a four -year term coinciding with the terms of two of the Council members. Elections take place every two years. The accounting policies of the City conform to accounting principles generally accepted in the United States of America, as applicable to governmental units. The accepted standard - setting body for establishing governmental accounting and financial reporting principles in the Governmental Accounting Standards Board (GASB). A. REPORTING ENTITY This report includes all of the funds of the City. The reporting entity for the City consists of the primary government and its component unit. Component units are legally separate organizations for which the primary government is financially accountable or other organizations for which the nature and significance of their relationship with the primary government are such that their exclusion would cause the reporting entity's financial statements to be misleading. The primary government is financially accountable if (1) it appoints a voting majority of the organization's governing body and it is able to impose its will on that organization, (2) it appoints a voting majority of the organization's governing body and there is a potential for the organization to provide specific financial benefits to, or impose specific financial burdens on, the primary government, (3) the organization is fiscally dependent on and there is a potential for the organization to provide specific financial benefits to, or impose specific financial burdens on, the primary government. Certain legally separate, tax exempt organizations should also be reported as a component unit if all of the following criteria are met: (1) the economic resources received or held by the separate organization are entirely or almost entirely for the direct benefit of the primary government, its component units, or its constituents; (2) the primary government or its component units, is entitled to, or has the ability to access, a majority of the economic resources received or held by the separate organization; and (3) the economic resources received or held by an individual organization that the primary government, or its component units, is entitled to, or has the ability to otherwise access, are significant to the primary government. Component units are reported using one of two methods, discrete presentation or blending. Generally, component units should be discretely presented in a separate column in the financial statements. A component unit should be reported as part of the primary government using the blending method if it meets any one of the following criteria: (1) the primary government and the component unit have substantially the same governing body and a financial benefit or burden relationship exists, (2) the primary government and the component unit have substantially the same governing body and management of the primary government has operational responsibility for the component unit, (3) the component unit serves or benefits, exclusively or almost exclusively, the primary government rather than its citizens, or (4) the total debt of the component unit will be paid entirely or almost entirely from resources of the primary government. The financial statements include the Rosemount Port Authority as a blended component unit. The Port Authority serves all the citizens of the government and is governed by a board comprised of three of five of the primary government's elected council and four citizens appointed at large. The bond issuance authorizations are approved by the primary government's council and the legal liability for the general obligation portion of the Port Authority's debt remains with the primary government. The Port Authority is reported in a special revenue fund and debt service fund. The Rosemount Port Authority does not issue separate financial statements. Page 23 CITY OF ROSEMOUNT NOTES TO FINANCIAL STATEMENTS As of and for the Year Ended December 31, 2013 NOTE I — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (coat.) B. GOVERNMENT -WIDE AND FUND FINANCIAL STATEMENTS In November 2010, the GASB issued statement No. 61 - The Financial Reporting Entity: Omnibus - an amendment of GASB Statements No. 94 and No. 34. This statement modifies certain requirements for inclusion of component units in the financial reporting entity. This standard was implemented effective January 1, 2013. In March 2012, the GASB issued statement No. 65 - Items Previously Reported as Assets and Liabilities. This statement establishes accounting and financial reporting standards that reclassify, as deferred outflows of resources or deferred inflows of resources, certain items that were previously reported as assets and liabilities and recognizes, as outflows of resources or inflows of resources, certain items that were previously reported as assets and liabilities. This standard was implemented effective January 1, 2013. Government -Wide Financial Statements The statement of net position and statement of activities display information about the reporting government as a whole. They include all funds of the reporting entity except for fiduciary funds. The statements distinguish between governmental and business -type activities. Governmental activities generally are financed through taxes, intergovernmental revenues, and other nonexchange revenues. Business -type activities are financed in whole or in part by fees charged to external parties for goods or services. The statement of activities demonstrates the degree to which the direct expenses of a given function, or segment, are offset by program revenues. Direct expenses are those that are clearly identifiable with a specific function or segment. The City does not allocate indirect expenses to functions in the statement of activities. 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 segment, and 2) grants and contributions that are restricted to meeting the operational or capital requirements of a particular function or segment. Taxes and other items not included among program revenues are reported as general revenues. Internally dedicated resources are reported as general revenues rather than as program revenues. Fund Financial Statements Financial statements of the reporting entity are organized into funds, each of which is considered to be a separate accounting entity. Each fund is accounted for by providing a separate set of self - balancing accounts, which constitute its assets, deferred outflows or resources, liabilities, deferred inflows of resources, net position /fund equity, revenues, and expenditures /expenses. Funds are organized as major funds or non -major funds within the governmental and proprietary statements. An emphasis is placed on major funds within the governmental and proprietary categories. A fund is considered major if it is the primary operating fund of the City or meets the following criteria: a. Total assets /deferred outflows of resources, liabilities /deferred inflows of resources, revenues, or expenditures /expenses of that individual governmental or enterprise fund are at least 10% of the corresponding total for all funds of that category or type, and b. The same element of the individual governmental fund or enterprise fund that met the 10% testis at least 5% of the corresponding total for all governmental and enterprise funds combined. c. In addition, any other governmental or enterprise fund that the City believes is particularly important to financial statement users may be reported as a major fund. Page 24 CITY OF ROSEMOUNT NOTES TO FINANCIAL STATEMENTS As of and for the Year Ended December 31, 2013 NOTE I — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.) B. GOVERNMENT -WIDE AND FUND FINANCIAL STATEMENTS (cont.) Fund Financial Statements (cont.) Separate financial statements are provided for governmental funds, proprietary funds and fiduciary funds, even though the latter are excluded from the government -wide financial statements. Major individual governmental funds and major individual enterprise funds are reported as separate columns in the fund financial statements. The City reports the following major governmental funds: General Fund — accounts for the City's primary operating activities. It is used to account for and report all financial resources except those accounted for and reported in another fund. Debt Service Fund — used to account for and report financial resources that are restricted, committed, or assigned to expenditure for the payment of general long -term debt principal, interest, and related costs, other than enterprise debt. Capital Projects Fund — used to account for and report financial resources that are restricted, committed, or assigned to expenditures for capital outlays, including the acquisition or construction of capital facilities and other capital assets. The capital projects fund consists of one primary fund and three separate internal funds maintained by the City. Port Authority TIF Fund — used to account for and report financial resources that are restricted, committed, or assigned to expenditures related to the activities of the City's Downtown — Brockway TIF District. The City reports the following major enterprise funds: Water Utility — accounts for operations of the water system. Sewer Utility — accounts for operations of the sewer system. Storm Water Utility— accounts for operations of the storm water drainage system. The City reports the following non -major governmental and enterprise funds: Special Revenue Funds — used to account for and report the proceeds of specific revenue sources that are restricted or committed to expenditures for specified purposes (other than debt service or capital projects). Fire Safety Education Fund GIS Fund Port Authority General Fund Enterprise Funds — may be used to report any activity for which a fee is charged to external uses for goods or services, and must be used for activities which meet certain debt or cost recovery criteria. Arena Fund — accounts for the activities of the City's ice arena operations. Page 25 CITY OF ROSEMOUNT NOTES TO FINANCIAL STATEMENTS As of and for the Year Ended December 31, 2013 NOTE I — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.) B. GOVERNMENT -WIDE AND FUND FINANCIAL STATEMENTS (cont.) Fund Financial Statements (cont.) In addition, the City reports the following fund types: Internal service funds are used to account for the financing of goods and services provided by one department or agency to other departments or agencies of the City on a cost - reimbursement basis. Insurance Fund — accumulates resources to pay deductibles and uninsured claims, and pays for a majority of the general liability insurance and workers compensation insurance premiums for the City. C. MEASUREMENT FOCUS, BASIS OF ACCOUNTING AND FINANCIAL STATEMENT PRESENTATION Government -Wide Financial Statements The government -wide statement of net position and statement of activities are reported using the economic resources measurement focus and the accrual basis of accounting. Under the accrual basis of accounting, revenues are recognized when earned and expenses are recorded when the liability is incurred or economic asset used. Revenues, expenses, gains, losses, assets, and liabilities resulting from exchange and exchange - like transactions are recognized when the exchange takes place. 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 are met. Special assessments are recorded as revenue when earned. Unbilled receivables are recorded as revenues when services are provided. As a general rule, the effect of interfund activity has been eliminated from the government -wide financial statements. Exceptions to this general rule are charges between the City's water and sewer utility and various other functions of the government. Elimination of these charges would distort the direct costs and program revenues reported for the various functions concerned. Page 26 CITY OF ROSEMOUNT NOTES TO FINANCIAL STATEMENTS As of and for the Year Ended December 31, 2013 NOTE I — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.) C. MEASUREMENT FOCUS, BASIS OFACCOUNTING AND FINANCIAL STATEMENT PRESENTATION (cont.) Fund Financial Statements Governmental fund financial statements are reported using the current financial resources measurement focus and the modified accrual basis of accounting. Revenues are recorded when they are both measurable and available. Available means collectible within the current period or soon enough thereafter to be used to pay liabilities of the current period. For this purpose, the City considers revenues to be available if they are collected within 60 days of the end of the current fiscal period. Expenditures are recorded when the related fund liability is incurred, except for unmatured interest on long -term debt, claims, judgments, compensated absences, and pension expenditures, which are recorded as a fund liability when expected to be paid with expendable available financial resources. Property taxes, special assessments, intergovernmental revenues, charges for services and interest associated with the current fiscal period are all considered to 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 City. Proprietary fund financial statements are reported using the economic resources measurement focus and the accrual basis of accounting, as described previously in this note. Agency funds follow the accrual basis of accounting, and do not have a measurement focus. The proprietary funds distinguish operating revenues and expenses from nonoperating items. Operating revenues and expenses generally result from providing services and producing and delivering goods in connection with a proprietary fund's principal ongoing operations. The principal operating revenues of the water, sewer, storm water, and arena funds are charges to customers for sales and services. Operating expenses for proprietary 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. All Financial Statements The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenditures /expenses during the reporting period. Actual results could differ from those estimates. Page 27 CITY OF ROSEMOUNT NOTES TO FINANCIAL STATEMENTS As of and for the Year Ended December 31, 2013 NOTE I — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.) D. ASSETS, LIABILITIES, DEFERRED INFLOWS OF RESOURCES, AND NET POSITION OR EQUITY 1. Deposits and Investments For purposes of the statement of cash flows, the City considers all highly liquid investments with an initial maturity of three months or less when acquired to be cash equivalents. Investment of City funds is restricted by state statutes. Available investments are limited to: 1. Direct obligations or obligations guaranteed by the United States or its agencies, commercial paper, 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 or certain Minnesota brokers /dealers. 2. General obligations of the State of Minnesota or any of its municipalities. 3. Bankers acceptances of United States banks eligible for purchase by the Federal Reserve System. 4. Shares of investment companies registered under the Federal Investment Company Act of 1940 and whose only investments are direct obligations guaranteed by the United States or its agencies. The City has adopted an investment policy. The policy contains the following guidelines: Credit Risk - The policy follows state statutes for allowable investments except that it does not permit the purchase of shares of investment companies registered under the Federal Investment Company Act of 1940 whose only investments are direct obligations guaranteed by the United States or its agencies. Concentration of Credit Risk - The policy does not limit the amount the City may invest in any one issuer. Interest Rate Risk - As a means of limiting its exposure to fair value losses arising from rising interest rates, the City's investment policy limits the amount of investments with maturities of more than five years to 35% of the City's total investment portfolio (including certificates of deposit). Investments are stated at fair value, which is the amount at which an investment could be exchanged in a current transaction between willing parties. Fair values are based on quoted market prices. No investments are reported at amortized cost. Adjustments necessary to record investments at fair value are recorded in the operating statement as increases or decreases in investment income. The difference between the bank statement balance and carrying value is due to outstanding checks and/or deposits in transit. See Note IV.A. for further information. Page 28 CITY OF ROSEMOUNT NOTES TO FINANCIAL STATEMENTS As of and for the Year Ended December 31, 2013 NOTE I — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.) D. ASSETS, LIABILITIES, DEFERRED INFLOWS OF RESOURCES, AND NET POSITION OR EQUITY (cont. ) 2. Receivables Property tax levies are set by the City Council in the fall each year and are certified to Dakota County for collection in the following year. In Minnesota, counties act as collection agents for all property taxes. The County spreads all levies over taxable property. Such taxes become a lien on January 1 and are recorded as receivables by the City at that date. Property taxes are accrued and recognized as revenue in the year collectible, net of delinquencies. Real property taxes may be paid by taxpayers in two equal installments on May 15 and October 15. Personal property taxes may be paid on February 28 and June 30. The County provides tax settlements to the City three times per year, in January, July, and December. Taxes which remain unpaid 60 days after year end are classified as delinquent taxes receivable and are fully offset by unavailable revenue (deferred inflow of resources) because they are not known to be available to finance current expenditures. Special assessments are levied against the benefited properties for the assessable costs of special assessments improvement projects in accordance with state statutes. The City usually adopts the assessment rolls when the individual projects are complete. The assessments are collectible over a term of years generally consistent with the term of years of the related bond issue. Collection of annual installments (including interest) is handled by the County in the same manner as property taxes. Property owners are allowed to prepay total future installments without interest or prepayment penalties. Special assessments receivable includes the following components: > Current - amount collected by Dakota County and not remitted to the City. > Delinquent - amounts billed to property owners but not paid. > Unavailable - assessment installments, which will be billed to property owners in future years. > Other - assessments for which payment has been postponed based on council action. Accounts receivable are considered to be 100% collectible. During the course of operations, transactions occur between individual funds that may result in amounts owed between funds. Short -term interfund loans are reported as "due to and from other funds." Long -term interfund loans (noncurrent portion) are reported as "advances from and to other funds." Interfund receivables and payables between funds within governmental activities are eliminated in the statement of net position. Any residual balances outstanding between the governmental activities and business -type activities are reported in the government -wide financial statements as internal balances. In the governmental fund financial statements, advances to other funds are offset equally by a nonspendable fund balance account which indicates that they do not constitute expendable available financial resources and, therefore, are not available for appropriation or by a restricted fund balance account, if the funds will ultimately be restricted when the advance is repaid. Page 29 CITY OF ROSEMOUNT NOTES TO FINANCIAL STATEMENTS As of and for the Year Ended December 31, 2013 NOTE I — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.) D. ASSETS, LIABILITIES, DEFERRED INFLOWS OF RESOURCES, AND NET POSITION OR EQUITY (cont.) 3. Inventories and Prepaid Items Governmental fund inventory items are charged to expenditure accounts when purchased. Year -end inventory was not significant. Proprietary fund inventories are generally used for construction and for operation and maintenance work. They are not for resale. They are valued at cost based on weighted average, and charged to construction and /or operation and maintenance expense when used. 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 and expensed as the items are used (consumption method). 4. Capital Assets Government — Wide Statements Capital assets, which include property, plant and equipment, are reported in the government -wide financial statements. Capital assets are defined by the government as assets with an initial cost of more than $5,000 for general capital assets and infrastructure assets, and an estimated useful life in excess of one year. All capital assets are valued at historical cost or estimated historical cost if actual amounts are unavailable. Donated capital assets are recorded at their estimated fair value at the date of donation. Additions to and replacements of capital assets of business -type activities are recorded at original cost, which includes material, labor, overhead, and an allowance for the cost of funds used during construction when significant. For tax - exempt debt, the amount of interest capitalized equals the interest expense incurred during construction netted against any interest revenue from temporary investment of borrowed fund proceeds. No interest was capitalized during the current year. The cost of renewals and betterments relating to retirement units is added to plant accounts. The cost of property replaced retired or otherwise disposed of, is deducted from plant accounts and, generally, together with removal costs less salvage, is charged to accumulated depreciation. Depreciation of all exhaustible capital assets is recorded as an allocated expense in the statement of activities, with accumulated depreciation reflected in the statement of net position. Depreciation is provided over the assets' estimated useful lives using the straight -line method of depreciation. The range of estimated useful lives by type of asset is as follows: Buildings 30 -65 Years Machinery and equipment 4 -20 Years Other improvements 60 Years Utility system 65 Years Infrastructure 35 -50 Years Fund Financial Statements In the fund financial statements, capital assets used in governmental fund operations are accounted for as capital outlay expenditures of the governmental fund upon acquisition. Capital assets used in proprietary fund operations are accounted for the same way as in the government -wide statements. Page 30 CITY OF ROSEMOUNT NOTES TO FINANCIAL STATEMENTS As of and for the Year Ended December 31, 2013 NOTE I — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.) D. ASSETS, LIABILITIES, DEFERRED INFLOWS OF RESOURCES, AND NET POSITION OR EQUITY (cunt.) 5. Compensated Absences Under terms of employment, employees are granted vacation, sick and comp time benefits in varying amounts These benefits are based upon union contracts and City actions as applicable. Amounts carried forward for vacation and comp time accruals are governed by these contracts and actions. Sick pay accruals may be carried forward indefinitely. All vested vacation, sick leave and comp time pay is accrued when incurred in the government -wide and proprietary fund financial statements. A liability for these amounts is reported in governmental funds only if they have matured, for example, as a result of employee resignations and retirements, and are payable with expendable available resources. Payments for vacation, sick and comp time leave will be made at rates in effect when the benefits are used. Accumulated vacation, sick and comp time leave liabilities at December 31, 2013 are determined on the basis of current salary rates and include salary related payments. 6. Long -Term Obligations /Conduit Debt All long -term obligations to be repaid from governmental and business -type resources are reported as liabilities in the government -wide statements. The long -term obligations consist primarily of notes and bonds payable, and accrued compensated absences. Long -term obligations for governmental funds are not reported as liabilities in the fund financial statements. The face value of debts (plus any premiums) are reported as an other financing source and payments of principal and interest are reported as expenditures. The accounting in proprietary funds is the same as it is in the government -wide statements. The City has approved the issuance of industrial revenue bonds (IRB) for the benefit of private business enterprises. IRB's are secured by mortgages or revenue agreements on the associated projects, and do not constitute indebtedness of the City. Accordingly, the bonds are not reported as liabilities in the accompanying financial statements. At year end, the aggregate principal amount for the four issues outstanding could not be determined; however, their original issue amounts totaled $13,094,720. 7. Deferred Inflows of Resources A deferred inflow of resources represents an acquisition of net position that applies to a future period and therefore will not be recognized as inflow of resources (revenue) until that future time. Page 31 CITY OF ROSEMOUNT NOTES TO FINANCIAL STATEMENTS As of and for the Year Ended December 31, 2013 NOTE I — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.) D. ASSETS, LIABILITIES, DEFERRED INFLOWS OF RESOURCES, AND NET POSITION OR EQUITY (cont. ) 8. Equity Classifications Government—Wide Statements Equity is classified as net position and displayed in three components: a. Net investment in capital assets - Consists of capital assets including restricted capital assets, net of accumulated depreciation and reduced by the outstanding balances (excluding unspent debt proceeds) of any bonds, mortgages, notes, or other borrowings that are attributable to the acquisition, construction, or improvement of those assets. b. Restricted net position - Consists of net position with constraints placed on their use either by 1) external groups such as creditors, grantors, contributors, or laws or regulations of other governments or, 2) law through constitutional provisions or enabling legislation. c. Unrestricted net position - All other net positions that do not meet the definitions of "restricted" or "net investment in capital assets." When both restricted and unrestricted resources are available for use, it is the City's policy to use restricted resources first, then unrestricted resources as they are needed. Fund Statements Governmental fund equity is classified as fund balance and displayed as follows: a. Nonspendable - Includes fund balance amounts that cannot be spent either because they are not in spendable form or because legal or contractual requirements require them to be maintained intact. b. Restricted - Consists of fund balances with constraints placed on their use either by 1) external groups such as creditors, grantors, contributors, or laws or regulations of other governments or 2) law through constitutional provisions or enabling legislation. c. Committed - Includes fund balance amounts that are constrained for specific purposes that are internally imposed by the government through formal action of the highest level of decision making authority. Fund balance amounts are committed through a formal action (resolution) of the City Council. This formal action must occur prior to the end of the reporting period, but the amount of the commitment, which will be subject to the constraints, may be determined in the subsequent period. Any changes to the constraints imposed require the same formal action of the City Council that originally created the commitment. Assigned - Includes spendable fund balance amounts that are intended to be used for specific purposes that are not considered restricted or committed. Fund balance may be assigned through the following: 1) The City Council has authorized the Finance Director and /or Administrator to assign amounts for a specific purpose. 2) All remaining positive spendable amounts in governmental funds, other than the general fund, that are neither restricted or committed. Assignments may take place after the end of the reporting period. Page 32 CITY OF ROSEMOUNT NOTES TO FINANCIAL STATEMENTS As of and for the Year Ended December 31, 2013 NOTE I — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.) D. ASSETS, LIABILITIES, DEFERRED INFLOWS OF RESOURCES, AND NET POSITION OR EQuITy (coat.) 8. Equity ClassiFcations (cont.) Fund Statements (cont.) e. Unassigned - Includes residual positive fund balance within the general fund which has not been classified within the other above mentioned categories. Unassigned fund balance may also include negative balances for any governmental fund if expenditures exceed amounts restricted, committed, or assigned for those purposes. Proprietary fund equity is classified the same as in the government -wide statements. The City considers restricted amounts to be spent first when both restricted and unrestricted fund balance is available unless there are legal documents / contracts that prohibit doing this, such as in grant agreements requiring dollar for dollar spending. Additionally, the City would first use committed, then assigned and lastly unassigned amounts of unrestricted fund balance when expenditures are made. The City has a formal minimum fund balance policy. That policy is to maintain a working capital fund of 45 to 55 percent of the subsequent year's general fund expenditures. The balance at year end was $6,001,628, or 54 percent, and is included in unassigned general fund balance. 9. Prior Period Information The basic financial statements 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 government's financial statements for the year ended December 31, 2012, from which the summarized information was derived. 10. Basis for Existing Rates Current utility rates were approved by the City Council on December 18, 2012. Page 33 CITY OF ROSEMOUNT NOTES TO FINANCIAL STATEMENTS As of and for the Year Ended December 31, 2013 NOTE II - RECONCILIATION OF GOVERNMENT -WIDE AND FUND FINANCIAL STATEMENTS A. EXPLANATION OF CERTAIN DIFFERENCES BETWEEN THE GOVERNMENTAL FUNDS BALANCE SHEET AND THE STATEMENT OF NET POSITION The governmental fund balance sheet includes a 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 "Some liabilities, including long -term debt, are not due and payable in the current period and, therefore, are not reported in the funds ". The details of this $16,467,379 difference are as follows: Long -term liabilities applicable to the City's governmental activities are not due and payable in the current period, and accordingly, are not reported as fund liabilities. Interest on long -term debt is not accrued in governmental funds, but rather is recognized as an expenditure when due. All liabilities - both current and long- term - are reported in the statement of net position. Bonds and notes payable (excluding unspent capital related proceeds) $ 15,295,000 Compensated absences 963,300 Accrued interest 209,079 Combined Adjustment for Long -Term Liabilities $ 16,467,379 NOTE III - STEWARDSHIP, COMPLIANCE, AND ACCOUNTABILITY A. BUDGETARY INFORMATION Annual budgets have been adopted for the general fund and the capital project fund that is created by the following sub - funds, Building CIP, Street CIP and Equipment CIP. The remaining capital project sub funds adopt project - length budgets and therefore are not included in the annual budgeting process. Formal budgetary integration is not employed for debt service funds because effective budgetary control is alternatively achieved through general obligation bond indenture provisions. The budgeted amounts presented include any amendments made. The appropriated budget is prepared by fund, department and function. The legal level of budgetary control is at the department level. The City Council may authorize department heads to transfer budgeted appropriations within departments. The Council approved several supplemental budgetary appropriations during the year, but they were not considered material. Appropriations lapse at year end unless specifically carried over. Carryovers to the following year were $2,256,613. Page 34 CITY OF ROSEMOUNT NOTES TO FINANCIAL STATEMENTS As of and for the Year Ended December 31, 2013 NOTE IV - DETAILED NOTES ON ALL FUNDS A. DEPOSITS AND INVESTMENTS The City maintains a cash and investment pool that is available for use by all funds. Each fund type's portion of this pool is displayed on the statement of net position and balance sheet as cash and investments. In addition, investments are separately held by several of the City's funds. The City's cash and investments at year end were comprised of the following: Petty cash and cash on hand Demand deposits U.S. instrumentalities Total Cash and Investments Carrying Statement Associated Value Balances Risks 2,400 $ 2,400 N/A 24,511,324 25,208,770 Custodial credit, credit, concentration of credit, 13,947,442 13,947,442 interest rate $ 38,461,166 $ 39,158,612 Deposits in each local and area bank are insured by the FDIC in the amount of $250,000 for time and savings accounts (including NOW accounts) and $250,000 for demand deposit accounts (interest- bearing and noninterest- bearing). In addition, if deposits are held in an institution outside of the state in which the government is located, insured amounts are further limited to a total of $250,000 for the combined amount of all deposit accounts. The Securities Investor Protection Corporation (SIPC), created by the Securities Investor Protection Act of 1970, is an independent government- sponsored corporation (not an agency of the U.S. government). SIPC membership provides account protection up to a maximum of $500,000 per customer, of which $100,000 may be in cash. Custodial Credit Risk Deposits Custodial credit risk is the risk that in the event of a financial institution failure, the City's deposits may not be returned to the City. The City maintains collateral agreements with its banks. At December 31, 2013, the banks had pledged various government securities in the amount of $19,824,300 to secure the City's deposits. The City had custodial credit risk exposure of approximately $11,000 in regards to deposits at one bank at December 31, 2013. Investments For an investment, custodial credit risk is the risk that, in the event of the failure of the counterparty, the City will not be able to recover the value of its investments or collateral securities that are in the possession of an outside party. The City does not have any investments exposed to custodial credit risk. Page 35 CITY OF ROSEMOUNT NOTES TO FINANCIAL STATEMENTS As of and for the Year Ended December 31, 2013 NOTE IV — DETAILED NOTES ON ALL FUNDS (cont.) A. DEPOSITS AND INVESTMENTS (cunt.) Credit Risk Credit risk is the risk that an issuer or other counterparty to an investment will not fulfill its obligations. As of December 31, 2013, all of the City of Rosemount's investments were U.S. agency obligations which received AAA ratings from Standard & Poor's and /or Moody's Investors Service, respectively. Concentration of Credit Risk Concentration of credit risk is the risk of loss attributed to the magnitude of the City's investment in a single issuer. As of December 31, 2013, all of the City of Rosemount's investments were U.S. agency obligations, as follows: Issuer Fair Value Percentage of Total Federal Home Loan Bank $ 10,704,845 77% Federal Home Loan Mortgage Corporation 2,361,206 17% Federal National Mortgage Association 881,391 6% $ 13,947,442 Interest Rate Risk Interest rate risk is the risk that changes in interest rates will adversely affect the value of an investment. As of December 31, 2013, the City of Rosemount's investments were as follows: Investment Maturities (in years) Total Fair Less More Investment Type Value than 1 1 -5 6-10 than 10 U.S. Agency Obligations $ 13,947,442 $ - $ - $ 13,947,442 $ - At December 31, 2013, the City held $12,055,912 in U.S. Agency Obligations that are callable at increasing stepped interest rates. See Note I.D.1 for further information on deposit and investment policies. Page 36 CITY OF ROSEMOUNT NOTES TO FINANCIAL STATEMENTS As of and for the Year Ended December 31, 2013 NOTE IV — DETAILED NOTES ON ALL FUNDS (cont.) B. RECEIVABLES Receivable amounts not expected to be collected within one year are listed below: Debt Capital Governmental Activities General Service Projects Totals Amounts not expected to be collected within one year $ 1,813 $ 628,710 $ 366,586 $ 997,109 Water Sewer Storm Water Business -Type Activities Utility Utility Utility Totals Amounts not expected to be collected within one year $ 68,961 $ 77,773 $ 346,252 $ 492,986 Governmental funds report unavailable or unearned revenue in connection with receivables for revenues that are not considered to be available to liquidate liabilities of the current period. Governmental funds also defer revenue recognition in connection with resources that have been received, but not yet earned. At the end of the current fiscal year, the various components of unavailable revenue and unearned revenue reported in the governmental funds were as follows: Unavailable Unearned Totals Delinquent property taxes receivable $ 126,838 $ - $ 126,838 Delinquent special assessments 66,310 - 66,310 Special assessments not yet due 2,690,008 576,127 3,266,135 Donations receivable for future projects 62,318 - 62,318 Total Deferred /Unearned Revenue for Governmental Funds $ 2,945,474 $ 576,127 $ 3,521,601 Page 37 CITY OF ROSEMOUNT NOTES TO FINANCIAL STATEMENTS As of and for the Year Ended December 31, 2013 NOTE IV — DETAILED NOTES ON ALL FUNDS (cont.) C. CAPITAL ASSETS Capital asset activity for the year ended December 31, 2013 was as follows: Total Governmental Activities Capital Assets, Net of Accumulated Depreciation $ 70,161,203 $ 5,874,657 $ 2,991,144 $ 73,044,716 Depreciation expense was charged to functions as follows: Governmental Activities General government Public safety Public works, which includes the depreciation of roads, bridges and parking lots Leisure activities Total Governmental Activities Depreciation Expense $ 187,223 304,653 1,144, 741 208,316 $ 1,844,933 Page 38 Beginning Ending Balance Additions Deletions Balance Governmental Activities Capital assets not being depreciated Land $ 10,498,466 $ 605,000 $ - $ 11,103,466 Land improvements 159,745 463,025 - 622,770 Construction in progress 2,100,911 2,849,430 2,967,281 1,983,060 Total Capital Assets Not Being Depreciated 12,759,122 3,917,455 2,967,281 13,709,296 Capital assets being depreciated Improvements 2,265,926 436,642 31,542 2,671,026 Buildings 13,872,836 319,679 - 14,192,515 Machinery and equipment 9,248,133 794,707 324,190 9,718,650 Infrastructure 90,941 - - 90,941 Roads 49,244,921 2,251,107 - 51,496,028 Bridges 1,887,923 - - 1,887,923 Parking lots 580,449 - - 580,449 Total Capital Assets Being Depreciated 77,191,129 3,802,135 355,732 80,637,532 Less: Accumulated depreciation for Improvements (961,584) (102,269) 30,230 (1,033,623) Buildings (4,110,631) (279,809) - (4,390,440) Machinery and equipment (6,126,034) (565,603) 301,639 (6,389,998) Infrastructure (466) (1,399) - (1,865) Roads (8,057,487) (833,804) - (8,891,291) Bridges (337,630) (47,198) - (384,828) Parking lots (195,216) (14,851) - (210,067) Total Accumulated Depreciation (19,789,048) (1,844,933) 331,869 (21,302,112) Net Capital Assets Being Depreciated 57,402,081 1,957,202 23,863 59,335,420 Total Governmental Activities Capital Assets, Net of Accumulated Depreciation $ 70,161,203 $ 5,874,657 $ 2,991,144 $ 73,044,716 Depreciation expense was charged to functions as follows: Governmental Activities General government Public safety Public works, which includes the depreciation of roads, bridges and parking lots Leisure activities Total Governmental Activities Depreciation Expense $ 187,223 304,653 1,144, 741 208,316 $ 1,844,933 Page 38 CITY OF ROSEMOUNT NOTES TO FINANCIAL STATEMENTS As of and for the Year Ended December 31, 2013 NOTE IV — DETAILED NOTES ON ALL FUNDS (cont.) C. CAPITAL ASSETS (cont.) Business -Type Activities Capital assets not being depreciated Land Construction in progress Total Capital Assets Not Being Depreciated Capital assets being depreciated Buildings Machinery and equipment Mains and lines Total Capital Assets Being Depreciated Less: Accumulated depreciation for Buildings Machinery and equipment Mains and lines Total Accumulated Depreciation Net Capital Assets Being Depreciated Total Business -Type Capital Assets, Net of Accumulated Depreciation Beginning Ending $ 2,643,767 $ - $ - $ 2,643,767 1,682,616 2,262,824 2,425,525 1,519,915 4,326,383 2,262,824 2,425,525 4,163,682 11,085,341 - 2,831,379 486,181 127,054,137 2,425,525 1 An 97n AS7 9 911 70A - 11,085,341 18,427 3,299,133 - 129,479,662 18 427 143.864.136 (2,696,930) (236,588) - (2,933,518) (1,898,468) (138,395) 18,283 (2,018,580) (43,414,355) (1,955,780) - (45,370,135) (48,009,753) (2,330,763) 18,283 (50,322,233) 92,961,104 580,943 144 93,541,903 $ 97,287,487 $ 2,843,767 $ 2,425,669 $ 97,705,585 Depreciation expense was charged to functions as follows: Business -Type Activities Water Sewer Storm water Arena Total Business -type Activities Depreciation Expense $ 773,852 864,548 635,291 57,072 $ 2,330,763 Page 39 CITY OF ROSEMOUNT NOTES TO FINANCIAL STATEMENTS As of and for the Year Ended December 31, 2013 NOTE IV — DETAILED NOTES ON ALL FUNDS (cunt.) D. INTERFUND RECEIVABLESIPAYABLES AND TRANSFERS The following is a schedule of interfund receivable /advances as of December 31, 2013: Receivable Fund Payable Fund Sewer Building CIP Sewer Water Subtotal — Fund financial statements Less: Fund eliminations Total — Government -Wide Statement of Net Position Amount $ 103,908 43,295 147,203 Amount Not Due Within One Year $ 85,084 35,469 120,553 (43,295) (35,469) $ 103,908 $ 85,084 The principal purpose of these interfund loans was to finance the public works building expansion in 1999, and to purchase and renovate a building in the Downtown- Brockway Tax Increment Financing District in 2005. For the statement of net position, interfund balances which are owed within the governmental activities or business -type activities are netted and eliminated. The sewer fund advanced funds to the water fund and capital projects fund. The sewer fund is charging the other funds interest on the advance based on the average outstanding advance balance during the year at a rate of 5 %. Following is a detailed repayment schedule for the sewer fund advance: Page 40 Principal Interest Totals 2014 $ 26,640 $ 7,360 $ 34,000 2015 27,972 6,028 34,000 2016 29,370 4,630 34,000 2017 30,839 3,161 34,000 2018 32,382 1,619 34,000 Total $ 147,203 $ 22,798 $ 1'70,000 Page 40 CITY OF ROSEMOUNT NOTES TO FINANCIAL STATEMENTS As of and for the Year Ended December 31, 2013 NOTE IV — DETAILED NOTES ON ALL FUNDS (cont.) D. INTERFuND RECEIVABLES /PAYABLES AND TRANSFERS (cont.) The following is a schedule of interfund transfers: Fund Transferred To Fund Transferred From Amount Principal Purpose 59,214 Share of capital project costs Water Capital Projects General Arena $ 3,500 Building and grounds Share of capital project costs Arena General 115,000 maintenance Capital Projects 431 Close capital projects Debt Service Water 200,000 Water share of debt payment Capital Projects 232,093 Close capital projects Capital Projects Sewer 116,948 Sewer share of project Statement of Activities Storm Water 638,325 Storm water share of project Water 139,194 Water share of project Enterprise Storm Water Water 155,000 Water share of debt payments Storm Water Capital Projects 59,214 Share of capital project costs Water Capital Projects 24,443 Share of capital project costs Sewer Capital Projects 10,806 Share of capital project costs Arena General 115,000 Operating expenses 1,694,954 Less: Fund eliminations (387,524) Less: Contributed plant reclassified to a transfer in the government -wide statements (2,574,463) Total Transfers — Government -Wide Statement of Activities $ (1,267,033) The contributed plant figure above includes a slight difference from the amount disclosed in the non -cash section of the statement of cash flows due to final cost allocation adjustments for the various capital projects. Generally, transfers are used to (1) move revenues from the fund that collects them to the fund that the budget requires to expend them, (2) move receipts restricted to debt service from the funds collecting the receipts to the debt service fund, and (3) use unrestricted revenues collected in the general fund to finance various programs accounted for in other funds in accordance with budgetary authorizations. For the statement of activities, interfund transfers within the governmental activities or business -type activities are netted and eliminated. Page 41 CITY OF ROSEMOUNT NOTES TO FINANCIAL STATEMENTS As of and for the Year Ended December 31, 2013 NOTE IV — DETAILED NOTES ON ALL FUNDS (cont.) E. LONG -TERM OBLIGATIONS Long -term obligations activity for the year ended December 31, 2013 was as follows: Other Liabilities: Vested compensated absences 192,425 113,249 92,362 213,312 102,390 Total Business -type Activities Long -Term Liabilities $ 3,978,507 $ 112,167 $ 1,942,362 $ 2,148,312 $ 637,390 Page 42 Amounts Beginning Ending Due Within Balance Increases Decreases Balance One Year GOVERNMENTAL ACTIVITIES Bonds and Notes Payable General obligation debt $ 15,340,000 $ 1,500,000 $ 1,545,000 $ 15,295,000 $ 1,580,000 Net discount (7,687) - (7,687) - - Sub -total 15,332,313 1,500,000 1,537,313 15,295,000 1,580,000 Other Liabilities Vested compensated absences 923,598 483,030 443,328 963,300 462,385 Total Governmental Activities Long -Term Liabilities $ 16,255,911 $ 1,983,030 $ 1,980,641 $ 16,258,300 $ 2,042,385 BUSINESS -TYPE ACTIVITIES Bonds and Notes Payable General obligation debt $ 3,785,000 $ - $ 1,850,000 $ 1,935,000 $ 535,000 Net discount/premium 1,082 (1,082) - - - Sub -total 3,786,082 (1,082) 1,850,000 1,935,000 535,000 Other Liabilities: Vested compensated absences 192,425 113,249 92,362 213,312 102,390 Total Business -type Activities Long -Term Liabilities $ 3,978,507 $ 112,167 $ 1,942,362 $ 2,148,312 $ 637,390 Page 42 CITY OF ROSEMOUNT NOTES TO FINANCIAL STATEMENTS As of and for the Year Ended December 31, 2013 NOTE IV — DETAILED NOTES ON ALL FUNDS (cont.) E. LONG -TERM OBLIGATIONS (cunt.) General Obligation Debt All general obligation notes and bonds payable are backed by the full faith and credit of the City. Notes and bonds in the governmental funds will be retired by future property tax levies or tax increments accumulated by the debt service fund. Business -type activities debt is payable by revenues from user fees of those funds or, if the revenues are not sufficient, by future tax levies. Governmental Activities Date of Final Interest Original Balance General Obligation Debt Issue Maturity Rates Indebtedness 12 -31 -13 Fire Station CIP Bonds, Series 2005A 2005 2025 3.5% to 4.3% $ 2,630,000 $ 1,880,000 Fire Station Refunding Bonds, Series 2005D 2005 2016 3.2% to 3.8% 1,115,000 375,000 Improvement Bonds, Series 2006B 2006 2017 4.0% 4,405,000 1,810,000 Equipment Certificates, Series 2008A 2008 2014 3.99% 385,000 85,000 Port Authority TIF, Series 2008A 2008 2024 5.0% to 5.5% 2,765,000 2,655,000 Port Authority TIF, Series 2008B 2008 2032 4.0% to 4.1 % 3,275,000 3,275,000 Crossover Refunding Bonds, Series 2010B 2010 2022 1.2% to 3.7% 1,355,000 1,230,000 Improvement Bonds, Series 2011A 2011 2017 0.45% to 1.35% 2,080,000 1,675,000 Improvement Bonds, Series 2012A 2012 2018 0.4% to 1.0% 810,000 810,000 Improvement Bonds, Series 2013A 2013 2019 0.5% to 1.65% 1,500,000 1,500,000 Total Governmental Activities — General Obligation Debt $ 15,295,000 Business -type Activities Date of Final Interest Original Balance General Obligation Debt Issue Maturity Rates Indebtedness 12 -31 -13 Water Revenue Bonds, Series 2000A 2000 2016 4.4% to 5.4% $ 1,160,000 $ 315,000 Water Revenue Bonds, Series 2007A 2007 2018 4.0% 1,210,000 675,000 Utility Rev Refunding Bonds, Series 2010A 2010 2018 0.8% to 2.6% 1,545,000 945,000 Total Business -type Activities - General Obligation Debt $ 1,935,000 Debt service requirements to maturity are as follows: Governmental Activities Business -Type Activities General Obligation Debt General Obligation Debt Year Principal Interest Principal Interest 2014 $ 1,580,000 $ 486,977 $ 535,000 $ 85,315 2015 1,845,000 445,594 410,000 59,328 2016 1,920,000 399,603 425,000 32,188 2017 1,855,000 352,467 315,000 13,342 2018 995,000 312,972 250,000 4,265 2019-2023 3,145,000 1,157,508 - - 2024 —2028 2,205,000 562,539 - 2029— 2032 1,750,000 145,395 - - Totals $ 15,295,000 $ 3,863,055 $ 1,935,000 $ 194,438 Page 43 CITY OF ROSEMOUNT NOTES TO FINANCIAL STATEMENTS As of and for the Year Ended December 31, 2013 NOTE IV — DETAILED NOTES ON ALL FUNDS (cont.) E. LONG -TERM OBLIGATIONS (cont.) General Obligation Debt (cont.) Other Debt Information Estimated payments of compensated absences are not included in the debt service requirement schedules. The compensated absences liability attributable to governmental activities will be liquidated primarily by the general fund. There are a number of limitations and restrictions contained in the various bond indentures and loan agreements. The City believes it is in compliance with all significant limitations and restrictions, including federal arbitrage regulations. The water and storm water utilities have pledged future water and storm water revenues, net of specified operating expenses, to repay revenue bonds issued in 2000, 2007, and 2010. Proceeds from bonds provided financing for utility improvements. The bonds are payable solely from water and storm water revenues and are payable through 2018. Annual principal and interest payments on the bonds are expected to require 16% of net revenues. The total principal and interest remaining to be paid on the bonds is $2,129,438. Principal and interest paid for the current year and the gross customer revenues were $1,957,740 and $3,801,921, respectively. Page 44 CITY OF ROSEMOUNT NOTES TO FINANCIAL STATEMENTS As of and for the Year Ended December 31, 2013 NOTE IV — DETAILED NOTES ON ALL FUNDS (cont.) F. NET POSITION /FUND BALANCES Net position reported on the government -wide statement of net position at December 31, 2013 includes the following: Governmental Activities Net Investment in Capital Assets Land $ 11,103,466 Construction in progress 1,983,060 Other capital assets, net of accumulated depreciation 59,958,190 Less: related long -term debt outstanding (excluding unspent capital related debt proceeds) (15,297,778) Total Net Investment in Capital Assets 57,746,938 Restricted for debt service 7,148,774 Unrestricted 15,883,105 Total Governmental Activities Net Position $ 80,778,817 Governmental fund balances reported on the fund financial statements at December 31, 2013 include the following: Nonspendable fund balance as of December 31, 2013, includes the following items: Fund Major Funds Amount Restriction General $ 67,266 Prepaid items Capital Projects 10,000 Prepaid items Total $ 77,266 Restricted fund balance as of December 31, 2013, includes the following items: Fund Major Funds Debt Service Port Authority TIF Total Amount Restriction $ 4,554,980 1,046,218 $ 5,601,198 Future debt service Future debt service Page 45 CITY OF ROSEMOUNT NOTES TO FINANCIAL STATEMENTS As of and for the Year Ended December 31, 2013 NOTE IV — DETAILED NOTES ON ALL FUNDS (cont.) F. NET POSITION /FUND BALANCES (cont.) Governmental Activities (cont.) Committed fund balance as of December 31, 2013, includes the following items: Fund Amount Purpose Non -Major Special Revenue Funds Fire Safety Education $ 1,267 Fund related expenditures GIS 13,593 Fund related expenditures Port Authority General 199,171 Fund related expenditures Total $ 214,031 Assigned fund balance as of December 31, 2013, includes the following items: Fund Amount Purpose Major Funds General Fund $ 963,300 430,000 225,000 115,085 70,544 131,733 356,595 Total General Fund 2,292,257 Capital Projects Fund Compensated absences Armory debt payments Health insurance Building maintenance Park maintenance Election equipment Various projects / equipment 311,957 Building CIP 379,203 Street CIP 575,498 Equipment CIP 4,976,748 Various projects Total Capital Projects Fund 6,243,406 Total $ 8,535,663 Page 46 CITY OF ROSEMOUNT NOTES TO FINANCIAL STATEMENTS As of and for the Year Ended December 31, 2013 NOTE IV — DETAILED NOTES ON ALL FUNDS (cont.) F. NET POSITION /FUND BALANCES (cont.) Governmental Activities (cont.) Unassigned fund balance as of December 31, 2013, includes the following items: Fund Amount Major Funds General $ 6,001,628 Total $ 6,001,628 Business -Type Activities Net Investment in Capital Assets Land $ 2,643,767 Construction in progress 1,519,915 Other capital assets, net of accumulated depreciation 93,541,903 Less: related long -term debt outstanding (excluding unspent capital related debt proceeds) (1,935,000) Total Net Investment in Capital Assets 95,770,585 Unrestricted 18,591,663 Total Business -Type Activities Net Position $ 114,362,248 Page 47 CITY OF ROSEMOUNT NOTES TO FINANCIAL STATEMENTS As of and for the Year Ended December 31, 2013 NOTE V - OTHER INFORMATION A. EMPLOYEES' RETIREMENT SYSTEM City employees and firefighters participate in the pension plans administered by the Public Employees Retirement Association of Minnesota (PERA) and the Rosemount Volunteer Fire Relief Association. In accordance with GASB Statement No. 27, the PERA plans are classified as multiple- employer, cost - sharing plans, and the Association's plan is classified as a single - employer plan. 1. Public Employees Retirement Association a. Plan Description All full -time and certain part -time employees of the City of Rosemount, Minnesota are covered by defined benefit plans administered by the Public Employees Retirement Association of Minnesota (PERA). PERA administers the General Employees Retirement Fund (GERF) and the Public Employees Police and Fire Fund (PEPFF) which are cost - sharing, multiple - employer retirement plans. These plans are established and administered in accordance with Minnesota Statutes, Chapters 353 and 356. 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. All new members must participate in the Coordinated Plan. All police officers, firefighters and peace officers who qualify for membership by statute are covered by the PEPFF. PERA provides retirement benefits as well as disability benefits to members, and benefits to survivors upon death of eligible members. Benefits are established by state statute, and vest after five years of credited service. The defined retirement benefits are based on a member's highest average salary for any five successive years of allowable service, age, and years of credit at termination of service. 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 percent of average salary for each of the first 10 years of service and 2.7 percent for each remaining year. The annuity accrual rate for Coordinated Plan member is 1.2 percent of average salary for each of the first 10 years and 1.7 percent for each remaining year. Under Method 2, the annuity accrual rate is 2.7 percent of average salary for Basic Plan members and 1.7 percent for Coordinated Plan members for each year of service. For PEPFF members, the annuity accrual rate is 3.0 percent for each year of service. For all PEPFF members and for GERF members whose annuity is calculated using Method 1, a full annuity is available when age plus years of service equal 90. A reduced retirement annuity is also available to eligible members seeking early retirement. Page 48 CITY OF ROSEMOUNT NOTES TO FINANCIAL STATEMENTS As of and for the Year Ended December 31, 2013 NOTE V — OTHER INFORMATION (cunt.) A. EMPLOYEES' RETIREMENT SYSTEM (cont.) 1. Public Employees Retirement Association (cont.) a. Plan Description (cont.) There are different types of annuities available to members upon retirement. A normal annuity is a lifetime annuity that ceases upon the death of the retiree — no survivor annuity is payable. There are also various types of joint and survivor annuity options available which will reduce the monthly normal annuity amount, because the annuity is payable over joint lives. Members may also leave their contributions in the fund upon termination of public service in order to qualify for a deferred annuity at retirement age. Refunds of contributions are available at any time to members who leave public service, but before retirement benefits begin. The benefit provisions stated in the previous paragraphs of this section are current provisions and apply to active plan participants. Vested, terminated employees who are entitled to benefits but are not receiving them yet are bound by the provisions in effect at the time they last terminated their public service. PERA issues a publicly available financial report that includes financial statements and required supplementary information for GERF and PEPFF. That report may be obtained on the Internet at www.mnpera.orq, by writing to PERA at 60 Empire Drive #200, St. Paul, Minnesota, 55103 -2088 or by calling (651) 296 -7460 or 1- 800 -652 -9026. b. Funding Policy Minnesota Statutes Chapter 353 sets the rates for employer and employee contributions. These statutes are established and amended by the state legislature. The City makes annual contributions to the pension plans equal to the amount required by state statutes. GERF Basic Plan members and Coordinated Plan members were required to contribute 9.1 % and 6.25 %, respectively, of their annual covered salary in 2013. PEPFF members were required to contribute 9.6% of their annual covered salary in 2013. In 2013, the City of Rosemount was required to contribute the following percentages of annual covered payroll: 11.78% for Basic Plan members, 7.25% for Coordinated Plan members, and 14.4% for PEPFF members. The City's contributions to the General Employees Retirement Fund for the years ending December 31, 2013, 2012 and 2011 were $259,654, $251,921 and $268,848, respectively. The City's contributions to the Public Employees Police & Fire Fund for the years ending December 31, 2013, 2012 and 2011 were $275,788, $272,834 and $256,236, respectively. The City's contributions were equal to the contractually required contributions for each year as set by state statute. Page 49 CITY OF ROSEMOUNT NOTES TO FINANCIAL STATEMENTS As of and for the Year Ended December 31, 2013 NOTE V — OTHER INFORMATION (cont.) A. EMPLOYEES' RETIREMENT SYSTEM (cont.) 2. Rosemount Fire Department Relief Association- Defined Benefit Pension Plan a. Plan Description The City of Rosemount contributes to the Rosemount Fire Department Relief Association Pension Plan; a single - employer retirement system administered by the Rosemount Fire Department Relief Association. The Rosemount Fire Department Relief Association provides a lump -sum benefit to its members upon retirement, total disability or death. These benefit provisions are established and can be amended by the Rosemount Fire Department Relief Association's Board of Trustees with approval by the Rosemount City Council. The Rosemount Fire Department Relief Association issues a publicly available financial report that includes financial statements and required supplementary information for the Rosemount Fire Department Relief Association Pension Plan. That report may be obtained by writing to City of Rosemount, 2875 145th Street West, Rosemount, Minnesota 55068 -4997, or by calling (651) 423 -4411. b. Funding Policy The contribution requirements are established and may be amended by the Minnesota State Legislature. The Rosemount Fire Department Relief Association is comprised of volunteers. Therefore, there are no covered payroll amounts or member contributions required. Individuals with at least 20 years of service who have reached age 50 are entitled to a lump -sum payment of $6,900 per year of service. In the event an otherwise qualified member has less than 20 years of service, the member is eligible for a pension payment of 60 percent after 10 years of service, increasing 4 percent for each year of service after 10 years to a maximum of 100 percent. Members retiring before 50 do not receive distributions until age 50, but interest at 5% per year is added to their retirement benefit until paid. c. Annual Pension Cost and Net Pension Obligations Financial requirements of the Association are determined based on a formula prescribed in Minnesota Statues 69.772. Those statutes prescribe a set amount of funding, per $100 of lump -sum benefits payable per year of service. For associations with assets exceeding the statutory pension liability, the financial requirements shall be the increase in the statutory pension liability for the next year over the current year, reduced by an amount equal to one -tenth of the surplus. For associations with a deficit of assets to fund the statutory pension liability, the financial requirements shall be the increase in the statutory pension liability for the next year over the current year, increased by an amount equal to one -tenth the deficit. The City's minimum obligation is the financial requirement for the year less anticipated state aids and interest on investments calculated at a rate of 5 percent. The value of assets was determined using fair value in accordance with GASB Statement No. 25. Securities traded on national exchanges are valued at the last reported sales price. Investments that do not have an established market value are reported at estimated fair value. Page 50 CITY OF ROSEMOUNT NOTES TO FINANCIAL STATEMENTS As of and for the Year Ended December 31, 2013 NOTE V — OTHER INFORMATION (cont.) A. EMPLOYEES' RETIREMENT SYSTEM (cont.) 2. Rosemount Fire Department Relief Association- Defined Benefit Pension Plan (cont.) c. Annual Pension Cost and Net Pension Obligations (cont.) The annual pension cost for the Rosemount Fire Department Relief Association Pension Plan for the year ended December 31, 2013 was as follows: Amount State of Minnesota contribution $ 125,632 City of Rosemount contribution 171,000 $ 296,632 The City recognizes the State of Minnesota's contributions to the Rosemount Fire Department Relief Association Pension Plan as revenue and expense. Three Year Trend Information Fiscal Year Annual Pension Ending Cost (APC) Percentage of APC Contribution 2013 $ 296,632 100.0% 2012 262,845 100.0% 2011 253,718 100.0% Net Pension Obligation 1 1 1 A formal actuarial valuation is not required by Minnesota Statutes because the pension benefit is a lump -sum distribution. The formula used to compute pension contributions requirements is substantially the same as that used to determine the standardized measure of the net pension obligation. The computation of the pension contribution requirements for 2013 was based on the same formula, funding method and other factors that were used in previous years. d. Required Supplementary Information, Schedule of Funding Progress Ten -year historical trend information is presented in the Rosemount Firefighters Relief Association's Annual Financial Report. This information is useful in assessing the pension plan's accumulation of sufficient assets to pay pension benefits as they become due. Page 51 CITY OF ROSEMOUNT NOTES TO FINANCIAL STATEMENTS As of and for the Year Ended December 31, 2013 NOTE V — OTHER INFORMATION (cont.) A. EMPLOYEES' RETIREMENT SYSTEM (cont.) 2. Rosemount Fire Department Relief Association- Defined Benefit Pension Plan (cont.) d. Required Supplementary Information, Schedule of Funding Progress (cont.) The following historical trend information was obtained from the Association's financial report for the year ended December 31, 2013: Accrued Date Assets Liabilities 12 -31 -13 $ 2,874,130 $ 2,468,808 12 -31 -12 2,504,979 2,523,870 12 -31 -11 2,783,038 3,034,608 Assets as a Percentage of Accrued Liabilities 116% $ 99% 92% Overfunded (Underfunded) Accrued Liabilities 405,322 (18,891) (251,570) Computations of the unfunded net pension obligation and employer contributions as a percent of covered payroll are not applicable since the fire department is a volunteer organization and no covered payroll exists. The accrued liabilities were determined pursuant to state statutes. Significant assumptions include: the entry age normal actuarial cost method was used to determine the normal cost of all benefits, level dollar amortization method, the rate of investment return used in making the valuation was 5% per annum compounded annually, age and service at retirement was assumed to occur at age 50, no turnover or early retirements, projected salary increases and inflationary increases do not apply, no postretirement benefit increases, and the amortization period is 20 years for normal cost and 10 years for prior service cost. e. Related Party Transactions As of December 31, 2013 and for the year then ended, the Association held no securities issued by City or other related parties. B. RISK MANAGEMENT The City is exposed to various risks of loss related to torts; theft of, damage to, or destruction of assets; errors and omissions; workers compensation; and health care of its employees. The City purchases commercial insurance and participates in a public entity risk pool called the Minnesota League of Cities Insurance Trust to provide coverage for these various risks of loss. Settled claims have not exceeded coverage in any of the past three years. There were no significant reductions in coverage compared to the prior year. The City has established an internal service fund (Insurance Fund) to account for and finance uninsured risks of loss related to torts, theft of, damage to and destruction of assets, including deductibles. The majority of the City's general liability and workers compensation insurance premiums are paid for by this fund. At December 31, 2013, there are no claims liabilities in the Insurance Fund based on the requirements of Governmental Accounting Standards Board Statement Number 10, which requires that a liability for claims be reported if information prior to the issuance of the financial statements indicates that it is probable a liability has been incurred at the date of the financial statements and the amount of loss can be reasonably estimated. Page 52 CITY OF ROSEMOUNT NOTES TO FINANCIAL STATEMENTS As of and for the Year Ended December 31, 2013 NOTE V — OTHER INFORMATION (cont.) C. COMMITMENTS AND CONTINGENCIES Claims and judgments are recorded as liabilities if all the conditions of Governmental Accounting Standards Board pronouncements are met. The liability and expenditure for claims and judgments are only reported in governmental funds if it has matured. Claims and judgments are recorded in the government -wide statements and proprietary funds as expenses when the related liabilities are incurred. From time to time, the City is party to various pending claims and legal proceedings. Although the outcome of such matters cannot be forecasted with certainty, it is the opinion of management and the City attorney that the likelihood is remote that any such claims or proceedings will have a material adverse effect on the City's financial position or results of operations. The City has received federal and state grants for specific purposes that are subject to review and audit by the grantor agencies. Such audits could lead to requests for reimbursements to the grantor agency for expenditures disallowed under terms of the grants. Management believes such disallowances, if any, would be immaterial. The City has active construction projects as of December 31, 2013. Work that has been completed on these projects but not yet paid for (including contract retainages) is reflected as accounts payable and expenditures. In 2007, the City committed to a municipal revenue obligation as part of a development agreement with 146th Street Partners, Limited Partnership. The amount of the obligation is $1,500,000, and is payable to the developer solely from available tax increments collected from a specific portion of the development. Payments are scheduled through the year 2032, and carry an interest rate of 4.96 %. The obligation does not constitute a charge upon any funds of the city. In the event that future tax increments are not sufficient to pay off the obligation, the obligation terminates with no further liability to the city. Since the amount of future payments is contingent on the collection of future TIF increments, the obligation is not reported as a liability in the accompanying financial statements. The balance of the commitment outstanding at year end has not been determined. D. RELATED ORGANIZATION The City entered into an agreement with SKB Environmental, Inc. for the purpose of providing for the construction and maintenance of facilities for public recreation, to improve living and working conditions within the City, further public educational opportunities, and to provide for the charitable needs of the City. This agreement created a trust called the City of Rosemount — SKB Environmental Trust Fund. Beginning in 2011, the amount of distributions to the City would be equal to the excess of the trust value over $1,525,000. The trust agreement states the funds can be used by the City for any lawful public purpose. During 2013, the City received approximately $350,000 from the trust. Page 53 CITY OF ROSEMOUNT NOTES TO FINANCIAL STATEMENTS As of and for the Year Ended December 31, 2013 NOTE V — OTHER INFORMATION (cont.) E. EFFECT OF NEW ACCOUNTING STANDARDS ON CURRENT - PERIOD FINANCIAL STATEMENTS The Governmental Accounting Standards Board (GASB) has approved the following: • Statement No. 67, Financial Reporting for Pension Plans — an amendment of GASB Statement No. 25 • Statement No. 68, Accounting and Financial Reporting for Pensions — an amendment of GASB Statement No. 27 • Statement No. 69, Government Combinations and Disposals of Government Operations • Statement No. 70, Accounting and Financial Reporting for Nonexchange Financial Guarantees When they become effective, application of these standards may restate portions of these financial statements. Page 54 THIS PAGE WAS LEFT BLANK INTENTIONALLY REQUIRED SUPPLEMENTARY INFORMATION CITY OF ROSEMOUNT REQUIRED SUPPLEMENTARY INFORMATION GENERALFUND SCHEDULE OF REVENUES COMPARED TO BUDGET (BUDGETARY BASIS) - BUDGET AND ACTUAL For the Year Ended December 31, 2013 REVENUES TAXES General property tax Fiscal disparities Other Total Taxes INTERGOVERNMENTAL REVENUES State aid - police State aid - general government State aid - highway Other Total Intergovernmental Revenues PUBLIC CHARGES FOR SERVICES General government Public safety Highways and streets Parks and recreation SAC Total Charges for Services LICENSES AND PERMITS Business Non - business Total Licenses and Permits FINES AND FORFEITURES County SPECIAL ASSESSMENTS INVESTMENT INCOME AND MISCELLANEOUS Interest earnings Change in fair value of investments Miscellaneous general revenues Donations Rents Total Investment income and miscellaneous Total Revenues OTHER FINANCING SOURCES Transfers in Budgeted Amounts Variance with Original Final Actual Final Budget $ 7,329,847 $ 7,329,847 $ 7,360,464 $ 30,617 1,235,453 1,235,453 1,235,453 - 257,000 257,000 269,306 12,306 8,822,300 8,822,300 8,865,223 42,923 150,000 150,000 160,129 10,129 30,000 30,000 38,515 8,515 32,600 32,600 32,790 190 87,500 87,500 87,552 52 300,100 300,100 318,986 18,886 607,600 607,600 707,178 99,578 38,400 38,400 32,815 (5,585) 15,200 15,200 51,212 36,012 246,900 246,900 228,171 (18,729) 1,800 1,800 2,601 801 909,900 909,900 1,021,977 112,077 51,000 51,000 51,115 115 331,300 331,300 471,016 139,716 382,300 382,300 522,131 139,831 125,000 125,000 106,617 (18,383) 1,000 1,000 4,470 3,470 145,500 145,500 91,017 (54,483) - - (357,024) (357,024) 4,000 4,000 43,412 39,412 - 12,805 12,923 118 35,000 35,000 27,000 (8,000) 184,500 197,305 (182,672) (379,977) 10,725,100 10,737,905 10,656,732 (81,173) 3,500 3,500 3,931 431 Total Revenues and Other Financing Sources $ 10,728,600 $ 10,741,405 $ 10,660,663 $ (80,742) See auditors' report and accompanying notes to required supplementary information. Page 55 CITY OF ROSEMOUNT REQUIRED SUPPLEMENTARY INFORMATION GENERALFUND SCHEDULE OF EXPENDITURES AND OTHER USES (BUDGETARY BASIS) - BUDGET AND ACTUAL For the Year Ended December 31, 2013 CURRENT EXPENDITURES GENERAL GOVERNMENT Mayor and council Executive Elections Finance Community development General government TOTAL GENERAL GOVERNMENT PUBLIC SAFETY Police department Fire department TOTAL PUBLIC SAFETY PUBLIC WORKS Government building maintenance Fleet maintenance Street maintenance Park maintenance TOTAL PUBLIC WORKS PARKS AND RECREATION CAPITAL OUTLAY OTHER FINANCING USES Transfers out TOTAL EXPENDITURES Beginning of year budget basis encumbrances End of year budget basis encumbrances GAAP basis expenditures and other financing uses Budgeted Amounts Original Final Actual Variance with Final Budget $ 247,700 $ 251,300 $ 145,989 $ 105,311 484,400 480,800 448,962 31,838 22,000 22,000 10,851 11,149 435,300 435,300 436,646 (1,346) 896,800 896,800 887,430 9,370 383,200 383,200 374,324 8,876 2,469,400 2,469,400 2,304,202 165,198 3,187,800 3,189,805 3,200,596 (10,791) 437,000 437,800 403,617 34,183 3,624,800 3,627,605 3,604,213 23,392 538,630 542,000 563,092 (21,092) 645,200 643,700 616,695 27,005 1,272,200 1,272,200 1,268,465 3,735 739,100 739,100 730,884 8,216 3,195,130 3,197,000 3,179,136 17,864 1,322,400 1,330,530 1,321,946 8,584 1,870 1,870 1,866 4 115,000 115,000 115,000 - $ 10,728,600 $ 10,741,405 10,526,363 $ 215,042 1,351,725 (1,273,464) $ 10,604,624 See auditors' report and accompanying notes to required supplementary information. Page 56 CITY OF ROSEMOUNT NOTES TO REQUIRED SUPPLEMENTARY INFORMATION As of and for the Year Ended December 31, 2013 Budgetary Information Budgetary information is derived from the annual operating budget and is presented using generally accepted accounting principles and the modified accrual basis of accounting with departures from generally accepted accounting principles for encumbrances. Excess expenditures over appropriations are as follows: General Fund Finance Police department Government building maintenance Final Budget Expenditures Excess $ 435,300 $ 436,646 $ 1,346 3,189,805 3,200,596 10,791 542,000 563,092 21,092 Rosemount Fire Department Relief Association- Defined Benefit Pension Plan Required Supplementary Information, Schedule of Funding Progress The following historical trend information was obtained from the Association's financial report for the year ended December 31, 2013. Assets as a Overfunded Percentage of (Underfunded) Accrued Accrued Accrued Date Assets Liabilities Liabilities Liabilities 12 -31 -13 $ 2,874,130 $ 2,468,808 116% $ 405,322 12 -31 -12 2,504,979 2,523,870 99% (18,891) 12 -31 -11 2,783,038 3,034,608 92% (251,570) Computations of the unfunded net pension obligation and employer contributions as a percent of covered payroll are not applicable since the fire department is a volunteer organization and no covered payroll exists. See auditors' report Page 57 SUPPLEMENTARY INFORMATION CITY OF ROSEMOUNT COMBINING BALANCE SHEET - NONMAJOR GOVERNMENTAL FUNDS As of December 31, 2013 Special Revenue Funds Total Fire Nonmajor Safety Port Authority Governmental Education GIS General Funds ASSETS Cash and investments $ 1,267 $ 13,593 $ 200,350 $ 215,210 Total assets $ 1,267 $ 13,593 $ 200,350 $ 215,210 LIABILITIES Accounts payable $ - $ - $ 1,179 $ 1,179 Total liabilities - - 1,179 1,179 FUND BALANCES Committed 1,267 13,593 199,171 214,031 Total fund balances 1,267 13,593 199,171 214,031 Total liabilities and fund balances $ 1,267 $ 13,593 $ 200,350 $ 215,210 Page 58 CITY OF ROSEMOUNT COMBINING STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES - NONMAJOR GOVERNMENTAL FUNDS For the Year Ended December 31, 2013 REVENUES Taxes Public charges for services Investment income and miscellaneous Total Revenues EXPENDITURES Current: General government Total Expenditures Net change in fund balance FUND BALANCES - Beginning of Year FUND BALANCES - END OF YEAR Special Revenue Funds Total Fire Nonmajor Safety Port Authority Governmental Education GIS General Funds $ - $ - $ 58,000 $ 58,000 5,760 - 5,760 41,526 41,526 - - 41,526 41,526 399 5,765 16,560 22,724 868 7,828 182,611 191,307 $ 1,267 $ 13,593 $ 199,171 $ 214,031 Page 59 CITY OF ROSEMOUNT BUILDING CIP CAPITAL PROJECT SUB -FUND SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE (BUDGETARY BASIS) - BUDGET AND ACTUAL For the Year Ended December 31, 2013 REVENUES Taxes Intergovernmental Charges for services Investment income / fair value adjustment Total Revenues EXPENDITURES Current: General government Capital Outlay Debt Service: Interest on lease Total Expenditures Excess of revenues over expenditures OTHER FINANCING SOURCES (USES) Transfers in Transfers out Total Other Financing Sources (Uses) Net Change in Fund Balance FUND BALANCE - Beginning FUND BALANCE - ENDING Original and Final Budgeted Amounts Actual $ 24,000 $ 24,000 - 2,501 600,000 1,105,626 10,500 (48,191) Variance with Final Budget 2,501 505,626 (58,691) 634,500 1,083,936 449,436 2,500 2,500 - 2,962,050 1,332,834 1,629,216 6,950 6,091 859 2,971,500 1,341,425 1,630,075 (2,337,000) (257,489) 2,079,511 (226,836) (226,836) (226,836) (226,836) (2,337,000) (484,325) 1,852,675 3,129,006 3,129,006 $ 792,006 $ 2,644,681 $ 1,852,675 Page 60 CITY OF ROSEMOUNT STREET CIP CAPITAL PROJECT SUB -FUND SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE (BUDGETARY BASIS) - BUDGET AND ACTUAL For the Year Ended December 31, 2013 REVENUES Taxes Intergovernmental Charges for services Special assessments Investment income Miscellaneous Total Revenues EXPENDITURES Current: General government Public works Capital Outlay Total Expenditures Excess of revenues over expenditures OTHER FINANCING SOURCES (USES) Transfers in Transfers out Total Other Financing Sources (Uses) Net Change in Fund Balance FUND BALANCE - Beginning FUND BALANCE - ENDING Original and Final Budgeted Amounts _ $ 730,000 $ 125,000 2,500 Variance with Actual Final Budget 730,000 $ - 62,504 62,504 125,000 - 299,001 299,001 (291) (2,791) 857,500 1,216,214 358,714 2,500 3,522 (1,022) - 15,992 (15,992) 855,000 290,066 564,934 857,500 309,580 547,920 906,634 906,634 - (771,445) (771,445) (771,445) (771,445) 135,189 135,189 1,515,058 1,515,058 - $ 1,515,058 $ 1,650,247 $ 135,189 Page 61 CITY OF ROSEMOUNT EQUIPMENT CIP CAPITAL PROJECT SUB -FUND SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE (BUDGETARY BASIS) - BUDGET AND ACTUAL For the Year Ended December 31, 2013 REVENUES Taxes Investment income Miscellaneous Total Revenues EXPENDITURES Current: General government Capital Outlay Debt Service: Principal retirement Total Expenditures Excess of revenues over expenditures OTHER FINANCING SOURCES Sale of capital assets Total Other Financing Sources Net Change in Fund Balance FUND BALANCE - Beginning FUND BALANCE - ENDING Original and Final Budgeted Variance with Amounts Actual Final Budget $ 460,000 $ 460,000 $ - 7,500 (24,986) (32,486) 141,638 50,518 (91,120} 609,138 485,532 (123,606) 2,500 2,500 - 552,000 714,741 (162,741) 60,638 21,908 38,730 615,138 739,149 (124,011) (6,000) (253,617) (247,617) 6,000 3,627 (2,373) 6,000 3,627 (2,373) (249,990) (249,990) 1,399,565 1,399,565 - $ 1,399,565 $ 1,149,575 $ (249,990) Page 62 STATISTICAL SECTION This part of the City of Rosemount's 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 government's overall financial health. Contents Page Financial Trends 64 These schedules contain trend information to help the reader understand how the government's financial performance and well -being have changed over time. Revenue Capacity 70 These schedules contain information to help the reader assess the government's most significant local revenue source, the property tax. Debt Capacity 74 These schedules present information to help the reader assess the affordability of the government's current levels of outstanding debt and the government's ability to issue additional debt in the future. Demographic and Economic Information 79 These schedules offer demographic and economic indicators to help the reader understand the environment within which the government's financial activities take place. Operating Information 81 These schedules contain service and infrastructure data to help the reader understand how the information in the government's financial report relates to the services the government 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. Page 63 Schedule 1 City of Rosemount Net Position by Component Last Ten Fiscal Years (Accrual Basis of Accounting) Governmental activities Net investment in capital assets Restricted Unrestricted Total governmental activities net position Business -type activities Net investment in capital assets Unrestricted Total business -type activities net position Primary government Net investment in capital assets Restricted Unrestricted Total primary government net position Fiscal Years 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 $ 17,030,985 $ 24,737,314 $ 34,221,147 $ 39,140,878 $ 37,876,848 $ 41,347,888 $ 49,563,765 $ 53,419,036 $ 54,828,890 $ 57,746,938 - 9,632,707 7,554,872 8,736,586 6,621,026 4,637,711 5,361,675 5,764,792 6,608,554 7,148,774 26,487,766 20,397,787 11,090,854 9,602,486 14,114,135 14,979,767 14,089,305 16,772,383 15,970,416 15,883,105 43,518,751 54,767,808 52,866,873 57,479,950 58,612,009 60,965,366 69,014,745 75,956,211 77,407,860 80,778,817 $ 69,812,374 $ 72,422,792 $ 82,445,638 $ 86,225,033 $ 89,687,681 $ 91,948,323 $ 89,025,234 $ 90,695,202 $ 93,501,405 $ 95,770,585 19,960,935 24,431,214 21,187,968 21,307,733 20,158,226 18,517,148 20,059,049 17,772,742 19,247,600 18,591,663 89,773,309 96,854;006 103,633,606 107,532,766 109,845,907 110,465,471 109,084,283 108,467,944 112,749,005 114,362,248 $ 86,843,359 $ 97,160,106 $ 116,666,785 $ 125,365,911 $ 127,564,529 $ 133,296,211 $ 138,588,999 $ 144,114,238 $ 148,330,295 $ 153,517,523 - 9,632,707 7,554,872 8,736,586 6,621,026 4,637,711 5,361,675 5,764,792 6,608,554 7,148,774 46,448,701 44,829,001 32,278,822 30,910,219 34,272,361 33,496,915 34,148,354 34,545,125 35,218,016 34,474,768 $ 133,292,060 $ 151,621,814 $ 156,500,479 $ 165,012,716 $ 168,457,916 $ 171,430,837 $ 178,099,028 $ 184,424,155 $ 190,156,865 $ 195,141,065 Source: City of Rosemount Comprehensive Annual Financial Reports Page 64 Schedule 2 City of Rosemount Changes in Net Position Last Ten Fiscal Years (Accrual Basis of Accounting) Expenses Governmental activities General government Public safety Public works Culture, education and recreation Conservation and economic development Interest and fiscal charges Total govemmental activities expenses Business -Type activities Water Utility Sewer Utility Storm Water Utility Arena Total Business -Type activities expenses Total primary government expenses Program Revenues Governmental activities Charges for services General government Public safety Public works Culture, education and recreation Operating grants and contributions General government Public safety Public works Culture, education and recreation Conservation and economic development Capital grants and contributions General government Public safety Public works Culture, education and recreation Conservation and economic development Total governmental activities program revenues Fiscal Years 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 $ 2,068,246 $ 2,739,933 $ 2,722,728 2,468,826 2,730,428 2,928,783 5,893,405 8,344,837 7,724,300 1,154,709 1,250,743 1,257,556 23,598 2,297 342 802,957 1,067,478 921,318 12, 411, 741 16,135,716 15, 555, 027 $ 2,610,367 3,293,615 4,974,625 1,386,322 9,677 841,108 13,115,714 $ 2,639,752 3,468,249 5,279,784 1,417,400 1,956,865 958,900 15,720,950 $ 2,754,573 $ 2,671,886 3,688,658 3,819,520 4,260,284 4,326,903 1,378,619 1,477,525 648,476 149,701 750,226 690,896 13, 480, 836 13,136, 431 $ 2,612,911 3,763,742 4,336,345 1,496,068 9,069 637,609 12,855,744 $ 2,701,234 $ 2,583,271 3,872,633 4,051,642 4,341,203 5,448,047 2,405,676 1,586,449 - 3,267 541,386 517,067 13,862,132 14,189,743 1,763,570 1,671,775 1,603,391 2,366,263 1,893,099 1,878,310 1,861,467 1,792,613 1,827,543 1,903,275 1,703,280 1,975,164 1,913,071 2,059,411 2,123,397 2,313,576 2,305,503 2,386,660 2,317,324 2,425,486 737,401 842,701 916,557 1,245,492 988,716 989,808 1,010,678 950,114 968,935 989,574 391,570 443,128 457,897 468,017 537,530 456,706 484,278 479,707 498,118 578,345 4,595,821 4,932,768 4,890,916 6,139,183 5,542,742 5,638,400 5,661,926 5,609,094 5,611,920 5,896,680 $ 17,007,562 $ 21,068,484 $ 20,445,943 $ 19,254,897 $ 21,263,692 $ 19,119,236 $ 18,798,357 $ 18,464,838 $ 19,474,052 $ 20,086,423 $ 2,591,883 $ 2,695,090 $ 2,065,514 $ 1,876,616 $ 2,031,866 $ 1,501,756 $ 1,672,014 $ 1,881,337 $ 2,286,892 $ 2,465,695 135,673 120,182 117,017 159,624 203,056 169,112 151,802 169,718 184,011 139,432 97,140 37,497 25,159 8,893 32,160 15,050 20,912 68,166 45,564 53,813 1,365,568 1,137,357 351,867 693,482 403,560 244,374 263,238 272,958 365,486 342,100 65,600 11,802 25,608 25,823 22,580 - - - 46,326 - 182,122 252,907 212,885 251,262 233,349 254,175 246,346 249,515 275,114 263,805 1,738,997 354,618 169,586 926,545 392,136 380,737 311,630 108,640 53,198 32,790 23,633 19,076 1,135 1,163 628 659 26,484 33,499 1,275 6,241 18,019 15,000 18,500 15,400 82,803 60,100 20,100 67,400 - 20,635 3,435,395 8,746 117,025 1,775 7,118 - 152,495 - 1,562 337 3,971 697 - - - 8,672,316 13,294,175 5,218,862 4,667,378 3,762,115 1,206,361 5,320,892 4,214,641 3,628,190 3,967,849 - 1,024,357 1,349 423,305 531 4,203 9,218 - - - - 210,863 - 522,179 256,357 19,425 39,352 322,808 14,890,951 22,760,814 8,216,228 9,168,078 7,689,075 4,103,973 8,062,758 7,065,874 6,925,408 7,615,168 Page 65 Schedule 2 (continued) City of Rosemount Changes in Net Position Last Ten Fiscal Years (Accrual Basis of Accounting) Business -Type activities Charges for services Water Utility Sewer Utility Storm Water Utility Arena Operating grants and contributions Water Utility Sewer Utility Capital grants and contributions Water Utility Sewer Utility Storm Water Utility Arena Total Business -Type activities program revenues Total primary government program revenues Net (Expense) Revenue Governmental activities Business -Type activities Total primary government net expense General Revenues and Other Changes in Net Position Governmental activities Property taxes, levied for general purposes Property taxes, levied for debt service Other taxes Investment income Change in fair value of investments Gain (loss) on the sale of assets Miscellaneous Transfers Total governmental activities Business -Type activities Investment income Change in fair value of investments Transfers Total Business -Type activities Total primary government Change in Net Position Governmental activities Business -Type activities Total primary government Fiscal Years 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 3,361,166 2,562,552 2,115,864 2,092,633 2,027,618 1,764,784 1,952,359 1,983,264 2,406,557 2,167,709 2,089,244 1,946,894 1,722,929 1,677, 768 1,767,732 1,482,651 1,470,801 1,470,626 1,707,730 1,716,022 1,739,183 1,999,635 1,167,514 1,056,510 1,137,287 852,704 888,995 927,429 1,135,067 1,061,632 337,912 331,205 351,808 373,504 390,631 370,964 406,797 378,046 352,930 376,058 288,615 44,989 107,855 46,807 56,388 70,279 72,960 243,835 168,573 371,582 126,936 87,619 90,776 88,516 392,757 416,493 71,656 110,538 207,422 83,484 846,683 - 80 - 18,165 1,075,041 85,242 190,022 487,082 648,297 8,789,739 6,972,894 5,556,826 5,335,738 5,790,578 6,032,916 4,948,810 5,303,760 6,465,361 6,424,784 23,680,690 29,733,708 13,773,054 14,503,816 13,479,653 10,136,889 13,011,568 12,369,634 13,390,769 14,039,952 2,479,210 6,625,098 (7,338,799) (3,947,636) (8,031,875) (9,376,863) (5,073,673) (5,789,870) (6,936,724) (6,574,575) 4,193,918 2,040,126 665,910 (803,445) 247,836 394,516 (713,116) (305,334) 853,441 528,104 $ 6,673,128 $ 8,665,224 $ (6,672,889) $ (4,751,081) $ (7,784,039) $ (8,982,347) $ (5,786,789) $ (6,095,204) $ (6,083,283) $ (6,046,471) $ 6,325,217 $ 6,902,852 $ 7,275,781 $ 8,640,194 $ 9,437,336 $ 9,768,391 $ 10,023,255 $ 10,266,170 $ 10,001,071 $ 10,123,158 1,644,099 1,377,159 1,951,327 2,025,349 2,005,338 1,711,452 1,257,365 936,054 1,038,404 1,037,524 141,642 173,719 184,868 201,446 208,667 224,276 264,808 262,783 242,491 259,064 376,200 567,112 1,064,315 967,337 611,533 297,536 164,474 243,193 136,310 121,886 n/a n/a n/a n/a n/a n/a n/a n/a n/a (458,073) - - - - (2,125,256) (851,439) - 130,114 13,248 12,883 29,244 71,371 131,352 326,263 365,516 340,763 429,150 204,149 127,617 116,123 (5,087,288) (4,468,254) (5,169,779) (3,599,876) (1,339,200) 239,241 984,000 688,873 (3,170,768) (1,267,033) 3,429,114 4,623,959 5,437,864 8,560,713 9,163,934 11,730,220 13,123,052 12,731,336 8,388,373 9,945,532 440,306 572,317 943,911 1,102,729 726,105 464,289 315,928 377,868 256,852 209,227 n/a n/a n/a n/a n/a n/a n/a n/a Ma (391,121) 5,087,288 4,468,254 5,169,779 3,599,876 1,339,200 (239,241) (984,000) (688,873) 3,170,768 1,267,033 5,527,594 5,040,571 6,113,690 4,702,605 2,065,305 225,048 (668,072) (311,005) 3,427,620 1,085,139 8,956,708 9,664,530 11,551,554 13,263,318 11,229,239 11,955,268 12,454,980 12,420,331 11,815,993 11,030,671 5,908,324 11,249,057 (1,900,935) 4,613,077 1,132,059 2,353,357 8,049,379 6,941,466 1,451,649 3,370,957 9,721,512 7,080,697 6,779,600 3,899,160 2,313,141 619,564 (1,381,188) (616,339) 4,281,061 1,613,243 $ 15,629,836 $ 18,329,754 $ 4,878,665 $ 8,512,237 $ 3,445,200 $ 2,972,921 $ 6,668,191 $ 6,325,127 $ 5,732,710 $ 4,984,200 Source: City of Rosemount Comprehensive Annual Financial Reports n/a - Not Available Page 66 Schedule 3 City of Rosemount Fund Balances, Governmental Funds Last Ten Fiscal Years (Modified Accrual Basis of Accounting) Fiscal Years 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 General Fund Reserved for Prepaid items $ 30,048 $ 29,926 $ 31,447 $ 25,797 $ 34,120 $ 78,379 $ 33,280 $ $ $ Encumbrances 503,524 599,962 334,104 558,190 524,904 638,254 465,544 Unreserved Designated 4,931,177 5,162,364 5,429,801 6,456,649 6,480,777 6,536,929 6,653,352 Undesignated 13,999 15,486 17,508 8,967 10,059 15,549 32,941 Nonspendable - - - - - - - 85,067 80,623 67,266 Restricted - - - Assigned 1,894,348 2,319,433 2,292,257 Unassigned - - 5,700,071 5,905,056 6,001,628 Total General Fund 5,478,748 5,807,738 5,812,860 7,049,603 7,049,860 7,269,111 7,185,117 7,679,486 8,305,112 8,361,151 All Other Governmental Funds Reserved for Debt service 9,508,673 9,784,931 7,570,248 7,180,264 5,582,205 3,854,760 6,173,964 Special revenue funds - prepaid items 335 364 391 416 - - - Capital projects funds - encumbrances 1,630,159 1,168,027 727,152 239,803 331,014 1,118,650 1,061,526 Unreserved Designated Capital projects funds 2,712,870 6,395,862 4,862,317 4,662,910 5,297,333 4,984,835 3,510,512 Special revenue funds 3,117,074 3,706,078 52,603 48,791 15,017 9,374 6,900 Undesignated Port Authority TIF fund - - (2,971,333) (3,370,688) 182,826 262,577 429,284 - - Special revenue funds (92,969) (331,928) 232,497 114,581 109,523 125,132 134,919 Nonspendable for Capital projects funds - - - - - - 10,000 10,000 Restricted for Debt service 4,782,476 4,193,284 4,554,980 Port Authority TIF fund 677,057 887,616 1,046,218 Committed for Special revenue funds 159,048 191,307 214,031 Assigned for Capital projects funds 8,515,086 6,229,951 6,243,406 Total All Other Governmental Funds 16,876,142 20,723,334 10,473,875 8,876,077 11,517,918 10,355,328 11,317,105 14,133,667 11,512,158 12,068,635 Total All Funds $ 22,354,890 $ 26,531,072 $ 16,286,735 $ 15,925,680 $ 18,567,778 $ 17,624,439 $18,502,222 $ 21,813,153 $19,817,270 $ 20,429,786 Source: City of Rosemount Comprehensive Annual Financial Reports Note: Beginning in 2011, the categories of fund balance changed with the implementation of GASB statement No. 54 Page 67 Schedule 4 City of Rosemount Changes in Fund Balances, Governmental Funds Last Ten Fiscal Years (Modified Accrual Basis of Accounting) Revenues Taxes Tax increments Intergovernmental Public charges for services Licenses and permits Fines and forfeitures Special assessments Investment income and miscellaneous Total revenues Expenditures General government Public safety Public works Parks and recreation Conservation and development Capital Outlay Debt Service Principal retirement Interest and fiscal charges Total expenditures Excess (deficiency) of revenues over (under) expenditures Other financing sources (uses) Issuance of long -term debt Payment to escrow agent Premium on long -term debt Discount on long -term debt Sale of capital assets Transfers in Transfers out Total other financing sources (uses) Net change in fund balances Fund balances - Beginning Fund balances - Ending Debt service as a percentage of noncapital expenditures 2004 2005 2006 Fiscal Years 2007 2008 2009 2010 2011 2012 2013 $ 8,110,958 $ 8,176,465 $ 9,111,739 $ 10,447,961 $ 11,079,607 $ 11,049,769 $ 10,822,174 $ 10,643,333 $ 10,376,939 $ 10,514,617 - 22,264 40,236 159,030 296,735 379,351 448,253 576,675 660,056 660,130 1,983,738 619,637 402,106 1,194,371 1,511,195 947,554 4,051,643 2,394,400 584,381 2,288,281 2,798,197 2,708,131 1,671,934 1,967,889 1,844,648 1,382,597 1,540,191 2,226,976 2,277,051 2,370,562 1,295,164 1,194,106 799,650 650,634 698,756 430,551 453,900 388,615 484,644 522,131 98,947 90,787 90,776 120,870 129,220 124,068 122,394 124,324 129,343 106,617 1,590,026 1,382,539 1,373,904 1,582,277 962,950 757,223 832,686 496,386 2,155,618 1,539,059 8,544,963 12,891,807 6,171,310 4,426,241 3,538,350 1,268,846 1,224,178 1,552,188 1,773,249 650,402 24,421,993 27,085,736 19,661,655 20,549,273 20,061,461 16,339,959 19,495,419 18,402,897 18,441,281 18,651,799 1,898,739 2,482,348 2,270,416 2,380,884 2,579,263 2,522,244 2,368,489 2,382,663 2,569,649 2,506,529 2,234,367 2,464,679 2,626,053 2,913,163 3,096,468 3,297,520 3,366,500 3,436,225 3,510,222 3,632,212 2,623,105 2,190,297 2,822,803 2,568,514 3,105,778 2,687,294 2,805,767 3,078,059 3,032,940 3,285,257 980,841 1,034,193 1,080,786 1,152,615 1,186,883 1,153,777 1,239,742 1,239,857 1,271,513 1,321,946 - - - - 1,944,457 160,445 139,965 - - - 12,469,486 15,932,587 22,873,101 9,719,678 6,689,680 3,835,826 7,808,264 6,185,959 8,096,866 7,628,944 3,011,929 3,811,892 4,106,223 3,565,000 4,300,000 3,645,000 1,840,000 2,225,000 2,405,000 1,545,000 981,801 936,522 903,470 1,013,010 843,205 826,350 726,878 677,469 582,377 511,526 24,200,268 28,852,518 36,682,852 23,312,864 23,745,734 18,128,456 20,295,605 19,225,232 21,468,567 20,431,414 221,725 (1,766,782) (17,021,197) (2,763,591) (3,684,273) (1,788,497) (800,186) (822,335) (3,027,286) (1,779,615) 5,280,000 4,775,000 450,000 6,425,000 1,355,000 2,080,000 810,000 1,500,000 - (1,182,525) (1,800) - - - - - 21,147 (3,533) - - - - - - 6,350 2,650 101,841 19,005 4,780 3,000 12,505 10,121 12,740 3,627 3,615,269 2,177,097 3,283,961 2,120,800 1,366,084 1,639,211 3,089,286 2,847,900 348,663 1,330,491 (2,070,942) (1,516,783) (219,031} (185,469) (1,469,493) (797,053) (2,778,822) (804,755) (140,000) (441,987) 1,550,677 5,942,964 6,776,860 2,402,536 6,326,371 845,158 1,677,969 4,133,266 1,031,403 2,392,131 $ 1,772,402 $ 4,176,182 $(10,244,337) $ (361,055) $ 2,642,098 $ (943,339) $ 877,783 $ 3,310,931 $ (1,995,883) $ 612,516 20,582,488 22,354,890 26,531,072 16,286,735 15,925,680 18,567,778 17,624,439 18,502,222 21,813,153 19,817,270 $ 22,354,890 $ 26,531,072 $ 16,286,735 $ 15,925,680 $ 18,567,778 $ 17,624,439 $ 18,502,222 $ 21,813,153 $ 19,817,270 $ 20,429,786 Source: City of Rosemount Comprehensive Annual Financial Reports 34.0% 36.8% 36.3% 33.7% 30.2% 31.3% 20.1 % 22.0% 22.3% 16.1% Page 68 Schedule 5 City of Rosemount Assessed Value (or Tax Capacity) and Estimated Market Value of All Taxable Property Last Ten Fiscal Years Source: Dakota County Assessor's Office, Usage Classification Report - Real Estate and Personal Properties Note: Property values shown are established at January 1 of the year preceding the "Pay- Year" listed. They are the basis of the taxes collected and applied to the "Pay- Year ". (1) For 1997 and 1998, the State Legislature changed the class rates of many types of property. This did not have an impact on the estimated market values but it did have the effect of lowering the overall net tax capacity rates. Beginning with 2001, payable 2002, the State made massive changes to the class rates of almost all properties. This resulted in large decreases in the overall net tax capacity rates. To offset part of this change, the State added a new "State Tax" on commercial and industrial properties that helped make up part of the losses. Beginning with 2011, the State made changes in the valuations by adding a "Market Value Exclusion" for properties valued at less than $414,000 that resulted in large reductions in the Estimated Market Values and the Net Tax Capacity Values. (2) Rates taken from Schedule 6 Page 69 Total Tax Capacity as % of Estimated Market Value 1.18% 1.17% Total M* <a� 1.16 %' Tax 1.14% Capacity Real Property Personal Property Total as % of 1 a Local Tax Estimated Local Tax Estimated Local Tax Estimated City Estimated State Tax Net Tax Market Net Tax Market Net Tax Market Tax Market Net Tax Pay -Year Capacity (1) Value Capacity (1) Value Capacity (1) Value Rate 2) Value Capacity (1) 2004 $ 15,324,087 $ 1,343,848,700 $ 435,343 $ 22,497,500 $ 15,759,430 $ 1,366,346,200 52.368 1.15% $ 4,025,191 2005 17,813,205 1,582,376,400 468,371 24,240,300 18,281,576 1,606,616,700 46.041 1.14% 4,224,695 2006 21,137,682 1,895,644,700 466,457 24,291,000 21,604,139 1,919,935,700 43.755 1.13% 4,611,764 2007 24,048,070 2,160,568,300 484,629 25,212,600 24,532,699 2,185,780,900 42.521 1.12% 5,088,943 2008 26,171,550 2,340,595,000 479,034 25,165,300 26,650,584 2,365,760,300 42.440 1.13% 5,661,820 2009 26,303,216 2,338,770,100 539,678 28,233,700 26,842,894 2,367,003,800 42.323 1.13% 6,048,039 2010 25,067,278 2,209,334,700 566,090 29,516,800 25,633,368 2,238,851,500 43.358 1.14% 6,321,515 2011 23,635,880 2,078,373,200 685,721 35,284,800 24,321,601 2,113,658,000 44.661 1.15% 6,248,792 2012 21,590,701 1,878,822,866 689,398 35,353,750 22,280,099 1,914,176,616 46.994 1.16% 6,203,052 2013 21,076,941 1,829,557,955 728,110 37,319,224 21,805,051 1,866,877,179 48.862 1.17% 6,237,507 Source: Dakota County Assessor's Office, Usage Classification Report - Real Estate and Personal Properties Note: Property values shown are established at January 1 of the year preceding the "Pay- Year" listed. They are the basis of the taxes collected and applied to the "Pay- Year ". (1) For 1997 and 1998, the State Legislature changed the class rates of many types of property. This did not have an impact on the estimated market values but it did have the effect of lowering the overall net tax capacity rates. Beginning with 2001, payable 2002, the State made massive changes to the class rates of almost all properties. This resulted in large decreases in the overall net tax capacity rates. To offset part of this change, the State added a new "State Tax" on commercial and industrial properties that helped make up part of the losses. Beginning with 2011, the State made changes in the valuations by adding a "Market Value Exclusion" for properties valued at less than $414,000 that resulted in large reductions in the Estimated Market Values and the Net Tax Capacity Values. (2) Rates taken from Schedule 6 Page 69 Total Tax Capacity as % of Estimated Market Value 1.18% 1.17% M* <a� 1.16 %' 1.14% 1.13% 1.12 %x z 1 a 1.10% 1.09% „M 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 Source: Dakota County Assessor's Office, Usage Classification Report - Real Estate and Personal Properties Note: Property values shown are established at January 1 of the year preceding the "Pay- Year" listed. They are the basis of the taxes collected and applied to the "Pay- Year ". (1) For 1997 and 1998, the State Legislature changed the class rates of many types of property. This did not have an impact on the estimated market values but it did have the effect of lowering the overall net tax capacity rates. Beginning with 2001, payable 2002, the State made massive changes to the class rates of almost all properties. This resulted in large decreases in the overall net tax capacity rates. To offset part of this change, the State added a new "State Tax" on commercial and industrial properties that helped make up part of the losses. Beginning with 2011, the State made changes in the valuations by adding a "Market Value Exclusion" for properties valued at less than $414,000 that resulted in large reductions in the Estimated Market Values and the Net Tax Capacity Values. (2) Rates taken from Schedule 6 Page 69 Schedule 6 City of Rosemount Property Tax Rates - All Direct and Overlapping Governmental Units Last Ten Fiscal Years (Rate per 1 % of Market Value) Source: Dakota County Treasurer- Auditor Note: All rates are overlapping rates except for the "City" and the "City Market Referendum Rates" (these two are the City's direct rates). Overlapping rates consist of the "School Districts ", "Dakota County" and the "Special Districts" (1) Beginning with property taxes payable in 1996, levies for voter approved referendums were based on market value. Therefore, a separate rate for these market valued levies will be included for the applicable entity for the life of the levies. Since these rates are calculated separately, they are not included in the total tax rates. n/a - Not Applicable Page 70 ISD 196 ISD 199 ISD 200 Dakota Totals City Market School Market School Market School Market County School School School Year Referendum District Referendum District Referendum District Referendum Dakota Referendum Special District District District Collectible City Rates (1) No. 196 Rates (1) No. 199 Rates (1) No. 200 Rates (1) County Rates (1) Districts (1) No. 196 No. 199 No. 200 2004 52.368 0.01138 26.074 0.13978 10.032 0.17096 22.050 0.19486 30.300 0.00754 5.128 113.870 97.828 109.846 2005 46.041 0.00972 26.251 0.10862 7.793 0.15316 22.126 0.09646 28.267 0.00666 5.216 105.775 87.317 101.650 2006 43.755 0.00818 27.554 0.22437 17.796 0.14799 18.683 0.24688 26.318 0.00592 5.256 102.883 93.125 94.012 2007 42.521 0.00665 23.607 0.20824 16.607 0.13682 18.157 0.22957 25.127 0.00516 5.024 96.279 89.279 90.829 2008 42.440 0.00623 21.136 0.21274 19.764 0.13159 16.676 0.22733 25.184 0.00471 4.996 93.756 92.384 89.296 2009 42.323 0.00631 21.109 0.21032 19.303 0.13392 16.735 0.22372 25.821 0.00471 4.916 94.169 92.363 89.795 2010 43.358 0.00652 25.391 0.22268 21.795 0.15183 20.206 0.25903 27.269 0.00501 4.987 101.005 97.409 95.820 2011 44.661 0.00697 26.959 0.22601 24.679 0.15606 22.140 0.26626 29.149 0.00537 5.199 105.968 103.688 101.149 2012 46.994 n/a 28.440 0.22131 28.363 0.16428 25.435 0.28618 31.426 0.00551 5.562 112.422 112.345 109.417 2013 48.862 n/a 27.956 0.23542 27.556 0.18354 23.932 29.48300 33.421 n/a 5.884 116.123 115.723 112.099 Source: Dakota County Treasurer- Auditor Note: All rates are overlapping rates except for the "City" and the "City Market Referendum Rates" (these two are the City's direct rates). Overlapping rates consist of the "School Districts ", "Dakota County" and the "Special Districts" (1) Beginning with property taxes payable in 1996, levies for voter approved referendums were based on market value. Therefore, a separate rate for these market valued levies will be included for the applicable entity for the life of the levies. Since these rates are calculated separately, they are not included in the total tax rates. n/a - Not Applicable Page 70 Schedule 7 City of Rosemount Principal Property Tax Payers Current Year and Nine Years Ago Principal Taxpayers Total $ 4,363,209 Total City Tax Capacity $ 21,805,051 Source: Dakota County Treasurer - Auditor 2013 Rank Local Percentage Tax Taxpayer Capacity (1) Local Tax Great Northern Oil Co. $ 1,604,692 Flint Hills Resources LP (2004 - Koch Refining Co.) 1,200,561 Northern States Power Co. 334,430 Clarel Corporation (Cub Foods) 185,686 146th Street Partners LP (Waterford Commons) 159,261 Northern Natural Gas Co. 125,012 Rosemount Crossing LLC (Aldi's) 94,842 Minnesota Pipeline Co. 92,356 CF Industries, Inc. ( Cenex) 87,740 Francis & Patricia Dolejs 84,948 Bigos - Rosemount LLC (Cannon Equipment) 80,866 MHC Rosemount Woods LLC (2004 - Hidden Valley) 79,310 Minnesota Energy Resources Corp. 79,238 Proto Labs Inc. (2004 - Webb Properties LLC) 78,016 Limerick Way LLC 76,251 DR Horton Inc. Minnesota - Cue Properties LLC (Wintz Companies) - Continental Nitrogen & Resources (CNR) - Gruett - Labriola Partnership (AWP) - Centex Homes - Contractor Property Developers (CPDC) - Principal Taxpayers Total $ 4,363,209 Total City Tax Capacity $ 21,805,051 Source: Dakota County Treasurer - Auditor 2013 Rank 1 2004 Percentage Percentage of Total Local of Total Local Tax Tax Local Tax Capacity Capacity (1) Rank Capacity 1 7.36% $ 1,129,336 2 5.51% 563,880 3 1.53% 268,392 4 0.85% 175,344 5 0.73% - 6 0.57% - 7 0.43% - 8 0.42% - 9 0.40% 69,182 10 0.39% - 11 0.37% 86,794 12 0.36% 65,249 13 0.36% - 14 0.36% 77,968 15 0.35% 75,002 70,061 68,285 68,034 66,784 63,013 36,896 20.01% $ 2,884,220 $ 15,759,430 (1) These figures do not include the dollars collected but the tax capacity for each entity. 1 7.17% 2 3.58% 3 1.70% 4 0.00% 9 0.44% 5 13 6 7 8 10 11 12 14 15 0.00% 0.49% 0.48% 0.44% 0.43% 0.43% 0.42% 0.40% 0.23% 18.30% Page 71 Schedule 8 City of Rosemount Property Tax Levies and Collections Last Ten Fiscal Years Source: Dakota County Treasurer - Auditor (1) The total tax levy differs from actual levy certified to the County by the City because of fiscal disparity calculations done by the County after certification. (2) Delinquent tax collections are all delinquent collections during that tax year - not just for the delinquent collections of that calendar year. Page 72 Ratio of Percent of Delinquent Total Outstanding Total Tax Total Tax Current Tax Current Taxes Tax Tax Delinquent Collections to Year Levy (1) Collections Collected Collections (2) Collections Taxes Total Tax Levy 2004 $ 8,383,035 $ 8,331,061 99.38% $ 102,935 $ 8,433,996 $ - 100.00% 2005 8,660,018 8,600,178 99.31% 64,730 8,664,908 - 100.00% 2006 9,616,019 9,519,884 99.00% 87,425 9,607,309 - 100.00% 2007 10,561,484 10,440,106 98.85% 108,978 10,549,084 7,548 99.93% 2008 11,368,729 11,202,867 98.54% 128,875 11,331,742 5,492 99.95% 2009 11,411,690 11,279,747 98.84% 144,999 11,424,746 5,109 99.96% 2010 11,160,169 11,059,249 99.10% 161,848 11,221,097 5,992 99.95% 2011 10,985,813 10,898,846 99.21% 123,066 11,021,912 8,391 99.92% 2012 10,490,554 10,418,211 99.31% 99,300 10,517,511 14,132 99.87% 2013 10,750,485 10,667,447 99.23% 84,910 10,752,357 80,175 99.25% Source: Dakota County Treasurer - Auditor (1) The total tax levy differs from actual levy certified to the County by the City because of fiscal disparity calculations done by the County after certification. (2) Delinquent tax collections are all delinquent collections during that tax year - not just for the delinquent collections of that calendar year. Page 72 Schedule 9 City of Rosemount Ratios of Outstanding Debt by Type Last Ten Fiscal Years Business - Type Governmental Activities Activities Year Population(1) Personal Income(1) G.O. Property Tax Supported(2) G.O. Tax Increment Supported(2) Equipment Certificates(2) G.O. and Revenue Supported (PortAuth.)(2) G.O. and Special G.O. Municipal Assessment State Aid Supported(2) Supported(2) G.O. Revenue Bonds(2) Total Primary Government Percentage of Personal Income Per Capita 2004 19,907 $ 807,189,036 $ 1,905,000 $ $ - $ 7,150,000 $ 11,340,000 $ $ 6,475,000 $ 26,870,000 3.33% $ 1,350 2005 20,837 869,027,922 5,510,000 1,535,000 6,570,000 9,025,000 8,730,000 31,370,000 3.61% 1,505 2006 22,049 950,201,655 4,275,000 - 1,615,000 4,985,000 11,325,000 - 8,165,000 30,365,000 3.20% 1,377 2007 22,397 1,008,872,865 4,030,000 1,765,000 3,585,000 9,705,000 - 8,555,000 27,640,000 2.74% 1,234 2008 22,750 1,054,621,750 3,760,000 6,040,000 1,775,000 3,350,000 6,285,000 6,850,000 28,060,000 2.66% 1,233 2009 23,750 1,053,882,500 3,475,000 6,040,000 1,310,000 1,555,000 5,185,000 6,160,000 23,725,000 2.25% 999 2010 21,874 984,811,228 3,185,000 6,040,000 760,000 2,820,000 4,275,000 6,965,000 24,045,000 2.44% 1,099 2011 22,239 1,001,244,258 2,885,000 6,040,000 520,000 2,725,000 4,765,000 - 4,585,000 21,520,000 2.15% 968 2012 22,432 1,038,579,168 2,575,000 6,005,000 265,000 1,355,000 5,140,000 3,785,000 19,125,000 1.84% 853 2013 22,711 1,051,496,589 2,255,000 5,930,000 85,000 1,230,000 5,795,000 1,935,000 17,230,000 1.64% 759 Note: Details regarding the City's outstanding debt can be found in the notes to the financial statements. (1) Population and personal income figures are taken from Schedule 14. (2) Figures taken from City of Rosemount bond documents. Page 73 Schedule 10 City of Rosemount Ratios of Net General Bonded Debt Outstanding Last Ten Fiscal Years General Bonded Debt Outstanding Note: Details regarding the City's outstanding debt can be found in the notes to the financial statements. (1) Population figures are taken from Schedule 14. (2) Estimated Market Value figures are taken from Schedule 5. (3) Figures taken from City of Rosemount bond documents. Page 74 Percentage of Estimated G.O. Property Less Restricted Total Estimated Market Tax Equipment Debt Service General Market Per Year Population(1) Value(2) Supported(3) Certificates(3) Total Funds Bonded Debt Value Capita 2004 19,907 $ 1,366,346,200 $ 1,905,000 $ - $ 1,905,000 $ 343,515 $ 1,561,485 0.11% $ 78 2005 20,837 1,606,616,700 5,510,000 1,535,000 7,045,000 1,503,014 5,541,986 0.34% 266 2006 22,049 1,919,935,700 4,275,000 1,615,000 5,890,000 560,562 5,329,438 0.28% 242 2007 22,397 2,185,780,900 4,030,000 1,765,000 5,795,000 709,370 5,085,630 0.23% 227 2008 22,750 2,365,760,300 3,760,000 1,775,000 5,535,000 866,988 4,668,012 0.20% 205 2009 23,750 2,367,003,800 3,475,000 1,310,000 4,785,000 2,038,321 2,746,679 0.12% 116 2010 21,874 2,238,851,500 3,185,000 760,000 3,945,000 1,936,318 2,008,682 0.09% 92 2011 22,239 2,113,658,000 2,885,000 520,000 3,405,000 1,605,726 1,799,274 0.09% 81 2012 22,432 1,914,176,616 2,575,000 265,000 2,840,000 1,129,632 1,710,368 0.09% 76 2013 22,711 1,866,877,179 2,255,000 85,000 2,340,000 737,907 1,602,093 0.09% 71 Note: Details regarding the City's outstanding debt can be found in the notes to the financial statements. (1) Population figures are taken from Schedule 14. (2) Estimated Market Value figures are taken from Schedule 5. (3) Figures taken from City of Rosemount bond documents. Page 74 Schedule 11 City of Rosemount Direct and Overlapping Governmental Activities Debt As of December 31, 2013 Governmental Activities Debt Governmental Units (1) Outstanding Direct Debt: City of Rosemount $ 15,295,000 Overlapping Debt: School Districts: I.S.D. 196 - Rosemount I.S.D. 199 - Inver Grove Heights I.S.D. 200 - Hastings Dakota County Regional: Metropolitan Council Total Overlapping Debt Total Direct & Overlapping Debt 105,209,247 46,625,000 46,935,000 46,485,000 16,715,000 (2) $ 261,969,247 $ 277,264,247 (1) Only those units with debt outstanding are shown here. Estimated Estimated Percentage Amount Applicable Applicable to City (3) to City 100.00% $ 15,295,000 14.10% 14, 834, 504 4.90% 2,284,625 0.10% 46,935 5.60% 2,603,160 0.70% 117,005 $ 19,886,229 (2) Excludes general obligation debt payable from waste water revenues and housing rental payments. Includes certificates of participation. (3) Percent of governmental unit within the City of Rosemount's boundaries calculated by the city's Financial Advisors, Springsted Inc. $ 35,181,229 Page 75 Schedule 12 City of Rosemount Legal Debt Margin Information Last Ten Fiscal Years Legal Debt Margin Calculation for Fiscal Year 2013 Estimated Market Value $ 1,866,877,179 Debt Limitation - 3% of Estimated Market Value 56,006,315 Debt Applicable to Limitation: Total Bonded Debt $ 17,230,000 Less: Special Assessment Bonds $ 5,795,000 Tax Increment Bonds 5,930,000 Revenue Bonds 1,935,000 Port Authority Bonds 1,230,000 State Aid Street Bonds - Amount Availabe for Repayment of G.O. Bonds 737,907 15,627,907 Total Debt Applicable to Limitation 1,602,093 Legal Debt Margin $ 54,404,222 Legal debt margin as a percentage of the debt limit 94.29% 82.75% 86.12% 88.37% 93.42% 96.13% 97.01% 97.16% 97.02% Note: Under State law, the City's outstanding general debt cannot exceed 3% of the total estimated market value of the City. (Debt limit was 2% prior to 2008) The legal debt margin is the City's available borrowing authority under State law and is calculated by subtracting the net debt applicable to the legal debt limit from the legal debt limit. 97.14% Page 76 Fiscal Year 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 Estimated Market Value $ 1,366,346,200 $ 1,606,616,700 $ 1,919,935,700 $ 2,185,780,900 $ 2,365,760,300 $ 2,367,003,800 $ 2,238,851,500 $ 2,113,658,000 $ 1,914,176,616 $ 1,866,877,179 Debt Limit - 3% of Estimated Market Value - 27,326,924 32,132,334 38,398,714 43,715,618 70,972,809 71,010,114 67,165,545 63,409,740 57,425,298 56,006,315 Limit was 2% prior to 2008 Total Net Debt Applicable to Debt Limit 1,561,485 5,541,986 5,329,438 5,085,630 4,668,012 2,746,679 2,008,682 1,799,274 1,710,368 1,602,093 Legal Debt Margin $ 25,765,439 $ 26,590,348 $ 33,069,276 $ 38,629,988 $ 66,304,797 $ 68,263,435 $ 65,156,863 $ 61,610,466 $ 55,714,930 $ 54,404,222 Legal debt margin as a percentage of the debt limit 94.29% 82.75% 86.12% 88.37% 93.42% 96.13% 97.01% 97.16% 97.02% Note: Under State law, the City's outstanding general debt cannot exceed 3% of the total estimated market value of the City. (Debt limit was 2% prior to 2008) The legal debt margin is the City's available borrowing authority under State law and is calculated by subtracting the net debt applicable to the legal debt limit from the legal debt limit. 97.14% Page 76 Schedule 13 City of Rosemount Pledged- Revenue Coverage Last Ten Fiscal Years Note: Details regarding the City's outstanding debt can be found in the notes to the financial statements. (1) Figure does not include depreciation expense. (2) 2008 includes call payments on 19968 & 1999C bonds, 2011 includes call payments on 2001 B, 2002B & 2003B bonds and 2013 includes call payment on 2005C bonds. (3) 2008 includes call /defeasance program for 19998 & 2001A bonds and 2011 includes calls for 2002A & 2003A bonds. Page 77 G.O. Revenue Bonds G.O. Special Assessment Bonds Net Revenue Available Debt Service Requirements Special Debt Service Requirements Gross For Debt Assessment Year Revenue Expenses (1) Service Principal (2) Interest Total Coverage Collections Principal (3) Interest Total Coverage 2004 $ 2,916,501 $ 2,390,070 $ 526,431 $ 600,000 $ 286,546 $ 886,546 59.38% $ 1,590,026 $ 2,065,000 $ 481,117 $ 2,546,117 62.45% 2005 2,917,231 2,536,543 380,688 735,000 257,063 992,063 38.37% 1,382,539 2,315,000 396,663 2,711,663 50.98% 2006 3,268,002 2,357,636 910,366 565,000 312,294 877,294 103.77% 1,373,904 2,105,000 314,634 2,419,634 56.78% 2007 3,299,851 3,285,070 14,781 820,000 313,579 1,133,579 1.30% 1,582,277 1,620,000 450,362 2,070,362 76.43% 2008 3,327,919 2,616,921 710,998 1,705,000 298,025 2,003,025 35.50% 962,950 3,420,000 330,859 3,750,859 25.67% 2009 3,379,397 2,744,735 634,662 690,000 256,788 946,788 67.03% 757,223 1,100,000 224,448 1,324,448 57.17% 2010 3,543,743 2,771,544 772,199 740,000 230,836 970,836 79.54% 832,686 910,000 184,068 1,094,068 76.11% 2011 3,744,722 2,737,918 1,006,804 2,380,000 218,295 2,598,295 38.75% 496,386 1,590,000 147,850 1,737,850 28.56% 2012 4,175,312 2,767,111 1,408,201 800,000 133,478 933,478 150.86% 2,155,618 435,000 112,512 547,512 393.71% 2013 4,419,729 2,958,568 1,461,161 1,850,000 110,313 1,960,313 74.54% 1,539,059 845,000 103,835 948,835 162.21% Note: Details regarding the City's outstanding debt can be found in the notes to the financial statements. (1) Figure does not include depreciation expense. (2) 2008 includes call payments on 19968 & 1999C bonds, 2011 includes call payments on 2001 B, 2002B & 2003B bonds and 2013 includes call payment on 2005C bonds. (3) 2008 includes call /defeasance program for 19998 & 2001A bonds and 2011 includes calls for 2002A & 2003A bonds. Page 77 Schedule 14 City of Rosemount Demographic and Economic Statistics Last Ten Calendar Years Calendar Per Capita Personal School Unemployment Median Year Population (1) Income (2) Income (3) Enrollment (4) Rate (5) Age (6) 2004 19,907 $ 40,548 $ 807,189,036 4,111 3.7% 34.7 2005 20,837 41,706 869,027,922 4,474 3.7% 35.2 2006 22,049 43,095 950,201,655 4,551 3.7% 35.7 2007 22,397 45,045 1,008,872, 865 4,458 4.4% 34.6 2008 22,750 46,357 1,054,621, 750 4,623 6.1% 36.0 2009 23,750 44,374 1,053, 882, 500 5,266 7.0% 34.6 2010 21,874 45,022 984,811,228 5,179 6.3% 36.8 2011 22,239 45,022 1,001,244,258 4,745 5.2% 36.5 2012 22,432 46,299 1,038,579,168 4,860 4.8% 36.7 2013 22,711 46,299 1,051,496,589 4,889 4.1% 36.7 (1) 2010 is a regular decennial census figure. All years from 2004 and on (except for 2010) are the City staffs best estimates as of 12/31 of each year to give a more indicative estimate of the actual population. (2) These figures are provided by and are for Dakota County. These figures usually have a 2 to 3 -year lag time so that is why the two most current years use the 2010 figure for computing the "Personal Income" figure. (3) These figures are derived by multiplying the City's population figure times Dakota County's per capita income figures. (4) School enrollment is the total number of students who reside within the Rosemount High School boundaries and go to Independent School District No. 196 schools located in Rosemount. The total school enrollment includes the total number of students with homes in the City of Rosemount. (5) Unemployment rates were compiled by the Minnesota Local Area Unemployment Statistics (LAUS) - for Dakota County. (6) These figures are provided by Dakota County. 2012's median age is the most current information available so 2013 is shown as the same age. Page 78 Schedule 15 City of Rosemount Principal Employers Current Year and Nine Years Ago 2013 Employer Employees Rank Percentage of Total City Employment Employees 2004 Rank Percentage of Total City Employment Note: The City of Rosemount does not track this information and there are no sources at the County or State level to provide this information. Page 79 Schedule 16 City of Rosemount Full - Time /Permanent Part-Time City Government Employees by Functiontprogram Last Ten Fiscal Years Sources: Finance Department Note: Employees listed are full -time and permanent part-time employees. Seasonal and temporary positions are not included Page 80 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 Function /Program General Government Administration 4.50 4.50 4.50 4.50 4.50 4.50 4.50 4.50 3.50 3.50 Finance 3.25 3.25 3.50 3.50 4.50 4.30 4.30 4.30 4.30 4.30 Community Development 11.00 11.00 10.50 10.50 10.50 10.50 9.75 9.75 9.50 9.50 Police Sworn Officers 19.00 19.00 20.00 21.00 22.00 22.00 22.00 22.00 22.00 22.00 Non -Sworn Employees 3.00 3.00 3.00 3.00 3.25 3.25 3.25 3.25 3.25 3.25 Fire Firefighters and Officers 37.00 41.00 41.00 39.00 43.00 44.00 43.00 43.00 41.00 43.00 Fire Marshall 0.50 0.50 0.50 0.50 - - - - - - Public Works Building Maintenance 1.00 1.00 1.00 1.00 - - - - 0.80 0.80 Fleet Maintenance 2.10 2.10 2.10 2.10 2.10 2.10 2.10 2.10 2.20 2.20 Street Maintenance 5.90 6.60 6.60 6.60 6.60 6.60 6.40 6.40 5.80 5.80 Parks Maintenance 5.10 5.60 5.60 5.60 5.60 5.60 5.60 5.60 4.60 4.60 Parks and Recreation Parks & Rec 9.25 10.00 10.00 10.00 9.50 9.50 9.50 9.50 9.50 9.50 Arena 1.80 2.30 2.30 2.30 1.80 1.85 1.85 1.85 1.85 1.85 Utilities Water 4.13 4.43 4.83 5.33 5.33 5.13 5.13 4.83 4.68 4.68 Sewer 4.13 4.43 4.83 5.33 5.33 5.13 5.13 4.83 4.68 4.68 Storm Water 1.85 2.05 2.25 2.25 2.25 2.30 2.30 2.10 2.10 2.10 113.50 120.75 122.50 122.50 126.25 126.76 124.81 124.01 119.75 121.75 Sources: Finance Department Note: Employees listed are full -time and permanent part-time employees. Seasonal and temporary positions are not included Page 80 Schedule 17 City of Rosemount Operating Indicators by Function /Program Last Ten Fiscal Years Function /Program General Government Total Permits Issued by the Building Department Total Number of Inspections Conducted Police Number of Calls for Service Number of Patrol Miles Adult Arrests Juvenile Arrests Traffic Violations Parking Violations Fire Number of Calls Answered Fires Extinguished Public Works Street Resurfacing (Miles) Park Acres Mowed Parks and Recreation Overall Program Participation Hours of Ioe Time Used Water Connections Water Main Breaks Average Daily Consumption (In Gallons) Sewer Connections Sources: Various City departments. 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 4,900 4,231 3,265 3,083 3,389 2,366 2,400 2,359 2,251 2,471 12,655 11,223 8,821 5,505 5,774 4,572 4,311 4,048 3,553 4,296 13,128 14,330 14,603 17,056 16,105 16,354 14,432 14,554 14,346 13,730 200,117 218,079 195,059 216,291 209,310 206,619 211,460 152,097 194,764 186,490 307 435 415 586 646 424 340 432 369 312 286 272 166 209 239 206 182 146 107 102 1,348 1,404 1,116 2,378 1,522 1,548 1,605 2,232 2,610 2,147 506 162 113 261 160 307 284 296 378 436 550 619 573 652 769 632 630 690 724 637 n/a n/a 40 63 5 59 34 34 52 35 1.20 4.10 1.60 0.75 1.20 0.64 10.50 1.30 2.30 1.60 103 113 130 135 127 127 134 134 154 154 13,000 13,500 14,000 14,000 14,000 14,200 14,500 14,500 14,500 15,000 2,415 2,289 2,344 2,544 2,545 2,466 2,577 2,515 2,577 2,479 5,687 5,989 6,032 6,075 6,186 6,273 6,381 6,431 7,464 7,576 . 2 2 - - - - 1 2,007,841 2,115,603 2,749,281 2,604,281 2,494,238 2,569,474 2,261,972 2,344,546 2,665,979 2,412,638 5,555 5,869 6,007 6,057 6,170 6,255 6,363 6,414 6,505 6,614 Page 81 Schedule 18 City of Rosemount Capital Asset Statistics by FunctionlProgram Last Ten Fiscal Years Function /Program General Government 1 1 1 1 1 914 9/4 City Halls /Other Buildings 1 1 1 1 1 1 1 Police 3 103 105 106 1,500 1,510 1,520 Stations 1 1 1 1 1 1 1 Patrol Units (Marked /Unmarked) 814 814 8/4 8/4 914 914 914 Fire 23 16 16 19 8 8 8 Stations 2 2 2 2 2 2 2 Fire Units (Vehicles & Trailer) 12 12 14 14 14 14 14 Public Works 12,096,000 95 97 98 84 86 86 Buildings 3 3 3 3 3 3 3 City Maintained Streets (Miles) (1) 121 100 101 102 102 103 103 Street Lights 1,032 1,271 1,290 1,290 1,300 1,488 1,500 Parks and Recreation Community Centers 1 1 1 1 1 1 1 Shelters/Other Buildings 3 3 3 3 3 3 3 Acreage 302 357 357 430 430 440 440 Parks 23 23 24 26 26 27 27 Playgrounds 18 19 19 19 19 20 20 Baseball /Softball Diamonds 17 18 19 19 19 20 20 Soccer /Football Fields 12 12 13 13 13 16 16 Tennis Courts 4 4 6 6 6 8 8 Water Water Mains (Miles) 97 111 116 119 119 122 122 Wells (Municpal /Rural) 6 7 7 8 7 8 8 Water Towers 3 3 3 4 4 4 4 Fire Hydrants 872 976 1,049 1,082 1,279 1,281 1,330 Storage Capacity 2,000,000 2,000,000 3,500,000 3,500,000 3,500,000 3,500,000 3,500,000 Maximum Pumping Capacity 6,000,000 9,648,000 9,648,000 11,664,000 10,994,000 12,096,000 12,096,000 Sewer Sanitary Sewer Mains (Miles) 70 81 65 90 90 91 91 Storm Sewer Mains (Miles) 51 69 75 78 81 82 84 Public Education Facilities: Number of Elementary Schools 2 2 2 2 2 2 2 Number of Secondary Schools 2 2 2 2 2 2 2 Number of Special Education Schools 1 1 1 1 1 2 2 (Dakota County Technical College) Sources: Various City departments. (1) Prior to 2005, Street Miles consisted of all streets and highways within the City, including County, State, Federal and private roads. Beginning in 2005, only City maintained streets are included 2011 2012 2013 1 1 1 1 1 1 914 9/4 914 2 2 2 14 14 15 3 3 3 103 105 106 1,500 1,510 1,520 1 1 1 3 3 3 467 467 534 28 28 27 20 20 20 20 22 23 16 16 19 8 8 8 125 127 129 8 8 8 4 4 4 1,342 1,342 1,366 3,500,000 3,500,000 3,500,000 12,096,000 12,096,000 12,096,000 95 97 98 84 86 86 2 2 2 2 2 2 2 2 2 Page 82 .. 0 111 � V _, BAKER T I L LY VIRCHOW KRAUSE, LLP Baker Tilly Virchocv Krause. LLP 225 S Sixth Sr. Ste 2300 Minneapolis, MN 55402 -4661 te1 612 876 4500 fax 612 233 8900 bakertilly.com MINNESOTA LEGAL COMPLIANCE Independent Auditor's Report Honorable Mayor and Members of City Council City of Rosemount, Minnesota We have audited, in accordance with auditing standards generally accepted in the United States of America, the financial statements of the governmental activities, the business -type activities, each major fund, and the aggregate remaining fund information of the City of Rosemount as of and for the year ended December 31, 2013, and the related notes to the financial statements, and have issued our report thereon dated May 12, 2014. The Minnesota Legal Compliance Audit Guide for Political Subdivisions, promulgated by the State Auditor pursuant to Minn. Stat. § 6.65, contains seven categories of compliance to be tested: contracting and bidding, deposits and investments, conflicts of interest, public indebtedness, claims and disbursements, miscellaneous provisions, and tax increment financing. Our study included all of the listed categories. In connection with our audit, nothing came to our attention that caused us to believe that the City of Rosemount failed to comply with the provisions of the Minnesota Legal Compliance Audit Guide for Political Subdivisions, except as described below. However, our audit was not directed primarily toward obtaining knowledge of such noncompliance. Accordingly, had we performed additional procedures, other matters may have come to our attention regarding the City of Rosemount's noncompliance with the above referenced provisions. In accordance with Minn. Stat. 118A.03, the City is required to have collateral pledged equal to at least ten percent more than the uninsured bank balance on deposit. At December 31, 2013, there was not sufficient collateral pledged at one of the City's depositories. We recommend that management review the collateral coverage each month. This report is intended solely for the information and use those charged with governance and management of the City of Rosemount and the State Auditor and is not intended to be and should not be used by anyone other than these specified parties. Minneapolis, Minnesota May 12, 2014 BAKER TILLY INTERNATIONAL An Affirmative Action Equal Opportunity Employer CITY OF ROSEMOUNT COMMUNICATION TO THOSE CHARGED WITH GOVERNANCE AND MANAGEMENT As of and for the Year Ended December 31, 2013 CITY OF ROSEMOUNT TABLE OF CONTENTS Page No. Required Communication of Internal Control Related Matters Identified in the Audit to Those Charged with Governance Internal Control Over Financial Reporting 2 Internal Control Environment 2-3 Other Communications to Those Charged with Governance Two Way Communication Regarding Your Audit 4-5 Communication of Recommendations and Informational Points to Management 6-9 Required Communications by the Auditor to Those Charged with Governance 10-13 Management Representations REQUIRED COMMUNICATION OF INTERNAL CONTROL RELATED MATTERS IDENTIFIED IN THE AUDIT TO THOSE CHARGED WITH GOVERNANCE 1 BAKER TILLY VIRCHOW KRAUSE. LLP Baker Tilly Virchow Krause, LLP 225 S Sixth Sr, Ste 300 Minneapolis, MN 55402 -4661 tel 612 8 °6 4500 fax 612 238 8900 bakerri lly.co m To the City Council City of Rosemount Rosemount, Minnesota In planning and performing our audit of the financial statements of the City of Rosemount as of and for the year ended December 31, 2013, in accordance with auditing standards generally accepted in the United States of America, we considered its internal control over financial reporting (internal control) as a basis for designing our auditing procedures that are appropriate in the circumstances for the purpose of expressing our opinions on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of its internal control. Accordingly, we do not express an opinion on the effectiveness of its internal control. Our consideration of internal control was for the limited purpose described in the preceding paragraph and was not designed to identify all deficiencies in internal control that might be material weaknesses or significant deficiencies and, therefore, material weaknesses or significant deficiencies may exist that were not identified. However, as discussed below, we identified a certain deficiency in internal control that we consider to be a material weakness and other deficiencies that we consider to be significant deficiencies. A deficiency in internal control exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct misstatements on a timely basis. A material weakness is a deficiency, or combination of deficiencies in internal control, such that there is a reasonable possibility that a material misstatement of the entity's financial statements will not be prevented, or detected and corrected, on a timely basis. We consider the following deficiency in the City's internal control to be a material weakness: > See the discussion on the following page under Internal Control over Financial Reporting. A significant deficiency is a deficiency, or a combination of deficiencies, in internal control that is less severe than a material weakness, yet important enough to merit attention by those charged with governance. We consider the following deficiency in the City's internal control to be a significant deficiency: > See the discussion on the following page under Internal Control Environment. This communication is intended solely for the information and use of management, those charged with governance, and others within the organization and is not intended to be, and should not be, used by anyone other than these specified parties. Minneapolis, Minnesota May 12, 2014 BAKER TILLY INTERNATIONAL Page 1 An AtFirmarive Action Equal Opportunity Employs INTERNAL CONTROL OVER FINANCIAL REPORTING Properly designed systems of internal control provides your organization with the ability to process and record monthly and year end transactions and prepare annual financial reports. Our audit includes a review and evaluation of the City's internal controls relating to financial reporting. Common attributes of a properly designed system of internal control for financial reporting are as follows: > There is adequate staffing to prepare financial reports throughout and at the end of the year. > Staff is properly trained and knowledgeable to perform all financial reporting functions. > Material misstatements are identified and corrected during the normal course of duties. > Complete and accurate financial statements including footnotes are prepared. > Financial reports are reviewed by an individual who is not the preparer for completeness and accuracy. Our evaluation of the City's internal controls relating to financial reporting has identified control deficiencies that are considered to be a material weakness surrounding the preparation of complete and accurate financial statements and footnotes, adjusting journal entries to correct misstatements, and an independent review by someone other than the preparer. As a result of these deficiencies, management is unable to prepare financial statements that are in conformity with generally accepted accounting principles. Management should consider what resources and changes are necessary to address and resolve the control deficiencies identified. INTERNAL CONTROL ENVIRONMENT Auditing standards require that we perform procedures to obtain an understanding of your government and its internal control environment as part of the annual audit. This includes an analysis of significant transaction cycles. A properly designed system of internal control includes adequate staffing, policies, and procedures to properly segregate duties. This includes systems that are designed to limit the access or control of any one individual to your government's assets or accounting records, and to achieve a higher likelihood that errors or irregularities in the City's accounting processes would be discovered by your staff in a timely manner. At this time, due to staffing and financial limitations, the City does not have proper internal controls in place to achieve adequate segregation of duties. As a result, errors or irregularities could occur as part of the financial process that may not be discovered by the City. Therefore, we are reporting a significant deficiency related to the City's internal control environment. Listed below are various control deficiencies that were noted as part of the audit process: CONTROLS OVER UTILITY BILLING 1. Proper segregation between receipting and billing functions does not exist. Page 2 INTERNAL CONTROL ENVIRONMENT (cont.) CONTROLS OVER FINANCIAL REPORTING ON A MONTHLY BASIS 1. A system report of manual adjusting journal entries is not reviewed by someone independent of posting journal entries. Adjusting journal entries and supporting documentation are not reviewed by an appropriate person who is the not the original preparer in most cases. 2. Account reconciliations are not performed by someone without general ledger access and involved with processing of transactions. We recommend that a designated City employee review the segregation of duties and these potential controls and determine whether additional controls should be implemented. This determination should take into consideration a cost / benefit analysis to the City. It is very important that the governing body provide the appropriate level of financial oversight to the City's day to day activities. Page 3 OTHER COMMUNICATIONS TO THOSE CHARGED WITH GOVERNANCE TWO WAY COMMUNICATION REGARDING YOUR AUDIT As part of our audit of your financial statements, we are providing communications to you throughout the audit process. Auditing requirements provide for two -way communication and are important in assisting the auditor and you with more information relevant to the audit. As this past audit is concluded, we use what we have learned to begin the planning process for next year's audit. It is important that you understand the following points about the scope and timing of our next audit: a. We address the significant risks or material misstatement, whether due to fraud or error, through our detailed audit procedures. b. We will obtain an understanding of the five components of internal control sufficient to assess the risk of material misstatement of the financial statements whether due to error or fraud, and to design the nature, timing, and extent of further audit procedures. We will obtain a sufficient understanding by performing risk assessment procedures to evaluate the design of controls relevant to an audit of financial statements and to determine whether they have been implemented. We will use such knowledge to: > Identify types of potential misstatements. > Consider factors that affect the risks of material misstatement. > Design tests of controls, when applicable, and substantive procedures. We will not express an opinion on the effectiveness of internal control over financial reporting or compliance with laws, regulations, and provisions of contracts or grant programs. For audits done in accordance with Government Auditing Standards, our report will include a paragraph that states that the purpose of the report is solely to describe the scope of testing of internal control over financial reporting and compliance and the result of that testing and not to provide an opinion on the effectiveness of internal control over financial reporting or on compliance and that the report is an integral part of an audit performed in accordance with Government Auditing Standards in considering internal control over financial reporting and compliance. The paragraph will also state that the report is not suitable for any other purpose. c. The concept of materiality recognizes that some matters, either individually or in the aggregate, are important for fair presentation of financial statements in conformity with generally accepted accounting principles while other matters are not important. In performing the audit, we are concerned with matters that, either individually or in the aggregate, could be material to the financial statements. Our responsibility is to plan and perform the audit to obtain reasonable assurance that material misstatements, whether caused by errors or fraud, are detected. d. Your financial statements contain components, as defined by auditing standards generally accepted in the United States of America, which we also audit. Page 4 TWO WAY COMMUNICATION REGARDING YOUR AUDIT (cont.) We are very interested in your views regarding certain matters. Those matters are listed here: a. We typically will communicate with your top level of management unless you tell us otherwise. b. We understand that the City Council has the responsibility to oversee the strategic direction of your organization, as well as the overall accountability of the entity. Management has the responsibility for achieving the objectives of the entity. c. We need to know your views about your organization's objectives and strategies, and the related business risks that may result in material misstatements. d. Which matters do you consider warrant particular attention during the audit, and are there any areas where you request additional procedures to be undertaken? e. Have you had any significant communications with regulators? f. Are there other matters that you believe are relevant to the audit of the financial statements? Also, is there anything that we need to know about the attitudes, awareness, and actions of the City concerning: a. The City's internal control and its importance in the entity, including how those charged with governance oversee the effectiveness of internal control? b. The detection or the possibility of fraud? We also need to know if you have taken actions in response to developments in financial reporting, laws, accounting standards, governance practices, or other related matters, or in response to previous communications with us. With regard to the timing of our audit, here is some general information. We typically perform preliminary financial audit work in early February. Our final financial fieldwork is scheduled during the first couple weeks of March to best coincide with your readiness and report deadlines. After fieldwork, we wrap up our financial audit procedures at our office and issue drafts of our report for review. Final copies of our report and other communications are issued after approval by your staff. This is typically 6 -8 weeks after final fieldwork, but may vary depending on a number of factors. Keep in mind that while this communication may assist us with planning the scope and timing of the audit, it does not change the auditor's sole responsibility to determine the overall audit strategy and the audit plan, including the nature, timing, and extent of procedures necessary to obtain sufficient appropriate audit evidence. We realize that you may have questions or wish to provide other feedback. We welcome the opportunity to hear from you. Page 5 COMMUNICATION OF RECOMMENDATIONS AND INFORMATIONAL POINTS TO MANAGEMENT RECOMMENDATIONS Recommendation #1 During our audit, it was noted that the amount of long term investments with maturity dates beyond five years increased to 43% of the total investments. The investment policy states that the targeted maximum for investments with this length to maturity should not exceed 35 %. We understand that the majority of the investments in this category include step bonds which does provide for some protection with regards to interest rate risk. We recommend that the maturities of investments continue to be monitored to determine if any modifications are deemed necessary going forward to bring the total back in line with the targeted threshold. Recommendation #2 We also noted that the City does not have a whistleblower policy /hotline in place. Occupational fraud (fraud in the workplace) is a widespread problem that affects practically every organization. There are three major categories of occupational fraud to consider: • Asset misappropriations. These schemes involve the theft or misuse of an organization's assets by such means as skimming revenues, stealing inventory or committing payroll fraud. • Corruption. Fraudsters wrongfully use their influence in business transactions to procure some benefit for themselves or another person. One of the most common is accepting kickbacks or engaging in conflicts of interest. • Fraudulent ffnancial statements. These generally involve falsification of an organization's financial statements by overstating revenue or understating liabilities or expenses. Most frauds that occur include some form of cash misappropriation. Cash frauds fall into one of three categories: • Fraudulent disbursements: A perpetrator causes the organization to disburse funds through some trick or device, such as submitting false invoices or forging checks. • Skimming: Cash is stolen from an organization before it is recorded on the organization's books and records. • Cash larceny: Cash is stolen from an organization after it has been recorded on the organization's books and records. The most common means of detection, by a wide margin, comes from tips via a whistleblower system. Audits, both internal and external, although excellent prevention devices, are not the most effective means of detecting frauds. Hotlines and other reporting mechanisms are a vital part of any organization's prevention efforts. Occupational fraud cannot be eliminated, but organizations that use hotlines can greatly reduce these costly crimes. The majority of tips come from employees. Organizations that did not have reporting mechanisms suffered median losses that were more than twice as high as organizations with them. Given these statistics, it is obvious that anonymous hotlines provide real benefits. Also, the effectiveness of these reporting mechanisms is higher when they are made available to customers, vendors, and other third parties — not just employees. Based on the report referred to above, and given the climate of accountability that exists these days, your organization should consider whether it would be worthwhile to set up some kind of whistleblower hotline. If you decide to pursue such a hotline, there are vendors who can act as the "host," or you can administer it yourself. We can help you find out more if you wish. Page 6 INFORMATIONAL POINTS GASB UPDATES The following is a schedule of GASB projects: Task or Event Effective Date Impact GASB No. 67 — For fiscal years This standard is applicable to the statewide retirement Financial Reporting for beginning after system (PERA) or the plan itself. This will not have a Pension Plans June 15, 2013. direct impact on the city. GASB No. 68 — December 312015 The city belongs to the statewide retirement system Accounting and (PERA). The PERA is a cost - sharing, multiple - Financial Reporting for employer, defined - benefit, public employee retirement Pensions system. PERA has represented that it will provide the information necessary for the employers to implement GASB No. 68. The city's share of the net pension liability / asset will be reported in its full - accrual funds and the government -wide financial statements. The footnote disclosures will have significant changes. _ GASB No. 69— December 31, 2014 This standard provides the guidance necessary for Government government combinations and disposals of Combinations and government operations. Disposals of Government GASB No. 70 — December 31, 2015 This standard provides guidance for non - exchange Accounting and financial guarantees that the city would become Financial Reporting involved in. For Nonexchange Financial Guarantees Page 7 INFORMATIONAL POINTS (cont.) GASB UPDATES (cont.) Task or Event Effective Date Impact GASB No. 71 — December 31, 2015 The requirements of this Statement will eliminate the Pension Transition for source of a potential significant understatement of Contributions Made restated beginning net position and expense in the Subsequent to the first year of implementation of GASB No. 68 in the Measurement Date — accrual -basis financial statements of the city. This will an amendment of be addressed with the implementation of GASB No. GASB No. 68 68. _ Current Agenda Topic: _ _ The GASB Board is The objective of this project is to consider the Conceptual scheduled to issue a measurement concepts that should be used in Framework - final Concepts governmental financial statements. A measurement Measurement Statement in March approach determines whether an asset or liability 2014 presented in a financial statement should be (1) reported at an amount that reflects a value at the date that the asset was acquired or the liability was incurred or (2) remeasured and reported at an amount that reflects a value at the date of the financial statements. Current Agenda The GASB Board is The objective of this project is to review and consider Project: Fair Value scheduled to issue alternatives for the further development of the Measurement an Exposure Draft in definition of fair value, the methods used to measure May 2014 fair value and the applicability of fair value guidance to investments and other items currently reported at fair value, and the potential disclosures about fair value. Current Agenda The GASB Board is This project is to assess what additional guidance Project: Fiduciary expected to issue an should be developed regarding the application of the Responsibilities Exposure Draft on fiduciary responsibility criteria in deciding whether and this project in how governments should report fiduciary activities in September 2014 their financial reports. Current Agenda The GASB Board is The objective of this project is to reexamine issues Project: Leases scheduled to issue associated with lease accounting, consider an Exposure Draft in improvements to existing guidance, and provide a November 2014 basis for the GASB Board to consider whether the current guidance is appropriate based on the definitions of assets and liabilities. Current Agenda During the first part The Board will consider the possibility of modifications Project: of 2014, the GASB to the existing standards of accounting and financial Postemployment Board will review reporting for other postemployment benefits (OPEB) Benefits Accounting remaining issues by state and local governmental employers and by the and Financial before issuing trustees, administrators, or sponsors of OPEB plans. Reporting: Other Exposure Drafts on GASB has stated that their objectives are to increase Postemployment employer and plan financial reporting transparency and to improve the Benefits Accounting OPEB accounting usefulness of information to the various users of the and Financial and financial financial statements. Reporting reporting and pensions not within the scope of Statement 68 Page 8 INFORMATIONAL POINTS (cont.) GASS UPDATES (cont.) The GASB has two other projects which are on hold. They include the conceptual framework for recognition and economic condition reporting — financial projections. The GASB revisits GASB standards ten (10) years after issuance. The GASB is currently revisiting GASB Statement No. 34, Basic Financial Statements — and Management's Discussion and Analysis for State and Local Governments, as well as reporting model - related pronouncements including Statements No. 37, Basic Financial Statements — and Management's Discussion and Analysis -for State and Local Governments; Omnibus, No. 41, Budgetary Comparison Schedules — Perspective Differences, and No. 46, Net Assets Restricted by Enabling Legislation, and Interpretation No. 6, Recognition and Measurement of Certain Liabilities and Expenditures in Governmental Fund Financial Statements. The GASB has indicated that they are revisiting the following major provisions of these standards: management's discussion and analysis, government -wide financial statements, fund financial statements, capital asset reporting, budgetary comparisons, special purpose government reporting, and related notes to financial statements. We will share updates with you as they become available. Page 9 REQUIRED COMMUNICATIONS BY THE AUDITOR TO THOSE CHARGED WITH GOVERNANCE BAKER TILLY VIRCHOW KRAUSE, LLP Baker Tilly Virchow Krause, LLP 225 S Sixth St, Ste 2300 Minneapolis, MN 55402 -4661 rel 612 876 4500 Eat 617.238 8900 bakertilly.com To the City Council City of Rosemount Rosemount, Minnesota Thank you for using Baker Tilly Virchow Krause, LLP as your auditor. We have completed our audit of the financial statements of the City of Rosemount for the year ended December 31, 2013 and have issued our report thereon dated May 12, 2014. This letter presents communications required by our professional standards. OUR RESPONSIBILITY UNDER AUDITING STANDARDS GENERALLY ACCEPTED IN THE UNITED STATES OF AMERICA The objective of a financial statement audit is the expression of an opinion on the financial statements. We conducted the audit in accordance with auditing standards generally accepted in the United States of America. These standards require that we plan and perform our audit to obtain reasonable, rather than absolute, assurance about whether the financial statements prepared by management with your oversight are free of material misstatement, whether caused by error or fraud. Our audit included examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our audit does not relieve management or those charged with governance of their responsibilities. As part of the audit we obtained an understanding of the entity and its environment, including internal control, sufficient to assess the risks of material misstatement of the financial statements and to design the nature, timing and extent of further audit procedures. The audit was not designed to provide assurance on internal control or to identify deficiencies in internal control. OTHER INFORMATION IN DOCUMENTS CONTAINING AUDITED FINANCIAL STATEMENTS Our responsibility does not extend beyond the audited financial statements identified in this report. We do not have any obligation to and have not performed any procedures to corroborate other information contained in client prepared documents, such as official statements related to debt issues. PLANNED SCOPE AND TIMING OF THE AUDIT We performed the audit according to the planned scope and timing previously communicated to you in our engagement letter and prior year communication to those charged with governance. BAKER `TI LyLY IN rE RNAT I ONAL Page 10 An Affirmative Action Equal Opportuniry Employ -r To the City Council City of Rosemount QUALITATIVE ASPECTS OF THE ENTITY'S SIGNIFICANT ACCOUNTING PRACTICES Accounting Policies Management is responsible for the selection and use of appropriate accounting policies. In accordance with the terms of our engagement letter, we will advise management about the appropriateness of accounting policies and their application. The significant accounting policies used by the City of Rosemount are described in Note I to the financial statements. As described in Note I to the financial statements, the City changed accounting policies related to reporting certain items previously reported as assets and liabilities by adopting Statement of Governmental Accounting Standards (GASB) Statements No. 65, Items Previously Reported as Assets and Liabilities in 2013. Implementation of this standard had no effect on the beginning balances for the year. We noted no transactions entered into by the City of Rosemount during the year that were both significant and unusual, and of which, under professional standards, we are required to inform you, or transactions for which there is a lack of authoritative guidance or consensus. Accounting Estimates Accounting estimates are an integral part of the financial statements prepared by management and are based on management's knowledge and experience about past and current events and assumptions about future events. Certain accounting estimates are particularly sensitive because of their significance to the financial statements and because of the possibility that future events affecting them may differ significantly from those expected. Financial Statement Disclosures The disclosures in the financial statements are neutral, consistent, and clear. DIFFICULTIES ENCOUNTERED IN PERFORMING THE AUDIT We encountered no significant difficulties in dealing with management in performing our audit. AUDIT ADJUSTMENTS Professional standards require us to accumulate all known and likely misstatements identified during the audit, other than those that are trivial, and communicate them to the appropriate level of management. There were no such misstatements identified related to the fund statements. However, we prepared the GASB No. 34 conversion entries which are summarized in the "Reconciliation of the Balance Sheet of Governmental Funds to the Statement of Net Position" and the "Reconciliation of the Statement of Revenues, Expenditures, and Changes in Fund Balances of Governmental Funds to the Statement of Activities" in the financial statements. A summary of uncorrected financial statement misstatements is attached. Management has determined that their effects are immaterial, both individually and in the aggregate, to the financial statements taken as a whole. DISAGREEMENTS WITH MANAGEMENT For purposes of this letter, professional standards define a disagreement with management as a matter, whether or not resolved to our satisfaction, concerning a financial accounting, reporting, or auditing matter that could be significant to the financial statements or the auditor's report. We are pleased to report that no such disagreements arose during the course of our audit. Page 11 To the City Council City of Rosemount CONSULTATIONS WITH OTHER INDEPENDENT ACCOUNTANTS In some cases, management may decide to consult with other accountants about auditing and accounting matters. If a consultation involves application of an accounting principle to the governmental unit's financial statements or a determination of the type of auditors' opinion that may be expressed on those statements, our professional standards require the consulting accountant to check with us to determine that the consultant has all the relevant facts. To our knowledge, there were no such consultations with other accountants. MANAGEMENT REPRESENTATIONS We have requested certain representations from management that are included in the management representation letter. This letter follows this required communication. INDEPENDENCE We are not aware of any relationships between Baker Tilly Virchow Krause, LLP and the City that, in our professional judgment, may reasonably be thought to bear on our independence. Relating to our audit of the financial statements of for the year ended December 31, 2013, Baker Tilly Virchow Krause, LLP hereby confirms that we are, in our professional judgment, independent with respect to the City in accordance with the Code of Professional Conduct issued by the American Institute of Certified Public Accountants, and provided no services to the City other than audit services provided in connection with the audit of the current year's financial statements and nonaudit services which in our judgment do not impair our independence. > Financial statement preparation > Adjusting journal entries > CIVIC Systems software None of these nonaudit services constitute an audit under generally accepted auditing standards. OTHER AUDIT FINDINGS OR ISSUES We generally discuss a variety of matters, including the application of accounting principles and auditing standards, with management each year prior to retention as the City's auditors. However, these discussions occurred in the normal course of our professional relationship and our responses were not a condition to our retention. OTHER MATTERS With respect to the supplementary information accompanying the financial statements, we made certain inquiries of management and evaluated the form, content, and methods of preparing the information to determine that the information complies with accounting principles generally accepted in the United States of America, the method of preparing it has not changed from the prior period, and the information is appropriate and complete in relation to our audit of the financial statements. We compared and reconciled the supplementary information to the underlying accounting records used to prepare the financial statements or to the financial statements themselves. Page 12 To the City Council City of Rosemount This information is intended solely for the use of the City Council and management and is not intended to be, and should not be, used by anyone other than these specified parties. We welcome the opportunity to discuss the information included in this letter and any other matters. Thank you for allowing us to serve you. Minneapolis, Minnesota May 12, 2014 Page 13 MANAGEMENT REPRESENTATIONS qDnSEMOUNT MINNESOTA May 12, 2014 Baker Tilly Virchow Krause, LLP 225 S. 6th Street, Suite 2300 Minneapolis, MN 55402 Dear Baker Tilly Virchow Krause, LLP; We are providing this letter in connection with your audit of the financial statements of the City of Rosemount as of December 31, 2013 and for the year then ended for the purpose of expressing an opinion as to whether the financial statements present fairly, In all material respects, the respective financial position of the governmental activities, the business -type activities, each major fund, and the aggregate remaining fund information of the City of Rosemount and the respective changes In financial position and cash flows, where applicable, in conformity with accounting principles generally accepted in the United States of America. We confirm that we are responsible for the fair presentation of the previously mentioned financial statements in conformity with accounting principles generally accepted in the United States of America. We are also responsible for adopting sound accounting policies, establishing and maintaining internal control over financial reporting, and preventing and detecting fraud. Certain representations in this letter are described as being limited to matters that are material. Items are considered material, regardless of size, if they involve an omission or misstatement of accounting information that, in the light of surrounding circumstances, makes it probable that the judgment of a reasonable person relying on the information would be changed or influenced by the omission or misstatement. An omission or misstatement that is monetarily small in amount could be considered material as a result of qualitative factors. We confirm, to the best of our knowledge and belief, the following representations made to you during your audit, Financial Statements 1. We have fulfilled our responsibilities, as set out in the terms of the audit engagement letter. 2. The financial statements referred to above are fairly presented in conformity with accounting principles generally accepted in the United States of America. We have engaged you to advise us in fulfilling that responsibility. The financial statements include all properly classified funds of the primary government and all component units required by accounting principles generally accepted in the United States of America to be included in the financial reporting entity. 3, We acknowledge our responsibility for 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. 4. We acknowledge our responsibility for the design, implementation, and maintenance of internal control to prevent and detect fraud. 5. Significant assumptions we used in making accounting estimates are reasonable. SPIRIT OF PRIDE AND PROGRESS Rosemount City Hall • 2875 145th Street West • Rosemount, MN 55068 -4997 651 -423 -4411 , TDD /TTY 651 -423 -6219 - Fax 651- 423 -5203 www.cl.rosemount.mn.us 6. Related party relationships and transactions, including revenues, expenditures /expenses, loans, transfers, leasing arrangements, and guarantees, and amounts receivable from or payable to related parties have been appropriately accounted for and disclosed in accordance with the requirements of accounting principles generally accepted in the United States of America. 7. All events subsequent to the date of the financial statements and for which accounting principles generally accepted in the United States of America require adjustment or disclosure have been adjusted or disclosed. No other events, including instances of noncompliance, have occurred subsequent to the balance sheet date and through the date of this letter that would require adjustment to or disclosure in the aforementioned financial statements. 8. All material transactions have been recorded in the accounting records and are reflected in the financial statements. 9. We believe the effects of the uncorrected financial statement misstatements summarized in the attached schedule are immaterial, both individually and in the aggregate, to the basic financial statements taken as a whole. In addition, you have recommended adjusting journal entries, and we are in agreement with those adjustments. 10. There are no known or possible litigation, claims, and assessments whose effects should be considered when preparing the financial statements. There are no unasserted claims or assessments that our lawyer has advised us are probable of assertion and must be disclosed in accordance with accounting principles generally accepted in the United States of America, 11. Guarantees, whether written or oral, under which the City is contingently liable, if any, have been properly recorded or disclosed. Information Provided 12. We have provided you with: a. Access to all information, of which we are aware, that is relevant to the preparation and fair presentation of the financial statements, such as financial records and related data , documentation, and other matters. b. Additional information that you have requested from us for the purpose of the audit. c. Unrestricted access to persons within the entity from whom you determined it necessary to obtain audit evidence. d. Minutes of the meetings of the City Council or summaries of actions of recent meetings for which minutes have not yet been prepared. 11 We have disclosed to you the results of our assessment of the risk that the financial statements may be materially misstated as a result of fraud. 14. We have no knowledge of any fraud or suspected fraud that affects the entity and involves: a. Management, b. Employees who have significant roles in internal control, or c. Others where the fraud could have a material effect on the financial statements. 15. We have no knowledge of any allegations of fraud or suspected fraud affecting the entity received in communications from employees, former employees, regulators, or others. 16. We have no knowledge of known instances of noncompliance or suspected noncompliance with provisions of laws, regulations, contracts, or grant agreements, or abuse, whose effects should be considered when preparing financial statements. 17. We have disclosed to you all known related parties and all the related party relationships and transactions of which we are aware. Other 18. There have been no communications from regulatory agencies concerning noncompliance with, or deficiencies in, financial reporting practices. 19. We have a process to track the status of audit findings and recommendations. 20. We have identified to you any previous financial audits, attestation engagements, and other studies related to the audit objectives and whether related recommendations have been implemented. 21. We have provided our views on reported findings, conclusions, and recommendations, as well as our planned corrective actions, for our report. 22. The City has no plans or intentions that may materially affect the carrying value or classification of assets, liabilities, or equity. 23. We are responsible for compliance with federal, state, and local laws, regulations, and provisions of contracts and grant agreements applicable to us, including tax or debt limits and debt contracts; and we have identified and disclosed to you all federal, state, and local laws, regulations and provisions of contracts and grant agreements that we believe have a direct and material effect on the determination of financial statement amounts or other financial data significant to the audit objectives, including legal and contractual provisions for reporting specific activities in separate funds. 24. There are no: a. Violations or possible violations of budget ordinances, federal, state, and local laws or regulations (including those pertaining to adopting and amending budgets), provisions of contracts and grant agreements, tax or debt limits, and any related debt covenants whose effects should be considered for disclosure in the financial statements or as a basis for recording a loss contingency, or for reporting on noncompliance. b. Other liabilities or gain or loss contingencies that are required to be accrued or disclosed by accounting principles generally accepted in the United States of America. c. Nonspendable, restricted, committed, or assigned fund balances that were not properly authorized and approved. d. Rates being charged to customers other than the rates as authorized by the applicable authoritative body. e. Violations of restrictions placed on revenues as a result of bond resolution covenants such as revenue distribution or debt service funding. 25. In regards to the non - attest services performed by you listed below, we have 1) made all management decisions and performed all management functions; 2) designated an individual with suitable skill, knowledge, or experience to oversee the services; 3) evaluated the adequacy and results of the services performed, and 4) accepted responsibility for the results of the services. a. Financial statement preparation b. Adjusting journal entries c. Civic Systems software None of these non - attest services constitute an audit under generally accepted auditing standards, including Government Auditing Standards, 26. The City of Rosemount has satisfactory title to all owned assets, and there are no liens or encumbrances on such assets nor has any asset been pledged as collateral. 27. The City of Rosemount has complied with all aspects of contractual agreements that would have a material effect on the financial statement in the event of noncompliance. 28. We have followed all applicable laws and regulations in adopting, approving, and amending budgets. 29. The financial statements include all component units as well as joint ventures with an equity interest, and properly disclose all other joint ventures and other related organizations. 30. The financial statements properly classify all funds and activities. 31. All funds that meet the quantitative criteria in GASB Statement No. 34 and No. 37 for presentation as major are identified and presented as such and all other funds that are presented as major are particularly important to financial statement users. 32. Components of net position (net investment in capital assets; restricted; and unrestricted) and equity amounts are properly classified and, if applicable, approved. 33. The City of Rosemount has no derivative financial instruments such as contracts that could be assigned to someone else or net settled, interest rate swaps, collars or caps. 34. Provisions for uncollectible receivables have been properly identified and recorded. 35. Expenses have been appropriately classified in or allocated to functions and programs in the statement of activities, and allocations have been made on a reasonable basis. 36. Revenues are appropriately classified in the statement of activities within program revenues and general revenues. 37. Interfund, internal, and intra - entity activity and balances have been appropriately classified and reported. 38. Deposits and investment securities are properly classified as to risk, and investments are properly valued. Collateral ization agreements with financial institutions, if any, have been properly disclosed. 39. Capital assets, including infrastructure and intangible assets, are properly capitalized, reported, and, if applicable, depreciated /amortized. Any known impairments have been recorded and disclosed. 40. Tax - exempt bonds issued have retained their tax - exempt status.. 41. We have appropriately disclosed the City of Rosemount's policy regarding whether to first apply restricted or unrestricted resources when an expense is incurred for purposes for which both restricted and unrestricted net position are available and have determined that net position were properly recognized under the policy. We have also disclosed our policy regarding how restricted and unrestricted fund balance is used when an expenditure is incurred for which both restricted and unrestricted fund balance is available, including the spending hierarchy for committed, assigned, and unassigned amounts. 42. We acknowledge our responsibility for the required supplementary information (RSI). The RSI is measured and presented within prescribed guidelines and the methods of measurement and presentation have not changed from those used in the prior period. We have disclosed to you any significant assumptions and interpretations underlying the measurement and presentation of the RSI. 43. With respect to the supplementary information, (SI): a. We acknowledge our responsibility for presenting the SI in accordance with accounting principles generally accepted in the United States of America, and we believe the SI, including its form and content, is fairly presented in accordance with accounting principles generally accepted in the United States of America. The methods of measurement and presentation of the SI have not changed from those used in the prior period, and we have disclosed to you any significant assumptions or interpretations underlying the measurement and presentation of the supplementary information. If the SI is not presented with the audited financial statements, we will make the audited financial statements readily available to the intended users of the supplementary information no later than the date we issue the supplementary information and the auditor's report thereon. 44. We have implemented GASB Statement No. 63 and believe that all deferred outflows and deferred inflows have been identified and properly classified in the financial statements and any other required classifications have been computed in compliance with the Standard. Sincerely, City of Rosemount I / >J City of Rosemount SUMMARY OF UNCORRECTED FINANCIAL STATEMENT MISSTATEMENTS December 31, 2013 Financial Statements Effect - Debit (Credit) to Financial Statement Total Total Total Change in Current Noncurrent Total Assets/ Current Noncurrent Total Liabilities/ Net Position/ Total Expenses/ Net Position/ Assets Assets Deferred Outflows Liabilities Liabilities Deferred Inflows Fund Balances Revenues Expenditures Fund Balances Governmental Activities - - 31,716 - - - 31.716 3( 2,645) - (32,645) Business -Type Activities - - 49,263 - - - 49.263 (48,779) - (48,779) General Fund - - 21,550 - - - 21,550 (16,860 (16,860) Debt Service Fund - - 1,518 - - 1.518 2,240 - (2,240) Capital Projects Fund - 6,143 - - 6,143 5,58 - (5,567) Water Fund 12,583 - 12,563 - - - 12,563 15,134 - (15,134) Sewer Fund 19,821 - 19,821 - - _19,621 12,500 - (12,500) Storm Water Fund 16.879 - 16,879 - - - 16,879 21145 - (21,145) Remaining Funds - - 2,505 - - - 2,505 (7.95 - (7,957) Note: The entries summarized above relate to the recording of accrued interest receivable. The impact on total revenues and change in net position /fund balances is netted by the reversal of prior year balances.