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3.a. Presentation and Acceptance of 2014 Comprehensive Annual Financial Report
EXECUTIVE SUMMARY City Council Meeting Date: June 16, 2015 AGENDA ITEM: Presentation and Acceptance of 2014 Comprehensive Annual Financial Report (CAFR) AGENDA SECTION: Presentations PREPARED BY: Jeff May, Finance Director AGENDA NO. 3.a. ATTACHMENTS: Resolution, PowerPoint Presentation, CAFR, Independent Auditor’s Report, Communication to those Charged with Governance and Management Memo APPROVED BY: ddj RECOMMENDED ACTION: Motion to adopt a Resolution Accepting the 2014 Comprehensive Annual Financial Report. ISSUE Review and accept the 2014 CAFR. BACKGROUND A representative from our audit firm, Baker Tilly Virchow Krause, LLP, will be here on Tuesday evening, June 16th, to review the City of Rosemount’s 2014 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 2014 CAFR. CITY OF ROSEMOUNT DAKOTA COUNTY, MINNESOTA RESOLUTION 2015 - A RESOLUTION ACCEPTING THE 2014 COMPREHENSIVE ANNUAL FINANCIAL REPORT WHEREAS, the City of Rosemount has been presented its 2014 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 2014 Comprehensive Annual Financial Report, prepared with the assistance of our audit firm of Baker Tilly Virchow Krause, LLP. ADOPTED this 16th day of June, 2015. _____________________________ William H. Droste, Mayor ATTEST: __________________________ Clarissa Hadler, City Clerk Ba k e r T i l l y V i r c h o w K r a u s e , L L P , i s an independently owned and managed me m b e r o f B a k e r T i l l y I n t e r n a t i o n a l . © 2010 Baker Tilly Virchow Krause, LLP Ci t y o f R o s e m o u n t Re v i e w o f 2 0 1 4 A u d i t Th i s r e p o r t i s i n t e n d e d s o l e l y f o r t h e us e o f t h e C i t y C o u n c i l a n d M a n a g e m e n t . Ju n e 1 6 , 2 0 1 5 Ag e n d a > Re q u i r e d A u d i t o r C o m m u n i c a t i o n s > Au d i t e d F i n a n c i a l S t a t e m e n t s ( C A F R ) > MN L e g a l C o m p l i a n c e T e s t i n g > Qu e s t i o n s 2 Re q u i r e d A u d i t C o m m u n i c a t i o n s > Au d i t o r s ’ r e s p o n s i b i l i t y – F i n d i n g s s i m i l a r t o p r i o r y e a r , w h i c h ar e c o m m o n f o r c i t i e s y o u r s i z e > No c h a n g e s t o p l a n n e d s c o p e a n d ti m i n g > No c h a n g e s t o a c c o u n t i n g p o l i c i e s > Ac c o u n t i n g e s t i m a t e s – D e p r e c i a b l e l i v e s f o r c a p i t a l a s s e t s > Fi n a n c i a l s t a t e m e n t d i s c l o s u r e s a r e ne u t r a l , c l e a r a n d c o n s i s t e n t > No d i f f i c u l t i e s i n p e r f o r m i n g t h e a u d i t > Au d i t a d j u s t m e n t s – O n l y s i g n i f i c a n t a u d i t a d j u s t m e n t re l a t e d t o t h e a c c o u n t i n g t r e a t m e n t o f a $ 4 0 0 , 0 0 0 c o n t r i b u t i o n – P a s s e d a d j u s t i n g e n t r i e s > No d i s a g r e e m e n t s w i t h ma n a g e m e n t > No c o n s u l t a t i o n s w i t h o t h e r ac c o u n t a n t s > Ma n a g e m e n t r e p r e s e n t a t i o n s – L e t t e r h a s b e e n p r o v i d e d > In d e p e n d e n c e > Ot h e r f i n d i n g s o r i s s u e s i n n o r m a l co u r s e o f a u d i t > Al s o i n c l u d e d v a r i o u s in f o r m a t i o n a l m a t t e r s i n l e t t e r – I n v e s t m e n t m a t u r i t i e s / p o l i c y – N e w s t a n d a r d s – G A S B N o . 6 8 3 Fi n a n c i a l S t a t e m e n t s ( C A F R ) Fi n a n c i a l S t a t e m e n t s ( C A F R ) > In d e p e n d e n t A u d i t o r s ’ R e p o r t – U n m o d i f i e d o p i n i o n > Ma n a g e m e n t ’ s D i s c u s s i o n a n d A n a l y s i s > St a t e m e n t o f N e t P o s i t i o n – A s s e t s i n c r e a s e d 4 % t o $ 2 2 5 m i l l i o n ( 7 7 % r e l a te s t o t h e b o o k v a l u e o f c a p i t a l a s s e t s ) – L i a b i l i t i e s i n c r e a s e d 4 % t o $ 2 0 . 7 m i l l i o n – T o t a l n e t p o s i t i o n ( e q u i t y ) i n c r e a s e d b y 4 % » U n r e s t r i c t e d e q u i t y p o r t i o n o f t h e to t a l i n c r e a s e w a s a p p r o x i m a t e l y 7 0 % > St a t e m e n t o f A c t i v i t i e s – F i g u r e s c o n s i s t e n t w i t h t h e p r i o r y e a r w i t h e x c e p t i o n o f i n v e s t m e n t r e t u r n s w h i c h y i e l d e d $6 0 0 , 0 0 0 o f g a i n s i n 2 0 1 4 c o m p a r e d t o $ 8 5 0 , 0 0 0 o f lo s s e s i n 2 0 1 3 . A l s o , c o n t r i b u t i o n s o f ap p r o x i m a t e l y $ 2 m i l l i o n w e r e r e c e i v e d i n 2 0 1 4 . > Mo d i f i e d A c c r u a l G o v e r n m e n t a l F u n d S t a t e m e n t s – S i m i l a r c h a n g e s a s n o t e d a b o v e a l o n g w i t h a n i n c r ea s e i n c a p i t a l o u t l a y e x p e n d i t u r e s f r o m $7 . 6 m i l l i o n t o $ 9 . 5 m i l l i o n ( t h o s e c o s t s ar e c a p i t a l i z e d a n d d e p r ec i a t e d o n t h e S O A ) 4 Fi n a n c i a l S t a t e m e n t s ( C A F R ) , c o n t . Fi n a n c i a l S t a t e m e n t s ( C A F R ) , c o n t . > Fi n a n c i a l S t a t e m e n t s f o r E n t e r p r i s e F u n d s – B a l a n c e s h e e t – u n r e s t r i c t e d e q u i t y w a s a p p r o x im a t e l y $ 7 . 2 m i l l i o n f o r w a t e r u t i l i t y , $ 5 . 8 mi l l i o n f o r s e w e r u t i l i t y , a n d $ 6 . 1 m i l l i o n f o r t h e s t o r m w a t e r u t i l i t y » S i g n i f i c a n t c a p i t a l p r o j e c t s i n 2 0 1 4 r e s u l t i n g in i n c r e a s e s t o r e l a t e d b a l a n c e s h e e t l i n e s – I n c o m e s t a t e m e n t – o v e r a l l n e t i n c o m e w a s a p p r o x i m a t e l y $ 4 0 0 , 0 0 0 b e f o r e c a p i t a l co n t r i b u t i o n s a n d t r a n s f e r s ( c o m p a r e s f a v o r ab l y t o 2 0 1 3 l o s s d r i v e n b y i n v e s t m e n t pe r f o r m a n c e a n d a n i n c r e a s e i n c o n n e c t i o n f e e s ) – C a s h f l o w s s t a t e m e n t – n e t o p e r a t i n g c a s h fl o w g e n e r a t e d w a s a p p r o x i m a t e l y $ 2 . 3 m i l l i o n > Fo o t n o t e s – S t a n d a r d d i s c l o s u r e s > Bu d g e t t o A c t u a l R e s u l t s f o r t h e G e n e r a l F u n d – R e v e n u e s e x c e e d e d b u d g e t b y $ 8 9 3 , 0 0 0 o r r o u g h l y 8 % ( p r i m a r i l y d r i v e n b y e x c e s s o f $2 9 2 , 0 0 0 f o r b u i l d i n g p e r m i t s a n d $ 3 2 3 , 0 0 0 f o r i n v e s t m e n t r e t u r n s ) – E x p e n d i t u r e s w e r e b e l o w b u d g e t b y 4 % o r $ 4 5 0 , 0 0 0 ( a l l d e p a r t m e n t s c o n t r i b u t e d ) > St a t i s t i c a l S c h e d u l e s 5 MN L e g a l C o m p l i a n c e R e v i e w Fo l l o w i n g a r e a s t e s t e d w i t h r e g a r d s t o r e l e v a n t s t a t e s t a t u t e s : > Co n t r a c t i n g a n d b i d d i n g > De p o s i t s a n d i n v e s t m e n t s > Co n f l i c t s o f i n t e r e s t > Pu b l i c i n d e b t e d n e s s > Cl a i m s a n d d i s b u r s e m e n t s > Ta x i n c r e m e n t f i n a n c i n g > Mi s c e l l a n e o u s p r o v i s i o n s 6 Qu e s t i o n s ? 7 8 Ry a n E n g e l s t a d , C P A , P a r t n e r Ry a n . E n g e l s t a d @ b a k e r t i l l y . c o m 61 2 8 7 6 4 6 1 3 22 5 S o u t h 6 t h S t r e e t , S u i t e 2 3 0 0 Mi n n e a p o l i s , M N 5 5 4 0 2 CITY OF ROSEMOUNT, MINNESOTA COMPREHENSIVE ANNUAL FINANCIAL REPORT FOR THE YEAR ENDED DECEMBER 31,2014 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 31,2014 TABLE OF CONTENTS INTRODUCTORY SECTION Letter of Transmittal GFOA Certificate of Achievement Organizational Chart List of Elected and Appointed Officials, Consultants and Advisors FINANCIAL SECTION Independent Auditors' Report Management's Discussion and Analysis Basic Financial Statements: Government-wide Financial Statements: Statement of Net Position Statement of Activities Fund Financial Statements: Balance Sheet - Governmental Funds Statement of Revenues, Expenditures and Changes in Fund Balances - Governmental Funds Reconciliation of the Statement of Revenues, Expenditures and Changes in Fund Balances of Governmental Funds to the Statement of Activities Statement of Net Position - Proprietary Funds Statement of Revenues, Expenses, and Changes in Net Position - Proprietary Funds Statement of Cash Flows - Proprietary Funds Notes to the Financial Statements Required Supplementary Information: Schedule of Revenues Compared to Budget (Budgetary Basis) - Budget and Actual- General Fund Schedule of Expenditures and Other Uses (Budgetary Basis) - Budget and Actual- General Fund Notes to Required Supplementary Information Supplementary Information: Combining and Individual Fund Statements and Schedules: Combining Balance Sheet - Nonmajor Governmental Funds Combining Statement of Revenues, Expenditures and Changes in Fund Balances - Nonmajor Governmental Funds Schedules of Revenues, Expenditures and Changes in Fund Balances (Budgetary Basis)- Budget and Actual: Building CIP Capital Project Sub-Fund Street CIP Capital Project Sub-Fund Equipment CIP Capital Project Sub-Fund i viii ix x xi - xiii 1 - 10 11 12 13 14 15 16 17 18 - 19 20 - 50 51 52 53 54 55 56 57 58 CITY OF ROSEMOUNT COMPREHENSIVE ANNUAL FINANCIAL REPORT As of and for the Year Ended December 31,2014 TABLE OF CONTENTS STATISTICAL SECTION (Unaudited) Net Position by Component Changes in Net Position Fund Balances, Governmental Funds Changes in Fund Balances, Governmental Funds Assessed Value (or Tax Capacity) and Estimated Market Value of All Taxable Property Property Tax Rates - All Direct and Overlapping Governmental Units Principal Property Tax Payers Property Tax Levies and Collections Ratios of Outstanding Debt by Type Ratios of Net General Bonded Debt Outstanding Direct and Overlapping Governmental Activities Debt Legal Debt Margin Information Pledged-Revenue Coverage Demographic and Economic Statistics Principal Employers Full-Time/Permanent Part-Time City Government Employees by Function/Program Operating Indicators by Function/Program Capital Asset Statistics by Function/Program 59 60 62 63 64 65 66 67 68 69 70 71 72 73 74 75 76 77 " ROSEMOUNT MINNESOTA June 9,2015 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, 2014. 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, 2014, 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 31,2014, 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 Strjet 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: Population Percent Population Increase Increase 2014 Staff Estimate 23,044 1,170 5.33% 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 108 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 about 1,000 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 1 st 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 so". The council holds a public hearing on the proposed budget and must adopt a final budget and levy by no later than December zo", prior to the close of the City's fiscal year. ii 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 51-52 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 western one third of the community is urbanized with new neighborhoods under construction in the central portion of the community. This is the area which was the subject of an Alternative Urban Areawide Review (AUAR) completed in 2007. A similar review was undertaken and approved in 2013 for the 5,000 acres owned by the University of Minnesota in Rosemount and to the south, in Empire Township. The City continues to work with University representatives to market the business park area on the east side of the landholdings and attract residential development in the west. The City is experiencing more inquiries about available land for new residential and industrial development. Projects that were abandoned several years ago are now being purchased by builders looking to finish the neighborhoods. The largest taxpayers continue to be the same landholders the City has seen for the last several years. Flint Hills Resources continues to be the largest tax payer with approximately 12.9% of the City's total local tax capacity. Labor market data is very impressive for the State, Minneapolis/St. Paul metropolitan area and Dakota County, in which Rosemount is located. 2014 labor force numbers were 2,964,848; 1,876,171; and 233,829 respectively with unemployment rates of 3.6%; 3.3% and 3.2% to match. These figures compare quite favorably with national figures. Community leadership has preserved 533 beautiful acres of land for 29 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 in the City is guided by the adopted 2030 Comprehensive Plan. The Plan, approved in 2009, has been amended on several occasions to permit new development more reflective of the current market demand than what was envisioned when adopted. The City has started to compile information associated with the 2040 Comprehensive Plan process. The current plan anticipates 6,500 more acres of urbanized growth for all types of development; residential, industrial and commercial. It is anticipated that land uses, and potentially future development locations may be modified in the upcoming Comprehensive Plan due to market demand, existing infrastructure and land ownership. Other factors New residential units continue to increase over the previous year. In 2013 there were 96 building permits pulled for new residential units; in 2014 there were 180 permitted units. A large part of the increase came from a 92-unit senior housing facility to be located in the City's historic Downtown. There are presently 234 platted lots available for residential development. 123 of these lots were designated for multi-family and had been left vacant during the economic downturn. A developer is picking up one of the projects and another is investigating building out the remaining, previously approved townhomes. iii Recent construction has resulted in a significant increase in future valuation for the community tax base. The estimated value of residential construction in 2014 was $45,310,000, which is greater than all the years since 2006. Commercial and industrial growth has also accelerated with a total estimated construction value of $28,000,000. Large industrial construction projects included blast modules and upgrades at Flint Hills Refinery, a processing building at SKB Environmental and tenant improvements at Akona. Commercial projects include a new retail space for Fluegels, Anytime Fitness retail mall, tenant finishes for Chuck & Don's and Von Hanson's, and interior upgrades at the Marcus Theater. 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 In 2014, we expanded our use of web mapping applications for all the utility maintenance processes (hydrant flushing, gate valve inspections, sump inspections / cleaning and sewer jetting). The new applications eliminated some of the licensing and access issues we experienced in the past when multiple users needed the software simultaneously. Support staff continues to explore new technologies that allow the maintenance staff to be more productive and efficient in their daily activities. Capital Improvement Projects The Public Works Department coordinated and / or completed several capital improvement projects in 2014: • Roof replacement on City Hall • Elevator upgrades at City Hall • Remodel front office area at City Hall, including new carpet • Replace HVAC units at City Hall and Fire Station 1 • Pump recondition at Well 12 • Inspection of all four water towers • Hydrant painting (approximately 120 hydrants) • Wash and stain bandshell at Central Park • New roof, new fascia and new stain at Schwarz Park shelter 2014 Street Improvements The 2014 Street Improvement Project included mill and overlay improvements to 0.6 miles of streets in the Carrollton 2nd Addition, as well as 0.6 miles of Shannon Parkway from 145th Street West to Connemara Trail. Construction Projects The Engineering Division coordinated the work on several construction projects in 2014: • Prestwick Place 8th, s" and io" Additions - These neighborhoods include a total of 68 single- family homes. It is the continuation of the development of Prestwick Place, located west of Akron Avenue along Connemara Trail. • Greystone 3rd Addition - The third phase of the Greystone development includes 19 single-family homes. It is located on the east side of Akron Avenue, north of CSAH 42. • Bella Vista 2nd Addition - This neighborhood includes 28 single-family homes and is the first phase of the Bella Vista development located east of Bacardi Avenue and north of Bonaire Path. • Bacardi Avenue - This project involves upgrading approximately Y2 mile of Bacardi Avenue to a paved roadway. Trunk water main and sanitary sewer were installed to serve future residential development to the east of Bacardi Avenue. • Well 16 - The City's eighth municipal well is located on Bacardi Avenue at the northwest corner of the Bella Vista development. The production well will be drilled in 2015 and is expected to go online in 2016. iv The Police Department is responsible for policing services to the community to ensure safety and response to service calls. A Community Oriented Policing philosophy is core to all services through partnerships and relationships with citizens, businesses and community organizations. Staffing levels are continually evaluated to meet the needs of a growing community. The specific service functions within the Police Department are described below. • Police Administration - The budget provides for the overall leadership, planning, coordination and management of personnel and administration of activities within the Police Department. This includes the collection, preparation and filing of crime data and miscellaneous reports with the State of Minnesota; preparation and oversight of the operating and capital improvements budgets; and strategic planning for the future needs of the Department and the community. Police Department leadership is also involved in many consolidated services governance boards that contribute to policing services for the city. The Dakota Communications Center (DCC), Criminal Justice Integrated Information Network (CJIIN), Dakota County Drug Task Forces and Dakota County Multi-Agency Assistance Group (MAAG) are consolidated services organizations that contribute to Rosemount's policing services. • Records Unit - The Police Department's Records Unit is responsible for the processing of over 2,200 case reports each year. Reports require transcription and compilation for transmittal to the city or county prosecutor's office or any other agency (e.g., social services, county crises, corrections) requiring information for service to the community. Records staff ensure the Police Department is compliant with all Minnesota Bureau of Criminal Apprehension data management laws, regulations and reporting requirements. Administrative support is provided to the entire Police Department for gun permit applications, criminal background checks and city licensing requirements. • Patrol Operations - Uniformed patrol is the core function of the Police Department and the most visible in the community. Through 24-hour daily patrols in marked police vehicles, patrol officers respond to calls for service, investigate traffic accidents, conduct preliminary criminal investigations, enforce traffic laws and enforce criminal laws. Patrol Officers respond to medical calls as trained first responders. Through patrol operations the Police Department meets its goal of the protection of life and property and creating a sense of safety and security in the community. Patrol Officers spend a significant amount of time developing relationships within the community and contacting members of community organizations. Patrol Officers perform additional specialty assignments as Crime Scene Technicians, Use-of-Force Instructors, Special Operations Team (SOT), Multi-Agency Assistance Group (MAAG) Tactical Officers, Drug Recognition Experts, and Field Training Officers. • Criminal Investigations - Patrol Officers and investigators are responsible for the investigation of criminal incidents through evidence gathering and analysis, witness and suspect interviews, and court preparation and testimony. Complex investigations or those requiring multi-jurisdictional or agency involvement are coordinated by the investigator. This is accomplished by working cooperatively with other police agencies, the County Attorney's Office, Child Protection, victim services and other local, state and federal law enforcement agencies. One investigator is assigned to the Dakota County Drug Task Force, a multi-jurisdictional joint powers entity, whose mission is to investigate drug crimes in the City of Rosemount and throughout Dakota County. In 2014 we added an investigative Sergeant. He is responsible for overseeing the investigative division which includes the Community Resource Officer (CRO), the School Resource Officer (SRO), Crisis Intervention Team (CIT), the Drug Task Force Officer along with the two officers assigned to be investigators. • Crime Prevention and Community Education A significant effort is made by the Police Department to inform residents of crime within the community, methods that citizens can take to help prevent crimes and building relationships with community members. While these objectives are part of each officer's daily responsibilities, there are specific programs that are frequently associated with community policing and that emphasize the v need for the police and citizens to work together to prevent criminal activity and reduce the opportunities for criminals to commit crimes. ~ School Liaison - Officers serve as a liaison to the Rosemount Middle and the Rosemount High School. One officer is assigned full-time to the High School and a second officer spends one-quarter time at the Middle School. The liaison officers investigate criminal incidents that occur at the schools or that involve students at the schools. In addition, the liaisons work with the school staff to enhance the safety and security for both staff and students. Presentations on a variety of topics are made by the liaison to classes at all grade levels. The Middle School officer also spends time at each of the elementary schools, working with staff on any issues and making presentations in classes. ~ Community Education - In order to work together with the community, police must share information concerning criminal activity and crime prevention with the community. Officers are available to make presentations to community groups and organizations on a variety of topics. In addition, officers provide prevention tips to persons on a daily basis who report criminal activity. Several events are also held throughout the year in an effort to build relationships with the residents and business persons. These include Night-to-Unite block parties and gatherings, Neighborhood Watch meetings and Public Safety in the Park events. ~ Reserve Officer Program - Reserve officers are volunteers who supplement the staff of sworn officers of the Department. The reserve officers are utilized to handle traffic and crowd control duties during city festivals and celebrations or emergencies, such as hazardous materials spills or leaks, damage resulting from tornadoes or other severe weather and major criminal incidents. Reserve officers patrol on some evenings and handle service calls; for example, asslstinq stalled motorists and animal complaints. They are also utilized regularly to provide crime prevention information to citizens at community events or through other programs. ~ Chaplain Program - The Police Chaplains assist in a variety of situations in which individuals or families are having difficulties. Chaplains are able to provide support to persons that are experiencing stress as a result of the death of a loved one, marital or family problems, financial struggles or any other event. By utilizing the chaplains to console and counsel persons in crisis, police officers are able to focus on their primary duties, while the chaplains are able to remain with the persons involved in the crisis. ---- ----------- --- • Animal Control- The Police Department is responsible for the enforcement of ordinances related to the control and care of domestic animals. These tasks are mainly handled by Community Service Officers. Their duties include the licensing of dogs and ferrets, assisting in the handling of stray, lost or injured animals and other complaints of animals causing a nuisance by barking, howling or being allowed to roam off the owner's property. • Code Enforcement - The Police Department assists the Community Development Department with code enforcement of city ordinances related to property maintenance and outside storage. The Department's Community Service Officers primarily handle this effort. Property owners that are observed to be in violation of an ordinance are notified of the violation and given an explanation of how to remedy the violation. The enforcement of city ordinances is important to maintain community standards, which help the City attain its mission of providing a safe, healthy and pleasant community. • Emergency Management - The City has an all-hazards emergency plan and the Chief of Police serves as the City's emergency manager. The emergency manager is responsible for the development of emergency plans in the event of a chemical, technical or natural disaster in the community (e.g. tornado, flooding, school shooting, or hazardous materials release). The Chief of Police represents the City of Rosemount on the Dakota County Domestic Preparedness Committee (DCDPC). The DCDPC is comprised of police, fire, dispatch, EMS, public health, and medical facility representatives to aid all Dakota County cities and Dakota County with all-hazards emergency planning and leadership. vi In 1999, a Family Resource Center building in Rosemount began operations. The 3600 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 3600 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, 2013. This was the eighteenth 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. Finance Director vii 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, 2013 Executive Director/CEO '+-I t c ro :::J..c oU E- O) ro en C o .0 0:::'+-1 ro '+- N 0 .- C ~ro .- C') >< U L.. -..-I 0 CITY OF ROSEMOUNT CITY OFFICIALS As of and for the Year Ended December 31,2014 Term of Office Term Expires ELECTED OFFICIALS: Mayor Bill Droste Council member Mark DeBettignies Council member Vanessa Demuth Council member Kim Shoe-Corrigan Council member Jeff Weisensel Four Years Four Years Four Years Four Years Four Years December 31, 2014 December 31,2014 December 31,2016 December 31,2014 December 31,2016 APPOINTED OFFICIALS: City Administrator Finance Director Assistant City Administrator City Engineer Community Development Director Police Chief Fire Chief Parks and Recreation Director Dwight D. Johnson Jeffrey A. May Emmy Foster Andrew Brotzler Kim Lindquist Mitchell Scott Richard Schroeder Dan Schultz CONSULTANTS AND ADVISORS: Legal Kennedy & Graven Fluegel Law Firm, PA Baker Tilly Virchow Krause, LLP Springsted, Inc. Ehlers & Associates, Inc. WSB & Associates Auditing Fiscal Engineering x THIS PAGE IN TEN TIONA LL Y LEFT BLANK ~AKER TILLY Baker Tilly Virchow Krause, LLP 225 S Sixth St, Ste 2300 Minneapolis, MN 55402-4661 tel 612 8764500 fax 612 238 8900 bakertilly.corn INDEPENDENT AUDITORS' REPORT To the Honorable Mayor and Members of the City Council City of Rosemount 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, as of and for the year ended December 31, 2014, and the related notes to the financial statements, which collectively comprise the City of Rosemount'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 audit. We conducted our audit 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 of Rosemount'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 of Rosemount'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. ~anindependentmemberOf BAKER TILLY INTERNATIONAL Page xi An Affirmative Action Equal Opportunity Employer To the Honorable Mayor and Members of the City Council City of Rosemount 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 31,2014 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. 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 of Rosemount's basic financial statements. The combining and individual fund financial statements and schedules 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 and schedules 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 of Rosemount'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 xii To the Honorable Mayor and Members of the City Council City of Rosemount Prior- Year Comparative Information We have previously audited the City of Rosemount's 2013 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 12, 2014. 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. Minneapolis, Minnesota June 9,2015 Page xiii THIS PAGE INTEN TIONA LL Y LEFT BLANK 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, 2014. 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 $203,593,295 (net position). Of this amount, $40,272,527 (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 $8,452,230. Most of this increase is attributable to an increase of our capital assets which included significant funding by developers, as well as a contribution received from the maturity of a trust. > At year end, unassigned fund balance for the General Fund was $6,288,615, or 55 percent of the total General Fund expenditures budgeted for the upcoming year. Comparison of this balance to prior years' balances is illustrated on the table on page 8. > The City's total debt increased by $285,000 (approximately 2%) during the current year. The reason for this increase was that there was one larger new debt issuance for new development, offset almost entirely by 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). Page 1 Both the government-wide financial statements distinguish functions of the City that are principally supported by taxes and intergovernmental revenues (governmental activities) from other functions that are intended to recover all or a significant portion of their costs through user fees and charges (business- type activities). The governmental activities of the City include general government, public safety, public works, recreation, and community development. The business-type activities of the City include water, sewer, storm water and an ice arena. The government-wide financial statements include not only the City itself, but also a legally separate port authority, which functions as the economic development arm of the City, and therefore has been blended in with the primary government. The government-wide financial statements can be found on pages 11-12 of this report. 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 14-16 of this report. Page 2 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 17-19 of this report. Notes to the financial statements The notes provide additional information that is essential to a full understanding of the data provided in the government-wide and fund financial statements. The notes to the financial statements can be found on pages 20-50 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 54-58 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 $203,593,295 at the close of the most recent fiscal year. The largest portion of the City's net position (77 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. Page 3 City of Rosemount's Statement of Net Position Governmental Business-Type 2014 Governmental Business-Type 2013 Activities Activities Totals Activities Activities Totals Current and other assets $ 30,691,981 $ 19,807,097 $ 50,499,078 $ 25,856,944 $ 19,008,677 $ 44,865,621 Capital assets 74,553,402 99,594,408 174,147,810 73,044,716 97,705,585 170,750,301 Total assets 105,245,383 119,401,505 224,646,888 98,901,660 116,714,262 215,615,922 Long-term liabilities outstanding 17,088,572 1,615,299 18,703,871 16,258,300 2,148,312 18,406,612 Other liabilities 1,713,810 243,361 1,957,171 1,288,416 203,702 1,492,118 Total liabilities 18,802,382 1,858,660 20,661,042 17,546,716 2,352,014 19,898,730 Deferred inflows of resources 392,551 392,551 576,127 576,127 Net position: Net investment in capital assets 58,438,402 98,194,408 156,632,810 57,746,938 95,770,585 153,517,523 Restricted 6,687,958 6,687,958 7,148,774 7,148,774 Unrestricted 20,924,090 19,348,437 40,272,527 15,883,105 18,591,663 34,474,768 Total net position $ 86,050,450 $ 117,542,845 $ 203,593,295 $ 80,778,817 $ 114,362,248 $ 195,141,065 An additional portion of the City's net position ($6,687,958 or 3%) represents resources that are subject to external restrictions on how they may be used. The remaining balance representing unrestricted net position ($40,272,527 or 20%) 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. Governmental activities Governmental activities increased the City's net position by $5,271,633, accounting for 62% of the total growth in the government's net position. This compares to an increase (from governmental activities) of $3,370,957 in 2013. Revenues increased by approximately $979,000 related to charges for services, $2,775,000 related to capital grants and contributions and approximately $778,000 for changes in the fair value of investments in 2014. The primary factor for the overall increase in net position from 2013 was due to the nature of the capital projects during 2014. Business-type activities Business-type activities increased the City's net position by $3,180,597, accounting for 38% of the total growth in the government's net position. This compares to an increase of $1 ,613,243 in 2013. The primary reasons for the larger current year increase was an increase in the net transfers from governmental activities of approximately $1,048,000 and an increase in the change in fair value of investments of approximately $668,000. Page 4 Elements of these changes are as follows: City's Changes in Net Position Business- Business- Governmental Type 2014 Governmental Type 2013 Activities Activities Totals Activities Activities Totals Revenues: Program revenues: Charges for services $ 3,980,356 $ 5,855,683 $ 9,836,039 $ 3,001,040 $ 5,321,421 $ 8,322,461 Operating grants and contributions 362,882 29,581 392,463 323,471 323,471 Capital grants and contributions 7,066,093 472,833 7,538,926 4,290,657 1,103,363 5,394,020 General revenues: Property taxes 11,350,967 11,350,967 11,160,682 11,160,682 Other taxes 288,425 288,425 259,064 259,064 Interest earnings 221,243 333,929 555,172 121,886 209,227 331,113 Change in fair value of investments 319,644 276,379 596,023 (458,073) (391,121) (849,194) Other 103,615 103,615 129,006 129,006 Total revenues 23,693,225 6,968,405 30,661,630 18,827,733 6,242,890 25,070,623 Expenses: General government 2,961,500 2,961,500 2,583,271 2,583,271 Public safety 4,233,610 4,233,610 4,051,642 4,051,642 Public works 5,764,176 5,764,176 5,448,047 5,448,047 Recreation 1,613,600 1,613,600 1,586,449 1,586,449 Economic development 1,032,304 1,032,304 3,267 3,267 Interest on long-term debt 501,682 501,682 517,067 517,067 Water 1,962,833 1,962,833 1,903,275 1,903,275 Sewer 2,522,913 2,522,913 2,425,486 2,425,486 Storm water 1,122,839 1,122,839 989,574 989,574 Arena 493,943 493,943 578,345 578,345 Total expenses 16,106,872 6,102,528 22,209,400 14,189,743 5,896,680 20,086,423 Increase in net position before transfers 7,586,353 865,877 8,452,230 4,637,990 346,210 4,984,200 Transfers (2,314,720) 2,314,720 (1,267,033} 1,267,033 Increase in net position 5,271,633 3,180,597 8,452,230 3,370,957 1,613,243 4,984,200 Net position - Beginning of Year 80,778,817 114,362,248 195,141 ,065 77,407,860 112,749,005 190,156,865 Net position - End of Year $ 86,050,450 $ 117,542,845 $ 203,593,295 $ 80,778,817 $ 114,362,248 $ 195,141 ,065 Page 5 Expenses and Program Revenues - Governmental Activities .Expenses .Revenue Millions General Government Public Safety Public Works Recreation Community Development Interest on long-term debt Page 6 Expenses and Program Revenues - Business-Type Activities Millions I!IExpenses .Revenue Water Sewer Storm water Ice Arena Revenuesby Source - Proprietary Funds Financial Analysis of the Government's Funds As noted earlier, the City uses fund accounting to ensure and demonstrate compliance with finance- related legal requirements. Governmental funds The focus of the City's governmental funds is to provide information on near-term inflows, outflows, and balances of spendable resources. Such information is useful in assessing the City's financing requirements. In particular, unassigned fund balance may serve as a useful measure of a government's net resources available for spending at the end of the fiscal year. Page 7 As of the end of the current fiscal year, the City's governmental funds reported combined ending fund balances of $24,782,008, an increase of $4,352,222 in comparison with the prior year. $6,288,615 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 ($76,238) is classified as nonspendable in regards to prepaid items, $6,397,867 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 $6,288,615, while total fund balance reached $9,163,647. The following table shows year-end General Fund balances as compared to the adopted expenditure budget of the following year: Fund Balance Budget 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% 5,700,0.11 * 54% 5,905,056 * 55% 6,001,628 * 54% 6,288,615 * 55% Year 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 $ 7,338,100 7,409,400 7,996,100 8,516,300 9,181,100 10,574,900 10,384,800 10,466,000 10,480,400 10,531,800 10,728,600 11,098,600 11,423,500 * This amount represents the unassigned General Fund balance During the current fiscal year, unassigned fund balance in the General Fund increased by $286,987. 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, 2014, 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 $421,157 primarily due to special assessment payments collected for future debt service payments. The capital projects fund balance increased by $3,075,705 due to new debt being issued and an increase in transfers into the fund. The Port Authority TIF fund balance decreased by $24,488 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 $19,065,696 while the arena fund had an unrestricted net position amounting to $282,741. The increase in total net position for the utility funds was $3,169,956 (of which $4,196,691 related to capital contributions into the utility funds and $1,520,638 of net cash transfers out of the utility funds) and the increase in total net position for the arena fund was $10,641 which included net transfers in of $111,500. Page 8 General Fund Budgetary Highlights There were a few significant variances between final budgeted revenues and actual amounts. Building permit revenue exceeded budget by approximately $292,000 because of a larger than expected increase in activity. General government charges for services exceeded budget by approximately $157,000 due mostly to a significant increase in plan checking fees and zoning fees related to volume of activity. Investment returns were approximately $333,000 in excess of budget mostly due to the adjustment of the fair value of investments at 2013 year-end compared to 2014 year-end 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. The reason for the final expenditures being more than budgeted were transfers and assignments made prior to the final year-end close that adjusted the fund balance to 55% per the City's Fund Balance Policy. 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, 2014, amounts to $174,147,810 (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 $9,826,259 for the year, developers paid for approximately $500,000 of them. City of Rosemount's Capital Assets (net of depreciation) Governmental Business-Type Activities Activities Totals Land $ 9,003,127 $ 2,651,767 $ 11,654,894 Land improvements 4,997,104 4,997,104 Buildings 14,415,644 11,085,341 25,500,985 Machinery and equipment 10,651,996 3,503,715 14,155,711 Mains and lines 131,455,129 131,455,129 I nfrastructu re 56,364,470 56,364,470 Construction in progress 1,923,887 3,350,466 5,274,353 Accumulated depreciation (22,802,826) (52,452,010) (75,254,836} Total capital assets $ 74,553,402 $ 99,594,408 $ 174,147,810 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 $17,515,000 (including debt recorded in the Port Authority). Of this amount, $7,180,000 was for general obligation improvement debt which has financed special assessment construction as part the continuing development within the City. An additional $6,925,000 was general obligation debt issued by the Port Authority which financed the City's economic development and redevelopment programs. Another $1,400,000 was general obligation revenue bond debt issued to add to and improve the water and storm water utility systems within the City. The remaining $2,010,000 was general obligation and general obligation refunding debt. Page 9 The City's total debt increased by $285,000, or approximately 2%, during the current fiscal year. The reason for this increase was that there was one larger new debt issuance for new development, offset almost entirely by the normally scheduled payments on existing debt. 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 $58,458,431. Of the City's $17,515,000 in outstanding general obligation debt at the current fiscal year end, $2,010,000 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 3.2 percent, which compares favorably with the state unemployment rate of 3.6 percent, and the national unemployment rate of 5.4 percent. > City building permits were up significantly in quantity and in value in 2014, as compared to 2013. A total of 2,879 permits with a total valuation of $75,168,593 were issued in 2014. 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 10 CITY OF ROSEMOUNT STATEMENT OF NET POSITION As of December 31,2014 (With Summarized Information as of December 31, 2013) Business- Governmental Type Totals Activities Activities 2014 2013 ASSETS Cash and investments $ 26,036,186 $ 18,018,833 $ 44,055,019 $ 38,461,166 Receivables Taxes 688,001 688,001 696,006 Delinquent taxes 71,655 71,655 126,838 Accounts 246,064 915,809 1,161,873 1,474,508 Special assessments 3,108,959 320,239 3,429,198 3,149,176 Due from other governmental units 434,404 351,694 786,098 669,753 I nternal balances (85,103) 85,103 Prepaid items 191,815 115,419 307,234 288,174 Capital assets Land 9,003,127 2,651,767 11,654,894 13,747,233 Construction in progress 1,923,887 3,350,466 5,274,353 3,502,975 Land improvements 4,997,104 4,997,104 3,293,796 Buildings 14,415,644 11,085,341 25,500,985 25,277,856 Machinery and equipment 10,651,996 3,503,715 14,155,711 13,017,783 Infrastructure 56,364,470 131,455,129 187,819,599 183,535,003 Less: accumulated depreciation {22,802,826) {52,452,010) {75,254,836) {71,624,345) Total Assets 105,245,383 119,401,505 224,646,888 215,615,922 LIABILITIES Accounts payable 1,155,643 180,327 1,335,970 909,528 Accrued payroll and payroll taxes 155,676 43,556 199,232 170,990 Other accrued liabilities and deposits 402,491 19,478 421,969 411,600 Noncurrent liabilities Due within one year 2,312,499 513,343 2,825,842 2,679,775 Due in more than one year 14,776,073 1,101,956 15,878,029 15,726,837 Total Liabilities 18,802,382 1,858,660 20,661,042 19,898,730 DEFERRED INFLOWS OF RESOURCES Unearned revenue 392,551 392,551 576,127 Total Deferred Inflows of Resources 392,551 392,551 576,127 NET POSITION Net investment in capital assets 58,438,402 98,194,408 156,632,810 153,517,523 Restricted 6,687,958 6,687,958 7,148,774 Unrestricted 20,924,090 19,348,437 40,272,527 34,474,768 Total Net Position $ 86,050,450 $ 117,542,845 $ 203,593,295 $ 195,141,065 See accompanying notes to financial statements. Page 11 CITY OF ROSEMOUNT STATEMENT OF ACTIVITIES For the Year Ended December 31, 2014 (With Summarized Information for the Year Ended December 31,2013) Net (Expense) Revenue and Program Revenues Changes in Net Position Operating Capital Prima~ Government Charges for Grants and Grants and Governmental Business-Type Totals Functions/Programs Expenses Services Contri butions Contri butions Activities Activities 2014 2013 Primary Government: Governmental activities: General government $ 2,961,500 $ 3,202,744 $ - $ 1,988,610 $ 2,229,854 $ - $ 2,229,854 $ (117,576) Public safety 4,233,610 146,973 283,095 18,131 (3,785,411 ) (3,785,411 ) (3,648,405) Public works 5,764,176 59,417 53,515 4,318,692 (1,332,552) (1,332,552) (1,393,595) Culture, education and recreation 1,613,600 571,222 3,736 (1,038,642) (1,038,642) (1,238,108) Conservation and economic development 1,032,304 22,536 740,660 (269,108) (269,108) 340,176 Interest and fiscal charges 501,682 (501,682) (501,682) (517,067) Total Governmental Activities 16,106,872 3,980,356 362,882 7,066,093 (4,697,541) (4,697,541) (6,574,575) Business-Type activities Water 1,962,833 2,379,147 9,901 180,568 606,783 606,783 636,016 Sewer 2,522,913 1,733,646 98,863 (690,404) (690,404) (625,980) Storm Water 1,122,839 1,350,259 19,680 193,402 440,502 440,502 720,355 Arena 493,943 392,631 (101,312) (101,312) (202,287) Total Business-Type Activities 6,102,528 5,855,683 29,581 472,833 255,569 255,569 528,104 Total Primary Government $ 22,209,400 $ 9,836,039 $ 392,463 $ 7,538,926 (4,697,541) 255,569 (4,441,972) (6,046,471 ) General revenues: Taxes Property taxes, levied for general purposes 10,328,709 10,328,709 10,123,158 Property taxes, levied for debt service 1,022,258 1,022,258 1,037,524 Other taxes 288,425 288,425 259,064 Interest earnings 221,243 333,929 555,172 331,113 Change in fair value of investments 319,644 276,379 596,023 (849,194) Miscellaneous 103,615 103,615 116,123 Gain on sale of capital assets 12,883 Transfers (2,314,720) 2,314,720 Total general revenues and transfers 9,969,174 2,925,028 12,894,202 11,030,671 Change in net position 5,271,633 3,180,597 8,452,230 4,984,200 Net position - beginning $ 80,778,817 $ 114,362,248 $ 195,141,065 $ 190,156,865 Net Position - Ending $ 86,050,450 $ 117,542,845 $ 203,593,295 $ 195,141,065 See accompanying notes to financial statements. Page 12 CITY OF ROSEMOUNT BALANCE SHEET - GOVERNMENTAL FUNDS As of December 31,2014 Port Nonmajor Total Authority Governmental Governmental General Debt Service CaEital Projects TIF Funds Funds ASSETS Cash and investments $ 9,145,098 $ 5,094,409 $ 9,945,837 $ 1,009,662 $ 207,106 $ 25,402,112 Receivables from: Taxes 747,588 12,068 759,656 Accounts 68,399 156,270 224,669 Special assessments 1,908,447 1,192,920 3,101,367 Delinquent special assessments 5,670 1,922 7,592 Due from other governmental units 12,772 333,754 87,878 434,404 Prepaid items 66,238 10,000 549 76,787 Total assets $ 10,040,095 $ 7,008,526 $ 11,640,703 $ 1,021,730 $ 295,533 $ 30,006,587 LIABILITIES, DEFERRED INFLOWS OF RESOURCES, AND FUND BALANCES Liabilities Accounts payable $ 376,050 $ - $ 763,411 $ - $ 4,150 $ 1,143,611 Accrued payroll and payroll taxes 155,676 155,676 Deposits payable 200,550 200,550 Advances from other funds 85,103 85,103 Total liabilities 732,276 848,514 4,150 1,584,940 Deferred Inflows of Resources Unavailable revenue 144,172 1,913,977 1,188,939 3,247,088 Unearned revenue 118,412 274,139 392,551 Total deferred inflows of resources 144,172 2,032,389 1,463,078 3,639,639 Fund Balances Nonspendable 66,238 10,000 549 76,787 Restricted 4,976,137 1,988,610 1,021,730 7,986,477 Committed 290,834 290,834 Assigned 2,808,794 7,330,501 10,139,295 Unassigned 6,288,615 6,288,615 Total fund balances 9,163,647 4,976,137 9,329,111 1,021,730 291,383 24,782,008 Total liabilities, deferred inflows of resources, and fund balances $ 10,040,095 $ 7,008,526 $ 11,640,703 $ 1,021,730 $ 295,533 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. 74,553,402 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. 3,247,088 Internal service funds are reported in the statement of net position as governmental activities. 758,465 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. (17,290,513) NET POSITION OF GOVERNMENTAL ACTIVITIES $ 86,050,450 See accompanying notes to financial statements. Page 13 CITY OF ROSEMOUNT STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES - GOVERNMENTAL FUNDS For the Year Ended December 31,2014 Port Nonmajor Total Authority Governmental Governmental General Debt Service Capital Projects TIF Funds Funds REVENUES Taxes $ 9,060,134 $ 375,622 $ 1,254,000 $ 646,636 $ 58,000 $ 11,394,392 Intergovernmental 342,158 1,427,106 740,660 2,509,924 Public charges for services 1,253,601 1,873,663 5,292 3,132,556 Licenses and permits 730,765 730,765 Fines and forfeitures 116,384 116,384 Special assessments 4,652 1,528,454 590,093 2,123,199 Interest earnings 176,321 6,806 33,089 800 217,016 Change in fair value of investments 231,871 87,773 319,644 Donations/contributions 1,988,610 1,988,610 Miscellaneous 100,972 507,731 1,422 610,125 Total Revenues 12,016,858 1,910,882 7,762,065 647,436 805,374 23,142,615 EXPENDITURES Current: General government 2,509,554 8,448 158,910 75,241 2,752,153 Public safety 3,762,826 3,762,826 Public works 3,165,615 26,872 3,192,487 Parks and recreation 1,304,867 1,304,867 Conservation and development 376,496 376,496 Capital Outlay 8,777,373 40,278 652,781 9,470,432 Debt Service: Principal retirement 1,470,000 110,000 1,580,000 I nterest and fiscal charges 219,725 19,595 269,285 508,605 Total Expenditures 10,742,862 1,689,725 8,832,288 954,969 728,022 22,947,866 Excess (deficiency) of revenues over expenditures 1,273,996 221,157 {1,070,223) {307,533) 77,352 194,749 OTHER FINANCING SOURCES (USES) Issuance of long-term debt 2,400,000 2,400,000 Sale of capital assets 65,290 283,045 348,335 Transfers in 3,500 200,000 1,705,255 1,908,755 Transfers out {475,000) {24,617) {499,617) Total Other Financing Sources (Uses) {471,500) 200,000 4,145,928 283,045 4,157,473 Net Change in Fund Balances 802,496 421,157 3,075,705 (24,488) 77,352 4,352,222 FUND BALANCES - Beginning 8,361,151 4,554,980 6,253,406 1,046,218 214,031 20,429,786 FUND BALANCES - ENDING $ 9,163,647 $ 4,976,137 $ 9,329,111 $ 1,021,730 $ 291,383 $ 24,782,008 See accompanying notes to financial statements. Page 14 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 31,2014 Net change in fund balances - total governmental funds $ 4,352,222 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 Some items reported as capital outlay but not capitalized Some items reported as operating expenditures in the fund financial statements but are capitalized in the government-wide statements Depreciation is reported in the government-wide statements Utility infrastructure constructed by capital projects funds not reported as governmental activities In the statement of activities, the loss of ($1 ,833,139) on the disposal of capital assets is reported. In the fund financial statements, proceeds from the sale of capital assets $348,335 are reported because the proceeds increase financial resources Internal service funds are reported in the statement of activities. 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. 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. 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. 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 Accrued interest on debt CHANGE IN NET POSITION OF GOVERNMENTAL ACTIVITIES See accompanying notes to financial statements. 9,470,432 (940,385) 786,731 (1,902,760) (3,723,858) (2,181,474) (67,755) 301,474 (2,400,000) 1,580,000 (9,919) 6,925 $ 5,271,633 Page 15 CITY OF ROSEMOUNT STATEMENT OF NET POSITION - PROPRIETARY FUNDS As of December 31, 2014 Business- T~~e Activities - Enter~rise Funds Governmental Activities - Storm Non-major Internal Service Water Sewer Water Arena Totals Fund ASSETS Current assets: Cash and investments $ 6,929,741 $ 5,285,438 $ 5,498,362 $ 305,292 $ 18,018,833 $ 634,074 Accounts receivable 349,893 340,790 196,149 28,977 915,809 21,395 Special assessments receivable 122,053 91,908 106,278 320,239 Due from other governments 351,694 351,694 Prepaid and other assets 7,856 97,661 4,548 5,354 115,419 115,028 Total current assets 7,409,543 5,815,797 6,157,031 339,623 19,721,994 770,497 Non-current assets: Advance to other funds 120,563 120,563 Property and equipment: Land 1,008,628 547,158 1,095,981 2,651,767 Construction in progress 828,755 2,005,665 516,046 3,350,466 Buildings 6,794,504 401,414 1,489,523 2,399,900 11,085,341 Mains and lines 21,191,244 17,417,434 26,855,162 65,463,840 Other improvements 16,528,701 36,927,459 12,535,129 65,991,289 Machinery and equipment 1,906,993 743,320 716,802 136,600 3,503,715 Less accumulated depreciation (14,169,558) (28,222,220) (8,981,375) (1,078,857) (52,452,010) Net property and equipment 34,089,267 29,820,230 34,227,268 1,457,643 99,594,408 Total non-current assets 34,089,267 29,940,793 34,227,268 1,457,643 99,714,971 Total Assets 41,498,810 35,756,590 40,384,299 1,797,266 119,436,965 770,497 LIABILITIES Current liabilities: Accounts payable 94,414 20,798 38,432 26,683 180,327 12,032 Accrued liabilities 26,612 7,412 4,325 5,207 43,556 Accrued interest 13,960 5,518 19,478 Current portion of long term obligations 273,146 38,146 190,055 11,996 513,343 Total current liabilities 408,132 66,356 238,330 43,886 756,704 12,032 Noncurrent liabilities: Accrued compensated absences 41,325 41,325 16,310 12,996 111,956 General obligation debt 530,000 460,000 990,000 Advances from other funds 35,460 35,460 Total noncurrent liabilities 606,785 41,325 476,310 12,996 1,137,416 Total Liabilities 1,014,917 107,681 714,640 56,882 1,894,120 12,032 NET POSITION Net investment in capital assets 33,324,267 29,820,230 33,592,268 1,457,643 98,194,408 Unrestricted 7,159,626 5,828,679 6,077,391 282,741 19,348,437 758,465 TOTAL NET POSITION $ 40,483,893 $ 35,648,909 $ 39,669,659 $ 1,740,384 $ 117,542,845 $ 758,465 See accompanying notes to financial statements. Page 16 CITY OF ROSEMOUNT STATEMENT OF REVENUES, EXPENSES, AND CHANGES IN NET POSITION PROPRIETARY FUNDS For the Year Ended December 31,2014 Business-T~pe Activities - Enterprise Funds Governmental Activities - Storm Non-major Internal Service Water Sewer Water Arena Totals Funds OPERATING REVENUES Charges for services $ 1,576,742 $ 1,533,518 $ 1,044,770 $ 392,631 $ 4,547,661 $ Water meters 37,385 37,385 Miscellaneous 2,800 2,800 Total Operating Revenues 1,616,927 1,533,518 1,044,770 392,631 4,587,846 OPERATING EXPENSES Personnel services 452,813 452,012 189,489 203,133 1,297,447 Supplies 177,496 8,274 8,150 21,932 215,852 28,417 Professional services and charges 170,107 26,008 98,423 35,154 329,692 27,244 Other services and charges 342,773 80,118 167,014 176,109 766,014 261,230 Metro sewer charges 1,090,261 1,090,261 Depreciation 782,249 866,240 645,747 57,615 2,351,851 Total Operating Expenses 1,925,438 2,522,913 1,108,823 493,943 6,051,117 316,891 Operating Loss (308,511) (989,395) (64,053) (101,312) (1,463,271) {316,891) NONOPERATING REVENUES (EXPENSES) Connection fees 467,164 188,024 298,912 954,100 Taxes 245,000 Intergovernmental 9,901 19,680 29,581 Interest earnings 105,515 147,534 80,427 453 333,929 4,136 Change in fair value of investments 96,607 104,600 75,172 276,379 Surcharges and penalties 295,056 12,104 6,577 313,737 Interest expense and fiscal agent fees (37,395) (14,016) (51,411) Total Nonoperating Revenues 936,848 452,262 466,752 453 1,856,315 249,136 Income (loss) before contributions and transfers 628,337 (537,133) 402,699 (100,859) 393,044 (67,755) Capital contributions, including special assessments 1,086,998 2,126,844 982,849 4,196,691 Transfers in 176,617 115,000 291,617 Transfers out (356,796) (1, 152,551) (187,908) {3,500) (1,700,755) Change in Net Position 1,358,539 437,160 1,374,257 10,641 3,180,597 (67,755) TOTAL NET POSITION - Beginning 39,125,354 35,211,749 38,295,402 1,729,743 114,362,248 826,220 TOTAL NET POSITION - ENDING $ 40,483,893 $ 35,648,909 $ 39,669,659 $ 1,740,384 $ 117,542,845 $ 758,465 See accompanying notes to financial statements. Page 17 CITY OF ROSEMOUNT STATEMENT OF CASH FLOWS PROPRIETARY FUNDS For the Year Ended December 31,2014 Business-T~pe Activities - Enter~rise Funds Governmental Activities - Storm Non major Internal Water Sewer Water Arena Totals Service Fund CASH FLOWS FROM OPERATING ACTIVITIES Cash received from customers $ 2,457,243 $ 1,750,106 $ 1,375,490 $ 419,168 $ 6,002,007 $ Cash paid to suppliers for goods and services (673,482) (1,187,856) (284,199) (226,587) (2,372,124) (354,984) Cash paid for employees (452,813) (452,012) p89,489) (203,133) P ,297,447) Net Cash Flows From (Used by) Operating Activities 1,330,948 110,238 901,802 (10,552) 2,332,436 (354,984) CASH FLOWS FROM NONCAPITAL FINANCING ACTIVITIES Property taxes 245,000 Repayment of advance to other funds 26,639 26,639 Repayment of advance from other funds (7,835) (7,835) Repayment of advance to other governmental units 29,686 29,686 Transfers from other funds 176,617 115,000 291,617 Transfers to other funds (356,796) p,152,551) (187,908) P,500) (1,700,755) Net Cash Flows From (Used by) Noncapital Financing Activities p64,631 ) (1,125,912) 18,395 111,500 {1,360,648) 245,000 CASH FLOWS FROM INVESTING ACTIVITIES Marketable securities purchased (1,339,089) (619,321 ) (1,033,070) (100,000) (3,091,480) (96,000) Marketable securities sold 546,000 1,696,000 725,000 2,967,000 150,000 Interest earnings 105,515 147,534 80,427 453 333,929 4,136 Net Cash Flows From (Used by) Investing Activities (687,574) 1,224,213 (227,643) (99,547) 209,449 58,136 CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES Debt retired (225,000) (310,000) (535,000) I nterest paid (41,645) (15,759) (57,404) Capital contributions 233,470 134,849 226,304 594,623 Acquisition and construction of capital assets p23,401) p89, 151) p90,311) (13,952) {516,815) Net Cash Flows From (Used by) Capital and Related Financing Activities p56,576) {54,302) (289,766) {13,952) {514,596) Net Increase (Decrease) in Cash and Cash Equivalents 122,167 154,237 402,788 (12,551) 666,641 (51,848) CASH AND CASH EQUIVALENTS - Beginning of Year 1,955,881 851,095 1,063,197 217,843 4,088,016 341,922 CASH AND CASH EQUIVALENTS - END OF YEAR $ 2,078,048 $ 1,005,332 $ 1,465,985 $ 205,292 $ 4,754,657 $ 290,074 RECONCILIATION OF CASH AND CASH EQUIVALENTS Cash and Investments per Statement of Net Position $ 6,929,741 $ 5,285,438 $ 5,498,362 $ 305,292 $ 18,018,833 $ 634,074 Less: Non Cash Equivalents (4,851,693) (4,280,106) {4,032,377) pOO,OOO) (13,264,176) (344,000) Cash and Cash Equivalents Per Statement of Cash Flows $ 2,078,048 $ 1,005,332 $ 1,465,985 $ 205,292 $ 4,754,657 $ 290,074 See accompanying notes to financial statements. Page 18 Business- T~~e Activities - Enter~rise Funds Governmental Activities - Water Sewer Storm Non major Internal Utilit~ Utilit~ Water Arena Totals Service Funds RECONCILIATION OF OPERATING INCOME (LOSS) TO NET CASH FLOWS FROM (USED BY) OPERATING ACTIVITIES Operating loss $ (308,511 ) $ (989,395) $ (64,053) $ (101,312) $ (1,463,271) (316,891 ) Non-operating income 772,121 200,128 325,169 1,297,418 Adjustments to Reconcile Operating Loss to Net Cash Flows From (Used by) Operating Activities Noncash items included in income Depreciation 782,249 866,240 645,747 57,615 2,351,851 Change in assets and liabilities Accounts receivable 51,669 16,460 5,551 73,680 (21,395) Other receivables 26,537 26,537 Prepaid items (984) 86 (215) (306) (1,419) (18,120) Accounts payable 27,789 12,353 (12,479) 10,476 38,139 1,422 Other current liabilities 4,004 1,755 585 1,169 7,513 Accrued liabilities 2,611 2,611 1,497 (4,731) 1,988 NET CASH FLOWS FROM (USED BY) OPERATING ACTIVITIES $ 1,330,948 $ 110,238 $ 901,802 $ (10,552) $ 2,332,436 $ (354,984) Non-cash capital, investing and financing activities: The Water Utility received contributed plant of $906,431 during the year. The Sewer Utility received contributed plant of $2,027,981 during the year. The Storm Water Utility received contributed plant of $789,447 during the year. Unrealized gains on investments were $96,607 for the Water Utility, $104,600 for the Sewer Utility, and $75,172 for the Storm Water Utility for the year. See accompanying notes to financial statements. Page 19 THIS PAGE INTEN TIONA LL Y LEFT BLANK CITY OF ROSEMOUNT INDEX TO NOTES TO FINANCIAL STATEMENTS As of and for the Year Ended December 31,2014 NOTE I. Summary of Significant Accounting Policies A. Reporting Entity B. Government-Wide and Fund Financial Statements C. Measurement Focus, Basis of Accounting, and Financial Statement Presentation D. Assets, Liabilities, Deferred Inflows of Resources, and Net Position or Equity 1. Deposits and Investments 2. Receivables 3. Inventories and Prepaid Items 4. Capital Assets 5. Compensated Absences 6. Long-Term Obligations/Conduit Debt 7. Deferred Inflows of Resources 8. Equity Classifications 9. Prior Period Information 10. Basis for Existing Rates 21 21 22 24 25 25 26 27 28 28 29 29 29 31 31 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 31 31 III. Stewardship, Compliance, and Accountability A. Budgetary Information 32 32 IV. Detailed Notes on All Funds A. Deposits and Investments B. Receivables C. Capital Assets D. Interfund Receivables/Payables and Transfers E. Long-Term Obligations F. Net Position/Fund Balances 33 33 35 36 38 40 42 V. Other Information A. Employees' Retirement System B. Risk Management C. Commitments and Contingencies D. Related Organization E. Effect of New Accounting Standards on Current-Period Financial Statements 44 44 48 49 50 50 Page 20 CITY OF ROSEMOUNT NOTES TO FINANCIAL STATEMENTS As of and for the Year Ended December 31,2014 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 anyone 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 21 CITY OF ROSEMOUNT NOTES TO FINANCIAL STATEMENTS As of and for the Year Ended December 31,2014 NOTE 1- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.) B. GOVERNMENT-WIDE AND FUND FINANCIAL STATEMENTS 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% test is 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. 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. Page 22 CITY OF ROSEMOUNT NOTES TO FINANCIAL STATEMENTS As of and for the Year Ended December 31,2014 NOTE 1- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.) B. GOVERNMENT-WIDE AND FUND FINANCIAL STATEMENTS (cont.) Fund Financial Statements (cont.) 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 23 CITY OF ROSEMOUNT NOTES TO FINANCIAL STATEMENTS As of and for the Year Ended December 31,2014 NOTE 1- 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. 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. Page 24 CITY OF ROSEMOUNT NOTES TO FINANCIAL STATEMENTS As of and for the Year Ended December 31,2014 NOTE 1- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.) c. MEASUREMENT Focus, BASIS OF ACCOUNTING AND FINANCIAL STATEMENT PRESENTATION (cont.) Fund Financial Statements (cont.) 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. 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. Page 25 CITY OF ROSEMOUNT NOTES TO FINANCIAL STATEMENTS As of and for the Year Ended December 31,2014 NOTE I - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.) D. ASSETS, LIABILITIES, DEFERRED INFLOWS OF RESOURCES, AND NET POSITION OR EQUITY (cont.) 1. Deposits and Investments (cont.) 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 anyone issu/er. 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 IVA for further information. 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. Page 26 CITY OF ROSEMOUNT NOTES TO FINANCIAL STATEMENTS As of and for the Year Ended December 31,2014 NOTE I - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.) D. ASSETS, LIABILITIES, DEFERRED INFLOWS OF RESOURCES, AND NET POSITION OR EQUITY (cont.) 2. Receivables (cont.) 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. 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). Page 27 CITY OF ROSEMOUNT NOTES TO FINANCIAL STATEMENTS As of and for the Year Ended December 31,2014 NOTE I - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.) D. ASSETS, LIABILITIES, DEFERRED INFLOWS OF RESOURCES, AND NET POSITION OR EQUITY (cont.) 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 Machinery and equipment Other improvements Utility system I nfrastructu re 30-65 Years 4-20 Years 60 Years 65 Years 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. 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. Page 28 CITY OF ROSEMOUNT NOTES TO FINANCIAL STATEMENTS As of and for the Year Ended December 31,2014 NOTE I - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.) D. ASSETS, LIABILITIES, DEFERRED INFLOWS OF RESOURCES, AND NET POSITION OR EQUITY (cont.) 5. Compensated Absences (cont.) 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 31,2014 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 another 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. 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. Page 29 CITY OF ROSEMOUNT NOTES TO FINANCIAL STATEMENTS As of and for the Year Ended December 31,2014 NOTE 1- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.) D. ASSETS, LIABILITIES, DEFERRED INFLOWS OF RESOURCES, AND NET POSITION OR EQUITY (cont.) 8. Equity Classifications (cont.) Government-Wide Statements (cont.) 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. d. 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. 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. Page 30 CITY OF ROSEMOUNT NOTES TO FINANCIAL STATEMENTS As of and for the Year Ended December 31, 2014 NOTE 1- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.) D. ASSETS, LIABILITIES, DEFERRED INFLOWS OF RESOURCES, AND NET POSITION OR EQUITY (cont.) 8. Equity Classifications (cont.) Fund Statements (cont.) 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 $6,288,615, or 55 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 31,2013, from which the summarized information was derived. 10. Basis for Existing Rates Current utility rates were approved by the City Council on December 17, 2013. NOTE 11- 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 $17,290,513 difference are as follows: Page 31 CITY OF ROSEMOUNT NOTES TO FINANCIAL STATEMENTS As of and for the Year Ended December 31,2014 NOTE II - RECONCILIATION OF GOVERNMENT-WIDE AND FUND FINANCIAL STATEMENTS (cont.) A. EXPLANATION OF CERTAIN DIFFERENCES BETWEEN THE GOVERNMENTAL FUNDS BALANCE SHEET AND THE STATEMENT OF NET POSITION (cont.) 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) Compensated absences Accrued interest $ 16,115,000 973,572 201,941 Combined Adjustment for Long-Term Liabilities $ 17,290,513 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 $2,689,322. Page 32 CITY OF ROSEMOUNT NOTES TO FINANCIAL STATEMENTS As of and for the Year Ended December 31, 2014 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: Carrying Statement Associated Value Balances Risks Petty cash and cash on hand $ 2,400 $ 2,400 N/A Demand deposits 30,461,318 32,109,232 Custodial credit, credit, concentration of credit, U.S. instrumentalities 13,591,301 13,591,301 interest rate Total Cash and Investments $ 44,055,019 $ 45,702,933 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 non interest-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, 2014, the banks had pledged various government securities in the amount of $25,856,192 to secure the City's deposits. The City has no custodial credit risk in regards to deposits at December 31,2014. 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 33 CITY OF ROSEMOUNT NOTES TO FINANCIAL STATEMENTS As of and for the Year Ended December 31, 2014 NOTE IV - DETAILED NOTES ON ALL FUNDS (cont.) A. DEPOSITS AND INVESTMENTS (cont.) 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, 2014, 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 31,2014, 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 $ 8,063,062 59% Federal Home Loan Mortgage Corporation 3,062,916 23% Federal Farm Credit Bank 1,748,594 13% Federal National Mortgage Association 394,416 3% Treasury Notes 322,313 2% $ 13,591,301 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 31,2014, the City of Rosemount's investments were as follows: Investment Maturities (in years) Investment Type Total Fair Value Less than 1 1 - 5 6 -10 More than 10 U.S. Agency Obligations $ 13,591,301 $ - $ 1,502,737 $ 12,088,564 $ ========= ========= At December 31, 2014, the City held $9,152,057 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 34 CITY OF ROSEMOUNT NOTES TO FINANCIAL STATEMENTS As of and for the Year Ended December 31,2014 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 $ - $ 820,632 $ 512,956 $ 1,333,588 Water Sewer Storm Water Business- Type Activities Utility Utility Utility Totals Amounts not expected to be collected within one year $ 52,483 $ 39,520 $ 318,114 $ 410,117 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 $ 71,655 $ $ 71,655 Delinquent special assessments 7,451 7,451 Special assessments not yet due 3,095,464 392,551 3,488,015 Donations receivable for future projects 72,518 72,518 Total Deferred/Unearned Revenue for Governmental Funds $ 3,247,088 $ 392,551 $ 3,639,639 Page 35 CITY OF ROSEMOUNT NOTES TO FINANCIAL STATEMENTS As of and for the Year Ended December 31,2014 NOTE IV - DETAILED NOTES ON ALL FUNDS (cont.) C. CAPITAL ASSETS Capital asset activity for the year ended December 31, 2014 was as follows: Beginning Ending Balance Additions Deletions Balance Governmental Activities Capital assets not being depreciated Land $ 11,103,466 $ 12,900 $ 2,113,239 $ 9,003,127 Land improvements 622,770 1,212,317 1,835,087 Construction in progress 1,983,060 2,356,366 2,415,539 1,923,887 Total Capital Assets Not Being Depreciated 13,709,296 3,581,583 4,528,778 12,762,101 Capital assets being depreciated Improvements 2,671,026 490,991 3,162,017 Buildings 14,192,515 223,129 14,415,644 Machinery and equipment 9,718,650 1,396,291 462,945 10,651,996 Infrastructure 90,941 118,096 209,037 Roads 51,496,028 2,191,033 53,687,061 Bridges 1,887,923 1,887,923 Parking lots 580,449 580,449 Total Capital Assets Being Depreciated 80,637,532 4,419,540 462,945 84,594,127 Less: Accumulated depreciation for Improvements (1,033,623) (118,407) (1,152,030) Buildings (4,390,440) (285,181 ) (4,675,621 ) Machinery and equipment (6,389,998) (576,980) 402,046 (6,564,932) Infrastructure (1,865) (2,055) (3,920) Roads (8,891,291 ) (858,089) (9,749,380) Bridges (384,828) (47,198) (432,026) Parking lots {210,067) (14,850) {224,917) Total Accumulated Depreciation {21 ,302,112) (1,902,760) 402,046 {22,802,826) Net Capital Assets Being Depreciated 59,335,420 2,516,780 60,899 61,791,301 Total Governmental Activities Capital Assets, Net of Accumulated Depreciation $ 73,044,716 $ 6,098,363 $ 4,589,677 $ 74,553,402 Depreciation expense was charged to functions as follows: Governmental Activities General government $ 194,273 Public safety 293,371 Public works, which includes the depreciation of roads, bridges and parking lots 1,166,602 Leisure activities 248,514 Total Governmental Activities Depreciation Expense $ 1,902,760 Page 36 CITY OF ROSEMOUNT NOTES TO FINANCIAL STATEMENTS As of and for the Year Ended December 31, 2014 NOTE IV - DETAILED NOTES ON ALL FUNDS (cont.) C. CAPITAL ASSETS (cont.) Beginning Ending Balance Additions Deletions Balance Business-Type Activities Capital assets not being depreciated Land $ 2,643,767 $ 8,000 $ - $ 2,651,767 Construction in progress 1,519,915 3,695,050 1,864,499 3,350,466 Total Capital Assets Not Being Depreciated 4,163,682 3,703,050 1,864,499 6,002,233 Capital assets being depreciated Buildings 11,085,341 11,085,341 Machinery and equipment 3,299,133 426,656 222,074 3,503,715 Mains and lines 129,479,662 1,975,467 131,455,129 Total Capital Assets Being Depreciated 143,864,136 2,402,123 222,074 146,044,185 Less: Accumulated depreciation for Buildings (2,933,518) (236,588) (3,170,106) Machinery and equipment (2,018,580) (116,602) 222,074 (1,913,108) Mains and lines {45,370,135) {1 ,998,661) {47,368,796) Total Accumulated Depreciation {50,322,233) {2,351 ,851) 222,074 {52,452,010) Net Capital Assets Being Depreciated 93,541,903 50,272 93,592,175 Total Business-Type Capital Assets, Net of Accumulated Depreciation $ 97,705,585 $ 3,753,322 $ 1,864,499 $ 99,594,408 Depreciation expense was charged to functions as follows: Business-Type Activities Water Sewer Storm water Arena $ 782,249 866,240 645,747 57,615 Total Business-type Activities Depreciation Expense $ 2,351,851 Page 37 CITY OF ROSEMOUNT NOTES TO FINANCIAL STATEMENTS As of and for the Year Ended December 31, 2014 NOTE IV - DETAILED NOTES ON ALL FUNDS (cont.) D. INTERFUND RECEIVABLES/PAYABLES AND TRANSFERS The following is a schedule of interfund receivable/advances as of December 31, 2014: Sewer Sewer Building CIP Water $ Amount Not Due Within Amount One Year 85,103 $ 65,338 35,460 27,242 120,563 92,580 (35,460) (27,242) 85,103 $ 65,338 Receivable Fund Payable Fund Subtotal - Fund financial statements Less: Fund eliminations Total - Government-Wide Statement of Net Position $ 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: Principal Interest 2015 $ 27,972 $ 6,028 2016 29,370 4,630 2017 30,839 3,161 2018 32,382 1,618 Total $ 120,563 $ 15,437 Totals $ 34,000 34,000 34,000 34,000 $ 136,000 Page 38 CITY OF ROSEMOUNT NOTES TO FINANCIAL STATEMENTS As of and for the Year Ended December 31, 2014 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 General Arena $ 3,500 Building and grounds maintenance Debt Service Water 200,000 Water share of debt payment Capital Projects Sewer Storm Water Water General 1,152,551 187,908 4,796 360,000 Sewer share of project Storm water share of project Water share of project Future improvements Enterprise Storm Water Storm Water Arena Water Capital Projects General 152,000 24,617 115,000 Water share of debt payments Share of capital project costs Operating expenses 2,200,372 Less: Fund eliminations Less: Contributed plant reclassified to a transfer in the government-wide statements (791,233) (3,723,859) Total Transfers - Government-Wide Statement of Activities $ (2,314,720) 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 39 CITY OF ROSEMOUNT NOTES TO FINANCIAL STATEMENTS As of and for the Year Ended December 31,2014 NOTE IV - DETAILED NOTES ON ALL FUNDS (cont.) E. LONG- TERM OBLIGATIONS Long-term obligations activity for the year ended December 31,2014 was as follows: Amounts Beginning Ending Due Within Balance Increases Decreases Balance One Year GOVERNMENTAL ACTIVITIES Bonds and Notes Payable General obligation debt $ 15,295,000 $ 2,400,000 $ 1,580,000 $ 16,115,000 $ 1,845,000 Other Liabilities Vested compensated absences 963,300 472,657 462,385 973,572 467,499 Total Governmental Activities Long-Term Liabilities $ 16,258,300 $ 2,872,657 $ 2,042,385 $ 17,088,572 $ 2,312,499 BUSINESS-TYPE ACTIVITIES Bonds and Notes Payable General obligation debt $ 1,935,000 $ - $ 535,000 $ 1,400,000 $ 410,000 Other Liabilities: Vested compensated absences 213,312 104,377 102,390 215,299 103,343 Total Business-type Activities Long-Term Liabilities $ 2,148,312 $ 104,377 $ 637,390 $ 1,615,299 $ 513,343 Ge~eral 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 Maturit:t Rates Indebtedness 12-31-14 Fire Station CIP Bonds, Series 2005A 2005 2025 3.5% to 4.3% $ 2,630,000 $ 1,755,000 Fire Station Refunding Bonds, Series 2005D 2005 2016 3.2% to 3.8% 1,115,000 255,000 Improvement Bonds, Series 2006B 2006 2017 4.0% 4,405,000 1,365,000 Port Authority TIF, Series 2008A 2008 2024 5.0% to 5.5% 2,765,000 2,545,000 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 1,105,000 Improvement Bonds, Series 2011A 2011 2017 0.45% to 1.35% 2,080,000 1,260,000 Improvement Bonds, Series 2012A 2012 2018 0.4% to 1.0% 810,000 655,000 Improvement Bonds, Series 2013A 2013 2019 0.5% to 1.65% 1,500,000 1,500,000 Improvement Bonds, Series 2014A 2014 2025 0.35% to 2.4% 2,400,000 2,400,000 Total Governmental Activities - General Obligation Debt $ 16,115,000 Page 40 CITY OF ROSEMOUNT NOTES TO FINANCIAL STATEMENTS As of and for the Year Ended December 31,2014 NOTE IV - DETAILED NOTES ON ALL FUNDS (cont.) E. LONG- TERM OBLIGATIONS (cont.) General Obligation Debt ( cont.) Business-type Activities General Obligation Debt Date of Issue Final Maturity Water Revenue Bonds, Series 2000A Water Revenue Bonds, Series 2007A Utility Rev Refunding Bonds, Series 2010A 2016 2018 2018 2000 2007 2010 Total Business-type Activities - General Obligation Debt Debt service requirements to maturity are as follows: Governmental Activities General Obligation Debt Interest Original Balance Rates Indebtedness 12-31-14 4.4% to 5.4% $ 1,160,000 $ 215,000 4.0% 1,210,000 550,000 0.8% to 2.6% 1,545,000 635,000 $ 1,400,000 Business-Type Activities General Obligation Debt Principal Interest Principal Interest 2015 2016 2017 2018 2019 2020 - 2024 2025 - 2029 2030 - 2032 $ 1,845,000 $ 2,300,000 2,250,000 1,390,000 1,260,000 3,545,000 2,185,000 1,340,000 Totals $ 16,115,000 $ Other Debt Information 465,738 $ 424,383 375,496 333,235 301,501 1,058,725 474,236 82,823 410,000 $ 425,000 315,000 250,000 39,921 25,625 13,343 4,265 3,516,136 $ 1,400,000 $ 83,154 ======= 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 $1,509,123. Principal and interest paid for the current year and the gross customer revenues were $588,940 and $4,103,375, respectively. Page 41 CITY OF ROSEMOUNT NOTES TO FINANCIAL STATEMENTS As of and for the Year Ended December 31, 2014 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 31,2014 includes the following: Governmental Activities Net Investment in Capital Assets Land Construction in progress Other capital assets, net of accumulated depreciation Less: related long-term debt outstanding (excluding unspent capital related debt proceeds) Total Net Investment in Capital Assets Restricted Debt service Future construction donations Total Restricted Total Governmental Activities Net Position $ 9,003,127 1,923,887 63,626,388 {16,115,000) 58,438,402 4,699,348 1,988,610 6,687,958 20,924,090 $ 86,050,450 Unrestricted Page 42 CITY OF ROSEMOUNT NOTES TO FINANCIAL STATEMENTS As of and for the Year Ended December 31, 2014 NOTE IV - DETAILED NOTES ON ALL FUNDS (cont.) F. NET POSITION/FuND BALANCES (cont.) Governmental Activities (cont.) Governmental fund balances reported on the fund financial statements at December 31, 2014 include the following: Port General Debt Capital Authority Nonmajor Fund Service Projects TIF Funds Totals Fund Balances Nonspendable: Prepaid items 66,238 10,000 549 76,787 Restricted for: Debt service 4,976,137 4,976,137 Capital Projects 1,988,610 1,988,610 Port Authority TI F 1,021,730 1,021,730 Committed for: Fire safety education 1,836 1,836 GIS 18,893 18,893 Port authority - general 270,105 270,105 Assigned for: Com pensated absences 973,572 973,572 Armory debt payments 345,612 345,612 Health insurance 225,000 225,000 Building maintenance 67,834 67,834 Park maintenance 185,544 185,544 Election equipment 131,733 131,733 Various projects / equipment 879,499 5,656,185 6,535,684 Building CIP 649,652 649,652 Street CIP 429,203 429,203 Equipment CIP 595,461 595,461 Unassigned: 6,288,615 6,288,615 Total Fund Balances $ 9,163,647 $ 4,976,137 $ 9,329,111 $ 1,021,730 $ 291,383 $ 24,782,008 Page 43 CITY OF ROSEMOUNT NOTES TO FINANCIAL STATEMENTS As of and for the Year Ended December 31,2014 NOTE IV - DETAILED NOTES ON ALL FUNDS (cont.) F. NET POSITION/FuND BALANCES (cont.) Business- Type Activities Net Investment in Capital Assets Land Construction in progress Other capital assets, net of accumulated depreciation Less: related long-term debt outstanding (excluding unspent capital related debt proceeds) Total Net Investment in Capital Assets $ 2,651,767 3,350,466 93,592,175 Total Business-Type Activities Net Position (1,400,000) 98,194,408 19,348,437 $ 117,542,845 Unrestricted 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. Page 44 CITY OF ROSEMOUNT NOTES TO FINANCIAL STATEMENTS As of and for the Year Ended December 31,2014 NOTE V - OTHER INFORMATION A. EMPLOYEES' RETIREMENT SYSTEM (cont.) 1. Public Employees Retirement Association (cont.) a. Plan Description (cont.) 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. There are different types of annuities available to members upon retirement. A single-life 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 be 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. 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.org.bywritingtoPERAat60EmpireDrive#200.St. Paul, Minnesota, 55103-2088 or by calling (651) 296-7460 or 1-800-652-9026. Page 45 CITY OF ROSEMOUNT NOTES TO FINANCIAL STATEMENTS As of and for the Year Ended December 31, 2014 NOTE V - OTHER INFORMATION (cont.) A. EMPLOYEES' RETIREMENT SYSTEM (cont.) 1. Public Employees Retirement Association (cont.) 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 2014. PEPFF members were required to contribute 10.2% of their annual covered salary in 2014. In 2014, 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 15.3% for PEPFF members. The City's contributions to the GERF for the years ending December 31, 2014, 2013 and 2012 were $264,550, $259,654 and $251,921, respectively. The City's contributions to the PEPFF for the years ending December 31, 2014, 2013 and 2012 were $303,908, $275,788 and $272,834, respectively. The City's contributions were equal to the contractually required contributions for each year as set by state statute. Contribution rates will increase on January 1, 2015 in the Coordinated Plan (6.5% for members and 7.5% for employers) and the Police and Fire Fund (10.8% for members and 16.2% for employers). 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. Page 46 CITY OF ROSEMOUNT NOTES TO FINANCIAL STATEMENTS As of and for the Year Ended December 31, 2014 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 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. 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. The annual pension cost for the Rosemount Fire Department Relief Association Pension Plan for the year ended December 31, 2014 was as follows: Amount State of Minnesota contribution City of Rosemount contribution $ 125,594 171,000 $ 296,594 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 Percentage Fiscal Year Annual Pension ofAPC Net Pension Ending Cost (APC) Contribution Obligation 2014 $ 296,594 100.0% $ 0 2013 296,632 100.0% 0 2012 262,845 100.0% 0 Page 47 CITY OF ROSEMOUNT NOTES TO FINANCIAL STATEMENTS As of and for the Year Ended December 31,2014 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 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. The following historical trend information was obtained from the Association's financial report for the year ended December 31,2014: Assets as a Overfunded Percentage of (Underfunded) Accrued Accrued Accrued Date Assets Liabilities Liabilities Liabilities 12-31-14 $ 3,348,776 $ 2,609,887 128% $ 738,889 12-31-13 2,874,130 2,468,808 116% 405,322 12-31-12 2,504,979 2,523,870 99% (18,891 ) 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. The equivalent single amortization period was not made available. e. Related Party Transactions As of December 31, 2014 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. Page 48 CITY OF ROSEMOUNT NOTES TO FINANCIAL STATEMENTS As of and for the Year Ended December 31,2014 NOTE V - OTHER INFORMATION (cont.) B. RISK MANAGEMENT (cont.) 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, 2014, 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. 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 31,2014. 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 payoff 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. Page 49 CITY OF ROSEMOUNT NOTES TO FINANCIAL STATEMENTS As of and for the Year Ended December 31,2014 NOTE V - OTHER INFORMATION (cont.) D. RELATED ORGANIZA TION 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 2014, the trust was liquidated and the City received a total of $1 ,588,610. In addition, SKB Environmental, Inc. donated $400,000 to the City to be used toward the Rosemount Activity Center project. E. EFFECT OF NEW ACCOUNTING STANDARDS ON CURRENT-PERIOD FINANCIAL STATEMENTS The Governmental Accounting Standards Board (GASB) has approved the following: > Statement No. 68, Accounting and Financial Reporting for Pensions - an amendment of GASB Statement No. 27 > Statement No. 71, Pension - Transition for Contributions Made Subsequent to the Measurement Date - an amendment of GASB No. 68 When they become effective, application of these standards may restate portions of these financial statements. Page 50 THIS PAGE IN TEN TIONA LL Y LEFT BLANK REQUIRED SUPPLEMENTARY INFORMATION CITY OF ROSEMOUNT REQUIRED SUPPLEMENTARY INFORMATION GENERAL FUND SCHEDULE OF REVENUES COMPARED TO BUDGET (BUDGETARY BASIS) - BUDGET AND ACTUAL For the Year Ended December 31,2014 Budgeted Amounts Variance with REVENUES Original Final Actual Final Budget TAXES General property tax $ 7,480,265 $ 7,480,265 $ 7,550,917 $ 70,652 Fiscal disparities 1,208,535 1,208,535 1,208,535 Other 280,000 280,000 300,682 20,682 Total Taxes 8,968,800 8,968,800 9,060,134 91,334 INTERGOVERNMENTAL REVENUES State aid - police 150,000 150,000 160,347 10,347 State aid - general government 30,000 30,000 58,620 28,620 State aid - highway 32,600 32,600 32,790 190 Other 88,200 88,200 90,401 2,201 Total Intergovernmental Revenues 300,800 300,800 342,158 41,358 PUBLIC CHARGES FOR SERVICES General government 792,900 792,900 947,615 154,715 Public safety 37,400 37,400 30,589 (6,811 ) Highways and streets 16,000 16,000 57,108 41,108 Parks and recreation 247,800 247,800 215,980 (31,820) SAC 2,000 2,000 2,309 309 Total Charges for Services 1,096,100 1,096,100 1,253,601 157,501 LICENSES AND PERMITS Business 57,000 57,000 57,185 185 Non-business 381,300 381,300 673,580 292,280 Total Licenses and Permits 438,300 438,300 730,765 292,465 FINES AND FORFEITURES County 125,000 125,000 116,384 {8,616) SPECIAL ASSESSMENTS 1,000 1,000 4,652 3,652 INVESTMENT INCOME AND MISCELLANEOUS Interest earnings 85,500 85,500 176,321 90,821 Change in fair value of investments 231,871 231,871 Miscellaneous general revenues 57,600 57,600 50,045 (7,555) Donations 28,756 28,756 Rents 222000 222000 222171 171 Total Investment income and miscellaneous 165,100 193,856 509,164 315,308 Total Revenues 11,095,100 11,123,856 12,016,858 893,002 OTHER FINANCING SOURCES Transfers in 3,500 3,500 3,500 Total Revenues and Other Financing Sources $ 11,098,600 $ 11,127,356 $ 12,020,358 $ 893,002 See auditors' report and accompanying notes to required supplementary information. Page 51 CITY OF ROSEMOUNT REQUIRED SUPPLEMENTARY INFORMATION GENERAL FUND SCHEDULE OF EXPENDITURES AND OTHER USES (BUDGETARY BASIS) - BUDGET AND ACTUAL For the Year Ended December 31, 2014 Budgeted Amounts Variance with CURRENT EXPENDITURES Original Final Actual Final Budget GENERAL GOVERNMENT Mayor and council $ 346,200 $ 346,200 $ 740,961 $ (394,761 ) Executive 502,000 502,000 482,980 19,020 Elections 40,000 40,000 27,562 12,438 Finance 464,800 464,800 460,919 3,881 Community development 929,300 929,300 894,997 34,303 General government 374,200 374,200 348,418 25,782 TOTAL GENERAL GOVERNMENT 2,656,500 2,656,500 2,955,837 (299,337) PUBLIC SAFETY Police department 3,352,042 3,358,109 3,334,014 24,095 Fire department 434,958 443,670 433,812 9,858 TOTAL PUBLIC SAFETY 3,787,000 3,801,779 3,767,826 33,953 PUBLIC WORKS Government building maintenance 555,200 555,200 513,951 41,249 Fleet maintenance 675,500 675,500 625,398 50,102 Street maintenance 1,348,300 1,348,300 1,302,271 46,029 Park maintenance 833,400 833,400 793,855 39,545 TOTAL PUBLIC WORKS 3,412,400 3,412,400 3,235,475 176,925 PARKS AND RECREATION 1,307,700 1,321,677 1,304,867 16,810 OTHER FINANCING USES Transfers out 115,000 115,000 475,000 (360,000) TOTAL EXPENDITURES $ 11,278,600 $ 11,307,356 11,739,005 $ (431,649) Beginning of year budget basis encumbrances 1,273,464 End of year budget basis encumbrances (1,794,607) GAAP basis expenditures and other financing uses $ 11,217,862 See auditors' report and accompanying notes to required supplementary information. Page 52 CITY OF ROSEMOUNT NOTES TO REQUIRED SUPPLEMENTARY INFORMATION As of and for the Year Ended December 31,2014 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 Final Budget Expenditures Excess Mayor and council $ 256,200 $ 740,961 $ 484,761 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 31,2014. Assets as a Overfunded Percentage of (Underfunded) Accrued Accrued Accrued Date Assets Liabilities Liabilities Liabilities 12-31-14 $ 3,348,776 $ 2,609,887 128% $ 738,889 12-31-13 2,874,130 2,468,808 116% 405,322 12-31-12 2,504,979 2,523,870 99% (18,891 ) 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 53 SUPPLEMENTARY INFORMATION CITY OF ROSEMOUNT COMBINING BALANCE SHEET - NONMAJOR GOVERNMENTAL FUNDS As of December 31,2014 Special Revenue Funds Total Fire Nonmajor Safety Port Authority Governmental Education GIS General Funds ASSETS Cash and investments $ 1,836 $ 18,893 $ 186,377 $ 207,106 Due from other governments 87,878 87,878 Prepaid items 549 549 Total assets $ 1,836 $ 18,893 $ 274,804 $ 295,533 LIABILITIES Accounts payable $ - $ - $ 4,150 $ 4,150 Total liabilities 4,150 4,150 FUND BALANCES Nonspendable 549 549 Committed 1,836 18,893 270,105 290,834 Total fund balances 1,836 18,893 270,654 291,383 Total liabilities and fund balances $ 1,836 $ 18,893 $ 274,804 $ 295,533 Page 54 CITY OF ROSEMOUNT COMBINING STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES - NONMAJOR GOVERNMENTAL FUNDS For the Year Ended December 31,2014 Special Revenue Funds Fire Safety Education GIS Total Nonmajor Port Authority Governmental General Funds REVENUES Taxes I ntergovern mental Public charges for services Investment income and miscellaneous Total Revenues $ - $ - $ 58,000 $ 58,000 740,660 740,660 5,292 1,422 569 5,292 8 845 5,300 799,505 805,374 569 EXPENDITURES Current: General government Capital Outlay Total Expenditures FUND BALANCES - END OF YEAR 75,241 75,241 652,781 652,781 728,022 728,022 569 5,300 71,483 77,352 1,267 13,593 199,171 214,031 $ 1,836 $ 18,893 $ 270,654 $ 291,383 Net change in fund balance FUND BALANCES - Beginning of Year Page 55 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 31,2014 Total Revenues Original and Final Budgeted Variance with Amounts Actual Final Budget $ 24,000 $ 24,000 $ 57,459 57,459 600,000 1,394,072 794,072 1,988,610 1,988,610 10,500 72,045 61,545 634,500 3,536,186 219011686 REVENUES Taxes Intergovernmental Charges for services Contributions and donations Investment income / fair value adjustment EXPENDITURES Current: General government Capital Outlay Debt Service: Interest on lease Net Change in Fund Balance 2,500 2,500 4,575,800 3,967,897 607,903 5,200 5,195 5 4,583,500 3,975,592 607,908 (3,949,000) (439,406) 3,509,594 2,644,681 2,644,681 $ {1,304,319) $ 2,205,275 $ 3,509,594 Total Expenditures FUND BALANCE - Beginning FUND BALANCE - ENDING Page 56 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 31,2014 Original and Final Budgeted Variance with REVENUES Amounts Actual Final Budget Taxes $ 740,000 $ 740,000 $ I ntergovern mental 312,887 312,887 Charges for services 125,000 125,000 Special assessments 450,962 450,962 Investment income 2,500 949 (1,551 ) Miscellaneous 8,715 8,715 Total Revenues 867,500 1 ,638,513 771 013 EXPENDITURES Current: General government 2,500 3,448 (948) Pu bl ic works 26,873 (26,873) Capital Outlay 865,000 159,808 705,192 Total Expenditures 867,500 190,129 677,371 Excess of revenues over expenditures 1,448,384 1,448,384 OTHER FINANCING SOURCES (USES) Transfers in 104,590 104,590 Transfers out {810,896) {810,896) Total Other Financing Sources (Uses) {706,306) {706,306) Net Change in Fund Balance 742,078 742,078 FUND BALANCE - Beginning 1,650,247 1,650,247 FUND BALANCE - ENDING $ 1,650,247 $ 2,392,325 $ 742,078 Page 57 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, 2014 Original and Final Budgeted Variance with REVENUES Amounts Actual Final Budget Taxes $ 490,000 $ 490,000 $ Investment income 7,500 36,332 28,832 Miscellaneous 1,178 1,178 Total Revenues 497,500 527,510 30,010 EXPENDITURES Current: General government 2,500 2,500 Capital Outlay 863,500 643,778 219,722 Total Expenditures 866,000 646,278 219,722 Excess (deficiency) of revenues over expenditures (368,500) (118,768) 249,732 OTHER FINANCING SOURCES Sale of capital assets 9,000 65,290 56,290 Transfers in 360,000 360,000 Total Other Financing Sources 9,000 425,290 416,290 Net Change in Fund Balance (359,500) 306,522 666,022 FUND BALANCE - Beginning 1,149,575 1,149,575 FUND BALANCE - ENDING $ 790,075 $ 1,456,097 $ 666,022 Page 58 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 59 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 64 These schedules contain information to help the reader assess the government's most significant local revenue source, the property tax. Debt Capacity 68 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 73 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 75 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. Schedule 1 City of Rosemount Net Position by Component Last Ten Fiscal Years (Accrual Basis of Accounting) Fiscal Years 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Governmental activities Net investment in capital assets $ 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 $ 58,438,402 Restricted 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 6,687,958 Unrestricted 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 20,924,090 Total governmental activities net position 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 86,050,450 Business-type activities Net investment in capital assets $ 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 $ 98,194,408 Unrestricted 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 19,348,437 Total business-type activities net position 96,854,006 103,633,606 107,532,766 109,845,907 110,465,471 109,084,283 108,467,944 112,749,005 114,362,248 117,542,845 Primary government Net investment in capital assets $ 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 $156,632,810 Restricted 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 6,687,958 Unrestricted 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 40,272,527 Total primary government net position $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 $ 203,593,295 Source: City of Rosemount Comprehensive Annual Financial Reports Page 59 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 governmental 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 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 $ 2,739,933 $ 2,722,728 $ 2,610,367 $ 2,639,752 $ 2,754,573 $ 2,671,886 $ 2,612,911 $ 2,701,234 $ 2,583,271 $ 2,961,500 2,730,428 2,928,783 3,293,615 3,468,249 3,688,658 3,819,520 3,763,742 3,872,633 4,051,642 4,233,610 8,344,837 7,724,300 4,974,625 5,279,784 4,260,284 4,326,903 4,336,345 4,341,203 5,448,047 5,764,176 1,250,743 1,257,556 1,386,322 1,417,400 1,378,619 1,477,525 1,496,068 2,405,676 1,586,449 1,613,600 2,297 342 9,677 1,956,865 648,476 149,701 9,069 3,267 1,032,304 1,067,478 921,318 841,108 958,900 750,226 690,896 637,609 541,386 517,067 501,682 16,135,716 15,555,027 13,115,714 15,720,950 13,480,836 13,136,431 12,855,744 13,862,132 14,189,743 16,106,872 1,671,775 1,975,164 842,701 443,128 4,932,768 1,603,391 1,913,071 916,557 457,897 4,890,916 2,366,263 2,059,411 1,245,492 468,017 6,139,183 1,893,099 2,123,397 988,716 537,530 5,542,742 1,878,310 2,313,576 989,808 456,706 5,638,400 1,861,467 2,305,503 1,010,678 484,278 5,661,926 1,792,613 2,386,660 950,114 479,707 5,609,094 1,827,543 2,317,324 968,935 498,118 5,611,920 1,903,275 2,425,486 989,574 578,345 5,896,680 1,962,833 2,522,913 1,122,839 493,943 6,102,528 $ 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 $ 22,209,400 $ 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 $ 3,202,744 120,182 117,017 159,624 203,056 169,112 151,802 169,718 184,011 139,432 146,973 37,497 25,159 8,893 32,160 15,050 20,912 68,166 45,564 53,813 59,417 1,137,357 351,867 693,482 403,560 244,374 263,238 272,958 365,486 342,100 571,222 11,802 252,907 354,618 19,076 15,000 3,435,395 152,495 13,294,175 1,024,357 210,863 22,760,814 25,608 212,885 169,586 1,135 18,500 8,746 5,218,862 1,349 8,216,228 25,823 251,262 926,545 1,163 15,400 117,025 1,562 4,667,378 423,305 9,168,078 22,580 233,349 392,136 628 82,803 1,775 337 3,762,115 531 522,179 7,689,075 254,175 380,737 659 60,100 7,118 3,971 1,206,361 4,203 256,357 4,103,973 246,346 311,630 26,484 20,100 697 5,320,892 9,218 19,425 8,062,758 249,515 108,640 33,499 67,400 4,214,641 7,065,874 46,326 275,114 53,198 1,275 3,628,190 39,352 6,925,408 263,805 32,790 6,241 20,635 3,967,849 322,808 7,615,168 283,095 53,515 3,736 22,536 1,988,610 18,131 4,318,692 740,660 11,409,331 Page 60 Schedule 2 (continued) City of Rosemount Changes in Net Position Last Ten Fiscal Years (Accrual Basis of Accounting) Fiscal Years 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Business-Type activities Charges for services Water Utility 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 2,379,147 Sewer Utility 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 1,733,646 Storm Water Utility 1,999,635 1,167,514 1,056,510 1,137,287 852,704 888,995 927,429 1,135,067 1,061,632 1,350,259 Arena 331,205 351,808 373,504 390,631 370,964 406,797 378,046 352,930 376,058 392,631 Operating grants and contributions Water Utility 9,901 Storm Water Utility 19,680 Capital grants and contributions Water Utility 44,989 107,855 46,807 56,388 70,279 72,960 243,835 168,573 371,582 180,568 Sewer Utility 87,619 90,776 88,516 392,757 416,493 71,656 110,538 207,422 83,484 98,863 Storm Water Utility 80 18,165 1,075,041 85,242 190,022 487,082 648,297 193,402 Arena Total Business-Type activities program revenues 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 6,358,097 Total primary government program revenues 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 17,767,428 Net (Expense) Revenue Governmental activities 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) (4,697,541) Business-Type activities 2,040,126 665,910 {803,445) 247,836 394,516 {713,116) {305,334) 853,441 528,104 255,569 Total primary government net expense $ 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) $ {4,441 ,972) General Revenues and Other Changes in Net Position Governmental activities Property taxes, levied for general purposes $ 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 $ 10,328,709 Property taxes, levied for debt service 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 1,022,258 Other taxes 173,719 184,868 201,446 208,667 224,276 264,808 262,783 242,491 259,064 288,425 Investment income 567,112 1,064,315 967,337 611,533 297,536 164,474 243,193 136,310 121,886 221,243 Change in fair value of investments nfa nfa nfa nfa nfa nfa nfa nfa (458,073) 319,644 Gain (loss) on the sale of assets (2,125,256) (851,439) 130,114 13,248 12,883 Miscellaneous 71,371 131,352 326,263 365,516 340,763 429,150 204,149 127,617 116,123 103,615 Transfers {4,468,254) {5,169,779) {3,599,876) {1,339,200) 239,241 984,000 688,873 {3,170,768) {1,267,033) {2,314,720) Total governmental activities 4,623,959 5,437,864 8,560,713 9,163,934 11,730,220 13,123,Q52 12,731,336 8,388,373 9,945,532 9,969,174 Business-Type activities Investment income 572,317 943,911 1,102,729 726,105 464,289 315,928 377,868 256,852 209,227 333,929 Change in fair value of investments nfa nfa nfa nfa nfa nfa nfa nfa (391,121) 276,379 Transfers 4,468,254 5,169,779 3,599,876 1,339,200 {239,241) {984,000) {688,873) 3,170,768 1,267,033 2,314,720 Total Business-Type activities 5,040,571 6,113,690 4,702,605 2,065,305 225,048 {668,072) {311,005) 3,427,620 1,085,139 2,925,028 Total primary government 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 12,894,202 Change in Net Position Governmental activities 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 5,271,633 Business-Type activities 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 3,180,597 Total primary government $ 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 $ 8,452,230 Source: City of Rosemount Comprehensive Annual Financial Reports nfa - Not Available Page 61 Schedule 3 City of Rosemount Fund Balances, Governmental Funds Last Ten Fiscal Years (Modified Accrual Basis of Accounting) Fiscal Years 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 General Fund Reserved for Prepaid items $ 29,926 $ 31,447 $ 25,797 $ 34,120 $ 78,379 $ 33,280 $ - $ - $ - $ Encumbrances 599,962 334,104 558,190 524,904 638,254 465,544 Unreserved Designated 5,162,364 5,429,801 6,456,649 6,480,777 6,536,929 6,653,352 Undesignated 15,486 17,508 8,967 10,059 15,549 32,941 Nonspendable 85,067 80,623 67,266 66,238 Restricted Assigned 1,894,348 2,319,433 2,292,257 2,808,794 Unassigned 5,700,071 5,905,056 6,001,628 6,288,615 Total General Fund 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 9,163,647 All Other Governmental Funds Reserved for Debt service 9,784,931 7,570,248 7,180,264 5,582,205 3,854,760 6,173,964 Special revenue funds - prepaid items 364 391 416 Capital projects funds - encumbrances 1,168,027 727,152 239,803 331,014 1,118,650 1,061,526 Unreserved Designated Capital projects funds 6,395,862 4,862,317 4,662,910 5,297,333 4,984,835 3,510,512 Special revenue funds 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 (331,928) 232,497 114,581 109,523 125,132 134,919 Nonspendable for Capital projects funds 10,000 10,000 10,000 Port Authority TIF fund 549 Restricted for Debt service 4,782,476 4,193,284 4,554,980 4,976,137 Capital Projects 1,988,610 Port Authority TIF fund 677,057 887,616 1,046,218 1,021,730 Committed for Special revenue funds 159,Q48 191,307 214,031 290,834 Assigned for Capital projects funds 8,515,086 6,229,951 6,243,406 7,330,501 Total All Other Governmental Funds 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 15,618,361 Total All Funds $ 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 $ 24,782,008 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 62 Schedule 4 City of Rosemount Changes in Fund Balances, Governmental Funds Last Ten Fiscal Years (Modified Accrual Basis of Accounting) Fiscal Years 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Revenues Taxes $ 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 $ 10,747,756 Tax increments 22,264 40,236 159,030 296,735 379,351 448,253 576,675 660,056 660,130 646,636 Intergovernmental 619,637 402,106 1,194,371 1,511,195 947,554 4,051,643 2,394,400 584,381 2,288,281 2,509,924 Public charges for services 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 3,132,556 Licenses and permits 1,194,106 799,650 650,634 698,756 430,551 453,900 388,615 484,644 522,131 730,765 Fines and forfeitures 90,787 90,776 120,870 129,220 124,068 122,394 124,324 129,343 106,617 116,384 Special assessments 1,382,539 1,373,904 1,582,277 962,950 757,223 832,686 496,386 2,155,618 1,539,059 2,123,199 Investment income and miscellaneous 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 3,135,395 Total revenues 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 23,142,615 Expenditures General government 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 2,752,153 Public safety 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 3,762,826 Public works 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 3,192,487 Parks and recreation 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 1,304,867 Conservation and development 1,944,457 160,445 139,965 376,496 Capital Outlay 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 9,470,432 Debt Service Principal retirement 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 1,580,000 Interest and fiscal charges 936,522 903,470 1,013,010 843,205 826,350 726,878 677,469 582,377 511,526 508,605 Total expenditures 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 22,947,866 Excess (deficiency) of revenues over (under) expenditures (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) 194,749 Other financing sources (uses) Issuance of long-term debt 5,280,000 4,775,000 450,000 6,425,000 1,355,000 2,080,000 810,000 1,500,000 2,400,000 Payment to escrow agent (1,182,525) (1,800) Premium on long-term debt 21,147 Discount on long-term debt (3,533) Sale of capital assets 2,650 101,841 19,005 4,780 3,000 12,505 10,121 12,740 3,627 348,335 Transfers in 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 1,908,755 Transfers out {1,516,783) {219,031 ) {185,469) {1,469,493) {797,053) {2,778,822) {804,755) {140,000) {441,987) {499,617) Total other financing sources (uses) 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 4,157,473 Net change in fund balances $ 4,176,182 ${10,244,337) $ {361,055) $ 2,642,098 $ {943,339) $ 877,783 $ 3,310,931 $ {1,995,883) $ 612,516 $ 4,352,222 Fund balances - Beginning 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 Fund balances - Ending $ 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 $ 24,782,008 Debt service as a percentage of noncapital expenditures 36.8% 36.3% 33.7% 30.2% 31.3% 20.1% 22.0% 22.3% 16.1% 15.5% Source: City of Rosemount Comprehensive Annual Financial Reports Page 63 Schedule 5 City of Rosemount Assessed Value (or Tax Capacity) and Estimated Market Value of All Taxable Property Last Ten Fiscal Years Total Tax Capacity Real Property Personal Property Total as%of 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 ~1l Value Capacity (1) Value Capacity ~1l Value Rate (2) Value Capacity (1) 2005 $ 17,813,205 $ 1,582,376,400 $ 468,371 $ 22,240,300 $ 18,281,576 $ 1,604,616,700 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 2014 21,898,381 1,908,586,387 788,742 40,027,970 22,687,123 1,948,614,357 47.676 1.16% 6,371,221 Total Tax Capacity as % of Estimated Market Value 1.18% 1.17% 1.16% 1.15% 1.14% 1.13% 1.12% 1.11% 1.10% 1.09% [ E1Total % 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 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 64 Schedule 6 City of Rosemount Property Tax Rates - All Direct and Overlapping Governmental Units Last Ten Fiscal Years (Rate per 1% of Market Value) ISO 196 ISO 199 ISO 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 Cit~ 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 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 nfa 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 nfa 27.956 0.23542 27.556 0.18354 23.932 0.29483 33.421 nfa 5.884 116.123 115.723 112.099 2014 47.676 nfa 27.606 0.25809 33.418 0.15657 23.052 0.26005 31.827 nfa 5.538 112.647 118.459 108.093 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. nfa - Not Applicable Page 65 Schedule 7 City of Rosemount Principal Property Tax Payers Current Year and Nine Years Ago 2014 2005 Percentage Percentage Local of Total Local of Total Tax Local Tax Tax Local Tax Taxpayer Capacity (1) Rank Capacity Capacity (1) Rank Capacity Flint Hills Resources Pine Bend LLC (Merged w/below) $ 2,947,426 12.99% $ 1,165,188 1 6.37% Great Northern Oil Company (2005 - Koch Refining) 597,877 2 3.27% Northern States Power Co. 345,068 2 1.52% 284,441 3 1.56% Clarel Corporation (Cub Foods) 185,686 3 0.82% 177,582 4 0.97% 146th Street Partners LP (Waterford Commons) 168,254 4 0.74% CF Industries Sales LLC (Cenex) 128,806 5 0.57% 72,580 9 0.40% Northern Natural Gas Co. 127,292 6 0.56% Minnesota Pipeline Co. 111,575 7 0.49% Hawkins Inc. 102,642 8 0.45% Minnesota Energy Resources Corp. 89,200 9 0.39% Rosemount Crossing LLC (Aldi's) 85,250 10 0.38% Francis & Patricia Dolejs 84,948 11 0.37% Proto Labs Inc. (2005 - Webb Properties LLC) 84,080 12 0.37% 77,968 6 0.43% MHC Rosemount Woods LLC (2005 - Hidden Valley) 79,310 13 0.35% 68,512 10 0.37% CMC Properties LLC (Wayne Transport) 78,844 14 0.35% Limerick Way LLC 78,542 15 0.35% 75,002 7 0.41% Bigos - Rosemount LLC (Cannon Equipment) 86,794 5 0.47% Continental Nitrogen & Resources (CNR) 73,172 8 0.40% GrueU-Labriola Partnership (AWP) 66,784 11 0.37% Contractor Property Developers (CPDC) 65,895 12 0.36% DR Horton Inc. Minnesota 54,104 13 0.30% Centex Homes 52,365 14 0.29% Progress Land Company 41,759 15 0.23% Principal Taxpayers Total $ 4,696,923 20.70% $ 2,960,023 16.19% Total City Tax Capacity $ 22,687,123 $ 18,281,576 Source: Dakota County Treasurer-Auditor (1) These figures do not include the dollars collected but the tax capacity for each entity. Page 66 Schedule 8 City of Rosemount Property Tax Levies and Collections Last Ten Fiscal Years 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 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% 2014 11,031,983 10,986,828 99.59% 110,510 11,097,338 41,682 99.62% 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 67 Schedule 9 City of Rosemount Ratios of Outstanding Debt by Type Last Ten Fiscal Years Business - Type Governmental Activities Activities G.O. and G.O. and G.O. Property G.O. Tax Revenue Special G.O. Municipal G.O. Total Percentage Personal Tax Increment Equipment Supported Assessment State Aid Revenue Primary of Personal Per Year Po~ulation{ 1) Income(1) Supported(2) Sup~orted(2) Certificates(2) (Port Auth.}(2) Su~ported(2) Supported(2) Bonds(2) Government Income Capita 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 21,874 988,529,808 3,185,000 6,040,000 760,000 2,820,000 4,275,000 6,965,000 24,045,000 2.43% 1,099 2011 22,239 1,033,557,525 2,885,000 6,040,000 520,000 2,725,000 4,765,000 4,585,000 21,520,000 2.08% 968 2012 22,432 1,118,167,904 2,575,000 6,005,000 265,000 1,355,000 5,140,000 3,785,000 19,125,000 1.71% 853 2013 22,711 1,132,075,217 2,255,000 5,930,000 85,000 1,230,000 5,795,000 1,935,000 17,230,000 1.52% 759 2014 23,044 1,148,674,268 2,010,000 5,820,000 1,105,000 7,180,000 1,400,000 17,515,000 1.52% 760 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 68 Schedule 10 City of Rosemount Ratios of Net General Bonded Debt Outstanding Last Ten Fiscal Years General Bonded Debt Outstanding Percentage of Estimated Less Restricted Total Estimated Market G.O. Debt Service General Market Per Year Population(1 ) Value(2) Debt (3) Funds Bonded Debt Value Capita 2005 20,837 $ 1,606,616,700 $ 31,370,000 $ 1,503,014 $ 29,866,986 1.86% $ 1,433 2006 22,049 1,919,935,700 30,365,000 560,562 29,804,438 1.55% 1,352 2007 22,397 2,185,780,900 27,640,000 709,370 26,930,630 1.23% 1,202 2008 22,750 2,365,760,300 28,060,000 866,988 27,193,012 1.15% 1,195 2009 23,750 2,367,003,800 23,725,000 2,038,321 21,686,679 0.92% 913 2010 21,874 2,238,851,500 21,245,000 1,936,318 19,308,682 0.86% 883 2011 22,239 2,113,658,000 21,520,000 1,605,726 19,914,274 0.94% 895 2012 22,432 1,914,176,616 19,125,000 1,129,632 17,995,368 0.94% 802 2013 22,711 1,866,877,179 17,230,000 737,907 16,492,093 0.88% 726 2014 23,044 1,948,614,357 17,515,000 528,504 16,986,496 0.87% 737 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 69 Schedule 11 City of Rosemount Direct and Overlapping Governmental Activities Debt As of December 31,2014 Governmental Units (1) Governmental Estimated Estimated Activities Percentage Amount Debt Applicable Applicable Outstanding to City (3) to City $ 16,115,000 100.00% $ 16,115,000 Direct Debt: City of Rosemount Overlapping Debt: School Districts: I.S.o. 196 - Rosemount I.S.D. 199 - Inver Grove Heights I.S.D. 200 - Hastings Total Direct & Overlapping Debt 96,477,253 67,040,000 42,015,000 40,890,000 21,040,000 (2) $ 267,462,253 $ 283,577 ,253 14.20% 6.00% 0.10% 13,699,770 4,022,400 42,015 Dakota County 5.60% 2,289,840 Regional: Metropolitan Council 147,280 0.70% Total Overlapping Debt $ 20,201,305 $ 36,316,305 (1) Only those units with debt outstanding are shown here. (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. Page 70 Schedule 12 City of Rosemount Legal Debt Margin Information Last Ten Fiscal Years Legal Debt Margin Calculation for Fiscal Year 2014 Estimated Market Value Debt Limitation - 3% of Estimated Market Value Debt Applicable to Limitation: Total Bonded Debt $ 1,948,614,357 58,458,431 $ 17,515,000 Less: Special Assessment Bonds $ 7,180,000 Tax Increment Bonds 5,820,000 Revenue Bonds 1,400,000 Port Authority Bonds 1,105,000 State Aid Street Bonds Amount Availabe for Repayment of G.O. Bonds 528,504 16,033,504 Total Debt Applicable to Limitation 1,481,496 Legal Debt Margin $ 56,976,935 Fiscal Year 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Estimated Market Value $ 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 $ 1,948,614,357 Debt Limit - 3% of Estimated Market Value - 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 58,458,431 Limit was 2% prior to 2008 Total Net Debt Applicable to Debt Limit 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 1,481,496 Legal Debt Margin $ 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 $ 56,976,935 Legal debt margin as a percentage of the debt limit 82.75% 86.12% 88.37% 93.42% 96.13% 97.01% 97.16% 97.02% 97.14% 97.47% 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. Page 71 Schedule 13 City of Rosemount Pledged-Revenue Coverage Last Ten Fiscal Years G.O. Revenue Bonds G.O. Special Assessment Bonds Net Revenue Available Debt Service Requirements Special Debt Service Reguirements Gross For Debt Assessment Year Revenue Expenses (1) Service Principal (2) Interest Total Coverage Collections Principal (3) Interest Total Coverage 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% 2014 4,195,215 3,262,938 932,277 535,000 53,940 588,940 158.30% 2,123,199 1,015,000 97,241 1,112,241 190.89% 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 1996B & 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 1999B & 2001A bonds and 2011 includes calls for 2002A & 2003A bonds. Page 72 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) 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 45,192 988,529,808 5,179 6.3% 36.8 2011 22,239 46,475 1,033,557,525 4,745 5.2% 36.5 2012 22,432 49,847 1,118,167,904 4,860 4.8% 36.7 2013 22,711 49,847 1,132,075,217 4,889 4.1% 36.7 2014 23,044 49,847 1,148,674,268 4,910 3.2% 36.7 (1) 2010 is a regular decennial census figure. All years from 2005 and on (except for 2010) are the City staff's 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 2012 figure for computing the "Personallncome" 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. 2013's median age is the most current information available so 2014 is shown as the same age. Page 73 Schedule 15 City of Rosemount Principal Employers Current Year and Nine Years Ago 2014 2005 Percentage Percentage of Total of Total City City Employer Employees Rank Employment Employees Rank 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 74 Schedule 16 City of Rosemount Full-Time/Permanent Part-Time City Government Employees by Function/Program Last Ten Fiscal Years 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Function/Program General Government Administration 4.50 4.50 4.50 4.50 4.50 4.50 4.50 3.50 3.50 3.50 Finance 3.25 3.50 3.50 4.50 4.30 4.30 4.30 4.30 4.30 4.55 Community Development 11.00 10.50 10.50 10.50 10.50 9.75 9.75 9.50 9.50 9.50 Police Sworn Officers 19.00 20.00 21.00 22.00 22.00 22.00 22.00 22.00 22.00 23.00 Non-Sworn Employees 3.00 3.00 3.00 3.25 3.25 3.25 3.25 3.25 3.25 3.25 Fire Firefighters and Officers 41.00 41.00 39.00 43.00 44.00 43.00 43.00 41.00 43.00 42.00 Fire Marshall 0.50 0.50 0.50 Public Works Building Maintenance 1.00 1.00 1.00 0.80 0.80 0.80 Fleet Maintenance 2.10 2.10 2.10 2.10 2.10 2.10 2.10 2.20 2.20 2.20 Street Maintenance 6.60 6.60 6.60 6.60 6.60 6.40 6.40 5.80 5.80 5.80 Parks Maintenance 5.60 5.60 5.60 5.60 5.60 5.60 5.60 4.60 4.60 4.60 Parks and Recreation Parks & Rec 10.00 10.00 10.00 9.50 9.50 9.50 9.50 9.50 9.50 9.50 Arena 2.30 2.30 2.30 1.80 1.85 1.85 1.85 1.85 1.85 1.85 Utilities Water 4.425 4.825 5.325 5.325 5.130 5.130 4.830 4.675 4.675 4.675 Sewer 4.425 4.825 5.325 5.325 5.130 5.130 4.830 4.675 4.675 4.675 Storm Water 2.05 2.25 2.25 2.25 2.30 2.30 2.10 2.10 2.10 2.10 120.75 122.50 122.50 126.25 126.76 124.81 124.01 119.75 121.75 122.00 Sources: Finance Department Note: Employees listed are full-time and permanent part-time employees. Seasonal and temporary positions are not included. Page 75 Schedule 17 City of Rosemount Operating Indicators by Function/Program Last Ten Fiscal Years 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Function/Proaram General Government Total Permits Issued by the Building Department 4,231 3,265 3,083 3,389 2,366 2,400 2,359 2,251 2,471 2,879 Total Number of Inspections Conducted 11,223 8,821 5,505 5,774 4,572 4,311 4,048 3,553 4,296 4,618 Police Number of Calls for Service 14,330 14,603 17,056 16,105 16,354 14,432 14,554 14,346 13,730 15,538 Number of Patrol Miles 218,079 195,059 216,291 209,310 206,619 211,460 152,097 194,764 186,490 195,393 Adult Arrests 435 415 586 646 424 340 432 369 312 230 Juvenile Arrests 272 166 209 239 206 182 146 107 102 101 Traffic Violations 1,404 1,116 2,378 1,522 1,548 1,605 2,232 2,610 2,147 2,452 Parking Violations 162 113 261 160 307 284 296 378 436 197 Fire Number of Calls Answered 619 573 652 769 632 630 690 724 637 715 Fires Extinguished n/a 40 63 59 34 34 52 35 38 Public Works Street Resurfacing (Miles) 4.10 1.60 0.75 1.20 0.64 10.50 1.30 2.30 1.60 1.20 Park Acres Mowed 113 130 135 127 127 134 134 154 154 154 Parks and Recreation Overall Program Participation 13,500 14,000 14,000 14,000 14,200 14,500 14,500 14,500 15,000 15,000 Hours of Ice Time Used 2,289 2,344 2,544 2,545 2,466 2,577 2,515 2,577 2,479 2,378 Water Connections 5,989 6,032 6,075 6,188 6,273 6,381 6,431 7,464 7,576 7,701 Water Main Breaks 2 2 1 1 Average Daily Consumption (In Gallons) 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 2,233,593 Sewer Connections 5,869 6,007 6,057 6,170 6,255 6,363 6,414 6,505 6,614 6,894 Sources: Various City departments. Page 76 Schedule 18 City of Rosemount Capital Asset Statistics by Function/Program Last Ten Fiscal Years Function/Program General Government City Halls/Other Buildings Police Stations Patrol Units (Marked/Unmarked) Fire Stations Fire Units (Vehicles & Trailer) Public Works Buildings City Maintained Streets (Miles) (1) Street Lights Parks and Recreation Community Centers Shelters/Other Buildings Acreage Parks Playgrounds BasebalVSoftball Diamonds Soccer/Football Fields Tennis Courts Water Water Mains (Miles) Wells (Municpal/Rural) Water Towers Fire Hydrants Storage Capacity Maximum Pumping Capacity Sewer Sanitary Sewer Mains (Miles) Storm Sewer Mains (Miles) Public Education Facilities: Number of Elementary Schools Number of Secondary Schools Number of Special Education Schools (Dakota County Technical College) Sources: Various City departments. 1 1 1 8/4 8/4 8/4 9/4 9/4 9/4 9/4 2 2 12 14 14 14 14 14 14 3 100 101 102 102 103 103 103 1,271 1,290 1,290 1,300 1,488 1,500 1,500 357 357 430 430 440 440 467 23 24 26 26 27 27 28 19 19 19 19 20 20 20 18 19 19 19 20 20 20 12 13 13 13 16 16 16 4 6 6 8 8 8 111 116 119 119 122 122 125 7 8 8 8 4 4 4 976 1,049 1,082 1,279 1,281 1,330 1,342 2,000,000 3,500,000 3,500,000 3,500,000 3,500,000 3,500,000 3,500,000 9,648,000 9,648,000 11,664,000 10,994,000 12,096,000 12,096,000 12,096,000 81 85 90 90 91 91 95 69 75 78 81 82 84 84 (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. 1 9/4 14 105 1,510 106 1,520 3 467 28 20 22 16 127 129 8 8 4 4 1,342 1,366 3,500,000 3,500,000 12,096,000 12,096,000 97 98 86 86 9/4 8/6 15 15 108 1,539 534 27 20 23 19 533 29 21 23 19 12 130 8 4 1,412 3,500,000 12,096,000 98 97 Page 77 Baker Tilly Virchow Krause, LLP 225 S Sixth St, Ste 2300 Minneapolis, MN 55402-4661 tel 612 8764500 fax 612 2388900 bakertilly.com MINNESOTA LEGAL COMPLIANCE Independent Auditor's Report .Hcncraole.Maycr.and.Members of__City_C_ouncll .. 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 governmentai 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, 2014, and the related notes to the financial statements, and have issued our report thereon dated June 9, 2015. 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. 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 abov~ referenced provisions. 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 June 9,2015 ~anindependentmemberOf BAKER TILLY INTERNATIONAL An Affirmative Action Equal Opportunity Employer CITY OF ROSEMOUNT Rosemount, Minnesota COMMUNICATION TO THOSE CHARGED WITH GOVERNANCEAND MANAGEMENT As of and for the Year Ended December 31,2014 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 6-8 Required Communications by the Auditor to Those Charged with Governance 9 -12 Summary of Uncorrected Misstatements Management Representations REQUIRED COMMUNICATION OF INTERNAL CONTROL RELATED MATTERS IDENTIFIED IN THE AUDIT TO THOSE CHARGED WITH GOVERNANCE ~AKER TILLY Baker Tilly Virchow Krause, LLP 225 S Sixth St, Ste 2300 Minneapolis, MN 55402-4661 tel 612 876 4500 fax 612 238 8900 bakertilly.com To the City Council City of Rosemount Rosemount, Minnesota --In--planning-and--performing-ouLaudiLoLthe financial.statements __ of.the.Citz.of.Rosemount.as.of and.for.the _year_ ended December 31, 2014, 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 June 9,2015 Page 1 ~anindependentmemberOf BAKER TILLY INTERNATIONAL An Affirmative Action Equal Opportunity Employer 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 as well as policies and procedures to properly segregate duties. This includes systems that are designed to limit the access or control of anyone individual to your government's assets or accounting records, and to achieve a higher likelihood that errors or irregularities in your 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. Our recommendations for strengthening controls are listed below. CONTROLS OVER UTILITY BILLING 1 . Persons involved in the cash receipting process should be independent of other billing duties. Page 2 INTERNAL CONTROL ENVIRONMENT (cont.) CONTROLS OVER FINANCIAL REPORTING ON A MONTHL y BASIS 1. Adjusting journal entries and supporting documentation should be reviewed and approved by an appropriate person who is not the original preparer. At a minimum, a system generated report of manual journal entries should be reviewed by someone independent of posting journal entries. 2. Account reconciliations prepared throughout the year should be performed by someone independent of processing of transactions in the account. 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 or grantor agencies? 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 8-12 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 accounted for 37% of the total investments, which is a sizeable decrease from 43% at the end of 2013. 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. INFORMATIONAL POINTS GASB UPDATES The following is a schedule of GASB projects: Task or Event Effective Date Impact GASB No. 68- For fiscal years The city belongs to the statewide retirement system Accounting and beginning after June (PERA). The PERA is a cost-sharing, multiple- Financial Reporting for 15,2014 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 discl~l!l~~JlL~Y~~lgnifi~lIl. chan[es. __ GASB No. 69- December 31, 2014 This standard provides the guidance necessary for Government government combinations and disposals of Com binations and government operations. Disposals of Government OIJt:::1 dllUII::> 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 F" 1011v10: Guarantees Page 6 INFORMATIONAL POINTS (cont.) GASS UPDATES (cont.) Task or Event Impact Effective Date GASB No. 71 - Pension Transition for Contributions Made Subsequent to the Measurement Date - an amendment of GASB No. 68 December 31, 2015 Agenda Topic: Conceptual Framework - Measurement Agenda Project: Fair Value Measurement The is scheduled to issue a final Concepts Statement soon. The recently issued an exposure draft. Project: Fiduciary Responsibilities recently issued an exposure draft. This project is to assess guidance should be developed regarding the application of the fiduciary responsibility criteria in deciding whether and how governments should report fiduciary activities in their financial .. " .... ,"" .. + .. ________ ~ .~~~~~~~--._--~----r--w--~---~-----~----~w~M __ ~~_. __ ~ _ The project is to reexamine issues associated with lease accounting, consider improvements to existing guidance, and provide a basis for the GASB Board to consider whether the current guidance is appropriate based on the definitions of assets and liabilities. Project: Leases Agenda Project: Postemployment Benefits Accounting and Financial Reporting: Other Postemployment Benefits Accounting and Financial Reporting The GASB recently issued an exposure draft. The recently issued an exposure draft. The requirements of this Statement will eliminate the source of a potential significant understatement of restated beginning net position and expense in the first year of implementation of GASB No. 68 in the accrual-basis financial statements of the city. This will be addressed with the implementation of GASB No. 68. onrecnve of this project is to consider the measurement concepts that should be used in governmental financial statements. A measurement approach determines whether an asset or liability 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. The this project is to review and consider alternatives for the further development of the definition of fair value, the methods used to measure fair value and the applicability of fair value guidance to investments and other items currently reported at fair value, and the disclosures about fair value. The Board will consider the possibility of rYlf'"l,riltllf"-:l1tlf'"lrlC to the existing standards of accounting and financial reporting for other postemployment benefits (OPEB) by state and local governmental employers and by the trustees, administrators, or sponsors of OPEB plans. GASB has stated that their objectives are to increase financial reporting transparency and to improve the usefulness of information to the various users of the financial statements. Page 7 INFORMATIONAL POINTS (cont.) GASB 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 8 REQUIRED COMMUNICATIONS BY THE AUDITOR TO THOSE CHARGED WITH GOVERNANCE ~AKER TILLY Baker Tilly Virchow Krause, LLP 225 S Sixth St, Ste 2300 Minneapolis, MN 55402-4661 tel 612 876 4500 fax 612 238 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 -De-c-emljer-3T;--2-oll:fana llavelssuea-ourreporfthereo-n-aatea-June 9;-ZOTS-:-TnTs refferpresents-.:c,· 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 vvith 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. As part of obtaining reasonable assurance about whether the financial statements are free of material misstatement, we performed tests of the City of Rosemount's compliance with certain provisions of laws, regulation, contracts, and grants. However, providing an opinion on compliance with those provisions is not an objective of our audit. OTHER INFORMA TION IN DOCUMENTS CONTAINING AUDITED FINANCIAL STA TEMENTS 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. Page 9 ~anindependentmemberOf BAKER TILLY INTERNATIONAL An Affirmative Action Equal Opportunity Employer 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. No new accounting policies were adopted and the application of existing policies was not changed during 2014. 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. DIFFICUL TIES 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 was one audit adjustment considered material to the financial statements for $400,000 to record donation revenue in the capital projects fund. In addition, 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 10 To the City Council City of Rosemount CONSUL TATIONS 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, 2014, 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. Page 11 To the City Council City of Rosemount OTHER MATTERS We applied certain limited procedures to the required supplementary information (RSI) that supplements the basic financial statements. Our procedures consisted of inquiries of management regarding 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 did not audit the RSI and do not express an opinion or provide any assurance on the RSI. We were engaged to report on the supplementary information which accompanies the financial statements but is not RSI. 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. RESTRICTION ON USE 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 June 9,2015 Page 12 SUMMARY OF UNCORRECTED MISSTATEMENTS City of Rosemount SUMMARY OF UNCORRECTED FINANCIAL STATEMENT MISSTATEMENTS December 31, 2014 Financial Statements Effect - Debit (Credit) to Financial Statement Total Total Total Assets/ Deferred Outflows Total Net Position/ Fund Balances Revenues Total Liabilities/ Deferred Inflows General Fund Water Fund Sewer Fund Storm Water Fund Remaining Funds 16,860 15,134 12,500 21,145 7,957 In addition to the amounts listed above, which relate to the reversal of prior year balances, there was an impairment to a water tower that was damaged during 2014. The remaining unpaid amount to repair the damages at December 31, 2014 are anticipated to be approximately $75,000. Total Expenses/ Expenditures Change in Net Position/ Fund Balances 16,860 15,134 12,500 21,145 7,957 MANAGEMENT REPRESENTATIONS "ROSEMOUNT MINNESOTA 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, 2014 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 • TDDITTY 651-423-6219· Fax 651-423-5203 www.ci.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 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 Councilor summaries of actions of recent meetings for which minutes have not yet been prepared. 13. We have disclosed to you 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, debt contracts, and IRS arbitrage regulations; 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, approving 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, except those already disclosed in the financial statement, if any. 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 nonattest services performed by you listed below, we have 1) accepted all management responsibility; 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 nonattest 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. 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. 29. The financial statements properly classify all funds and activities. 30. 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. 31. Components of net position (net investment in capital assets; restricted; and unrestricted) and components of fund balance (nonspendable, restricted, committed, assigned and unassigned) are properly classified and, if applicable, approved. 32. 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. 33. Provisions for uncollectible receivables have been properly identified and recorded. 34. 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. 35. Revenues are appropriately classified in the statement of activities within program revenues and general revenues. 36. Interfund, internal, and intra-entity activity and balances have been appropriately classified and reported. 37. Deposits and investment securities are properly classified as to risk, and investments are properly valued. Collateralization agreements with financial institutions, if any, have been properly disclosed. 38. Capital assets, including infrastructure and intangible assets, are properly capitalized, reported, and, if applicable, depreciated/amortized. Any known impairments have been recorded and disclosed. 39. Tax-exempt bonds issued have retained their tax-exempt status. 40. 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 which resources (that is, restricted, committed, assigned or unassigned) are considered to be spent first for expenditures for which more than one resource classification is available. 41. 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. 42. 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. b. 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. Sincerely, City of Rosemount Signed: Signed: Signed: Dated: City of Rosemount SUMMARY OF UNCORRECTED FINANCIAL STATEMENT MISSTATEMENTS December 31,2014 Financial Statements Effect - Debit (Credit) to Financial Statement Total Total Assets! Deferred Outflows General Fund Water Fund Sewer Fund Storm Water Fund Remaining Funds Total Total Liabilities! Deferred Inflows Net Position! Fund Balances Total Revenues 16,860 15,134 12,500 21,145 7,957 In addition to the amounts listed above, which relate to the reversal of prior year balances, there was an impairment to a water tower that was damaged during 2014. The remaining unpaid amount to repair the damages at December 31,2014 are anticipated to be approximately $75,000. Total Expenses! Expenditures Change in Net Position! Fund Balances 16,860 15,134 12,500 21,145 7,957