The URL can be used to link to this page

2006 Comp. Annual Financial Report CITY F SH RE INNESOT A I COMPREHENSIVE ANNUAL FINANCIAL REPORT For the year ended December 31, 2006 www.ci.shorewood.mn.us CITY OF SHOREWOOD SHOREWOOD, MINNESOTA COMPREHENSIVE ANNUAL FINANCIAL REPORT FOR THE YEAR ENDED DECEMBER 31, 2006 CRAIG W. DAWSON, CITY ADMINISTRATOR/CLERK REPORT PREPARED BY BONNIE BURTON, FINANCE DIRECTOR/TREASURER MEMBER OF GOVERNMENT FINANCE OFFICERS ASSOCIATION OF THE UNITED STATES AND CANADA CITY OF SHOREWOOD, MINNESOTA TABLE OF CONTENTS DECEMBER 31, 2006 I. INTRODUCTORY SECTION Elected and Appointed Officials Organization Chart Letter of Transmittal from Finance Director/Treasurer Certification of Achievement for Excellence in Financial Reporting II. FINANCIAL SECTION Independent Auditor's Report Management's Discussion and Analysis Basic Financial Statements Government-wide Financial Statements Statement of Net Assets Statement of Activities Fund Financial Statements Governmental Funds Balance Sheet Reconciliation ofthe Balance Sheet to the Statement of Net Assets Statement of Revenues, Expenditures and Changes in Fund Balances Reconciliation of the Statement of Revenues, Expenditures and Changes in Fund Balances to the Statement of Activities General Fund Statement of Revenues, Expenditures and Changes in Fund Balances - Budget and Actual Proprietary Fund Statements of Net Assets Statements of Revenues, Expenses and Changes in Fund Net Assets Statements of Cash Flows Fiduciary Fund Statement of Net Assets Notes to the Financial Statements Combining and Individual Fund Financial Statements and Schedules Nonmajor Governmental Funds Combining Balance Sheet Combining Statement of Revenues, Expenditures and Changes in Fund Balances (Deficits) General Fund Schedule of Revenues, Expenditures and Changes in Fund Balances - Budget and Actual Debt Service Funds Combining Balance Sheet Combining Schedule of Revenues, Expenditures and Changes in Fund Balances Enterprise Funds Liquor Funds Schedules of Assets, Liabilities and Net Assets Schedules of Revenues, Expenses and Changes in Fund Net Assets Schedules of Cash Flows Exhibit Page No. 1 2 I - V 3 4-5 i-xii 1 6 2 7-8 3 9 - 10 4 11 5 12 - 13 6 14 7 15 8 16 - 18 9 19-21 10 22 - 27 11 28 29 - 49 A-I 50 - 51 A-2 52 - 53 B-1 54 - 58 C-l 59 C-2 60 D-l D-2 D-3 61 - 62 63 - 64 65 - 66 CITY OF SHOREWOOD, MINNESOTA TABLE OF CONTENTS - CONTINUED DECEMBER 31,2006 II. FINANCIAL SECTION - CONTINUED Combining and Individual Fund Statements and Schedules Agency Fund Combining Schedule of Changes in Assets and Liabilities Summary Financial Report Revenues and Expenditures for General Operations - Governmental Funds III STATISTICAL SECTION (UNAUDITED) Net Assets by Component Changes in Net Assets Fund Balances of Governmental Funds Changes in Fund Balances of Governmental Funds Tax Capacity, Market Value and Estimated Actual Value of Taxable Property Property Tax Capacity Rates - Direct and Overlapping Governments Principal Taxpayers Property Tax Levies and Collections Ratio of Net Bonded Debt to Assessed Value and Net Bonded Debt Per Capita Ratios of General Bonded Debt Outstanding Computation of Direct and Overlapping Debt Legal Debt Margin Information Pledged-Revenue Coverage Demographic and Economic Statistics Principal Employers Full- Time Equivalent City Government Employees by Function Operating Indicators by Function Capital Asset Statistics by Function Exhibit E-l F-l Table 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 Page No. 67 68 69 70 - 71 72 - 73 74 - 75 76 - 77 78 - 79 80 - 81 82 83 84 85 86 - 87 88 - 89 90 91 - 92 93 94 95 INTRODUCTORY SECTION CITY OF SHOREWOOD SHOREWOOD, MINNESOTA YEAR ENDED DECEMBER 31, 2006 Name C. Woodrow Love Christine Lizee Laura Turgeon Paula Callies Martin Wellens Craig W. Dawson Bonnie Burton CITY OF SHOREWOOD, MINNESOTA ELECTED AND APPOINTED OFFICIALS DECEMBER 31, 2006 ELECTED Title Term Expires Mayor Council Member, Ward 1 Council Member, Ward 2 Council Member, Ward 3 Council Member, Ward 4 12/31/06 12/31/06 12/31/08 12/31/06 12/31/08 APPOINTED City Administrator/Clerk Finance Director/Treasurer -1- t- o:: e:( J: o Z o - t- e:( N - Z e:( C) 0:: o C o o ~ W 0:: o J: en u. o > t- - o (J) I- Z W C en w 0:: C o o ~ W 0:: o :I: (J) :::! u z ::> o u >- !:: u :z (ll ~ () 0 c: fIl .~ ~ ~ ] ~ ~E~~~:gl/) '=~';~g:3'~ ~(J~~~G)~ '~'5-~ ~.~ b ct JictS:(I)Cf.)(fJg l1) :o::i " .. c: .. ~ 11l ~ E t 5Q)~g~"*~ e~~~.;~~ ~~iic~~'c ~cc';;1Gffi ""jij'jij:EE~EO:: c: :!E :i: Q) Q. lo. ..:.::: ~~~~'g.....",O~ ~~Q.fJ)W c: ~ .. " ~"E .- 0 c: " ~ ~ 6 0) <( .?:':;:; .S ~ ~ g E 'r: g- g- to 0 .... c ii:Nc.._ .. g ~6:E Eo:;:; u E :;:; fG c: ~ g ~ ~ & OlfllV).gEj:: "'iij'~6'E~.~~ ~~gg~:g-g b:Jwo:...Ja..c..> -2- ~ c: .. E .. '" " .. ~ c: c: .. .!!E~ .!! ~ ~.. ~ ..Q.- c:: III C) (Q (l) Ul_ g>'E~ i;'g~ ~ ~:gEffi~a:]~ 65-m~-t~g~ Eg>:S<(o~~E ~<(c:::) -'0 Oz "'::> ""0" 'zo..-o ~C)O~r:: O~~:;~ OOo<[<t- ~>~:Ew cnozz!!: ~~ctctu. CITY OF SHOREWOOD 5755,COUNTRY CLUB ROAD~. SHOREWOOD, MINNESOTA 55331-8927' (952) 474-3236 FAX (952) 474~0128 . wvyw.ci.shorewood.mn.us . cityhall@ci.shorewood.mn.us Celebrating 50 Years. 1956--- 2006 June 5, 2007 Honorable Mayor and Members of the City Council, City of Shorewood, Minnesota Mayor and City Council Members: The Comprehensive Annual Financial RepOli of the City of Shorewood, Minnesota (the City) for the fiscal year ended December 31, 2006, is hereby submitted. Management assumes- full responsibility for the completeness and fairness of the presentation of all of the information presented in this report. We believe the data, as presented, are accurate in all material respects and are reported in a manner designed to present fairly the financial position and results of operations of the various funds and account groups of the City. INDEPENDENT AUDIT Minnesota State Statutes require an annual audit of the City's accounts by the Minnesota State Auditor or by independen,t celiified public accountants. The City of Shorewood' s financial statements have been audited by the firm of Abdo, Eick & Meyers, LLP, a firm of independent certified public accountants, and they have issued an unqualified ("clean") opinion on the City of Shorewood's financial statements for the year ended December 31, 2006. The independent auditor's report is presented at the front of the financial section of this report. INTERNAL CONTROLS City management staff has established a comprehensive internal control framework that is designed both to protect the government's assets from loss, theft, or misuse, and to compile sufficient reliable information for the preparation of the City of Shorewood's financial statements in conformity with GAAP. The cost of internal controls should not exceed anticipated benefits; tI1erefore, the City of Shorewood's comprehensive framework of internal controls has been designed to provide reasonable, rather than absolute, assurance f''' T " t PRINTED ON ReCYCLED PAPER ... that the financial statements are free of any matelial misstatements. The internal control system is evaluated as part of the annual audit. ORGANIZA TION OF THE REPORT The Comprehensive Annual Financial Report is presented in three sections: Introductory, Financial and Statistical. The Introductory section includes this transmittal letter, the City's organizational chmt and a list of City officials. The Financial section includes the independent auditor's repOlt. Management's discussion and analysis CMD&A) immediately. follows the independent auditor's report and provides a narrative introduction, overview, and analysis of the basic financial statements. :MD&A complements this letter of transmittal and should be read in conjunction with it. The general-purpose financial statements follow the :MD&A letter. Lastly, the Statistical section includes financial and demographic information, generally presented on a multi-year basis. The organization, form, and contents of this report were prepared in accordance with the standards prescribed by the Governmental Accounting Standards Board, the Government Finance Officers Association of the United States and Canada, the American Institute of Certified Public Accountants, and the Minnesota State Auditor's Office. PROFILE OF THE GOVERNMENT The City of Shotewoodwas incorporated in 1956 and is a suburb of the City of Minneapolis. It is located 20 miles southwest of the Twin Cities on the southern shore of Lake Minnetonka. The City is predominantly a residential community with limited comtnercial businesses and two commercial shopping malls. The City is 6 square miles in area and had an estimated population of 7,499 as of 2006. The City, which is currently 95% developed, continues to expelience growth in its residential base but because of the limited availability of large tracts of land, this growth will come at a reduced rate and will be with much smaller developments than in the past. The. City of Shorewood operates under the Council-Administrator form of government. Policy making and legislative autholity are vested in a governing council consisting of the mayor and four other members. The governing council is responsible, among other things, for passing ordinances, adopting the budget, appointing committees, and hiling employees and consulting staff. The City Administrator is responsible for calTying out the policies and ordinances of the governing council, and for overseeing the day-to-day operations of the government.- The council is elected from four wards on a non-partisan basis. Council members serve four-year staggered terms, with two council members elected every two yem"s. The mayor is elected to serve a two-year terID. The Economic Development Authority (EDA) of the City was created in 2001 pursuant to Minnesota Statutes to carry out economic and industrial development and redevelopment consistent with policies established by the Council. Its board is comprised of members of II the City Council. The EDA activities are blended and separate financial statements are not issued for this component unit. The City provides its residents and businesses with a full range of municipal services consisting of police, fire, public works, parks and general administrative services. The City also operates five enterprises: a water utility, sewer utility, recycling utility, stOlID-water management utility, and an off-sale liquor operation with two store locations during 2006. LOCAL ECONOMY The City of Shorewood displays very strong wealth indices with a per capita income of $49,566 (191.5% of state average) and a median family income of 183% of state average. Full value per capita is very healthy at $206,107, and the City's fiscal 2006 full property valuation is over $1.5 billion. The City maintains stable financial operations due to a history of conservative budgeting, characterized by the maintenance of healthy reserves, as well as the lack of reliance on state aid. In addition, the City's debt burden is expected to remain manageable given expected ongoing tax base growth and limited capital needs. FINANCIAL AND MANAGEMENT EMPHASIS Governance The City Council, in its leadership role, has effectively established a focus for City government in Shorewood. The Council has adopted a Statement of Purpose and has established overall goals and expectations for the City. It has identified issues facing the City and stated priorities so that the staff can efficiently and effectively allocate time and resources. The City Council's calendar consists of three phases. The first phase is Planning: it includes review of the previous year's work plan and periodic review of the City's Comprehensive Plan. It also includes identification of goals and pliorities for the next twelve months. The second phase is that of Programming and Capital Finance Planning: each year the five- year Capital Improvement Program is reviewed and updated based upon pliorities established in the first phase. Any changes to the Capital Improvement Program are based upon the Phase One decisions. The third phase is Budgeting: the operating budget is developed based on decisions made in the first two phases. The budget format provides information and data to the City Council and other readers. It defines departmental missions and sets objectives for the budget year. Cooperative Public Service DelivelY Shorewood is committed to working cooperatively with other Lake Minnetonka area cities to carefully consider methods to efficiently deliver public services. The City has various III contrac.tual alTangements with other governmental jUlisdictions and with plivate entities for providing many of these services.. The City is also involved in cooperative employee training, disaster preparedness and other areas of mutual concem as an active participant in the Lake Minnetonka area. The City of Shorewood, along with the cities of Excelsior, Deephaven, Greenwood and Tonka Bay, has been a member of the Excelsior Fire District since 2000. The Excelsior Fire Distlict is a joint powers organization. A combined police and fire public safety building that serves the South Lake Minnetonka Area cities was completed in late 2003. A fire station to serve the east side of the Excelsior Fire District was completed in 2004. The City has been a member city of the South Lake. Minnetonka Police Department (SLIvIPD) since its inception in 1973: The other members of this joint powers organization are the cities of Excelsior, Greenwood, and Tonka Bay. The new police station was completed at the end of 2003. LONG- TERM FINANCIAL PLANNING Budgeting Controls The annual budget serves as the foundation of the City of Shorewood's financial planning and control. The City maintains budgetary controls to ensure compliance with legal provisions embodied in the annual appropriated budget approved by the City Council. The annual appropriated budget also includes the general fund activities. The legal level of budgetary control is established at the department level, but management control is exercised at the line item level. The City continues meeting its responsibility for sound financial management, as demonstrated by the statements and schedules included in the financial section of this report The City Council continues its plan to accumulate resources for future capital equipment and improvement projects; amounts were transferred to various capital project funds in 2006. Budgeted transfers for capital improvement purposes during 2006 were $610,000. Debt Administration . As of December 31, 2006, the City's debt outstanding totaled $15,475,000. Of this. total, $11,555,000 is lease revenue bonds issued in 2002 and 2003 by the EDA to finance the construction of Public Safety (police and fire) buildings. General obligation revenue bonds at year end are $3,920,000. The proceeds from these bonds financed water system extensions and improvements and will be repaid from special assessments and Water fund revenues. The City's bond rating of Aa3 was reaffirmed in October 2006 by Moody's Investor Service with the issuance of $1.45 rpillion General Obligation Water Revenue bonds. In addition, the City has a capital lease to finance its pOltion of construction of the Southshore Senior Community Center. . IV Cash Management The City of Shorewood subscribes to the "pooled cash" concept of investing which means that all funds with cash balances participate in an investment pool. This permits some funds to be overdrawn and other funds to show positive cash balances, with the City overall maintaining a positive cash balance. The pooled cash concept provides for investing of greater amounts of money at more favorable rates and interest earnings are then allocated to the pmticipating funds. Risk Management The Citiof Shorewood's general property and liability coverage and its workers' compensation insurance are provided through the League of Minnesota Cities Insurance Trust (LMCIT). The LMCIT insurance program is a joint self-insurance plan designed to lower and stabilize cities' insurance rate~ and to assure that cities have a source of coverage available. The LMCIT reserves and rates are reviewed annually by an actuary to assure that the program remains financially strong. CERTIFICA TE OF ACHIEVEMENT The City of Shorewood was awarded a Certificate of Achievement for Excellence in Financial Reporting for its comprehensive annual financial report (CAFR) for the fiscal year ended December 31, 2005. This award is given by the Government Finance Officers Association of the United States and Canada (GFOA) and this was the fourteenth consecutive year that Shorewood has received this prestigious award. In order to be awarded a Certificate of Achievement, the government published an easily readable and efficiently organized CAFR. This report satisfied both GAAP (generally accepted accounting principles) and applicable legal requirements. A Certificate of Achievement is valid for a period of one year only. We believe our current CAFR contiimes to meet the Celtificate of Achievement Program's requirements and we are submitting it to the GFOA to determine its eligibility for another certificate. ACKNOWLEDGMENTS We wish to express appreciation to the Mayor and City Council for their continued interest and support in planning and conducting the financial operations of the City in a responsible and progressive manner. We also want to express our appreciation to the finance department staff and the City's independent auditor for their work in preparing this repOlt. Respectfully submitted, ~~ Bonnie Burton Finance Director/Treasurer v Certificate of Achievement for Excellence in Financial Reporting Presented to City of Shorewood Minnesota For its Comprehensive Annual Financial Report for the Fiscal Year Ended December 31, 2005 A Certificate of Achievement for Excellence in Financial Reporting is presented by the Government Finance Officers Association of the United States and Canada to government units and public employee retirement systems whose comprehensive annual financial reports (CAFRs) achieve the highest standards in government accounting and financial reporting. President ~/~ Executive Director -3- FINANCIAL SECTION CITY OF SHOREWOOD SHOREWOOD, MINNESOTA YEAR ENDED DECEMBER 31, 2006 Certified Public Accountants & Consultants Grandview Square 5201 Eden Avenue Suite 370 Edina, MN 55436 INDEPENDENT AUDITOR'S REPORT Honorable Mayor and Council City of Shorewood, Minnesota We have audited the accompanying [mancial statements of the governmental activities, the business-type activities, each major fund, and the aggregate remaining fund information of the City of Shorewood, Minnesota (the City), as of and for the year ended December 31, 2006, which collectively comprise the City's basic financial statements as listed in the table of contents. These financial statements are the responsibility ofthe City's management. Our responsibility is to express opinions on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the [mancial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinions. In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities, the business-type activities, each major fund, and the aggregate remaining fund information of the City as of December 31,2006, and the respective changes in financial position and cash flows, where applicable, thereof and the budgetary comparison for the General fund for the year then ended in conformity with accounting principles generally accepted in the United States of America. The management's discussion and analysis on pages I through XII is not a required part of the basic financial statements but is supplementary information required by accounting principles generally accepted in the United States of America. We have applied certain limited procedures, which consisted principally of inquiries of management regarding the methods of measurement and presentation of the required supplementary information. However, we did not audit the information and express no opinion on it. 952.835.9090 . Fax 952.835.3261 www.aemcpas.com Page Two Our audit was conducted for the purpose of forming opinions pn the financial statements that collectively comprise the City's basic frnancial statements. The introductory section, combining and individual fund frnancial statements and schedules, and statistical sections are presented for purposes of additional analysis and are not a required part of the basic financial statements. The combining and individual fund frnancial statements and schedules have been subjected to the auditing procedures applied in the audit of the basic frnancial statements and, in our opinion, are fairly stated in all material respects in relation to the basic frnancial statements taken as a whole. The introductory section and statistical sections have not been subjected to the auditing procedures applied in the audit of the basic frnancial statements and, accordingly, we express no opinion on them. April 5, 2007 Minneapolis, Minnesota ().4J.oJ ~ q.jJpjrJ<M_ikf ABDO, EICK & MEYERS, LLP Certified Public Accountants 952.835.9090 . Fax 952.835.3261 www.aemcpas.com CITY OF SHOREWOOD 5755 COUNTRY CLUB ROAD. SHOREWOOD, MINNESOTA 55331-8927 . (952) 474-3236 FAX (952) 474-0128. www.ci.shorewood.mn.us. cityhall@ci.shorewood.mn.lls Celebrating 50 Years + 1956 - 2006 Management's Discussion and Analysis As management of the City of Shorewood, Minnesota, (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 31,2006. Financial Highlights .. The assets of the City exceeded its liabilities at the close of the most recent fiscal year by $32,929,723 (net assets). Of this amount, $15,545,788 (umestricted net assets) may be used to meet the City's ongoing obligations to residents and creditors. .. The City's total net assets increased by $885,882. Much of this increase is attributable to increased water fund revenues from connection fees, charges for services, special assessments, and activities related to water fund infrastructure improvements. In 2006, the City issued $1.45 million in G.O. Water Revenue Bonds and proceeds remain on hand for projects commencing in 2007. .. As of the close of the current fiscal year, the City's governmental funds reported combined ending fund balances of $5,843,711, a decrease of $504,780 in comparison with the prior year. Approximately 96 percent of this total amount, $5,581,273, is available for spending at the City's discretion, but has been designated for specific purposes. .. At the end of the current fiscal year, umeserved fund balance for the General fund was $3,383,906, or 66 percent of total 2007 budgeted expenditures. While these funds are not legally reserved, they are designated for future purposes. .. The City's total debt increased by $774,487, or 5 percent during the current fiscal year. The key factor in this increase was the issuance of General Obligation Water Revenue bonds for $1,450,000. 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 supplemental information in addition to the basic financial statements themsel ves. ~'I> -I- t- . PRINTED ON RECYCLED PAPER .." Management Discussion and Analysis - Continued April 13,2006 The fInancial statements also include notes that explain some ofthe information in the financial statements and provide more detailed data. The statements are followed by a section of combining and individual fund fInancial statements and schedules that further explains and supports the information in the fInancial statements. Figure 1 shows how the required parts ofthis annual report are arranged and relate to one another. In addition to these required elements, we have included a section with combining and individual fund fmancial statements and schedules that provide details about nonmajor governmental funds, which are added together and presented in single columns in the basic financial statements. Figure 1 Required Components of the City's Annual Financial Report Management's Discussion and Analysis Basic Financial Statements Required Supplementary Information .... ...... .... .... .... .... .... I.................................................................................-; . . . . . . - - - Government-wide Fund Financial Financial Statements Statements Notes to the Financial Statements Summary ( ) Detail -11- Management Discussion and Analysis - Continued April 13, 2006 Figure 2 summarizes the major features ofthe City's [mancial statements, including the portion of the City government they cover and the types of information they contain. The remainder of this overview section of management's discussion and analysis explains the structure and contents of each of the statements. Figure 2 Major features of the Government-wide and Fund Financial Statements Fund Financial Statements Government-wide Governmental Funds Proprietary Funds Statements Scope Entire City government The activities of the City that Activities the City operates (except fiduciary funds) and are not proprietary or similar to private businesses, the City's component units fiduciary, such as police, fire such as the water and sewer and parks system Required financial . Statement of Net Assets . .Balance Sheet . Statements of Net Assets statements . Statement of Activities . Statement of Revenues, . Statements of Revenues, Expenditures, and Expenses and Changes in Changes in Fund Fund Net Assets Balances . Statements of Cash Flows Accounting Basis and Accrual accounting and Modified accrual accounting Accrual accounting and measurement focus economic resources focus and current [mancial economic resources focus resources focus Type of asset/liability All assets and liabilities, both Only assets expected to be All assets and liabilities, both information financial and capital, and used up and liabilities that financial and capital, and short-term and long-term come due during the year or short-term and long-term soon thereafter; no capital assets included Type of in flow/out flow All revenues and expenses Revenues for which cash is All revenues and expenses information during year, regardless of received during or soon after during the year, regardless of when cash is received or paid the end of the year; when cash is received or paid expenditures when goods or services have been received and payment is due during the year or soon thereafter Government-wide Financial Statements The government-widejinancial statements are designed to provide readers with a broad overview of the City's finances, in a manner similar to a private-sector business. The statement of net assets presents information on all of the City's assets and liabilities, with the difference between the two reported as net assets. Over time, increases or decreases in net assets may serve as a useful indicator of whether the [mancial position of the City is improving or deteriorating. The statement of activities presents information showing how the City's net assets changed during the most recent fiscal year. All changes in net assets are reported as soon as the underlying event giving rise to the change occurs, regardless of the timing of related cash flows. Thus, revenues and expenses are reported in this statement for some items that will only result in cash flows in future fiscal periods (e.g., uncollected taxes and earned but unused vacation leave). Both of the government-wide [mancial statements distinguish functions of the City that are principally supported by taxes and intergovernmental revenue (governmental activities) from other functions that are intended to recover all or a significant portion oftheir costs through user fees and charges (business-type activities). The governmental activities of the City include general government, public safety, public works, culture and recreation, and interest on long-term debt. The business-type activities of the City include water, sewer, recycling, storm water management utility and liquor operation. -lll- Management Discussion and Analysis - Continued April 13, 2006 The government-wide financial statements include not only the City itself (known as the primaJY government), but also a legally separate Economic Development Authority (EDA) for which the City is financially accountable. The EDA, although legally separate, functions for all practical purposes as a department of the City, and therefore has been included as an integral part of the primary government. The government-wide financial statements can be found on pages 6 - 8 of this report. Fund Financial Statements Afund 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. Governmentalfunds. Governmentalfunds are used to account for essentially the same functions reported as governmental activities in the government-wide [mancial statements. However, unlike the government-wide financial statements, governmental fund [mancial statements focus on near-term inflows and outflows of spendable resources, as well as on balances of spendable resources available at the end of the fiscal year. Such information may be useful in evaluating a government's near-term 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 [mancial statements. By doing so, readers may better understand the long-term impact by the government's near-term financing decisions. Both the governmental fund balance sheet and the governmental fund statement ofrevenues, expenditures and changes in fund balances provide a reconciliation to facilitate this comparison between governmental funds and governmental activities. The City maintains 10 individual governmental funds. Information is presented separately in the governmental fund balance sheet and in the governmental fund statement of revenues, expenditures and changes in fund balances (deficits) for the General, the Debt Service, and the Street Reconstruction, all of which are considered to be major funds. Data from the other 7 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 or schedules 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 [mancial statements can be found on pages 9 - 15 ofthis report. Proprietary funds. The City maintains one type of proprietary fund. Entelprisefunds 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 water, sewer, recycling, stormwater management utility and liquor operation. Proprietary funds provide the same type of information as the government-wide financial statements, only in more detail. The proprietary fund [mancial statements provide separate information for each of the enterprise funds which are considered to be major funds of the City. The basic proprietary fund financial statements can be found on pages 16 - 27 of this report. Fiduciary funds. Fiduciary funds are used to account for resources held for the benefit of parties outside the City. Fiduciary funds are not reflected in the government-wide financial statements because the resources of those funds are not available to support the City's own programs. The accounting used for fiduciary funds is much like that used for proprietary funds. The basic fiduciary fund [mancial statements can be found on page 28 ofthis 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 [mancial statements. The notes to the [mancial statements can be found on pages 29 - 49 ofthis report. -IV- Other Information Management Discussion and Analysis - Continued April 13, 2006 The combining statements referred to earlier in connection with nonmajor governmental funds are presented following the notes to fmancial statements. Combining and individual fund fmancial statements and schedules can be found on pages 50 - 68 of this report. Government-wide Financial Analysis As noted earlier, net assets may serve over time as a useful indicator of a government's financial position. In the case of the City, assets exceeded liabilities by $32,929,723 at the close ofthe most recent fiscal year. Of the City's net assets (53 percent) reflects its investment in capital assets (e.g., land, buildings, machinery and equipment), less any related debt used to acquire those assets that is still outstanding. The City uses these capital assets to provide services to citizens; consequently, these assets are not available for future spending. Although the City's investment in its capital assets is reported net of related debt, it should be noted that the resources needed to repay this debt must be provided from other sources, since the capital assets themselves cannot be used to liquidate these liabilities. 2006 Assets Cash and temporary investments Cash with fiscal agent Receivables Internal balances Inventories Prepaids Deferred charges Capital assets $ 5,916,970 12,335,689 (2 I 0,000) 11,760,214 29,802,873 Total assets Liabilities Noncurrent liabilities Other liabilities 11 ,795, 192 576,402 Total liabilities 12,371,594 Net assets Invested in capital assets, net of related debt Restricted Unrestricted 11 ,690,620 24,632 5,716,027 $ 17,431,279 Total net assets Summary of Net Assets Governmental Activities 2005 $ 6,878,784 12,462,697 (260,000) 48,593 11,473,535 30,603,609 12,210,499 704,190 12,914,689 11,372,213 6,316,707 $ 17,688,920 In crease (Decrease) $ (961,814) 2006 $ 8,330,919 82,751 1,058,154 210,000 240,349 11,930 94,385 9,588,683 19,617,17] 3,951,867 166,860 4,118,727 5,668,683 $ (257,641) $ 15,498,444 9,829,761 (127,008) 50,000 (48,593) 286,679 (800,736) (4]5,307) (127,788) (543,095) 3 ]8,407 24,632 (600,680) Business-type Activities 2005 $ 7,345,892 103,601 694,1 77 260,000 239,755 6,803 64,25] 8,917,309 ] 7,631,788 2,762,073 514,794 3,276,867 6,1 72,309 8,182,6]2 $ 14,354,92] Increase (Decrease) $ 985,027 (20,850) 363,977 (50,000) 594 5,127 30,]34 671,374 ],985,383 1,189,794 (347,934) 841,860 (503,626) ],647,149 $ 1,]43,523 The remaining balance of unrestricted net assets is $15,545,788. This may be used to meet the City's ongoing obligations to citizens and creditors. At the end of the current fiscal year, the City is able to report positive balances in all three categories of net assets, both for the government as a whole, as well as for its separate governmental and business-type activities. -v- Management Discussion and Analysis - Continued April 13, 2006 Governmental activities. Governmental activities decreased the City's net assets by $257,641. Key elements ofthis decrease are attributable to Shorewood's share of the County Road 19 intersection, which was substantially completed in 2006. Changes in Net Assets Governmental Activities Business-type Activities Increase Increase 2006 2005 (Decrease) 2006 2005 (Decrease) Revenues Program revenues Charges for services $ 1,087,646 $ 1,169,440 $ (81,794) $ 4,445,154 $ 3,743,191 $ 701,963 Operating grants and contributions 3 1,730 100,910 (69,180) Capital grants and contributions 395,229 2,404,367 (2,009,138) General revenues Property taxes 4,144,543 3,770,702 373,841 Grants and contributions not restricted to specific programs 4,925 4,785 140 Unrestricted investment earnings 327,921 201,024 126,897 310,28 I 190,943 119,338 Gain on sale of capital assets 4,300 (4,300) Total revenues 5,991,994 7,655,528 (1,663,534) 4,755,435 3,934,134 821,30 I Expenses General government 1,357,714 1,222,510 135,204 Public safety 1,806,915 1,690,903 116,012 Public works 2,275,402 5,019,967 (2,744,565) Culture and recreation 233,881 246,381 (12,500) Interest on long-term debt 600,723 606,189 (5,466) Water 488,513 567,854 (79,341) Sewer 785,638 740,174 45,464 Recycling 124,354 105,823 18,531 Stormwater management utility 171,190 73,885 97,305 Liquor 2,017,217 2,006,107 11,110 Total expenses 6,274,635 8,785,950 (2,511 ,315) 3,586,912 3,493,843 93,069 Increase (decrease) in net assets before transfers (282,641) (1,130,422) 847,781 1,168,523 440,291 728,232 Transfers 25,000 (17,000) 42,000 (25,000) 17,000 (42,000) Change in net assets (257,641 ) (1,147,422) 889,781 1,143,523 457,291 686,232 Net assets, January 1 17,688,920 18,836,342 (1,147,422) 14,354,921 13,897,630 457,291 Net assets, December 31 $ 17,431,279 $ 17,688,920 $ (257,641) $ 15,498,444 $ 14,354,921 $ 1,143,523 -Vl- Management Discussion and Analysis - Continued April 13,2006 The following graph depicts various governmental activities and shows the revenue and expenses directly related to those activities. $2,500,000 $2,000,000 $1,500,000 $1,000,000 $500,000 Expenses and Program Revenues - Governmental Activities $- General government Public safety Public works Culture and recreation Interest on long- term debt I_ Expenses - Program revenues I Revenues by Source - Governmental Activities Unrestricted investment earnings 5.4% Charges for services 18.1% Operating grants and contributions 0.5% Transfers 0.4% Grants and contributions not restricted to specific programs 0.1% Capital grants and contributions 6.6% Property taxes 68.9% For the most part, increases in expenses closely paralleled inflation and growth in the demand for services. -vii- Management Discussion and Analysis - Continued April 13, 2006 Business-type activities. Business-type activities increased the City's net assets by $1,143,523. Key elements of this increase are as follows: . Much ofthis increase is attributable to increased water fund revenues from permit and connection fees, charges for services, special assessments, and activities related to water fund infrastructure improvements. In 2006, the City issued $1.45 million in G. O. Water Revenue Bonds and proceeds remain on hand for proj ects commencing in 2007. . Sanitary Sewer, Storm water Management Operations, and Liquor Operations generally remained stable. . The Recycling Fund receives a County recycling grant, which when combined with operating income realized increases in cash. Expenses and Program Revenues - Business-type Activities $500,000 $2,500,000 $2,000,000 $1,500,000 $1,000,000 $- Water Sewer Recycling Storm water management utility Liquor I_ Expenses - Program revenues I -viii- Management Discussion and Analysis - Continued April 13, 2006 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. Govemmentalfunds. 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 fmancing requirements. In particular, unreservedfund balance may serve as a useful measure of a government's net resources available for spending at the end of the fiscal year. As ofthe end of the current fiscal year, the City's governmental funds reported combined ending fund balances of$5,843,711 , a decrease of $504,780 in comparison with the prior year. Approximately 96 percent of this total amount $5,581,273 constitutes unreservedfund balance, which is available for spending at the City's discretion. The remainder of fund balance is reserved to indicate that it is not available for new spending because it has already been committed to pay debt service in the amount of $262,438. The General fund is the chief operating fund of the City. At the end ofthe current year, the fund balance ofthe General fund was $3,383,906. As a measure of the General fund's liquidity, it may be useful to compare both unreserved fund balance and total fund balance to total fund expenditures. Total fund balance represents 87 percent of fund expenditures. The fund balance of the City's General fund increased by $390,725 during the current fiscal year. The key factor in this increase was: . Greater than anticipated fine revenue, interest income revenue and building permit activity and revenue ($185,500). . Several departments with less than anticipated capital and operating expenditures (Parks, Public Works, Snow and Ice removal ). The Debt Service fund has a total fund balance of $262,43 8, all of which is reserved for the payment of debt service. The net increase in fund balance during the current year in the Debt Service fund was $23,565. The Street Reconstruction fund had a fund balance of$I,225,915, a decrease of $991,680. Proprietary funds. The City's proprietary funds provide the same type of information found in the government-wide financial statements, but in more detail. Unrestricted net assets of the enterprise funds at the end of the year amounted to $9,829,761. The total growth in net assets for the funds was $1,143,523. Other factors concerning the finances of this fund have already been addressed in the discussion of the City's business-type activities. General Fund Budgetary Highlights The City's General fund budget was not amended during the year. The budget was a balanced budget. Revenues exceeded expectations by $157,963 and expenditures were under budget by $232,762. The actual results were significantly different from the final budget amounts because of the following: . The building permits and fees revenue was approximately $185,000 due to new residential construction values in the $1 million plus range. . Several departments (Parks, Public Works, Snow and Ice removal) had savings due to equipment and services that were not purchased or required. -lX- Management Discussion and Analysis - Continued April 13,2006 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, 2006, amounts to $21,348,897 (net of accumulated depreciation). This investment in capital assets includes land, structures, improvements, machinery and equipment, park facilities, and roads. Major capital asset events during the current fiscal year included the following: . Construction progress on the Wedgewood Drive, Mallard Lane, and Teal Circle street reconstruction project including installation of municipal water services. . Significant construction progress on several municipal water projects including the SE Area Well, Woodhaven Well, and Badger Well projects. . Upgrade and rehabilitation of several sanitary sewer lift stations projects. Additional information on the City's capital assets can be found in Note 3C on pages 39 - 41 of this report. Capital Assets Net of Depreciation Governmental Activities Business-type Activities Increase Increase 2006 2005 (Decrease) 2006 2005 (Decrease) Land $ 741,826 $ 741,826 $ $ 404,392 $ 404,392 $ Construction in progress 1,378,581 1,378,581 940,522 762,669 177,853 Buildings 1,417,567 1,468,186 (50,619) Improvements other than buildings 251,088 274,630 (23,542) Machinery and equipment 397,034 375,659 21,375 99,165 139,062 (39,897) Infrastructure 7,574,118 8,613,234 (1,039,116) 8,144,604 7,611,186 533,418 Total $ 11,760,214 $ 11,473,535 $ 286,679 $ 9,588,683 $ 8,917,309 $ 671,374 -x- Management Discussion and Analysis - Continued April 13, 2006 Long-term debt. At the end of the current fiscal year, the City had total bonded debt outstanding of$15,475,000. Of this amount, $11,555,000 is lease revenue bonds and $3,920,000 is general obligation revenue bonds. While all of the City's bonds have revenue streams, they are all backed by the full faith and credit of the City. Outstanding Debt Governmental Activities Business-type Activities In crease Increase 2006 2005 (Decrease) 2006 2005 (Decrease) General obligation revenue bonds $ $ $ $ 3,920,000 $ 2,745,000 $ 1,175,000 Lease revenue bonds 11,555,000 12,010,000 (455,000) Capital lease bonds 69,594 101,322 (31,728) Compensated absences payable 170,598 99,177 71,421 31,867 17,073 14,794 Total $ 11,795,192 $ 12,210,499 $ (415,307) $ 3,951,867 $ 2,762,073 $ 1,189,794 The City's total debt increased $774,487 (5 percent) during the current fiscal year. This is primarily due to the issuance of a new bond and scheduled principal payments. The City maintains an "Aa3" rating from Moody's Investors Services for general obligation debt. This rating was reaffirmed in conjunction with issuing $1.45 million in General Obligation Water Revenue Bonds in October 2006. Minnesota statutes limit the amount of net general obligation debt a City may issue to 2 percent of the market value of taxable property within the City. Net debt is debt payable solely from ad valorem taxes. Additional information on the City's long-term debt can be found in Note 3F on pages 42 - 45 ofthis report. Economic Factors and Next Year's Budgets and Rates . Property valuations within the City remain strong and growing, especially in the desirable lakeshore area. . Inflationary and unemployment trends in the region compare favorably to national indices. . The City takes a responsible long term perspective with [mancial planning and management. Decisions are made to insure ongoing capacity to provide quality services to residents, at a good value. . The 2007 budget was developed to insulate the City from revenue changes at the State level. Actions by the State should have minimal impact on City activities. All of these factors were considered in preparing the City's budget for the 2007 fiscal year. During the current fiscal year, unreserved fund balance in the General fund increased to $3,383,906. It is intended that this use of available fund balance will be used for special one-time projects as determined by the City Council. Rate increases were approved for the Stormwater Management utility to fund the anticipated projects that will be required in 2007 and future years to provide for enhancements to the system. The rate increase is expected to provide revenues for these projects. 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 City's finances. Questions concerning any of the information provided in this report or requests for additional [mancial information should be addressed to Bonnie Burton, Finance Director/Treasurer, City of Shorewood, 5755 Country Club Road, Shorewood, Minnesota 55331. -xi- GOVERNMENT-WIDE FINANCIAL STATEMENTS CITY OF SHOREWOOD SHOREWOOD, MINNESOTA YEAR ENDED DECEMBER 31, 2006 THIS PAGE IS LEFT BLANK INTENTIONALL Y CITY OF SHOREWOOD, MINNESOTA Exhibit 1 STATEMENT OF NET ASSETS DECEMBER 31,2006 Governmental Business-type Activities Activities Total ASSETS Cash and temporary investments $ 5,916,970 $ 8,330,919 $ 14,247,889 Cash with fiscal agent 82,751 82,751 Receivables Accrued interest 304,979 62,003 366,982 Delinquent taxes 109,634 109,634 Accounts 53,753 363,360 417,113 Special assessments 10,589 632,791 643,380 Lease 11,555,000 11,555,000 Intergovernmental 301,734 301,734 Internal balances (210,000) 210,000 Inventories 240,349 240,349 Prepaid items 11,930 11,930 Deferred charges 94,385 94,385 Capital assets Land 741,826 404,392 1,146,218 Construction in progress 1,378,581 940,522 2,319,103 Depreciable capital assets, net 9,639,807 8,243,769 17,883,576 TOTAL ASSETS 29,802,873 19,617,171 49,420,044 LIABILITIES Accounts and contracts payable 311,718 81,006 392,724 Accrued salaries payable 21,332 6,789 28,121 Due to other governments 4,768 21,723 26,491 Accrued interest payable 238,584 29,517 268,101 Unearned revenue 27,825 27,825 Noncurrent liabilities Due within one year 669,330 286,867 956,197 Due in more than one year 11,125,862 3,665,000 14,790,862 TOTAL LIABILITIES 12,371,594 4,118,727 16,490,321 NET ASSETS Invested in capital assets, net of related debt 11,690,620 5,668,683 17,359,303 Restricted for Debt service 24,632 24,632 Unrestricted 5,716,027 9,829,761 15,545,788 TOTAL NET ASSETS $ 17,431,279 $ 15,498,444 $ 32,929,723 The notes to the fmancial statements are an integral part of this statement. -6- Functions/Programs Governmental activities General government Public safety Public works Culture and recreation Interest on long-term debt Total governmental activities Business-type activities Water Sewer Recycling Stormwater management utility Liquor Total business-type activities Total 488,513 1,350,041 785,638 836,175 124,354 144,886 171,190 129,708 2,017,217 1,984,344 3,586,912 4,445,154 $ 9,861,547 $ 5,532,800 $ 31,730 $ 395,229 CITY OF SHOREWQOD, MINNESOTA STATEMENT OF ACTIVITIES FOR THE YEAR ENDED DECEMBER 31, 2006 Expenses $ 1,357,714 1,806,915 2,275,402 233,881 600,723 6,274,635 1,087,646 31,730 General revenues Taxes Property taxes, levied for general purposes Grants and contributions not restricted to specific programs Unrestricted investment earnings Transfers Total general revenues and transfers Change in net assets Net assets, January 1 Net assets, December 31 The notes to the [mancial statements are an integral part of this statement. -7- 395,229 Exhibit 2 Net (Expense) Revenue and Changes in Net Assets Governmental Business-type Activities Activities Total $ (1,331,374) $ $ (1,331,374) (746,409) (746,409) (1,917,373) (1,917,373) (164,151) (164,151) (600,723) (600,723) (4,760,030) (4,760,030) 861,528 861,528 50,537 50,537 20,532 20,532 (41,482) (41,482) (32,873) (32,873) 858,242 858,242 (4,760,030) 858,242 (3,901,788) 4,144,543 4,144,543 4,925 4,925 327,921 310,281 638,202 25,000 (25,000) 4,502,389 285,281 4,787,670 (257,641) 1,143,523 885,882 17,688,920 14,354,921 32,043,841 $ 17,431,279 $ 15,498,444 $ 32,929,723 -8- THIS PAGE IS LEFT BLANK INTENTIONALL Y FUND FINANCIAL STATEMENTS CITY OF SHOREWOOD SHOREWOOD, MINNESOTA YEAR ENDED DECEMBER 31, 2006 CITY OF SHOREWOOD, MINNESOTA BALANCE SHEET GOVERNMENTAL FUNDS DECEMBER 31, 2006 Debt Street General Service Reconstruction ASSETS Cash and temporary investments $ 3,510,253 $ 261,520 $ 957,077 Receivables Accrued interest 40,272 918 15,849 Delinquent taxes 109,634 Accounts 53,753 Special assessments 9,811 778 Lease 11,555,000 Due from other governments Due from other funds 350,000 TOTAL ASSETS $ 3,723,723 $ 11,818,216 $ 1,322,926 LIABILITIES AND FUND BALANCES LIABILITIES Accounts and contracts payable $ 35,145 $ $ 97,011 Due to other funds 210,000 Due to other governments 4,768 Salaries and compensated absences payable 21,332 Deferred revenue 68,572 11,555,778 TOTAL LIABILITIES 339,817 11,555,778 97,011 FUND BALANCES Reserved for debt service 262,438 Unreserved Designated, reported in General fund 3,383,906 Capital projects funds 1,225,915 Undesignated, reported in Capital projects funds TOTAL FUND BALANCES 3,383,906 262,438 1,225,915 TOTAL LIABILITIES AND FUND BALANCES $ 3,723,723 $ 11,818,216 $ 1,322,926 The notes to the fmancial statements are an integral part of this statement. -9- Exhibit 3 Other Total Governmental Governmental Funds Funds $ 1,188,120 $ 5,916,970 11 , 160 68,199 109,634 53,753 10,589 11 ,555,000 301,734 301,734 350,000 $ 1,501,014 $ 18,365,879 $ 179,562 $ 311,718 350,000 560,000 4,768 21,332 11,624,350 529,562 12,522,168 262,438 1,141,661 3,383,906 2,367,576 (170,209) (170,209) 971,452 5,843,711 $ 1,501,014 $ 18,365,879 -10- THIS PAGE IS LEFT BLANK INTENTIONALL Y CITY OF SHOREWOOD, MINNESOTA RECONCILIA TION OF THE BALANCE SHEET TO THE STATEMENT OF NET ASSETS GOVERNMENTAL FUNDS AS OF DECEMBER 31,2006 Exhibit 4 Total fund balances - governmental $ 5,843,711 Amounts reported for the governmental activities in the statement of net assets are different because: Capital assets used in governmental activities are not [mancial resources and therefore are not reported as assets in governmental funds. Cost of capital assets Less: accumulated depreciation 31,919,839 (20,159,625) Long-term liabilities, including bonds payable, are not due and payable in the current period and therefore are not reported as liabilities in the funds. Long-term liabilities at year-end consist of: Bonds payable Compensated absences (11,624,594) (170,598) Some receivables are not available soon enough to pay for the current period's expenditures, and therefore are deferred in the funds. Interest on lease receivable Taxes Special assessments Leases 236,780 58,762 10,588 11,555,000 Governmental funds do not report a liability for accrued interest until due and payable. (238,584) Total net asset - governmental activities $ 17,431,279 The notes to the [mancial statements are an integral part of this statement. -11- CITY OF SHOREWOOD, MINNESOTA STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES GOVERNMENTAL FUNDS FOR THE YEAR ENDED DECEMBER 31, 2006 Debt Street General Service Reconstruction REVENUES Taxes $ 4,141,539 $ $ Licenses and permits 382,408 Intergovernmental 4,925 Charges for services 45,450 Fines and forfeitures 79,040 Special assessments 895 Interest on investments 183,076 6,519 73,737 Miscellaneous 12,020 1,060,240 TOTAL REVENUES 4,848,458 1,067,654 73,737 EXPENDITURES Current General government 1,264,509 Public safety 1,257,998 Public works 626,048 Culture and recreation 169,411 Capital outlay General government 18,047 Public safety 503,886 Public works 7,468 1,410,417 Culture and recreation Debt service Principal 31,728 455,000 Interest and service charges 18,638 589,089 TOTAL EXPENDITURES 3,897,733 1,044,089 1,410,417 EXCESS (DEFICIENCY) OF REVENUES OVER (UNDER) EXPENDITURES 950,725 23,565 (1,336,680) OTHER FINANCING SOURCES (USES) Transfers in 50,000 345,000 Transfers out (610,000) TOTAL OTHER FINANCING SOURCES (USES) (560,000) 345,000 NET CHANGE IN FUND BALANCES 390,725 23,565 (991,680) FUND BALANCES, JANUARY 1 2,993,181 238,873 2,217,595 FUND BALANCES, DECEMBER 31 $ 3,383,906 $ 262,438 $ 1,225,915 The notes to the financial statements are an integral part of this statement. -12- 1,264,509 1,257,998 626,048 169,411 8,472 26,519 40,198 544,084 556,138 1,974,023 26,578 26,578 486,728 607,727 631,386 6,983,625 (167,390) (529,780) 240,000 635,000 (610,000) 240,000 25,000 72,610 (504,780) 898,842 6,348,491 $ 971,452 $ 5,843,711 Other Governmental Funds $ 360,807 64,589 38,600 463,996 Exhibit 5 Total Governmental Funds $ 4,141,539 382,408 365,732 45,450 79,040 895 327,921 1,110,860 6,453,845 -13- CITY OF SHOREWOOD, MINNESOTA RECONCILIATION OF THE STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES TO THE STATEMENT OF ACTIVITIES GOVERNMENTAL FUNDS FOR THE YEAR ENDED DECEMBER 31, 2006 Total net change in fund balances - governmental funds Amounts reported for governmental activities in the statement of activities are different because: Capital outlays are reported in governmental funds as expenditures. However, in the statement of activities, the cost of those assets is allocated over the estimated useful lives as depreciation expense. Capital outlays Depreciation expense The issuance oflong-term debt provides current [mancial resources to governmental funds, while the repayment of principal of long-term debt consumes the current [mancial resources of governmental funds. Neither transaction, however, has any effect on net assets. Also, governmental funds report the effect of issuance costs, premiums, discounts and similar items when debt is first issued, whereas these amounts are deferred and amortized in the statement of activities. Principal repayments Interest on long-term debt in the statement of activities differs from the amount reported in the governmental fund because interest is recognized as an expenditure in the funds when it is due, and thus requires the use of current [mancial resources. In the statement of activities, however interest expense is recognized as the interest accrues, regardless of when it is due. Certain revenues are recognized as soon as it is earned. Under the modified accrual basis of accounting certain revenues cannot be recognized until they are available to liquidate liabilities of the current period. Property taxes Special assessments Leases Some expenses reported in the statement of activities do not require the use of current financial resources and, therefore, are not reported as expenditures in governmental funds. Compensated absences Change in net assets - governmental activities The notes to the [mancial statements are an integral part of this statement. -14- Exhibit 6 $ (504,780) 1,527,172 (1,240,493) 486,728 7,004 3,004 (3,673) (461,182) (71,421) $ (257,641 ) CITY OF SHOREWOOD, MINNESOTA Exhibit 7 STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES - BUDGET AND ACTUAL GENERAL FUND FOR THE YEAR ENDED DECEMBER 31,2006 Variance with Budgeted Amounts Final Budget - Actual Positive Original Final Amounts (Negative) REVENUES Taxes $ 4,190,395 $ 4,190,395 $ 4,141,539 $ (48,856) Licenses and permits 197,100 197,100 382,408 185,308 Intergovernmental 65,000 65,000 4,925 (60,075) Charges for services 43,000 43,000 45,450 2,450 Fines and forfeitures 70,000 70,000 79,040 9,040 Interest on investments 94,800 94,800 183,076 88,276 Miscellaneous 30,200 30,200 12,020 (18,180) TOTAL REVENUES 4,690,495 4,690,495 4,848,458 157,963 EXPENDITURES Current General government 1,298,993 1,298,993 1,264,509 34,484 Public safety 1,207,076 1,207,076 1,257,998 (50,922) Public works 673,869 673,869 626,048 47,821 Culture and recreation 221,104 221,104 169,411 51,693 Capital outlay 679,087 679,087 529,401 149,686 Debt service 50,366 50,366 50,366 TOTAL EXPENDITURES 4,130,495 4,130,495 3,897,733 232,762 EXCESS OF REVENUES OVER EXPENDITURES 560,000 560,000 950,725 390,725 OTHER FINANCING SOURCES (USES) Transfers in 50,000 50,000 50,000 Transfers out (610,000) (610,000) (610,000) TOTAL OTHER FINANCING SOURCES (USES) (560,000) (560,000) (560,000) NET CHANGE IN FUND BALANCES 390,725 390,725 FUND BALANCES, JANUARY 1 2,993,181 2,993,181 2,993,181 FUND BALANCES, DECEMBER 31 $ 2,993,181 $ 2,993,181 $ 3,383,906 $ 390,725 The notes to the [mancial statements are an integral part of this statement. -15- CITY OF SHOREWOOD, MINNESOTA Exhibit 8 STATEMENTS OF NET ASSETS - CONTINUED ON THE FOLLOWING PAGES PROPRIETARY FUNDS DECEMBER 31, 2006 AND 2005 Business-type Activities - Enterprise Funds Water Sewer 2006 2005 2006 2005 ASSETS CURRENT ASSETS Cash and temporary investments $ 3,650,102 $ 3,043,864 $ 3,958,626 $ 3,550,499 Cash with fiscal agent 82,751 103,601 Receivables Accrued interest 25,949 20,583 30,326 24,348 Accounts 105,823 100,767 217,733 215,180 Special assessments 3,061 1,543 3,421 3,659 Due from other funds 260,000 350,000 Inventories, at cost Prepaid items 4,635 4,416 3,390 TOTAL CURRENT ASSETS 3,872,321 3,274,774 4,473,496 4,143,686 NONCURRENT ASSETS Special assessments receivable 603,186 254,508 18,373 15,184 Deferred charges 94,385 64,251 Capital assets Land Construction in progress 929,740 542,761 10,782 219,908 Machinery and equipment 59,802 59,802 70,690 70,690 Infrastructure 7,726,550 7,050,734 8,155,714 7,896,525 Less accumulated depreciation (2,466,356) (2,282,251 ) (6,125,195) (5,921,131) Total capital assets (Net of accumulated depreciation) 6,249,736 5,371,046 2,111,991 2,265,992 TOTAL NONCURRENT ASSETS 6,947,307 5,689,805 2,130,364 2,281,176 TOTAL ASSETS 10,819,628 8,964,579 6,603,860 6,424,862 LIABILITIES CURRENT LIABILITIES Accounts and contracts payable 42,036 322,065 9,891 33,842 Due to other funds Due to other governments 2,000 1,636 1,504 4,307 Accrued interest payable 29,517 52,980 Salaries and compensated absences payable 1,756 1,106 772 1,043 Deferred revenue 27,825 30,680 Current portion of long-term debt 255,000 275,000 TOTAL CURRENT LIABILITIES 358,134 683,467 12,167 39,192 NONCURRENT LIABILITIES Bonds payable less current portion above 3,665,000 2,470,000 TOTAL LIABILITIES 4,023,134 3,153,467 12,167 39,192 NET ASSETS Invested in capital assets, net of related debt 2,329,736 2,626,046 2,111,991 2,265,992 Unrestricted 4,466,758 3,185,066 4,479,702 4,119,678 TOTAL NET ASSETS $ 6,796,494 $ 5,811,112 $ 6,591,693 $ 6,385,670 The notes to the financial statements are an integral part of this statement. -16- Business-type Activities - Enterprise Funds - Continued Recycling Storrnwater Management Utility Liquor 2006 2005 2006 2005 2006 2005 $ 83,554 $ 61,905 $ 275,950 $ 300,316 $ 362,687 $ 389,308 471 424 2,287 2,059 2,970 2,585 18,810 18,562 20,994 23,790 7,349 435 557 296 313 240,349 239,755 3,905 2,387 103,270 81,448 299,527 326,478 609,911 641,384 2,547 1,630 1,472 1,136 404,392 404,392 793,312 793,313 316,]82 316,182 (101,045) (81,212) (185,885) (152,404) ] ,096,659 1,116,493 130,297 163,778 2,547 1,630 ],098,]31 1,117,629 ]30,297 163,778 105,817 83,078 1,397,658 1,444,107 740,208 805,162 142 50,000 1,900 90,000 28,937 41,783 18,219 19,437 57 57 36,071 21,03] 50,199 9],957 83,227 82,251 50,199 9],957 83,227 82,251 $ 105,817 105,817 83,078 83,078 1,096,659 250,800 $ 1,347,459 1,116,493 235,657 $ 1,352,150 130,297 526,684 656,98 ] 163,778 559,133 722,911 $ $ $ -17- Exhibit 8 THIS PAGE IS LEFT BLANK INTENTIONALL Y CITY OF SHOREWOOD, MINNESOTA STATEMENTS OF NET ASSETS - CONTINUED PROPRIETARY FUNDS DECEMBER 31,2006 AND 2005 ASSETS CURRENT ASSETS Cash and temporary investments Cash with fiscal agent Receivables Accrued interest Accounts Special assessments Due from other funds Inventories, at cost Prepaid items TOTAL CURRENT ASSETS NONCURRENT ASSETS Special assessments receivable Deferred charges Capital assets Land Construction in progress Machinery and equipment Infrastructure Less accumulated depreciation Total capital assets (Net of accumulated depreciation) TOTAL NONCURRENT ASSETS TOTAL ASSETS LIABILITIES CURRENT LIABILITIES Accounts and contracts payable Due to other funds Due to other governments Accrued interest payable Salaries and compensated absences payable Deferred revenue Current portion of long-term debt TOTAL CURRENT LIABILITIES NONCURRENT LIABILITIES Bonds payable less current portion above TOTAL LIABILITIES NET ASSETS Invested in capital assets, net of related debt Unrestricted TOTAL NET ASSETS The notes to the financial statements are an integral part ofthis statement. -18- Exhibit 8 Totals 2006 2005 $ 8,330,919 $ 7,345,892 82,751 103,601 62,003 49,999 363,360 365,648 7,213 6,072 260,000 350,000 240,349 239,755 11,930 6,803 9,358,525 8,467,770 625,578 272,458 94,385 64,251 404,392 404,392 940,522 762,669 130,492 130,492 16,991,758 16,056,754 (8,878,481 ) (8,436,998) 9,588,683 8,917,309 10,308,646 9,254,018 19,667,171 17,721,788 81,006 399,590 50,000 90,000 21,723 25,380 29,517 52,980 38,656 23,237 27,825 30,680 255,000 275,000 503,727 896,867 3,665,000 2,470,000 4,168,727 3,366,867 5,668,683 6,172,309 9,829,761 8,182,612 $ 15,498,444 $ 14,354,921 CITY OF SHOREWOOD, MINNESOTA Exhibit 9 STATEMENTS OF REVENUES, EXPENSES AND CHANGES IN FUND NET ASSETS - CONTINUED OF THE FOLLOWING PAGES PROPRIETARY FUNDS FOR THE YEARS ENDED DECEMBER 31, 2006 AND 2005 Business-type Activities - Enterprise Funds Water Sewer 2006 2005 2006 2005 OPERATING REVENUES Sales $ $ $ $ Less cost of sales GROSS PROFIT Charges for services 582,572 511 ,486 807,598 815,886 GROSS PROFIT AND REVENUES 582,572 511,486 807,598 815,886 OPERATING EXPENSES Personal services 75,164 76,394 46,261 66,486 Supplies 11,576 11,730 3,932 3,199 Repairs and maintenance 10,807 25,446 13,932 10,679 Depreciation 184,105 182,145 204,064 203,783 Professional services 2,000 86,651 2,000 3,837 Contracted services 12,836 8,225 12,594 4,446 Insurance 6,917 7,665 4,878 1,966 Water purchases 19,691 14,054 Utilities 69,027 60,098 9,412 7,915 Disposal charges 486,873 435,084 Rent Advertising Other 15,225 10,595 1,692 2,779 TOTAL OPERATING EXPENSES 407,348 483,003 785,638 740,174 OPERA TING INCOME (LOSS) 175,224 28,483 21,960 75,712 NONOPERATING REVENUES (EXPENSES) Special assessments 457,171 22,088 Permits and connection fees 209,003 41,989 28,577 18,053 Interest on investments 123,854 70,666 155,486 98,988 Antenna lease Other income (expense) 101,295 74,209 Interest expense (81,165) (84,851 ) TOTAL NONOPERATING REVENUES (EXPENSES) 810,158 124,101 184,063 117,041 INCOME (LOSS) BEFORE TRANSFERS 985,382 152,584 206,023 192,753 TRANSFERS Transfers in 60,000 Transfers out TOTAL TRANSFERS 60,000 CHANGE IN NET ASSETS 985,382 152,584 206,023 252,753 NET ASSETS, JANUARY 1 5,811,112 5,658,528 6,385,670 6,132,917 NET ASSETS, DECEMBER 31 $ 6,796,494 $ 5,811,112 $ 6,591,693 $ 6,385,670 The notes to the financial statements are an integral part of this statement. -19- Business-type Activities - Enterprise Funds - Continued Recycling Storm water Management Utility Liquor 2006 2005 2006 2005 2006 2005 $ $ $ $ $ 1,978,051 $ 2,035,480 (1,442,802) (1,476,866) 535,249 558,614 123,443 95,039 69,177 69,637 123,443 95,039 69,177 69,637 535,249 558,614 10,193 9,439 279,615 241,038 164 2,328 1,871 979 8,785 9,818 90,056 19,833 19,833 33,481 36,958 41,702 32,700 5,450 4,286 124,117 103,341 2,066 3,704 1,711 1,645 12,184 14,202 23,089 23,254 154,984 149,689 14,284 11,718 73 154 1,031 1,312 40,832 36,633 124,354 105,823 166,752 67,967 574,415 529,241 (911 ) (10,784) (97,575) 1,670 (39,166) 29,373 2,207 1,319 11,791 7,385 16,943 12,585 22,973 21,443 21,478 60,531 10,039 6,293 4,834 (4,438) (5,918) 23,650 22,797 67,884 34,479 23,236 17,419 22,739 12,013 (29,691 ) 36,149 (15,930) 46,792 25,000 7,000 (50,000) (50,000) 25,000 7,000 (50,000) (50,000) 22,739 12,013 (4,691) 43,149 (65,930) (3,208) 83,078 71,065 1,352,150 1,309,001 722,911 726,119 $ 105,817 $ 83,078 $ 1,347,459 $ 1,352,150 $ 656,981 $ 722,911 -20- Exhibit 9 THIS PAGE IS LEFT BLANK INTENTIONALL Y CITY OF SHOREWOOD, MINNESOTA Exhibit 9 STATEMENTS OF REVENUES, EXPENSES AND CHANGES IN FUND NET ASSETS - CONTINUED PROPRIETARY FUNDS FOR THE YEARS ENDED DECEMBER 31, 2006 AND 2005 Totals 2006 2005 OPERATING REVENUES Sales $ 1,978,051 $ 2,035,480 Less cost of sales (1,442,802) (1,476,866) GROSS PROFIT 535,249 558,614 Charges for services 1,582,790 1,492,048 GROSS PROFIT AND REVENUES 2,1 18,039 2,050,662 OPERATING EXPENSES Personal services 411,233 393,357 Supplies 26,328 28,054 Repairs and maintenance 114,795 36,125 Depreciation 441,483 442,719 Professional services 51,152 127,474 Contracted services 153,324 121,361 Insurance 23,979 23,833 Water purchases 19,691 14,054 Utilities 101,528 91,267 Disposal charges 486,873 435,084 Rent 154,984 149,689 Advertising 14,284 11,718 Other 58,853 51,473 TOTAL OPERATING EXPENSES 2,058,507 1,926,208 OPERATING INCOME (LOSS) 59,532 124,454 NONOPERATING REVENUES (EXPENSES) Special assessments 457,171 22,088 Permits and connection fees 237,580 60,042 Interest on investments 310,281 190,943 Antenna lease 22,973 Other income (expense) 189,562 110,560 Interest expense (85,603) (90,769) TOTAL NONOPERATING REVENUES (EXPENSES) 1,108,991 315,837 INCOME (LOSS) BEFORE TRANSFERS 1,168,523 440,291 TRANSFERS Transfers in 25,000 67,000 Transfers out (50,000) (50,000) TOTAL TRANSFERS (25,000) 17,000 CHANGE IN NET ASSETS 1,143,523 457,291 NET ASSETS, JANUARY 1 14,354,921 13,897,630 NET ASSETS, DECEMBER 31 $ 15,498,444 $ 14,354,921 The notes to the financial statements are an integral part ofthis statement. -21- CITY OF SHOREWOOD, MINNESOTA Exhibit 10 STATEMENTS OF CASH FLOWS - CONTINUED ON THE FOLLOWING PAGES PROPRIETARY FUNDS FOR THE YEARS ENDED DECEMBER 31,2006 AND 2005 Business-type Activities - Enterprise Funds Water Sewer 2006 2005 2006 2005 CASH FLOWS FROM OPERATING ACTIVITIES Receipts from customers and users $ 577,516 $ 506,780 $ 802,094 $ 811,116 Other receipts and payments, net 98,440 75,670 Payments to suppliers, contractors and other governments (166,977) (214,666) (565,457) (464,455) Payments to employees (74,514) (75,828) (46,532) (65,868) NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES 434,465 291,956 190,105 280,793 CASH FLOWS FROM NONCAPITAL FINANCING ACTIVITIES (Increase) decrease in due from other funds 90,000 (230,000) Transfers in 60,000 Interest paid on interfund loan Increase (decrease) in due to other funds Transfers out NET CASH PROVIDED (USED) BY NONCAPIT AL FINANCING ACTIVITIES 90,000 (170,000) CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES Permits and connection fees received 209,003 41,989 28,577 18,053 Bond proceeds 1,414,043 1,479,643 Principal paid on revenue bonds (275,000) (950,000) Interest paid on revenue bonds (98,805) (64,335) Acquisition of capital assets (1,323,781) (251,319) (50,063) (219,908) Special assessments collected 106,975 69,828 NET CASH PROVIDED (USED) BY CAPITAL AND RELATED FINANCING ACTIVITIES 32,435 325,806 (21,486) (20 I ,855) CASH FLOWS FROM INVESTING ACTIVITIES Interest received on investments 118,488 62,793 149,508 93,511 NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 585,388 680,555 408,127 2,449 CASH AND CASH EQUIVALENTS, JANUARY I 3,147,465 2,466,910 3,550,499 3,548,050 CASH AND CASH EQUIVALENTS, DECEMBER 31 $ 3,732,853 $ 3,147,465 $ 3,958,626 $ 3,550,499 The notes to the financial statements are an integral part of this statement. -22- Business-type Activities - Enterprise Funds - Continued Recycling Storm water Management Utility Liquor 2006 2005 2006 2005 2006 2005 $ 122,400 $ 93,358 $ 71,654 $ 64,573 $ 1,985,400 $ 2,035,576 21,443 21,4 78 60,531 33,012 6,293 4,834 (124,354) (105,823) (13 8,484) (58,220) (1,720,297) (1,789,221) (10,193) (9,382) (264,575) (237,961) 19,489 9,013 (16,492) 29,983 6,821 13,228 2,160 21,649 61,905 $ 83,554 1,132 10,145 51,760 $ 61,905 25,000 7,000 (4,438) (5,918) (40,000) (30,000) (50,000) (50,000) (19,438) (28,918) (50,000) (50,000) 11,564 7,167 16,558 12,710 (24,366) 8,232 (26,621) (24,062) 300,316 292,084 389,308 413,370 $ $ 300,316 $ $ 389,308 362,687 275,950 -23- Exhibit 10 THIS PAGE IS LEFT BLANK INTENTIONALL Y CITY OF SHOREWOOD, MINNESOTA Exhibit 10 STATEMENTS OF CASH FLOWS - CONTINUED PROPRIETARY FUNDS FOR THE YEARS ENDED DECEMBER 31,2006 AND 2005 Totals 2006 2005 CASH FLOWS FROM OPERATING ACTIVITIES Receipts from customers and users $ 3,559,064 $ 3,511,403 Other receipts and payments, net 186,707 134,994 Payments to suppliers, contractors and other governments (2,715,569) (2,632,385) Payments to employees (395,814) (389,039) NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES 634,388 624,973 CASH FLOWS FROM NONCAPIT AL FINANCING ACTIVITIES (Increase) decrease in due from other funds 90,000 (230,000) Transfers in 25,000 67,000 Interest paid on interfund loan (4,438) (5,918) Increase (decrease) in due to other funds (40,000) (30,000) Transfers out (50,000) (50,000) NET CASH PROVIDED (USED) BY NONCAPITAL FINANCING ACTIVITIES 20,562 (248,918) CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES Permits and connection fees received 237,580 60,042 Bond proceeds 1,414,043 1,479,643 Principal paid on revenue bonds (275,000) (950,000) Interest paid on revenue bonds (98,805) (64,335) Acquisition of capital assets (1,373,844) (471,227) Special assessments collected 106,975 69,828 NET CASH PROVIDED (USED) BY CAPITAL AND RELATED FINANCING ACTIVITIES 10,949 123,951 CASH FLOWS FROM INVESTING ACTIVITIES Interest received on investments 298,278 177,313 NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 964,177 677,319 CASH AND CASH EQUIVALENTS, JANUARY 1 7,449,493 6,772,174 CASH AND CASH EQUIVALENTS, DECEMBER 31 $ 8,413,670 $ 7,449,493 The notes to the financial statements are an integral part of this statement. -24- CITY OF SHOREWOOD, MINNESOTA Exhibit 10 STATEMENTS OF CASH FLOWS - CONTINUED PROPRIETARY FUNDS FOR THE YEARS ENDED DECEMBER 31, 2006 AND 2005 Business-type Activities - Enterprise Funds Water Sewer 2006 2005 2006 2005 RECONCILIATION OF OPERATING INCOME (LOSS) TO NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES Operating income (loss) $ 175,224 $ 28,483 $ 21,960 $ 75,712 Adjustments to reconcile operating income (loss) to net cash provided by operating activities Other income related to operations 98,440 75,670 Depreciation 184,105 182,145 204,064 203,783 (Increase) decrease in assets: Accounts receivable (5,056) (4,706) (2,553) (4,792) Special assessments receivable (2,951) 22 Inventories Prepaid items (219) 293 (3,390) 406 Increase (decrease) in liabilities: Accounts payable (19,043) 9,478 (23,951) 4,747 Due to other governments 364 27 (2,803) 297 Salaries and compensated absences payable 650 566 (271) 618 NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES $ 434,465 $ 291,956 $ 190,105 $ 280,793 NONCASH CAPITAL AND RELATED FINANCING ACTIVITIES Amortization of bond discount $ 5,823 $ 4,652 $ $ Bond discount issued $ 35,957 $ 45,357 $ $ Capital assets purchased on account $ 30,457 $ 291,443 $ $ The notes to the financial statements are an integral part ofthis statement. -25- Business-type Activities - Enterprise Funds - Continued Recycling Stormwater Management Utility Liquor 2006 2005 2006 2005 2006 2005 $ (911 ) $ (10,784) $ (97,575) $ 1,670 $ (39,166) $ 29,373 21,443 21,478 60,531 33,012 6,293 4,834 19,833 19,833 33,481 36,958 (248) (2,077) 2,796 (5,057) 7,349 96 (795) 396 (319) (7) (594) 2,401 (1,518) 1,480 (1,758) (19,525) (12,846) (65,316) (1,218) 325 57 15,040 3,077 $ 19,489 $ 9,013 $ (16,492) $ 29,983 $ 6,821 $ 13,228 $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ -26- Exhibit 10 THIS PAGE IS LEFT BLANK INTENTION ALL Y CITY OF SHOREWOOD, MINNESOTA STATEMENTS OF CASH FLOWS - CONTINUED PROPRIETARY FUNDS FOR THE YEARS ENDED DECEMBER 31,2006 AND 2005 RECONCILIATION OF OPERATING INCOME (LOSS) TO NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES Operating income (loss) Adjustments to reconcile operating income (loss) to net cash provided by operating activities Other income related to operations Depreciation (Increase) decrease in assets: Accounts receivable Special assessments receivable Inventories Prepaids Increase (decrease) in liabilities: Accounts payable Due to other governments Salaries and compensated absences payable NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES NONCASH CAPITAL AND RELATED FINANCING ACTIVITIES Amortization of bond discount Bond discount issued Capital assets purchased on account The notes to the financial statements are an integral part of this statement. -27- Exhibit 10 Totals 2006 2005 $ 59,532 $ 124,454 186,707 134,994 441,483 442,719 2,288 (16,536) (4,065) 411 (594) 2,401 (5,127) 2,179 (57,598) (70,616) (3,657) 649 15,419 4,318 $ 634,388 $ 624,973 $ $ $ $ $ $ 4,652 45,357 291,443 5,823 35,957 30,457 ASSETS Cash and temporary investments LIABILITIES Escrow deposits payable CITY OF SHOREWOOD, MINNESOTA STATEMENT OF NET ASSETS FIDUCIARY FUND DECEMBER 31,2006 Exhibit 11 Agency $ 101,060 $ 101,060 The notes to the financial statements are an integral part of this statement. -28- CITY OF SHOREWOOD, MINNESOTA NOTES TO THE FINANCIAL STATEMENTS DECEMBER 31, 2006 Note 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES A. Reporting Entity The City of Shorewood, Minnesota (the City), operates under the "Optional Plan A" form of government as defmed in the State of Minnesota statutes. Under this plan, the government of the City is directed by a Council composed of an elected Mayor and four elected Council members. The Council exercises legislative authority and determines all matters of policy. The Council appoints personnel responsible for the proper administration of all affairs relating to the City. The City has considered all potential units for which it is financially accountable, and other organizations for which the nature and significance oftheir relationship with the City are such that exclusion would cause the City's financial statements to be misleading or incomplete. The Governmental Accounting Standards Board (GASB) has set forth criteria to be considered in determining financial accountability. These criteria include appointing a voting majority of an organization's governing body, and (1) the ability of the City to impose its will on that organization or (2) the potential for the organization to provide specific benefits to, or impose specific fmancial burdens on the City. Blended component units, although legally separate entities are, in substance, part ofthe City's operations and so data from these units are combined with data of the City. The City has the following component unit: Blended Component Unit The Economic Development Authority (EDA) of the City was created pursuant to Minnesota statutes 469.090 through 469.108 to carry out economic and industrial development and redevelopment consistent with policies established by the Council. It is comprised of the members of the Council and has a December 31 year end. The EDA activities are blended and reported in the Debt Service and capital projects funds. Separate financial statements are not issued for this component unit. B. Government-wide and Fund Financial Statements The government-wide financial statements (i.e., the statement of net assets and the statement of changes in net assets) report information on all of the nonfiduciary activities of the City and its component unit. Governmental activities, which normally are supported by taxes and intergovernmental revenues, are reported separately from business-type activities, which rely to a significant extent on fees and charges for support. The statement of activities demonstrates the degree to which the direct expenses of a given function or segment are offset by program revenues. Direct expenses are those that are clearly identifiable with a specific function or segment. 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 properly included among program revenues are reported instead as general revenues. Separate fmancial statements are provided for governmental funds, proprietary funds and fiduciary funds. Major individual governmental funds and major individual enterprise funds are reported as separate columns in the fund financial statements. -29- CITY OF SHOREWOOD, MINNESOTA NOTES TO THE FINANCIAL STATEMENTS DECEMBER 31,2006 Note 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED C. Measurement Focus, Basis of Accounting and Financial Statement Presentation The government-wide fmancial statements are reported using the economic resources measurement focus and the accrual basis of accounting, as are the proprietary fund fmancial statements. Revenues are recorded when earned and expenses are recorded when a liability is incurred, regardless of the timing of related cash flows. Property taxes are recognized as revenues in the year for which they are levied. Grants and similar items are recognized as revenue as soon as all eligibility requirements imposed by the provider have been met. Governmental fund financial statements are reported using the currentfinancial resources measurementfocus and the modified accrual basis of accounting. Revenues are recognized as soon as they are both measurable and available. Revenues are considered to be available when they are collectible within the current period or soon enough thereafter to pay liabilities of the current period. For this purpose, the City considers revenues to be available if they are collected within 60 days ofthe end of the current fiscal period. Expenditures generally are recorded when a liability is incurred, as under accrual accounting. However, debt service expenditures, as well as expenditures related to compensated absences and claims and judgments, are recorded only when payment is due. Property taxes, licenses and interest associated with the current fiscal period are all considered to be susceptible to accrual and so have been recognized as revenues ofthe 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. Revenue resulting from exchange transactions, in which each party gives and receives essentially equal value, is recorded on the accrual basis when the exchange takes place. On a modified accrual basis, revenue is recorded in the year in which the resources are measurable and become available. Non-exchange transactions, in which the City receives value without directly giving equal value in return, include property taxes, grants, entitlement and donations. On an accrual basis, revenue from property taxes is recognized in the year for which the tax is levied. Revenue from grants, entitlements and donations is recognized in the year in which all eligibility requirements have been satisfied. Eligibility requirements include timing requirements, which specify the year when the resources are required to be used or the year when use is first permitted, matching requirements, in which the City must provide local resources to be used for a specified purpose, and expenditure requirements, in which the resources are provided to the City on a reimbursement basis. On a modified accrual basis, revenue from non-exchange transactions must also be available before it can be recognized. Deferred revenue arises when assets are recognized before revenue recognition criteria have been satisfied. Grants and entitlements received before eligibility requirements are met are also recorded as deferred revenue. On the modified accrual basis, receivables that will not be collected within the available period have also been reported as deferred revenue in the fund fmancial statements. The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect certain reported amounts and disclosures. Accordingly, actual results could differ from those estimates. -30- CITY OF SHORE WOOD, MINNESOTA NOTES TO THE FINANCIAL STATEMENTS DECEMBER 31,2006 Note 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED The City reports the following major governmental funds: The General fund is the City's primary operating fund. It accounts for all financial resources of the general government, except those required to be accounted for in another fund. The Debt Service fund accounts for the resources accumulated and payments made for principal and interest on long-term general obligation debt of governmental funds. The Street Reconstruction fund was established for the purpose of funding the periodic reconstruction of City streets and roadways. The City reports the following major proprietary funds: The Water fund accounts for the activities of the City's water distribution system. The Sewer fund accounts for the activities of the City's sewage collection system. The Recyclingfund accounts for the activities of the City recycling program. The Stormwater Management Utility fund accounts for the activities of the City stormwater management system. The Liquor fund is used to account for the activities of the City's off-sale liquor operation. The operation consists of two off-sale liquor store sites. A portion of the net income generated by the operation, if any, is used to fund General fund activities. Additionally, the City reports the following fund types: The Fiduciary funds account for assets held by the City in a trustee capacity or as an agent on behalf of others. The Agency fund is custodial in nature and does not present results of operations or have a measurement focus. Agency funds are accounted for using the modified accrual basis of accounting. This fund is used to account for assets that the City holds for others, developer escrow accounts, in an agency capacity. Private-sector standards of accounting and fmancial reporting issued prior to December 1, 1989, generally are followed in both the government-wide and proprietary fund financial statements to the extent that those standards do not conflict with or contradict guidance of the GASB. Governments also have the option of following subsequent private-sector guidance for their business-type activities and enterprise funds, subject to this same limitation. The government has elected not to follow subsequent private-sector guidance. As a general rule the effect of interfund activity has been eliminated from government-wide fmancial statements. Exceptions to this general rule are payments-in-lieu of taxes and other charges between the City's water and sewer function and various other functions of the City. Elimination of these charges would distort the direct costs and program revenues reported for the various functions concerned. Amounts reported as program revenues include 1) charges to customers or applicants for goods, services, or privileges provided, 2) operating grants and contribution, and 3) capital grants and contributions, including special assessments. Internally dedicated resources are reported as general revenues rather than as program revenues. Likewise, general revenues include all taxes. -31- CITY OF SHOREWOOD, MINNESOTA NOTES TO THE FINANCIAL STATEMENTS DECEMBER 31, 2006 Note 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED 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, and liquor enterprise funds are charges to customers for sales and services. Operating expenses for enterprise funds include the cost of sales and services, administrative expenses, and depreciation on capital assets. All revenues and expenses not meeting this defmition are reported as nonoperating revenues and expenses. 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. D. Assets, Liabilities and Net Assets or Equity Deposits and Investments The City's cash and cash equivalents are considered to be cash on hand, demand deposits, and short-term investments with original maturities of three months or less from the date of acquisition. Cash balances from all funds are pooled and invested, to the extent available, in certificates of deposit and other authorized investments. Earnings from such investments are allocated on the basis of applicable participation by each ofthe funds. The City may also invest idle funds as authorized by Minnesota statutes, as follows: 1. Direct obligations or obligations guaranteed by the United States or its agencies. 2. Shares of investment companies registered under the Federal Investment Company Act of 1940 and whose only investments are in securities in (1) above. 3. General obligations of the State of Minnesota or any of its municipalities. 4. Bankers acceptances of Unites States banks eligible for purchase by the Federal Reserve System. 5. Commercial paper issued by United States banks corporations or their Canadian subsidiaries, of highest quality, and maturing in 270 days or less. 6. Repurchase or reverse repurchase agreements with banks that are members ofthe 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 securities broker-dealers. 7. Guaranteed investment contracts (GIC's) issued or guaranteed by United States commercial banks or domestic branches of foreign banks or United States insurance companies if similar debt obligations of the issuer or the collateral pledged by the issuer is in the top two rating categories, or in the top three rating categories for long-term GIC's issued by Minnesota banks. Investments for the City are reported at fair value. Earnings on investments are allocated to the individual funds based upon the average cash and investment balances. The Minnesota Municipal Money Market Fund (4M) investment pool operates in accordance with appropriate state laws and regulations. The reported value ofthe pool is the same as the fair value of the pool share. Financial statements ofthe 4M fund can be obtained by contacting Voyageur Asset Management at 100 South Fifth Street Suite 2300, Minneapolis, MN 55402-1240. -32- CITY OF SHOREWOOD, MINNESOTA NOTES TO THE FINANCIAL STATEMENTS DECEMBER 31, 2006 Note 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED Property Taxes The Council annually adopts a tax levy in December and certifies it to the County for collection in the following year. The County is responsible for collecting all property taxes for the City. These taxes attach an enforceable lien on taxable property within the City on January 1 and are payable by the property owners in two installments. The taxes are collected by the County Auditor and tax settlements are made to the City during January, July and December each year. Taxes payable on homestead property, as defined by Minnesota statutes, were partially reduced by a market value credit aid. The credit is paid to the City by the State of Minnesota (the State) in lieu oftaxes levied against the homestead property. However, in 2006 the City received an aid reduction which eliminated their market value credit aid. Delinquent taxes receivable include the past six years' uncollected taxes. Delinquent taxes have been offset by a deferred revenue liability for delinquent taxes not received within 60 days after year end in the fund financial statements. Accounts Receivable Accounts receivable include amounts billed for services provided before year end. Unbilled utility enterprise fund receivables are also included for services provided in 2006. The City annually certifies delinquent water and sewer accounts to the County for collection in the following year. Therefore, there has been no allowance for doubtful accounts established. Special Assessments Special assessments represent the fmancing for public improvements paid for by benefiting property owners. These assessments are recorded as receivables upon certification to the County. Special assessments are recognized as revenue when they are received in cash or within 60 days after year end. All governmental assessments receivable are offset by a deferred revenue liability in the fund fmancial statements. Interfund Receivables and Payables Transactions between funds that are representative of lending/borrowing arrangements outstanding at the end of the fiscal year are referred to as either "interfund receivables/payables" (i.e., the current portion of interfund loans) or "advances to/from other funds" (i.e., the non-current portion of inter fund loans). All other outstanding balances between funds are reported as "due to/from other funds." Any residual balances outstanding between the governmental activities and business-type activities area reported in the government-wide financial statements as "internal balances." Advances between funds, as reported in the fund fmancial statements, are offset by a fund balance reserve account in applicable governmental funds to indicate they are not available for appropriation and are not expendable available fmancial resources. Inventories and Prepaid Items The inventories are stated at average cost, which approximates market using the fIrst-in, first-out (FIFO) method. 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. -33- CITY OF SHOREWOOD, MINNESOTA NOTES TO THE FINANCIAL STATEMENTS DECEMBER 31, 2006 Note 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED Capital Assets Capital assets, which include property, plant, equipment and infrastructure assets (e.g., roads, bridges, sidewalks, and similar items), are reported in the applicable governmental or business-type activities columns in the government-wide fmancial statements. Capital assets are defmed by the City as assets with an initial, individual cost of more than $5,000 (amount not rounded) and an estimated useful life in excess of one year. Such assets are recorded at historical cost or estimated historical cost if purchased or constructed. Donated capital assets are recorded at estimated fair market value at the date of donation. For financial statement purposes only, a capitalization threshold is established for each capital asset category as follows: Assets Threshold Land and land improvements Other improvements Buildings Building improvements Machinery and equipment Vehicles Infrastructure Other assets $ 10,000 25,000 25,000 25,000 5,000 5,000 100,000 5,000 In the case of initial capitalization of general infrastructure assets (i.e., those reported by governmental activities) the City chose to include items dating back to June 30, 1980. The City was able to estimate the historical cost for the initial reporting of these assets through backtracking (Le., estimating the current replacement cost of the infrastructure to be capitalized and using an appropriate price-level index to deflate the cost to the acquisition year or estimated acquisition year). As the City constructs or acquires capital assets each period, including infrastructure assets, they are capitalized and reported at historical cost. The reported value excludes normal maintenance and repairs which are essentially amounts spent in relation to capital assets that do not increase the capacity or efficiency of the item or extend its useful life beyond the original estimate. Interest incurred during the construction phase of capital assets of business-type activities is included as part of the capitalized value of the assets constructed. Property, plant and equipment of the City, are depreciated using the straight-line method over the following estimated useful lives: Assets Useful Lives in Years Land improvements Buildings and improvements System improvements/infrastructure Machinery and equipment Vehicles 15 - 20 7 - 40 20 - 50 5 - 15 5 - 15 -34- CITY OF SHOREWOOD, MINNESOTA NOTES TO THE FINANCIAL STATEMENTS DECEMBER 31, 2006 Note 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED Compensated Absences It is the City's policy to permit employees to accumulate a portion of earned but unused vacation and sick pay benefits. Accumulated vacation and sick pay are accrued when incurred in the government-wide, proprietary, and fiduciary 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. Long-term Obligations In the government-wide financial statement and proprietary fund types in the fund financial statements, long- term debt and other long-term obligations are reported as liabilities in the applicable governmental activities, business-type activities or proprietary fund type statement of net assets. Bond premiums and discounts, as well as issuance costs, are deferred and amortized over the life of the bonds using the straight-line method. In the fund financial statements, governmental fund types recognized bond premiums and discounts, as well as bond issuance costs, during the current period. The face amount of debt issued is reported as other financing sources. Premiums received on debt issuances are reported as other financing sources while discounts on debt issuances are reported as other fmancing uses. Issuance costs, whether or not withheld from the actual debt proceeds received, are reported as debt service expenditures. Fund Equity In the fund financial statements, governmental funds report reservations of fund balance for amounts that are not available for appropriation or are legally restricted by outside parties for use for a specific purpose. Designations of fund balance represent tentative management plans that are subject to change. Net Assets Net assets represent the difference between assets and liabilities. Net assets are displayed in three components: a. Invested in capital assets, net of related debt - Consists of capital assets, net of accumulated depreciation reduced by any outstanding debt attributable to acquire capital assets. b. Restricted net assets - Consist of net assets restricted when there are limitations imposed on their use through external restrictions imposed by creditors, grantors, laws or regulations of other governments. c. Unrestricted net assets - All other net assets that do not meet the definition of "restricted" or "invested in capital assets, net of related debt". Comparative Data/Reclassifications Comparative total data for the prior year have been presented only for individual enterprise funds in the fund financial statements in order to provide an understanding of the changes in the financial position and operations of these funds. Also, certain amounts presented in the prior year data have been reclassified in order to be consistent with the current year's presentation. -35- CITY OF SHOREWOOD, MINNESOTA NOTES TO THE FINANCIAL STATEMENTS DECEMBER 31, 2006 Note 2: STEWARDSHIP, COMPLIANCE AND ACCOUNTABILITY A. Budgetary Information Annual budgets are adopted on a basis consistent with accounting principles generally accepted in the United States of America for the General fund. All annual appropriations lapse at fiscal year end. The City does not use encumbrance accounting. In August of each year, all departments of the City submit requests for appropriations to the City Administrator so that a budget may be prepared. Before September 15th, the proposed budget is presented to the Council for review. In early December, the Council holds public hearings and a final budget is prepared and adopted. The appropriated budget is prepared by fund, function and department. The City's department heads, with the approval of the City Administrator, may make transfers of appropriations within a department. Transfers of appropriations between departments require the approval of the Council. The legal level of budgetary control is the department level. Budgeted amounts are as originally adopted. B. Deficit Fund Equity The MSA Construction fund had a deficit fund balance of $170,209 as of December 31, 2006. The deficit will be eliminated with future revenue sources or transfers. Note 3: DETAILED NOTES ON ALL FUNDS A. Deposits and Investments Deposits Custodial credit risk for deposits and investments is the risk that in the event of a bank failure, the City's deposits and investments may not be returned or the City will not be able to recover collateral securities in the possession of an outside party. In accordance with Minnesota statutes and as authorized by the Council, the City maintains deposits at those depository banks, all of which are members of the Federal Reserve System. Minnesota statutes require that all City deposits be protected by insurance, surety bond or collateral. The market value of collateral pledged must equal 110 percent of the deposits not covered by insurance or bonds (140 percent in the case of mortgage notes pledged). Authorized collateral includes the legal investments described below, as well as certain first mortgage notes, and certain other State or local government obligations. Minnesota statutes require that securities pledged as collateral be held in safekeeping by the City or in a financial institution other than that furnishing the collateral. At year end, the City's carrying amount of deposits was $1,915,112 and the bank balance was $2,034,591. The entire bank balance was covered by federal depository insurance. -36- CITY OF SHOREWOOD, MINNESOTA NOTES TO THE FINANCIAL STATEMENTS DECEMBER 31,2006 Note 3: DETAILED NOTES ON ALL FUNDS - CONTINUED Investments The 4M fund is a customized cash management and investment program for Minnesota public funds. Sponsored and governed by the League of Minnesota Cities since 1987, the 4M fund is a unique investment alternative designed to address the daily and long-term investment needs of Minnesota cities and other municipal entities. Allowable under Minnesota statutes, the 4M fund is comprised oftop quality, rated investments. At year end, the City had the following investments that are insured or registered, or securities held by the City's agent in the City's name: Fair Value Credit Segmented and Quality/ Time Carrying Types of Investments Rating (1) Distribution (2) Amount Non Pooled investments U.S. Government Securities AAA < 6 months $ 2,776,344 U.S. Government Securities AAA 6 to 12 months 476,416 U.S. Government Securities AAA 1 to 3 years 1,922,510 U.S. Government Securities AAA > 3 years 4,998,094 Commercial Paper A-I < 6 months 746,384 Commercial Paper A-I less than 270 days 535,176 Total non pooled 11,454,924 Pooled investments: Minnesota Municipal Money Market Fund P-l < 6 months 493,412 Broker Money Market N/A N/A 566,952 Total pooled 1,060,364 Total investments $ 12,515,288 1. Ratings are provided by various credit ratings agencies where applicable to indicate associated credit risk. 2. Interest rate risk is disclosed using the segmented time distribution method. N/AIndicates not applicable or available. At year end, the City's cash and investment balances were as follows: Carrying amount of deposits Investments Cash on hand $ 1,915,112 12,515,288 1,300 Total $ 14,431,700 As reported on the financial statements Statement of net assets Cash with fiscal agent Fiduciary fund $ 14,247,889 82,751 101,060 Total $ 14,431,700 -37- CITY OF SHOREWOOD, MINNESOTA NOTES TO THE FINANCIAL STATEMENTS DECEMBER 31,2006 Note 3: DETAILED NOTES ON ALL FUNDS - CONTINUED At December 31,2006 investments in one issuer (other than investments issued by or explicitly guaranteed by U.S. government, mutual funds, external investment pools and other pooled investments) that represent 5 percent or more of the City's investments are as follows: Federal Home Loan Bank (FHLB) Federal National Mortgage Association (FNMA) Federal Home Loan Bank of Chicago (FHLBC) Federal Home Loan Mortgage Corporation (FHLMC) $ 1,230,991 2,555,453 2,135,690 1,471,747 Concentration of credit risk/interest rate risk: In accordance with the City's investment policy, the City diversifies its investment portfolio to eliminate the risk of loss resulting from over-concentration of assets in a specific maturity, a specific issuer or a specific class of securities. The maturities selected shall provide for stability of income and reasonable liquidity. Custodial credit risk - investments. In accordance with the City's investment policy, the investment officer shall structure all investments, deposits and repurchase agreements so that the custodial risk is categorized as either insured or register, or securities held by the City or its agent in the City's name or uninsured and unregistered, with securities held by the counterparty's trust department or agent in the City's name. All investments are placed in safekeeping at [mancial institutions. B. Deferred Revenue Governmental funds report deferred revenue in connection with receivables for revenues that are not considered to be available to liquidate liabilities of the current period. Governmental and business-type funds defer revenue recognition in connection with resources that have been received, but not yet earned. At the end of the current fiscal year, the various components of deferred revenue and unearned revenue reported in the governmental funds and business-type funds were as follows: Unavailable Unearned $ 58,762 $ 9,810 778 9,245,000 2,310,000 $ II ,624,350 $ Governmental activities General fund Taxes Special assessments 1993 Improvement and Refunding Special assessments 2002 Public Safety Buildings Lease receivable 2003 Public Safety Buildings Lease receivable Total Business-type activities Water fund Rent $ $ 27,825 -38- CITY OF SHOREWOOD, MINNESOTA NOTES TO THE FINANCIAL STATEMENTS DECEMBER 31, 2006 Note 3: DETAILED NOTES ON ALL FUNDS - CONTINUED C. Capital Assets Capital asset activity for the year ended December 31, 2006 was as follows: Beginning Ending Balance Increases Decreases Balance Governmental activities Capital assets not being depreciated Land $ 741,826 $ $ $ 741,826 Construction in progress 1,378,581 1,378,581 Total capital assets not being depreciated 741,826 1,378,581 2,120,407 Capital assets being depreciated Buildings 2,015,769 2,015,769 Improvements other than buildings 719,514 13,960 733,474 Infrastructure 24,841,273 24,841,273 Machinery and equipment 2,085,278 134,631 (10,993) 2,208,916 Total capital assets being depreciated 29,661,834 148,591 (10,993) 29,799,432 Less accumulated depreciation Buildings (547,583) (50,619) (598,202) Improvements other than buildings (444,884) (37,502) (482,386) Infrastructure (16,228,039) (1,039,116) (17,267,155) Machinery and equipment (1,709,619) (113,256) 10,993 (1,811 ,882) Total accumulated depreciation (18,930,125) (1,240,493) 10,993 (20,159,625) Total capital assets being depreciated, net 10,731,709 (1,091,902) 9,639,807 Governmental activities capital assets, net $ 11,473,535 $ 286,679 $ $ 11,760,214 -39- CITY OF SHOREWOOD, MINNESOTA NOTES TO THE FINANCIAL STATEMENTS DECEMBER 31,2006 Note 3: DETAILED NOTES ON ALL FUNDS - CONTINUED Beginning Ending Balance Increases Decreases Balance Business-type activities Capital assets not being depreciated Land $ 404,392 $ $ $ 404,392 Construction in progress 762,669 1,112,857 (935,004) 940,522 Total capital assets not being depreciated 1,167,061 1,112,857 (935,004) 1,344,914 Capital assets being depreciated Infrastructure 16,056,754 935,004 16,991,758 Machinery and equipment 130,492 130,492 Total capital assets being depreciated 16,187,246 935,004 17,122,250 Less accumulated depreciation for Infrastructure (8,337,620) (435,022) (8,772,642) Machinery and equipment (99,378) (6,461) (105,839) Total accumulated depreciation (8,436,998) (441,483) (8,878,481 ) Total capital assets being depreciated, net 7,750,248 493,521 8,243,769 Business-type activities capital assets, net $ 8,917,309 $ 1,606,378 $ (935,004) $ 9,588,683 Depreciation expense was charged to functions/programs of the City as follows: Governmental activities General government Public works Culture and recreation $ 44,943 1,147,697 47,853 Total depreciation expense - governmental activities $ 1,240,493 Business-type activities Water Sewer Stormwater management utility Liquor $ 184,105 204,064 19,833 33,481 Total depreciation expense - business-type activities $ 441,483 -40- CITY OF SHORE WOOD, MINNESOTA NOTES TO THE FINANCIAL STATEMENTS DECEMBER 31, 2006 Note 3: DETAILED NOTES ON ALL FUNDS - CONTINUED Construction Commitments The City has active construction projects as of December 31,2006. The projects include street construction in areas with newly developed housing and widening and construction of existing streets and bridges. The County Road 19 project is a multi-government project and the construction costs are shared by Hennepin County and the cities of Tonka Bay and Shorewood. At year end the commitments with contractors for these projects are as follows: Project Spent to date $ 3,766,042 1,095,035 578,677 $ 5,439,754 Remaining Commitment County Road 19 and Smithtown Intersection Wedgewood Drive, Teal Circle & Mallard Lane Improvements Southeast Water System Connection $ 36,503 95,788 30,457 Total $ 162,748 D. Interfund Receivables, Payables and Transfers The composition of inter fund balances as of December 31, 2006, is as follows: Receivable Fund Payable Fund Purpose Amount Enterprise Enterprise Sewer Stormwater management To purchase land $ 50,000 Sewer General To purchase land 210,000 Street reconstruction MSA Construction For construction of a county road 350,000 Total $ 610,000 Interfund transfers Transfers in Nonmajor Street Stormwater General governmental Reconstruction Management Fund fund funds fund Enterprise Total Transfers out General $ $ 240,000 $ 345,000 $ 25,000 $ 610,000 Liquor 50,000 50,000 Total $ 50,000 $ 240,000 $ 345,000 $ 25,000 $ 660,000 Transfers were for capital improvements and purchases. -41- CITY OF SHOREWOOD, MINNESOTA NOTES TO THE FINANCIAL STATEMENTS DECEMBER 31,2006 Note 3: DETAILED NOTES ON ALL FUNDS - CONTINUED E. Leases Operating Leases The City leases space for liquor store operations. These leases are considered, for accounting purposes, to be operating leases. Lease expense for the year ended December 31, 2006 amounted to $154,984. Future minimum lease payments for all leases are as follows: Year Ending Shorewood Waterford December 31, Plaza Center Total 2007 $ 59,604 $ 13,750 $ 73,354 2008 51,193 51,193 Total $ 110,797 $ 13,750 $ 124,547 F. Long-term Debt General Obligation Bonds. The City issues general obligation bonds to provide funds for the acquisition and construction of major capital facilities. General obligation bonds have been issued for both governmental and business-type activities. These bonds are reported in the proprietary funds if they are expected to be repaid from proprietary fund revenues. In addition, general obligation bonds have been issued to refund special assessments related bonds. General Obligation Bonds General obligation bonds are direct obligations and pledge the full faith and credit of the City. The City has the following general obligation debt: General Obligation Revenue Bonds The following bonds were issued to fmance capital improvements in the enterprise funds. They will be retired from net revenues ofthe enterprise funds. Description Authorized and Issued Interest Rate Issue Date Maturity Date Balance at Year End G.O. Water Revenue Bonds of2005 G.O. Water Revenue Bonds of 1996 G. O. Water Refunding Bonds of2003 G.O. Water Revenue Bonds of 2006 $ 1,525,000 3.00-4.25 % 06/01/05 01/01/25 $ 1,455,000 860,000 4.95-5.4 11/01/96 02/01/12 345,000 815,000 1.50-3.00 08/01/03 02/01/11 670,000 1,450,000 4.00 11/29/06 01/0 1/22 1,450,000 Total G.O. Revenue Bonds $ 3,920,000 -42- CITY OF SHOREWOOD, MINNESOTA NOTES TO THE FINANCIAL STATEMENTS DECEMBER 31, 2006 Note 3: DETAILED NOTES ON ALL FUNDS - CONTINUED Annual debt service requirements to maturity for general obligation revenue bonds are as follows: G.O. Revenue Bonds Year Ending Business-type Activities December 31, Principal Interest Total 2007 $ 255,000 $ 124,722 $ 379,722 2008 250,000 136,636 386,636 2009 250,000 128,770 378,770 2010 250,000 120,332 370,332 2011 240,000 111,538 351,538 2012 - 2016 950,000 443,802 1,393,802 2017 - 2021 1,155,000 238,046 1,393,046 2022 - 2025 570,000 38,421 608,421 Total $ 3,920,000 $ 1 ,342,267 $ 5,262,267 Lease Revenue Bonds The City also issues bonds where the City pledges income derived from the acquired or constructed assets to pay debt service. Revenue bonds outstanding at year end are as follows: Balance Authorized Interest Issue Maturity at Description and Issued Rate Date Date Year End Public Safety Fire Facility, Series 2002A $ 3,865,000 3.00-5.50 % 09/01/02 02/01/23 $ 3,590,000 Public Safety Police Facility, Series 2002B 4,025,000 3.00-5.50 09/01/02 02/01/23 3,740,000 Public Safety Fire Facility, Series 2002C 2,060,000 3.00-5.50 09/01/02 02/01/23 1,915,000 Public Safety Fire Facility, Series 2003A 1,195,000 2.35-5.10 04/15/03 02/01/23 1,145,000 Public Safety Police Facility, Series 2003B 1,220,000 2.35-5.1 0 04/15/03 02/01/23 1,165,000 Total Lease Revenue Bonds $ 11 ,555,000 -43- CITY OF SHOREWOOD, MINNESOTA NOTES TO THE FINANCIAL STATEMENTS DECEMBER 31, 2006 Note 3: DETAILED NOTES ON ALL FUNDS - CONTINUED Annual debt service requirements to maturity for revenue bonds are as follows: Lease Revenue Bonds Year Ending Governmental Activities December 31, Principal Interest Total 2007 $ 465,000 $ 559,550 $ 1,024,550 2008 485,000 541,240 1,026,240 2009 495,000 521,290 1,016,290 2010 525,000 499,608 1,024,608 2011 545,000 476,222 1,021,222 2012-2016 3,130,000 1,963,650 5,093,650 2017 - 2021 3,990,000 1,068,720 5,058,720 2022 - 2023 1,920,000 105,435 2,025,435 Total $ 1l,555,000 $ 5,735,715 $ 17,290,715 Capital Lease Payable During 1996, the City entered into a lease, with option to purchase, agreement as lessee for financing the South Shore Senior Center project. Title remains with the City so long as they are not in default of terms in the lease agreement. Balance Original Interest Issue Maturity at Description Asset Amount Rate Date Date Year End Southshore Center $ 311,000 6.22 % 05/30/96 08/01/08 $ 69,594 The lease agreement qualifies as a capital lease for accounting purposes and, therefore, has been recorded at the present value of the future minimum lease payments as of the date of its inception. Capital Leases Payable Year Ending Governmental Activities December 31, Principal Interest Total 2007 $ 33,732 $ 3,812 $ 37,544 2008 35,862 1,682 37,544 Total $ 69,594 $ 5,494 $ 75,088 -44- CITY OF SHOREWOOD, MINNESOTA NOTES TO THE FINANCIAL STATEMENTS DECEMBER 31, 2006 Note 3: DETAILED NOTES ON ALL FUNDS - CONTINUED Changes in Long-term Liabilities Long-term liability activity for the year ended December 31, 2006, was as follows: Beginning Ending Due Within Balance Increases Decreases Balance One Year Governmental activities Lease revenue bonds $ 12,010,000 $ $ (455,000) $ 11,555,000 $ 465,000 Capital leases payable 101,322 (31,728) 69,594 33,732 Compensated absences 99,177 135,103 (63,682) 170,598 170,598 Total $ 12,210,499 $ 135,103 $ (550,410) $ lL795,192 $ 669,330 Business-type activities General obligation revenue bonds $ 2,745,000 $ 1,450,000 $ (275,000) $ 3,920,000 $ 255,000 Compensated absences 17,073 17,465 (2,671) 31,867 31,867 Total $ 2,762,073 $ 1,467,465 $ (277,671) $ 3,95 1,867 $ 286,867 G. Fund Balance Reservations/Designations The City has made the following reservations and designations of fund balance. Fund balance - Unreserved - Designated General Street Reconstruction Other governmental Working capital Capital outlay Capital outlay Amount $ 262,438 $ 3,383,906 1,225,915 971,452 $ 5,581,273 Fund Purpose Fund balance - Reserved Debt Service Debt service on bonds issued Total designated fund balance -45- CITY OF SHOREWOOD, MINNESOTA NOTES TO THE FINANCIAL STATEMENTS DECEMBER 31,2006 Note 4: DEFINED BENEFIT PENSION PLAN - STATEWIDE A. Plan Description All full-time and certain part-time employees of the City are covered by defined benefit plans administered by the Public Employees Retirement Association of Minnesota (PERA). PERA administers the Public Employees Retirement Fund (PERF), which is a cost-sharing, multiple-employer retirement plan. This plan is established and administered in accordance with Minnesota statutes, chapters 353 and 356. PERF members belong to either the Coordinated Plan or the Basic Plan. Coordinated Plan members are covered by Social Security and Basic Plan members are not. All new members must participate in the Coordinated Plan. PERA provides retirement benefits as well as disability benefits to members, and benefits to survivors upon death of eligible members. Benefits are established by Minnesota statute, and vest after three years of credited service. The defined retirement benefits are based on a member's highest average salary for any five successive years of allowable service, age and years of credit at termination of service. 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 a 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. 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 normal annuity is a lifetime annuity that ceases upon the death ofthe retiree-no survivor annuity is payable. There are also various types of joint and survivor annuity options available which will reduce the monthly normal annuity amount, because the annuity is payable over joint lives. Members may also leave their contributions in the fund upon termination of public service, in order to qualify for a deferred annuity at retirement age. Refunds of contributions are available at any time to members who leave public service, but before retirement benefits begin. The benefit provisions stated in the previous paragraphs of this section are current provisions and apply to active plan participants. Vested, terminated employees who are entitled to benefits but are not receiving them yet are bound by the provisions in effect at the time they last terminated their public service. PERA issues a publicly available financial report that includes financial statements and required supplementary information for PERF. That report may be obtained on the Internet at rnnpera.org, by writing to PERA, 60 Empire Drive, Suite 200, St. Paul, Minnesota 55103-1855 or by calling 651-296-7460 or 800-652-9026. B. Funding Policy Minnesota statutes, chapter 353 sets the rates for employer and employee contributions. These statutes are established and amended by the State legislature. The City makes annual contributions to the pension plans equal to the amount required by Minnesota statutes. PERF Basic Plan members and Coordinated Plan members were required to contribute 9.10 percent and 5.50 percent, respectively, of their annual covered salary in 2006. Contribution rates in the Coordinated Plan will increase in 2007 to 5.75 percent. The City is required to contribute the following percentages of annual covered payroll: 11.78 percent for Basic Plan PERF members, and 6.0 percent for Coordinated Plan PERF members. Employer contribution rates for the Coordinated Plan will increase to 6.25 percent, effective January 1, 2007. The City's contributions to the PERF for the years ending December 31, 2006, 2005 and 2004 were $73,993, $65,563 and $68,440, respectively. The City's contributions were equal to the contractually required contributions for each year as set by Minnesota statute. -46- CITY OF SHOREWOOD, MINNESOTA NOTES TO THE FINANCIAL STATEMENTS DECEMBER 31, 2006 Note 5: JOINT VENTURES A. South Lake Minnetonka Police Department The City participates in a joint powers agreement with the cities of Excelsior, Greenwood and Tonka Bay, which establishes the South Lake Minnetonka Police Department (Department) for the purpose of providing police protection within the four communities. The agreement creates a coordinating committee, comprised of the Mayors of each participating community, as the governing body, which meets quarterly. Each year, the coordinating committee adopts an operating budget, which is approved by all participating cities. The cost of the operating budget is divided between the participating cities based upon a fixed percentage of the total municipal revenue allocated to each city. Any budget shortfall is made up first from department reserves, with any excess shortfall assessed to each participating community according to the formula. The most recent year of audited information is December 31, 2006. The Department had accounts payable, accrued interest, accrued payroll and compensated absences, and bonds payable of$5,411,790. Separate financial statements can be obtained by writing to the South Lake Minnetonka Police Department, 24150 Smithtown Road, Shorewood, Minnesota 5533 1. The following is a summary ofthe Department's Statement of Net Assets as of December 31,2006 and 2005: SOUTH LAKE MINNETONKA POLICE DEPARTMENT SUMMARY OF STATEMENTS OF NET ASSETS DECEMBER 31,2006 AND 2005 2006 2005 Assets $ 5,939,1 05 $ 6,036,233 Liabilities Net assets $ 5,223,057 716,048 $ 5,411 ,790 624,443 Total liabilities and net assets $ 5,939,105 $ 6,036,233 The following is a summary of the Department's statement of activities for the years ended December 31, 2006 and 2005: SOUTH LAKE MINNETONKA POLICE DEPARTMENT SUMMARY STATEMENTS OF ACTIVITES YEARS ENDED DECEMBER 31, 2006 AND 2005 2006 2005 Expenses $ 2,168,606 $ 2,026,891 Revenues 228,917 173,368 Net expenses (1,939,689) (1,853,523) General revenues 2,031,294 2,033,505 Change in net assets 91,605 179,982 Net assets, January 1 624,443 444,461 Net assets, December 3 1 $ 716,048 $ 624,443 -47- CITY OF SHOREWOOD, MINNESOTA NOTES TO THE FINANCIAL STATEMENTS DECEMBER 31, 2006 Note 5: JOINT VENTURES - CONTINUED B. Southshore Community Center The City participates in a joint venture with the cities of Deep haven, Excelsior, Greenwood and Tonka Bay, which establishes the Southshore Community Center (Senior Center) to provide senior citizens educational and recreational activities. Upon completion of the facility, the member cities will lease the Southshore Center to the Friends of the Southshore Senior Community Center (Community Center). The term of the lease shall be 25 years at a rental rate of $1 per year. In addition to the rental rate, the Community Center is required to pay all operating costs of the Southshore Center. The member cities are responsible for a proportionate share ofthe building construction. Shorewood fmanced its obligation by issuing a lease purchase note. The remaining balance on the lease is $69,594 and is reflected in the government-wide statements. This will be paid out of the General fund. In the event operating costs are not covered by revenue, each member is responsible for their proportionate share oflosses. The building is recorded in the capital asset section on the Statement of Net Assets. The ownership interest of each city is proportionate to each city's investment in the Southshore Center. Separate fmancial statements are issued for the Community Center and can be obtained at the City offices. C. Excelsior Fire District In August of2000, the cities of Deephaven, Excelsior, Greenwood, Shorewood and Tonka Bay entered a joint powers agreement to provide fIre protection and medical response service to their residents and created an entity called the Excelsior Fire District (the District). The Board of Directors is comprised often members and fIve alternate members. Each member city appoints two representatives on the Board of Directors and one alternate. The City is billed for service based on a formula that determines its share of the total expenditures. Separate financial statements can be obtained by writing to the Excelsior Fire District, 24100 Smithtown Road, Shorewood, Minnesota 55331. Selected financial information is shown below for the most recent year of audited information, which is December 31, 2006: Governmental Funds Special Capital General Revenue Projects Total Total assets $ 159,053 $ 369,558 $ 50,800 $ 579,411 T otalliabilities 58,484 58,484 Total equity 100,569 369,558 50,800 520,927 Total revenues 1,257,033 157,285 1,414,318 Total expenditures 602,378 714,648 119,599 1,436,625 Total other financing sources (uses) (717,369) 592,369 125,000 Government- wide Total assets Total liabilities Total net assets Total expenses Total charges for services Total unrestricted investment earnings $ 8,330,063 6,961,729 1,368,334 1,253,207 1,396,676 17,642 -48- CITY OF SHOREWOOD, MINNESOTA NOTES TO THE FINANCIAL STATEMENTS DECEMBER 31,2006 Note 6: OTHER INFORMATION A. Risk Management The City is exposed to various risks of loss related to torts; theft of, damage to and destruction of assets; errors and omissions; injuries to employees; and natural disasters for which the City carries insurance. The City obtains insurance through participation in the League of Minnesota Cities Insurance Trust (LMCIT) which is a risk sharing pool with approximately 800 other governmental units. The City pays an annual premium to LMCIT for its workers compensation and property and casualty insurance. The LMCIT is self sustaining through member premiums and will reinsure for claims above a prescribed dollar amount for each insurance event. Settled claims have not exceeded the City's coverage in any of the past three fiscal years. Liabilities are reported when it is probable that a loss has occurred and the amount of the loss can be reasonably estimated. Liabilities, if any, include an amount for claims that have been incurred but not reported (IBNRs). The City's management is not aware of any incurred but not reported claims. B. Legal Debt Margin The City's statutory debt limit is $26,453,492 computed as two percent of the taxable market value of property within the City. Long-term debt issued and financed partially or entirely by special assessments, tax increments or the net revenues of enterprise fund operations is excluded from the debt limit computation. The City has no debt that is subject to the statutory debt limit. C. Subsequent Events On January 25,2007, the Economic Development Authority issued $4,130,000 of Public Safety Fire Facility Lease Revenue Crossover Refunding Bonds, series 2007 A. The bonds will be refunding the 2002A Public Safety Fire Facility Lease Revenue Bonds, will mature on February 1,2023 and bears an average coupon rate of 4.16 percent. On January 25,2007, the Economic Development Authority issued $4,285,000 of Public Safety Police Facility Lease Revenue Crossover Refunding Bonds, series 2007B. The bonds will be refunding the 2002B Public Safety Police Facility Lease Revenue Bonds, will mature on February 1,2023 and bears an average coupon rate of 4.15 percent. On January 25,2007, the Economic Development Authority issued $1,570,000 of Public Safety Fire Facility Lease Revenue Crossover Refunding Bonds, series 2007C. The bonds will be refunding the 2002C Public Safety Fire Facility Lease Revenue Bonds, will mature on February 1,2022 and bears an average coupon rate of 3.94 percent. -49- THIS PAGE IS LEFT BLANK INTENTIONALL Y COMBINING AND INDIVIDUAL FUND FINANCIAL STATEMENTS AND SCHEDULES CITY OF SHOREWOOD SHOREWOOD, MINNESOTA YEAR ENDED DECEMBER 31,2006 THIS PAGE IS LEFT BLANK INTENTIONALL Y NONMAJOR GOVERNMENTAL FUNDS NON MAJOR CAPITAL PROJECTS FUNDS Capital projects funds are used to account for the acquisition and construction of major capital facilities other than those financed by enterprise funds. Public Facilities/Office Equipment - This fund was established to account for capital improvement projects for public facilities and replacement of office equipment that may be financed without the need to issue bonds. Park Capital Improvement - This fund accounts for park land acquisition and other capital improvements in the City parks. Equipment Replacement - This fund was established for the purpose of funding the replacement of capital equipment. MSA Construction - This fund was established to account for the accumulation of Municipal State Aid (MSA) to fund the periodic reconstruction ofMSA designated roads. Land and Open Space - This fund was established to accumulate resources for the acquisition of land and open spaces, including conservation easements. EDA Public Safety Facilities Proiect - This fund was established for the purpose of accounting for construction ofthe new public safety facility. Senior Community Center - This fund was established to account for the construction of a Senior Community Center. CITY OF SHOREWOOD, MINNESOTA NONMAJOR GOVERNMENTAL FUNDS COMBINING BALANCE SHEET DECEMBER 31,2006 Capital Projects Funds Public Facilities/ Park Office Capital Equipment Equipment Improvement Replacement ASSETS Cash and temporary investments $ 247,577 $ 317,738 $ 391,987 Receivables Accrued interest 1,491 2,169 2,492 Due from other governments TOTAL ASSETS $ 249,068 $ 319,907 $ 394,479 LIABILITIES AND FUND BALANCES (DEFICITS) LIABILITIES Accounts and contracts payable $ $ $ 1,314 Due to other funds TOTAL LIABILITIES 1,314 FUND BALANCES (DEFICITS) Designated for capital outlay 249,068 319,907 393,165 Undesignated TOTAL FUND BALANCES (DEFICITS) 249,068 319,907 393,165 TOTAL LIABILITIES AND FUND BALANCES (DEFICITS) $ 249,068 $ 319,907 $ 394,479 -50- Exhibit A-I Capital Projects Funds - Continued EDA Public Safety Senior MSA Land and Facilities Community Construction Open Space Project Center Total $ 51,654 $ 15,229 $ 125,645 $ 38,290 $ 1,188,120 4,651 76 281 11,160 301,734 301,734 $ 358,039 $ 15,305 $ 125,645 $ 38,571 $ 1,501,014 $ 178,248 350,000 $ $ $ $ 179,562 350,000 528,248 529,562 (170,209) 1,141,661 (170,209) 15,305 125,645 38,571 15,305 125,645 38,571 971,452 (170,209) $ 15,305 $ 125,645 $ 38,571 $ 1,501,014 $ 358,039 -51- CITY OF SHOREWOOD, MINNESOTA NONMAJOR GOVERNMENTAL FUNDS COMBINING STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES (DEFICITS) FOR THE YEAR ENDED DECEMBER 31,2006 Capital Projects Funds Public Facilities/ Park Office Capital Equipment Equipment Improvement Replacement REVENUES Intergovernmental $ $ $ Interest on investments 7,070 10,569 12,461 Miscellaneous Park dedication fees 37,200 Other 1,400 TOTAL REVENUES 7,070 49,169 12,461 EXPENDITURES Capital outlay General government 5,520 2,952 Public safety Public works 120,949 Culture and recreation 26,460 TOTAL EXPENDITURES 5,520 26,460 123,901 EXCESS (DEFICIENCY) OF REVENUES OVER (UNDER) EXPENDITURES 1,550 22,709 (111,440) OTHER FINANCING SOURCES Transfers in 50,000 10,000 175,000 NET CHANGE IN FUND BALANCES 51,550 32,709 63,560 FUND BALANCES (DEFICITS), JANUARY 1 197,518 287,198 329,605 FUND BALANCES (DEFICITS), DECEMBER 31 $ 249,068 $ 319,907 $ 393,165 -52- Exhibit A-2 Capital Projects Funds - Continued EDA Public Safety Senior MSA Land and Facilities Community Construction Open Space Project Center Total $ 360,807 $ $ $ $ 360,807 25,955 297 6,820 1,417 64,589 37,200 1,400 386,762 297 6,820 1,417 463,996 8,472 40,198 40,198 435,189 556,138 108 10 26,578 435,189 108 40,198 10 631,386 (48,427) 189 (33,378) 1,407 (167,390) 5,000 240,000 (48,427) 5,189 (33,378) 1,407 72,610 (121,782) 10,116 159,023 37,164 898,842 $ (170,209) $ 15,305 $ 125,645 $ 38,571 $ 971,452 -53- CITY OF SHOREWOOD, MINNESOTA Exhibit B-1 GENERAL FUND SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES - CONTINUED ON THE FOLLOWING PAGES BUDGET AND ACTUAL FOR THE YEAR ENDED DECEMBER 31,2006 (With comparative actual amounts for the year ended December 3], 2005) 2006 2005 Variance with Budgeted Amounts Final Budget Actual Positive Actual Original Final Amounts (Negative) Amounts REVENUES Taxes General property taxes $ 4,072,804 $ 4,072,804 $ 4,023,948 $ (48,856) $ 3,637,087 Fiscal disparities 117,591 117,591 117,591 1] 3,546 Total 4,190,395 4,190,395 4,141,539 (48,856) 3,750,633 Licenses and permits Business 13,100 13,100 12,694 (406) 13,385 Nonbusiness 184,000 184,000 369,714 185,714 321,335 Total 197,100 197,100 382,408 185,308 334,720 Intergovemmental State Property tax credits 174 174 34 Other 65,000 65,000 4,751 (60,249) 64,446 Total 65,000 65,000 4,925 (60,075) 64,480 Charges for services General government 13,000 13,000 14,320 ],320 ]6,262 Parks and recreation 30,000 30,000 31,130 1,130 34,490 Total 43,000 43,000 45,450 2,450 50,752 Fines and forfeitures 70,000 70,000 79,040 9,040 90,149 Interest on investments 94,800 94,800 183,076 88,276 107,787 Miscellaneous revenue Refunds and reimbursements 8,600 8,600 5,180 (3,420) 90,309 Contributions and donations 1,000 1,000 1,000 Other 21,600 21,600 5,840 (15,760) 5,536 Total 30,200 30,200 12,020 (18,180) 96,845 TOTAL REVENUES 4,690,495 4,690,495 4,848,458 157,963 4,495,366 -54- CITY OF SHOREWOOD, MINNESOTA Exhibit B-1 GENERAL FUND SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES - CONTINUED BUDGET AND ACTUAL FOR THE YEAR ENDED DECEMBER 31, 2006 (With comparative actual amounts for the year ended December 31, 2005) 2006 2005 Variance with Budgeted Amounts Final Budget Actual Positive Actual Original Final Amounts (Negative) Amounts EXPENDITURES Current General government Mayor and Council Personal services $ 16,793 $ 16,793 $ 16,794 $ (1) $ 16,794 Supplies 1,000 1,000 1,127 (127) 1,411 Other services and charges 55,000 55,000 43,039 11,961 41,502 Total 72,793 72,793 60,960 11,833 59,707 Administrative Personal services 136,009 136,009 120,342 15,667 120,964 Supplies 400 400 148 252 262 Other services and charges 11 ,800 11,800 5,015 6,785 9,809 Total 148,209 148,209 125,505 22,704 131,035 City clerk / elections Personal services 158,601 158,601 161,055 (2,454) 139,868 Supplies 34,300 34,300 21,653 12,647 20,579 Other services and charges 31,265 31,265 31,505 (240) 16,551 Total 224,166 224,166 214,213 9,953 176,998 Finance Personal services 174,972 174,972 144,311 30,661 153,459 Supplies 6,700 6,700 5,018 1,682 5,056 Other services and charges 12,000 12,000 9,367 2,633 8,497 Total 193,672 193,672 158,696 34,976 167,012 Professional services Other services and charges 180,000 180,000 164,864 15,136 162,271 Planning and zoning Personal services 165,751 165,751 180,557 (14,806) 154,669 Supplies 1,925 1,925 789 1,136 707 Other services and charges 13,580 13,580 10,125 3,455 7,915 Total 181,256 181,256 191,471 (10,215) 163,291 -55- CITY OF SHOREWOOD, MINNESOTA Exhibit B-1 GENERAL FUND SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES - CONTINUED BUDGET AND ACTUAL FOR THE YEAR ENDED DECEMBER 31, 2006 (With comparative actual amounts for the year ended December 31, 2005) 2006 2005 Variance with Budgeted Amounts Final Budget Actual Positive Actual Original Final Amounts (Negative) Amounts EXPENDITURES - CONTINUED Current - Continued General government - Continued Municipal building Supplies $ 26,650 $ 26,650 $ 22,391 $ 4,259 $ 16,472 Other services and charges 117,800 117,800 130,974 (13,174) 139,914 Total 144,450 144,450 153,365 (8,915) 156,386 City engineer Personal services 132,147 132,147 III ,466 20,681 111,604 Supplies 1,450 1,450 580 870 907 Other services and charges 20,850 20,850 83,389 (62,539) 39,885 Total 154,447 154,447 195,435 (40,988) 152,396 Total general government 1,298,993 1,298,993 1,264,509 34,484 1,169,096 Public safety Police protection Other services and charges 758,938 758,938 782,013 (23,075) 727,725 Fire protection Other services and charges 307,496 307,496 314,647 (7,151) 263,107 Animal control Other services and charges 26,000 26,000 21,845 4,155 24,673 Protective inspection Personal services 103,422 103,422 124,766 (21,344) 101,925 Supplies 400 400 38 362 162 Other services and charges 10,820 10,820 14,689 (3,869) 7,028 Total 114,642 114,642 139,493 (24,851) 109,115 Total public safety 1,207,076 1,207,076 1,257,998 (50,922) 1,124,620 Public works General maintenance Personal services 254,324 254,324 266,421 (12,097) 219,118 Supplies 55,950 55,950 53,501 2,449 51,557 Other services and charges 37,200 37,200 35,830 1,370 29,406 Total 347,474 347,474 355,752 (8,278) 300,081 -56- CITY OF SHOREWOOD, MINNESOTA Exhibit B-1 GENERAL FUND SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES - CONTINUED BUDGET AND ACTUAL FOR THE YEAR ENDED DECEMBER 31, 2006 (With comparative actual amounts for the year ended December 31, 2005) 2006 2005 Variance with Budgeted Amounts Final Budget Actual Positive Actual Original Final Amounts (Negative) Amounts EXPENDITURES - CONTINUED Current - Continued Public works Streets and highways Personal services $ 108,534 $ 108,534 $ 87,375 $ 21,159 $ 87,337 Supplies 47,400 47,400 65,953 (18,553) 59,856 Other services and charges 20,000 20,000 11,379 8,621 13,994 Total 175,934 175,934 164,707 11,227 161,187 Snow and ice removal Personal services 36,792 36,792 14,467 22,325 24,475 Supplies 33,000 33,000 12,862 20,138 20,864 Total 69,792 69,792 27,329 42,463 45,339 Traffic control Supplies 6,000 6,000 1,415 4,585 4,662 Other services and charges 36,400 36,400 40,286 (3,886) 31,457 Total 42,400 42,400 41,701 699 36,119 Sanitation and waste removal Personal services 648 648 608 (4,747) 594 Supplies 500 500 500 Other services and charges 4,300 4,300 5,395 3,692 3,502 Total 5,448 5,448 6,003 (555) 4,096 Tree maintenance Personal services 15,121 15,121 22,123 (7,002) 15,011 Supplies 2,700 2,700 1,323 1,377 479 Other services and charges 15,000 15,000 7,110 7,890 7,768 Total 32,821 32,821 30,556 2,265 23,258 Total public works 673,869 673,869 626,048 47,821 570,080 -57- THIS PAGE IS LEFT BLANK INTENTIONALL Y CITY OF SHOREWOOD, MINNESOTA Exhibit B-1 GENERAL FUND SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES - CONTINUED BUDGET AND ACTUAL FOR THE YEAR ENDED DECEMBER 31, 2006 (With comparative actual amounts for the year ended December 31, 2005) 2006 2005 Variance with Budgeted Amounts Final Budget Actual Positive Actual Original Final Amounts (Negative) Amounts EXPENDITURES - CONTINUED Current - Continued Culture and recreation Personal services $ 137,054 $ 137,054 $ 112,753 $ 24,301 $ 109,304 Supplies 13,250 13,250 6,861 6,389 10,025 Other services and charges 70,800 70,800 49,797 21,003 48,190 Total culture and recreation 221,104 221,104 169,411 51,693 167,519 Total current expenditures 3,401,042 3,401,042 3,317,966 83,076 3,031,315 Capital outlay General government 116,400 116,400 18,047 98,353 359,267 Public safety 486,837 486,837 503,886 (17,049) 490,083 Public works 75,475 75,475 7,468 68,007 350 Culture and recreation 375 375 375 9,989 Total capital outlay 679,087 679,087 529,401 149,686 859,689 Debt service Principal 31,728 31,728 31,728 29,842 Interest and other 18,638 18,638 18,638 13,562 Total debt service 50,366 50,366 50,366 43,404 TOTAL EXPENDITURES 4,130,495 4,130,495 3,897,733 232,762 3,934,408 EXCESS OF REVENUES OVER EXPENDITURES 560,000 560,000 950,725 390,725 560,958 OTHER FINANCING SOURCES (USES) Transfers in 50,000 50,000 50,000 50,000 Transfers out (610,000) (610,000) (610,000) (559,000) TOTAL OTHER FINANCING SOURCES (USES) (560,000) (560,000) (560,000) (509,000) NET CHANGE IN FUND BALANCES 390,725 390,725 51,958 FUND BALANCES, JANUARY 1 2,993,181 2,993,181 2,993,181 2,941,223 FUND BALANCES, DECEMBER 31 $ 2,993,181 $ 2,993,181 $ 3,383,906 $ 390,725 $ 2,993,181 -58- CITY OF SHOREWOOD, MINNESOTA Exhibit C-l DEBT SERVICE FUNDS COMBINING BALANCE SHEET DECEMBER 31, 2006 1993 Improvement Waterford 2002/2003 and III Tax Public Safety Refunding Increment Building Total ASSETS Cash and temporary investments $ 114,999 $ 10,919 $ 135,602 $ 261,520 Receivables Accrued interest 838 80 918 Special assessments Deferred 778 778 Lease 11,555,000 11,555,000 TOTAL ASSETS $ 116,615 $ 10,999 $ 11,690,602 $ 11,818,216 LIABILITIES AND FUND BALANCES LIABILITIES Deferred revenue $ 778 $ $ 11,555,000 $ 11,555,778 FUND BALANCES Reserved for Debt service 115,837 10,999 135,602 262,438 TOTAL LIABILITIES AND FUND BALANCES $ 116,615 $ 10,999 $ 11,690,602 $ 11,818,216 -59- CITY OF SHOREWOOD, MINNESOTA Exhibit C-2 DEBT SERVICE FUNDS COMBINING SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES FOR THE YEAR ENDED DECEMBER 31, 2006 1993 Improvement Waterford 2002/2003 and III Tax Public Safety Refunding Increment Building Total REVENUES Special assessments $ 895 $ $ $ 895 Lease payments 1,040,693 1,040,693 Interest on investments 4,154 404 1,961 6,519 Miscellaneous 19,547 19,547 TOTAL REVENUES 5,049 404 1,062,201 1,067,654 EXPENDITURES Debt service Principal 455,000 455,000 Interest and service charges 30 3 589,056 589,089 TOTAL EXPENDITURES 30 3 1,044,056 1,044,089 NET CHANGE IN FUND BALANCES 5,019 401 18,145 23,565 FUND BALANCES, JANUARY 1 110,818 10,598 117,457 238,873 FUND BALANCES, DECEMBER 31 $ 115,837 $ 10,999 $ 135,602 $ 262,438 -60- CITY OF SHOREWOOD, MINNESOTA LIQUOR FUNDS SCHEDULES OF ASSETS, LIABILITIES AND NET ASSETS DECEMBER 31, 2006 AND 2005 Tonka Bay 2006 ASSETS CURRENT ASSETS Cash and temporary investments Receivables Accrued interest Accounts Inventories, at cost Prepaid items $ TOTAL CURRENT ASSETS NONCURRENT ASSETS Capital assets Equipment and furnishings Less accumulated depreciation TOTAL CAPITAL ASSETS (net of accumulated depreciation) TOTAL ASSETS LIABILITIES CURRENT LIABILITIES Accounts and contracts payable Due to other governments Salaries and compensated absences payable TOTAL CURRENT LIABILITIES NET ASSETS Invested in capital assets Unrestricted TOTAL NET ASSETS $ -61- 2005 $ $ Exhibit D-I Waterford Center Shorewood Plaza Totals 2006 2005 2006 2005 2006 2005 $ 3,401 $ 36,862 $ 359,286 $ 352,446 $ 362,687 $ 389,308 283 166 2,687 2,419 2,970 2,585 7,349 7,349 98,041 92,813 142,308 146,942 240,349 239,755 1,952 1,162 1,953 1,225 3,905 2,387 103,677 138,352 506,234 503,032 609,911 641,384 68,199 (59,796) 68,199 (56,785) 247,983 (126,089) 247,983 (95,619) 316,182 (185,885) 316,182 (152,404) 8,403 11,414 121,894 152,364 130,297 163,778 112,080 149,766 628,128 655,396 740,208 805,162 8,446 7,336 14,433 11,045 8,166 5,337 20,491 10,883 21,638 30,738 11,271 15,694 28,937 18,219 36,071 41,783 19,437 21,031 30,215 24,548 53,012 57,703 83,227 82,251 8,403 73,462 11,414 113,804 121,894 453,222 152,364 445,329 130,297 526,684 163,778 559,133 $ 125,218 $ 575,116 $ 597,693 $ 656,981 $ 722,911 $ 81,865 -62- CITY OF SHOREWOOD, MINNESOTA LIQUOR FUNDS SCHEDULES OF REVENUES, EXPENSES AND CHANGES IN FUND NET ASSETS FOR THE YEARS ENDED DECEMBER 31,2006 AND 2005 Tonka Bay 2006 OPERATING REVENUES Sales Less cost of goods sold $ GROSS PROFIT OPERATING EXPENSES Personal services Supplies Depreciation Professional services Contracted services Insurance Utilities Rent Advertising Other TOTAL OPERATING EXPENSES OPERATING INCOME (LOSS) NONOPERATING REVENUES Interest on investments Other income TOTAL NONOPERATING REVENUES INCOME BEFORE TRANSFERS TRANSFERS Transfers in Transfers out TOTAL TRANSFERS CHANGE IN NET ASSETS NET ASSETS, JANUARY 1 NET ASSETS, DECEMBER 31 $ -63- 2005 $ 72 72 (72) 4,752 4,752 4,680 (252,894) (252,894) (248,214) 248,214 $ Exhibit D-2 Waterford Center Shorewood Plaza Totals 2006 2005 2006 2005 2006 2005 $ 863,424 $ (632,354) 854,693 (617,873) $ 1,114,627 (810,448) $ 1,180,787 (858,993) $ 1,978,051 (1,442,802) $ 2,035,480 (1,476,866) 231,070 236,820 304,179 321,794 535,249 558,614 136,553 111,767 143,062 129,271 279,615 241,038 4,267 5,256 4,518 4,562 8,785 9,818 3,011 3,386 30,470 33,572 33,481 36,958 2,725 2,143 2,725 2,143 5,450 4,286 596 510 1,115 1,135 1,711 1,645 6,092 7,101 6,092 7,101 12,184 14,202 10,088 8,234 13,001 15,020 23,089 23,254 67,425 67,426 87,559 82,263 154,984 149,689 7,087 5,859 7,197 5,859 14,284 11,718 17,052 14,468 23,780 22,093 40,832 36,633 254,896 226,150 319,519 303,019 574,415 529,241 (23,826) 10,670 (15,340) 18,775 (39,166) 29,373 2,335 3,138 2,465 14,608 3,155 7,833 2,369 16,943 6,293 12,585 4,834 5,473 2,465 17,763 10,202 23,236 17,419 (18,353) 13,135 2,423 28,977 (15,930) 46,792 229,447 23,447 252,894 (25,000) (25,000) (25,000) (25,000) (50,000) (302,894) (25,000) 204,447 (25,000) (1,553) (50,000) (50,000) (43,353) 217,582 (22,577) 27,424 (65,930) (3,208) 125,218 (92,364) 597,693 570,269 722,911 726,119 $ 81,865 $ 125,218 $ 575,116 $ 597,693 $ 656,981 $ 722,911 -64- CITY OF SHORE WOOD, MINNESOTA LIQUOR FUNDS SCHEDULES OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31,2006 AND 2005 Tonka Bay 2006 2005 CASH FLOWS FROM OPERATING ACTIVITIES Receipts from customers and users Other receipts and payments, net Payments to suppliers, contractors and other govemments Payments to employees $ $ (72) NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES (72) CASH FLOWS FROM NONCAPIT AL FINANCING ACTIVITIES Transfers in Transfers out NET CASH PROVIDED (USED) BY NON CAP IT AL FINANCING ACTIVITIES (252,894) (252,894) 6,153 (246,813) 246,813 $ $ CASH FLOWS FROM INVESTING ACTIVITIES Interest received on investments NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS CASH AND CASH EQUIVALENTS (DEFICITS), JANUARY 1 CASH AND CASH EQUIVALENTS, DECEMBER 31 RECONCILIATION OF OPERATING INCOME (LOSS) TO NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES Operating income (loss) Adjustments to reconcile operating income (loss) to net cash provided (used) by operating activities Other income related to operations Depreciation (Increase) decrease in assets: Accounts receivable Inventories Prepaid items Increase (decrease) in liabilities: Accounts and contracts payable Due to other governments Salaries and compensated absences payable $ $ (72) NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES $ $ (72) -65- Exhibit D-3 Waterford Center Shorewood Plaza Totals 2006 2005 2006 2005 2006 2005 $ 870,773 $ 854,789 $ 1,114,627 $ 1,180,787 $ 1,985,400 $ 2,035,576 3,138 2,465 3,155 2,369 6,293 4,834 (757,133) (751,777) (963,164) (1,037,372) (1,720,297) (1,789,221) (127,457) (110,470) (137,118) (127,491) (264,575) (237,961) (10,679) (4,993) 17,500 18,293 6,821 13,228 229,447 23,447 252,894 (25,000) (25,000) (25,000) (25,000) (50,000) (302,894) (25,000) 204,447 (25,000) (1,553) (50,000) (50,000) 2,218 ( 166) 14,340 6,723 16,558 12,710 (33,461) 199,288 6,840 23,463 (26,621) (24,062) 36,862 (162,426) 352,446 328,983 389,308 413,370 $ 3,401 $ 36,862 $ 359,286 $ 352,446 $ 362,687 $ 389,308 $ (23,826) $ 10,670 $ (15,340) $ 18,775 $ (39,166) $ 29,373 3,138 2,465 3,155 2,369 6,293 4,834 3,01l 3,386 30,470 33,572 33,481 36,958 7,349 96 7,349 96 (5,228) 1,636 4,634 765 (594) 2,401 (790) 771 (728) 709 (1,518) 1,480 (2,599) (26,048) (10,247) (39,268) (12,846) (65,316) (830) 734 (388) (409) (1,218) 325 9,096 1,297 5,944 1,780 15,040 3,077 $ (10,679) $ (4,993) $ 17,500 $ 18,293 $ 6,821 $ 13,228 -66- CITY OF SHOREWOOD, MINNESOTA AGENCY FUND COMBINING SCHEDULE OF CHANGES IN ASSETS AND LIABILITIES FOR THE YEAR ENDED DECEMBER 31, 2006 Exhibit E-l Balance Balance January 1 Additions Deductions December 31 Developer Escrow Accounts ASSETS Cash and temporary investments $ 125,815 $ 35,379 $ (60,134) $ 101,060 LIABILITIES Accounts payable $ 125,815 $ 35,379 $ (60,134) $ 101,060 -67- CITY OF SHOREWOOD, MINNESOTA Exhibit F-l SUMMARY FINANCIAL REPORT REVENUES AND EXPENDITURES FOR GENERAL OPERATIONS GOVERNMENTAL FUNDS FOR THE YEARS ENDED DECEMBER 31, 2006 AND 2005 Percent Total Increase 2006 2005 (Decrease) REVENUES Taxes $ 4,141,539 $ 3,750,633 10.42 % Licenses and permits 382,408 334,720 14.25 Intergovernmental 365,732 2,432,656 (84.97) Charges for services 45,450 50,752 (10.45) Fines and forfeits 79,040 90,149 (12.32) Special assessments 895 6,928 (87.08) Investment earnings 327,921 201,024 63.13 Miscellaneous 1,110,860 1,134,429 (2.08) TOTAL REVENUES $ 6,453,845 $ 8,001,291 (19.34) % Per Capita $ 860.63 $ 1,059.63 EXPENDITURES Current General government $ 1,264,509 $ 1,169,096 8.16 % Public safety 1,257,998 1,124,620 11.86 Streets and highways 626,048 570,080 9.82 Culture and recreation 169,411 167,519 1.13 Capital outlay General government 26,519 363,302 (92.70) Public safety 544,084 565,466 (3.78) Streets and highways 1,974,023 3,349,707 (41.07) Culture and recreation 26,578 29,246 (9.12) Debt service Principal 486,728 384,842 26.47 Interest and other charges 607,727 611,358 (0.59) TOTAL EXPENDITURES $ 6,983,625 $ 8,335,236 (16.22) % Per Capita $ 931.27 $ 1,103.86 Total Long-term Indebtedness $ 11,624,594 $ 12,111,322 (4.02) % Per Capita 1,550.15 1,603.94 (3.35) General Fund Balance - December 31 $ 3,383,906 $ 2,993,181 13.05 % Per Capita 451.25 396.40 13.84 The purpose of this report is to provide a summary of [mancial infonnation concerning the City of Shorewood to interested citizens. The complete [mancial statements may be examined at City Hall, 5755 Country Club Road. Questions about this report should be directed to Bonnie Burton, Finance Director at (952)474-3236. -68- THIS PAGE IS LEFT BLANK INTENTIONALL Y SECTION III STATISTICAL SECTION (UNAUDITED) CITY OF SHOREWOOD SHOREWOOD, MINNESOTA YEAR ENDED DECEMBER 31, 2006 THIS PAGE IS LEFT BLANK INTENTIONALL Y STATISTICAL SECTION This part of the City of Shorewood's comprehensive annual [mancial report presents detailed information as a context for understanding what the information in the [mancial statements, note disclosures, and required supplementary information says about the government's overall financial health. Page Financial Trends These schedules contain trend information to help the reader understand how the government's financial performance and well-being have changed over time. 69 Revenue Capacity These schedules contain information to help the reader assess the government's most significant local revenue source, the property tax. 76 Debt Capacity 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. 83 Demographic and Economic Information These schedules offer demographic and economic indicators to help the reader understand the environment within which the government's financial activities take place. 90 Operating Information These schedules contain service and infrastructure data to help the reader understand how the information in the government's [mancial report relocates to the services the government provides and the activities it performs. 93 THIS PAGE IS LEFT BLANK INTENTION ALL y CITY OF SHOREWOOD, MINNESOTA Table 1 STATISTICAL SECTION (UNAUDITED) NET ASSETS BY COMPONENT LAST THREE FISCAL YEARS (accrual basis of accounting) Fiscal Year 2006 2005 2004 Governmental activities Invested in capital assets, net of related debt $ 11,690,620 $ 11,372,213 $ 12,167,269 Restricted 24,632 Unrestricted 5,716,027 6,316,707 6,669,073 Total governmental activities net assets $ 17,431,279 $ 17,688,920 $ 18,836,342 Business-type activities Invested in capital assets, net of related debt $ 5,668,683 $ 6,172,309 $ 6,427,358 Unrestricted 9,829,761 8,182,612 7,470,272 Total business-type activities net assets $ 15,498,444 $ 14,354,921 $ 13,897,630 Total primary government Invested in capital assets, net of related debt $ 17,359,303 $ 17,544,522 $ 18,594,627 Restricted 24,632 Unrestricted 15,545,788 14,499,319 14,139,345 Total primary government $ 32,929,723 $ 32,043,841 $ 32,733,972 Note: Net assets are not available for years prior to 2004 -69- CITY OF SHOREWOOD, MINNESOTA Table 2 STATISTICAL SECTION (UNAUDITED) CHANGES IN NET ASSETS LAST THREE FISCAL YEARS Fiscal Year 2006 2005 2004 Expenses Govemmental activities General government $ 1,357,714 $ 1,222,510 $ 1,074,028 Public safety 1,806,915 1,690,903 2,972,094 Public works 2,275,402 5,019,967 2,446,325 Culture and recreation 233,881 246,381 254,081 Interest on long-term debt 600,723 606,189 607,862 Total governmental activities expenses 6,274,635 8,785,950 7,354,390 Business-type activities Water 488,513 567,854 591,858 Sewer 785,638 740,174 735,480 Recycling 124,354 105,823 106,933 Stormwater management utility 171,190 73,885 106,757 Liquor 2,017,217 2,006,107 2,152,411 Total business-type activities expenses 3,586,912 3,493,843 3,693,439 Total expenses $ 9,861,547 $ 12,279,793 $ 11,047,829 Program revenues Governmental activities Charges for services General government $ 25,340 $ 112,107 $ 51,069 Public safety 1,060,506 1,055,758 983,684 Culture and recreation 1,800 1,575 1,080 Operating grants and contributions 31,730 100,910 119,594 Capital grants and contributions 395,229 2,404,367 996,967 Total governmental activities program revenues 1,514,605 3,674,717 2,152,394 Business-type activities Charges for services Water 1,350,041 649,772 620,189 Sewer 836,175 833,939 866,350 Recycling 144,886 116,517 114,987 Stormwater management utility 129,708 102,649 85,978 Liquor 1,984,344 2,040,314 2,199,139 Total business-type activities program revenues 4,445,154 3,743,191 3,886,643 Total program revenues $ 5,959,759 $ 7,417,908 $ 6,039,037 Net revenues (expenses) Govemmental activities $ (4,760,030) $ (5,111,233) $ (5,201,996) Business-type activities 858,242 249,348 193,204 Total primary govemment $ (3,901,788) $ (4,861,885) $ (5,008,792) -70- CITY OF SHOREWOOD, MINNESOTA Table 2 STATISTICAL SECTION (UNAUDITED) CHANGES IN NET ASSETS - CONTINUED LAST THREE FISCAL YEARS (accrual basis of accounting) Fiscal Year 2006 2005 2004 General Revenues and Other Changes in Net Assets General Revenues Governmental activities Taxes Property taxes, levied for general purpose $ 4,144,543 $ 3,770,702 $ 3,345,326 Grants and contributions not restricted to specific programs 4,925 4,785 4,723 Unrestricted investment earnings 327,921 201,024 127,853 Loss on sale of capital assets (5,500) Gain on sale of capital assets 4,300 Transfers 25,000 (17,000) 5,000 Total governmental activities general revenues 4,502,389 3,963,811 3,477,402 Business-type activities Unrestricted investment earnings 310,281 190,943 144,163 Transfers (25,000) 17,000 (5,000) Total business-type activities general revenues 285,281 207,943 139,163 Total primary government $ 4,787,670 $ 4,171,754 $ 3,616,565 Change in Net Assets Governmental activities $ (257,641) $ (1,147,422) $ (1,724,594) Business-type activities 1,143,523 457,291 332,367 Total primary government $ 885,882 $ (690,131) $ (1,392,227) Note: Changes in net assets are not available for years prior to 2004 -71- CITY OF SHOREWOOD, MINNESOTA STATISTICAL SECTION (UNAUDITED) FUND BALANCES OF GOVERNMENTAL FUNDS LAST TEN FISCAL YEARS Fiscal Year 1997 1998 1999 2000 General fund Reserved $ $ $ 34,450 $ 35,500 Unreserved 1,578,910 1,458,046 1,531,901 1,713,680 Total general fund $ 1,578,910 $ 1,458,046 $ 1,566,351 $ 1,749,180 All other governmental funds Reserved $ 478,192 $ 426,621 $ 376,643 $ 303,857 Unreserved, reported in: Debt service funds (1,643) Special revenue funds Capital project funds 1,763,126 1,789,052 1,635,871 1,461,012 Total all other governmental funds $ 2,241,318 $ 2,214,030 $ 2,012,514 $ 1,764,869 -72- Table 3 Fiscal Year 2001 2002 2003 2004 2005 2006 $ 48,593 2,944,588 $ $ 44,994 $ 2,112,984 2,546,472 $ $ 117,760 1,905,309 2,941,223 3,383,906 $ 2,023,069 $ 2,157,978 $ 2,546,472 $ 2,941,223 $ 2,993,181 $ 3,383,906 $ 231,421 $ 246,283 $ 205,350 $ 191,410 $ 238,873 $ 262,438 (37,482) (8,342) 2,560,347 10,081,818 4,562,479 3,566,803 3,116,437 2,197,367 $ 2,783,426 $ 10,290,619 $ 4,767,829 $ 3,758,213 $ 3,355,310 $ 2,459,805 -73- CITY OF SHOREWOOD, MINNESOTA STATISTICAL SECTION (UNAUDITED) CHANGES IN FUND BALANCES OF GOVERNMENTAL FUNDS LAST TEN FISCAL YEARS Fiscal Year 1997 1998 1999 2000 Revenues Taxes $ 2,017,021 $ 2,111,143 $ 2,204,851 $ 1,938,705 Licenses and permits 236,672 223,248 221,555 346,086 Intergovernmental 582,579 571,824 509,697 725,955 Charges for services 63,209 34,296 43,348 29,381 Fines and forfeitures 76,340 73,337 94,115 76,483 Special assessments 140,414 105,950 95,138 61,713 Interest on investments 211,415 203,456 110,500 248,334 Miscellaneous 113,382 60,938 78,079 144,241 Total revenues 3,441,032 3,384,192 3,357,283 3,570,898 Expenditures General government 807,892 957,685 850,852 984,586 Public safety 743,617 788,253 799,515 827,483 Public works 451,756 505,240 424,246 435,024 Culture and recreation 114,904 110,287 114,435 135,891 Capital Outlay 930,117 612,691 737,614 1,156,543 Debt service Principal 337,603 334,437 310,665 151,970 Interest 197,047 213,751 211,567 36,092 Total expenditures 3,582,936 3,522,344 3,448,894 3,727,589 Excess of revenues over (under) expenditures (141,904) (138,152) (91,611) (156,691) Other financing sources (uses) Transfers in 829,895 771,275 557,850 589,675 Proceeds from sale of bonds Transfers out (839,895) (781,275) (559,450) (497,800) Total other financing sources (uses) (10,000) (10,000) (1,600) 91,875 Net change in fund balances $ (151,904) $ (148,152) $ (93,211) $ (64,816) Debt service as a percentage of Noncapital expenditures 20.2% 18.8% 19.3% 7.3% -74- Table 4 Fiscal Year 2001 2002 2003 2004 2005 2006 $ 2,206,525 $ 2,658,663 $ 3,071,853 $ 3,344,442 $ 3,750,633 $ 4,141,539 349,515 229,234 334,424 310,055 334,720 382,408 3,104,043 171,783 1,947,484 1,014,410 2,432,656 365,732 42,222 46,079 48,689 44,169 50,752 45,450 61,243 89,632 88,949 81,841 90,149 79,040 52,485 9,235 10,217 10,737 6,928 895 225,500 283,024 146,331 127,853 201,024 327,921 71,236 375,510 551,167 740,030 1,134,429 1,110,860 6,112,769 3,863,160 6,199,114 5,673,537 8,001,291 6,453,845 989,502 1,001,921 1,038,909 1,037,043 1,169,096 1,264,509 893,070 1,008,792 999,049 1,028,689 1,124,620 1,257,998 487,092 428,530 420,608 477,596 570,080 626,048 126,139 160,115 164,540 168,278 167,519 169,411 2,164,146 3,433,022 10,571,521 2,896,330 4,307,721 2,571,204 148,358 139,833 46,402 48,069 384,842 486,728 27,016 18,844 460,759 637,397 611,358 607,727 4,835,323 6,191,057 13,701,788 6,293,402 8,335,236 6,983,625 1,277,446 (2,327,897) (7,502,674) (619,865) (333,945) (529,780) 554,000 629,100 391,107 328,500 542,000 635,000 9,950,000 2,368,378 (539,000) (609,100) (391,107) (323,500) (559,000) (610,000) 15,000 9,970,000 2,368,378 5,000 (17,000) 25,000 $ 1,292,446 $ 7,642,103 $ (5,134,296) $ (614,865) $ (350,945) $ (504,780) 6.6% 5.8% 16.2% 20.2% 24.7% 24.8% -75- CITY OF SHOREWOOD, MINNESOTA STATISTICAL SECTION (UNAUDITED) TAX CAPACITY, MARKET VALUE AND ESTIMATED ACTUAL VALUE OF TAXABLE PROPERTY (Shown by year of tax collectibility) 1997 1998 1999 2000 Taxable market value Personal property $ $ $ $ Real estate Total taxable market value $ 560,500,800 $ 595,451,900 $ 626,118,400 $ 680,244,500 Estimated actual value of taxable property $ 555,709,500 $ 595,451,300 $ 625,522,200 $ 685,565,400 Taxable market value as a percentage of estimated actual value 100.86 % 100.00 % 100.10 % 99.22 % Tax capacity Personal property $ $ $ $ Real estate Tax capacity 9,901,879 9,897,574 9,663,252 10,346,255 Contribution to fiscal disparities pool (202,668) (214,901) (203,942) (201,693) Receivable from fiscal disparities pool 350,823 337,116 342,621 379,095 Tax increment (294,512) (319,186) (312,066) Taxable valuationffotal tax capacity $ 9,755,522 $ 9,700,603 $ 9,489,865 $ 10,523,657 Tax levies General $ 1,703,016 $ 1,778,585 $ 1,860,507 $ 1,935,799 Debt service Total $ 1,703,016 $ 1,778,585 $ 1,860,507 $ 1,935,799 Tax capacity rate General 17.479 % 18.3 I 7 % 19.573 % 18.340 % Debt service Total 17.479 % 18.317 % 19.573 % 18.340 % Source: Hennepin County Assessor Note: Property in the county is reassessed annually. The county assesses property at approximately 90 percent of actual value for all types of real and personal property. Note: Information not available prior to 2003 for the allocation of taxable market value and tax capacity between personal property and real estate. -76- Table 5 $ 769,858,900 2003 2004 2005 2006 $ 3,962,200 $ 3,831,300 $ 4,130,300 $ 4,361,600 914,769,800 1,033,460,200 1,173,029,000 1,318,313,000 $ 918,732,000 $ 1,037,291,500 $ 1,177,159,300 $ 1,322,674,600 $ 1,066,523,800 $ 1,415,129,000 $ 1,550,488,900 $ 1,416,341,600 2001 2002 $ $ $ 817,063,900 $ 795,637,300 $ 914,769,800 96.76 % 89.32 % 86.14 % 73.30 % 75.92 % 93.39 % $ $ $ 78,073 $ 75,409 $ 81,333 $ 85,635 9,658,728 10,980,358 12,590,290 14,269,195 11,344,958 8,690,552 9,736,801 11,055,767 12,671,623 14,354,830 (253,832) (171,024) (184,657) (200,062) (213,988) (276,939) 426,424 314,412 344,682 396,666 379,072 399,944 $ 11,517,550 $ 8,833,940 $ 9,896,826 $ 11 ,252,371 $ 12,836,707 $ 14,477,835 $ 2,208,574 $ 2,763,367 $ 2,851,847 $ 305,000 2,907,997 $ 512,232 3,333,864 $ 496,792 3,678,592 511,803 $ 2,208,574 $ 3,420,229 $ 3,830,656 $ 4,190,395 2,763,367 $ 3,156,847 $ 19.208 % 31.923 % 28.816 % 3.082 25.843 % 4.552 25.971 % 3.870 25.408 % 3.535 19.208 % 31.923 % 31.898 % 30.396 % 29.841 % 28.944 % -77- CITY OF SHOREWOOD, MINNESOTA STATISTICAL SECTION (UNAUDITED) PROPERTY TAX CAPACITY RATES - DIRECT AND OVERLAPPING GOVERNMENTS (PER $1,000 OF TAX CAPACITY IN 1997-2006) Overlapping Rates Storm Year (1) Sewer Taxes School District Watershed District District Payable City County No. 276 No. 277 No.3 No.4 Misc. No.2 1997 17.479 % 35.515 % 78.420 % 52.223 % 1.319 % 0.860 % 6.149 % % 1998 18.317 38.386 76.408 59.701 0.660 0.843 6.973 1999 19.573 40.994 69.423 67.286 0.825 0.880 8.043 2000 18.340 39.655 59.565 57.711 0.525 0.866 7.916 2001 19.208 37.624 47.155 40.246 1.363 0.946 7.916 2002 31.923 50.409 20.868 25.504 2.461 1.608 7.386 2003 31.898 50.607 24.215 20.758 1.236 1.616 7.757 2004 30.396 47.324 23.125 14.354 0.768 0.732 7.488 2005 29.841 44.172 21.989 16.250 1.276 1.375 7.382 2006 28.944 41.016 22.952 10.522 1.072 0.787 6.998 Source: Hennepin County Assessor (1) Includes vocational school Overlapping rates are those oflocal and county governments that apply to property owners within the City. Not all overlapping rates apply to all City property owners (e.g. the rates for special districts apply only to the proportion of the government's property owners whose property is located within the geographic boundaries of the special district). -78- Table 6 Totals School District No. 276 Watershed School District District No.4 No. 277 Watershed Watershed Sewer Watershed District District District District No.3 No.4 No.2 No.3 138.882 % 138.423 % 138.423 % 112.685 % 140.744 140.927 140.927 124.037 138.858 138.913 138.913 136.721 126.001 126.342 126.342 124.147 112.966 112.549 112.549 106.057 112.355 112.194 112.194 117.683 115.738 116.093 116.093 112.256 109.125 109.089 109.089 100.354 104.644 104.743 104.743 98.905 100.958 100.673 100.673 88.528 -79- CITY OF SHOREWOOD, MINNESOTA STATISTICAL SECTION (UNAUDITED) PRINCIPAL TAXPAYERS DECEMBER 31,2006 2006 Percent Tax of Total Taxpayer Capacity Rank Tax Capacity Big Box One, LLC $ 92,190 1 0.64 % Shurgard Storage Centers Inc 73,610 2 0.51 Towle Real Estate 71,790 3 0.50 Mirmetonka Country Club 51,890 4 0.36 Kimberly & Frank Vennes 50,625 5 0.35 Mirmetonka Portable Dredging Co. 48,250 6 0.33 The Mary Sue Simon Qprt 46,940 7 0.32 Xcel Energy 46,410 8 0.32 Waterford Center LLP 45,110 9 0.31 Beacon Bank 43,490 10 0.30 Northern States Power Company First State Bank Excelsior Shorewood Village Shopping Center, Inc. Minnegasco Two S Properties NSP Property Tax Dept. MFT, Inc. Totals $ 570,305 3.94 % -80- Table 7 1997 Tax Capacity Percent of Total Tax Capacity Rank $ 69,838 2 0.72 33,125 8 0.34 57,666 6 0.59 75,460 1 0.77 69,150 3 0.71 63,850 4 0.65 59,188 5 0.61 38,557 7 0.40 32,808 9 0.34 31,738 10 0.33 $ 531,380 5.45 % % -81- CITY OF SHOREWOOD, MINNESOTA Table 8 STATISTICAL SECTION (UNAUDITED) PROPERTY TAX LEVIES AND COLLECTIONS LAST TEN FISCAL YEARS (1) Percent Collection Percentage Collection of Total Fiscal Total of Current of Levy in subsequent Total Collections . Year Levy Year's Levy Collected years Collections to Levy 1997 $ 1,703,016 $ 1,683,193 98.84 % $ 19,982 $ 1,703,175 100.01 % 1998 1,778,585 1,760,645 98.99 15,694 1,776,339 99.87 1999 1,860,507 1,845,191 99.18 15,306 1,860,497 100.00 2000 1,935,779 1,922,709 99.32 13,056 1,935,765 100.00 2001 2,208,574 2,188,665 99.10 19,594 2,208,259 99.99 2002 2,763,367 2,734,632 98.96 27,089 2,761,721 99.94 2003 3,156,847 3,131,798 99.21 19,188 3,150,986 99.81 2004 3,420,229 3,390,137 99.12 25,037 3,415,174 99.85 2005 3,830,656 3,783,074 98.76 40,293 3,823,367 99.81 2006 4,190,395 4,145,829 98.94 4,145,829 98.94 (1) Includes state paid property tax credits. -82- 0'\ Q,l :c C': Eo-< -<0 f:-< IJ:.1 0 Of:-<f:-< tZl S f:-< 1J:.1;::J ~ z-<1J:.1 ~ ~ ~ ^ '-" IJ:.1 o Z 0 ooz 0-0 ~t)~ IJ:.1 IJ:.1 f:-< ~tZllJ:.1 O....:lZ ::r: -< ~ tZlUO ~t::0 OtZl- ;><-f:-< f:-< ~ -< - f:-< P::: UtZl -< f:-< - p... -< U ~ IJ:.1 p... f:-< ~ IJ:.1 tZl o P::: o -< IJ:.1 IJ:.1 o ;>< Z ....:l 0-< ~~ f:-< - IJ:.1 ~ Z Z o ~ ~ ~ IJ:.1 -< g....:l -< > o IJ:.1 tZl tZl IJ:.1 tZl tZl -< I U) U) <l) ~ 0. "u; >-> ;::l f:-< ~ l:l ~ .~ p... ~ U 4-< o <l) c.o ~ - i:: <l) u ..... <l) p... 03 ..0 ;::l ..... _ <l) U 4-< 0. -< 0 0 <l) ..... ~ ;::l p... 1tj~~ .5 > .g t; ~ IJ:.1 f:-< - i:: C <l) 03 ~ E - e E o .5 <l) f:-< ..... > p... 0 o U) '"Cl U) i:: i:: "~ 03 0 0 ".S:_ ~ .~ ~ _ i:: .~ ;::l u ,'g ::0 i:: -<'-'O~ <l) ~ 03 U) _ <l) '& ~ ~ <l) U....:l <l) <l) ;::l U) U) i:: '"Cl ~ <l) i:: <l) > 0 ....:l ~ ~ U) .~ - :~ - u -< 03 ~ - ~ a3 f:-< E i:: ..... <l) > o o - i:: <l) U) E '"Cl <l) i:: ..... 0 g ~ - i:: Cd .S en ~ ~ "'0 i:: .~ 5 <l) ::0 ~ 00 03 ..... u ~ U) <l) ~;>< t-t-NMNO\NMt-M -MI,O V) 0 1,0 1,0 NI,Ot- 1,0 V) -.:t M M v;, O\^ O\^ O\^ 0 N^ Vl '(f( I,OMNooO\OO-.:tI,OO t-~V:MC"!""l"<l:~~- 00000 0 t-OV) 0\ 1,0 0\ 00 -.:t^ t- o^ - o^ V) M -.:t N t-^ N^ -.:t^ M M 1,0 00 V) M NI,OMM 00 -.:t I,O^ N MO^V)-.:t^ _0000 1,0 N O\^ 0\ N^N^--.:t^ - - >t N 1,0 N M 1,0 ^ I,O^ 1,0 V) 1,0 00 -.:t^ -.:t^ - - Vl 000000 000000 oo^ooo^o^ V)^ 0 o^ o^ V) 0 V)t-o\O-M 1,0 -.:t N" - 0\" t-^ NN"NN" o 0 0 0 o 0 0 0 ooo^o 0" 0" V) 0" 1,Ot--.:tN M-t-O\ N"N N^M Vl t-O V) 1,0 00 V) M-.:t N-.:t O\l,Oo\NI,OMMI,ONo\ 00 -.:t t-^oo -.:t I,O^N - ~V) V)^ I,O^ V) M o^ V) ~ ~ O\t-V)M-ooV)MOI,O NNNNN"'"""".-.-.- Vl 000 000 o 0 o^ o^ V)^ V) V) 1,0 1,0 0\ M M 0\" N^ N^ - - o o o^ o - o N" - - - Vl 000 000 o 0 o^ o^ 0" V) N -.:t 00 1,0 -.:t N Vl 0000000 0000000 oo^ooo"oo o^ V) 0" o^ V) o^ o^ oo-.:t-ooV)-.:tN 1,OV)-.:tN- Vl t-ooo\O-NM-.:tV)1,O 0\0\0\0000000 0\0\0\0000000 ___NNNNNNN -.:t 0\ V) -.:t" -.:t V) V) - o o o V)" V) V) <Ii - i:: <l) E <l) - ~ - U) 03 'u i:: ~ i:: t;:; <l) ..c: - o - U) <l) - o i:: <l) ..c: - .5 '"Cl i:: ;::l c.8 <l) .0 i:: ~ u - .0 <l) '"Cl c.o i:: :a i:: l:l U) - ;::l o U) ~ U <l) ..c: - c.o i:: :a ..... ~ c.o <l) ..... $l 'C; - <l) o (l) - o Z o:i 1<J '"Cl i:: o .~ "5 0. o 0. ..... c.8 o 0\ <l) c.o ~ 0. i:: o U) .~ - U) .~ - tZl U 's o i:: o u IJ:.1 '"Cl i:: ~ U :.a ~ ..... c.o o E <l) o 4-< o <l) "5 '"Cl (l) ..c: u tZl <l) ..c: - (l) <l) tZl d o .~ E ..... c.8 .5 <l) ;::l 03 > € <l) 0. o ..... 0. ..... c.8 € <l) 0. o ..... p... <l) ::0 ~ ~ ~ f:-< 4-< o <l) ;::l 03 > 03 .8 u -< '"Cl <l) - ~ .5 - U) IJ:.1 '"Cl i:: ~ <l) ;::l 03 > I M 00 I - <l) ~ ..... ~ ;:;E .s 'u ~ 0. ~ U ~ f:-< 4-< o <l) "5 '"Cl <l) ..c: u tZl <l) ..c: - <l) (l) tZl CITY OF SHOREWOOD, MINNESOTA STATISTICAL SECTION (UNAUDITED) RATIOS OF GENERAL BONDED DEBT OUTSTANDING LAST TEN FISCAL YEARS Table 10 Amounts Percentage of General Available in Net Estimated Actual Fiscal Obligation Debt Service Bonded Value of Per Year Bonds Funds Debt Taxable Property Capita 1997 $ 680,000 $ 471,813 $ 208,187 0.04 % $ 30 1998 545,000 426,621 118,379 0.02 17 1999 410,000 367,111 42,889 0.01 6 2000 280,000 294,605 (14,605) (0.00) (2) 2001 155,000 221,837 (66,837) (0.01) (9) 2002 40,000 116,688 (76,688) (0.01) (10) 2003 20,000 108,925 (88,925) (0.01) (12) 2004 2005 2006 Note: Details regarding the City's outstanding debt can be found in the notes to the fmancial statements. See the Schedule of Demographic and Economic Statistics on page 90 for population data. See the Schedule of Tax Capacity, Market Value and Estimated Actual Value of Taxable Property for property value information. -84- CITY OF SHOREWOOD, MINNESOTA Table 11 STATISTICAL SECTION (UNAUDITED) COMPUTATION OF DIRECT AND OVERLAPPING DEBT DECEMBER 31,2006 Gross Amount Bonded of Debt Used Percentage Net Debt For Net Debt Net Applicable to Applicable Calculation Debt District to District Direct Debt City of Shorewood $ $ 100.00 % $ Overlapping Debt School District #276 $ 70,710,000 $ 42,689,756 19.79 % $ 8,448,303 School District #277 7,480,000 7,035,646 2.06 144,934 Hennepin County 446,550,000 445,110,130 1.16 5,163,278 Henn Suburban Park District 69,975,000 63,899,496 1.54 984,052 Henn Regional RR Authority 45,865,000 45,585,046 1.16 528,787 Metropolitan Council 169,100,000 142,497,686 0.52 740,988 Total Overlapping Debt $ 809,680,000 $ 746,817,760 2.14 % $ 16,010,341 Total Direct and Overlapping Debt $ 809,680,000 $ 746,817,760 2.14 % $ 16,010,341 Sources: Market value data used to estimate applicable percentages provided by the County Board of Equalization and Assessment. Debt outstanding data provided by the county. Note: Overlapping governments are those that coincide, at least in part, with the geographic boundaries of the City. This schedule estimates the portion of the outstanding debt ofthose overlapping governments that is borne by the residents and businesses of the City. This process recognized that, when considering the government's ability to issue and repay long-term debt, the entire debt burden borne by the residents and businesses should be taken into account. However, this does not imply that every taxpayer is a resident, and therefore responsible for repaying the debt, of each overlapping government. * The percentage of overlapping debt applicable is estimated using taxable market property values. Applicable percentages were estimated by determining the portion of the county's taxable market value that is within the City's boundaries and dividing it by the county's total taxable market value. -85- Legal debt margin CITY OF SHOREWOOD, MINNESOTA STATISTICAL SECTION (UNAUDITED) LEGAL DEBT MARGIN INFORMATION LAST TEN FISCAL YEARS Fiscal Year 1997 1998 1999 2000 $ 11,210,016 $ 11,909,038 $ 12,522,368 $ 13,604,890 208,187 118,379 42,889 (14,605) $ 11,001,829 $ 11,790,659 $ 12,479,479 $ 13,619,495 Debt limit Total net debt applicable to limit Total net debt applicable to the limit as a percentage of debt limit 1.9% 1.0% 0.3% (0.1%) Note: Under state law, the City's outstanding general obligation debt should not exceed 2 percent of the market value of taxable property. By law, the general obligation debt subject to the limitation may be offset by amounts set aside for the extinguishment of those obligations. -86- Fiscal Year Table 12 2001 $ 15,397,178 (66,837) $ 15,464,015 (0.4%) 2002 $ 16,341,278 (76,688) $ 16,417,966 (0.5%) 2003 2004 $ 18,374,640 $ 20,745,830 (88,925) $ 18,463,565 $ 20,745,830 (0.5%) 2005 $ 23,543,186 $ 23,543,186 Legal Debt Margin Calculation for Fiscal Year 2006 Taxable market value Debt limit (2% of market value) Debt applicable to limit General obligation bonds Less: amount available in debt service funds Total net debt applicable to limit Legal debt margin -87- 2006 $ 26,453,492 $ 26,453,492 $ 1,322,674,600 $ 26,453,492 $ 26,453,492 CITY Of SHOREWOOD, MINNESOTA Table 13 STATISTICAL SECTION (UNAUDITED) PLEDGED-REVENUE COVERAGE LAST TEN FISCAL YEARS General Obligation Revenue Bonds (1) Net fiscal Gross (2) Revenue Debt Service Year Revenue Expenses Available Principal Interest Coverage 1997 $ 252,866 $ 180,601 $ 72,265 $ 125,000 $ 120,737 0.29 1998 311,925 179,914 132,011 185,000 125,085 0.43 1999 454,227 201,325 252,902 180,000 117,642 0.85 2000 465,548 186,696 278,852 190,000 109,736 0.93 2001 398,555 209,332 189,223 185,000 99,739 0.66 2002 287,465 236,575 50,890 185,000 93,280 0.18 2003 539,287 192,689 346,598 185,000 86,907 1.27 2004 676,287 314,513 361,774 190,000 88,712 1.30 2005 720,438 300,858 419,580 950,000 79,456 0.41 2006 1,264,892 223,243 1,041,649 275,000 81,165 2.92 fiscal Year Tax Increment Bonds Revenue from Property Debt Service Taxes Principal Interest Coverage $ 313,512 $ 180,000 $ 134,685 1.00 334,290 180,000 162,545 0.98 334,124 155,000 168,043 1.03 861 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 (1) Including interest and other income (2) Excluding depreciation and interest on bonds -88- CITY OF SHOREWOOD, MINNESOTA Table 13 STATISTICAL SECTION (UNAUDITED) PLEDGED-REVENUE COVERAGE - CONTINUED LAST TEN FISCAL YEARS Capital Leases Revenue from Fiscal Property Debt Service Year Taxes Principal Interest Coverage 1997 $ 37,544 $ 15,103 $ 22,441 1.00 1998 37,544 19,437 18,107 1.00 1999 37,544 20,665 16,879 1.00 2000 37,544 21,969 15,575 1.00 2001 37,544 23,358 14,186 1.00 2002 37,544 24,833 12,711 1.00 2003 37,544 26,402 11,142 1.00 2004 37,544 28,069 9,475 1.00 2005 37,544 29,842 7,702 1.00 2006 37,544 31,728 5,816 1.00 Lease Revenue Bonds Revenue from Fiscal Lease Debt Service Year Payments Principal Interest Coverage 1997 $ $ $ 1998 1999 2000 2001 2002 2003 447,704 447,704 1.00 2004 620,596 624,650 0.99 2005 948,384 355,000 588,384 1.01 2006 1,040,693 455,000 589,056 1.00 -89- THIS PAGE IS LEFT BLANK INTENTIONALL Y CITY OF SHOREWOOD, MINNESOTA Table 14 DEMOGRAPHIC AND ECONOMIC STATISTICS LAST TEN FISCAL YEARS Percent of population Per Capita which has a Fiscal Personal Median bachelor's or post Unemployment Year Population (1) Income (2) Age (3) graduate degree (4) Rate (5) 1997 6,889 $ 35,486 34.4 2.5 % 1998 6,955 38,233 34.4 2.1 1999 7,008 40,078 34.4 2.2 2000 7,400 43,075 38.7 58.8 % 2.7 2001 7,540 43,553 38.7 3.5 2002 7,590 43,907 38.7 4.4 2003 7,595 45,344 38.7 4.7 2004 7,625 48,045 38.7 4.3 2005 7,551 49,566 38.7 3.8 2006 7,499 nla 38.7 3.3 Data Sources: (1) Metropolitan Council (2) Bureau of Economic Analysis (3) US Census Bureau (4) US Census Bureau 2000 (5) Mirmesota Department of Employment and Economic Development Note: Population, median age, and education level information are based on surveys conducted during the last quarter of the calendar year. Personal income information is a total for the year. Unemployment rate information is an adjusted yearly average. School enrollment is based on the census at the start of the school year. -90- CITY OF SHOREWOOD, MINNESOTA PRINCIPAL EMPLOYERS CURRENT YEAR AND NINE YEARS AGO 2006 Percentage of Total City Employer Employees Rank Employment Cub Foods 115 N/A % Driscolls Supervalue N/A Xcel Energy 90 2 N/A City of Shorewood 54 * 3 N/A Minnetonka Country Club 50 4 N/A Beacon Bank N/A 5 N/A Minnewashta Elementary School N/A 6 N/A Total 309 % Source: Minnesota Department of Employment and Economic Development * Includes part-time and temporary seasonal employees. N/A - indicates not available -91- Tabel15 1997 Percentage of Total City Employees Rank Employment % 115 1 N/A 90 2 N/A 54 * 3 N/A 50 4 N/A N/A 5 N/A N/A 6 N/A 309 % -92- CITY OF SHOREWOOD, MINNESOTA FULL- TIME EQUIVALENT CITY GOVERNMENT EMPLOYEES BY FUNCTION DECEMBER 31,2006 Function General government Public works Maintenance Culture and recreation Parks Water Sewer Municipal Liqour Total Source: City of Shorewood Note: Information not available prior to 2006. -93- Table 16 Full-time Equivalent Employees as of 13 6 13 1.5 1.5 3 38 CITY OF SHOREWOOD, MINNESOTA OPERATING INDICATORS BY FUNCTION DECEMBER 31, 2006 Table 17 Function 2006 Building/engineering Permits issued Public works Street sweeping (hours) Snowplowing (hours) Equipment repair (hours) Water New connections Water mains breaks Average daily consumption (thousands of gallons) Sewer Average daily treatment flow (thousands of gallons) 1,137 1,000 2,000 2,080 24 3 800,000 1,000,000 Sources: Various government departments. Note: Indicators are not available for the general government function. Note: Information not available prior to 2006. -94- THIS PAGE IS LEFT BLANK INTENTIONALL Y CITY OF SHOREWOOD, MINNESOTA CAPITAL ASSET STATISTICS BY FUNCTION DECEMBER 31,2006 Function Public Works Highways and streets Streets (miles) Street lights Traffic signals Culture and recreation Parks division Parks Parks acreage Baseball diamonds Basketball courts Bike trails (miles) Hockey rinks/outdoor Softball diamonds Swimming areas Tennis courts Volleyball courts Utilities Water Miles of water main Consumers Maximum daily capacity (gallons) Sewer Miles of sanitary sewer Lift stations Maximum daily treatment capacity (gallons) Storm sewer Miles of storm sewer Source: Various city departments Note: No capital asset indicators are available for the general government function. Note: Information not available prior to 2006. -95- Table 18 2006 50 194 5 7 102 5 1 2.45 3 3 1 5 2 27 1,265 800,000 60 14 1,000,000 12