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2008 Comp. Annual Financial ReportCITY OF SHOREWOOD, MINNESOTA COMPREHENSIVE ANNUAL FINANCIAL REPORT For the year ended December 31, 2008 www.ci.shorewood.mn.us CITY OF SHOREWOOD SHOREWOOD, MINNESOTA COMPREHENSIVE ANNUAL FINANCIAL REPORT FOR THE YEAR ENDED DECEMBER 31, 2008 BRIAN HECK, CITY ADMINISTRATOR/CLERK REPORT PREPARED BY BONNIE BURTON, FINANCE DIRECTOR/TREASURER MEMBER OF GOVERNMENT FINANCE OFFICERS ASSOCIATION OF THE UNITED STATES AND CANADA THIS PAGE IS LEFT BLANK INTENTIONALLY CITY OF SHOREWOOD, MINNESOTA TABLE OF CONTENTS DECEMBER 31, 2008 Exhibit Page No. I. INTRODUCTORY SECTION Elected and Appointed Officials 1 Organization Chart 2 Letter of Transmittal from Finance Director /Treasurer I - V Certification of Achievement for Excellence in Financial Reporting 3 II. FINANCIAL SECTION Independent Auditor's Report 4-5 Management's Discussion and Analysis i - xii Basic Financial Statements Government -wide Financial Statements Statement of Net Assets 1 6 Statement of Activities 2 7-8 Fund Financial Statements Governmental Funds Balance Sheet 3 9-10 Reconciliation of the Balance Sheet to the Statement of Net Assets 4 11 Statement of Revenues, Expenditures and Changes in Fund Balances 5 12-13 Reconciliation of the Statement of Revenues, Expenditures and Changes in Fund Balances to the Statement of Activities 6 14 General Fund Statement of Revenues, Expenditures and Changes in Fund Balances - Budget and Actual 7 15 Proprietary Fund Statements of Net Assets 8 16-17 Statements of Revenues, Expenses and Changes in Fund Net Assets 9 18-19 Statements of Cash Flows 10 20-23 Fiduciary Fund Statement of Net Assets 11 24 Notes to the Financial Statements 25-46 Combining and Individual Fund Financial Statements and Schedules Nonmajor Governmental Funds Combining Balance Sheet A -1 47-48 Combining Statement of Revenues, Expenditures and Changes in Fund Balances (Deficits) A -2 49-50 Nonmajor Proprietary Funds Combining Statements of Net Assets B -1 51-52 Combining Statements of Revenues, Expenses and Changes in Fund Net Assets B -2 53-54 Combining Statements of Cash Flows B -3 55-58 General Fund Schedule of Revenues, Expenditures and Changes in Fund Balances - Budget and Actual C -1 59-64 Debt Service Funds Combining Balance Sheet D -1 65 Combining Schedule of Revenues, Expenditures and Changes in Fund Balances D -2 66 THIS PAGE IS LEFT BLANK INTENTIONALLY CITY OF SHOREWOOD, MINNESOTA TABLE OF CONTENTS - CONTINUED DECEMBER 31, 2008 Exhibit Page No. II. FINANCIAL SECTION - CONTINUED Combining and Individual Fund Statements and Schedules Enterprise Funds Liquor Funds Schedules of Assets, Liabilities and Net Assets E -1 67-68 Schedules of Revenues, Expenses and Changes in Fund Net Assets E -2 69-70 Schedules of Cash Flows E -3 71-72 Agency Fund Combining Schedule of Changes in Assets and Liabilities F -1 73 Summary Financial Report Revenues and Expenditures for General Operations - Governmental Funds G -1 74 Table III STATISTICAL SECTION (UNAUDITED) Net Assets by Component 1 75-76 Changes in Net Assets 2 77-80 Fund Balances of Governmental Funds 3 81 -82 Changes in Fund Balances of Governmental Funds 4 83-84 Tax Capacity, Market Value and Estimated Actual Value of Taxable Property 5 85-86 Property Tax Capacity Rates - Direct and Overlapping Governments 6 87-88 Principal Taxpayers 7 89-90 Property Tax Levies and Collections 8 91 Ratio of Net Bonded Debt to Assessed Value and Net Bonded Debt Per Capita 9 92 Ratios of General Bonded Debt Outstanding 10 93 Computation of Direct and Overlapping Debt 11 94 Legal Debt Margin Information 12 95-96 Pledged- Revenue Coverage 13 97-98 Demographic and Economic Statistics 14 99 Principal Employers 15 100-101 Full -Time Equivalent City Government Employees by Function 16 102 Operating Indicators by Function 17 103 Capital Asset Statistics by Function 18 104 THIS PAGE IS LEFT BLANK INTENTIONALLY CITY OF SHOREWOOD, MINNESOTA ELECTED AND APPOINTED OFFICIALS DECEMBER 31, 2008 ELECTED Name Title Christine Lizee Mayor Richard Woodruff Council Member Laura Turgeon Council Member Paula Callies Council Member Jeffery Bailey Council Member Martin Wellens Council Member APPOINTED Brian Heck City Administrator Bonnie Burton Finance Director /Treasurer -I- Term Expires 12/31/10 12/31/12 12/31/10 01/31/08 12/31/12 12/31/08 THIS PAGE IS LEFT BLANK INTENTIONALLY CITY OF SHOREWOOD ORGANIZATION CHART SHOREWOOD RESIDENTS JOINT POWERS ORGANIZATIONS E - SLMPD EXCELSIOR FIRE DISTRICT - Lake Minnetonka Communications Commission Lake Minnetonka Conservation District FINANCE tJ DIRECTOR/ SR. ACCOUNTING CLERK LIQUOR DIRECTOR LIQUOR STORE MANAGERS ACCOUNT I I STORE CLERK SALES CLERKS Personnel / HR MIS Off -Sale Retail Accounting Budgeting Investments Purchasing Utility Billing Payroll Accts. Payable Accts. Receivable Special Assessments Insurance /Risk Management CITY ADMINISTRATOR EXEC. SECRETARY/ DEPUTY CLERK RECEPTIONIST/ SECRETARY/ PARK SECRETARY RECEPTIONIST TECHNICIAN I --------------- --- General Government Licensing Elections Records Legal Publications Public Information Cable TV Franchise PLANNING ASSISTANTS I OFFICIAL --------------- --- Planning Zoning Administration Property Records Inspection ASSESSOR - HENNEPIN COUNTY RECYCLING - WASTE MANAGEMENT ANIMAL CONTROL - CITY OF ORONO ANIMAL IMPOUND - AUNTIE RUTH'S FIRE (Islands) - MOUND ADVISORY BOARDS PARK COMMISSION PLANNING COMMISSION DIRECTOR OF PUBLIC WORKS CITY ENGINEER LIGHT EQPT. I UTILITY MAINT. r ENGINEERING OPERATORS I TECHNICIAN ----------------------------- Building and Grounds Engineering Services Tree Maintenance Project Mgmt Park Maintenance Water Maintenance Street Maintenance Sewer Maintenance Equipment Maintenance Sanitation/Weeds Stormwater System Street Lighting Park Planning /Recreation Programs • 5755 COUNTRY CLUB ROAD • SHOREWOOD, MINNESOTA 55331 -8927 a (952) 474 -3236 FAX (952) 474 -0128 e www.ci.shorewood.mmus • cityhaII @ci.shorewood.mn.us May 25, 2009 Honorable Mayor and Members of the City Council, - City of Shorewood, Minnesota Mayor and City Council Members: The Comprehensive Annual Financial Report of the City.of Shorewood, Minnesota for the fiscal year ended December 31, 2008, is hereby submitted. The report was prepared in accordance with accounting principles generally accepted in the United States of America (GAAP) as established by the Governmental Accounting Standards Board and meets the requirements of the State Auditor's office. INTERNAL CONTROLS The report consists of management's representations concerning the finances of the City. Consequently, management assumes full responsibility for the completeness and reliability of the information presented in this report. To provide a reasonable basis for making these representations, management of the City has established internal controls designed to protect the City's assets loss, theft, or misuse, and to provide sufficient information for the preparation of these financial statements in conformity with GAAP. Because the cost of internal controls should not outweigh the benefits, the City's internal controls have been designed to provide reasonable, rather than absolute, assurance that the financial statements are free of any material misstatements. As management, we assert that to the best of our knowledge and belief this financial report is complete and reliable in all material respects. INDEPENDENT AUDIT The City of Shorewood's financial statements have been audited by the firm of Abdo, Eick & Meyers, LLP, Certified Public Accountants. They have issued an unqualified ( "clean ") opinion on the City of Shorewood's financial statements for the year ended December 31, 2008. The independent auditor's report is presented at the front of the financial section of this report. �� PRINTED ON RECYCLED PAPER 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 chart and a list of City officials. The financial section includes the independent auditor's report. Management's discussion and analysis (MD &A) can be found in the financial section of this report immediately following the independent auditor's report; it provides a narrative introduction, overview, and analysis of the basic financial statements. This letter of transmittal complements the MD &A 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. CITY PROFILE The City of Shorewood was 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 commercial businesses and two commercial shopping malls. The City is 6 square miles in area and had an estimated population of 7,917 as of 2008. The City, which is currently 95% developed, continues to experience 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 authority are vested in a governing council consisting of the mayor and four other members, elected from four wards on a non - partisan basis. Council members serve four -year staggered terms, with two council members elected every two years. The mayor is elected to serve a two -year term. 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 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. During 2008, the City operated four enterprises: a water utility; sanitary. sewer; recycling; and storm -water management utilities. The City discontinued its off. -sale liquor operation at the end of 2007. The City sold the two liquor store locations to private investors. The City Council is evaluating its long -term plans and goals to determine what should be done with the remaining funds. LOCAL ECONOMY The City of Shorewood displays very strong wealth indices with a per capita income of $54,425 (191.5% of state average) and median family income is $115,585 (183% of state average). Full value per capita is very healthy at $244,018, and the City's fiscal 2008 full, property valuation is over $1.8 billion. II THIS PAGE IS LEFT BLANK INTENTIONALLY 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 government in In Shorewood and has established overall goals and expectations for the City. The 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 priorities for the next twelve months. The second phase is programming and capital finance planning; each year the five -year Capital Improvement Program is reviewed and updated based upon priorities established in the first phase. The third phase is budgeting; the annual operating budget is developed based on decisions made in the first two phases. The Council is required. to adopt a preliminary budget by September 15 of each year and a final budget by no later than the end of the fiscal year. The budget is prepared by fund, function, and department. Cooperative Public Service Delivery 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 contractual arrangements with other governmental jurisdictions and with private entities for providing many of these services. The City is also involved in cooperative employee training, disaster preparedness and other areas of mutual concern 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 District 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. The City has been a member city of the South Lake Minnetonka Police Department (SLMPD) since its inception in 1973. The other members of this joint powers organization are the cities of Excelsior, Greenwood, and Tonka Bay. 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 continues meeting its responsibility for sound financial management, as demonstrated by the statements and schedules 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 2008. Budgeted transfers for capital improvement purposes during 2008 were $945,000. III The City Council has adopted,a General Fund Balance Policy to ensure that General Fund reserves remain at 50 -55% of the next year's expenditures. This policy will ensure the long -term economic stability of the.. organization by providing adequate working capital given the periodic nature of tax receipts and by providing for unexpected shortfalls or emergencies. Iii accordance with this policy, budgeted use of General Fund reserves in 2008 was $100,000. Debt Adnunistration As of December 31, 2008, the City's debt outstanding totaled $25,330,000. Of this total, $21,915,000 is combined lease revenue bonds issued in 2002 and 2003 by the EDA to finance the construction of Public Safety (police and fire) buildings and EDA Lease Revenue Advance Refunding Bonds issued in 2007. In addition, in 2008 the EDA issued lease revenue bonds in the amount of $1,310,000 million to finance the construction of the City Municipal Building. The City of Shorewood's bond ratingwas upgraded to Aa2 from Aa3 in July, 2008, by Moody.'s In Investors Service with the issuance of $1.310 million in Lease Revenue Public Facility (City Hall Construction) Bonds. At that time, Moody's also upgraded the Shorewood Economic Development Authority (EDA) bond - rating to Aa3 from Al, based upon the City's pledge to make the lease payments subject to annual appropriation in the City's annual operating budget, and the fact that a city hall facility is of an essential nature for a municipality. General obligation revenue bonds at year end are-$' ,415,000. The proceeds from these bonds financed water system extensions and improvements and will be repaid from special assessments and water rate revenues. 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 participating funds. Risk Management The City of 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 rates 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. CERTIFICATE 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, 2007. This award is given by the Government Finance Officers Association of the United States and Canada (GFOA). and this was the sixteenth consecutive year that Shorewood has received this prestigious award. In order to be awarded a Certificate of Achievement, the government had to publish an easily readable and efficiently organized CAFR that satisfied both generally accepted accounting principles and applicable legal requirements. N THIS PAGE IS LEFT BLANK INTENTIONALLY A Certificate of Achievement is valid for a period of one year only. We believe our current CAFR continues to meet the Certificate of Achievement Program requirements and we are submitting it to the GFOA to determine its eligibility for another certificate. ACKNOWLEDGMENTS We would like to express our appreciation to the employees of the Finance and Administration departments for their contribution to the preparation of this report. We would also like to thank the Mayor and Council members for their continued interest and support in planning and conducting the financial operations of the City in a responsible and progressive manner. Respectfully submitted, Br' W. t Bonnie Burton ity Ad i rator /Clerk. Finance Director /Treasurer V THIS PAGE IS LEFT BLANK INTENTIONALLY 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, 2007 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. E QFFj F� OF cam MOM W STAB$ p i M o TM President Executive Director -3- THIS PAGE IS LEFT BLANK INTENTIONALLY ABDO EICK & ®r.1 _lMEYERSLLP Certified Public Accountants & Consultants 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 financial 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, 2008, which collectively comprise the City's basic financial statements as listed in the table of contents. These financial statements are the responsibility of the City's management. Our responsibility is to express opinions on these financial statements based on our audit. The prior year's comparative information has been derived from the City's 2007 financial statements and, in our report dated May 5, 2008; we expressed unqualified opinions on the respective proprietary fund financial statements. We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free 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, 2008, 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. -4- 952.835.9090 • Fax 952.835.3261 www.aemepas.com THIS PAGE IS LEFT BLANK INTENTIONALLY Page Two Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the City's basic financial statements. The introductory section, combining and individual fund financial 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 financial statements and schedules have been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, are fairly stated in all material respects in relation to the basic financial 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 financial statements and, accordingly, we express no opinion on them. May 25, 2009 Minneapolis, Minnesota 519 ", Q 4*101y f-( ABDO, EICK & MEYERS, LLP Certified Public Accountants 952.835.9090 • Fax 952.835.3261 www.aemcpas.com CITY OF SHOREWOOD, MINNESOTA 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, 2008. Financial Highlights • The assets of the City exceeded its liabilities at the close of the most recent fiscal year by $33,650,103 (net assets). Of this amount, $17,587,683 (unrestricted net assets) may be used to meet the City's ongoing obligations to residents and creditors. • The City's total net assets increased $53,742, solely from business -type activities. • As of the close of the current fiscal year, the City's governmental funds reported combined ending fund balances of $17,485,431, an increase of $1,210,269 in comparison with the prior year. This increase is due to the issuance of long- term debt. Approximately 42 percent of this total amount, $7,404,339, is available for spending at the City's discretion, but has been designated for specific purposes. • At the end of the current fiscal year, unreserved fund balance for the General fund was $3,660,359, or 67 percent of total 2009 budgeted expenditures. While these funds are not legally reserved, they are designated for future purposes. • The City's total debt increased $554,910, or 2 percent during the current fiscal year. The key factor in this increase was the net of the issuance of $1,300,000 of Lease Revenue bonds and annual debt service payments. 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 themselves. Management Discussion and Analysis - Continued May 25, 2009 The financial statements also include notes that explain some of the 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 of this 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 financial 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 Basic Financial Required Discussion and Statements Supplementary Analysis Information ................ Government -wide Fund Notes to the Financial Financial Financial Statements Statements Statements Summary Detail -ii- Management Discussion and Analysis - Continued May 25, 2009 Figure 2 summarizes the major features of the City's financial 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 Government -wide Financial Statements The government -wide financial statements are designed to provide readers with a broad overview of the City's finances, in a manner similar to a private- sector business. The statement of net assets presents information on all of the City's assets and liabilities, with the difference between the two reported as net assets. Over time, increases or decreases in net assets may serve as a useful indicator of whether the financial position of the City is improving or deteriorating. The statement of activities presents information showing how the 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 cashflows. Thus, revenues and expenses are reported in this statement for some items that will only result in cash flows in future fiscal periods (e.g., uncollected taxes and earned but unused vacation leave). Both of the government -wide financial statements distinguish functions of the City that are principally supported by taxes and intergovernmental revenue (governmental activities) from other functions that are intended to recover all or a significant portion of their costs through user fees and charges (business -type activities). The governmental activities of the City include general government, public safety, public works, culture and recreation, and interest on long -term debt. The business -type activities of the City include water, sewer, recycling, stormwater management utility and liquor operation. M 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 financial 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 -wide financial statements are designed to provide readers with a broad overview of the City's finances, in a manner similar to a private- sector business. The statement of net assets presents information on all of the City's assets and liabilities, with the difference between the two reported as net assets. Over time, increases or decreases in net assets may serve as a useful indicator of whether the financial position of the City is improving or deteriorating. The statement of activities presents information showing how the 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 cashflows. Thus, revenues and expenses are reported in this statement for some items that will only result in cash flows in future fiscal periods (e.g., uncollected taxes and earned but unused vacation leave). Both of the government -wide financial statements distinguish functions of the City that are principally supported by taxes and intergovernmental revenue (governmental activities) from other functions that are intended to recover all or a significant portion of their costs through user fees and charges (business -type activities). The governmental activities of the City include general government, public safety, public works, culture and recreation, and interest on long -term debt. The business -type activities of the City include water, sewer, recycling, stormwater management utility and liquor operation. M Management Discussion and Analysis - Continued May 25, 2009 The government -wide financial statements include not only the City itself (known as the primary 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 A fund is a grouping of related accounts that is used to maintain control over resources that have been segregated for specific activities or objectives. The City, like other state and local governments, uses fund accounting to ensure and demonstrate compliance with finance - related legal requirements. All of the funds of the City can be divided into three categories: governmental funds, proprietary funds and fiduciary funds. Governmental funds. Governmental funds are used to account for essentially the same functions reported as governmental activities in the government -wide financial statements. However, unlike the government -wide financial statements, governmental fund financial statements focus on near -term inflows and outflows of spendable resources, as well as on balances of spendable resources available at the end of the fiscal year. Such information may be useful in evaluating a government's near -term financing requirements. Because the focus of governmental funds is narrower than that of the government -wide financial statements, it is useful to compare the information presented for governmental funds with similar information presented for governmental activities in the government -wide financial statements. By doing so, readers may better understand the long -term impact by the government's near -term financing decisions. Both the governmental fund balance sheet and the governmental fund statement of revenues, expenditures and changes in fund balances provide a reconciliation to facilitate this comparison between governmental funds and governmental activities. The City maintains 13 individual governmental funds, three of which are debt service 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 and the Debt Service funds, which are considered to be major funds. Data from the other 9 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 financial statements can be found on pages 9 - 15 of this report. Proprietary funds. The City maintains one type of proprietary fund. Enterprise funds are used to report the same functions presented as business -type activities in the government -wide financial statements. The City uses enterprise funds to account for its 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 financial 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 - 23 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 financial statements can be found on page 24 of this report. Notes to the Financial Statements The notes provide additional information that is essential to a full understanding of the data provided in the government -wide and fund financial statements. The notes to the financial statements can be found on pages 25 - 46 of this report. -iv- Management Discussion and Analysis - Continued May 25, 2009 Other Information The combining statements referred to earlier in connection with nonmajor governmental funds are presented following the notes to financial statements. Combining and individual fund financial statements and schedules can be found on pages 47 - 74 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 $33,650,103 at the close of the most recent fiscal year. Of the City's net assets (48 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. Summary of Net Assets Governmental Activities Increase 2008 2007 (Decrease) Business -type Activities Increase 2008 2007 (Decrease) Assets Cash and temporary investments Cash with fiscal agent Receivables Internal balances Prepaids Deferred charges Capital assets $ 7,290,049 $ 6,178,511 $ 1,111,538 10,018,708 10,028,996 (10,288) 12,091,794 11,971,013 120,781 (110,000) (160,000) 50,000 47,750 - 47,750 190,253 143,369 46,884 10,740,566 10,960,550 (219,984) $ 9,574,004 $ 9,365,228 $ 208,776 115,033 110,926 4,107 901,367 1,000,939 (99,572) 110,000 160,000 (50,000) 12,204 11,182 1,022 78,216 86,301 (8,085) 10,046,854 9,731,229 315,625 Total assets Liabilities Noncurrent liabilities Other liabilities Total liabilities Net assets Invested in capital assets, net of related debt Unrestricted Total net assets 40,269,120 39,122,439 1,146,681 20,837,678 20,465,805 371,873 22,087,321 21,282,411 804,910 3,415,000 3,665,000 (250,000) 1,350,374 732,293 618,081 604,000 312,179 291,821 23,437,695 22,014,704 1,422,991 4,019,000 3,977,179 41,821 9,430,566 10,960,550 (1,529,984) 6,631,854 6,152,530 479,324 7,400,859 6,147,185 1,253,674 10,186,824 10,336,096 (149,272) $ 16,831,425 $ 17,107,735 _L _L176,310 $ 16,818,678 $ 16,488,626 $ 330,052 The balance of unrestricted net assets is $17,587,683. This may be used to meet the City's ongoing obligations to citizens and creditors. -v- Management Discussion and Analysis - Continued May 25, 2009 Governmental activities. Governmental activities decreased the City's net assets by $276,310. Key elements of this decrease are attributable to increased expenditures. Changes in Net Assets Governmental Activities Business -type Activities Increase Increase 2008 2007 (Decrease) 2008 2007 (Decrease) Revenues Program revenues Charges for services $ 826,174 $ 940,166 $ (113,992) $ 1,850,702 $ 3,658,687 $ (1,807,985) Operating grants 1,906,890 1,819,250 87,640 - - - and contributions 90,493 99,800 (9,307) 27,950 - 27,950 Capital grants 273,054 258,906 14,148 - - - and contributions 674,343 132,912 541,431 - - - General revenues - - - 657,776 636,506 21,270 Property taxes 4,582,909 4,360,254 222,655 - - - Grants and contributions - - - 96,945 91,157 5,788 not restricted to - - - 106,143 63,888 42,255 specific programs 19,957 37,746 (17,789) - - - Unrestricted investment Total expenses 7,152,032 6,371,928 780,104 1,798,269 3,629,195 earnings 641,846 621,234 20,612 289,669 434,072 (144,403) Gain on sale of capital assets - - - - 382,890 (382,890) Total revenues 6,835,722 6,192,112 643,610 2,168,321 4,475,649 (2,307,328) Expenses General government 1,483,913 1,321,971 161,942 - - - Public safety 1,906,890 1,819,250 87,640 - - - Public works 2,485,752 1,971,571 514,181 - - - Culture and recreation 273,054 258,906 14,148 - - - Interest on long -term debt 1,002,423 1,000,230 2,193 - - - Water - - - 657,776 636,506 21,270 Sewer - - - 921,238 952,107 (30,869) Recycling - - - 96,945 91,157 5,788 Stormwater management utility - - - 106,143 63,888 42,255 Liquor - - - 16,167 1,885,537 (1,869,370) Total expenses 7,152,032 6,371,928 780,104 1,798,269 3,629,195 (1,830,926) Increase (decrease) in net assets before transfers (316,310) (179,816) (136,494) 370,052 846,454 (476,402) Transfers 40,000 (143,728) 183,728 (40,000) 143,728 (183,728) Change in net assets (276,310) (323,544) 47,234 330,052 990,182 (660,130) Net assets, January 17,107,735 17,431,279 (323,544) 16,488,626 15,498,444 990,182 Net assets, December 31 $ 16,831,425 $ 17,107,735 $ (276,310) $ 16,818,678 __L I6,488,626 $ 330,052 -vi- Management Discussion and Analysis - Continued May 25, 2009 The following graph depicts various governmental activities and shows the revenue and expenses directly related to those activities. Expenses and Program Revenues - Governmental Activities $3,000,000 $2,500,000 $2,000,000 $1,500,000 $1,000,000 $500,000 General government Public safety Public works Culture and Interest on long -term recreation debt ■ Expenses ■ Program revenues Revenues by Source - Governmental Activities Grants and contributions not restricted to specific programs 0.3% Charges for services Unrestricted investment Onera tin a arnnts and pital grants and contributions 9.9% ces 67.0% For the most part, increases in expenses closely paralleled inflation and growth in the demand for services. -vu- Management Discussion and Analysis - Continued May 25, 2009 Business -type activities. Business -type activities increased the City's net assets by $330,052. Key elements of this increase are as follows: • The Water and Stormwater Management funds provided net operating revenues of nearly $200 thousand. • The liquor stores are no longer in operation and provide significant savings. Expenses and Program Revenues - Business -type Activities $1,000,000 $900,000 $800,000 $700,000 $600,000 01i $500,000 $400,000 $300,000 $200,000 $100,000 $- Water Sewer Recycling Stormwater Liquor management utility ■ Expenses ■ Program revenues Revenues by Source — Business -type Activities Charges for services 85.3% 41 Operating grants and contributions 1.3% Unrestricted investment earnings 13.4% -viii- Management Discussion and Analysis - Continued May 25, 2009 Financial Analysis of the Government's Funds As noted earlier, the City uses fund accounting to ensure and demonstrate compliance with finance- related legal requirements. Governmental funds. The focus of the City's governmental funds is to provide information on near -term inflows, outflows and balances of spendable resources. Such information is useful in assessing the City's financing requirements. In particular, unreserved fund balance may serve as a useful measure of a government's net resources available for spending at the end of the fiscal year. As of the end of the current fiscal year, the City's governmental funds reported combined ending fund balances of $17,485,431, an increase of $1,210,269 in comparison with the prior year. Approximately 42 percent of this total amount $7,404,339 constitutes unreserved fund 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 and for prepaid items in the amount of $10,033,342 and $47,750 respectively. The General fund is the chief operating fund of the City. At the end of the current year, the fund balance of the General fund was $3,708,109. 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 85 percent of same year fund expenditures. The fund balance of the City's General fund decreased $53,400 during the current fiscal year. The Debt Service fund has a total fund balance of $10,033,342, all of which is reserved for the payment of debt service. The decrease in fund balance was in line with the City's debt service financing plan. 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 $10,186,824. The total growth in net assets for the funds was $330,052. 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 that included $100,000 in planned use of General Fund reserves, in accordance with the City's recently adopted fund balance policy. Prior to the use of general fund balance reserves, revenues were under budget by $42,310 and expenditures were under budget by $28,910. The actual amounts were different from the final budget amounts because of the following: • The interest earned on investments exceeded budget by $41,862. • The other revenue variances including building permit revenue and court fines, generally resulted from the slowing economy. • General fund expenditures were $28,910 under budget. While many of the functions of General Fund were over budget slightly, the largest positive variance of $71,156 within General Government was able to offset any negative variances. Cost reductions at City Hall, including maintenance, supplies, and insurance were the primary factors for significant budget savings. i►a Management Discussion and Analysis - Continued May 25, 2009 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, 2008, amounts to $20,787,420 (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: • A major addition and renovation to the City Hall municipal facility, financed through the issuance of $1.310 million in lease revenue bonds during 2008. The construction on this facility was approximately 75% complete at the end of 2008 and will be finished in 2009. • Completion of several municipal water projects, including rehabilitation of the SE Area Watertower and Amesbury Well projects, and significant progress on the installation of the Radio -Read Water Meter Project. • Upgrade and rehabilitation of several sanitary sewer lift station projects. Additional information on the City's capital assets can be found in Note 3D on pages 36 - 38 of this report. Capital Assets Net of Depreciation -x- Governmental Activities Business -type Activities Increase Increase 2008 2007 (Decrease) 2008 2007 (Decrease) Land $ 741,826 $ 741,826 $ - $ 404,392 $ 404,392 $ - Construction in progress 640,726 - 640,726 856,754 954,258 (97,504) Buildings 1,317,047 1,367,307 (50,260) - - - Improvements other than buildings 180,679 214,610 (33,931) - - - Machinery and equipment 469,442 479,017 (9,575) 33,384 19,663 13,721 Infrastructure 7,390,846 8,157,790 (766,944) 8,752,324 8,352,916 399,408 Total $ 10,740,566 $ 10,960,550 $ (219,984) $ 10,046,854 $ 9,731,229 $ 315,625 -x- Management Discussion and Analysis - Continued May 25, 2009 Long -term debt. At the end of the current fiscal year, the City had total bonded debt outstanding of $25,330,000. Of this amount, $21,915,000 is lease revenue bonds and $3,415,000 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 General obligation revenue bonds Lease revenue bonds Capital lease bonds Compensated absences payable Total Governmental Activities Business -type Activities Increase Increase 2008 2007 (Decrease) 2008 2007 (Decrease) 21,915,000 21,090,000 825,000 172,321 192,411 (20,090) $ 3,415,000 $ 3,665,000 $ (250,000) $ 22,087,321 $ 21,282,411 $ 804,910 $ 3,415,000 $ 3,665,000 $ (250,000) The City's total debt increased $554,910 (2 percent) during the current fiscal year. This is primarily due to the issuance of $1,300,000 of Lease Revenue bonds. The City's bond rating was upgraded to "Aa2" from "Aa3" in July, 2008 by Moody's Investors Services with the issuance of the 2008 bonds. At that time, Moody's also upgraded the Shorewood Economic Development Authority (EDA) bond rating to "Aa3" from "Al". Minnesota statutes limit the amount of net general obligation debt a City may issue to 3 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 39 - 42 of this report. -xi- Management Discussion and Analysis - Continued May 25, 2009 Economic Factors and Next Year's Budgets and Rates • Property valuations within the City remain generally stable, especially in the desirable lakeshore area, despite difficult national economic conditions. • Inflationary and unemployment trends in the region compare favorably to national indices. • The City takes a responsible long term perspective with financial planning and management. Decisions are made to insure ongoing capacity to provide quality services to residents, at a good value. • The 2009 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 2009 fiscal year. During the current fiscal year, unreserved fund balance in the General fund decreased $53,400. This amount was less than the planned use of $100,000 during the 2008 budget cycle. This planned use of general fund balance reserves was in accordance with the Fund Balance Policy adopted in 2007 by the City Council. Other possible uses of available fund balance include special one- time projects as determined by the City Council. 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 financial information should be addressed to Bonnie Burton, Finance Director /Treasurer, City of Shorewood, 5755 Country Club Road, Shorewood, Minnesota 55331. -xii- GOVERNMENT -WIDE FINANCIAL STATEMENTS CITY OF SHOREWOOD SHOREWOOD, MINNESOTA YEAR ENDED DECEMBER 31, 2008 CITY OF SHOREWOOD, MINNESOTA STATEMENT OF NET ASSETS DECEMBER 31, 2008 ASSETS Cash and temporary investments Cash with fiscal agent Receivables Accrued interest Delinquent taxes Accounts Special assessments Lease Intergovernmental Internal balances Prepaid items Deferred charges Capital assets Nondepreciable assets Depreciable capital assets, net TOTAL ASSETS LIABILITIES Accounts and contracts payable Accrued salaries payable Due to other governments Accrued interest payable Unearned revenue Noncurrent liabilities Due within one year Compensated absences payable Bonds payable Due in more than one year Bonds payable TOTAL LIABILITIES NET ASSETS Invested in capital assets, net of related debt Unrestricted TOTAL NET ASSETS Governmental Business -type Exhibit 1 $ 7,290,049 $ 9,574,004 $ 16,864,053 10,018,708 115,033 10,133,741 272,743 53,537 326,280 136,764 - 136,764 52,628 410,430 463,058 3,590 437,400 440,990 10,605,000 - 10,605,000 1,021,069 - 1,021,069 (110,000) 110,000 - 47,750 12,204 59,954 190,253 78,216 268,469 1,382,552 1,261,146 2,643,698 9,358,014 8,785,708 18,143,722 40,269,120 20,837,678 61,106,798 526,063 484,710 1,010,773 51,599 5,693 57,292 358,513 15,356 373,869 414,199 64,630 478,829 - 33,611 33,611 172,321 - 172,321 520,000 250,000 770,000 21,395,000 3,165,000 24,560,000 23,437,695 4,019,000 27,456,695 9,430,566 6,631,854 16,062,420 7,400,859 10,186,824 17,587,683 $ 16,831,425 $ 16,818,678 $ 33,650,103 The notes to the financial statements are an integral part of this statement. -6- CITY OF SHOREWOOD, MINNESOTA STATEMENT OF ACTIVITIES FOR THE YEAR ENDED DECEMBER 31, 2008 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 Progra Revenues Operating Capital Grants Grants and and Contributions Contributions > 3,135 $ - 58,198 672,343 29,160 2,000 90,493 674,343 657,776 752,338 Charges for Expenses Services 96,945 64,629 23,202 - $ 1,483,913 $ 32,528 1,906,890 793,041 2,485,752 - 273,054 605 1,002,423 - Taxes 7,152,032 826,174 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 Progra Revenues Operating Capital Grants Grants and and Contributions Contributions > 3,135 $ - 58,198 672,343 29,160 2,000 90,493 674,343 657,776 752,338 - 921,238 829,117 - - 96,945 64,629 23,202 - 106,143 204,618 4,748 - 16,167 - - - 1,798,269 1,850,702 27,950 - $ 8,950,301 $ 2,676,876 $ 118,443 $ 674,343 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 financial statements are an integral part of this statement. -7- Exhibit 2 Net (Expense) Revenue and Changes in Net Assets Governmental Business -type Activities Activities Total $ (1,448,250) $ - $ (1,448,250) (1,113,849) - (1,113,849) (1,755,211) - (1,755,211) (241,289) - (241,289) (1,002,423) - (1,002,423) (5,561,022) - (5,561,022) - 94,562 94,562 - (92,121) (92,121) - (9,114) (9,114) - 103,223 103,223 - (16,167) (16,167) - 80,383 80,383 (5,561,022) 80,383 (5,480,639) 4,582,909 4,582,909 19,957 19,957 641,846 289,669 931,515 40,000 (40,000) - 5,284,712 249,669 5,534,381 (276,310) 330,052 53,742 17,107,735 16,488,626 33,596,361 $ 16,831,425 $ 16,818,678 $ 33,650,103 -8- FUND FINANCIAL STATEMENTS CITY OF SHOREWOOD SHOREWOOD, MINNESOTA YEAR ENDED DECEMBER 31, 2008 CITY OF SHOREWOOD, MINNESOTA BALANCESHEET GOVERNMENTAL FUNDS DECEMBER 31, 2008 ASSETS Cash and temporary investments Cash with fiscal agent Receivables Accrued interest Delinquent taxes Accounts Special assessments Lease Due from other governments Due from other funds Prepaid items TOTAL ASSETS LIABILITIES AND FUND BALANCES LIABILITIES Accounts and contracts payable Due to other funds Due to other governments Salaries and compensated absences payable Deferred revenue TOTAL LIABILITIES FUND BALANCES Reserved for debt service Reserved for prepaid items Unreserved Designated, reported in General fund Capital projects funds TOTAL FUND BALANCES TOTAL LIABILITIES AND FUND BALANCES $ 3,844,756 31,949 136,764 52,628 3,590 Other Debt Governmental Service Funds $ 14,981 $ 3,430,743 10,018,277 - 84 19,187 10,605,000 - - 1,021,069 550,000 $ 4,117,437 $ 20,638,342 $ 5,020,999 $ 156,299 $ - $ 369,764 110,000 - 550,000 1,258 - 357,255 51,599 - - 90,172 10,605,000 - 409,328 10, 605,000 1,277,019 - 10,033,342 - 47,750 - - 3,660,359 - - - - 3,743,980 3,708,109 10,033,342 3,743,980 $ 4,117,437 $ 20,638,342 $ 5,020,999 The notes to the financial statements are an integral part of this statement. -9- Exhibit 3 Total Governmental Funds $ 7,290,480 10,018,277 51,220 136,764 52,628 3,590 10,605,000 1,021,069 550,000 47,750 $ 29,776,778 $ 526,063 660,000 358,513 51,599 10,695,172 12-291-347 10,033,342 47,750 3,660,359 3,743,980 17.485.431 $ 29,776,778 -10- CITY OF SHOREWOOD, MINNESOTA Exhibit 4 RECONCILIATION OF THE BALANCE SHEET TO THE STATEMENT OF NET ASSETS GOVERNMENTAL FUNDS AS OF DECEMBER 31, 2008 Total fund balances - governmental $ 17,485,431 Amounts reported for the governmental activities in the statement of net assets are different because: Capital assets used in governmental activities are not financial resources and therefore are not reported as assets in governmental funds. Cost of capital assets 33,176,899 Less: accumulated depreciation (22,436,333) 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 (21,915,000) Less: unamortized deferred charges 190,253 Compensated absences (172,321) 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 221,523 Taxes 86,582 Special assessments 3,590 Leases 10,605,000 Governmental funds do not report a liability for accrued interest until due and payable. (414,199) Total net asset - governmental activities $ 16,831,425 The notes to the financial 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, 2008 REVENUES Taxes Licenses and permits Intergovernmental Charges for services Fines and forfeitures Interest on investments Miscellaneous TOTAL REVENUES EXPENDITURES Current General government Public safety Public works Culture and recreation Capital outlay General government Public safety Public works Culture and recreation Debt service Principal Interest and service charges Bond issuance costs TOTAL EXPENDITURES EXCESS (DEFICIENCY) OF REVENUES OVER (UNDER) EXPENDITURES OTHER FINANCING SOURCES (USES) Transfers in Long -term debt issued Transfers out TOTAL OTHER FINANCING SOURCES (USES) NET CHANGE IN FUND BALANCES FUND BALANCES, JANUARY 1 FUND BALANCES, DECEMBER 31 The notes to the financial statements are an integral part of this statement. 1,430,354 - 13,195 1,352,254 - - 760,272 - 15 229,252 - 7 17,685 - 670,167 547,528 - 9,033 - - 873,656 - 46,297 - 485,000 Other 7,890 Debt Governmental General Service Funds $ 4,582,602 $ - $ - 195,419 - - 78,155 - 675,450 50,753 - - 53,369 - - 161,862 402,246 77,738 14,675 1,03 7,241 2,000 5,136,835 1,439,487 755,188 1,430,354 - 13,195 1,352,254 - - 760,272 - 15 229,252 - 7 17,685 - 670,167 547,528 - 9,033 - - 873,656 - 46,297 - 485,000 - 7,890 970,067 - - - 58,569 4,345,235 1,45 5,067 1,670,939 791,600 (15,580) (915,751) 40,000 8,366 885,000 - - 1,310,000 (885,000) - (8,366) (845,000) 8,366 2,186,634 (53,400) (7,214) 1,270,883 3,761,509 10,040,556 2,473,097 $ 3,708,109 $ 10,033,342 $ 3,743,980 -12- Exhibit 5 Total Governmental Funds $ 4,582,602 195,419 753,605 50,753 53,369 641,846 1,053,916 7,331,510 1,443,549 1,352,254 760,287 229,259 687,852 556,561 873,656 46,297 485,000 977,957 58,569 7,471,241 (139,731) 933,366 1,310,000 (893,366) 1,350,000 1,210,269 16,275,162 $ 17,485,431 -13- CITY OF SHOREWOOD, MINNESOTA Exhibit 6 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, 2008 Total net change in fund balances - governmental funds $ 1,210,269 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 893,526 Depreciation expense (1,113,510) The issuance of long -term debt provides current financial resources to governmental funds, while the repayment of principal of long -term debt consumes the current financial 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 485,000 Debt issued or incurred (1,310,000) Less: issuance costs on bonds issued 58,569 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 financial resources. In the statement of activities, however interest expense is recognized as the interest accrues, regardless of when it is due. (24,466) 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 307 Special assessments (3,107) Leases (492,988) 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 20,090 Change in net assets - governmental activities $ (276,310) The notes to the financial statements are an integral part of this statement. -14- CITY OF SHOREWOOD, MINNESOTA STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES - BUDGET AND ACTUAL GENERAL FUND FOR THE YEAR ENDED DECEMBER 31, 2008 REVENUES Taxes Licenses and permits Intergovernmental Charges for services Fines and forfeitures Interest on investments Miscellaneous TOTAL REVENUES EXPENDITURES Current General government Public safety Public works Culture and recreation Capital outlay Debt service TOTAL EXPENDITURES EXCESS OF REVENUES OVER EXPENDITURES OTHER FINANCING SOURCES (USES) Transfers in Transfers out TOTAL OTHER FINANCING SOURCES (USES) NET CHANGE IN FUND BALANCES Exhibit 7 FUND BALANCES, JANUARY 1 3,761,509 3,761,509 3,761,509 - FUND BALANCES, DECEMBER 31 $ 3,761,509 $ 3,761,509 $ 3,708,109 $ (53,400) The notes to the financial statements are an integral part of this statement. -15- Variance with Budgeted Amounts Final Budget - Actual Positive Original Final Amounts (Negative) $ 4,582,139 $ 4,582,139 $ 4,582,602 $ 463 216,150 216,150 195,419 (20,731) 94,856 94,856 78,155 (16,701) 56,000 56,000 50,753 (5,247) 80,000 80,000 53,369 (26,631) 120,000 120,000 161,862 41,862 30,000 30,000 14,675 (15,325) 5,179,145 5,179,145 5,136,835 (42,310) 1,501,510 1,501,510 1,430,354 71,156 1,332,554 1,332,554 1,352,254 (19,700) 732,145 732,145 760,272 (28,127) 218,608 218,608 229,252 (10,644) 581,438 581,438 565,213 16,225 7,890 7,890 7,890 - 4,374,145 4,374,145 4,345,235 28,910 805,000 805,000 791,600 (13,400) 140,000 140,000 40,000 (100,000) (945,000) (945,000) (885,000) 60,000 (805,000) (805,000) (845,000) (40,000) - - (53,400) (53,400) FUND BALANCES, JANUARY 1 3,761,509 3,761,509 3,761,509 - FUND BALANCES, DECEMBER 31 $ 3,761,509 $ 3,761,509 $ 3,708,109 $ (53,400) The notes to the financial statements are an integral part of this statement. -15- CITY OF SHOREWOOD, MINNESOTA STATEMENTS OF NET ASSETS PROPRIETARY FUNDS DECEMBER 31, 2008 AND 2007 NONCURRENT ASSETS Special assessments receivable 385,874 Business -type Activities - Enterprise Funds 20,079 22,322 Water Sewer 86,301 - 2008 2007 2008 2007 ASSETS - Land - - CURRENT ASSETS - Construction in progress 559,914 804,051 Cash and temporary investments $ 3,659,564 $ 3,629,125 $ 4,476,799 $ 4,387,059 Cash with fiscal agent 115,033 110,926 - - Receivables 8,155,713 Less accumulated depreciation (2,908,778) (2,671,756) Accrued interest 20,456 27,720 25,046 30,082 Accounts 114,078 94,917 229,028 218,815 Special assessments 14,385 11,159 6,081 5,688 Due from other funds - - 110,000 160,000 Prepaid items 7,691 6,826 4,513 4,356 TOTAL CURRENT ASSETS 3,931,207 3,880,673 4,851,467 4,806,000 NONCURRENT ASSETS Special assessments receivable 385,874 504,299 20,079 22,322 Deferred charges 78,216 86,301 - - Capital assets 64,630 68,012 - - Land - - - - Construction in progress 559,914 804,051 296,840 150,207 Machinery and equipment 69,158 59,802 80,046 70,690 Infrastructure 9,271,927 8,421,029 8,166,496 8,155,713 Less accumulated depreciation (2,908,778) (2,671,756) (6,545,742) (6,335,333) Total capital assets 3,165,000 3,415,000 - - (Net of accumulated depreciation) 6,992,221 6,613,126 1,997,640 2,041,277 TOTAL NONCURRENT ASSETS 7,456,311 7,203,726 2,017,719 2,063,599 TOTAL ASSETS 11,387,518 11,084,399 6,869,186 6,869,599 LIABILITIES CURRENT LIABILITIES Accounts and contracts payable 461,654 60,222 7,776 69,809 Due to other governments 2,581 2,291 12,775 - Accrued interest payable 64,630 68,012 - - Salaries and compensated absences payable 1,544 828 3,278 1,504 Deferred revenue 33,611 79,662 - - Current portion of bonds payable 250,000 250,000 - - TOTAL CURRENT LIABILITIES 814,020 461,015 23,829 71,313 NONCURRENT LIABILITIES Bonds payable less current portion above 3,165,000 3,415,000 - - TOTAL LIABILITIES 3,979,020 3,876,015 23,829 71,313 NET ASSETS Invested in capital assets, net of related debt 3,577,221 2,948,126 1,997,640 2,041,277 Unrestricted 3,831,277 4,260,258 4,847,717 4,757,009 TOTAL NET ASSETS $ 7,408,498 $ 7,208,384 $ 6,845,357 $ 6,798,286 The notes to the financial statements are an integral part of this statement. -16- Exhibit 8 Business -type Activities - Enterprise Funds - Continued Nonmajor Enterprise Totals $ 1,437,641 $ 1,349,044 $ 9,574,004 $ 9,365,228 - - 115,033 110,926 8,035 5,629 53,537 63,431 67,324 74,542 410,430 388,274 1,401 1,259 21,867 18,106 - - 110,000 160,000 - - 12,204 11,182 1,514,401 1,430,474 10,297,075 10,117,147 9,580 4,507 415,533 531,128 - - 78,216 86,301 404,392 404,392 404,392 404,392 - - 856,754 954,258 - - 149,204 130,492 793,312 793,312 18,231,735 17,370,054 (140,711) (120,878) (9,595,231) (9,127,967) 1,056,993 1,076,826 10,046,854 9,731,229 1,066,573 1,081,333 10,540,603 10,348,658 2,580,974 2,511,807 20,837,678 20,465,805 15,280 29,725 484,710 159,756 - - 15,356 2,291 - - 64,630 68,012 871 126 5,693 2,458 - - 33,611 79,662 - - 250,000 250,000 16,151 29,851 854,000 562,179 - - 3,165,000 3,415,000 16,151 29,851 4,019,000 3,977,179 1,056,993 1,076,826 6,631,854 6,066,229 1,507,830 1,405,130 10,186,824 10,422,397 $ 2,564,823 $ 2,481,956 $ 16,818,678 $ 16,488,626 -17- CITY OF SHOREWOOD, MINNESOTA STATEMENTS OF REVENUES, EXPENSES AND CHANGES IN FUND NET ASSETS PROPRIETARY FUNDS FOR THE YEARS ENDED DECEMBER 31, 2008 AND 2007 Business -type Activities - Enterprise Funds Water Sewer The notes to the financial statements are an integral part of this statement. -18- 2008 2007 2008 2007 OPERATING REVENUES Sales $ _ $ _ $ Less cost of sales GROSS PROFIT - Charges for services 606,593 580,158 826,867 823,293 GROSS PROFIT AND REVENUES 606,593 580,158 826,867 823,293 OPERATING EXPENSES Personal services 95,734 86,676 87,189 85,256 Supplies 8,993 15,151 4,328 3,866 Repairs and maintenance 8,127 5,052 3,564 7,694 Depreciation 237,023 205,400 210,408 210,138 Professional services 2,250 2,000 8,669 2,000 Contracted services 13,905 43,570 9,530 21,665 Insurance 7,900 7,135 5,288 5,642 Water purchases 33,974 22,780 - - Utilities 79,144 65,750 9,870 9,058 Disposal charges - - 579,574 604,067 Rent _ _ - _ Advertising _ _ _ _ Other 28,137 10,942 2,818 2,721 TOTAL OPERATING EXPENSES 515,187 464,456 921,238 952,107 OPERATING INCOME (LOSS) 91,406 115,702 (94,371) (128,814) NONOPERATING REVENUES (EXPENSES) Special assessments 34,908 45,167 - - Permits and connection fees 920 55,277 2,250 9,663 Interest on investments 105,552 183,168 139,192 213,244 Gain on sale of capital assets - - - - Other income 109,917 101,947 - Interest expense (142,589) (172,050) - - TOTAL NONOPERATING REVENUES (EXPENSES) 108,708 213,509 141,442 222,907 INCOME BEFORE TRANSFERS 200,114 329,211 47,071 94,093 TRANSFERS Transfers in - 82,679 - 112,500 Transfers out _ _ _ _ TOTAL TRANSFERS - 82,679 - 112,500 CHANGE IN NET ASSETS 200,114 411,890 47,071 206,593 NET ASSETS, JANUARY 1 7,208,384 6,796,494 6,798,286 6,591,693 NET ASSETS, DECEMBER 31 $ 7,408,498 $ 7,208,384 $ 6,845,357 $ 6,798,286 The notes to the financial statements are an integral part of this statement. -18- Exhibit 9 Business -type Activities - Enterprise Funds - Continued Nonmajor Enterprise Totals 2008 2007 2008 2007 $ - $ 1,784,266 $ - $ 1,784,266 (1,300,438) - (1,300,438) 483,828 - 483,828 268,511 233,275 1,701,971 1,636,726 268,511 717,103 1,701,971 2,120,554 27,926 276,365 210,849 448,297 8,548 9,831 21,869 28,848 - - 11,691 12,746 19,833 51,953 467,264 467,491 4,631 67,245 15,550 71,245 146,246 92,879 169,681 158,114 - 14,732 13,188 27,509 - - 33,974 22,780 377 21,387 89,391 96,195 - - 579,574 604,067 - 154,662 - 154,662 - 7,680 - 7,680 11,694 40,944 42,649 54,607 219,255 737,678 1,655,680 2,154,241 49,256 (20,575) 46,291 (33,687) - - 34,908 45,167 - - 3,170 64,940 44,925 37,660 289,669 434,072 - 382,890 - 382,890 28,686 25,641 138,603 127,588 - (2,466) (142,589) (174,516) 73,611 443,725 323,761 880,141 122,867 423,150 370,052 846,454 - 41,049 - 236,228 (40,000) (92,500) (40,000) (92,500) (40,000) (51,451) (40,000) 143,728 82,867 371,699 330,052 990,182 2,481,956 2,110,257 16,488,626 15,498,444 $ 2,564,823 $ 2,481,956 $ 16,818,678 $ 16,488,626 -19- CITY OF SHOREWOOD, MINNESOTA STATEMENTS OF CASH FLOWS PROPRIETARY FUNDS FOR THE YEARS ENDED DECEMBER 31, 2008 AND 2007 CASH FLOWS FROM OPERATING ACTIVITIES Business -type Activities - Enterprise Funds Water Sewer 2008 2 007 2008 2007 Receipts from customers and users $ 587,432 $ 591,064 $ 818,504 $ 815,995 Other receipts and payments, net 63,866 153,784 - - Payments to suppliers, contractors and other governments (182,646) (161,975) (613,949) (658,372) Payments to employees (95,018) (87,604) (85,415) (84,524) NET CASH PROVIDED BY OPERATING ACTIVITIES CASH FLOWS FROM NONCAPITAL FINANCING ACTIVITIES (Increase) decrease in due from other funds Transfers in Interest paid on interfund loan Increase (decrease) in due to other funds Transfers out NET CASH PROVIDED (USED) BY NONCAPITAL FINANCING ACTIVITIES CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES Permits and connection fees received Principal paid on revenue bonds Interest paid on revenue bonds Acquisition of capital assets Proceeds from sale of capital assets Special assessments collected 373,634 495,269 119,140 73,099 - - 50,000 100,000 82,679 - 112,500 82,679 50,000 212,500 920 55,277 2,250 9,663 (250,000) (255,000) - - (137,886) (125,471) - - (215,045) (562,909) (225,878) (80,317) 150,107 135,956 NET CASH PROVIDED (USED) BY CAPITAL AND RELATED FINANCING ACTIVITIES (451,904) (752,147) (223,628) (70,654) CASH FLOWS FROM INVESTING ACTIVITIES Interest received on investments NET INCREASE IN CASH AND CASH EQUIVALENTS CASH AND CASH EQUIVALENTS, JANUARY 1 CASH AND CASH EQUIVALENTS, DECEMBER 31 112,816 181,397 144,228 213,488 34,546 7,198 89,740 428,433 3,740,051 3,732,853 4,387,059 3,958,626 $ 3,774,597 $ 3,740,051 $ 4,476,799 $ 4,387,059 The notes to the financial statements are an integral part of this statement. -20- Exhibit 10 Business -type Activities - Enterprise Funds - Continued Nonmmajor Enterprise Totals $ 270,514 $ 1,981,787 $ 1,676,450 $ 3,388,846 28,686 25,641 92,552 179,425 (185,941) (1,483,117) (982,536) (2,303,464) (27,181) (312,367) (207,614) (484,495) 86,078 211,944 578,852 780,312 41,049 (2,466) (50,000) (40,000) (92,500) (40,000) (103,917) 50,000 100,000 - 236,228 (2,466) (50,000) (40,000) (92,500) 10,000 191,262 - - 3,170 64,940 - - (250,000) (255,000) - - (137,886) (125,471) - - (440,923) (643,226) - 481,067 - 481,067 - - 150,107 135,956 - 481,067 (675,532) (341,734) 42,519 37,759 299,563 432,644 88,597 626,853 212,883 1,062,484 1,349,044 722,191 9,476,154 8,413,670 $ 1,437,641 $ 1,349,044 $ 9,689,037 $ 9,476,154 -21- CITY OF SHOREWOOD, MINNESOTA STATEMENTS OF CASH FLOWS - CONTINUED PROPRIETARY FUNDS FOR THE YEARS ENDED DECEMBER 31, 2008 AND 2007 RECONCILIATION OF OPERATING INCOME (LOSS) TO NET CASH PROVIDED 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 Prepaid items Increase (decrease) in liabilities: Accounts payable Due to other governments Salaries and compensated absences payable NET CASH PROVIDED BY OPERATING ACTIVITIES NONCASH CAPITAL AND RELATED FINANCING ACTIVITIES Retirement of capital assets Amortization of bond discount Capital assets purchased on account Business -type Activities - Enterprise Funds Water Sewer 2008 2007 2008 2007 $ 91,406 $ 115,702 $ (94,371) $ (128,814) 63,866 153,784 - - 237,023 205,400 210,408 210,138 (19,161) 10,906 (10,213) (1,082) - - 1,850 (6,216) (865) (2,191) (157) (966) 359 12,305 (2,926) 811 290 291 12,775 (1,504) 716 (928) 1,774 732 $ 373,634 $ 495,269 $ 119,140 $ 73,099 The notes to the financial statements are an integral part of this statement. -22- $ 8,084 $ 8,084 $ - $ - $ 437,411 $ 36,338 $ - $ 59,107 The notes to the financial statements are an integral part of this statement. -22- Exhibit 10 Business -type Activities - Enterprise Funds - Continued Nonmmajor Enterprise Totals 2008 2007 2008 2007 $ 49,256 $ (20,575) $ 46,291 $ (33,687) 28,686 25,641 92,552 179,425 19,833 51,953 467,264 467,491 7,218 (34,738) (22,156) (24,914) (5,215) (1,016) (3,365) (7,232) - 240,349 - 240,349 - 3,905 (1,022) 748 (14,445) 646 (17,012) 13,762 - (18,219) 13,065 (19,432) 745 (36,002) 3,235 (36,198) $ 86,078 $ 211,944 $ 578,852 $ 780,312 $ - $ 98,177 $ - $ 98,177 $ - $ - $ 8,084 $ 8,084 $ - $ - $ 437,411 $ 95,445 -23- CITY OF SHOREWOOD, MINNESOTA Exhibit 11 STATEMENT OF NET ASSETS FIDUCIARY FUND DECEMBER 31, 2008 ASSETS Cash and temporary investments LIABILITIES Escrow deposits payable Agency $ 135,593 $ 135,593 The notes to the financial statements are an integral part of this statement. -24- CITY OF SHOREWOOD, MINNESOTA NOTES TO THE FINANCIAL STATEMENTS DECEMBER 31, 2008 Note l: 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 defined 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 of their 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 financial burdens on the City. Blended component units, although legally separate entities are, in substance, part of the 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 is 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 financial 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. -25- CITY OF SHOREWOOD, MINNESOTA NOTES TO THE FINANCIAL STATEMENTS DECEMBER 31, 2008 Note 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED C. Measurement Focus, Basis of Accounting and Financial Statement Presentation The government -wide financial statements are reported using the economic resources measurement focus and the accrual basis of accounting, as are the proprietary fund financial statements. Revenues are recorded when earned and expenses are recorded when a liability is incurred, regardless of the timing of related cash flows. Property taxes are recognized as revenues in the year for which they are levied. Grants and similar items are recognized as revenue as soon as all eligibility requirements imposed by the provider have been met. Governmental fund financial statements are reported using the current financial resources measurement focus and the modified accrual basis of accounting. Revenues are recognized as soon as they are both measurable and available. Revenues are considered to be available when they are collectible within the current period or soon enough thereafter to pay liabilities of the current period. For this purpose, the City considers revenues to be available if they are collected within 60 days of the end of the current fiscal period. Expenditures generally are recorded when a liability is incurred, as under accrual accounting. However, debt service expenditures, as well as expenditures related to compensated absences and claims and judgments, are recorded only when payment is due. Property taxes, licenses and interest associated with the current fiscal period are all considered to be susceptible to accrual and so have been recognized as revenues of the current fiscal period. Only the portion of special assessments receivable due within the current fiscal period is considered to be susceptible to accrual as revenue of the current period. All other revenue items are considered to be measurable and available only when cash is received by the 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 financial 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. -26- CITY OF SHOREWOOD, MINNESOTA NOTES TO THE FINANCIAL STATEMENTS DECEMBER 31, 2008 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 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. 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 certain residents, developers, and other parties that are involved with escrow related projects within the City. Private - sector standards of accounting and financial 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 financial 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. -27- CITY OF SHOREWOOD, MINNESOTA NOTES TO THE FINANCIAL STATEMENTS DECEMBER 31, 2008 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, recycling, stormwater management utility 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 definition 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 of the 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 United 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 of the Federal Reserve System with capitalization exceeding $10,000,000, a primary reporting dealer in U.S. government securities to the Federal Reserve Bank of New York, or certain Minnesota 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 of the pool is the same as the fair value of the pool share. Financial statements of the 4M fund can be obtained by contacting Voyageur Asset Management at 100 South Fifth Street Suite 2300, Minneapolis, MN 55402 -1240. -28- CITY OF SHOREWOOD, MINNESOTA NOTES TO THE FINANCIAL STATEMENTS DECEMBER 31, 2008 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 of taxes levied against the homestead property. However, in 2008 the City received an aid reduction which decreased 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 2008. 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 financing 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 financial 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 interfund 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 financial 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 financial resources. Prepaid Items Certain payments to vendors reflect costs applicable to future accounting periods and are recorded as prepaid items in both government -wide and fund financial statements. -29- CITY OF SHOREWOOD, MINNESOTA NOTES TO THE FINANCIAL STATEMENTS DECEMBER 31, 2008 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 financial statements. Capital assets are defined by the City as assets with 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 $ 10,000 Other improvements 25,000 Buildings 25,000 Building improvements 25,000 Machinery and equipment 5,000 Vehicles 5,000 Infrastructure 100,000 Other assets 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 (i.e., 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: Asset Land improvements Buildings and improvements System improvements /infrastructure Machinery and equipment Vehicles Useful Lives in Years 15-20 7 -40 20 -50 5 -15 5 -15 _30- CITY OF SHOREWOOD, MINNESOTA NOTES TO THE FINANCIAL STATEMENTS DECEMBER 31, 2008 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. In the case of an employee leaving, the General fund would be responsible for liquidation of the liability. 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 financing 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. -31- CITY OF SHOREWOOD, MINNESOTA NOTES TO THE FINANCIAL STATEMENTS DECEMBER 31, 2008 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 15 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. 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. Authorized collateral in lieu of a corporate surety bond includes: • United States government Treasury bills, Treasury notes, Treasury bonds; • Issues of United States government agencies and instrumentalities as quoted by a recognized industry quotation service available to the government entity; • General obligation securities of any state or local government with taxing powers which is rate "A" or better by a national bond rating service, or revenue obligation securities of any state or local government with taxing powers which is rated "AA" or better by a national bond rating service; • General obligation securities of a local government with taxing powers may be pledged as collateral against funds deposited by that same local government entity; • Irrevocable standby letters of credit issued by Federal Home Loan Banks to a municipality accompanied by written evidence that the bank's public debt is rated "AA" or better by Moody's Investors Service, Inc., or Standard & Poor's Corporation; and • Time deposits that are fully insured by any federal agency. -32- CITY OF SHOREWOOD, MINNESOTA NOTES TO THE FINANCIAL STATEMENTS DECEMBER 31, 2008 Note 3: DETAILED NOTES ON ALL FUNDS - CONTINUED Minnesota statutes require that all collateral shall be placed in safekeeping in a restricted account at a Federal Reserve Bank, or in an account at a trust department of a commercial bank or other financial institution that is not owned or controlled by the financial institution furnishing the collateral. The selection should be approved by the government entity. At year end, the City's carrying amount of deposits was $4,295,709 and the bank balance was $4,320,238. The entire bank balance was covered by federal depository insurance. A reconciliation of cash and temporary investments as shown on the financial statements for the City follows: Carrying amount of deposits $ 4,295,709 Investments 22,837,578 Cash on hand 100 Total $ 27,133,387 As reported on the financial statements Statement of net assets $ 16,864,053 Cash with fiscal agent 10,133,741 Fiduciary fund 135,593 Total $ 27,133,387 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 of top quality, rated investments. -33- CITY OF SHOREWOOD, MINNESOTA NOTES TO THE FINANCIAL STATEMENTS DECEMBER 31, 2008 Note 3: DETAILED NOTES ON ALL FUNDS - CONTINUED 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: Pooled investments Minnesota Municipal Money Market Fund P -1 less than 6 months Fair Value Broker Money Market Credit Segmented and Brokered Certificates of Deposit Quality/ Time Carrying Types of Investments Rating (1) Distribution (2) Amount Brokered Certificates of Deposit N/A 1 to 3 years Non Pooled investments Total pooled U.S. Government Securities AAA 1 to 3 years $ 10,003,591 U.S. Government Agency Securities AAA more than 3 years 3,275,177 Total non pooled 13,278,768 Pooled investments Minnesota Municipal Money Market Fund P -1 less than 6 months 1,432,028 Broker Money Market N/A less than 6 months 3,699,745 Brokered Certificates of Deposit N/A less than 6 months 3,220,317 Brokered Certificates of Deposit N/A 6 to 12 months 627,889 Brokered Certificates of Deposit N/A 1 to 3 years 578,831 Total pooled 9,558,810 Total investments $ 22,837,578 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/A Indicates not applicable or available. The investments of the City are subject to the following risks: • Credit Risk. Credit risk is the risk that an issuer or other counterparty to an investment will not fulfill its obligations. Ratings are provided by various credit rating agencies and where applicable, indicate associated credit risk. Minnesota Statutes and the City's investment policy limit the City's investments to the list on page 28 of the notes. Custodial Credit Risk. The custodial credit risk for investments is the risk that, in the event of the failure of the counterparty to a transaction, a government will not be able to recover the value of investment or collateral securities that are in the possession of an outside party. 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 registered, 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 financial institutions. • Concentration of Credit Risk. Concentration of credit risk is the risk of loss attributed to the magnitude of a government's investment in a single issuer. 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. • Interest rate risk. Interest rate risk is the risk that changes in interest rates will adversely affect the fair value of an investment. -34- CITY OF SHOREWOOD, MINNESOTA NOTES TO THE FINANCIAL STATEMENTS DECEMBER 31, 2008 Note 3: DETAILED NOTES ON ALL FUNDS - CONTINUED B. Intergovernmental Receivables A summary of all amounts due from other governments as of December 31, 2008 is as follows: Fund Local County State Total Governmental Activities MSA Construction $ 57,400 $ 298,095 $ 665,574 $ 1,021,069 The entire receivable is related to the CSAH 19 at Smithtown Road project. The local balance is due from the City of Tonka Bay. C. 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: Governmental activities General fund Taxes Special assessments 2002 Public Safety Buildings Lease receivable 2003 Public Safety Buildings Lease receivable Total Business -type activities Water fund Rent Unavailable Unearned $ 86,582 $ - 3,590 - 8,485,000 - -35- 2,120,000 - $ 10,695,172 $ - $ - $ 33,611 CITY OF SHOREWOOD, MINNESOTA NOTES TO THE FINANCIAL STATEMENTS DECEMBER 31, 2008 Note 3: DETAILED NOTES ON ALL FUNDS - CONTINUED D. Capital Assets Capital asset activity for the year ended December 31, 2008 was as follows: Governmental activities Capital assets not being depreciated Land Construction in progress Total capital assets not being depreciated Capital assets being depreciated Buildings Improvements other than buildings Infrastructure Machinery and equipment Total capital assets being depreciated Less accumulated depreciation Buildings Improvements other than buildings Infrastructure Machinery and equipment Total accumulated depreciation Total capital assets being depreciated, net Governmental activities capital assets, net Beginning Ending Balance Increases Decreases Balance $ 741,826 $ - $ - $ 741,826 - 640,726 - 640,726 741,826 640,726 1,382,552 2,015,769 - 733,474 - 26,375,500 140,855 2,416,804 111,945 31,541,547 252,800 (648,462) (50,260) (518,864) (33,931) (18,217,710) (907,799) (1,937,787) (121,520) (21,322,823) (1,113,510) - 2,015,769 - 733,474 - 26,516,355 2,528,749 31,794,347 (698,722) (552,795) (19,125,509) (2,059,307) (22,436,333) 10,218,724 (860,710) - 9,358,014 $ 10,960,550 $ (219,984) $ - $ 10,740,566 -36- CITY OF SHOREWOOD, MINNESOTA NOTES TO THE FINANCIAL STATEMENTS DECEMBER 31, 2008 Note 3: DETAILED NOTES ON ALL FUNDS - CONTINUED Beginning Balance Increases Business -type activities Capital assets not being depreciated Land Construction in progress Total capital assets not being depreciated Capital assets being depreciated Infrastructure Machinery and equipment Total capital assets being depreciated Less accumulated depreciation for Infrastructure Machinery and equipment Total accumulated depreciation Total capital assets being depreciated, net Business -type activities capital assets, net Ending Decreases Balance $ 404,392 $ - $ - $ 404,392 954,258 695,709 (793,213) 856,754 1,358,650 695,709 (793,213) 1,261,146 17,370,054 861,681 - 18,231,735 130,492 18,712 - 149,204 17,500,546 880,393 - 18,380,939 (9,017,138) (462,273) - (9,479,411) (110,829) (4,991) - (115,820) (9,127,967) (467,264) - (9,595,231) 8,372,579 413,129 - 8,785,708 $ 9,731,229 $ 1,108,838 $ (793,213) $ 10,046,854 Depreciation expense was charged to functions /programs of the City as follows: Governmental activities General government Public works Culture and recreation Total depreciation expense - governmental activities Business -type activities Water Sewer Stormwater management utility Total depreciation expense - business -type activities $ 51,148 1,017,117 45,245 $ 1,113,510 $ 237,023 210,408 19,833 $ 467,264 -37- CITY OF SHOREWOOD, MINNESOTA NOTES TO THE FINANCIAL STATEMENTS DECEMBER 31, 2008 Note 3: DETAILED NOTES ON ALL FUNDS - CONTINUED Construction Commitments The City has active construction projects as of December 31, 2008. At year end the commitments with contractors for these projects are as follows: Spent Remaining Project to date Commitment City Hall Construction $ 508,955 $ 422,855 E. Interfund Receivables, Payables and Transfers The composition of interfund balances as of December 31, 2008, is as follows: Receivable Fund Sewer Street reconstruction Total Interfund transfers Fund Payable Fund Purpose Amount General To purchase land $ 110,000 MSA Construction For construction of a county road 550,000 $ 660,000 Transfers in Nonmaj or General Debt Service Governmental Total Transfers out General $ - $ - $ 885,000 $ 885,000 Nonmajor governmental - 8,366 - 8,366 Liquor 40,000 - - 40,000 Total $ 40,000 $ 8,366 $ 885,000 $ 933,366 The City annually budgets transfers for specific purposes. Annual transfers are made as part of capital improvement plans as well as annual budgets. For the year ended December 31, 2008, the City made the following one -time transfers: • The City Hall Construction fund transferred $3,116 of interest earnings to the 2008 Lease Revenue Bond fund as part the new debt issues financing plan. • The EDA Public Safety Facilities Project fund transferred $5,250 to the 2002 & 2003 Public Safety Lease Revenue Bond fund to cover its portion of fiscal agent fees. -38- CITY OF SHOREWOOD, MINNESOTA NOTES TO THE FINANCIAL STATEMENTS DECEMBER 31, 2008 Note 3: DETAILED NOTES ON ALL FUNDS - CONTINUED 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 finance capital improvements in the enterprise funds. They will be retired from net revenues of the enterprise funds. Authorized Interest Issue Description and Issued Rate Date G.O. Water Revenue Bonds of 2005 G.O. Water Revenue Bonds of 1996 G.O. Water Refunding Bonds of 2003 G.O. Water Revenue Bonds of 2006 $ 1,525,000 3.00 - 4.25 % 06/01/05 Balance Maturity at Date Year End 01/01/25 $ 1,345,000 860,000 4.95 - 5.40 11/01/96 02/01/12 230,000 815,000 1.50-3.00 08/01/03 02/01/11 390,000 1,450,000 4.00 11/29/06 01/01/22 1,450,000 Total G.O. Revenue Bonds Annual debt service requirements to maturity for general obligation revenue bonds are as follows: $ 3,415,000 -39- G.O. Revenue Bonds Year Ending Business -type Activities December 31, Principal Interest Total 2009 $ 250,000 $ 128,770 $ 378,770 2010 250,000 120,333 370,333 2011 240,000 111,538 351,538 2012 175,000 103,398 278,398 2013 185,000 96,103 281,103 2014-2018 1,025,000 366,908 1,391,908 2019-2023 1,080,000 144,938 1,224,938 2024- 2025 210,000 8,922 218,922 Total $ 3,415,000 $ 1,080,910 $ 4,495,910 -39- CITY OF SHOREWOOD, MINNESOTA NOTES TO THE FINANCIAL STATEMENTS DECEMBER 31, 2008 Note 3: DETAILED NOTES ON ALL FUNDS - CONTINUED 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: -40- 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 $ 3,300,000 Public Safety Police Facility, Series 2002B 4,025,000 3,00-5.50 09/01/02 02/01/23 3,435,000 Public Safety Fire Facility, Series 2002C 2,060,000 3.00-5.50 09/01/02 02/01/23 1,760,000 Public Safety Fire Facility, Series 2003A 1,195,000 2.35-5.10 04/15/03 02/01/23 1,045,000 Public Safety Police Facility, Series 2003B 1,220,000 2.35-5.10 04/15/03 02/01/23 1,065,000 Public Safety Fire Facility, Refunding Series 2007A 4,130,000 3.75-5.00 01/01/07 02/01/23 4,130,000 Public Safety Police Facility, Refunding Series 2007B 4,285,000 3.75-5.00 01/01/07 02/01/23 4,285,000 Public Safety Fire Facility, Refunding Series 2007C 1,585,000 3.75-5.00 01/01/07 02/01/22 1,585,000 Public Project Lease Revenue Bonds, Series 2008A 1,310,000 2.85-4.80 08/19/08 12/01/28 1,310,000 Total Lease Revenue Bonds $ 21,915,000 Annual debt service requirements to maturity for revenue bonds are as follows: Lease Revenue Bonds Year Ending Governmental Activities December 31, Principal Interest Total 2009 $ 520,000 $ 1,008,638 $ 1,528,638 2010 1,015,000 959,206 1,974,206 2011 1,170,000 915,279 2,085,279 2012 1,220,000 865,093 2,085,093 2013 1,270,000 810,008 2,080,008 2014-2018 7,285,000 3,093,772 10,378,772 2019-2023 8,990,000 1,209,472 10,199,472 2024 -2028 445,000 65,400 510,400 Total $ 21,915,000 $ 8,926,868 $ 30,841,868 -40- CITY OF SHOREWOOD, MINNESOTA NOTES TO THE FINANCIAL STATEMENTS DECEMBER 31, 2008 Note 3: DETAILED NOTES ON ALL FUNDS - CONTINUED Changes in Long -term Liabilities Long -term liability activity for the year ended December 31, 2008, was as follows: Business -type activities General obligation revenue bonds $ 3,665,000 $ - $ (250,000) $ 3,415,000 $ 250,000 Crossover Refunding On January 1, 2007 the Economic Development Authority (the EDA) of the City issued $4,130,000 of Public Safety Fire Facility Lease Revenue Crossover Refunding Bonds, 2007A. The bonds issued will crossover refund the 2002A and 2003A Public Safety Fire Facility Lease Revenue Bonds. The proceeds of the bonds were deposited in an escrow account and will be used to pay issuance costs and to purchase government obligations. The government obligations will bear interest rates that will provide sufficient funds to refund the old bonds. The 2002A series bonds will be refunded on August 1, 2009 and the 2003A series bonds will be refunded on August 1, 2010. The escrow account will also provide debt service payments on the new bond until the crossover dates. The old bonds are not considered defeased until the crossover dates, and therefore will not be removed as liabilities. As a result of the crossover refunding issue, the EDA will save $288,277 in debt service payments and achieve an economic gain (the present value of the difference between the old and the new debt service) of $195,442. Crossover Refunding On January 1, 2007 the Economic Development Authority (the EDA) of the City issued $4,285,000 of Public Safety Police Facility Lease Revenue Crossover Refunding Bonds, 2007B. The bonds issued will crossover refund the 2002B and 2003B Public Safety Police Facility Lease Revenue Bonds. The proceeds of the bonds were deposited in an escrow account and will be used to pay issuance costs and to purchase government obligations. The government obligations. will bear interest rates that will provide sufficient funds to refund the old bonds. The 2002B series bonds will be refunded on August 1, 2009 and the 2003B series bonds will be refunded on August 1, 2010. The escrow account will also provide debt service payments on the new bond until the crossover dates. The old bonds are not considered defeased until the crossover dates, and therefore will not be removed as liabilities. As a result of the crossover refunding issue, the EDA will save $304,293 in debt service payments and achieve an economic gain (the present value of the difference between the old and the new debt service) of $204,501. -41- Beginning Ending Due Within Balance Increases Decreases Balance One Year Governmental activities Lease revenue bonds $ 21,090,000 $ 1,310,000 $ (485,000) $ 21,915,000 $ 520,000 Compensated absences 192,411 148,795 (168,885) 172,321 172,321 Total $ 21,282,411 $ 1,458,795 $ (653,885) $ 22,087,321 $ 692,321 Business -type activities General obligation revenue bonds $ 3,665,000 $ - $ (250,000) $ 3,415,000 $ 250,000 Crossover Refunding On January 1, 2007 the Economic Development Authority (the EDA) of the City issued $4,130,000 of Public Safety Fire Facility Lease Revenue Crossover Refunding Bonds, 2007A. The bonds issued will crossover refund the 2002A and 2003A Public Safety Fire Facility Lease Revenue Bonds. The proceeds of the bonds were deposited in an escrow account and will be used to pay issuance costs and to purchase government obligations. The government obligations will bear interest rates that will provide sufficient funds to refund the old bonds. The 2002A series bonds will be refunded on August 1, 2009 and the 2003A series bonds will be refunded on August 1, 2010. The escrow account will also provide debt service payments on the new bond until the crossover dates. The old bonds are not considered defeased until the crossover dates, and therefore will not be removed as liabilities. As a result of the crossover refunding issue, the EDA will save $288,277 in debt service payments and achieve an economic gain (the present value of the difference between the old and the new debt service) of $195,442. Crossover Refunding On January 1, 2007 the Economic Development Authority (the EDA) of the City issued $4,285,000 of Public Safety Police Facility Lease Revenue Crossover Refunding Bonds, 2007B. The bonds issued will crossover refund the 2002B and 2003B Public Safety Police Facility Lease Revenue Bonds. The proceeds of the bonds were deposited in an escrow account and will be used to pay issuance costs and to purchase government obligations. The government obligations. will bear interest rates that will provide sufficient funds to refund the old bonds. The 2002B series bonds will be refunded on August 1, 2009 and the 2003B series bonds will be refunded on August 1, 2010. The escrow account will also provide debt service payments on the new bond until the crossover dates. The old bonds are not considered defeased until the crossover dates, and therefore will not be removed as liabilities. As a result of the crossover refunding issue, the EDA will save $304,293 in debt service payments and achieve an economic gain (the present value of the difference between the old and the new debt service) of $204,501. -41- CITY OF SHOREWOOD, MINNESOTA NOTES TO THE FINANCIAL STATEMENTS DECEMBER 31, 2008 Note 3: DETAILED NOTES ON ALL FUNDS - CONTINUED Crossover Refunding On January 1, 2007 the Economic Development Authority (the EDA) of the City issued $1,585,000 of Public Safety Fire Facility Lease Revenue Crossover Refunding Bonds, 2007C. The bonds issued will crossover refund the 2002C Public Safety Fire Facility Lease Revenue Bond. The proceeds of the bonds were deposited in an escrow account and will be used to pay issuance costs and to purchase government obligations. The government obligations will bear interest rates that will provide sufficient funds to refund the old bond on August 1, 2009. The escrow account will also provide debt service payments on the new bond until the crossover date. The old bonds are not considered defeased until the crossover date, and therefore will not be removed as a liability. As a result of the crossover refunding issue, the EDA will save $227,700 in debt service payments and achieve an economic gain (the present value of the difference between the old and the new debt service) of $94,873. G. Fund Balance Reservations/Designations The City has made the following reservations and designations of fund balance. Fund Fund balance - Reserved General Debt Service Total reserved fund balance Purpose Amount Prepaids $ 47,750 Debt service on bonds issued 10,033,342 Fund balance - Unreserved - Designated General Other governmental Total designated fund balance Note 4: DEFINED BENEFIT PENSION PLAN - STATEWIDE A. Plan Description $ 7,404,339 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. $ 10,081,092 Working capital $ 3,660,359 Capital outlay 3,743,980 -42- CITY OF SHOREWOOD, MINNESOTA NOTES TO THE FINANCIAL STATEMENTS DECEMBER 31, 2008 Note 4: DEFINED BENEFIT PENSION PLAN - STATEWIDE - CONTINUED 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 of the retiree -no survivor annuity is payable. There are also various types of joint and survivor annuity options available which will reduce the monthly normal annuity amount, because the annuity is payable over joint lives. Members may also leave their contributions in the fund upon termination of public service, in order to qualify for a deferred annuity at retirement age. Refunds of contributions are available at any time to members who leave public service, but before retirement benefits begin. The benefit provisions stated in the previous paragraphs of this section are current provisions and apply to active plan participants. Vested, terminated employees who are entitled to benefits but are not receiving them yet are bound by the provisions in effect at the time they last terminated their public service. PERA issues a publicly available financial report that includes financial statements and required supplementary information for PERF. That report may be obtained on the Internet at www.nmpera.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 6.00 percent, respectively, of their annual covered salary in 2008. The City is required to contribute the following percentages of annual covered payroll: 11.78 percent for Basic Plan PERF members, and 6.50 percent for Coordinated Plan PERF members. Employer contribution rates for the Coordinated Plan will 'increase to 6.75 percent, effective January 1, 2009. The City's contributions to the PERF for the years ending December 31, 2008, 2007 and 2006 were $83,917, $83,893 and $73,993, respectively. The City's contributions were equal to the contractually required contributions for each year as set by Minnesota statute. -43- CITY OF SHOREWOOD, MINNESOTA NOTES TO THE FINANCIAL STATEMENTS DECEMBER 31, 2008 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, 2008. Separate financial statements can be obtained by writing to the South Lake Minnetonka Police Department, 24150 Smithtown Road, Shorewood, Minnesota 55331.The following is a summary of the Department's Statement of Net Assets as of December 31, 2008 and 2007: SOUTH LAKE MINNETONKA POLICE DEPARTMENT SUMMARY OF STATEMENTS OF NET ASSETS DECEMBER 31, 2008 AND 2007 2008 2007 Assets $ 5,761,316 $ 5,925,467 Liabilities $ 4,894,756 $ 5,083,424 Net assets 866,560 842,043 Total liabilities and net assets $ 5,761,316 $ 5,925,467 The following is a summary of the Department's statement of activities for the years ended December 31, 2008 and 2007: SOUTH LAKE MINNETONKA POLICE DEPARTMENT SUMMARY STATEMENTS OF ACTIVITES YEARS ENDED DECEMBER 31, 2008 AND 2007 2008 2007 Expenses Revenues Net expenses General revenues Change in net assets Net assets, January 1 Net assets, December 31 $ 2,433,114 $ 2,360,248 2,404,879 2,400,061 (28,235) 39,813 52,752 86,182 24,517 125,995 842,043 716,048 $ 866,560 $ 842,043 -44- CITY OF SHOREWOOD, MINNESOTA NOTES TO THE FINANCIAL STATEMENTS DECEMBER 31, 2008 Note 5: JOINT VENTURES - CONTINUED B. Southshore Community Center The City participates in a joint venture with the cities of Deephaven, 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 of the building construction. Shorewood financed its obligation by issuing a lease purchase note. The City retired its portion of the required lease obligations during 2007. In the event operating costs are not covered by revenue, each member is responsible for their proportionate share of losses. 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 financial statements are issued for the Community Center and can be obtained at the City offices. C. Excelsior Fire District In August of 2000, 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 of ten 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, 2008: Government - wide Total assets $ 8,337,904 Governmental Funds 6,498,383 Total net assets 1,839,521 Special Capital Total charges for services 1,507,764 General Revenue Projects Total Total assets $ 344,483 $ 8,273 $ 337,364 $ 690,120 Total liabilities 91,235 - 9,388 100,623 Total equity 253,248 8,273 327,976 589,497 Total revenues 1,497,850 730 17,278 1,515,858 Total expenditures 702,734 - 762,005 1,464,739 Total other financing sources (uses) (748,313) - 754,013 5,700 Government - wide Total assets $ 8,337,904 Total liabilities 6,498,383 Total net assets 1,839,521 Total expenses 1,307,432 Total charges for services 1,507,764 Total general revenues 16,794 -45- CITY OF SHOREWOOD, MINNESOTA NOTES TO THE FINANCIAL STATEMENTS DECEMBER 31, 2008 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 $48,047,970 computed as three 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. Discontinued Operations The City discontinued its liquor store operations during December 2007. The liquor stores provided an operating loss of $101,271 for the year ended December 31, 2007. The City sold the liquor stores, applicable capital assets and all remaining inventory. The City received a combined $382,890 for the sale of the two liquor stores. A summary of the remaining assets and liabilities are as follows: 2008 Waterford Shorewood Total ASSETS Cash and temporary investments $ 237,478 $ 653,529 $ 891,007 Receivables Accrued interest 1,327 3,653 4,980 Accounts - - - TOTAL ASSETS 238,805 657,182 895,987 LIABILITIES Accounts payable - - - NET ASSETS Unrestricted $ 238,805 $ 657,182 $ 895,987 -46- Financial Section - Combining and Individual Fund Statements and Schedules NONMAJOR GOVERNMENTAL FUNDS NONMAJOR 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 - This fund was established to account for capital improvement projects for municipal public facilities. 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. Street Reconstruction - This fund was established for the purpose of funding the periodic reconstruction of City streets and roadways. MSA Construction - This fund was established to account for the accumulation of Municipal State Aid (MSA) to fund the periodic reconstruction of MSA designated roads. Technolozy - This fund was established for the replacement of office equipment, computers, and technology for municipal operations at the city offices. City Hall Construction - This fund was established for the purpose of accounting for construction and remodeling of City Hall. EDA Public Safety Facilities Proiect - This fund was established for the purpose of accounting for construction of the 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, 2008 Capital Projects Funds -47- Park Public Capital Equipment Street Facilities Improvement Replacement Reconstruction ASSETS Cash and temporary investments $ 225,495 $ 261,250 $ 668,138 $ 1,069,984 Receivables Accrued interest 1,260 1,460 3,735 5,981 Due from other governments - - - - Due from other funds - - - 550,000 TOTAL ASSETS $ 226,755 $ 262,710 $ 671,873 $ 1,625,965 LIABILITIES AND FUND BALANCES LIABILITIES Accounts and contracts payable $ - $ - $ 426 $ - Due to other funds - - - - Due to other governments - - - - TOTAL LIABILITIES - - 426 - FUND BALANCES Unreserved Designated for capital outlay 226,755 262,710 671,447 1,625,965 TOTAL LIABILITIES AND FUND BALANCES $ 226,755 $ 262,710 $ 671,873 $ 1,625,965 -47- Exhibit A -1 Capital Projects Funds - Continued EDA Public Safety Senior MSA City Hall Facilities Community Construction Technology Construction Project Center Total $ 172,034 $ 102,925 $ 822,153 $ 67,266 $ 41,498 $ 3,430,743 962 575 4,595 387 232 19,187 1,021,069 - - - 1,021,069 - - - - 550,000 $ 1,194,065 $ 103,500 $ 826,748 $ 67,653 $ 41,730 $ 5,020,999 $ 169,000 $ - 200,338 $ - $ - $ 369,764 550,000 - - - - 550,000 357,255 - - - - 357,255 1,076,255 - 200,338 - - 1,277,019 117,810 103,500 626,410 67,653 41,730 3,743,980 $ 1,194,065 $ 103,500 $ 826,748 $ 67,653 $ 41,730 $ 5,020,999 -48- CITY OF SHOREWOOD, MINNESOTA NONMAJOR GOVERNMENTAL FUNDS COMBINING STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES (DEFICITS) FOR THE YEAR ENDED DECEMBER 31, 2008 Capital Projects Funds REVENUES Intergovernmental Interest on investments Miscellaneous Park dedication fees TOTAL REVENUES EXPENDITURES Current General government Public works Culture and recreation Capital outlay General government Public safety Public works Culture and recreation Debt Service Bond issuance costs 41 - 94 - 40,304 - 2,181 - - 16,585 330,816 46,297 - - TOTAL EXPENDITURES Park 46,297 18,860 Public Capital Equipment Street Facilities Improvement Replacement Reconstruction OVER (UNDER) EXPENDITURES (34,689) (36,497) 5,656 7,800 16,743 20,041 - 2,000 - - 5,656 9,800 16,743 20,041 41 - 94 - 40,304 - 2,181 - - 16,585 330,816 46,297 - - TOTAL EXPENDITURES 40,345 46,297 18,860 330,816 EXCESS (DEFICIENCY) OF REVENUES OVER (UNDER) EXPENDITURES (34,689) (36,497) (2,117) (310,775) OTHER FINANCING SOURCES (USES) Long -term debt issued - - - - Transfers in 50,000 15,000 175,000 645,000 Transfers out - - - - TOTAL OTHER FINANCING SOURCES (USES) 50,000 15,000 175,000 645,000 NET CHANGE IN FUND BALANCES 15,311 (21,497) 172,883 334,225 FUND BALANCES (DEFICITS), JANUARY 1 211,444 284,207 498,564 1,291,740 FUND BALANCES, DECEMBER 31 $ 226,755 $ 262,710 $ 671,447 $ 1,625,965 -49- Exhibit A -2 Capital Projects Funds - Continued EDA Public Safety Senior MSA City Hall Facilities Community Construction Technology Construction Project Center Total $ 675,450 $ - $ - $ - $ - $ 675,450 3,532 3,516 18,821 429 1,200 77,738 678,982 3,516 18,821 - - 2,000 429 1,200 755,188 - 16 13,044 - - 13,195 15 - - - - 15 - - - - 7 7 - - 627,682 - - 670,167 - - - 9,033 - 9,033 526,255 - - - - 873,656 - _ - _ - 46,297 - - 58,569 - - 58,569 526,270 16 699,295 9,033 7 1,670,939 152,712 3,500 (680,474) (8,604) 1,193 (915,751) - - 1,310,000 - - 1,310,000 _ _ - 885,000 - - (3,116) (5,250) - (8,366) - - 1,306,884 (5,250) - 2,186,634 152,712 3,500 626,410 (13,854) 1,193 1,270,883 (34,902) 100,000 - 81,507 40,537 2,473,097 $ 117,810 $ 103,500 $ 626,410 $ 67,653 $ 41,730 $ 3,743,980 -50- NONMAJOR PROPRIETARY FUNDS NONMAJOR ENTERPRISE FUNDS Enterprise funds are used to account for fund activities of the City that operate in a manner similar to private businesses. Reeyeling - This fund accounts for the activities of the City's recycling program. Stormwater Management Utility - This fund accounts for the activities of the City's stormwater management system. Liquor - This fund is used to account for the activities of the City's off -sale liquor operation. The operation consisted of two off - sale liquor store sites. The City discontinued operations of the liquor store sites during 2007. CITY OF SHOREWOOD, MINNESOTA NONMAJOR PROPRIETARY FUNDS COMBINING STATEMENTS OF NET ASSETS DECEMBER 31, 2008 AND 2007 ASSETS CURRENT ASSETS Cash and temporary investments Receivables Accrued interest Accounts Special assessments TOTAL CURRENT ASSETS NONCURRENT ASSETS Special assessments receivable Capital assets Land Infrastructure Less accumulated depreciation Total capital assets (Net of accumulated depreciation) TOTAL NONCURRENT ASSETS TOTAL ASSETS LIABILITIES CURRENT LIABILITIES Accounts and contracts payable Salaries and compensated absences payable TOTAL LIABILITIES NET ASSETS Invested in capital assets, net of related debt Unrestricted TOTAL NET ASSETS Business -type Activities - Enterprise Funds Recycling Stormwater Management Utility $ 96,842 $ 94,646 $ 449,792 $ 322,116 541 634 2,514 2,246 15,535 17,690 51,789 54,810 725 756 676 503 113,643 113,726 504,771 379,675 2,636 2,018 6,944 2,489 - - 404,392 404,392 - - 793,312 793,312 - - (140,711) (120,878) 1,056,993 1,076,826 2,636 2,018 1,063,937 1,079,315 116,279 115,744 1,568,708 1,458,990 13,980 6,990 1,300 7,816 13,980 6,990 2,171 7,942 - - 1,056,993 1,076,826 102,299 108,754 509,544 374,222 $ 102,299 $ 108,754 $ 1,566,537 $ 1,451,048 -51- Exhibit B -1 Business -type Activities - Enterprise Funds - Continued Liquor Totals $ 891,007 $ 932,282 $ 1,437,641 $ 1,349,044 4,980 2,749 8,035 5,629 - 2,042 67,324 74,542 - - 1,401 1,259 895,987 937,073 1,514,401 1,430,474 - - 9,580 4,507 - - 404,392 404,392 - - 793,312 793,312 - - (140,711) (120,878) - - 1,056,993 1,076,826 - - 1,066,573 1,081,333 895,987 937,073 2,580,974 2,511,807 14,919 15,280 29,725 14,919 16,151 29,851 - - 1,056,993 1,076,826 895,987 922,154 1,507,830 1,405,130 $ 895,987 $ 922,154 $ 2,564,823 $ 2,481,956 -52- CITY OF SHOREWOOD, MINNESOTA NONMAJOR PROPRIETARY FUNDS COMBINING STATEMENTS OF REVENUES, EXPENSES AND CHANGES IN FUND NET ASSETS FOR THE YEARS ENDED DECEMBER 31, 2008 AND 2007 Business -type Activities - Enterprise Funds Recycling Stormwater Management Utility 2008 2007 2008 2007 OPERATING REVENUES Sales $ _ $ _ $ _ $ _ Less cost of sales - - - - GROSS PROFIT - - - - Charges for services 64,166 68,928 204,345 164,347 GROSS PROFIT AND REVENUES 64,166 68,928 204,345 164,347 OPERATING EXPENSES Personal services 1,109 - 15,519 26,708 Supplies 1,421 - 7,292 749 Depreciation - - 19,833 19,833 Professional services - - 131 13,220 Contracted services 83,880 91,139 62,366 - Insurance _ _ _ _ Utilities - _ _ - Rent _ _ _ _ Advertising _ _ - _ Other 10,535 18 1,002 912 TOTAL OPERATING EXPENSES 96,945 91,157 106,143 61,422 OPERATING INCOME (LOSS) (32,779) (22,229) 98,202 102,925 NONOPERATING REVENUES (EXPENSES) Interest on investments 2,659 4,160 12,266 14,515 Gain on sale of capital assets - - - - Other income 23,665 21,006 5,021 66 Interest expense - - - (2,466) TOTAL NONOPERATING REVENUES (EXPENSES) 26,324 25,166 17,287 12,115 INCOME (LOSS) BEFORE TRANSFERS (6,455) 2,937 115,489 115,040 TRANSFERS Transfers in - - - 41,049 Transfers out - - - (52,500) TOTAL TRANSFERS - - - (11,451) CHANGE IN NET ASSETS (6,455) 2,937 115,489 103,589 NET ASSETS, JANUARY 1 108,754 105,817 1,451,048 1,347,459 NET ASSETS, DECEMBER 31 $ 102,299 $ 108,754 $ 1,566,537 $ 1,451,048 -53- Exhibit B -2 Business -type Activities - Enterprise Funds - Continued Liquor Totals 2008 2007 2008 2007 $ - $ 1,784,266 $ - $ 1,784,266 (1,300,438) - (1,300,438) 483,828 - 483,828 - 268,511 233,275 483,828 268,511 717,103 11,298 249,657 27,926 276,365 (165) 9,082 8,548 9,831 - 32,120 19,833 51,953 4,500 54,025 4,631 67,245 - 1,740 146,246 92,879 - 14,732 - 14,732 377 21,387 377 21,387 - 154,662 - 154,662 - 7,680 - 7,680 157 40,014 11,694 40,944 16,167 585,099 219,255 737,678 (16,167) (101,271) 49,256 (20,575) 30,000 18,985 44,925 37,660 - 382,890 - 382,890 - 4,569 28,686 25,641 - - - (2,466) 30,000 406,444 73,611 443,725 13,833 305,173 122,867 423,150 - - - 41,049 (40,000) (40,000) (40,000) (92,500) (40,000) (40,000) (40,000) (51,451) (26,167) 265,173 82,867 371,699 922,154 656,981 2,481,956 2,110,257 $ 895,987 $ 922,154 $ 2,564,823 $ 2,481,956 -54- CITY OF SHOREWOOD, MINNESOTA NONMAJOR PROPRIETARY FUNDS COMBINING STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 2008 AND 2007 Business -type Activities - Enterprise Funds Recycling Stormwater Management Utility CASH FLOWS FROM OPERATING ACTIVITIES Receipts from customers and users $ 65,734 $ 70,256 $ 202,738 $ 129,307 Other receipts and payments, net 23,665 21,006 5,021 66 Payments to suppliers, contractors and other governments (88,846) (84,167) (77,307) (7,207) Payments to employees (1,109) - (14,774) (26,639) NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES (556) 7,095 115,678 95,527 CASH FLOWS FROM NONCAPITAL FINANCING ACTIVITIES Transfers in - - - 41,049 Interest paid on interfund loan - - - (2,466) Increase (decrease) in due to other funds - - - (50,000) Transfers out - - - (52,500) NET CASH USED BY NONCAPITAL FINANCING ACTIVITIES - - - (63,917) CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES Proceeds from sale of capital assets - - - - CASH FLOWS FROM INVESTING ACTIVITIES Interest received on investments 2,752 3,997 11,998 14,556 NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 2,196 11,092 127,676 46,166 CASH AND CASH EQUIVALENTS, JANUARY 1 94,646 83,554 322,116 275,950 CASH AND CASH EQUIVALENTS, DECEMBER 31 $ 96,842 $ 94,646 $ 449,792 $ 322,116 -55- Exhibit B -3 Business -type Activities - Enterprise Funds - Continued Liquor Totals 2008 2007 2008 2007 $ 2,042 $ 1,782,224 $ 270,514 $ 1,981,787 - 4,569 28,686 25,641 (19,788) (1,391,743) (185,941) (1,483,117) (11,298) (285,728) (27,181) (312,367) (29,044) 109,322 86,078 211,944 41,049 (2,466) (50,000) (40,000) (40,000) (40,000) (92,500) (40,000) (40,000) (40,000) (103,917) - 481,067 - 481,067 27,769 19,206 42,519 37,759 (41,275) 569,595 88,597 626,853 932,282 362,687 1,349,044 722,191 $ 891,007 $ 932,282 $ 1,437,641 $__1,349,044 -56- CITY OF SHOREWOOD, MINNESOTA NONMAJOR PROPRIETARY FUNDS COMBINING STATEMENTS OF CASH FLOWS - CONTINUED FOR THE YEARS ENDED DECEMBER 31, 2008 AND 2007 Business -type Activities - Enterprise Funds - Continued Recycling Stor Management Utility 2008 2007 2008 2007 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 Special assessments receivable Inventories Prepaid items 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 Retirement of capital assets (32,779) $ (22,229) $ 98,202 $ 102,925 23,665 21,006 5,021 66 - - 19,833 19,833 2,155 1,120 3,021 (33,816) (587) 208 (4,628) (1,224) 6,990 6,990 (6,516) 7,674 - - 745 69 $ (556) $ 7,095 $ 115,678 $ 95,527 -57- Exhibit B -3 Business -type Activities - Enterprise Funds - Continued Liquor Totals 2008 2007 2008 2007 $ (16,167) $ (101,271) $ 49,256 $ (20,575) - 4,569 28,686 25,641 - 32,120 19,833 51,953 2,042 (2,042) 7,218 (34,738) - - (5,215) (1,016) - 240,349 - 240,349 - 3,905 - 3,905 (14,919) (14,018) (14,445) 646 - (18,219) - (18,219) - (36,071) 745 (36,002) $ (29,044) $ 109,322 $ 86,078 $ 211,944 $ - $ 98,177 $ - $ 98,177 -58- Charges for services General government CITY OF SHOREWOOD, MINNESOTA 26,000 Exhibit C -1 (5,012) GENERAL FUND Parks and recreation 30,000 30,000 SCHEDULE OF REVENUES, EXPENDITURES AND (235) 34,920 CHANGES IN FUND BALANCES - CONTINUED ON THE FOLLOWING PAGES 56,000 56,000 BUDGET AND ACTUAL (5,247) 50,819 Fines and forfeitures FOR THE YEAR ENDED DECEMBER 31, 2008 80,000 53,369 (26,631) (With comparative actual amounts for the year ended December 31, 2007) Interest on investments 120,000 2008 161,862 2007 257,922 Variance with Budgeted Amounts Final Budget Actual Positive Actual Original Final Amounts (Negative) Amounts REVENUES Taxes General property taxes $ 4,464,456 $ 4,464,456 $ 4,464,919 $ 463 $ 4,224,497 Fiscal disparities 117,683 117,683 117,683 - 108,244 Total 4,582,139 4,582,139 4,582,602 463 4,332,741 Licenses and permits Business 11,650 11,650 15,024 3,374 21,672 Nonbusiness 204,500 204,500 180,395 (24,105) 234,800 Total 216,150 216,150 195,419 (20,731) 256,472 Intergovernmental State Property tax credits 29,856 29,856 15,206 (14,650) 32,995 Other 65,000 65,000 62,949 (2,051) 62,906 Total 94,856 94,856 78,155 (16,701) 95,901 Charges for services General government 26,000 26,000 20,988 (5,012) 15,899 Parks and recreation 30,000 30,000 29,765 (235) 34,920 Total 56,000 56,000 50,753 (5,247) 50,819 Fines and forfeitures 80,000 80,000 53,369 (26,631) 77,777 Interest on investments 120,000 120,000 161,862 41,862 257,922 Miscellaneous revenue Refunds and reimbursements 9,000 9,000 5,368 (3,632) 9,561 Contributions and donations - - 3,135 3,135 1,785 Other 21,000 21,000 6,172 (14,828) 17,415 Total 30,000 30,000 14,675 (15,325) 28,761 TOTAL REVENUES 5,179,145 5,179,145 5,136,835 (42,310) 5,100,393 -59- City clerk / elections Personal services CITY OF SHOREWOOD, MINNESOTA 212,055 Exhibit C -1 (2,809) GENERALFUND Supplies 27,935 27,935 SCHEDULE OF REVENUES, EXPENDITURES AND 2,766 21,293 Other services and charges CHANGES IN FUND BALANCES - CONTINUED 38,035 33,467 4,568 BUDGET AND ACTUAL Total 278,025 278,025 FOR THE YEAR ENDED DECEMBER 31, 2008 4,525 246,173 (With comparative actual amounts for the year ended December 31, 2007) 12,900 9,985 2008 13,330 2007 203,940 203,940 Variance with (334) 184,853 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 $ 16,255 $ 538 $ 16,794 Supplies 1,200 1,200 2,478 (1,278) 1,402 Other services and charges 52,100 52,100 50,989 1,111 45,123 Total 70,093 70,093 69,722 371 63,319 Administrative Personal services 169,971 169,971 227,601 (57,630) 144,631 Supplies 400 400 81 319 - Other services and charges 8,250 8,250 1,610 6,640 4,549 Total 178,621 178,621 229,292 (50,671) 149,180 City clerk / elections Personal services 212,055 212,055 214,864 (2,809) 192,733 Supplies 27,935 27,935 25,169 2,766 21,293 Other services and charges 38,035 38,035 33,467 4,568 32,147 Total 278,025 278,025 273,500 4,525 246,173 Finance Personal services 168,881 168,881 154,685 14,196 139,037 Supplies 7,500 7,500 5,914 1,586 5,338 Other services and charges 12,700 12,700 4,053 8,647 3,083 Total 189,081 189,081 164,652 24,429 147,458 Professional services Other services and charges 217,000 217,000 213,220 3,780 196,880 Planning and zoning Personal services 190,830 190,830 192,979 (2,149) 169,864 Supplies 210 210 1,310 (1,100) 1,659 Other services and charges 12,900 12,900 9,985 2,915 13,330 Total 203,940 203,940 204,274 (334) 184,853 -60- CITY OF SHOREWOOD, MINNESOTA GENERALFUND SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES - CONTINUED BUDGET AND ACTUAL FOR THE YEAR ENDED DECEMBER 31, 2008 (With comparative actual amounts for the year ended December 31, 2007) 2008 EXPENDITURES - CONTINUED Current - Continued General government - Continued Municipal building Supplies Other services and charges Total City engineer Personal services Supplies Other services and charges Total Total general government Public safety Police protection Other services and charges Fire protection Other services and charges Animal control Other services and charges Protective inspection Personal services Supplies Other services and charges Total Total public safety Exhibit C -1 Budgeted Amounts Original Final Variance with Final Budget Actual Positive Amounts (Negative) Actual $ 76,314 $ 76,314 $ 26,531 $ 49,783 $ 34,518 149,000 149,000 116,950 32,050 100,227 (7,551) 291,368 225,314 225,314 143,481 81,833 134,745 25,060 21,390 116,634 122,126 122,126 124,019 (1,893) 119,803 875 875 688 187 1,485 16,435 16,435 7,506 8,929 9,184 128,134 128,134 139,436 139,436 132,213 7,223 130,472 1,352,254 1,501,510 1,501,510 1,430,354 71,156 1,253,080 867,500 867,500 895,059 (27,559) 823,021 311,860 311,860 319,411 (7,551) 291,368 25,060 25,060 - 25,060 21,390 116,634 116,634 130,390 (13,756) 118,166 400 400 5 395 291 11,100 11,100 7,389 3,711 9,685 128,134 128,134 137,784 (9,650) 128,142 1,332,554 1,332,554 1,352,254 (19,700) 1,263,921 -61- Streets and highways Personal services CITY OF SHOREWOOD, MINNESOTA 89,272 Exhibit C -1 (10,886) GENERAL FUND Supplies 62,000 62,000 SCHEDULE OF REVENUES, EXPENDITURES AND (20,993) 66,260 Other services and charges CHANGES IN FUND BALANCES - CONTINUED 32,000 14,284 17,716 BUDGET AND ACTUAL 9,736 (4,095) 4,458 Total FOR THE YEAR ENDED DECEMBER 31, 2008 183,272 197,435 (With comparative actual amounts for the year ended December 31, 2007) 2008 Snow and ice removal 2007 Variance with Personal services Budgeted Amounts Final Budget 33,874 5,292 Actual Positive Actual 44,500 Original Final Amounts (Negative) Amounts EXPENDITURES - CONTINUED Total 83,666 Current - Continued 68,605 15,061 69,189 Public works General maintenance Personal services $ 276,798 $ 276,798 $ 295,618 $ (18,820) $ 292,023 Supplies 65,050 65,050 77,290 (12,240) 70,206 Other services and charges 43,640 43,640 40,700 2,940 42,142 Total 385,488 385,488 413,608 (28,120) 404,371 Streets and highways Personal services 89,272 89,272 100,158 (10,886) 87,344 Supplies 62,000 62,000 82,993 (20,993) 66,260 Other services and charges 32,000 32,000 14,284 17,716 17,617 9,736 (4,095) 4,458 Total 183,272 183,272 197,435 (14,163) 171,221 Snow and ice removal Personal services 39,166 39,166 33,874 5,292 33,960 Supplies 44,500 44,500 34,731 9,769 35,229 Total 83,666 83,666 68,605 15,061 69,189 Traffic control Personal services - - - - 355 Supplies 1,500 1,500 2,873 (1,373) 4,067 Other services and charges 42,300 42,300 43,664 (1,364) 34,852 Total 43,800 43,800 46,537 (2,737) 39,274 Sanitation and waste removal Personal services 641 641 2,005 (1,364) 2,667 Supplies 500 500 32 468 - Other services and charges 4,500 4,500 7,699 (3,199) 1,791 Total 5,641 5,641 9,736 (4,095) 4,458 -62- Capital outlay General government Public safety Public works Culture and recreation Total capital outlay Debt service Principal Interest and other Total debt service TOTAL EXPENDITURES EXCESS OF REVENUES OVER EXPENDITURES 24,750 CITY OF SHOREWOOD, MINNESOTA 17,685 Exhibit C -1 54,133 GENERAL FUND 547,188 547,528 (340) SCHEDULE OF REVENUES, EXPENDITURES AND 9,500 9,500 - CHANGES IN FUND BALANCES - CONTINUED 639 - - BUDGET AND ACTUAL - 10,000 581,438 FOR THE YEAR ENDED DECEMBER 31, 2008 565,213 16,225 (With comparative actual amounts for the year ended December 31, 2007) 2008 - 2007 - 33,732 Variance with 7,890 7,890 Budgeted Amounts Final Budget 7,890 7,890 Actual Positive Actual 4,374,145 Original Final Amounts (Negative) Amounts EXPENDITURES - CONTINUED 805,000 Current - Continued 791,600 (13,400) 1,007,603 Public works - continued Tree maintenance Personal services $ 16,128 $ 16,128 $ 19,043 $ (2,915) $ 17,801 Supplies 3,150 3,150 333 2,817 502 Other services and charges 11,000 11,000 4,975 6,025 11,295 Total 30,278 30,278 24,351 5,927 29,598 Total public works 732,145 732,145 760,272 (28,127) 718,111 Culture and recreation Personal services 131,408 131,408 139,161 (7,753) 126,592 Supplies 12,400 12,400 14,810 (2,410) 8,836 Other services and charges 74,800 74,800 75,281 (481) 55,491 Total culture and recreation 218,608 218,608 229,252 (10,644) 190,919 Total current expenditures 3,784,817 3,784,817 3,772,132 12,685 3,426,031 Capital outlay General government Public safety Public works Culture and recreation Total capital outlay Debt service Principal Interest and other Total debt service TOTAL EXPENDITURES EXCESS OF REVENUES OVER EXPENDITURES 24,750 24,750 17,685 7,065 54,133 547,188 547,188 547,528 (340) 554,087 9,500 9,500 - 9,500 639 - - - - 10,000 581,438 581,438 565,213 16,225 618,859 - - - - 33,732 7,890 7,890 7,890 - 14,168 7,890 7,890 7,890 - 47,900 4,374,145 4,374,145 4,345,235 28,910 4,092,790 805,000 805,000 791,600 (13,400) 1,007,603 -63- CITY OF SHOREWOOD, MINNESOTA Exhibit C -1 GENERAL FUND SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES - CONTINUED BUDGET AND ACTUAL FOR THE YEAR ENDED DECEMBER 31, 2008 (With comparative actual amounts for the year ended December 31, 2007) 2008 2007 Budgeted Amounts Variance with Final Budget Actual Positive Actual -64- Original Final Amounts (Negative) Amounts OTHER FINANCING SOURCES (USES) Transfers in $ 140,000 $ 140,000 $ 40,000 $ (100,000) $ 40,000 Transfers out (945,000) (945,000) (885,000) 60,000 (670,000) TOTAL OTHER FINANCING SOURCES (USES) (805,000) (805,000) (845,000) (40,000) (630,000) NET CHANGE IN FUND BALANCES - - (53,400) (53,400) 377,603 FUND BALANCES, JANUARY 1 3,761,509 3,761,509 3,761,509 - 3,383,906 FUND BALANCES, DECEMBER 31 $ 3,761,509 $ 3,761,509 $ 3,708,109 $ (53,400) $ 3,761,509 -64- CITY OF SHOREWOOD, MINNESOTA Exhibit D -1 DEBT SERVICE FUNDS COMBINING BALANCE SHEET DECEMBER 31, 2008 -65- Waterford 2002/2003 2008 III Tax Public Safety Lease Revenue Increment Building Bond Total ASSETS Cash and temporary investments $ 11,834 $ - $ 3,147 $ 14,981 Cash with fiscal agent - 10,018,277 - 10,018,277 Receivables Accrued interest 66 - 18 84 Lease - 10,605,000 - 10,605,000 TOTAL ASSETS $ 11,900 $ 20,623,277 $ 3,165 $ 20,638,342 LIABILITIES AND FUND BALANCES LIABILITIES Deferred revenue $ - $ 10,605,000 $ - $ 10,605,000 FUND BALANCES Reserved for Debt service 11,900 10,018,277 3,165 10,033,342 TOTAL LIABILITIES AND FUND BALANCES $ 11,900 $ 20,623,277 $ 3,165 $ 20,638,342 -65- CITY OF SHOREWOOD, MINNESOTA DEBT SERVICE FUNDS COMBINING SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES FOR THE YEAR ENDED DECEMBER 31, 2008 REVENUES Lease payments Interest on investments TOTAL REVENUES EXPENDITURES Debt service Principal Interest and service charges TOTAL EXPENDITURES EXCESS (DEFICIENCY) OF REVENUES OVER (UNDER) EXPENDITURES OTHER FINANCING SOURCES Transfer in NET CHANGE IN FUND BALANCES FUND BALANCES, JANUARY 1 FUND BALANCES, DECEMBER 31 Exhibit D -2 Waterford 2002/2003 2008 III Tax Public Safety Lease Revenue Increment Building Bond Total $ - $ 1,037,241 $ - $ 1,037,241 342 401,855 49 402,246 342 1,439,096 49 1,439,487 - 485,000 - 485,000 2 970,065 - 970,067 2 1,455,065 - 1,455,067 340 (15,969) 49 (15,580) - 5,250 3,116 8,366 340 (10,719) 3,165 (7,214) 11,560 10,028,996 - 10,040,556 $ 11,900 $ 10,018,277 $ 3,165 $ 10,033,342 -66- CITY OF SHOREWOOD, MINNESOTA LIQUOR FUNDS SCHEDULES OF ASSETS, LIABILITIES AND NET ASSETS DECEMBER 31, 2008 AND 2007 Waterford Center 'Inno 11nn7 ASSETS CURRENT ASSETS Cash and temporary investments Receivables Accrued interest Accounts $ 237,478 $ 263,756 1,327 23 - 1,021 TOTAL ASSETS LIABILITIES CURRENT LIABILITIES Accounts and contracts payable NET ASSETS Unrestricted 238,805 264,800 7,131 $ 238,805 $ 257,669 -67- Exhibit E -1 Shorewo Plaza 2008 2007 Totals $ 653,529 $ 668,526 $ 3,653 2,726 - 1,021 657,182 672,273 7,788 2008 2007 891,007 $ 932,282 4,980 2,749 895,987 937,073 14,919 $ 657,182 $ 664,485 $ 895,987 $ 922,154 -68- CITY OF SHOREWOOD, MINNESOTA LIQUOR FUNDS SCHEDULES OF REVENUES, EXPENSES AND CHANGES IN FUND NET ASSETS FOR THE YEARS ENDED DECEMBER 31, 2008 AND 2007 Waterford Center 2008 2007 OPERATING REVENUES Sales $ - $ 792,259 Less cost of goods sold - (572,169) GROSS PROFIT - 220,090 OPERATING EXPENSES Personal services 5,649 112,343 Supplies (165) 3,779 Depreciation - 2,982 Professional services 2,250 26,490 Contracted services - 583 Insurance - 7,366 Utilities (16) 9,024 Rent - 66,938 Advertising - 3,840 Other 41 17,724 TOTAL OPERATING EXPENSES 7,759 251,069 OPERATING LOSS (7,759) (30,979) NONOPERATING REVENUES Interest on investments 8,895 419 Gain on sale of capital assets - 225,379 Other income - 985 TOTAL NONOPERATING REVENUES 8,895 226,783 INCOME BEFORE TRANSFERS 1,136 195,804 TRANSFERS Transfers out (20,000) (20,000) CHANGE IN NET ASSETS (18,864) 175,804 NET ASSETS, JANUARY 1 257,669 81,865 NET ASSETS, DECEMBER 31 $ 238,805 $ 257,669 -69- Exhibit E -2 Shorewood Plaza Totals 2008 2007 2008 2007 $ - $ 992,007 $ - $ 1,784,266 - (728,269) - (1,300,438) - 263,738 - 483,828 5,649 137,314 11,298 249,657 - 5,303 (165) 9,082 - 29,138 - 32,120 2,250 27,535 4,500 54,025 - 1,157 - 1,740 - 7,366 - 14,732 393 12,363 377 21,387 - 87,724 - 154,662 - 3,840 - 7,680 116 22,290 157 40,014 8,408 334,030 16,167 585,099 (8,408) (70,292) (16,167) (101,271) 21,105 18,566 30,000 18,985 - 157,511 - 382,890 - 3,584 - 4,569 21,105 179,661 30,000 406,444 12,697 109,369 13,833 305,173 (20,000) (20,000) (40,000) (40,000) (7,303) 89,369 (26,167) 265,173 664,485 575,116 922,154 656,981 $ 657,182 $ 664,485 $ 895,987 $ 922,154 -70- CITY OF SHOREWOOD, MINNESOTA LIQUOR FUNDS SCHEDULES OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 2008 AND 2007 Waterford Center 2008 2007 CASH FLOWS FROM OPERATING ACTIVITIES Receipts from customers and users $ 1,021 $ 791,238 Other receipts and payments, net - 985 Payments to suppliers, contractors and other governments (9,241) (616,571) Payments to employees (5,649) (126,776) NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES (13,869) 48,876 CASH FLOWS FROM NONCAPITAL FINANCING ACTIVITIES Transfers out (20,000) (20,000) CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES Proceeds from sale of capital assets - 230,800 CASH FLOWS FROM INVESTING ACTIVITIES Interest received on investments 7,591 679 NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (26,278) 260,355 CASH AND CASH EQUIVALENTS, JANUARY 1 263,756 3,401 CASH AND CASH EQUIVALENTS, DECEMBER 31 $ 237,478 $ 263,756 RECONCILIATION OF OPERATING LOSS TO NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES Operating loss $ (7,759) $ (30,979) Adjustments to reconcile operating income (loss) to net cash provided (used) by operating activities Other income related to operations - 985 Depreciation - 2,982 (Increase) decrease in assets: Accounts receivable 1,021 (1,021) Inventories - 98,041 Prepaid items - 1,952 Increase (decrease) in liabilities: Accounts and contracts payable (7,131) (1,315) Due to other governments - (7,336) Salaries and compensated absences payable - (14,433) NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES $ (13,869) $ 48,876 NONCASH CAPITAL AND RELATED FINANCING ACTIVITIES Retirement of capital assets $ - $ 5,421 -71- Exhibit E -3 Shorewood Plaza Totals 2008 2007 2008 2007 $ 1,021 $ 990,986 $ 2,042 $ 1,782,224 - 3,584 - 4,569 (10,547) (775,172) (19,788) (1,391,743) (5,649) (158,952) (11,298) (285,728) (15,175) 60,446 (29,044) 109,322 (20,000) (20,000) (40,000) (40,000) - 250,267 - 481,067 - 29,138 - 32,120 1,021 (1,021) 20,178 18,527 27,769 19,206 - 3,905 (7,788) (12,703) (14,919) (14,018) (14,997) 309,240 (41,275) 569,595 668,526 359,286 932,282 362,687 $ 653,529 $ 668,526 $ 891,007 $ 932,282 $ (8,408) $ (70,292) $ (16,167) $ (101,271) - 3,584 - 4,569 - 29,138 - 32,120 1,021 (1,021) 2,042 (2,042) - 142,308 - 240,349 - 1,953 - 3,905 (7,788) (12,703) (14,919) (14,018) - (10,883) - (18,219) - (21,638) - (36,071) $ (15,175) $ 60,446 $ (29,044) $ 109,322 $ - $ 92,756 $ - $ 98,177 -72- CITY OF SHOREWOOD, MINNESOTA Exhibit F -1 AGENCY FUND COMBINING SCHEDULE OF CHANGES IN ASSETS AND LIABILITIES FOR THE YEAR ENDED DECEMBER 31, 2008 Developer Escrow Accounts ASSETS Cash and temporary investments LIABILITIES Escrow deposits payable Balance Balance January 1 Additions Deductions December 31 $ 127,374 $ 52,640 $ (44,421) $ 135,593 $ 127,374 $ 52,640 $ (44,421) $ 135,593 -73- CITY OF SHOREWOOD, MINNESOTA Exhibit G -1 SUMMARY FINANCIAL REPORT REVENUES AND EXPENDITURES FOR GENERAL OPERATIONS GOVERNMENTAL FUNDS FOR THE YEARS ENDED DECEMBER 31, 2008 AND 2007 The purpose of this report is to provide a summary of financial information concerning the City of Shorewood to interested citizens. The complete financial 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. -74- Percent Total Increase 2008 2007 (Decrease) REVENUES Taxes $ 4,582,602 $ 4,332,741 5.77 % Licenses and permits 195,419 256,472 (23.80) Intergovernmental 753,605 224,286 236.00 Charges for services 50,753 50,819 (0.13) Fines and forfeits 53,369 77,777 (31.38) Special assessments - 418 (100.00) Investment earnings 641,846 621,234 3.32 Miscellaneous 1,053,916 1,077,012 (2.14) TOTAL REVENUES $ 7,331,510 $ 6,640,759 10.40 % Per Capita $ 963.28 $ 885.55 8.78 EXPENDITURES Current General government $ 1,443,549 $ 1,253,223 15.19 % Public safety 1,352,254 1,263,921 6.99 Streets and highways 760,287 718,350 5.84 Culture and recreation 229,259 190,931 20.07 Capital outlay General government 687,852 54,133 1,170.67 Public safety 556,561 554,087 0.45 Streets and highways 873,656 425,153 105.49 Culture and recreation 46,297 90,423 (48.80) Debt service Principal 485,000 534,594 (9.28) Interest and other charges 1,036,526 956,532 8.36 TOTAL EXPENDITURES $ 7,471,241 $ 6,041,347 23.67 % Per Capita $ 981.64 $ 805.62 21.85 Total Long -term Indebtedness $ 21,915,000 $ 21,090,000 3.91 % Per Capita $ 2,879.39 $ 2,812.37 2.38 General Fund Balance - December 31 $ 3,708,109 $ 3,761,509 (1.42) % Per Capita $ 487.20 $ 501.60 (2.87) The purpose of this report is to provide a summary of financial information concerning the City of Shorewood to interested citizens. The complete financial 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. -74- THIS PAGE IS LEFT BLANK INTENTIONALLY STATISTICAL SECTION This part of the City of Shorewood's comprehensive annual financial report presents detailed information as a context for understanding what the information in the financial statements, note disclosures, and required supplementary information says about the government's overall financial health. 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. 75 Revenue Capacity These schedules contain information to help the reader assess the government's most significant local revenue source, the property tax. 85 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. 92 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. 99 Operating Information These schedules contain service and infrastructure data to help the reader understand how the information in the government's financial report relocates to the services the government provides and the activities it performs. 102 CITY OF SHOREWOOD, MINNESOTA STATISTICAL SECTION (UNAUDITED) NET ASSETS BY COMPONENT LAST FIVE FISCAL YEARS (accrual basis of accounting) Fiscal Year Governmental activities Invested in capital assets, net of related debt Restricted Unrestricted Total governmental activities net assets 2004 2005 2006 $ 12,167,269 $ 11,372,213 $ 11,690,620 - - 24,632 6,669,073 6,316,707 5,716,027 $ 18,836,342 $ 17,688,920 $ 17,431,279 Business -type activities Invested in capital assets, net of related debt Unrestricted Total business -type activities net assets Total primary government Invested in capital assets, net of related debt Restricted Unrestricted Total primary government Note: Net assets are not available for years prior to 2004 $ 6,427,358 $ 6,172,309 $ 5,668,683 7,470,272 8,182,612 9,829,761 $ 13,897,630 $ 14,354,921 $ 15,498,444 $ 18,594,627 $ 17,544,522 $ 17,359,303 - - 24,632 14,139,345 14,499,319 15,545,788 $ 32,733,972 $ 32,043,841 $ 32,929,723 -75- Table 1 Fiscal Year Inm Innu $ 10,960,550 $ 9,430,566 6,147,185 7,400,859 $ 17,107,735 $ 16,831,425 $ 6,066,229 $ 6,631,854 10,422,397 10,186,824 $ 16,488,626 $ 16,818,678 $ 17,026,779 $ 16,062,420 16,569,5 82 17,587,683 $ 33,596,361 $ 33,650,103 -76- CITY OF SHOREWOOD, MINNESOTA STATISTICAL SECTION (UNAUDITED) CHANGES IN NET ASSETS LAST FIVE FISCAL YEARS (accrual basis of accounting) Fiscal Year 2004 2005 2006 Expenses Governmental activities General government $ 1,074,028 $ 1,222,510 $ 1,357,714 Public safety 2,972,094 1,690,903 1,806,915 Public works 2,446,325 5,019,967 2,275,402 Culture and recreation 254,081 246,381 233,881 Interest on long -term debt 607,862 606,189 600,723 Total governmental activities expenses 7,354,390 8,785,950 6,274,635 Business -type activities Water 591,858 567,854 488,513 Sewer 735,480 740,174 785,638 Recycling 106,933 105,823 124,354 Stormwater management utility 106,757 73,885 171,190 Liquor 2,152,411 2,006,107 2,017,217 Total business -type activities expenses 3,693,439 3,493,843 3,586,912 Total expenses $ 11,047,829 $ 12,279,793 $ 9,861,547 Program revenues Governmental activities Charges for services General government $ 51,069 $ 112,107 $ 25,340 Public safety 983,684 1,055,758 1,060,506 Culture and recreation 1,080 1,575 1,800 Operating grants and contributions 119,594 100,910 31,730 Capital grants and contributions 996,967 2,404,367 395,229 Total governmental activities program revenues 2,152,394 3,674,717 1,514,605 Business -type activities Charges for services Water 620,189 649,772 1,350,041 Sewer 866,350 833,939 836,175 Recycling 114,987 116,517 144,886 Stormwater management utility 85,978 102,649 129,708 Liquor 2,199,139 2,040,314 1,984,344 Operating grants and contributions - - - Total business -type activities program revenues 3,886,643 3,743,191 4,445,154 Total program revenues $ 6,039,037 $ 7,417,908 $ 5,959,759 -77- Table 2 Fiscal Year �nn� �nnQ $ 1,321,971 $ 1,483,913 1,819,250 1,906,890 1,971,571 2,485,752 258,906 273,054 1,000,230 1,002,423 6,371,928 7,152,032 636,506 657,776 952,107 921,238 91,157 96,945 63,888 106,143 1,885,537 16,167 3,629,195 1,798,269 $ 10,001,123 $ 8,950,301 $ 41,475 $ 32,528 896,731 793,041 1,960 605 99,800 90,493 132,912 674,343 1,172,878 1,591,010 782,549 752,338 832,956 829,117 89,934 64,629 164,413 204,618 1,788,835 - - 27,950 3,658,687 1,878,652 $ 4,831,565 $ 3,469,662 -78- CITY OF SHOREWOOD, MINNESOTA STATISTICAL SECTION (UNAUDITED) CHANGES IN NET ASSETS - CONTINUED LAST FIVE FISCAL YEARS (accrual basis of accounting) Fiscal Year 2004 2005 2006 Net revenues (expenses) Governmental activities $ (5,201,996) $ (5,111,233) $ (4,760,030) Business -type activities 193,204 249,348 858,242 Total primary government General Revenues and Other Changes in Net Assets General Revenues Governmental activities Taxes Property taxes, levied for general purpose Grants and contributions not restricted to specific programs Unrestricted investment earnings Loss on sale of capital assets Gain on sale of capital assets Transfers Total governmental activities general revenues Business -type activities Unrestricted investment earnings Gain on sale of capital assets Transfers Total business -type activities general revenues Total primary government Change in Net Assets Governmental activities Business -type activities Total primary government $ (5,008,792) $ (4,861,885) $ (3,901,788) $ 3,345,326 $ 3,770,702 $ 4,144,543 4,723 4,785 4,925 127,853 201,024 327,921 (5,500) - - - 4,300 - 5,000 (17,000) 25,000 3,477,402 3,963,811 4,502,389 144,163 190,943 310,281 (5,000) 17,000 (25,000) 139,163 207,943 285,281 $ 3,616,565 $ 4,171,754 $ 4,787,670 $ (1,724,594) $ (1,147,422) $ (257,641) 332,367 457,291 1,143,523 $ (1,392,227) $ (690,131) $ 885,882 Note: Changes in net assets are not available for years prior to 2004 -79- Table 2 Fiscal Year 2007 2,008 $ (5,199,050) $ (5,561,022) 29,492 80,383 $ (5,169,558) $ (5,480,639) $ 4,360,254 37,746 621,234 $ 4,582,909 19,957 641,846 (143,728) 40,000 4,875,506 5,284,712 434,072 289,669 382,890 - 143,728 (40,000) 960,690 249,669 $ 5,836,196 $ 5,534,381 $ (323,544) $ (276,310) oon IQ zznnci $ 666,638 $ 53,742 -80- CITY OF SHOREWOOD, MINNESOTA STATISTICAL SECTION (UNAUDITED) FUND BALANCES OF GOVERNMENTAL FUNDS LAST TEN FISCAL YEARS Fiscal Year 1999 2000 2001 2002 General fund Reserved $ 34,450 $ 35,500 $ 117,760 $ 44,994 Unreserved 1,531,901 1,713,680 1,905,309 2,112,984 Total general fund $ 1,566,351 $ 1,749,180 $ 2,023,069 $ 2,157,978 All other governmental funds Reserved $ 376,643 $ 303,857 $ 231,421 $ 246,283 Unreserved, reported in: Debt service funds - - - (37,482) Special revenue funds - - (8,342) - Capital project funds 1,635,871 1,461,012 2,560,347 10,081,818 Total all other governmental funds $ 2,012,514 $ 1,764,869 $ 2,783,426 $ 10,290,619 -81- Table 3 Fiscal Year 2003 2004 2005 2006 2007 2008 $ - $ - $ 48,593 $ - $ - $ 47,750 2,546,472 2,941,223 2,944,588 3,383,906 3,761,509 3,660,359 $ 2,546,472 $ 2,941,223 $ 2,993,181 $ 3,383,906 $ 3,761,509 $ 3,708,109 $ 205,350 $ 191,410 $ 238,873 $ 262,438 $ 10,040,556 $ 10,033,342 4,562,479 3,566,803 3,116,437 2,197,367 2,473,097 3,743,980 $ 4,767,829 $ 3,758,213 $ 3,355,310 $ 2,459,805 $ 12,513,653 $ 13,777,322 -82- CITY OF SHOREWOOD, MINNESOTA STATISTICAL SECTION (UNAUDITED) CHANGES IN FUND BALANCES OF GOVERNMENTAL FUNDS LAST TEN FISCAL YEARS Other financing sources (uses) Transfers in 557,850 589,675 554,000 629,100 Proceeds from sale of bonds - - - 9,950,000 Discount on long -term debt issued - - - - Transfers out (559,450) (497,800) (539,000) (609,100) Total other financing sources (uses) (1,600) 91,875 15,000 9,970,000 Net change in fund balances $ (93,211) $ (64,816) $ 1,292,446 $ 7,642,103 Debt service as a percentage of Noncapital expenditures 19.3% 7.3% 6.6% 5.8% -83- Fiscal Year 1999 2000 2001 2002 Revenues Taxes $ 2,204,851 $ 1,938,705 $ 2,206,525 $ 2,658,663 Licenses and permits 221,555 346,086 349,515 229,234 Intergovernmental 509,697 725,955 3,104,043 171,783 Charges for services 43,348 29,381 42,222 46,079 Fines and forfeitures 94,115 76,483 61,243 89,632 Special assessments 95,138 61,713 52,485 9,235 Interest on investments 110,500 248,334 225,500 283,024 Miscellaneous 78,079 144,241 71,236 375,510 Total revenues 3,357,283 3,570,898 6,112,769 3,863,160 Expenditures General government 850,852 984,586 989,502 1,001,921 Public safety 799,515 827,483 893,070 1,008,792 Public works 424,246 435,024 487,092 428,530 Culture and recreation 114,435 135,891 126,139 160,115 Capital Outlay 737,614 1,156,543 2,164,146 3,433,022 Debt service Principal 310,665 151,970 148,358 139,833 Interest 211,567 36,092 27,016 18,844 Bond issuance costs - - - - Total expenditures 3,448,894 3,727,589 4,835,323 6,191,057 Excess (deficiency) of revenues over (under) expenditures (91,611) (156,691) 1,277,446 (2,327,897) Other financing sources (uses) Transfers in 557,850 589,675 554,000 629,100 Proceeds from sale of bonds - - - 9,950,000 Discount on long -term debt issued - - - - Transfers out (559,450) (497,800) (539,000) (609,100) Total other financing sources (uses) (1,600) 91,875 15,000 9,970,000 Net change in fund balances $ (93,211) $ (64,816) $ 1,292,446 $ 7,642,103 Debt service as a percentage of Noncapital expenditures 19.3% 7.3% 6.6% 5.8% -83- Table 4 Fiscal Year 2003 2004 2005 2006 2007 2008 $ 3,071,853 $ 3,344,442 $ 3,750,633 $ 4,141,539 $ 4,332,741 $ 4,582,602 334,424 310,055 334,720 382,408 256,472 195,419 1,947,484 1,014,410 2,432,656 365,732 224,286 753,605 48,689 44,169 50,752 45,450 50,819 50,753 88,949 81,841 90,149 79,040 77,777 53,369 10,217 10,737 6,928 895 418 - 146,331 127,853 201,024 327,921 621,234 641,846 551,167 740,030 1,134,429 1,110,860 1,077,012 1,053,916 6,199,114 5,673,537 8,001,291 6,453,845 6,640,759 7,331,510 1,038,909 1,037,043 1,169,096 1,264,509 1,253,223 1,443,549 999,049 1,028,689 1,124,620 1,257,998 1,263,921 1,352,254 420,608 477,596 570,080 626,048 718,350 760,287 164,540 168,278 167,519 169,411 190,931 229,259 10,571,521 2,896,330 4,307,721 2,571,204 1,123,796 2,164,366 46,402 48,069 384,842 486,728 534,594 485,000 460,759 637,397 611,358 607,727 956,532 977,957 - - - - - 58,569 13,701,788 6,293,402 8,335,236 6,983,625 6,041,347 7,471,241 (7,502,674) (619,865) (333,945) (529,780) 599,412 (139,731) 391,107 328,500 542,000 635,000 770,091 933,366 2,368,378 - - - 10,000,000 1,310,000 - - - - (24,233) - (391,107) (323,500) (559,000) (610,000) (913,819) (893,366) 2,368,378 5,000 (17,000) 25,000 9,832,039 1,350,000 $ (5,134,296) $ (614,865) $ (350,945) $ (504,780) $ 10,431,451 $ 1,210,269 16.2% 11.2% 12.7% 20.1% 26.3% 23.1% -84- CITY OF SHOREWOOD, MINNESOTA STATISTICAL SECTION (UNAUDITED) TAX CAPACITY, MARKET VALUE AND ESTIMATED ACTUAL VALUE OF TAXABLE PROPERTY (Shown by year of tax collectability) -85- 1999 2000 2001 2002 Taxable market value Personal property $ - $ - $ - $ - Real estate - - - - Total taxable market value $ 626,118,400 $ 680,244,500 $ 769,858,900 $ 817,063,900 Estimated actual value of taxable property $ 625,522,200 $ 685,565,400 $ 795,637,300 $ 914,769,800 Taxable market value as a percentage of estimated actual value 100.10 % 99.22 % 96.76 % 89.32 % Tax capacity Personal property $ - $ - $ - $ - Real estate - - - - Tax capacity 9,663,252 10,346,255 11,344,958 8,690,552 Contribution to fiscal disparities pool (203,942) (201,693) (253,832) (171,024) Receivable from fiscal disparities pool 342,621 379,095 426,424 314,412 Tax increment (312,066) - - - Taxable valuation/Total tax capacity $ 9,489,865 $ 10,523,657 $ 11,517,550 $ 8,833,940 Tax levies General $ 1,860,507 $ 1,935,799 $ 2,208,574 $ 2,763,367 Debt service - - - - Total $ 1,860,507 $ 1,935,799 $ 2,208,574 $ 2,763,367 Direct tax rate General 19.573 % 18.340 % 19.208 % 31.923 % Debt service - - - - Total 19.573 % 18.340 % 19.208 % 31.923 % 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. -85- Table 5 -86- 2003 2004 2005 2006 2007 2008 $ 3,962,200 $ 3,831,300 $ 4,130,300 $ 4,361,600 $ 4,591,200 $ 4,336,600 914,769,800 1,033,460,200 1,173,029,000 1,318,313,000 1,475,529,200 1,597,262,400 $ 918,732,000 $ 1,037,291,500 $ 1,177,159,300 $ 1,322,674,600 $ 1,480,120,400 $ 1,601,599,000 $ 1,066,523,800 $ 1,415,129,000 $ 1,550,488,900 $ 1,416,341,600 $ 1,553,767,900 $ 1,645,188,300 86.14 % 73.30 % 75.92 % 93.39 % 95.26 % 97.35 % $ 78,073 $ 75,409 $ 81,333 $ 85,635 $ 89,872 $ 84,780 9,658,728 10,980,358 12,590,290 14,269,195 16,130,097 17,619,943 9,736, 801 11,055,767 12,671,623 14,354, 830 16,219,969 17,704,723 (184,657) (200,062) (213,988) (276,939) (308,590) (351,789) 344,682 396,666 379,072 399,944 407,687 445,780 $ 9,896,826 $ 11,252,371 $ 12,836,707 $ 14,477,835 $ 16,319,066 $ 17,798,714 $ 2,851,847 $ 2,907,997 $ 3,333,864 $ 3,678,592 $ 3,835,173 $ 4,056,917 305,000 512,232 496,792 511,803 561,135 555,078 $ 3,156,847 $ 3,420,229 $ 3,830,656 $ 4,190,395 $ 4,396,308 $ 4,611,995 28.816 % 25.843 % 25.971 % 25.408 % 23.501 % 22.793 % 3.082 4.552 3.870 3.535 3.439 3.119 31.898 30.396 % 29.841 % 28.944 % 26.940 % 25.912 % -86- CITY OF SHOREWOOD, MINNESOTA STATISTICAL SECTION (UNAUDITED) PROPERTY TAX CAPACITY RATES - DIRECT AND OVERLAPPING GOVERNMENTS (PER $1,000 OF TAX CAPACITY IN 1999 -2008) -87- 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 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 - 2007 26.940 39.110 24.793 9.911 1.121 0.743 7.310 - 2008 25.912 38.571 17.980 8.521 1.404 1.302 7.397 - Source: Hennepin County Assessor (1) Includes vocational school Overlapping rates are those of local 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). -87- Table 6 Totals School District No. 276 138.913 % Watershed School District District No.4 No. 277 Watershed Watershed Sewer Watershed District District District District No.3 No.4 No.2 No.3 138.858 % 138.913 % 138.913 % 136.721 % 126.001 126.342 126.342 124.147 112.966 112.549 112.549 106.057 112.355 112.367 112.367 117.856 115.738 111.308 111.308 107.471 109.125 109.089 109.089 100.354 104.644 104.743 104.743 98.905 100.958 100.673 100.673 88.528 99.224 98.846 98.846 84.342 91.264 91.162 91.162 81.805 -88- CITY OF SHOREWOOD, MINNESOTA STATISTICAL SECTION (UNAUDITED) PRINCIPAL TAXPAYERS DECEMBER 31, 2008 2008 Percent Tax of Total Taxpayer Capacity Rank Tax Capacity Big Box One, LLC Towle Real Estate Shurgard Storage Centers Inc South Lake Office Building, LLC Beacon Bank Kimberly & Frank Vennes The Mary Sue Simon Qprt Minnetonka Country Club Waterford Center LLP Luaina Santelli Two S Properties First State Bank Excelsior Shorewood Village Shopping Center, Inc. Thomas J. & Cynthia J. Redmond Xcel Energy (formerly Northern States Power Company) Second Half LLC Lawrence Reid Totals $ 159,250 1 0.89 % 129,250 2 0.73 77,250 3 0.43 70,750 4 0.40 64,250 5 0.36 62,025 6 0.35 54,638 7 0.31 54,090 8 0.30 53,250 9 0.30 49,288 10 0.28 $ 774,041 4.35 -89- Table 7 1999 Percent Tax of Total Capacity Rank Tax Capacity 32,823 6 0.35 64,970 2 0.68 47,800 4 0.50 109,326 1 1.15 62,559 3 0.66 45,250 5 0.48 32,441 7 0.34 28,760 8 0.30 24,932 9 0.26 22,986 10 0.24 $ 471,847 4.97 % -90- CITY OF SHOREWOOD, MINNESOTA STATISTICAL SECTION (UNAUDITED) PROPERTY TAX LEVIES AND COLLECTIONS LAST TEN FISCAL YEARS Percentage of Levy 99.18 % 99.32 99.10 98.96 99.21 99.12 98.76 98.94 98.27 98.59 Collection in subsequent years $ 15,306 13,056 19,594 28,193 20,015 27,949 46,139 36,068 59,305 (1) Includes state paid property tax credits. -91- Total $ 1,860,497 1,935,765 2,208,259 2,762,825 3,151,813 3,418,086 3,829,213 4,181,897 4,379,594 4,546,899 Table 8 Percent of Total Collections to Levy 100.00 % 100.00 99.99 99.98 99.84 99.94 99.96 99.80 99.62 98.59 (1) Collection Fiscal Total of Current Year Levy Year's Levy 1999 $ 1,860,507 $ 1,845,191 2000 1,93 5,779 1,922,709 2001 2,208,574 2,188,665 2002 2,763,367 2,734,632 2003 3,156,847 3,131,798 2004 3,420,229 3,390,137 2005 3,830,656 3,783,074 2006 4,190,395 4,145,829 2007 4,396,308 4,320,289 2008 4,611,995 4,546,899 Percentage of Levy 99.18 % 99.32 99.10 98.96 99.21 99.12 98.76 98.94 98.27 98.59 Collection in subsequent years $ 15,306 13,056 19,594 28,193 20,015 27,949 46,139 36,068 59,305 (1) Includes state paid property tax credits. -91- Total $ 1,860,497 1,935,765 2,208,259 2,762,825 3,151,813 3,418,086 3,829,213 4,181,897 4,379,594 4,546,899 Table 8 Percent of Total Collections to Levy 100.00 % 100.00 99.99 99.98 99.84 99.94 99.96 99.80 99.62 98.59 Table 9 CITY OF SHOREWOOD, MINNESOTA STATISTICAL SECTION (UNAUDITED) RATIO OF NET BONDED DEBT TO ASSESSED VALUE AND NET BONDED DEBT PER CAPITA LAST TEN FISCAL YEARS Note: Details regarding the City's outstanding debt can be found in the notes to the financial statements. See the Schedule of Demographic and Economic Statistics on page 99 for population data. See the Schedule of Tax Capacity, Market Value and Estimated Actual Value of Taxable Property for property value information. -92- Business - Type Governmental Activities Activities General Tax Lease General Total Percentage of Fiscal Obligation Increment Revenue Capital Obligation Primary personal Per Year Bonds Bonds Bonds Leases Revenue Bonds Government income Capita 1999 $ 410,000 $ 285,000 $ - $ 255,795 $ 2,290,000 $ 3,240,795 1.15 % $ 462 2000 280,000 - - 233,826 2,100,000 2,613,826 0.82 353 2001 155,000 - - 210,468 1,915,000 2,280,468 0.69 302 2002 40,000 - 9,950,000 185,635 1,730,000 11,905,635 3.57 1,569 2003 20,000 - 12,365,000 159,233 2,360,000 14,904,233 4.33 1,962 2004 - - 12,365,000 131,134 2,170,000 14,666,134 4.00 1,923 2005 - - 12,010,000 101,322 2,745,000 14,856,322 3.97 1,967 2006 - - 11,555,000 69,594 3,920,000 15,544,594 4.18 2,073 2007 - - 21,090,000 - 3,665,000 24,755,000 6.56 3,301 2008 - - 21,915,000 - 3,415,000 25,330,000 5.88 3,199 Note: Details regarding the City's outstanding debt can be found in the notes to the financial statements. See the Schedule of Demographic and Economic Statistics on page 99 for population data. See the Schedule of Tax Capacity, Market Value and Estimated Actual Value of Taxable Property for property value information. -92- CITY OF SHOREWOOD, MINNESOTA STATISTICAL SECTION (UNAUDITED) RATIOS OF GENERAL BONDED DEBT OUTSTANDING LAST TEN FISCAL YEARS Table 10 Percentage of Less Value of Per Amounts Capita General Available in Net Fiscal Obligation Debt Service Bonded Year Bonds Funds Debt 1999 $ 410,000 $ 367,111 $ 42,889 2000 280,000 294,605 (14,605) 2001 155,000 221,837 (66,837) 2002 40,000 116,688 (76,688) 2003 20,000 108,925 (88,925) 2004 - - - 2005 - - - 2006 - - - 2007 - - - 2008 - - - Table 10 Percentage of Estimated Actual Value of Per Taxable Property Capita 0.01 % $ 6 (0.00) (2) (0.01) (9) (0.01) (10) (0.01) (12) Note: Details regarding the City's outstanding debt can be found in the notes to the financial statements. See the Schedule of Demographic and Economic Statistics on page 99 for population data. See the Schedule of Tax Capacity, Market Value and Estimated Actual Value of Taxable Property for property value -93- CITY OF SHOREWOOD, MINNESOTA STATISTICAL SECTION (UNAUDITED) COMPUTATION OF DIRECT AND OVERLAPPING DEBT DECEMBER 31, 2008 Direct Debt City of Shorewood Overlapping Debt School District #276 School District #277 Hennepin County Henn Suburban Park District Henn Regional RR Authority Metropolitan Council Total Overlapping Debt Total Direct and Overlapping Debt Table 11 Gross Amount Bonded of Debt Used Percentage Net Debt For Net Debt Net Applicable to Applicable Calculation Debt District to District $ - $ - 100.00 % $ - $ 73,209,548 $ 61,408,100 23.79 % $ 14,608,987 5,785,000 5,407,748 2.35 127,082 506,840,000 501,975,359 1.23 6,174,297 82,325,000 72,794,815 1.63 1,186,555 43,895,000 43,486,862 1.23 534,888 189,490,000 137,904,653 0.55 758,476 $ 901,544,548 $ 822,977,537 2.84 % $ 23,390,285 $ 901,544,548 $ 822,977,537 2.84 % $ 23,390,285 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 of those 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. -94- CITY OF SHOREWOOD, MINNESOTA STATISTICAL SECTION (UNAUDITED) LEGAL DEBT MARGIN INFORMATION LAST TEN FISCAL YEARS Fiscal Year 1999 2000 Debt limit $ 12,522,368 $ 13,604,890 Total net debt applicable to limit Legal debt margin Total net debt applicable to the limit as a percentage of debt limit 2001 2002 $ 15,397,178 $ 16,341,278 42,889 (14,605) (66,837) (76,688) $ 12,479,479 $ 13,619,495 $ 15,464,015 $ 16,417,966 0.3% (0.1 0/2) (0.4%) (0.5%) Note: Under state law, the City's outstanding general obligation debt should not exceed 3 percent of the market value of taxable property. The percentage was changed to 3 percent for fiscal year 2008, prior to that, the percentage was 2 percent. By law, the general obligation debt subject to the limitation may be offset by amounts set aside for the extinguishment of those obligations. -95- Table 12 Fiscal Year 2003 2004 2005 2006 2007 2008 $ 18,374,640 $ 20,745,830 $ 23,543,186 $ 26,453,492 $ 29,602,408 $ 48,047,970 (88,925) - - - - - $ 18,463,565 $ 20,745,830 $ 23,543,186 $ 26,453,492 $ 29,602,408 $ 48,047,970 (0.5 %) - - - Legal Debt Margin Calculation for Fiscal Year 2008 Taxable market value Debt limit (3% 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 $ 1,601,599,000 $ 48,047,970 $ 48,047,970 .M CITY OF SHOREWOOD, MINNESOTA Table 13 STATISTICAL SECTION (UNAUDITED) PLEDGED - REVENUE COVERAGE LAST TEN FISCAL YEARS (1) (2) Including interest and other income Excluding depreciation and interest on bonds -97- General Obligation Revenue Bonds (1) Net Fiscal Gross (2) Revenue Debt Service Year Revenue Expenses Available Principal Interest Coverage 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 2007 965,717 259,056 706,661 255,000 172,050 1.65 2008 857,890 278,164 579,726 250,000 142,589 1.48 Tax Increment Bonds Revenue from Fiscal Property Debt Service Year Taxes Principal Interest Coverage 1999 $ 334,124 $ 155,000 $ 168,043 1.03 2000 - - 861 - 2001 - - - - 2002 - - - - 2003 - - - - 2004 - - - - 2005 - - - - 2006 - - - - 2007 - - - - 2008 - - - - (1) (2) Including interest and other income Excluding depreciation and interest on bonds -97- CITY OF SHOREWOOD, MINNESOTA Table 13 STATISTICAL SECTION (UNAUDITED) PLEDGED - REVENUE COVERAGE - CONTINUED LAST TEN FISCAL YEARS Lease Revenue Bonds Fiscal Year 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 Revenue from Lease Debt Service Payments Principal 447,704 620,596 948,384 1,040,693 1,034,751 1,037,241 -98- 355,000 455,000 465,000 485,000 Interest 447,704 624,650 588,384 589,056 941,222 970,065 Coverage 1.00 0.99 1.01 1.00 0.74 0.71 Capital Leases Revenue from Fiscal Property Debt Service Year Taxes Principal Interest Coverage 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 2007 73,406 69,594 3,812 1.00 2008 - - - - Lease Revenue Bonds Fiscal Year 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 Revenue from Lease Debt Service Payments Principal 447,704 620,596 948,384 1,040,693 1,034,751 1,037,241 -98- 355,000 455,000 465,000 485,000 Interest 447,704 624,650 588,384 589,056 941,222 970,065 Coverage 1.00 0.99 1.01 1.00 0.74 0.71 THIS PAGE IS LEFT BLANK INTENTIONALLY CITY OF SHOREWOOD, MINNESOTA Table 14 DEMOGRAPHIC AND ECONOMIC STATISTICS LAST TEN FISCAL YEARS Data Sources: (1) Metropolitan Council (2) Bureau of Economic Analysis (3) US Census Bureau (4) US Census Bureau 2000 (5) Minnesota 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. -99- Percent of population Total Per Capita which has a Fiscal Personal Personal Median bachelor's or post Unemployment Year Population (1) Income (2) Income (2) Age (3) graduate degree (4) Rate (5) 1999 7,008 $ 280,866,624 $ 40,078 34.4 2.2 % 2000 7,400 318,755,000 43,075 38.7 58.8 % 2.7 2001 7,540 328,389,620 43,553 38.7 3.5 2002 7,590 333,254,130 43,907 38.7 4.4 2003 7,595 344,387,680 45,344 38.7 4.7 2004 7,625 366,343,125 48,045 38.7 4.3 2005 7,551 374,272,866 49,566 38.7 3.8 2006 7,499 371,695,434 49,566 38.7 3.3 2007 7,611 377,246,826 49,566 38.7 4.7 2008 7,917 430,882,725 54,425 39.0 7.3 Data Sources: (1) Metropolitan Council (2) Bureau of Economic Analysis (3) US Census Bureau (4) US Census Bureau 2000 (5) Minnesota 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. -99- CITY OF SHOREWOOD, MINNESOTA PRINCIPAL EMPLOYERS CURRENT YEAR AND NINE YEARS AGO 2008 Percentage of Total City Employer Employees Rank Employment Minnewashta Elementary School 351 1 N/A % Cub Foods 125 2 N/A Xcel Energy 60 3 N/A Beacon Bank 39 4 N/A City of Shorewood 34 * 5 N/A Minnetonka County Club 30 6 N/A Driscoll's Supervalu - N/A Total Source: Minnesota Department of Employment and Economic Development * Includes part-time and temporary seasonal employees. N/A - indicates not available 639 - % -100- Table 15 1999 309 - % -101- Percentage of Total City Employees Rank Employment N/A 90 2 N/A N/A 54 * 3 N/A 50 4 N/A 115 1 N/A 309 - % -101- CITY OF SHOREWOOD, MINNESOTA Table 16 FULL -TIME EQUIVALENT CITY GOVERNMENT EMPLOYEES BY FUNCTION LAST TEN FISCAL YEARS (1) Function 2006 2007 2008 General government 13 13 13 Public works Engineering Maintenance 6 6 6 Culture and recreation Parks 13 5 5 Water 1.5 1.5 1.5 Sewer 1.5 1.5 1.5 Municipal Liquor 3 2 - Total 38 29 27 Source: City of Shorewood (1) Information prior to 2006 was not maintained by the City. The table will be updated on a go- forward basis. -102- CITY OF SHOREWOOD, MINNESOTA Table 17 OPERATING INDICATORS BY FUNCTION LAST TEN FISCAL YEARS (1) Function 2006 2007 2008 Building/engineering Permits issued 1,137 710 686 Public works Street sweeping (hours) 1,000 1,614 1,500 Snowplowing (hours) 2,000 1,394 1,508 Equipment repair (hours) 2,080 2,080 2,080 Water New connections 24 22 13 Water mains breaks 3 7 3 Average daily consumption (thousands of gallons) 482,000 482,000 482,000 Sewer Average daily treatment flow (thousands of gallons) 1,000,000 1,000,000 1,000,000 Sources: Various government departments. Note: Indicators are not available for the general government function. (1) Information prior to 2006 was not maintained by the City. The table will be updated on a go- forward basis -103- CITY OF SHOREWOOD, MINNESOTA CAPITAL ASSET STATISTICS BY FUNCTION LAST TEN FISCAL YEARS (1) Function 2006 Table 18 2007 2008 Public Works Highways and streets Streets (miles) 50 51 Street lights 194 194 Traffic signals 5 5 Culture and recreation Parks division Parks 7 7 Parks acreage 102 102 Baseball diamonds 5 5 Basketball courts 1 1 Bike trails (miles) 2.45 2.45 Hockey rinks /outdoor 3 3 Softball diamonds 3 3 Swimming areas 1 1 Tennis courts 5 5 Volleyball courts 2 2 Utilities Water Miles of water main 27 28 Consumers 1,265 1,297 Maximum daily capacity (gallons) 919,000 919,000 Sewer Miles of sanitary sewer 60 60 Lift stations 14 14 Maximum daily treatment capacity (gallons) 1,000,000 1,000,000 Storm sewer Miles of storm sewer 12 12 Source: Various city departments Note: No capital asset indicators are available for the general government function. (1) Information prior to 2006 was not maintained by the City. The table will be updated on a go- forward basis. 51 194 5 7 102 5 1 2.45 3 3 1 5 2 28 1,310 919,000 60 14 1,000,000 12 -104-