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2009 Comp. Annual Financial ReportCITY OF SHOREWOOD SHOREWOOD, MINNESOTA COMPREHENSIVE ANNUAL FINANCIAL REPORT FOR THE YEAR ENDED DECEMBER 31, 2009 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, 2009 Exhibit Page No. I. INTRODUCTORY SECTION Elected and Appointed Officials 7 Organization Chart 8 Letter of Transmittal from Finance Director /Treasurer 9 Certification of Achievement for Excellence in Financial Reporting 15 II. FINANCIAL SECTION Independent Auditor's Report 19 Management's Discussion and Analysis 23 Basic Financial Statements Government -wide Financial Statements Statement of Net Assets 1 37 Statement of Activities 2 38 Fund Financial Statements Governmental Funds Balance Sheet 3 42 Reconciliation of the Balance Sheet to the Statement of Net Assets 4 45 Statement of Revenues, Expenditures and Changes in Fund Balances 5 46 Reconciliation of the Statement of Revenues, Expenditures and Changes in Fund Balances to the Statement of Activities 6 48 General Fund Statement of Revenues, Expenditures and Changes in Fund Balances - Budget and Actual 7 49 Proprietary Fund Statements of Net Assets 8 50 Statements of Revenues, Expenses and Changes in Fund Net Assets 9 52 Statements of Cash Flows 10 54 Fiduciary Fund Statement of Net Assets 11 58 Notes to the Financial Statements 59 Combining and Individual Fund Financial Statements and Schedules Nonmajor Governmental Funds Combining Balance Sheet A -1 86 Combining Statement of Revenues, Expenditures and Changes in Fund Balances (Deficits) A -2 88 Nonmajor Proprietary Funds Combining Statements of Net Assets B -1 92 Combining Statements of Revenues, Expenses and Changes in Fund Net Assets B -2 94 Combining Statements of Cash Flows B -3 96 General Fund Schedule of Revenues, Expenditures and Changes in Fund Balances - Budget and Actual C -1 98 Debt Service Funds Combining Balance Sheet D -1 104 Combining Schedule of Revenues, Expenditures and Changes in Fund Balances D -2 105 -1- THIS PAGE IS LEFT BLANK INTENTIONALLY -2- CITY OF SHOREWOOD, MINNESOTA TABLE OF CONTENTS - CONTINUED DECEMBER 31, 2009 Exhibit Pau No. II. FINANCIAL SECTION - CONTINUED Combining and Individual Fund Statements and Schedules Agency Fund Combining Schedule of Changes in Assets and Liabilities E -1 106 Supplementary Information Summary Financial Report (Unaudited) Revenues and Expenditures for General Operations - Governmental Funds F -1 109 Table III STATISTICAL SECTION (UNAUDITED) Net Assets by Component 1 114 Changes in Net Assets 2 116 Fund Balances of Governmental Funds 3 120 Changes in Fund Balances of Governmental Funds 4 122 Tax Capacity, Market Value and Estimated Actual Value of Taxable Property 5 124 Property Tax Capacity Rates - Direct and Overlapping Governments 6 126 Principal Taxpayers 7 128 Property Tax Levies and Collections 8 130 Ratio of Net Bonded Debt to Assessed Value and Net Bonded Debt Per Capita 9 131 Ratios of General Bonded Debt Outstanding 10 132 Computation of Direct and Overlapping Debt 11 133 Legal Debt Margin Information 12 134 Pledged- Revenue Coverage 13 136 Demographic and Economic Statistics 14 137 Principal Employers 15 138 Full -Time Equivalent City Government Employees by Function 16 140 Operating Indicators by Function 17 141 Capital Asset Statistics by Function 18 142 -3- THIS PAGE IS LEFT BLANK INTENTIONALLY -4- INTRODUCTORY SECTION CITY OF SHOREWOOD SHOREWOOD, MINNESOTA YEAR ENDED DECEMBER 31, 2009 THIS PAGE IS LEFT BLANK INTENTIONALLY -6- CITY OF SHOREWOOD, MINNESOTA ELECTED AND APPOINTED OFFICIALS DECEMBER 31, 2009 ELECTED Name Title Christine Lizde Mayor Jeffery Bailey Council Member Laura Turgeon Council Member Richard Woodruff Council Member Scott Zerby Council Member APPOINTED Name Title Brian Heck City Administrator Bonnie Burton Finance Director /Treasurer Term Expires 12/31/10 12/31/10 12/31/10 12/31/12 12/31/12 -7- • JPA Police Fire LMCD LMCC Finance Dir Sr Acct Clerk IT /Phones Island Fire Assessor Recycling Park /Recreation Community Center Plan /Zone Dir Planning, Bldg Asst Official Residents Council Administrator Deputy Clerk Recep- tionist Comm Coord Web Tech Advisory Boards Plan Commission Park Commission Attorney Engineer M Pub Works Dir Utiliites Parks - Maint. Streets CITY OF SHOREWOOD 5755 COUNTRY CLUB ROAD • SHOREWOOD, MINNESOTA 55331 -8927 • (952) 474 -3236 FAX (952) 474 -0128 • www.ci.shorewood.mmus • cityha11@ci.shorewood.mn.us May 25, 2010 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, 2009, 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. 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 from 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. The City of Shorewood's financial statements have been audited by the firm of Abdo, Eick & Meyers, LLP, Certified Public Accountants. The goal of the audit was to provide reasonable assurance that the financial statements of the City for the year ended December 31, 2009, are free of material misstatement. The independent audit involved examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates used by management; and evaluating the overall financial statement presentation. Based upon the audit, the independent auditor concluded that there was reasonable basis for rendering an unqualified opinion that the City's financial statements, for the is PRINTED ON RECYCLED PAPER -9- year ended December 31, 2009, are fairly presented in conformity with GAAP. The independent auditors report is present in the financial section of this report. The independent auditor's report is presented at the front of the financial section of this report. GAAP requires that management provide a narrative introduction, overview, and analysis to accompany the basic financial statements in the form of Management's Discussion and Analysis (MD &A). The City's MD &A can be found in the financial section of this report immediately following the independent auditor's report. City Profile The City of Shorewood is a suburban community located southwest of the Twin Cities on the southern shore of Lake Minnetonka, a setting of rolling hills and picturesque lakes and creeks. Shorewood has a convenient location, a comprehensive system of highways, and is a short distance from downtown Minneapolis and St. Paul and the Minneapolis -St. Paul International Airport. 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 7,929 as of 2009. The City, which is currently 95% developed, continues to experience some 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. Incorporated in 1956 as a City, 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- member council, elected 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 City Administrator /Clerk is responsible for overseeing the day -to -day operations of the government, and to assign responsibility to City staff for the efficient and effective delivery of City services. 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 and fire protection, street maintenance, recreation programs, park maintenance, community and economic development, and administrative services, including building inspections. During 2009, the City operated four enterprises: a water utility; sanitary sewer; recycling; and storm -water management utilities. The City discontinued its off -sale liquor operation when it 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. Economic Conditions and Outlook Governance The City Council, in its leadership role, has effectively established a focus for government 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 -10- 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 annual budget serves as the foundation of the City of Shorewood's financial planning and control. Departments submit budget requests to Finance in May and the City Administrator presents the proposed budget to the City Council for review prior to September 15` of each year. Budget work - sessions are usually held with the City Council in July and August. The City Council holds a public hearing on the proposed budget and adopts the final budget in December each year. The budget is prepared by fund, function, and department. The City's directors develop their departmental budgets, with subsequent review and input from the City Administrator and Finance Director. Any changes in the total budget must be approved by the City Council. 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. Debt Administration As of December 31, 2009, the City's debt outstanding totaled $16,460,000. Of this total, $12,010,000 is lease revenue bonds issued in 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, which was completed in 2009. The City of Shorewood's bond rating was upgraded to Aa2 from Aa3 in July, 2008, by Moody's 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. -11- General obligation revenue bonds at year end are $3,165,000. The proceeds from these bonds financed water system extensions and improvements and will be repaid from special assessments and water rate revenues. Long -term Financial Planning The City has implemented various financial/ budget policies to guide the City Council and staff when making financial decisions to ensure the long -term stability and flexibility of City finances and operations. These policies include the following: • The original budget should be balanced with revenues equal to expenditures, • The City will designate as fund balance for working capital in the General Fund 55 -60% of the next years' General fund expenditures and transfers, in accordance with the General Fund Balance Policy adopted by the Council. This policy ensures 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. In accordance with this policy, budgeted use of General Fund reserves in 2009 was $160,000. • The City will maintain a five -year capital improvement plan to provide for capital asset acquisition, maintenance, replacement, and retirement. • The City continues its plan to accumulate resources for future capital equipment and improvement projects; amounts were transferred to various capital project funds in 2009. Budgeted transfers for capital improvement purposes during 2009 were $1,030,000. Major Initiatives The City is in the process of updating its comprehensive plan which was submitted to the Metropolitan Council in 2009. An overview of demographic and economic trends points to a number of important factors that will shape the community between now and future years. • Shorewood and the surrounding region will experience increased traffic congestion • Cultural diversity will increase in Shorewood and Minnesota as a whole. • The majority of Baby Boomers will reach "official" retirement age of 65 within approximately seven years. • Depending on location and market demand, some properties may experience redevelopment pressure. Other initiatives during the year included the following: The City of Shorewood took over the operations of the Southshore Community Center in 2009. The Center was built in the late 1990's as a joint venture by the following five Lake Minnetonka Area Cities: Shorewood, Excelsior, Tonka Bay, Deephaven and Greenwood. Until recently, the center was leased to an organization that emphasized senior programming. Many of the senior - oriented programs still remain during the day, and these are a critical component, but center renovations were made to attract new renters, including businesses, teachers, and wedding parties. Shorewood has contracted with new management for the Southshore Center, and after minor updates to the facility, new programs have been developed to attract all ages. The Southshore Center's revived use by community residents of all ages has generated enthusiasm and participation. -12- The City of Shorewood adopted a 20 year road program in 2008. Specifically, the goal of the program is to repair through reconstruction or reclamation, roads that score four (4) or lower on the PASER evaluation system. The Council has directed staff to evaluate methods for funding the program. Staff is reviewing various options, including a comprehensive bonding program; an assessment policy; transfers of assets from other funds; or some combination of the above. It is expected that implementation of this program will commence in 2010. The City established the Community Infrastructure Fund by designating $1,000,000 in reserves to be made available for use as an internal loan find for infrastructure projects benefitting the City as a whole. Certificate of Achievement The Government Finance Officers Association of the United States and Canada (GFOA) awarded a Certificate of Achievement for Excellence in Financial Reporting to the City of Shorewood for its comprehensive annual financial report (CAFR) for the fiscal year ended December 31, 2008. The Certificate of Achievement is a prestigious national award - recognizing conformance with the highest standards for preparation of state and local government financial reports. In order to be awarded a Certificate of Achievement, a government unit must publish an easily readable and efficiently organized comprehensive annual financial report whos•° contents conform to program standards. Such comprehensive annual Financial report must Jat y bo':h generally accepted accounting principles and applicable legal requirements. A Certificate of Achievement is valid for a period of one year. The City of Shorewood has received a Certificate of Achievement for the past sixteen consecutive years. We believe our current report continues to conform to 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. &Jmc-, Bonnie Burton Finance Director /Treasurer -13- Respectfully submitted, THIS PAGE IS LEFT BLANK INTENTIONALLY -14- 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, 2008 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. NTED ST AND N CA C P.OAPURATbN mIPAs° President Executive Director -15- THIS PAGE IS LEFT BLANK INTENTIONALLY 9 r FINANCIAL SECTION CITY OF SHOREWOOD SHOREWOOD, MINNESOTA YEAR ENDED DECEMBER 31, 2009 -17- THIS PAGE IS LEFT BLANK INTENTIONALLY sill ABDO EICK & r,&l- MEYERS 1.1.P Certified Public iten uatmtts & Catsult1utts 5201 Eden Avenue Suite 370 Edina. NIN 5.51.36 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, 2009, 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 2008 financial statements and, in our report dated May 25, 2009; 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, 2009, 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. Accounting principles generally accepted in the United States of America require that the Management's Discussion and Analysis on pages 23 through 33 be presented to supplement the basic financial statements. Such information, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board, who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management's responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance. 952.837.9090 • Fax 952.835.3261 -19- www.aemcpas.com THIS PAGE IS LEFT BLANK INTENTIONALLY -20- Our audit was conducted for the purpose of forming an opinion on the basic financial statements that collectively comprise the City's basic financial statements as a whole. The introductory section, combining and individual fund financial statements and schedules, supplementary information, and statistical section 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 are the responsibility of management and were derived from and relate directly to the underlying accounting and other records used to prepare the financial statements. The information has been subjected to the auditing procedures applied in the audit of the basic financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the financial statements or to the financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the information is fairly stated in all material respects in relation to the financial statements as a whole. The introductory section, supplementary information, and statistical sections have not been subjected to the auditing procedures applied in the audit of the basic financial statements and, accordingly, we do not express an opinion or provide any assurance on it. May 25, 2010 Minneapolis, Minnesota OL&&k4" ABDO, EICK & MEYERS, LLP Certified Public Accountants 952.835.9090 • Fax 952.835.3261 -21 www.aemepas.com THIS PAGE IS LEFT BLANK INTENTIONALLY -22- May 25, 2010 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, 2009. Financial Highlights • The assets of the City exceeded its liabilities at the close of the most recent fiscal year by $33,320,927 (net assets). Of this amount, $17,358,316 (unrestricted net assets) may be used to meet the City's ongoing obligations to residents and creditors. • The City's total net assets decreased $329,176, 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 $9,743,222, a decrease of $7,742,209 in comparison with the prior year. This decrease is due to revenues under expenditures and $8,100,000 of refunded bonds. Approximately 80 percent of this total amount, $7,808,094, is available for spending at the City's discretion. • At the end of the current fiscal year, unreserved fund balance for the General fund was $3,555,224, or 66 percent of total 2010 budgeted expenditures. While these funds are not legally reserved, they are designated for future purposes. • The City's total debt decreased $8,848,588, or 35 percent during the current fiscal year. The key factor in this decrease was lease revenue bonds that were refunded in the amount of $8,100,000 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. -23- Management Discussion and Analysis - Continued May 25, 2010 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 Discussion and Statements Analysis Government -wide I I Fund Financial Financial Required Supplementary Information Notes to the Financial Statements Statements Statements L Summary Detail -24- Management Discussion and Analysis - Continued May 25, 2010 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. -25- 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. -25- Management Discussion and Analysis - Continued May 25, 2010 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 start on page 37 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 14 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, Debt Service, and Street Reconstruction 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 start on page 42 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 start on page 50 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 58 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 start on page 59 of this report. -26- Management Discussion and Analysis - Continued May 25, 2010 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 starts on page 86 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 $33,320,927 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 Net assets Invested in capital assets, net of related debt 9,480,314 9,430,566 49,748 6,482,297 6,631,854 (149,557) Unrestricted 7,909,106 7,400,859 508,247 9,449,210 10,186,824 (737,614) Total net assets $ 17,389,420 $ 16,831,425 $ 557,995 $ 15,931,507 $ 16,818,678 $ (887,171) The balance of unrestricted net assets is $17,358,316. This maybe used to meet the City's ongoing obligations to citizens and creditors. -27- Governmental Activities Business -type Activities Increase Increase 2009 2008 (Decrease) 2009 2008 (Decrease) Assets Cash and temporary investments $ 8,324,911 $ 7,290,049 $ 1,034,862 $ 8,632,487 $ 9,574,004 $ (941,517) Cash with fiscal agent 1,909,864 10,018,708 (8,108,844) 114,058 115,033 (975) Receivables 10,530,707 12,091,794 (1,561,087) 738,500 901,367 (162,867) Internal balances (60,000) (110,000) 50,000 60,000 110,000 (50,000) Prepaids 2,837 47,750 (44,913) 13,041 12,204 837 Deferred charges 178,568 190,253 (11,685) 70,132 78,216 (8,084) Capital assets 10,765,314 10,740,566 24,748 9,647,297 10,046,854 (399,557) Total assets 31,652,201 40,269,120 (8,616,919) 19,275,515 20,837,678 (1,562,163) Liabilities Noncurrent liabilities 13,488,733 22,087,321 (8,598,588) 3,165,000 3,415,000 (250,000) Other liabilities 774,048 1,350,374 (576,326) 179,008 604,000 (424,992) Total liabilities 14,262,781 23,437,695 (9,174,914) 3,344,008 4,019,000 (674,992) Net assets Invested in capital assets, net of related debt 9,480,314 9,430,566 49,748 6,482,297 6,631,854 (149,557) Unrestricted 7,909,106 7,400,859 508,247 9,449,210 10,186,824 (737,614) Total net assets $ 17,389,420 $ 16,831,425 $ 557,995 $ 15,931,507 $ 16,818,678 $ (887,171) The balance of unrestricted net assets is $17,358,316. This maybe used to meet the City's ongoing obligations to citizens and creditors. -27- Management Discussion and Analysis - Continued May 25, 2010 Governmental activities. Governmental activities increased the City's net assets by $557,995. Key elements of this increase are attributable to interfund transfers. Changes in Net Assets Increase (decrease) in net assets before transfers Governmental Activities (316,310) Business -type Activities 152,829 370,052 (217,223) Transfers Increase 40,000 1,000,000 Increase (40,000) 2009 2008 (Decrease) 2009 2008 (Decrease) Revenues (1,217,223) Net assets, January 1 16,831,425 17,107,735 (276,310) 16,818,678 Program revenues 330,052 Net assets, December 31 $ 17,389,420 $ 16,831,425 $ 557,995 Charges for services $ 710,928 $ 826,174 $ (115,246) $ 1,842,839 $ 1,850,702 $ (7,863) Operating grants and contributions 90,681 90,493 188 28,488 27,950 538 Capital grants and contributions 43 674,343 (674,300) - - - General revenues Property taxes 4,743,174 4,582,909 160,265 - - - Grants and contributions not restricted to specific programs 4,940 19,957 (15,017) - - - Unrestricted investment earnings 333,626 641,846 (308,220) 102,833 289,669 (186,836) Total revenues 5,883,392 6,835,722 (952,330) 1,974,160 2,168,321 (194,161) Expenses General government 1,486,281 1,483,913 2,368 - - - Public safety 1,904,966 1,906,890 (1,924) - - - Public works 1,941,272 2,485,752 (544,480) - - - Culture and recreation 394,110 273,054 121,056 - - - Interest on long -term debt 638,768 1,002,423 (363,655) - - - Water - - - 659,113 657,776 1,337 Sewer - - - 955,956 921,238 34,718 Recycling - - - 99,286 96,945 2,341 Stormwater management utility - - - 106,847 106,143 704 Liquor - - - 129 16,167 (16,038) Total expenses 6,365,397 7,152,032 (786,635) 1,821,331 1,798,269 23,062 Increase (decrease) in net assets before transfers (482,005) (316,310) (165,695) 152,829 370,052 (217,223) Transfers 1,040,000 40,000 1,000,000 (1,040,000) (40,000) (1,000,000) Change in net assets 557,995 (276,310) 834,305 (887,171) 330,052 (1,217,223) Net assets, January 1 16,831,425 17,107,735 (276,310) 16,818,678 16,488,626 330,052 Net assets, December 31 $ 17,389,420 $ 16,831,425 $ 557,995 $ 15,931,507 $ 16,818,678 $ (887,171) -28- Management Discussion and Analysis - Continued May 25, 2010 The following graph depicts various governmental activities and shows the revenue and expenses directly related to those activities. Expenses and Program Revenues - Governmental Activities $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 ■Expeses ■Piog-enues Revenues by Source - Governmental Activities Charges for services Unrestrict ea Grants and contributions not restricted to specific programs 0.1% Oneratinrr Arantc and taxes 80.6% For the most part, increases in expenses closely paralleled inflation and growth in the demand for services. -29- Management Discussion and Analysis - Continued May 25, 2010 Business -type activities. Business -type activities decreased the City's net assets by $887,171. Key elements of this decrease are attributable to interfund transfers out. Expenses and Program Revenues - Business -type Activities $1,200,000 $1,000,000 $800,000 $600,000 $400,000 $200,000 $- Water Sewer Recycling Stormwater Liquor management utility ■Expenses ■Preg—revenues Revenues by Source - Business -type Activities Charges for services Operating grants and contributions 1.4% earnings 5.2% -30- Unrestricted investment Management Discussion and Analysis - Continued May 25, 2010 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 $9,743,222, a decrease of $7,742,209 in comparison with the prior year. Approximately 80 percent of this total amount $7,808,094 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 $1,932,291 and $2,837 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 $3,555,724. 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 84 percent of same year fund expenditures. The fund balance of the City's General fund decreased $152,385 during the current fiscal year. The Debt Service fund has a total fund balance of $1,932,291, 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. The Street Reconstruction fund has a fund balance of $1,619,643. The fund balance decreased $6,322 during the current fiscal year due to capital outlay expenditures in excess of revenues and transfers in. Proprietary funds. The City's proprietary funds provide the same type of information found in the government -wide financial statements, but in more detail. Unrestricted net assets of the enterprise funds at the end of the year amounted to $9,449,210. The total decrease in net assets for the funds was $887,171. 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 called for the planned use of General Fund reserves in the amount of $160,000, 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 $213,525 and expenditures were under budget by $110,793. The actual amounts were different from the final budget amounts because of the following: • All sources of revenue in the General fund were under budget. The largest negative variance in revenue was related to licenses and permits which were under budget by $68,387. • The largest positive variances related to expenditures were in the general government and public works departments which were under budget by $57,373 and $108,587, respectively. • There were only two categories of expenditures that were over budget. The largest negative expenditure variance was related to culture and recreation which was $65,197 over budget. -31- Management Discussion and Analysis - Continued May 25, 2010 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, 2009, amounts to $20,412,611 (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 completed during 2009. • Completion of the Water Tower Project and the purchase of radio read meters occurred during 2009. Additional information on the City's capital assets can be found in Note 3C starts on page 71 of this report. Capital Assets Net of Depreciation Land Construction in progress Buildings Improvements other than buildings Machinery and equipment Infrastructure Total Governmental Activities Business -type Activities Increase Increase 2009 2008 (Decrease) 2009 2008 (Decrease) $ 741,826 $ 741,826 $ - $ 404,392 $ 404,392 $ 399,551 640,726 (241,175) - 856,754 (856,754) 2,531,842 1,317,047 1,214,795 - - - 172,797 180,679 (7,882) - - - 367,099 469,442 (102,343) 24,653 33,384 (8,731) 6,552,199 7,390,846 (838,647) 9,218,252 8,752,324 465,928 $ 10,765,314 $ 10,740,566 $ 24,748 $ 9,647,297 $ 10,046,854 $ (399,557) -32- Management Discussion and Analysis - Continued May 25, 2010 Long -term debt. At the end of the current fiscal year, the City had total bonded debt outstanding of $16,460,000. Of this amount, $13,295,000 is lease revenue bonds and $3,165,000 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 Governmen Activities Increase 2009 2008 General obligation revenue bonds $ - $ Lease revenue bonds 13,295,000 21,915,000 Capital lease bonds - - Business -type Activities Increase (Decrease) 2009 2008 (Decrease) $ - $ 3,165,000 $ 3,415,000 $ (250,000) (8,620,000) - - - Compensated absences payable 193,733 172,321 21,412 Total $ 13,488,733 $ 22,087,321 $ (8,598,588) $ 3,165,000 $ 3,415,000 $ (250,000) The City's total debt decreased $8,848,588 (35 percent) during the current fiscal year. This is primarily due to the refunding of $8,100,000 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 "A1 ". 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 3E starts on page 74 of this report. 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 2010 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 2010 fiscal year. During the current fiscal year, fund balance in the General fund decreased $152,385. This amount was less than the planned use of $160,000 during the 2009 budget cycle. This planned use of general fund balance reserves was in accordance with the Fund Balance Policy adopted 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 the City of Shorewood, 5755 Country Club Road, Shorewood, Minnesota 55331. -33- THIS PAGE IS LEFT BLANK INTENTIONALLY -34- GOVERNMENT -WIDE FINANCIAL STATEMENTS CITY OF SHOREWOOD SHOREWOOD, MINNESOTA YEAR ENDED DECEMBER 31, 2009 -35- THIS PAGE IS LEFT BLANK INTENTIONALLY -36- CITY OF SHOREWOOD, MINNESOTA Exhibit 1 STATEMENT OF NET ASSETS DECEMBER 31, 2009 ASSETS Cash and temporary investments Cash with fiscal agent Receivables Accrued interest Delinquent taxes Accounts Special assessments Lease 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 Activities Activities Total $ 8,324,911 $ 8,632,487 $ 16,957,398 1,909,864 114,058 2,023,922 204,838 26,093 230,931 163,677 - 163,677 51,891 357,194 409,085 301 355,213 355,514 10,110,000 - 10,110,000 (60,000) 60,000 - 2,837 13,041 15,878 178,568 70,132 248,700 1,141,377 404,392 1,545,769 9,623,937 9,242,905 18,866,842 31,652,201 19,275,515 50,927,716 128,711 76,833 205,544 58,711 3,390 62,101 363,407 2,446 365,853 223,219 61,077 284,296 - 35,262 35,262 193,733 - 193,733 600,000 250,000 850,000 12,695,000 2,915,000 15,610,000 14,262,781 3,344,008 17,606,789 9,480,314 6,482,297 15,962,611 7,909,106 9,449,210 17,358,316 $_17,389 420 $ 15,931,507 $ 33,320,927 The notes to the financial statements are an integral part of this statement. -37- CITY OF SHOREWOOD, MINNESOTA STATEMENT OF ACTIVITIES FOR THE YEAR ENDED DECEMBER 31, 2009 Program Revenues 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 Capital Grants and 43 43 659,113 784,318 - - Operating 802,252 - - Charges for Grants and Expenses Services Contributions $ 1,486,281 $ 34,064 $ 820 1,904,966 634,742 - 1,941,272 6,279 61,471 394,110 35,843 28,390 638,768 - - 6,365,397 710,928 90,681 Capital Grants and 43 43 659,113 784,318 - - 955,956 802,252 - - 99,286 65,112 22,830 - 106,847 191,157 5,658 - 129 - - - 1,821,331 1,842,839 28,488 $ 8,186,728 $ 2,553,767 $ 119,169 $ 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. 43 -38- Exhibit 2 Net (Expense) Revenue and Changes in Net Assets Governmental Business -type Activities Activities Total $ (1,451,397) $ (1,270,224) (1,873,479) (329,877) (638,768) (5,563,745) $ (1,451,397) (1,270,224) (1,873,479) (329,877) (638,768) (5,563,745) - 125,205 125,205 - (153,704) (153,704) - (11,344) (11,344) - 89,968 89,968 - (129) (129) - 49,996 49,996 (5,563,745) 49,996 (5,513,749) 4,743,174 - 4,743,174 4,940 - 4,940 333,626 102,833 436,459 1,040,000 (1,040,000) - 6,121,740 (937,167) 5,184,573 557,995 (887,171) (329,176) 16,831,425 16,818,678 33,650,103 $ 17,389,420 $ 15,931,507 $ 33,320,927 -39- THIS PAGE IS LEFT BLANK INTENTIONALLY -40- FUND FINANCIAL STATEMENTS CITY OF SHOREWOOD SHOREWOOD, MINNESOTA YEAR ENDED DECEMBER 31, 2009 -41- CITY OF SHOREWOOD, MINNESOTA BALANCE SHEET GOVERNMENTAL FUNDS DECEMBER 31, 2009 The notes to the financial statements are an integral part of this statement. -42- Debt Street General Service Reconstruction ASSETS Cash and temporary investments $ 3,649,338 $ 22,391 $ 1,634,034 Cash with fiscal agent - 1,909,864 - Receivables Accrued interest 16,282 36 3,289 Delinquent taxes 163,677 - - Accounts 51,497 - - Special assessments 301 - - Lease - 10,110,000 - Due from other funds - - - Prepaid items 500 - - TOTAL ASSETS $ 3,881,595 $ 12,042,291 $ 1,637,323 LIABILITIES AND FUND BALANCES LIABILITIES Accounts and contracts payable $ 80,069 $ - $ 17,680 Due to other funds 60,000 - - Due to other governments 402 - - Accrued salaries payable 58,711 - - Deferred revenue 126,689 10,110,000 - TOTAL LIABILITIES 325,871 10,110,000 17,680 FUND BALANCES Reserved for debt service - 1,932,291 - Reserved for prepaid items 500 - - Unreserved Designated, reported in General fund 3,555,224 - - Capital projects funds - - 1,619,643 Undesignated, reported in Capital projects funds - - - TOTAL FUND BALANCES 3,555,724 1,932,291 1,619,643 TOTAL LIABILITIES AND FUND BALANCES $ 3,881,595 $ 12,042,291 $ 1,637,323 The notes to the financial statements are an integral part of this statement. -42- Exhibit 3 Other Total Governmental Governmental Funds Funds $ 3,019,148 $ 8,324,911 - 1,909,864 7,652 27,259 - 163,677 394 51,891 - 301 - 10,110,000 50,000 50,000 2,337 2,837 $ 3,079,531 $ 20,640,740 $ 30,962 $ 128,711 50,000 110,000 363,005 363,407 - 58,711 10,236,689 443,967 10,897,518 - 1,932,291 2,337 2,837 - 3,555,224 2,664,530 4,284,173 (31,303) (31,303) 2,635,564 9,743,222 $ 3,079,531 $ 20,640,740 -43- THIS PAGE IS LEFT BLANK INTENTIONALLY -44- CITY OF SHOREWOOD, MINNESOTA Exhibit 4 RECONCILIATION OF THE BALANCE SHEET TO THE STATEMENT OF NET ASSETS GOVERNMENTAL FUNDS AS OF DECEMBER 31, 2009 Total fund balances - governmental $ 9,743,222 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 34,212,635 Less: accumulated depreciation (23,447,321) 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 (13,295,000) Less: unamortized deferred charges 178,568 Compensated absences (193,733) 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 177,579 Delinquent taxes 126,388 Special assessments 301 Leases 10,110,000 Governmental funds do not report a liability for accrued interest until due and payable. (223,219) Total net asset - governmental activities $ 17,389,420 The notes to the financial statements are an integral part of this statement. -45- CITY OF SHOREWOOD, MINNESOTA STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES GOVERNMENTAL FUNDS FOR THE YEAR ENDED DECEMBER 31, 2009 REVENUES Taxes Licenses and permits Intergovernmental Charges for services Fines and forfeitures Interest on investments Miscellaneous $ 4,703,368 127,883 66,411 41,649 52,968 58,627 24,131 Debt Street Service Reconstruction 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 TOTAL EXPENDITURES EXCESS (DEFICIENCY) OF REVENUES OVER (UNDER) EXPENDITURES OTHER FINANCING SOURCES (USES) Transfers in Bonds refunded Transfers out TOTAL OTHER FINANCING SOURCES (USES) 1►1 iy r�l /�►[�7 it l►iJ �[i1�173•���[y i3.y FUND BALANCES, JANUARY 1 FUND BALANCES, DECEMBER 31 The notes to the financial statements are an integral part of this statement. 238,979 11,142 992,835 - 1,231,814 11,142 1,384,712 - - 1,392,139 - - 669,578 - 1,364 267,407 - - 11,877 - - 511,508 - - 5,003 - 716,100 - 520,000 - 5,425 812,638 - 4,247,649 1,332,638 717,464 827,388 (100,824) (706,322) 40,000 99,773 700,000 - (8,100,000) - (1,019,773) - - (979,773) (8,000,227) 700,000 (152,385) (8,101,051) (6,322) 3,708,109 10,033,342 1,625,965 $ 3,555,724 $ 1,932,291 $ 1,619,643 -46- Exhibit 5 Other Total Governmental Governmental $ - $ 4,703,368 127,883 66,411 41,649 52,968 24,878 333,626 42,948 1,059,914 67,826 6,385,819 1,902 1,386,614 - 1,392,139 12 670,954 59,095 326,502 660,101 671,978 11 511,519 9,746 730,849 39,410 39,410 520,000 o 1 o ncI 770,277 7,068,028 (702,451) (682,209) 1,220,000 2,059,773 - (8,100,000) - (1,019,773) 1,220,000 (7,060,000) 517,549 (7,742,209) 2,118,015 17,485,431 $ 2,635,564 $ 9,743,222 -47- 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, 2009 Total net change in fund balances - governmental funds $ (7,742,209) 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 1,084,671 Depreciation expense (1,059,923) 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 520,000 Bonds refunded 8,100,000 Interest on long -term debt in the statement of activities differs from the amount reported in the governmental funds 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. 179,295 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 39,806 Special assessments (3,289) Leases (538,944) 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 (21,412) Change in net assets - governmental activities $ 557,995 The notes to the financial statements are an integral part of this statement. -48- CITY OF SHOREWOOD, MINNESOTA STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES - BUDGET AND ACTUAL GENERAL FUND FOR THE YEAR ENDED DECEMBER 31, 2009 Budgeted Amounts 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 FUND BALANCES, JANUARY 1 FUND BALANCES, DECEMBER 31 Original Final Exhibit 7 Variance with Final Budget - Actual Positive Amounts (Negative) $ 4,745,569 $ 4,745,569 $ 4,703,368 $ (42,201) 196,270 196,270 127,883 (68,387) 95,723 95,723 66,411 (29,312) 46,000 46,000 41,649 (4,351) 55,000 55,000 52,968 (2,032) 117,000 117,000 58,627 (58,373) 33,000 33,000 24,131 (8,869) 5,288,562 5,288,562 5,075,037 (213,525) 1,442,085 1,442,085 1,384,712 57,373 1,393,072 1,393,072 1,392,139 933 778,165 778,165 669,578 108,587 202,210 202,210 267,407 (65,197) 542,910 542,910 528,388 14,522 - - 5,425 (5,425) 4,358,442 4,358,442 4,247,649 110,793 930,120 930,120 827,388 (102,732) 40,000 40,000 40,000 - (1,130,120) (1,130,120) (1,019,773) 110,347 (1,090,120) (1,090,120) (979,773) 110,347 (160,000) (160,000) (152,385) 7,615 3,708,109 3,708,109 3,708,109 - $ 3,548,109 $ 3,548,109 $ 3,555,724 $ 7,615 The notes to the fmancial statements are an integral part of this statement. -49- CITY OF SHOREWOOD, MINNESOTA STATEMENTS OF NET ASSETS PROPRIETARY FUNDS DECEMBER 31, 2009 AND 2008 LIABILITIES CURRENT LIABILITIES Accounts and contracts payable Business -type Activities - Enterprise Funds 461,654 9,005 Water Due to other governments Sewer 2,581 - 2009 2008 2009 2008 ASSETS - Accrued salaries payable 1,476 1,544 CURRENT ASSETS 3,278 Unearned revenue 35,262 33,611 Cash and temporary investments $ 3,443,647 $ 3,659,564 $ 3,666,489 $ 4,476,799 Cash with fiscal agent 114,058 115,033 - - Receivables 23,829 NONCURRENT LIABILITIES Accrued interest 10,311 20,456 10,992 25,046 Accounts 95,729 114,078 200,182 229,028 Special assessments 15,104 14,385 6,015 6,081 Due from other funds - - 60,000 110,000 Prepaid items 7,816 7,691 5,225 4,513 TOTAL CURRENT ASSETS 3,686,665 3,931,207 3,948,903 4,851,467 NONCURRENT ASSETS $ 6,845,357 Special assessments receivable 298,873 385,874 24,269 20,079 Deferred charges 70,132 78,216 - Capital assets Land - - - - Construction in progress - 559,914 - 296,840 Machinery and equipment 69,158 69,158 80,046 80,046 Infrastructure 9,944,664 9,271,927 8,463,336 8,166,496 Less accumulated depreciation (3,182,844) (2,908,778) (6,764,223) (6,545,742) Total capital assets (Net of accumulated depreciation) 6,830,978 6,992,221 1,779,159 1,997,640 TOTAL NONCURRENT ASSETS 7,199,983 7,456,311 1,803,428 2,017,719 TOTAL ASSETS 10,886,648 11,387,518 5,752,331 6,869,186 LIABILITIES CURRENT LIABILITIES Accounts and contracts payable 50,224 461,654 9,005 7,776 Due to other governments 2,446 2,581 - 12,775 Accrued interest payable 61,077 64,630 - - Accrued salaries payable 1,476 1,544 1,529 3,278 Unearned revenue 35,262 33,611 - - Current portion of bonds payable 250,000 250,000 - - TOTAL CURRENT LIABILITIES 400,485 814,020 10,534 23,829 NONCURRENT LIABILITIES Bonds payable less current portion above 2,915,000 3,165,000 - - TOTAL LIABILITIES 3,315,485 3,979,020 10,534 23,829 NET ASSETS Invested in capital assets, net of related debt 3,665,978 3,577,221 1,779,159 1,997,640 Unrestricted 3,905,185 3,831,277 3,962,638 4,847,717 TOTAL NET ASSETS $ 7,571,163 $ 7,408 $ 5,741,797 $ 6,845,357 The notes to the financial statements are an integral part of this statement. -50- Exhibit 8 Business -type Activities - Enterprise Funds - Continued Nonmajor Enterprise Totals 2009 2008 2009 2008 $ 1,522,351 $ 1,437,641 $ 8,632,487 $ 9,574,004 - - 114,058 115,033 4,790 8,035 26,093 53,537 61,283 67,324 357,194 410,430 2,366 1,401 23,485 21,867 - - 60,000 110,000 - - 13,041 12,204 1,590,790 1,514,401 9,226,358 10,297,075 8,586 9,580 331,728 415,533 - - 70,132 78,216 404,392 404,392 404,392 404,392 - - - 856,754 - - 149,204 149,204 793,312 793,312 19,201,312 18,231,735 (160,544) (140,711) (10,107,611) (9,595,231) 1,037,160 1,056,993 9,647,297 10,046,854 1,045,746 1,066,573 10,049,157 10,540,603 2,636,536 2,580,974 19,275,515 20,837,678 17,604 15,280 76,833 484,710 - - 2,446 15,356 - - 61,077 64,630 385 871 3,390 5,693 - - 35,262 33,611 - - 250,000 250,000 17,989 16,151 429,008 854,000 - - 2,915,000 3,165,000 17,989 16,151 3,344,008 4,019,000 1,037,160 1,056,993 6,482,297 6,631,854 1,581,387 1,507,830 9,449,210 10,186,824 $ 2,618,547 $ 2,564,823 $ 15,931,507 $ 16,818,678 -51- CITY OF SHOREWOOD, MINNESOTA STATEMENTS OF REVENUES, EXPENSES AND CHANGES IN FUND NET ASSETS - CONTINUED ON THE FOLLOWING PAGES PROPRIETARY FUNDS FOR THE YEARS ENDED DECEMBER 31, 2009 AND 2008 OPERATING REVENUES Charges for services OPERATING EXPENSES Personal services Supplies Repairs and maintenance Depreciation Professional services Contracted services Insurance Water purchases Utilities Disposal charges Other TOTAL OPERATING EXPENSES OPERATING INCOME (LOSS) NONOPERATING REVENUES (EXPENSES) Special assessments Permits and connection fees Interest on investments Other income Interest expense TOTAL NONOPERATING REVENUES (EXPENSES) INCOME (LOSS) BEFORE TRANSFERS TRANSFERS OUT CHANGE IN NET ASSETS NET ASSETS, JANUARY 1 NET ASSETS, DECEMBER 31 Business -type Activities - Enterprise Funds Water Sewer 2009 2008 2009 2008 $ 577,565 $ 606,593 $ 801,552 $ 826.867 89,791 95,734 67,758 87,189 12,529 8,993 4,406 4,328 4,679 8,127 2,526 3,564 274,066 237,023 218,481 210,408 2,250 2,250 2,523 8,669 14,329 13,905 31,351 9,530 10,125 7,900 6,427 5,288 32,509 33,974 - - 71,100 79,144 9,382 9,870 - - 607,022 579,574 13,683 28,137 6,080 2,818 525,061 515,187 955,956 921,238 52,504 91,406 (154,404) (94.371) 40,214 34,908 - - 28,885 920 700 2,250 37,460 105,552 50,144 139,192 137,654 109,917 - - (134,052) (142,589) - - 110,161 108,708 50,844 141.442 162,665 200,114 (103,560) 47.071 - - (1,000,000) - 162,665 200,114 (1,103,560) 47,071 7,408,498 7,208,384 6,845,357 6,798,286 $ 7,571,163 $ 7,408,498 $ 5,741,797 $ 6,845,357 The notes to the financial statements are an integral part of this statement. -52- Exhibit 9 Business -type Activities - Enterprise Funds - Continued Nonmajor Enterprise Totals 2009 2008 2009 2008 $ 256,024 $ 268,511 $ 1,635,141 $ 1,701,971 60,126 27,926 217,675 210,849 2,510 8,548 19,445 21,869 - - 7,205 11,691 19,833 19,833 512,380 467,264 3,163 4,631 7,936 15,550 119,039 146,246 164,719 169,681 - - 16,552 13,188 - - 32,509 33,974 - 377 80,482 89,391 - - 607,022 579,574 1,591 11,694 21,354 42,649 206,262 219,255 1,687,279 1,655,680 49,762 49,256 (52,138) 46,291 - - 40,214 34,908 - - 29,585 3,170 15,229 44,925 102,833 289,669 28,733 28,686 166,387 138,603 - - (134,052) (142,589) 43,962 73,611 204,967 323,761 93,724 122,867 152,829 370,052 (40,000) (40,000) (1,040,000) (40,000) 53,724 82,867 (887,171) 330,052 2,564,823 2,481,956 16,818,678 16,488,626 $ 2,618,547 $ 2,564,823 $ 15,931,507 $ 16,818,678 -53- CITY OF SHOREWOOD, MINNESOTA STATEMENTS OF CASH FLOWS - CONTINUED ON THE FOLLOWING PAGES PROPRIETARY FUNDS FOR THE YEARS ENDED DECEMBER 31, 2009 AND 2008 CASH FLOWS FROM OPERATING ACTIVITIES Receipts from customers and users Other receipts and payments, net Payments to suppliers, contractors and other governments Payments to employees NET CASH PROVIDED BY OPERATING ACTIVITIES CASH FLOWS FROM NONCAPITAL FINANCING ACTIVITIES Decrease in due from 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 Special assessments collected NET CASH PROVIDED (USED) BY CAPITAL AND RELATED FINANCING ACTIVITIES (739,186) Business -type Activities - Enterprise Funds Water Sewer 47,605 2009 2008 2009 2008 $ 595,914 $ 587,432 $ 826,274 $ 818,504 139,305 63,866 - - (170,671) (182,646) (681,975) (613,949) (89,859) (95,018) (69,507) (85,415) 474,689 373,634 74,792 50,000 50.000 (1,000,000) - (950,000) 50,000 28,885 920 700 2,250 (250,000) (250,000) - - (129,521) (137,886) - - (515,046) (215,045) - (225,878) 1 26,496 150,107 - - CASH FLOWS FROM INVESTING ACTIVITIES Interest received on investments NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS CASH AND CASH EQUIVALENTS, JANUARY 1 CASH AND CASH EQUIVALENTS, DECEMBER 31 700 (223,628) (216,892) 34,546 (810,310) 89,740 3,774,597 3,740,051 4.476,799 4,387,059 $ 3,557,705 $ 3,774,597 $ 3,666,489 $ 4,476,799 RECONCILIATION OF CASH AND CASH EQUIVALENTS TO THE STATEMENT OF NET ASSETS Cash and temporary investments $ 3,443,647 $ 3,659,564 $ 3,666,489 $ 4,476,799 Cash with fiscal agent 114,058 115,033 - - TOTAL CASH AND CASH EQUIVALENTS $ 3,557,705 $ 3,774,597 $ 3,666,489 $ 4,476,799 The notes to the financial statements are an integral part of this statement. -54- Exhibit 10 Business -type Activities - Enterprise Funds - Continued Nonmmajor Enterprise Totals 2009 2008 2009 2008 $ 262,094 $ 270,514 $ 1,684,282 $ 1,676,450 28,733 28,686 168,038 92,552 (123,979) (185,941) (976,625) (982,536) (60,612) (27,181) (219,978) (207,614) 106,236 86,078 655,717 578,852 50,000 50,000 (40,000) (40,000) (1,040,000) (40,000) (40,000) (40,000) (990,000) 10,000 - - 29,585 3,170 - - (250,000) (250,000) - - (129,521) (137,886) - (515,046) (440,923) - 126,496 150,107 (738,486) (675,532) 18.474 42,519 130,277 299,563 84,710 88,597 (942,492) 212,883 1,437,641 1,349,044 9,689,037 9,476,154 $ 1,522,351 $ 1,437,641 $ 8,746,545 $ 9 $ 1,522,351 $ 1,437,641 $ 8,632,487 $ 9,574,004 - - 114,058 115,033 $ 1,522,351 $ 1,437,641 $ 8,746,545 $ 9,689,037 -55- CITY OF SHOREWOOD, MINNESOTA STATEMENTS OF CASH FLOWS - CONTINUED PROPRIETARY FUNDS FOR THE YEARS ENDED DECEMBER 31, 2009 AND 2008 Business -type Activities - Enterprise Funds Water Sewer 2009 2008 2009 2008 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 Prepaid items Increase (decrease) in liabilities: Accounts payable Due to other governments Accrued salaries payable NET CASH PROVIDED BY OPERATING ACTIVITIES NONCASH CAPITAL AND RELATED FINANCING ACTIVITIES Amortization of deferred charges Capital assets purchased on account $ 52,504 $ 91,406 $ (154,404) $ (94,371) 139,305 63,866 - - 274,066 237,023 218,481 210,408 18,349 (19,161) 28,846 (10,213) - - (4,124) 1,850 (125) (865) (712) (157) (9,207) 359 1,229 (2,926) (135) 290 (12,775) 12,775 (68) 716 (1,749) 1,774 $ 474,689 $ 373,634 $ 74,792 $ 119,140 $ 8,084 $ 8,084 $ $ - $ 35,188 $ 437,411 $ - $ - The notes to the financial statements are an integral part of this statement. -56- Exhibit 10 Business -type Activities - Enterprise Funds - Continued Nonmmajor Enterprise Totals 2009 2008 2009 2008 49.762 $ 49,256 $ (52,138) $ 46,291 28,733 28,686 168,038 92,552 19,833 19,833 512,380 467,264 6,041 7,218 53,236 (22,156) 29 (5,215) (4,095) (3,365) - - (837) (1,022) 2,324 (14,445) (5,654) (17,012) - - (12,910) 13,065 (486) 745 (2,303) 3,235 $ 106,236 $ 86,078 $ 655,717 $ 578,852 $ - $ - $ 8,084 $ 8,084 $ - $ - $ 35,188 $ 437,411 -57- CITY OF SHOREWOOD, MINNESOTA STATEMENT OF NET ASSETS FIDUCIARY FUND DECEMBER 31, 2009 ASSETS Cash and temporary investments LIABILITIES Accounts payable Escrow deposits payable TOTAL LIABILITIES The notes to the financial statements are an integral part of this statement. Exhibit I I Agency $ 124,728 8,155 116,573 $ 124,728 -58- CITY OF SHOREWOOD, MINNESOTA NOTES TO THE FINANCIAL STATEMENTS DECEMBER 31, 2009 Note 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES A. Reporting Entity The City of Shorewood, Minnesota (the City), operates under the "Optional Plan A" form of government as 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 activities) 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. -59- CITY OF SHOREWOOD, MINNESOTA NOTES TO THE FINANCIAL STATEMENTS DECEMBER 31, 2009 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. -60- CITY OF SHOREWOOD, MINNESOTA NOTES TO THE FINANCIAL STATEMENTS DECEMBER 31, 2009 Note 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED The City reports the following major governmental funds: The General fund is the City's primary operating fund. It accounts for all financial resources of the general government, except those required to be accounted for in another fund. The Debt Service fund accounts for the resources accumulated and payments made for principal and interest on long -term general obligation debt of governmental funds. The Street Reconstruction fund was established for the purpose of funding the periodic reconstruction of City streets and roadways. The City reports the following major proprietary funds: The Water fund accounts for the activities of the City's water distribution system. The Sewer fund accounts for the activities of the City's sewage collection system. 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 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. 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. -61- CITY OF SHOREWOOD, MINNESOTA NOTES TO THE FINANCIAL STATEMENTS DECEMBER 31, 2009 Note 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED 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 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 received the highest credit rating, rated in one of the two highest rating categories by a statistical rating agency, and have a final maturity of thirteen months or less. 3. General obligations of a state or local government with taxing powers rated "A" or better; revenue obligations rated "AA" or better. 4. General obligations of the Minnesota Housing Finance Agency rated "A" or better. 5. Bankers' acceptances of United States banks eligible for purchase by the Federal Reserve System. 6. Commercial paper issued by United States banks corporations or their Canadian subsidiaries, of highest quality category by at least two nationally recognized rating agencies, and maturing in 270 days or less. 7. Repurchase or reverse repurchase agreements and securities lending agreements with financial institutions qualified as a "depository" by the government entity, 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. 8. Guaranteed investment contracts (GIC's) issued or guaranteed by a United States commercial bank, a domestic branch of a foreign bank, a United States insurance company, or its Canadian subsidiary, whose similar debt obligations were rated in one of the top two rating categories by a nationally recognized rating agency. 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. The Minnesota 4M Fund is an external investment pool not registered with the Securities Exchange Commission (SEC) that follows the same regulatory rules of the SEC under rule 2a7. 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. -62- CITY OF SHOREWOOD, MINNESOTA NOTES TO THE FINANCIAL STATEMENTS DECEMBER 31, 2009 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 2009 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 2009. 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 "interf nid 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 are 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. Prepaid items of the City are accounted for using the consumption method. -63- CITY OF SHOREWOOD, MINNESOTA NOTES TO THE FINANCIAL STATEMENTS DECEMBER 31, 2009 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 backtrending (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: Useful Lives Assets in Years Land improvements 15-20 Other improvements Buildings and improvements 7-40 System improvements /infrastructure 20-50 Machinery and equipment 5-15 Vehicles 5-15 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. -64- CITY OF SHOREWOOD, MINNESOTA NOTES TO THE FINANCIAL STATEMENTS DECEMBER 31, 2009 Note 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED Postemployment Benefits Other Than Pensions Under Minnesota statute 471.61, subdivision 2b., public employers must allow retirees and their dependents to continue coverage indefinitely in an employer- sponsored health care plan, under the following conditions: 1) Retirees must be receiving (or eligible to receive) an annuity from a Minnesota public pension plan, 2) Coverage must continue in group plan until age 65, and retirees must pay no more than the group premium, and 3) Retirees may obtain dependent coverage immediately before retirement. All premiums are funded on a pay -as- you -go basis. It was determined, in accordance with GASB Statement 45, at January 1, 2009 that the City has a zero 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 recognize 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 defmition 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. -65- CITY OF SHOREWOOD, MINNESOTA NOTES TO THE FINANCIAL STATEMENTS DECEMBER 31, 2009 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. B. Deficit Fund Equity The following funds had a deficit fund balance as of December 31, 2009: Fund Amount Nonmaj or City Hall Construction $ 26,255 Senior Community Center 2,711 The City plans to fund these deficits with future revenues and interfund transfers. -66- CITY OF SHOREWOOD, MINNESOTA NOTES TO THE FINANCIAL STATEMENTS DECEMBER 31, 2009 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 rated "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. 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 $4,134,790 and the bank balance was $4,160,498. The entire bank balance was covered by federal depository insurance. -67- CITY OF SHOREWOOD, MINNESOTA NOTES TO THE FINANCIAL STATEMENTS DECEMBER 31, 2009 Note 3: DETAILED NOTES ON ALL FUNDS - CONTINUED A reconciliation of cash and temporary investments as shown on the financial statements for the City follows: Carrying amount of deposits $ 4,134,790 Investments 14,971,158 Cash on hand 100 Total S 19,106,048 As reported on the financial statements Statement of net assets $ 16,957,398 Cash with fiscal agent 2,023,922 Fiduciary fund 124,728 Total $ 19,106,048 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, highly rated investments. At year end, the City had the following investments that are insured or registered, or securities held by the City's agent in the City's name: 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. -68- Fair Value Credit Segmented and Quality/ Time Carrying Types of Investments Rating (1) Distribution (2) Amount Non Pooled investments U.S. Government Securities AAA more than 3 years $ 2,194,649 U.S. Government Agency Securities AAA more than 3 years 1,909,686 Brokered Certificates of Deposit N/A less than 6 months 2,625,620 Brokered Certificates of Deposit N/A 6 to 12 months 1,138,557 Brokered Certificates of Deposit N/A 1 to 3 years 1,586,739 Brokered Certificates of Deposit N/A more than 3 years 943,395 Total non pooled 10,398,646 Pooled investments Minnesota Municipal Money Market Fund P -1 less than 6 months 1,676,072 Broker Money Market N/A less than 6 months 2,896,440 Total pooled 4,572,512 Total investments $ 14,971,158 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. -68- CITY OF SHOREWOOD, MINNESOTA NOTES TO THE FINANCIAL STATEMENTS DECEMBER 31, 2009 Note 3: DETAILED NOTES ON ALL FUNDS - CONTINUED 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 62 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. In accordance with its investment policy and also detailed in the description of concentration of credit risk, the City manages its exposure to declines in fair values by "laddering" their investment maturities to ensure that a portion of the portfolio is maturing monthly, or as needed to meet projected expenditures. The City also permits no more than 30% of total investments to extend beyond five (5) years and does not directly invest in securities maturing more than 15 years from the date of purchase. -69- CITY OF SHOREWOOD, MINNESOTA NOTES TO THE FINANCIAL STATEMENTS DECEMBER 31, 2009 Note 3: DETAILED NOTES ON ALL FUNDS - CONTINUED B. Deferred Revenue Governmental funds report deferred revenue in connection with receivables for revenues that are not considered to be available to liquidate liabilities of the current period. Governmental and business -type funds defer revenue recognition in connection with resources that have been received, but not yet earned. At the end of the current fiscal year, the various components of deferred revenue and unearned revenue reported in the governmental funds and business -type funds were as follows: Governmental activities General fund Taxes Special assessments 2002 Public Safety Buildings Lease receivable 2003 Public Safety Buildings Lease receivable Unavailable Unearned $ 126,388 301 8,090,000 2,020,000 - Total Business -type activities Water fund Rent $ 10,236,689 $ - $ - $ 35,262 -70- CITY OF SHOREWOOD, MINNESOTA NOTES TO THE FINANCIAL STATEMENTS DECEMBER 31, 2009 Note 3: DETAILED NOTES ON ALL FUNDS - CONTINUED C. Capital Assets Capital asset activity for the year ended December 31, 2009 was as follows: Beginning Balance Governmental activities Capital assets not being depreciated Land Construction in progress Total capital assets not being depreciated Capital assets being depreciated Ending Increases Decreases Balance $ 741,826 $ - $ - $ 741,826 640,726 1,056,317 (1,297,492) 399,551 1,382,552 1,056,317 (1,297,492) 1,141,377 Buildings 2,015,769 1,297,492 - 3,313,261 Improvements other than buildings 733,474 13,605 - 747,079 Infrastructure 26,516,355 - - 26,516,355 Machinery and equipment 2,528,749 14,749 (48,935) 2,494,563 Total capital assets being depreciated Less accumulated depreciation 31,794,347 1,325,846 (48,935) 33,071,258 Buildings (698,722) (82,697) - (781,419) Improvements other than buildings (552,795) (21,487) - (574,282) Infrastructure (19,125,509) (838,647) - (19,964,156) Machinery and equipment (2,059,307) (117,092) 48,935 (2,127,464) Total accumulated depreciation (22,436,333) (1,059,923) 48,935 (23,447,321) Total capital assets being depreciated, net 9,358,014 265,923 - 9,623,937 Governmental activities capital assets, net $ 10,740,566 $ 1,322,240 $ (1,297,492) $ 10,765,314 -71- CITY OF SHOREWOOD, MINNESOTA NOTES TO THE FINANCIAL STATEMENTS DECEMBER 31, 2009 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 $ 404,392 $ 856,754 1,261,146 18,231,735 149,204 _ Ending Decreases Balance $ - $ 404,392 (856,754) - (856,754) 404,392 969,577 18,380,939 969,577 19,201,312 149,204 - 19,350,516 Infrastructure (9,479,411) (503,649) - (9,983,060) Machinery and equipment (115,820) (8,731) - (124,551) Total accumulated depreciation (9,595,231) (512,380) - (10, 107,6 M Total capital assets being depreciated, net 8,785,708 457,197 - 9,242,905 Business -type activities capital assets, net $ 10,046,854 $ 457,197 $ (856,754) $ 9,647,297 Depreciation expense was charged to functions /programs of the City as follows: Governmental activities General government $ 74,847 Public works 944,868 Culture and recreation 40,208 Total depreciation expense - governmental activities $ 1,059,923 Business -type activities Water $ 274,066 Sewer 218,481 Stormwater management utility 19,833 Total depreciation expense - business -type activities $ 512,380 -72- CITY OF SHOREWOOD, MINNESOTA NOTES TO THE FINANCIAL STATEMENTS DECEMBER 31, 2009 Note 3: DETAILED NOTES ON ALL FUNDS - CONTINUED Construction Commitments The City has an active construction project as of December 31, 2009. At year end, the commitment with the contractor for this project is as follows: Spent Remaining Project to date Commitment Harding Lane Rehabilitation $ 267,910 $ 146,004 D. Interfund Receivables, Payables and Transfers The composition of interfund balances as of December 31, 2009, is as follows: Receivable Fund Payable Fund Purpose Amount Sewer General To purchase land $ 60,000 Nonmajor governmental Nonmajor governmental Public Facilities City Hall Construction City hall project 50,000 Total $ 110,000 Interfund transfers Transfers in Street Nonmajor Fund General Debt Service Reconstruction Governmental Total Transfers out General $ - $ 99,773 $ 700,000 $ 220,000 $ 1,019,773 Sewer - - - 1,000,000 1,000,000 Liquor 40,000 - - - 40,000 Total $ 40,000 $ 99,773 $ 700,000 $ 1,220,000 $ 2,059,773 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, 2009, the City made the following one -time transfers: • The General fund transferred $99,773 to the 2008 Lease Revenue Bond fund as part the debt issues financing plan. • The Sewer fund transferred $1,000,000 to the Community Infrastructure fund for future projects. -73- CITY OF SHOREWOOD, MINNESOTA NOTES TO THE FINANCIAL STATEMENTS DECEMBER 31, 2009 Note 3: DETAILED NOTES ON ALL FUNDS - CONTINUED E. 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 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. Description 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 1,450,000 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: $ 3,165,000 G.O. Revenue Bonds Balance Authorized Interest Issue Maturity at and Issued Rate Date Date Year End $ 1,525,000 3.00-4.25 % 06/01/05 01/01/25 $ 1,285,000 860,000 4.95-5.40 11/01/96 02/01/12 175,000 815,000 1.50-3.00 08/01/03 02/01/11 255,000 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: $ 3,165,000 -74- G.O. Revenue Bonds Year Ending Business -type Activities December 31, Principal Interest Total 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 190,000 88,940 278,940 2015 -2019 1,065,000 326,018 1,391,018 2020 -2024 955,000 103,581 1,058,581 2025 105,000 2,231 107,231 Total $ 3,165,000 $ 952,142 $ 4,117,142 -74- CITY OF SHOREWOOD, MINNESOTA NOTES TO THE FINANCIAL STATEMENTS DECEMBER 31, 2009 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: December 31, 2010 2011 2012 2013 2014 2015 -2019 2020 -2024 2025 -2028 Total Principal Interest Total $ 600,000 $ 551,239 Balance 735,000 Authorized Interest Issue Maturity at Description and Issued Rate Date Date Year End Public Safety Fire Facility, 1,564,046 6,289,046 4,485,000 491,388 4,976,388 Series 2003A $ 1,195,000 2.35-5.10 % 04/15/03 02/01/23 $ 995,000 Public Safety Police Facility, Series 2003B 1,220,000 2.35-5.10 04/15/03 02/01/23 1,015,000 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 1,285,000 Total Lease Revenue Bonds $ 13,295,000 Annual debt service requirements to maturity for revenue bonds are as follows: Lease Revenue Bonds Year Ending Governmental Activities December 31, 2010 2011 2012 2013 2014 2015 -2019 2020 -2024 2025 -2028 Total Principal Interest Total $ 600,000 $ 551,239 $ 1,151,239 735,000 526,654 1,261,654 765,000 497,279 1,262,279 795,000 464,638 1,259,638 825,000 429,862 1,254,862 4,725,000 1,564,046 6,289,046 4,485,000 491,388 4,976,388 365,000 44,375 409,375 $ 13,295,000 $ 4,569,481 $ 17,864,481 -75- CITY OF SHOREWOOD, MINNESOTA NOTES TO THE FINANCIAL STATEMENTS DECEMBER 31, 2009 Note 3: DETAILED NOTES ON ALL FUNDS - CONTINUED Changes in Long -term Liabilities Long -term liability activity for the year ended December 31, 2009, was as follows: Business -type activities General obligation revenue bonds $ 3,415,000 $ - $ (250,000) $ 3,165,000 $ 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 were refunded on February 1, 2009 and the 2003A series bonds will be refunded on February 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 were refunded on February 1, 2009 and the 2003B series bonds will be refunded on February 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. -76- Beginning Ending Due Within Balance Increases Decreases Balance One Year Governmental activities Lease revenue bonds $ 21,915,000 $ - $(8,620,000) $ 13,295,000 $ 600,000 Compensated absences 172,321 164,805 (143,393) 193,733 193,733 Total $ 22,087,321 $ 164,805 $(8,763,393) $ 13,488,733 $ 793,733 Business -type activities General obligation revenue bonds $ 3,415,000 $ - $ (250,000) $ 3,165,000 $ 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 were refunded on February 1, 2009 and the 2003A series bonds will be refunded on February 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 were refunded on February 1, 2009 and the 2003B series bonds will be refunded on February 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. -76- CITY OF SHOREWOOD, MINNESOTA NOTES TO THE FINANCIAL STATEMENTS DECEMBER 31, 2009 Note 3: DETAILED NOTES ON ALL FUNDS - CONTINUED F. Fund Balance Reservations/Designations The City has made the following reservations and designations of fund balance. Fu nd Fund balance - Reserved General Debt Service Other governmental Total reserved fund balance Purpose Amount Prepaids $ 500 Debt service on bonds issued 1,932,291 Prepaids 2,337 Fund balance - Unreserved - Designated General Street Reconstruction Other governmental Total designated fund balance Note 4: DEFINED BENEFIT PENSION PLAN - STATEWIDE A. Plan Description $ 7,839,397 All full -time and certain part-time employees of the City are covered by defined benefit plans administered by the Public Employees Retirement Association of Minnesota (PERA). PERA administers the Public Employees Retirement Fund (PERF), which is a cost - sharing, multiple - employer retirement plan. This plan is established and administered in accordance with Minnesota statutes, chapters 353 and 356. PERF members belong to either the Coordinated Plan or the Basic Plan. Coordinated Plan members are covered by Social Security and Basic Plan members are not. All new members must participate in the Coordinated Plan. PERA provides retirement benefits as well as disability benefits to members, and benefits to survivors upon death of eligible members. Benefits are established by Minnesota statute, and vest after three years of credited service. The defined retirement benefits are based on a member's highest average salary for any five successive years of allowable service, age and years of credit at termination of service. Two methods are used to compute benefits for PERA's Coordinated and Basic Plan members. The retiring member receives the higher of a step -rate benefit accrual formula (Method 1) or a level accrual formula (Method 2). Under Method 1, the annuity accrual rate for a Basic Plan member is 2.2 percent of average salary for each of the first 10 years of service and 2.7 percent for each remaining year. The annuity accrual rate for a Coordinated Plan member is 1.2 percent of average salary for each of the first 10 years and 1.7 percent for each remaining year. Under Method 2, the annuity accrual rate is 2.7 percent of average salary for Basic Plan members and 1.7 percent for Coordinated Plan members for each year of service. A reduced retirement annuity is also available to eligible members seeking early retirement. $ 1,935,128 Working capital $ 3,555,224 Capital outlay 1,619,643 Capital outlay 2,664,530 -77- CITY OF SHOREWOOD, MINNESOTA NOTES TO THE FINANCIAL STATEMENTS DECEMBER 31, 2009 Note 4: DEFINED BENEFIT PENSION PLAN - STATEWIDE - CONTINUED 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.mnpera.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 2009. The City is required to contribute the following percentages of annual covered payroll: 11.78 percent for Basic Plan PERF members, and 6.75 percent for Coordinated Plan PERF members. Employer contribution rates for the Coordinated Plan will increase to 7.00 percent, effective January 1, 2010. The City's contributions to the PERF for the years ending December 31, 2009, 2008 and 2007 were $79,201, $83,917 and $83,893, respectively. The City's contributions were equal to the contractually required contributions for each year as set by Minnesota statute. -78- CITY OF SHOREWOOD, MINNESOTA NOTES TO THE FINANCIAL STATEMENTS DECEMBER 31, 2009 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 fuzed 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, 2009. 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, 2009 and 2008: SOUTH LAKE MINNETONKA POLICE DEPARTMENT SUMMARY OF STATEMENTS OF NET ASSETS DECEMBER 31, 2009 AND 2008 2009 2008 Assets $ 5,608,495 $ 5,761,316 Liabilities $ 4,645,360 $ 4,894,756 Net assets 963,135 866,560 Total liabilities and net assets $ 5,608,495 $ 5,761,316 The following is a summary of the Department's statement of activities for the years ended December 31, 2009 and 2008: SOUTH LAKE MINNETONKA POLICE DEPARTMENT SUMMARY STATEMENTS OF ACTIVITES YEARS ENDED DECEMBER 31, 2009 AND 2008 2009 2008 Expenses Revenues Net expenses General revenues Change in net assets Net assets, January 1 Net assets, December 31 $ 2,421,205 $ 2,433,114 143,701 169,101 (2,277,504) (2,264,013) 2,374,079 2,288,530 96,575 24,517 866,560 842,043 $ 963,135 $ 866,560 -79- CITY OF SHOREWOOD, MINNESOTA NOTES TO THE FINANCIAL STATEMENTS DECEMBER 31, 2009 Note 5: JOINT VENTURES - CONTINUED B. 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. The following is a summary of the District's Statement of Net Assets as of December 31, 2009 and 2008: EXCELSIOR FIRE DISTRICT SUMMARY OF STATEMENTS OF NET ASSETS DECEMBER 31, 2009 AND 2008 2009 2008 Assets Liabilities Net assets Total liabilities and net assets $ 8,422,859 $ 8,337,904 $ 6,312,024 $ 6,498,383 2,110,835 1,839,521 $ 8,422,859 $ 8,337,904 The following is a summary of the District's statement of activities for the years ended December 31, 2009 and 2008: SOUTH LAKE MINNETONKA POLICE DEPARTMENT SUMMARY STATEMENTS OF ACTIVITES YEARS ENDED DECEMBER 31, 2009 AND 2008 2009 2008 Charges for services Expenses Net revenues General revenues Change in net assets Net assets, January 1 Net assets, December 31 $ 1,503,047 $ 1,507,764 1,281,120 1,307,432 221,927 200,332 49,387 11,094 271,314 211,426 1,839,521 1,628,095 $ 2,110,835 $ 1,839,521 -80- CITY OF SHOREWOOD, MINNESOTA NOTES TO THE FINANCIAL STATEMENTS DECEMBER 31, 2009 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 $49,674,588 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. Southshore Community Center On July 1, 2009, the City entered into an agreement to take over operations of the Southshore Community Center. The City also contracted with Community Recreation Resources (CRR) for the operation, management, and programming of the Southshore Community Center. The contract with CRR is for the period of July 1, 2009 to July 1, 2012. The agreement is for a three year period with an option to renew and/or renegotiate. The City will pay CRR $5,000 for the period of July 1, 2009 to December 31, 2009 and $10,000 for the period of January 1, 2010 to December 31, 2010. During that time, the City shall pay a 15 percent commission on quarterly revenues to CRR. Beginning on January 1, 2011, the fee will increase to $15,000 per year with a 20 percent commission rate on revenues. In addition, the City will fund a part-time contractor brought in by CRR to assist and staff the center at a cost of $6,000 per year, with a built -in increase at eighteen months not to exceed $6,750 annually for the following 18 months. -81- THIS PAGE IS LEFT BLANK INTENTIONALLY -82- COMBINING AND INDIVIDUAL FUND FINANCIAL STATEMENTS AND SCHEDULES CITY OF SHOREWOOD SHOREWOOD, MINNESOTA YEAR ENDED DECEMBER 31, 2009 -83- THIS PAGE IS LEFT BLANK INTENTIONALLY -84- 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. 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. Technology - 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. Community Infrastructure — This fund was established for the purpose of providing internal funding for the construction of infrastructure capital improvements. Southshore Community Center - This fund was established to account for the construction and management of a Senior Community Center. EDA Public Safety Facilities Project - This fund was established for the purpose of accounting for construction of the new public safety facility. -85- CITY OF SHOREWOOD, MINNESOTA NONMAJOR GOVERNMENTAL FUNDS COMBINING BALANCE SHEET DECEMBER 31, 2009 ASSETS Cash and temporary investments Receivables Accrued interest Accounts Due from other funds Prepaid items TOTAL ASSETS LIABILITIES AND FUND BALANCES (DEFICITS) LIABILITIES Accounts and contracts payable Due to other funds Due to other governments TOTAL LIABILITIES FUND BALANCES (DEFICITS) Reserved for prepaid items Unreserved Designated for capital outlay Undesignated TOTAL FUND BALANCES (DEFICITS) TOTAL LIABILITIES AND FUND BALANCES (DEFICITS) Capital Projects Funds 363,005 363,005 227,762 Park 842,786 127,671 Public Capital Equipment MSA Facilities Improvement Replacement Construction $ 177,083 $ 292,161 $ 840,270 $ 487,569 679 875 2,516 3,107 - 394 - - 50,000 - - - $ 227,762 $ 293,430 $ 842,786 $ 490,676 363,005 363,005 227,762 293,430 842,786 127,671 227,762 293,430 842,786 127,671 $ 227,762 $ 293,430 $ 842,786 $ 490,676 -86- Exhibit A -1 -87- Capital Projects Funds - Continued EDA Public Southshore Safety City Hall Community Community Facilities Technology Construction Infrastructure Center Project Total $ 104,256 $ 49,013 $ 1,000,000 $ 644 $ 68,152 $ 3,019,148 269 - - 2 204 7,652 - - - - - 394 - - - - - 50,000 - - - 2,337 - 2,337 $ 104,525 $ 49,013 $ 1,000,000 $ 2,983 $ 68,356 $ 3,079,531 $ - $ 25,268 $ - $ 5,694 $ - $ 30,962 - 50,000 - - - 50,000 - - - - - 363,005 - 75,268 - 5,694 - 443,967 - - - 2,337 - 2,337 104,525 - 1,000,000 - 68,356 2,664,530 - (26,255) - (5,048) - (31,303) 104,525 (26,255) 1,000,000 (2,711) 68,356 2,635,564 $ 104,525 $ 49,013 $ 1,000,000 $ 2,983 $ 68,356 $ 3,079,531 -87- CITY OF SHOREWOOD, MINNESOTA NONMAJOR GOVERNMENTAL FUNDS COMBINING STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES (DEFICITS) FOR THE YEAR ENDED DECEMBER 31, 2009 Capital Projects Funds REVENUES Interest on investments Miscellaneous Contributions and donations Other TOTAL REVENUES EXPENDITURES Current General government Public works Culture and recreation Capital outlay General government Public safety Public works Culture and recreation TOTAL EXPENDITURES EXCESS (DEFICIENCY) OF REVENUES OVER (UNDER) EXPENDITURES OTHER FINANCING SOURCES Transfers in NET CHANGE IN FUND BALANCES FUND BALANCES, JANUARY 1 FUND BALANCES (DEFICITS), DECEMBER 31 1,200 Park 71 - Public Capital Equipment MSA Facilities Improvement Replacement Construction $ 2,339 $ 2,771 $ 7,282 $ 3,594 - 394 - 6,279 2,339 3,165 7,282 9,873 1,200 - 71 - - - - 12 132 - 1,126 - - - 9,746 - - 17,445 - - 1,332 17,445 10,943 12 1,007 (14,280) (3,661) 9,861 - 45,000 175,000 - 1,007 30,720 171,339 9,861 226,755 262,710 671,447 117,810 $ 227,762 $ 293,430 $ 842,786 $ 127,671 -88- Exhibit A -2 Capital Projects Funds - Continued EDA Public Southshore Safety City Hall Community Community Facilities Technology Construction Infrastructure Center Project Total $ 1,039 $ 6,795 $ - $ 344 $ 714 $ 24,878 - - - 1,320 - 1,320 - - - 34,955 - 41,628 1,039 6,795 - 36,619 714 67,826 14 617 - 658,843 14 659,460 59,095 21,965 81,060 1,902 12 59,095 660,101 11 11 9,746 11 770,277 1,025 (652,665) - (44,441) 703 (702,451) - - 1,000,000 - - 1,220,000 1,025 (652,665) 1,000,000 (44,441) 703 517,549 103,500 626,410 - 41,730 67,653 2,118,015 $ 104,525 $ (26,255) $ 1,000,000 $ (2,711) $ 68,356 $ 2,635,564 -89- THIS PAGE IS LEFT BLANK INTENTIONALLY -90- 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. Recycling - 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. Li uor -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. -91- CITY OF SHOREWOOD, MINNESOTA NONMAJOR PROPRIETARY FUNDS COMBINING STATEMENTS OF NET ASSETS DECEMBER 31, 2009 AND 2008 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 Accrued salaries payable TOTAL LIABILITIES NET ASSETS Invested in capital assets Unrestricted TOTAL NET ASSETS Business -type Activities - Enterprise Funds Recycling Stormwater Management Utility $ 88,814 $ 96,842 $ 571,128 $ 449,792 266 541 1,822 2,514 14,287 15,535 46,996 51,789 748 725 1,618 676 104,115 113,643 621,564 504,771 2,193 2,636 6,393 6,944 - - 404,392 404,392 - - 793,312 793,312 - - (160,544) (140,711) - - 1,037,160 1,056,993 2,193 2,636 1,043,553 1,063,937 106,308 116,279 1,665,117 1,568,708 14,367 13,980 3,237 1,300 - - IM R71 14,367 13,980 3,622 2,171 - - 1,037,160 1,056,993 91,941 102,299 624,335 509,544 $ 91,941 $ 102,299 $ 1,661,495 $ 1,566,537 -92- Exhibit B -1 Business -type Activities - Enterprise Funds - Continued Liqu Totals 2009 2008 2009 2008 $ 862,409 $ 891,007 $ 1,522,351 $ 1,437,641 2,702 4,980 4,790 8,035 - - 61,283 67,324 2,366 1,401 865,111 895,987 - - 8,586 9,580 - - 404,392 404,392 - - 793,312 793,312 - - (160,544) (140,711) - - 1,037,160 1,056,993 - - 1,045,746 1,066,573 865,111 895,987 2,636,536 2,580,974 17,604 15,280 385 871 17,989 16,151 - - 1,037,160 1,056,993 865,111 895,987 1,581,387 1,507,830 $ 865,111 $ 895,987 $ 2,618,547 $ 2,564,823 -93- CITY OF SHOREWOOD, MINNESOTA NONMAJOR PROPRIETARY FUNDS COMBINING STATEMENTS OF REVENUES, EXPENSES AND CHANGES IN FUND NET ASSETS FOR THE YEARS ENDED DECEMBER 31, 2009 AND 2008 TRANSFERS OUT CHANGE IN NET ASSETS Business -type Activities - Enterprise Funds (6,455) 94,958 Recycling NET ASSETS, JANUARY 1 Stormwater Management Utility 108,754 2009 2008 2009 2008 OPERATING REVENUES $ 1,661,495 $ 1,566,537 Charges for services $ 64,992 $ 64,166 $ 191,032 $ 204,345 OPERATING EXPENSES Personal services 4,298 1,109 55,828 15,519 Supplies 716 1,421 1,794 7,292 Depreciation - - 19,833 19,833 Professional services - - 3,163 131 Contracted services 94,104 83,880 24,935 62,366 Utilities - - - - Other 168 10,535 1,294 1,002 TOTAL OPERATING EXPENSES 99,286 96,945 106,847 106,143 OPERATING INCOME (LOSS) (34,294) (32,779) 84,185 98,202 NONOPERATING REVENUES Interest on investments 986 2,659 4,990 12,266 Other income 22,950 23,665 5,783 5,021 TOTAL NONOPERATING REVENUES 23,936 26,324 10,773 17,287 INCOME (LOSS) BEFORE TRANSFERS (10,358) (6,455) 94,958 115,489 TRANSFERS OUT CHANGE IN NET ASSETS (10,358) (6,455) 94,958 115,489 NET ASSETS, JANUARY 1 102,299 108,754 1,566,537 1,451,048 NET ASSETS, DECEMBER 31 $ 91,941 $ 102,299 $ 1,661,495 $ 1,566,537 -94- Exhibit B -2 Business -type Activities - Enterprise Funds - Continued Liquor Totals 15,229 2009 2008 2009 2008 $ - $ - $ 256,024 $ 268,511 - 11,298 60,126 27,926 - (165) 2,510 8,548 - - 19,833 19,833 - 4,500 3,163 4,631 - - 119,039 146,246 - 377 - 377 129 157 1,591 11,694 129 16,167 206,262 219,255 (129) (16,167) 49,762 49,256 9,253 30,000 15,229 44,925 - - 28,733 28,686 9,253 30,000 43,962 73,611 9,124 13,833 93,724 122,867 (40,000) (40,000) (40,000) (40,000) (30,876) (26,167) 53,724 82,867 895,987 922,154 2,564,823 2,481,956 $ 865,111 $ 895,987 $ 2,618,547 $ 2,564,823 -95- CITY OF SHOREWOOD, MINNESOTA NONMAJOR PROPRIETARY FUNDS COMBINING STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 2009 AND 2008 Business -type Activities - Enterprise Funds Recycling Stormwater Management Utility CASH FLOWS FROM OPERATING ACTIVITIES Receipts from customers and users Other receipts and payments, net Payments to suppliers, contractors and other governments Payments to employees NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES $ 66,660 $ 65,734 $ 195,434 $ 202,738 22,950 23,665 5,783 5,021 (94,601) (88,846) (29,249) (77,307) (4,298) (1,109) (56,314) (14,774) (9,289) (556) 115,654 CASH FLOWS FROM NONCAPITAL FINANCING ACTIVITIES Transfers out CASH FLOWS FROM INVESTING ACTIVITIES Interest received on investments NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS CASH AND CASH EQUIVALENTS, JANUARY 1 CASH AND CASH EQUIVALENTS, DECEMBER 31 RECONCILIATION OF OPERATING INCOME (LOSS) TO NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES Operating income (loss) Adjustments to reconcile operating income (loss) to net cash provided (used) by operating activities Other income related to operations Depreciation (Increase) decrease in assets: Accounts receivable Special assessments receivable Increase (decrease) in liabilities: Accounts payable Accrued salaries payable NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES 1,261 115,678 2,752 5,682 11,998 (8,028) 2,196 121,336 127,676 96,842 94,646 449,792 322,116 $ 88 $ 96,842 $ 571,128 $ 449,792 $ (34,294) $ (32,779) $ 84,185 $ 98,202 22,950 23,665 5,783 5,021 - - 19,833 19,833 1,248 2,155 4,793 3,021 420 (587) (391) (4,628) 387 6,990 1,937 (6,516) - - (486) 745 $ (9,289) $ (556) $ 115,654 $ 115,678 -96- Exhibit B -3 Business -type Activities - Enterprise Funds - Continued Liquor Totals 2009 2008 2009 2008 $ - $ 2,042 $ 262,094 $ 270,514 - 28,733 28,686 (129) (19,788) (123,979) (185,941) - (11,298) (60,612) (27,181) (129) (29,044) 106,236 86,078 (40,000) (40,000) (40,000) (40,000) 11,531 27,769 18,474 42,519 (28,598) (41,275) 84,710 88,597 891,007 932,282 1,437,641 1,349,044 $ 862,409 $ 891,007 $ 1,522,351 $ 1,437,641 $ (129) $ (16,167) $ 49,762 $ 49,256 28,733 28,686 - 19,833 19,833 2,042 6,041 7,218 - - 29 (5,215) (14,919) 2,324 (14,445) (486) 745 $ (129) $ (29,044) $ 106,236 $ 86,078 -97- Charges for services General government CITY OF SHOREWOOD, MINNESOTA 15,000 Exhibit C -1 (746) GENERALFUND Culture and recreation 31,000 31,000 SCHEDULE OF REVENUES, EXPENDITURES AND (3,605) 29,765 CHANGES IN FUND BALANCES - CONTINUED ON THE FOLLOWING PAGES 46,000 46,000 BUDGET AND ACTUAL (4,351) 50,753 Fines and forfeitures FOR THE YEAR ENDED DECEMBER 31, 2009 55,000 52,968 (2,032) (With comparative actual amounts for the year ended December 31, 2008) Interest on investments 117,000 2009 58,627 2008 161,862 Variance with Budgeted Amounts Final Budget Actual Positive Actual Original Final Amounts (Negative) Amounts REVENUES Taxes General property taxes $ 4,621,711 $ 4,621,711 $ 4,579,510 $ (42,201) $ 4,464,919 Fiscal disparities 123,858 123,858 123,858 117,683 Total 4,745,569 4,745,569 4,703,368 (42,201) 4,582,602 Licenses and permits Business 11,770 11,770 14,525 2,755 15,024 Nonbusiness 184,500 184,500 113,358 (71,142) 180,395 Total 196,270 196,270 127,883 (68,387) 195,419 Intergovernmental State Property tax credits 30,723 30,723 189 (30,534) 15,206 Other 65,000 65,000 66,222 1,222 62,949 Total 95,723 95,723 66,411 (29,312) 78,155 Charges for services General government 15,000 15,000 14,254 (746) 20,988 Culture and recreation 31,000 31,000 27,395 (3,605) 29,765 Total 46,000 46,000 41,649 (4,351) 50,753 Fines and forfeitures 55,000 55,000 52,968 (2,032) 53,369 Interest on investments 117,000 117,000 58,627 (58,373) 161,862 Miscellaneous revenue Refunds and reimbursements 10,000 10,000 11,349 1,349 5,368 Contributions and donations - - 820 820 3,135 Other 23,000 23,000 11,962 (11,038) 6,172 Total 33,000 33,000 24,131 (8,869) 14,675 TOTAL REVENUES 5,288,562 5,288,562 5,075,037 (213,525) 5,136,835 -98- Administrative Personal services CITY OF SHOREWOOD, MINNESOTA 167,371 Exhibit C -1 18,085 GENERALFUND Supplies 200 200 SCHEDULE OF REVENUES, EXPENDITURES AND 160 81 Other services and charges CHANGES IN FUND BALANCES - CONTINUED 5,950 7,909 (1,959) BUDGET AND ACTUAL Total 173,521 173,521 FOR THE YEAR ENDED DECEMBER 31, 2009 16,286 229,292 267,280 (With comparative actual amounts for the year ended December 31, 2008) 272,012 (4,732) 2009 2008 Finance Variance with Budgeted Amounts Final Budget Personal services 177,637 Actual Positive Actual 154,685 Original Final Amounts (Negative) Amounts EXPENDITURES 1,248 5,914 Other services and charges Current 8,500 4,799 3,701 General government Mayor and Council Total 194,337 194,337 Personal services $ 16,794 $ 16,794 $ 16,794 $ - $ 16,255 Supplies 1,400 1,400 3,064 (1,664) 2,478 Other services and charges 52,000 52,000 46,158 5,842 50,989 Other services and charges Total 70,194 70,194 66,016 4,178 69,722 Administrative Personal services 167,371 167,371 149,286 18,085 227,601 Supplies 200 200 40 160 81 Other services and charges 5,950 5,950 7,909 (1,959) 1,610 Total 173,521 173,521 157,235 16,286 229,292 City clerk / elections Personal services 207,030 207,030 220,596 (13,566) 214,864 Supplies 23,300 23,300 19,884 3,416 25,169 Other services and charges 36,950 36,950 31,532 5,418 33,467 Total 213,306 213,306 206,602 6,704 Total 267,280 267,280 272,012 (4,732) 273,500 Finance Personal services 177,637 177,637 166,032 11,605 154,685 Supplies 8,200 8,200 6,952 1,248 5,914 Other services and charges 8,500 8,500 4,799 3,701 4,053 Total 194,337 194,337 177,783 16,554 164,652 Professional services Other services and charges 205,500 205,500 223,858 (18,358) 213,220 Planning and zoning Personal services 199,601 199,601 195,474 4,127 192,979 Supplies 1,755 1,755 2,138 (383) 1,310 Other services and charges 11,950 11,950 8,990 2,960 9,985 Total 213,306 213,306 206,602 6,704 204,274 -99- CITY OF SHOREWOOD, MINNESOTA GENERAL FUND SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES - CONTINUED BUDGET AND ACTUAL FOR THE YEAR ENDED DECEMBER 31, 2009 (With comparative actual amounts for the year ended December 31, 2008) 2009 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 Protective inspection Personal services Supplies Other services and charges Total Total public safety Budgeted Amounts Original Final Exhibit C -1 2008 Variance with Final Budget Actual Positive Actual Amounts (Negative) Amounts $ 26,300 $ 26,300 $ 34,321 $ (8,021) $ 26,531 139,500 139,500 123,958 15,542 116,950 10,700 10,700 5,647 165,800 165,800 158,279 7,521 143,481 8,964 137,784 1,393,072 1,393,072 132,594 132,594 114,547 18,047 124,019 900 900 741 159 688 18,653 18,653 7,639 11,014 7,506 152,147 152,147 122,927 29,220 132,213 1,442,085 1,442,085 1,384,712 57.373 1,430,354 943,000 316,138 943,000 943,989 (989) 895,059 316,138 323,180 (7,042) 319,411 122,484 122,484 119,184 3,300 130,390 750 750 139 611 5 10,700 10,700 5,647 5,053 7,389 133,934 133,934 124,970 8,964 137,784 1,393,072 1,393,072 1,392,139 933 1,352,254 -100- Streets and highways Personal services CITY OF SHOREWOOD, MINNESOTA 93,895 Exhibit C -1 24,049 GENERAL FUND Supplies 73,000 73,000 SCHEDULE OF REVENUES, EXPENDITURES AND 19,832 82,993 Other services and charges CHANGES IN FUND BALANCES - CONTINUED 23,500 27,233 (3,733) BUDGET AND ACTUAL FOR THE YEAR ENDED DECEMBER 31, 2009 Total 190,395 (With comparative actual amounts for the year ended December 31, 2008) 40,148 197,435 2009 Snow and ice removal 2008 Variance with Personal services Budgeted Amounts Final Budget 35,995 5,177 Actual Positive Actual 45,340 Original Final Amounts (Negative) Amounts EXPENDITURES - CONTINUED Total Current - Continued 86,512 74,452 12,060 Public works Traffic control General maintenance Personal services $ 290,805 $ 290,805 $ 279,601 $ 11,204 $ 295,618 Supplies 80,800 80,800 58,800 22,000 77,290 Other services and charges 45,940 45,940 40,539 5,401 40,700 Total 417,545 417,545 378,940 38,605 413,608 Streets and highways Personal services 93,895 93,895 69,846 24,049 100,158 Supplies 73,000 73,000 53,168 19,832 82,993 Other services and charges 23,500 23,500 27,233 (3,733) 14,284 Total 190,395 190,395 150,247 40,148 197,435 Snow and ice removal Personal services 41,172 41,172 35,995 5,177 33,874 Supplies 45,340 45,340 38,457 6,883 34,731 Total 86,512 86,512 74,452 12,060 68,605 Traffic control Supplies 4,000 4,000 3,412 588 2,873 Other services and charges 43,600 43,600 42,291 1,309 43,664 Total 47,600 47,600 45,703 1,897 46,537 Sanitation and waste removal Personal services 645 645 2,764 (2,119) 2,005 Supplies 500 500 21 479 32 Other services and charges 4,400 4,400 - 4,400 7,699 Total 5,545 5,545 2,785 2,760 9,736 -101- Culture and recreation Personal services CITY OF SHOREWOOD, MINNESOTA 137,710 Exhibit C -1 (9,822) GENERAL FUND Supplies 12,300 12,300 SCHEDULE OF REVENUES, EXPENDITURES AND 2,206 14,810 Other services and charges CHANGES IN FUND BALANCES - CONTINUED 52,200 109,781 (57,581) BUDGET AND ACTUAL Total culture and recreation 202,210 202,210 FOR THE YEAR ENDED DECEMBER 31, 2009 (65,197) 229,252 (With comparative actual amounts for the year ended December 31, 2008) 3,815,532 3,713,836 2009 3,772,132 2008 - - Variance with (5,425) 7,890 Budgeted Amounts Final Budget 4,358,442 4,358,442 Actual Positive Actual EXCESS OF REVENUES Original Final Amounts (Negative) Amounts EXPENDITURES - CONTINUED OVER EXPENDITURES 930,120 Current - Continued 827,388 (102,732) 791,600 Public works - continued Tree maintenance Personal services $ 16,968 $ 16,968 $ 7,513 $ 9,455 $ 19,043 Supplies 2,600 2,600 437 2,163 333 Other services and charges 11,000 11,000 9,501 1,499 4,975 Total 30,568 30,568 17,451 13,117 24,351 Total public works 778,165 778,165 669,578 108,587 760,272 Culture and recreation Personal services 137,710 137,710 147,532 (9,822) 139,161 Supplies 12,300 12,300 10,094 2,206 14,810 Other services and charges 52,200 52,200 109,781 (57,581) 75,281 Total culture and recreation 202,210 202,210 267,407 (65,197) 229,252 Total current expenditures 3,815,532 3,815,532 3,713,836 101,696 3,772,132 Capital outlay General government 21,910 21,910 11,877 10,033 17,685 Public safety 517,500 517,500 511,508 5,992 547,528 Public works 3,500 3,500 5,003 (1,503) - Total capital outlay 542,910 542,910 528,388 14,522 565,213 Debt service Interest and service charges - - 5,425 (5,425) 7,890 TOTAL EXPENDITURES 4,358,442 4,358,442 4,247,649 110,793 4,345,235 EXCESS OF REVENUES OVER EXPENDITURES 930,120 930,120 827,388 (102,732) 791,600 -102- 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, 2009 (With comparative actual amounts for the year ended December 31, 2008) 2009 2008 FUND BALANCES, JANUARY 1 3,708,109 3,708,109 3,708,109 Variance with FUND BALANCES, DECEMBER 31 $ 3,548,109 Budgeted Amounts $ 3,555,724 $ Final Budget Actual Positive Actual Original Final Amounts (Negative) Amounts OTHER FINANCING SOURCES (USES) Transfers in $ 40,000 $ 40,000 $ 40,000 $ - $ 40,000 Transfers out (1,130,120) (1,130,120) (1,019,773) 110,347 (885,000) TOTAL OTHER FINANCING SOURCES (USES) (1,090,120) (1,090,120) (979,773) 110,347 (845,000) NET CHANGE IN FUND BALANCES (160,000) (160,000) (152,385) 7,615 (53,400) FUND BALANCES, JANUARY 1 3,708,109 3,708,109 3,708,109 - 3,761,509 FUND BALANCES, DECEMBER 31 $ 3,548,109 $ 3,548,109 $ 3,555,724 $ 7,615 $ 3,708,109 -103- ASSETS Cash and temporary investments Cash with fiscal agent Receivables Accrued interest Lease TOTAL ASSETS LIABILITIES AND FUND BALANCES LIABILITIES Deferred revenue FUND BALANCES Reserved for Debt service TOTAL LIABILITIES AND FUND BALANCES CITY OF SHOREWOOD, MINNESOTA Exhibit D -1 DEBT SERVICE FUNDS COMBINING BALANCE SHEET DECEMBER 31, 2009 Waterford 2002/2003 2008 III Tax Public Safety Lease Revenue Increment Building Bond Total $ 11,985 $ 7,217 $ 3,189 $ 22,391 - 1,909,864 - 1,909,864 36 - - 36 - 10,110,000 - 10,110,000 $ 12,021 $ 12,027,081 $ 3,189 $ 12,042,291 $ - $ 10,110,000 $ 12,021 1,917,081 - $ 10,110,000 3,189 1,932,291 $ 12,021 $ 12,027,081 $ 3,189 $ 12,042,291 -104- CITY OF SHOREWOOD, MINNESOTA Exhibit D -2 DEBT SERVICE FUNDS COMBINING SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES FOR THE YEAR ENDED DECEMBER 31, 2009 Waterford 2002/2003 2008 III Tax Public Safety Lease Revenue Increment Building Bond Total REVENUES Lease payments $ - $ 992,835 $ - $ 992,835 Interest on investments 123 238,832 24 238,979 TOTAL REVENUES 123 1,231,667 24 1,231,814 EXPENDITURES Debt service Principal Interest and service charges TOTAL EXPENDITURES EXCESS (DEFICIENCY) OF REVENUES OVER (UNDER) EXPENDITURES OTHER FINANCING SOURCES (USES) Transfers in Bonds refunded TOTAL OTHER FINANCING SOURCES (USES) NET CHANGE IN FUND BALANCES FUND BALANCES, JANUARY 1 FUND BALANCES, DECEMBER 31 - 495,000 25,000 520,000 2 737,863 74,773 812,638 2 1,232,863 99,773 1,332,638 121 (1,196) (99,749) (100,824) 99,773 99,773 (8,100,000) - (8,100,000) - (8,100,000) 99,773 (8,000,227) 121 (8,101,196) 24 (8,101,051) 11,900 10,018,277 3,165 10,033,342 $ 12,021 $ 1,917,081 $ 3,189 $ 1,932,291 -105- CITY OF SHOREWOOD, MINNESOTA AGENCY FUND COMBINING SCHEDULE OF CHANGES IN ASSETS AND LIABILITIES FOR THE YEAR ENDED DECEMBER 31, 2009 Developer Escrow Accounts ASSETS Cash and temporary investments LIABILITIES Accounts payable Escrow deposits payable TOTAL LIABILITIES Balance January 1 Exhibit E -1 Balance December 31 $ 135,593 $ 33,591 $ (44,456) $ 124,728 $ - $ 8,155 $ - $ 8,155 135,593 33,591 (52,611) 116,573 $ 135,593 $ 41,746 $ (52,611) $ 124,728 Additions Deductions -106- SUPPLEMENTARY INFORMATION CITY OF SHOREWOOD SHOREWOOD, MINNESOTA YEAR ENDED DECEMBER 31, 2009 -107- THIS PAGE IS LEFT BLANK INTENTIONALLY -108- CITY OF SHOREWOOD, MINNESOTA Exhibit F -1 SUPPLEMENTARY INFORMATION SUMMARY FINANCIAL REPORT (UNAUDITED) REVENUES AND EXPENDITURES FOR GENERAL OPERATIONS GOVERNMENTAL FUNDS FOR THE YEARS ENDED DECEMBER 31, 2009 AND 2008 Percent Total Increase 2009 2008 (Decrease) REVENUES Taxes Licenses and permits Intergovernmental Charges for services Fines and forfeits Interest on investments Miscellaneous TOTAL REVENUES Per Capita 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 TOTAL EXPENDITURES Per Capita Total Long -term Indebtedness Per Capita $ 4,703,368 $ 4,582,602 2.64 % 127,883 195,419 (34.56) 66,411 753,605 (91.19) 41,649 50,753 (17.94) 52,968 53,369 (0.75) 333,626 641,846 (48.02) 1,059,914 1,053,916 0.57 $ 6,385,819 $ 7,331,510 (12.90) % $ 842 $ 963 (12.57) $ 1,386,614 $ 1,443,549 (3.94) % 1,392,139 1,352,254 2.95 670,954 760,287 (11.75) 326,502 229,259 42.42 671,978 687,852 (2.31) 511,519 556,561 (8.09) 730,849 873,656 (16.35) 39,410 46,297 (14.88) 520,000 485,000 7.22 818,063 1,036,526 (21.08) $ 7,068,028 $ 7,471,241 (5.40) % $ 932 $ 982 (5.04) $ 13,295,000 $ 21,915,000 (39.33) % $ 1,754 $ 2,879 (39.10) General Fund Balance - December 31 $ 3,555,724 $ 3,708,109 (4.11) % Per Capita $ 469 $ 487 (3.74) 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. -109- THIS PAGE IS LEFT BLANK INTENTIONALLY SECTION III STATISTICAL SECTION (UNAUDITED) CITY OF SHOREWOOD SHOREWOOD, MINNESOTA YEAR ENDED DECEMBER 31, 2009 some THIS PAGE IS LEFT BLANK INTENTIONALLY -112- 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. Pam 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. 114 Revenue Capacity These schedules contain information to help the reader assess the government's most significant local revenue source, the property tax. 124 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. 131 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. 139 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. 140 -113- CITY OF SHOREWOOD, MINNESOTA STATISTICAL SECTION (UNAUDITED) NET ASSETS BY COMPONENT LAST SIX FISCAL YEARS (accrual basis of accounting) Governmental activities Invested in capital assets, net of related debt Restricted Unrestricted Fiscal Year 2004 2005 2006 Total governmental activities net assets 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 $ 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 $ 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 -114- Table 1 Fiscal Year 2007 2008 2009 $ 10,960,550 $ 9,430,566 $ 9,480,314 6,147,185 7,400,859 7,909,106 $ 17,107,735 1 $ 16,831,425 $ 17,389,420 $ 6,066,229 $ 6,631,854 $ 6,482,297 10,422,397 10,186,824 9,449,210 $ 16,488,626 $ 16,818,678 $ 15,931,507 $ 17,026,779 $ 16,062,420 $ 15,962,611 16,569,582 17,587,683 17,358,316 $ 33,596,361 $ 33,650,103 $ 33,320,927 311611 CITY OF SHOREWOOD, MINNESOTA STATISTICAL SECTION (UNAUDITED) CHANGES IN NET ASSETS - CONTINUED ON THE FOLLOWING PAGES LAST SIX FISCAL YEARS (accrual basis of accounting) Fiscal Year 2004 2005 2006 Expenses Governmental activities General government Public safety Public works Culture and recreation Interest on long -term debt Total governmental activities expenses Business -type activities Water Sewer Recycling Stormwater management utility Liquor Total business -type activities expenses $ 1,074,028 $ 1,222,510 $ 1,357,714 2,972,094 1,690,903 1,806,915 2,451,825 5,019,967 2,275,402 254,081 246,381 23 3, 881 607,862 606,189 600,723 2,152,394 3,674,717 7,359,890 8,785.950 6,274,635 $ 5,959,759 591,858 567,854 488,513 735,480 740,174 785,638 106,933 105,823 124,354 106,757 73,885 171,190 2,152,411 2,006,107 2,017,217 3,693,439 3,493,843 3,586,912 Total expenses Program revenues Governmental activities Charges for services General government Public safety Public works Culture and recreation Operating grants and contributions Capital grants and contributions Total governmental activities program revenues Business -type activities Charges for services Water Sewer Recycling Stormwater management utility Liquor Operating grants and contributions Total business -type activities program revenues Total program revenues $ 11,053,329 $ 12,279,793 $ 9.861,547 $ 51,069 $ 112,107 $ 25,340 983,684 1,055, 758 1,060,506 1,080 1,575 1,800 119,594 100,910 31,730 996,967 2,404,367 395,229 2,152,394 3,674,717 1,514,605 620,189 649,772 1,350,041 866,350 833,939 836,175 114,987 116,517 144,886 85,978 102,649 129,708 2,199,139 2,040,314 1,984,344 3,886,643 3,743,191 4,445,154 $ 6,039,037 $ 7,417,908 $ 5,959,759 -116- Table 2 Fiscal Year 2007 2008 2009 $ 1,321,971 $ 1,483,913 $ 1,486,281 1,819,250 1,906,890 1,904,966 1,971,571 2,485,752 1,941,272 258,906 273,054 394,110 1,000,230 1,002,423 638,768 132,912 674,343 43 6,371,928 7,152,032 6,365,397 636,506 657,776 659,113 952,107 921,238 955,956 91,157 96,945 99,286 63,888 106,143 106,847 1,885,537 16,167 129 3,629,195 1,798,269 1,821,331 $ 10,001,123 $ 8,950,301 $ 8,186,728 $ 41,475 $ 32,528 $ 34,064 8 96, 731 793,041 63 4, 742 - - 6,279 1,960 605 35,843 99,800 90,493 90,681 132,912 674,343 43 1,172,878 1,591,010 801,652 782,549 752,338 784,318 832,956 829,117 802,252 89,934 64,629 65,112 164,413 204,618 191,157 1,788,835 - - - 27,950 28,488 3,658,687 1,878,652 1,871,327 $ 4,831,565 $ 3,469,662 $ 2,672,979 -117- CITY OF SHOREWOOD, MINNESOTA STATISTICAL SECTION (UNAUDITED) CHANGES IN NET ASSETS - CONTINUED LAST SIX FISCAL YEARS (accrual basis of accounting) Fiscal Year 2004 2005 2006 Net revenues (expenses) Governmental activities Business -type activities 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 Gain on sale of capital assets Transfers $ (5,207,496) $ (5,111,233) $ (4,760,030) 193,204 249,348 858,242 $ (5,014,292) $ (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 - 4,300 - 5,000 (17,000) 25,000 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 Note: Changes in net assets are not available for years prior to 2004 3,482,902 3,963,811 4,502,389 144,163 190,943 310,281 (5,000) 17,000 (25,000) 139,163 207,943 285,281 $ 3,622,065 $ 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 -118- Table 2 Fiscal Year 2007 2008 2009 $ (5,199,050) $ (5,561,022) $ (5,563,745) 29,492 80,383 49,996 $ (5,169,558) $ (5,480,639) $ (5,513,749) $ 4,360,254 $ 4,582,909 $ 4,743,174 37,746 19,957 4,940 621,234 641,846 333,626 (143,728) 40,000 1,040,000 4,875,506 5,284,712 6,121,740 434,072 289,669 102,833 3 82, 890 - - 143,728 (40,000) (1,040,000) 960,690 249,669 (937,167) $ 5,836,196 $ 5,534,381 $ 5,184,573 $ (323,544) $ (276,310) $ 557,995 990,182 330,052 (887,171) $ 666,638 $ 53,742 $ (329,176) -119- CITY OF SHOREWOOD, MINNESOTA STATISTICAL SECTION (UNAUDITED) FUND BALANCES OF GOVERNMENTAL FUNDS LAST TEN FISCAL YEARS Fiscal Year 2000 2001 General fund 2002 2003 Reserved $ 35,500 $ 117,760 $ 44,994 $ - Unreserved 1,713,680 1,905,309 2,112,984 2,546,472 Total general fund $ 1,749,180 $ 2,023,069 $ 2,157,978 $ 2,546,472 All other governmental funds Reserved $ 303,857 $ 231,421 $ 246,283 $ 205,350 Unreserved, reported in: Debt service funds - - (37,482) - Special revenue funds - (8,342) - - Capital project funds 1,461,012 2,560,347 10,081,818 4,562,479 Total all other governmental funds $ 1,764,869 $ 2,783,426 $ 10,290,619 $ 4,767,829 -120- Table 3 Fiscal Year 2004 2005 2006 2007 2008 2009 $ - $ 48,593 $ - $ - $ 47,750 $ 500 2,941,223 2,944,588 3,383,906 3,761,509 3,660,359 3,555,224 $ 2,941,223 $ 2,993,181 $ 3,383,906 $ 3,761,509 $ 3,708,109 $ 3,555,724 $ 191,410 $ 238,873 $ 262,438 $ 10,040,556 $ 10,033,342 $ 1,934,628 3,566,803 3,116,437 2,197,367 2,473,097 3,743,980 4,252,870 $ 3,758,213 $ 3,355,310 $ 2,459,805 $ 12,513,653 $ 13,777,322 $ 6,187,498 -121- CITY OF SHOREWOOD, MINNESOTA STATISTICAL SECTION (UNAUDITED) CHANGES IN FUND BALANCES OF GOVERNMENTAL FUNDS LAST TEN FISCAL YEARS Fiscal Year 2000 2001 2002 2003 Revenues Taxes $ 1,938,705 $ 2,206,525 $ 2,658,663 $ 3,071,853 Licenses and permits 346,086 349,515 229,234 334,424 Intergovernmental 725,955 3,104,043 171,783 1,947,484 Charges for services 29,381 42,222 46,079 48,689 Fines and forfeitures 76,483 61,243 89,632 88,949 Special assessments 61,713 52,485 9,235 10,217 Interest on investments 248,334 225,500 283,024 146,331 Miscellaneous 144,241 71,236 375,510 551,167 Total revenues 3,570,898 6,112,769 3,863,160 6,199,114 Expenditures General government 984,586 989,502 1,001,921 1,038,909 Public safety 827,483 893,070 1,008,792 999,049 Public works 435,024 487,092 428,530 420,608 Culture and recreation 135,891 126,139 160,115 164,540 Capital Outlay 1,156,543 2,164,146 3,433,022 10,571,521 Debt service Principal 151,970 148,358 139,833 46,402 Interest and service charges 36,092 27,016 18,844 460,759 Bond issuance costs - - - - Total expenditures 3,727,589 4,835,323 6,191,057 13,701,788 Excess (deficiency) of revenues over (under) expenditures (156,691) 1,277,446 (2,327,897) (7,502,674) Other financing sources (uses) Transfers in 589,675 554,000 629,100 391,107 Proceeds from sale of bonds - - 9,950,000 2,368,378 Bonds refunded - - - - Discount on long -term debt issued - - - - Transfers out (497,800) (539,000) (609,100) (391,107) Total other financing sources (uses) 91,875 15,000 9,970,000 2,368,378 Net change in fund balances $ (64,816) $ 1,292,446 $ 7,642,103 $ (5,134,296) Debt service as a percentage of Noncapital expenditures 7.3% 6.6% 5.8% 16.2% -122- Table 4 Fiscal Year 2004 2005 2006 2007 2008 2009 $ 3,344,442 $ 3,750,633 $ 4,141,539 $ 4,332,741 $ 4,582,602 $ 4,703,368 310,055 334,720 382,408 256,472 195,419 127,883 1,014,410 2,432,656 365,732 224,286 753,605 66,411 44,169 50,752 45,450 50,819 50,753 41,649 81,841 90,149 79,040 77,777 53,369 52,968 10,737 6,928 895 418 - - 127,853 201,024 327,921 621,234 641,846 333,626 740,030 1,134,429 1,110,860 1,077,012 1,053,916 1,059,914 5,673,537 8,001,291 6,453,845 6,640,759 7,331,510 6,385,819 1,037,043 1,169,096 1,264,509 1,253,223 1,443,549 1,386,614 1,028,689 1,124,620 1,257,998 1,263,921 1,352,254 1,392,139 477,596 570,080 626,048 718,350 760,287 670,954 168,278 167,519 169,411 190,931 229,259 326,502 2,896,330 4,307,721 2,571,204 1,123,796 2,164,366 1,953,756 48,069 384,842 486,728 534,594 485,000 520,000 637,397 611,358 607,727 956,532 977,957 818,063 - - - - 58,569 - 6,293,402 8,335,236 6,983,625 6,041,347 7,471,241 7,068,028 (619,865) (333,945) (529,780) 599,412 (139,731) (682,209) 328,500 542,000 635,000 770,091 933,366 2,059,773 - - - 10,000,000 1,310,000 - - - - - - (8,100,000) - - - (24,233) - - (323,500) (559,000) (610,000) (913,819) (893,366) (1,019,773) 5,000 (17,000) 25,000 9,832,039 1,350,000 (7,060,000) $ (614,865) $ (350,945) $ (504,780) $ 10,431,451 $ 1,210,269 $ (7,742,209) 11.2% 12.7% 20.1% 26.3% 23.1% 22.4% -123- CITY OF SHOREWOOD, MINNESOTA STATISTICAL SECTION (UNAUDITED) TAX CAPACITY, MARKET VALUE AND ESTIMATED ACTUAL VALUE OF TAXABLE PROPERTY (Shown by year of tax collectability) -124- 2000 2001 2002 2003 Taxable market value Personal property $ - $ - $ - $ 3,962,200 Real estate - - - 914,769,800 Total taxable market value $ 680,244,500 $ 769,858,900 $ 817,063,900 $ 918,732,000 Estimated actual value of taxable property $ 685,565,400 $ 795,637,300 $ 914,769,800 $ 1,066,523,800 Taxable market value as a percentage of estimated actual value 99.22 % 96.76 % 89.32 % 86.14 % Tax capacity Personal property $ - $ - $ - $ 78,073 Real estate - - - 9,658,728 Tax capacity 10,346,255 11,344,958 8,690,552 9,736,801 Contribution to fiscal disparities pool (201,693) (253,832) (171,024) (184,657) Receivable from fiscal disparities pool 379,095 426,424 314,412 344,682 Taxable valuation/Total tax capacity $ 10,523,657 $ 11,517,550 $ 8,833,940 $ 9,896,826 Tax levies General $ 1,935,799 $ 2,208,574 $ 2,763,367 $ 2,851,847 Debt service - - - 305,000 Total $ 1,935,799 $ 2,208.574 $ 2,763367 $ 3,156,847 Direct tax rate General 18.340 % 19.208 % 31.923 % 28.816 % Debt service - - - 3.082 Total 18.340 % 19.208 % 31.923 % 31.898 % 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. -124- Table 5 OVAIS 2004 2005 2006 2007 2008 2009 $ 3,831,300 $ 4,130,300 $ 4,361,600 $ 4,591,200 $ 4,336,600 $ 4,764,900 1,033,460,200 1,173,029,000 1,318,313,000 1,475,529,200 1,597,262,400 1,651,054,700 $ 1,037,291,500 $ 1,177,159,300 $ 1,322,674,600 $ 1,480,120,400 $ 1,601,599,000 $ 1,655,819,600 $ 1,415,129,000 $ 1,550,488,900 $ 1,416,341,600 $ 1,553,767,900 $ 1,645,188,300 $ 1,673,720,100 73.30 % 75.92 % 93.39 % 95.26 % 97.35 % 98.93 $ 75,409 $ 81,333 $ 85,635 $ 89,872 $ 84,780 $ 91,548 10,980,358 12,590,290 14,269,195 16,130,097 17,619,943 18,305,114 11,055,767 12,671,623 14,354,830 16,219,969 17, 704, 723 18,396,662 (200,062) (213,988) (276,939) (308,590) (351,789) (396,336) 396,666 379,072 399,944 407,687 445,780 513,259 $ 11,252,371 $ 12,836,707 $ 14,477,835 $ 16,319,066 $ 17,798,714 $ 18,513,585 $ 2,907,997 $ 3,333,864 $ 3,678,592 $ 3,835,173 $ 4,056,917 $ 4,158,672 512,232 496,792 511,803 561,135 555,078 617,620 $ 3,420,229 $ 3,830,656 $ 4,190.395 $ 4,396,308 $ 4,611,995 $ 4,776,292 25.843 % 25.971 % 25.408 % 23.501 % 22.793 % 22.463 % 4.552 3.870 3.535 3.439 3.119 3.336 30.396 % 29.841 % 28.944 % 26.940 % 25.912 % 25.799 OVAIS CITY OF SHOREWOOD, MINNESOTA STATISTICAL SECTION (UNAUDITED) PROPERTY TAX CAPACITY RATES - DIRECT AND OVERLAPPING GOVERNMENTS (PER $1,000 OF TAX CAPACITY IN 2000 -2009) 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). -126- 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 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 - 2009 25.799 40.413 17.186 8.284 1.489 1.246 7.154 - 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). -126- Table 6 Totals School District No. 276 126.342 % Watershed School District District No.4 No. 277 Watershed Watershed Sewer Watershed District District District District No.3 No.4 No.2 No.3 126.001 % 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 92.041 91.798 91.798 83.139 -127- CITY OF SHOREWOOD, MINNESOTA STATISTICAL SECTION (UNAUDITED) PRINCIPAL TAXPAYERS DECEMBER 31, 2009 2009 Percent Tax of Total Taxpayer Capacity Rank Tax Capacity Big Box One, LLC $ 151,250 1 0.82 % Stanley M. Taube 123,250 2 0.67 South Lake Office Building LLC 79,250 3 0.43 Shugard storage Centers Inc 77,250 4 0.42 Elaine & Gary Jarrett 65,888 5 0.36 Beacon Bank 64,250 6 0.35 John & Margaret G Wiehoff 56,375 7 0.30 The Mary Sue Simon Qprt 54,313 8 0.29 Minnetonka Country Club 54,090 9 0.29 Thomas J. & Cynthia J. Redmond 50,563 10 0.27 Two S Properties - - - First State bank Excelsior - - - Waterford Center LLP - - - Shorewood Village Shopping Center, Inc. - - - Steven R. Litman Trustee - - - Xcel Energy (formerly Northern States Power Company) - - - Second Half LLC - - - Lawrence Reid - - - Totals $ 776,479 4.19 Source: Hennepin County Assessor -128- Table 7 2000 Percent Tax of Total Capacity Rank Tax Capacity 64,970 4 0.62 33,567 7 0.32 127,792 1 1.21 66,500 3 0.63 78,400 2 0.74 59,700 5 0.57 35,643 6 0.34 28,760 8 0.27 27,400 9 0.26 24,983 10 0.24 $ 547,715 5.20 % -129- CITY OF SHOREWOOD, MINNESOTA STATISTICAL SECTION (UNAUDITED) PROPERTY TAX LEVIES AND COLLECTIONS LAST TEN FISCAL YEARS Percentage of Levy 99.32 % 99.10 98.96 99.21 99.12 98.76 98.94 98.27 98.59 97.35 Collection in subsequent years $ 13,056 19,594 28,193 24,727 29,754 46,458 39,935 66,893 39,645 (1) Includes state paid property tax credits. -130- Total $ 1,935,765 2,208,259 2,762,825 3,156,525 3,419,891 3,829,532 4,185,764 4,387,182 4,586,544 4,649,904 Table 8 Percent of Total Collections to Levy 100.00 % 99.99 99.98 99.99 99.99 99.97 99.89 99.79 99.45 97.35 (1) Collection Fiscal Total of Current Year Levy Year's Levy 2000 $ 1,935,779 $ 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 2009 4,776,292 4,649,904 Percentage of Levy 99.32 % 99.10 98.96 99.21 99.12 98.76 98.94 98.27 98.59 97.35 Collection in subsequent years $ 13,056 19,594 28,193 24,727 29,754 46,458 39,935 66,893 39,645 (1) Includes state paid property tax credits. -130- Total $ 1,935,765 2,208,259 2,762,825 3,156,525 3,419,891 3,829,532 4,185,764 4,387,182 4,586,544 4,649,904 Table 8 Percent of Total Collections to Levy 100.00 % 99.99 99.98 99.99 99.99 99.97 99.89 99.79 99.45 97.35 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 137 for personal income and population data. Business - Type Governmental Activities Activities General Lease General Total Percentage of Fiscal Obligation Revenue Capital Obligation Primary Personal Per Year Bonds Bonds Leases Revenue Bonds Government Income Capita 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 2009 - 13,295,000 - 3,165,000 16,460,000 3.81 2,076 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 137 for personal income and population data. CITY OF SHOREWOOD, MINNESOTA STATISTICAL SECTION (UNAUDITED) RATIOS OF GENERAL BONDED DEBT OUTSTANDING LAST TEN FISCAL YEARS Percentage of Table 10 Net Estimated Actual Less Bonded Value of Amounts Debt General Available in Fiscal Obligation Debt Service Year Bonds Funds 2000 $ 280,000 $ 294,605 2001 155,000 221,837 2002 40,000 116,688 2003 20,000 108,925 2004 - - 2005 - - 2006 - - 2007 - - 2008 - - 2009 - - Percentage of Table 10 Net Estimated Actual Bonded Value of Per Debt Taxable Property Capita $ (14,605) (0.00) % $ (2) (66,837) (0.01) (9) (76,688) (0.01) (10) (88,925) (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 137 for population data. See the Schedule of Tax Capacity, Market Value and Estimated Actual Value of Taxable Property on pages 124 -125 for property value information. -132- CITY OF SHOREWOOD, MINNESOTA STATISTICAL SECTION (UNAUDITED) COMPUTATION OF DIRECT AND OVERLAPPING DEBT DECEMBER 31, 2009 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 % $ - $ 97,004,548 $ 87,212,819 24.02 % $ 20,948,519 8,980,000 8,700,726 2.44 212,298 608,360,000 600,494,319 1.23 7,386,080 80,895,000 71,017,752 1.67 1,185,996 42,850,000 42,430,624 1.23 521,897 208,505,000 131,613,280 0.57 750,196 $ 1,046,594,548 $ 941,469,520 3.29 % $ 31,004,986 $ 1,046,594,548 $ 941,469,520 3.29 % $ 31,004,986 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. -133- CITY OF SHOREWOOD, MINNESOTA STATISTICAL SECTION (UNAUDITED) LEGAL DEBT MARGIN INFORMATION LAST TEN FISCAL YEARS 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. -134- Fiscal Year 2000 2001 2002 2003 Debt limit $ 13,604,890 $ 15,397,178 $ 16,341,278 $ 18,374,640 Total net debt applicable to limit (14,605) (66,837) (76,688) (88,925) Legal debt margin $ 13,619,495 $ 15,464,015 $ 16,417,966 $ 18,463,565 Total net debt applicable to the limit as a percentage of debt limit (0.1 %) (0.4%) (0.5%) (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. -134- Table 12 Fiscal Year 2004 2005 2006 2007 2008 2009 $ 20,745,830 $ 23,543,186 $ 26,453,492 $ 29,602,408 $ 48,047,970 $ 49,674,588 $ 20,745,830 $ 23,543,186 $ 26,453,492 $ 29,602,408 $ 48,047,970 $ 49,674,588 Legal Debt Margin Calculation for Fiscal Year 2009 Taxable market value Debt limit (3% of market value) Debt applicable to limit General obligation bonds Less: amount available hi debt service funds Total net debt applicable to limit Legal debt margin $ 1,655,819,600 $ 49,674,588 $ 49,674,588 -135- Fiscal X7 - -- 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 (1) (2) Fiscal Year 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 CITY OF SHOREWOOD, MINNESOTA Table 13 STATISTICAL SECTION (UNAUDITED) PLEDGED - REVENUE COVERAGE LAST TEN FISCAL YEARS General Obligation Revenue Bonds (1) Net Gross (2) Revenue Debt Service Revenue Expenses Available Principal Interest Coverage $ 465,548 $ 186,696 $ 278,852 $ 190,000 $ 109,736 0.93 398,555 209,332 189,223 185,000 99,739 0.66 287,465 236,575 50,890 185,000 93,280 0.18 539,287 192,689 346,598 185,000 86,907 1.27 676,287 314,513 361,774 190,000 88,712 1.30 720,438 300,858 419,580 950,000 79,456 0.41 1,264,892 223,243 1,041,649 275,000 81,165 2.92 765,717 259,056 506,661 255,000 172,050 1.19 857,890 278,164 579,726 250,000 142,589 1.48 821,778 250,995 570,783 250,000 134,052 1.49 Including interest and other income Excluding depreciation and interest on bonds Capital Leases Revenue from Principal 624,650 0.99 Property Debt Service 620,596 - Taxes Principal Interest Coverage $ 37,544 $ 21,969 $ 15,575 1.00 37,544 23,358 14,186 1.00 37,544 24,833 12,711 1.00 37,544 26,402 11,142 1.00 37,544 28,069 9,475 1.00 37,544 29,842 7,702 1.00 37,544 31,728 5,816 1.00 73,406 69,594 3,812 1.00 Lease Revenue Bonds Fiscal " -- 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 Revenue from Lease Debt Service Payments Principal 624,650 0.99 447,704 - 620,596 - 948,384 355,000 1,040,693 455,000 1,034,751 465,000 1,037,241 485,000 992,835 495,000 -136- Interest Coverage 447,704 1.00 624,650 0.99 588,384 1.01 589,056 1.00 941,222 0.74 970,065 0.71 737,863 0.81 CITY OF SHOREWOOD, MINNESOTA Table 14 DEMOGRAPHIC AND ECONOMIC STATISTICS LAST TEN FISCAL YEARS Fiscal Percent of population Total Per Capita which has a Personal Personal Median bachelor's or post Population (1) Income (2) Income (2) Age (3) graduate degree (4) 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 2009 7,929 431,535,825 54,425 39.0 7.4 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. Unemployment Rate (5) -137- CITY OF SHOREWOOD, MINNESOTA PRINCIPAL EMPLOYERS CURRENT YEAR AND NINE YEARS AGO (1) 2009 Percentage of Total City Employer Employees Rank Employment Minnewashta Elementary School 103 1 N/A % Cub Foods 101 2 N/A Xcel Energy 35 3 N/A Beacon Bank 33 4 N/A City of Shorewood 32 * 5 N/A Minnetonka County Club 30 6 N/A Total 334 - % Source: Minnesota Department of Employment and Economic Development * Includes part -time and temporary seasonal employees. N/A - indicates not available (1) Information for 2000 was not available. The table will be updated for future years. -138- Table 15 2000 Percentage of Total City Employees Rank Employment - N/A % - N/A - N/A - N/A - N/A - N/A -139- CITY OF SHOREWOOD, MINNESOTA FULL -TIME EQUIVALENT CITY GOVERNMENT EMPLOYEES BY FUNCTION LAST TEN FISCAL YEARS (1) Function General government Public works Engineering Maintenance Culture and recreation Parks Water Sewer Municipal Liquor Total Table 16 2006 2007 2008 2009 13 13 13 12 6 6 6 6 13 5 5 5 1.5 1.5 1.5 1.5 1.5 15 15 15 38 29 27 26 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. -140- CITY OF SHOREWOOD, MINNESOTA OPERATING INDICATORS BY FUNCTION LAST TEN FISCAL YEARS (1) Table 17 Function 2006 2007 2008 2009 Building/engineering Permits issued 1,137 710 686 603 Public works Street sweeping (hours) 1,000 1,614 1,500 1,550 Snowplowing (hours) 2,000 1,394 1,508 765 Equipment repair (hours) 2,080 2,080 2,080 2,080 Water New connections 24 22 13 11 Water mains breaks 3 7 3 Average daily consumption (thousands of gallons) 482,000 482,000 482,000 467,600 Sewer Average daily treatment flow (thousands of gallons) 1,000,000 1,000,000 1,000,000 1,000,000 Source: City of Shorewood 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. -141- CITY OF SHOREWOOD, MINNESOTA CAPITAL ASSET STATISTICS BY FUNCTION LAST TEN FISCAL YEARS (1) Function 2006 2007 2008 Public Works Highways and streets Streets (miles) 50 51 51 Street lights 194 194 194 Traffic signals 5 5 5 Culture and recreation Parks division Parks 7 7 7 Parks acreage 102 102 102 Baseball diamonds 5 5 5 Basketball courts 1 1 1 Bike trails (miles) 2.45 2.45 2.45 Hockey rinks /outdoor 3 3 3 Softball diamonds 3 3 3 Swimming areas 1 1 1 Tennis courts 5 5 5 Volleyball courts 2 2 2 Utilities Water Miles of water main 27 28 28 Consumers 1,265 1,297 1,310 Maximum daily capacity (gallons) 919,000 919,000 919,000 Sewer Miles of sanitary sewer 60 60 60 Lift stations 14 14 14 Maximum daily treatment capacity (gallons) 1,000,000 1,000,000 1,000,000 Storm sewer Miles of storm sewer 12 12 12 Source: City of Shorewood 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 Table 18 2009 51 194 5 7 102 5 1 2.45 3 3 1 5 2 28 1,321 919,000 60 14 1,000,000 12 -142-