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2015 Comp. Annual Financial Report CITY OF SHOREWOOD SHOREWOOD, MINNESOTA COMPREHENSIVE ANNUAL FINANCIAL REPORT FOR THE YEAR ENDED DECEMBER 31, 2015 BILL JOYNES, CITY ADMINISTRATOR REPORT PREPARED BY BRUCE DEJONG, 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 COMPREHENSIVE ANNUAL FINANCIAL REPORT TABLE OF CONTENTS FOR THE YEAR ENDED DECEMBER 31, 2015 Exhibit Page No. INTRODUCTORY SECTION Elected and Appointed Officials 4 Organization Chart 5 Letter of Transmittal 7 Certification of Achievement for Excellence in Financial Reporting 12 FINANCIAL SECTION Independent Auditor’s Report 15 Management’s Discussion and Analysis 19 Basic Financial Statements Government-wide Financial Statements Statement of Net Position 1 33 Statement of Activities 2 34 Fund Financial Statements Governmental Funds Balance Sheet 3 38 Reconciliation of the Balance Sheet to the Statement of Net Position 4 41 Statement of Revenues, Expenditures and Changes in Fund Balances 5 42 Reconciliation of the Statement of Revenues, Expenditures and Changes in Fund Balances to the Statement of Activities 6 44 General Fund Statement of Revenues, Expenditures and Changes in Fund Balances - Budget and Actual 7 45 Proprietary Funds Statement of Net Position 8 46 Statement of Revenues, Expenses and Changes in Net Position 9 47 Statement of Cash Flows 10 48 Fiduciary Fund Statement of Net Position 11 50 Notes to the Financial Statements 51 Required Supplementary Information Schedule of Employer’s Share of Public Employees Retirement Association Net Pension Liability - General Employees Retirement Fund 78 Schedule of Employer’s Public Employees Retirement Association Contributions - General Employees Retirement Fund 78 Combining and Individual Fund Financial Statements and Schedules Nonmajor Governmental Funds Combining Balance Sheet A-1 82 Combining Statement of Revenues, Expenditures and Changes in Fund Balances A-2 83 Nonmajor Capital Projects Funds Combining Balance Sheet B-1 86 Combining Statement of Revenues, Expenditures and Changes in Fund Balances B-2 87 General Fund Schedule of Revenues, Expenditures and Changes in Fund Balances - Budget and Actual C-1 88 Debt Service Funds Combining Balance Sheet D-1 92 Combining Schedule of Revenues, Expenditures and Changes in Fund Balances D-2 93 Agency Fund Combining Statement of Changes in Assets and Liabilities E-1 94 Summary Financial Report Revenues and Expenditures for General Operations - Governmental Funds F-1 95 -1- CITY OF SHOREWOOD, MINNESOTA COMPREHENSIVE ANNUAL FINANCIAL REPORT TABLE OF CONTENTS - CONTINUED FOR THE YEAR ENDED DECEMBER 31, 2015 Table Page No. STATISTICAL SECTION (UNAUDITED) Net Position by Component 1 100 Changes in Net Position 2 102 Fund Balances of Governmental Funds 3 106 Changes in Fund Balances of Governmental Funds 4 108 Tax Capacity, Market Value and Estimated Actual Value of Taxable Property 5 110 Property Tax Capacity Rates - Direct and Overlapping Governments 6 112 Principal Taxpayers 7 114 Property Tax Levies and Collections 8 115 Ratio of Net Bonded Debt to Assessed Value and Net Bonded Debt Per Capita 9 116 Computation of Direct and Overlapping Debt 10 117 Legal Debt Margin Information 11 118 Pledged-Revenue Coverage 12 120 Demographic and Economic Statistics 13 121 Principal Employers 14 122 Full-Time Equivalent City Government Employees by Function 15 123 Operating Indicators by Function 16 124 Capital Asset Statistics by Function 17 125 -2- INTRODUCTORY SECTION CITY OF SHOREWOOD SHOREWOOD, MINNESOTA FOR THE YEAR ENDED DECEMBER 31, 2015 -3- CITY OF SHOREWOOD, MINNESOTA ELECTED AND APPOINTED OFFICIALS FOR THE YEAR ENDED DECEMBER 31, 2015 Name Title Term Expires Scott Zerby Mayor 12/31/16 Richard Woodruff Council Member 12/31/16 Jennifer Labadie Council Member 12/31/18 Debbie Siakel Council Member 12/31/18 Kristine Sundberg Council Member 12/31/16 Name Title Bill Joynes City Administrator Bruce DeJong Finance Director/Treasurer ELECTED APPOINTED -4- City of Shorewood Organizational Chart Residents Council Administrator Advisory Boards Plan Commission Park Commission Joint Powers Agencies Police Fire LMCD LMCC Plan/Zone DirFinance Dir City Clerk Pub Works Dir Planning Asst Contracted Services IT/Phones Mound Fire Assessor Recycling Attorney Engineer Bldg Official Recep- tionist Comm Coord Park/Rec Coord Utiliites Parks Maint. Streets Sr Acct Clerk -5- THIS PAGE IS LEFT BLANK INTENTIONALLY -6- -12- FINANCIAL SECTION CITY OF SHOREWOOD SHOREWOOD, MINNESOTA FOR THE YEAR ENDED DECEMBER 31, 2015 -13- THIS PAGE IS LEFT BLANK INTENTIONALLY -14- INDEPENDENT AUDITOR’S REPORT Honorable Mayor and City Council City of Shorewood, Minnesota Report on the Financial Statements We have audited the accompanying financial statements of the governmental activities, the business-type activities, each major fund, and the aggregate remaining fund information of the City of Shorewood, Minnesota (the City), as of and for the year ended December 31, 2015, and the related notes to the financial statements, which collectively comprise the City’s basic financial statements as listed in the table of contents. Management’s Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. Auditor’s Responsibility Our responsibility is to express opinions on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the City’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the City’s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions. 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, 2015, and the respective changes in financial position and, where applicable, cash flows thereof and the budgetary comparison for the General fund for the year then ended in accordance with accounting principles generally accepted in the United States of America. -15- THIS PAGE IS LEFT BLANK INTENTIONALLY -16- Change in Accounting Standards As described in Note 8 to the financial statements, the City adopted the provisions of Governmental Accounting Standard Board (GASB) Statement No. 68, Accounting and Financial Reporting for Pensions - an Amendment of GASB Statement No. 27 and Statement No. 71, Pension Transition for Contributions Made Subsequent to the Measurement Date - an Amendment of GASB Statement No. 68, for the year ended December 31, 2015. Adoption of the provisions of these statements results in significant change to the classifications of the components of the financial statements. Other Matters Required Supplementary Information Accounting principles generally accepted in the United States of America require that the Management’s Discussion and Analysis starting on page 19 and the Schedules of Employer’s Share of the Net Pension Liability and the Schedules of Employer’s Contributions on page 78 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. Other Information Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the City’s basic financial statements. The introductory section, combining and individual fund financial statements and schedules, and statistical section are presented for purposes of additional analysis and are not a required part of the 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 basic financial statements. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the basic financial statements or to the basic financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the combining and individual fund financial statements and schedules are fairly stated, in all material respects, in relation to the basic financial statements as a whole. The introductory section and statistical section 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 them. ABDO, EICK & MEYERS, LLP Minneapolis, Minnesota June 27, 2016 -17- THIS PAGE IS LEFT BLANK INTENTIONALLY -18- 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, 2015. Financial Highlights • The assets and deferred outflows of resources of the City exceeded its liabilities and deferred inflows of resources at the close of the most recent fiscal year by $30,398,490 (net position). Of this amount, $13,290,048 (unrestricted net position) may be used to meet the City’s ongoing obligations to residents and creditors. • The beginning unrestricted net position was decreased by $1,254,080 to recognize the effects of GASB Statement No. 68 implementation. • The City’s total net position decreased $27,169, which is due to expenses in excess of revenues in business-type activities. • As of the close of the current fiscal year, the City’s governmental funds reported combined ending fund balances of $7,838,036, an increase of $387,906 in comparison with the prior year. This increase is primarily the result of revenues exceeding expenditures. Approximately 56 percent of this total amount, $4,402,951, is unassigned and available for spending at the City’s discretion. • At the end of the current fiscal year, unassigned fund balance for the General fund was $4,402,951, or 82.5 percent of total 2015 expenditures and transfers out. The City has a policy to maintain a General fund working capital balance of 55.0 - 60.0 percent of expenditures and transfers. • The City’s total debt increased $105,576, or 1.0 percent during the current fiscal year. This was the result of recording the net pension liability in relation to the adoption of GASB Statement No. 68 offset by regularly scheduled principal and interest payments. -19- 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. Figure 1 illustrates 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 Discussion and Analysis Basic Financial Statements Required Supplementary Information Government- wide Financial Statements Fund Financial Statements Notes to the Financial Statements Summary Detail -20- 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 Fund Financial Statements Government-wide Statements Governmental Funds Proprietary Funds Scope Entire City government (except fiduciary funds) and the City’s component units The activities of the City that are not proprietary or fiduciary, such as police, fire and parks Activities the City operates similar to private businesses, such as the water and sewer system Required financial statements • Statement of Net Position • Statement of Activities • Balance Sheet • Statement of Revenues, Expenditures, and Changes in Fund Balances • Statements of Net Position • Statements of Revenues, Expenses and Changes in Fund Net Position • Statements of Cash Flows Accounting Basis and measurement focus Accrual accounting and economic resources focus Modified accrual accounting and current financial resources focus Accrual accounting and economic resources focus Type of asset/liability information All assets and liabilities, both financial and capital, and short-term and long-term Only assets expected to be used up and liabilities that come due during the year or soon thereafter; no capital assets included All assets and liabilities, both financial and capital, and short-term and long-term Type of deferred outflows/inflows of resources information All deferred outflows/inflows of resources, regardless of when cash is received or paid Only deferred outflows of resources expected to be used up and deferred inflows of resources that come due during the year of son thereafter; no capital assets included All deferred outflows/inflows of resources, regardless of when cash is received or paid Type of in flow/out flow information All revenues and expenses during year, regardless of when cash is received or paid Revenues for which cash is received during or soon after the end of the year; expenditures when goods or services have been received and payment is due during the year or soon thereafter All revenues and expenses during the year, regardless of when cash is received or paid Government-wide financial statements. The government-wide financial statements are designed to provide readers with a broad overview of the City’s finances, in a manner similar to a private-sector business. The statement of net position presents information on all of the City’s assets and deferred outflows of resources, and liabilities and deferred inflows of resources, with the difference between the two reported as net position. Over time, increases or decreases in net position may serve as a useful indicator of whether the financial position of the City is improving or deteriorating. The statement of activities presents information showing how the City’s net position changed during the most recent fiscal year. All changes in net position are reported as soon as the underlying event giving rise to the change occurs, regardless of the timing of related cash flows. Thus, revenues and expenses are reported in this statement for some items that will only result in cash flows in future fiscal periods (e.g., uncollected taxes and earned 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, stormwater management utility, and recycling. -21- 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 33 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 of 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 12 individual governmental funds, four 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 for the General, Debt Service, and Street Reconstruction funds, which are considered to be major funds. Data from the other six 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 38 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, stormwater management utility, and recycling. 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. The Water, Sewer, and Stormwater Management Utility funds are considered to be major funds of the City, while the Recycling fund is a nonmajor fund. The basic proprietary fund financial statements start on page 46 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 50 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 51 of this report. Other information. The combining statements referred to earlier in connection with nonmajor governmental funds are presented following the notes to the financial statements. Combining and individual fund financial statements and schedules starts on page 82 of this report. -22- Government-wide Financial Analysis As noted earlier, net position may serve over time as a useful indicator of a government’s financial position. In the case of the City, assets and deferred inflows of resources exceeded liabilities and deferred inflows of resources by $30,398,490 at the close of the most recent fiscal year. Of the City’s net position 56.3 percent reflects its investment in capital assets (e.g., land, buildings, machinery and equipment), less any related debt used to acquire those assets that is still outstanding. The City uses these capital assets to provide services to citizens; consequently, these assets are not available for future spending. Although the City’s investment in its capital assets is reported net of related debt, it should be noted that the resources needed to repay this debt must be provided from other sources, since the capital assets themselves cannot be used to liquidate these liabilities. City of Shorewood’s Summary of Net Position Increase Increase 20152014 (Decrease)20152014 (Decrease) Assets Cash and temporary investments 7,563,089$ 7,145,458$ 417,631$ 5,970,378$ 7,132,674$ (1,162,296)$ Cash with fiscal agent - - - 274,646 270,101 4,545 Receivables 6,907,353 7,697,438 (790,085) 676,593 614,843 61,750 Prepaids 99,216 103,996 (4,780) 2,137 - 2,137 Land held for resale 150,068 150,068 - - - - Capital assets 10,374,897 10,789,046 (414,149) 9,613,545 8,878,271 735,274 Total assets 25,094,623 25,886,006 (791,383) 16,537,299 16,895,889 (358,590) Deferred outflows of resources 96,618 - 96,618 28,310 - 28,310 Liabilities Noncurrent liabilities 8,456,831 8,337,883 118,948 2,146,628 2,160,000 (13,372) Other liabilities 410,932 476,982 (66,050) 70,480 127,291 (56,811) Total liabilities 8,867,763 8,814,865 52,898 2,217,108 2,287,291 (70,183) Deferred inflows of resources 211,513 - 211,513 61,976 - 61,976 Net position Net investment in capital assets 9,394,897 9,754,046 (359,149) 7,713,545 6,718,271 995,274 Unrestricted 6,717,068 7,317,095 (600,027) 6,572,980 7,890,327 (1,317,347) Total net position 16,111,965$ 17,071,141$ (959,176)$ 14,286,525$ 14,608,598$ (322,073)$ Governmental Activities Business-type Activities The balance of unrestricted net position is $13,290,048. This may be used to meet the City’s ongoing obligations to citizens and creditors. -23- Governmental activities. Governmental activities increased the City’s net position by $8,333. Key elements of this decrease are as follows: City of Shorewood’s Changes in Net Position *Increase *Increase 20152014 (Decrease)20152014 (Decrease) Revenues Program revenues Charges for services 987,821$ 946,281$ 41,540$ 1,785,419$ 1,681,045$ 104,374$ Operating grants and contribution 86,370 48,284 38,086 26,198 31,279 (5,081) Capital grants and contributions 184,605 811,522 (626,917) 5,706 115,490 (109,784) General revenues Property taxes 4,931,075 4,854,521 76,554 - - - Grants and contributions not restricted to specific programs 5,840 5,848 (8) - - - Unrestricted investment earnings 60,283 86,530 (26,247) 68,119 95,130 (27,011) Gain on disposal of capital assets 30,000 - 30,000 - - - Total revenues 6,285,994 6,752,986 (466,992) 1,885,442 1,922,944 (37,502) Expenses General government 1,318,558 1,277,118 41,440 - - - Public safety 2,080,769 2,036,394 44,375 - - - Public works 1,971,483 1,991,852 (20,369) - - - Culture and recreation 613,494 397,365 216,129 - - - Interest on long-term debt 318,357 355,378 (37,021) - - - Water - - - 721,184 690,479 30,705 Sewer - - - 944,263 873,711 70,552 Stormwater Management Utility - - - 99,312 203,825 (104,513) Recycling - - - 131,185 178,457 (47,272) Total expenses 6,302,661 6,058,107 244,554 1,895,944 1,946,472 (50,528) Increase (decrease) in net position before transfers (16,667) 694,879 (711,546) (10,502) (23,528) 13,026 Transfers of capital assets (245,121) - (245,121) 245,121 - 245,121 Transfers 270,121 25,000 245,121 (270,121) (25,000) (245,121) Change in net position 8,333 719,879 (711,546) (35,502) (48,528) 13,026 Net position, January 1 as restated 16,103,632 16,351,262 (247,630) 14,322,027 14,657,126 (335,099) Net position, December 31 16,111,965$ 17,071,141$ (959,176)$ 14,286,525$ 14,608,598$ (322,073)$ Governmental Activities Business-type Activities * GASB Statement No. 68 was implemented for the year ended December 31, 2015 and required a $967,509 restatement of beginning net position for governmental activities and $286,571 restatement for business-type activities. Prior year amounts were not restated causing a variance in ending net position at December 31, 2014 and beginning net position January 1, 2015. -24- The following graph depicts various governmental activities and shows the revenue and expenses directly related to those activities. Expenses and Program Revenues - Governmental Activities $- $500,000 $1,000,000 $1,500,000 $2,000,000 $2,500,000 General government Public safety Public works Culture and recreation Interest on long-term debt Expenses Program revenues Revenues by Source - Governmental Activities Charges for services 15.7% Operating grants and contributions 1.4% Capital grants and contributions 3.0% Property taxes 78.8% Grants and contributions not restricted to specific programs 1.0% Unrestricted investment earnings 0.1% -25- Business-type activities. Business-type activities decreased the City’s net position by $35,502. Expenses and Program Revenues - Business-type Activities $- $100,000 $200,000 $300,000 $400,000 $500,000 $600,000 $700,000 $800,000 $900,000 $1,000,000 Water Sewer Recycling Stormwater management utility Expenses Program revenues Revenues by Source - Business-type Activities Charges for services 94.7% Operating grants and contributions 1.4% Capital grants and contributions 0.3% Unrestricted investment earnings 3.6% -26- Financial Analysis of the Government’s Funds As noted earlier, the City uses fund accounting to ensure and demonstrate compliance with finance-related legal requirements. Governmental funds. The focus of the City’s governmental funds is to provide information on near-term inflows, outflows and balances of spendable resources. Such information is useful in assessing the City’s financing requirements. In particular, unassigned fund balance may serve as a useful measure of a government’s net resources available for spending at the end of the fiscal year. As of the end of the current fiscal year, the City’s governmental funds reported combined ending fund balances of $7,838,036, an increase of $387,906 in comparison with the prior year. Approximately 56 percent of this total amount, $4,402,951 constitutes unassigned fund balance, which is available for spending at the City’s discretion. The remaining fund balance is made up of the following: 1) Nonspendable ($99,216), 2) Restricted ($31,805), and 3) Assigned ($3,304,064). 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 $4,502,167. As a measure of the General fund’s liquidity, it may be useful to compare both unassigned fund balance and total fund balance to total fund expenditures and transfers out. Unassigned fund balance represents 82.5 percent of same year fund expenditures and transfers out, whereas, total fund balance represents 84.3 percent. The fund balance of the City’s General fund increased $416,696 during the current fiscal year. The Debt Service fund has a total fund balance of $31,805, all of which is restricted for the payment of debt service. The increase in fund balance of $6,151 was in line with the City’s debt service financing plan. The Street Reconstruction fund has a fund balance of $1,453,048. The fund balance decreased by $83,624 during the current fiscal year due to expenditures for various capital projects. 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 position of the enterprise funds at the end of the year amounted to $6,572,980. The total decrease in net position for the funds was $35,502. 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 $142,178. Revenues were over budget by $255,527, and expenditures were under budget by $303,347. The actual amounts were different from the final budget amounts because of the following: • The largest revenue variance was in licenses and permits, which were over budget by $127,797 due to building permits received in excess of expectations. Another significant revenue variance was in miscellaneous, which was over budget by $68,349 which was due to additional refunds and reimbursements. • The largest expenditure variances were in general government and public works, which were $59,923 and $283,350 under budget, respectively. The general government department was under budget due to Mayor and City Council and Municipal Building expenditures. The public works department was under budget due to General Maintenance and Snow and Ice Removal expenditures. -27- 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, 2015, amounts to $19,988,442 (net of accumulated depreciation). This investment in capital assets includes land, structures, improvements, machinery and equipment, park facilities, and roads. Major capital asset events during the current fiscal year included the following: • Completion of various projects including two dump trucks, Valleywood Street Reconstruction, Sunnyvale Street Reconstruction, 2014 Mill & Overlay project, and the 2015 Mill & Overlay project. • Progress made on various projects including Star Lane & Star Circle Street and Utility projects, 2015 sealcoat project, Excelsior Blvd Trail project, and the Smithtown Road East sidewalk extension. Additional information on the City’s capital assets can be found in Note 3B starting on page 63 of this report. City of Shorewood’s Capital Assets (net of depreciation) Increase Increase 20152014 (Decrease)20152014 (Decrease) Land 741,826$ 741,826$ -$ 434,113$ 434,113$ -$ Construction in progress 782,626 1,499,144 (716,518) 476,899 - 476,899 Buildings 1,862,369 1,938,885 (76,516) - - - Improvements other than buildings 239,287 252,644 (13,357) - - - Infrastructure 6,155,505 5,608,346 547,159 8,387,038 8,444,158 (57,120) Machinery and equipment 593,284 748,201 (154,917) 315,495 - 315,495 Total 10,374,897$ 10,789,046$ (414,149)$ 9,613,545$ 8,878,271$ 735,274$ Governmental Activities Business-type Activities Long-term debt. At the end of the current fiscal year, the City had total bonded debt outstanding of $9,300,000. Of this amount, $7,400,000 is lease revenue bonds and $1,900,000 is general obligation revenue bonds. While all of the City’s bonds have dedicated revenue streams pledged to repayment, the general obligation revenue bonds are all backed by the full faith and credit of the City. City of Shorewood’s Outstanding Debt Increase Increase 20152014 (Decrease)20152014 (Decrease) General obligation revenue bonds -$ -$ -$ 1,900,000$ 2,160,000$ (260,000)$ Lease revenue bonds 7,400,000 8,135,000 (735,000) - - - Compensated absences payable 215,129 202,883 12,246 - - - Net pension liability 841,702 - 841,702 246,628 - 246,628 Total 8,456,831$ 8,337,883$ 118,948$ 2,146,628$ 2,160,000$ (13,372)$ Governmental Activities Business-type Activities 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 3D starting on page 66 of this report. -28- Economic Factors and Next Year’s Budgets and Rates • The City has experienced increases in residential property values, particularly on higher value properties around Lake Minnetonka, but lower value home prices seem to be trending up in line with the entire region. • Unemployment trends in the region compare favorably to national indices. • The 2016 budget was developed to continue using General fund balance to bring the overall balance down to the policy level while continuing to provide the same service levels to the public. • The property tax levy for the 2016 budget was increased 3 percent from the 2015 budget. All of these factors were taken into account in preparing the City’s budget for the 2016 fiscal year. During the 2015 fiscal year, the fund balance in the General fund increased by $416,696. For 2016, the City budgeted an $180,148 deficit using fund balance to balance the budget. This planned use of fund balance was in accordance with the Fund Balance Policy adopted by the City Council. Other than balancing the budget, possible uses of fund balance in excess of the policy level include one-time projects, and transfers to capital project funds as determined by the City Council. Requests for Information This financial report is designed to provide a general overview of the City’s finances for all those with an interest in the City’s finances. Questions concerning any of the information provided in this report or requests for additional financial information should be addressed to the City of Shorewood, 5755 Country Club Road, Shorewood, Minnesota 55331. -29- THIS PAGE IS LEFT BLANK INTENTIONALLY -30- GOVERNMENT-WIDE FINANCIAL STATEMENTS CITY OF SHOREWOOD SHOREWOOD, MINNESOTA FOR THE YEAR ENDED DECEMBER 31, 2015 -31- THIS PAGE IS LEFT BLANK INTENTIONALLY -32- Exhibit 1CITY OF SHOREWOOD, MINNESOTA STATEMENT OF NET POSITION DECEMBER 31, 2015 Governmental Business-type Activities Activities Total ASSETS Cash and temporary investments 7,563,089$ 5,970,378$ 13,533,467$ Cash with fiscal agent - 274,646 274,646 Receivables Accrued interest 140,756 35,463 176,219 Property taxes 86,563 - 86,563 Accounts, net 84,545 420,095 504,640 Special assessments 263 221,035 221,298 Lease 6,591,974 - 6,591,974 Due from other governments 3,252 - 3,252 Prepaid items 99,216 2,137 101,353 Land held for resale 150,068 - 150,068 Capital assets Nondepreciable assets 1,524,452 911,012 2,435,464 Depreciable capital assets, net 8,850,445 8,702,533 17,552,978 TOTAL ASSETS 25,094,623 16,537,299 41,631,922 DEFERRED OUTFLOWS OF RESOURCES Deferred pension resources 96,618 28,310 124,928 LIABILITIES Accounts and contracts payable 199,704 49,879 249,583 Accrued salaries payable 17,807 3,503 21,310 Due to other governments 24,582 7,947 32,529 Accrued interest payable 113,568 9,151 122,719 Unearned revenue 55,271 - 55,271 Noncurrent liabilities Due within one year 928,453 265,000 1,193,453 Due in more than one year 7,528,378 1,881,628 9,410,006 TOTAL LIABILITIES 8,867,763 2,217,108 11,084,871 DEFERRED INFLOWS OF RESOURCES Deferred pension resources 211,513 61,976 273,489 NET POSITION Net investment in capital assets 9,394,897 7,713,545 17,108,442 Unrestricted 6,717,068 6,572,980 13,290,048 TOTAL NET POSITION 16,111,965$ 14,286,525$ 30,398,490$ The notes to the financial statements are an integral part of this statement. -33- CITY OF SHOREWOOD, MINNESOTA STATEMENT OF ACTIVITIES FOR THE YEAR ENDED DECEMBER 31, 2015 Operating Capital Grants Charges for Grants and and Expenses Services Contributions Contributions Governmental activities General government 1,318,558$ 260,440$ 300$ -$ Public safety 2,080,769 617,557 1,590 - Public works 1,971,483 940 84,206 - Culture and recreation 613,494 108,884 274 184,605 Interest on long-term debt 318,357 - - - Total governmental activities 6,302,661 987,821 86,370 184,605 Business-type activities Water 721,184 544,748 - 3,098 Sewer 944,263 858,066 - 2,608 Stormwater management utility 99,312 227,676 - - Recycling 131,185 154,929 26,198 - Total business-type activities 1,895,944 1,785,419 26,198 5,706 Total 8,198,605$ 2,773,240$ 112,568$ 190,311$ General revenues Taxes Property taxes, levied for general purposes Grants and contributions not restricted to specific programs Unrestricted investment earnings Gain on disposal of capital assets Transfers of capital assets Transfers Total general revenues Change in net position Net position, January 1 as restated (Note 8) Net position, December 31 The notes to the financial statements are an integral part of this statement. Functions/Programs Program Revenues -34- Exhibit 2 Governmental Business-type Activities Activities Total (1,057,818)$ -$ (1,057,818)$ (1,461,622) - (1,461,622) (1,886,337) - (1,886,337) (319,731) - (319,731) (318,357) - (318,357) (5,043,865) - (5,043,865) - (173,338) (173,338) - (83,589) (83,589) - 128,364 128,364 - 49,942 49,942 - (78,621) (78,621) (5,043,865) (78,621) (5,122,486) 4,931,075 - 4,931,075 5,840 - 5,840 60,283 68,119 128,402 30,000 - 30,000 (245,121) 245,121 - 270,121 (270,121) - 5,052,198 43,119 5,095,317 8,333 (35,502) (27,169) 16,103,632 14,322,027 30,425,659 16,111,965$ 14,286,525$ 30,398,490$ Net (Expense) Revenue and Changes in Net Position -35- THIS PAGE IS LEFT BLANK INTENTIONALLY -36- FUND FINANCIAL STATEMENTS CITY OF SHOREWOOD SHOREWOOD, MINNESOTA FOR THE YEAR ENDED DECEMBER 31, 2015 -37- CITY OF SHOREWOOD, MINNESOTA BALANCE SHEET GOVERNMENTAL FUNDS DECEMBER 31, 2015 Debt Street General Service Reconstruction ASSETS Cash and temporary investments 4,534,092$ 31,805$ 1,498,142$ Receivables Accrued interest 16,285 - 6,400 Taxes 86,563 - - Accounts, net 8,230 - - Special assessments 263 - - Lease - 6,420,000 - Due from other governments 3,252 - - Prepaid items 99,216 - - Land held for resale - - - TOTAL ASSETS 4,747,901$ 6,451,805$ 1,504,542$ LIABILITIES Accounts and contracts payable 94,026$ -$ 51,494$ Accrued salaries payable 17,404 - - Due to other governments 24,582 - - Unearned revenue 55,271 - - TOTAL LIABILITIES 191,283 - 51,494 DEFERRED INFLOWS OF RESOURCES Unavailable revenue - property taxes 54,451 - - Unavailable revenue - lease receivables - 6,420,000 - TOTAL DEFERRED INFLOWS OF RESOURCES 54,451 6,420,000 - FUND BALANCES Nonspendable prepaid items 99,216 - - Restricted for debt service - 31,805 - Assigned to Street reconstruction - - 1,453,048 Capital outlay - - - Community center operations - - - Unassigned 4,402,951 - - TOTAL FUND BALANCES 4,502,167 31,805 1,453,048 TOTAL LIABILITIES, DEFERRED INFLOWS OF RESOURCES, AND FUND BALANCES 4,747,901$ 6,451,805$ 1,504,542$ The notes to the financial statements are an integral part of this statement. -38- Exhibit 3 Other Total Governmental Governmental Funds Funds 1,499,050$ 7,563,089$ 8,196 30,881 - 86,563 76,315 84,545 - 263 171,974 6,591,974 - 3,252 - 99,216 150,068 150,068 1,905,603$ 14,609,851$ 54,184$ 199,704$ 403 17,807 - 24,582 - 55,271 54,587 297,364 - 54,451 - 6,420,000 - 6,474,451 - 99,216 - 31,805 - 1,453,048 1,797,637 1,797,637 53,379 53,379 - 4,402,951 1,851,016 7,838,036 1,905,603$ 14,609,851$ -39- THIS PAGE IS LEFT BLANK INTENTIONALLY -40- Exhibit 4CITY OF SHOREWOOD, MINNESOTA RECONCILIATION OF THE BALANCE SHEET TO THE STATEMENT OF NET POSITION GOVERNMENTAL FUNDS DECEMBER 31, 2015 Amounts reported for the governmental activities in the statement of net position are different because Total fund balances - governmental 7,838,036$ Capital assets used in governmental activities are not financial resources and therefore are not reported as assets in governmental funds. Cost of capital assets 39,206,842 Less: accumulated depreciation (28,831,945) 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 (7,400,000) Compensated absences payable (215,129) Pension liability (841,702) Some receivables are not available soon enough to pay for the current period's expenditures, and therefore are reported as unavailable revenue in the funds. Interest on lease receivable 109,875 Delinquent taxes receivable 54,451 Leases receivable 6,420,000 Governmental funds do not report long-term amounts to pensions Deferred outflows of resources 96,618 Deferred inflows of resources (211,513) Governmental funds do not report a liability for accrued interest until due and payable.(113,568) Total net position - governmental activities 16,111,965$ The notes to the financial statements are an integral part of this statement. -41- CITY OF SHOREWOOD, MINNESOTA STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES GOVERNMENTAL FUNDS FOR THE YEAR ENDED DECEMBER 31, 2015 Debt Street General Service Reconstruction REVENUES Taxes 4,949,126$ -$ -$ Licenses and permits 275,567 - - Intergovernmental 91,636 - - Charges for services 67,618 - - Fines and forfeitures 65,234 - - Interest on investments 35,182 - 10,337 Miscellaneous 247,249 970,569 - TOTAL REVENUES 5,731,612 970,569 10,337 EXPENDITURES Current General government 1,247,105 - - Public safety 1,579,400 - - Public works 712,736 - 14,169 Culture and recreation 255,826 - - Capital outlay Public safety 501,336 - - Public works - - 893,716 Culture and recreation - - - Debt service Principal - 735,000 - Interest and service charges - 330,931 - TOTAL EXPENDITURES 4,296,403 1,065,931 907,885 EXCESS (DEFICIENCY) OF REVENUES OVER (UNDER) EXPENDITURES 1,435,209 (95,362) (897,548) OTHER FINANCING SOURCES (USES) Transfers in 25,000 101,513 813,924 Transfers out (1,043,513) - - TOTAL OTHER FINANCING SOURCES (USES)(1,018,513) 101,513 813,924 NET CHANGE IN FUND BALANCES 416,696 6,151 (83,624) FUND BALANCES, JANUARY 1 4,085,471 25,654 1,536,672 FUND BALANCES, DECEMBER 31 4,502,167$ 31,805$ 1,453,048$ The notes to the financial statements are an integral part of this statement. -42- Exhibit 5 Other Total Governmental Governmental Funds Funds -$ 4,949,126$ - 275,567 65,135 156,771 48,719 116,337 - 65,234 14,764 60,283 126,522 1,344,340 255,140 6,967,658 - 1,247,105 - 1,579,400 - 726,905 88,967 344,793 - 501,336 14,114 907,830 476,573 476,573 - 735,000 - 330,931 579,654 6,849,873 (324,514) 117,785 373,197 1,313,634 - (1,043,513) 373,197 270,121 48,683 387,906 1,802,333 7,450,130 1,851,016$ 7,838,036$ -43- Exhibit 6CITY OF SHOREWOOD, MINNESOTA RECONCILIATION OF THE STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES TO THE STATEMENT OF ACTIVITIES GOVERNMENTAL FUNDS FOR THE YEAR ENDED DECEMBER 31, 2015 Amounts reported for governmental activities in the statement of activities are different because Total net change in fund balances - governmental funds 387,906$ 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 885,402 Depreciation expense (1,084,430) A gain or loss on the disposal of capital assets, including the difference between carrying value and any related sales proceeds, is included in net position. However, only the sales proceeds are included in the change in the change in fund balance.30,000 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 position. Also, governmental funds report the effect of premiums, discounts and similar items when debt is first issued, whereas these amounts are amortized in the statement of activities. Principal repayments 735,000 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.12,574 Long-term pension activity is not reported in governmental funds. Pension expense 10,912 Capital assets constructed in capital projects funds but intended for enterprise fund use are transferred in the government-wide financial statements.(245,121) 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. Delinquent taxes (18,051) Special assessments (1,222) Leases (692,391) 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 (12,246) Change in net position - governmental activities 8,333$ The notes to the financial statements are an integral part of this statement. -44- Exhibit 7CITY OF SHOREWOOD, MINNESOTA STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES - BUDGET AND ACTUAL GENERAL FUND FOR THE YEAR ENDED DECEMBER 31, 2015 Actual Variance with Original Final Amounts Final Budget REVENUES Taxes 4,931,464$ 4,931,464$ 4,949,126$ 17,662$ Licenses and permits 147,770 147,770 275,567 127,797 Intergovernmental 75,751 75,751 91,636 15,885 Charges for services 50,200 50,200 67,618 17,418 Fines and forfeitures 57,000 57,000 65,234 8,234 Interest on investments 35,000 35,000 35,182 182 Miscellaneous 178,900 178,900 247,249 68,349 TOTAL REVENUES 5,476,085 5,476,085 5,731,612 255,527 EXPENDITURES Current General government 1,307,028 1,307,028 1,247,105 59,923 Public safety 1,563,183 1,563,183 1,579,400 (16,217) Public works 996,086 996,086 712,736 283,350 Culture and recreation 232,116 232,116 255,826 (23,710) Capital outlay Public safety 501,337 501,337 501,336 1 TOTAL EXPENDITURES 4,599,750 4,599,750 4,296,403 303,347 EXCESS OF REVENUES OVER EXPENDITURES 876,335 876,335 1,435,209 558,874 OTHER FINANCING SOURCES (USES) Transfers in 25,000 25,000 25,000 - Transfers out (1,043,513) (1,043,513) (1,043,513) - TOTAL OTHER FINANCING SOURCES (USES)(1,018,513) (1,018,513) (1,018,513) - NET CHANGE IN FUND BALANCES (142,178) (142,178) 416,696 558,874 FUND BALANCES, JANUARY 1 4,085,471 4,085,471 4,085,471 - FUND BALANCES, DECEMBER 31 3,943,293$ 3,943,293$ 4,502,167$ 558,874$ The notes to the financial statements are an integral part of this statement. Budgeted Amounts -45- Exhibit 8CITY OF SHOREWOOD, MINNESOTA STATEMENT OF NET POSITION PROPRIETARY FUNDS DECEMBER 31, 2015 Stormwater Management Nonmajor Water Sewer Utility Recycling Totals ASSETS CURRENT ASSETS Cash and temporary investments 2,783,726$ 2,566,193$ 497,758$ 122,701$ 5,970,378$ Cash with fiscal agent 274,646 - - - 274,646 Receivables Accrued interest 17,835 16,018 1,119 491 35,463 Accounts 77,469 236,468 60,690 45,468 420,095 Special assessments 80,626 21,160 6,028 4,138 111,952 Prepaid Items 1,075 422 640 - 2,137 TOTAL CURRENT ASSETS 3,235,377 2,840,261 566,235 172,798 6,814,671 NONCURRENT ASSETS Special assessments receivable 100,853 5,334 1,869 1,027 109,083 Capital assets Land - - 434,113 - 434,113 Construction in progress 476,899 - - - 476,899 Machinery and equipment 215,144 218,660 59,499 - 493,303 Infrastructure 10,061,371 9,191,567 1,704,892 - 20,957,830 Less accumulated depreciation (4,812,045) (7,581,853) (354,702) - (12,748,600) NET CAPITAL ASSETS 5,941,369 1,828,374 1,843,802 - 9,613,545 TOTAL NONCURRENT ASSETS 6,042,222 1,833,708 1,845,671 1,027 9,722,628 TOTAL ASSETS 9,277,599 4,673,969 2,411,906 173,825 16,537,299 DEFERRED OUTFLOWS OF RESOURCES Deferred pension resources 13,091 10,600 3,674 945 28,310 LIABILITIES CURRENT LIABILITIES Accounts and contracts payable 41,196 7,551 650 482 49,879 Accrued salaries payable 1,565 1,498 358 82 3,503 Due to other governments 5,487 2,460 - - 7,947 Accrued interest payable 9,151 - - - 9,151 Bonds payable - current 265,000 - - - 265,000 TOTAL CURRENT LIABILITIES 322,399 11,509 1,008 564 335,480 NONCURRENT LIABILITIES Bonds payable 1,635,000 - - - 1,635,000 Pension liability 114,048 92,343 32,006 8,231 246,628 TOTAL NONCURRENT LIABILITIES 1,749,048 92,343 32,006 8,231 1,881,628 TOTAL LIABILITIES 2,071,447 103,852 33,014 8,795 2,217,108 DEFERRED INFLOWS OF RESOURCES Deferred pension resources 28,659 23,205 8,043 2,069 61,976 NET POSITION Net investment in capital assets 4,041,369 1,828,374 1,843,802 - 7,713,545 Unrestricted 3,149,215 2,729,138 530,721 163,906 6,572,980 TOTAL NET POSITION 7,190,584$ 4,557,512$ 2,374,523$ 163,906$ 14,286,525$ The notes to the financial statements are an integral part of this statement. Business-type Activities - Enterprise Funds -46- Exhibit 9CITY OF SHOREWOOD, MINNESOTA STATEMENT OF REVENUES, EXPENSES AND CHANGES IN NET POSITION PROPRIETARY FUNDS FOR THE YEAR ENDED DECEMBER 31, 2015 Stormwater Management Nonmajor Water Sewer Utility Recycling Totals OPERATING REVENUES Charges for services 406,147$ 858,066$ 227,676$ 154,929$ 1,646,818$ OPERATING EXPENSES Personal services 184,210 153,854 25,316 13,675 377,055 Supplies 12,619 1,425 1,590 1,519 17,153 Repairs and maintenance 2,276 33,158 4 - 35,438 Depreciation 289,740 85,424 44,109 - 419,273 Professional services 31,582 795 25,870 - 58,247 Contracted services 71,394 16,319 2,164 115,742 205,619 Water purchases 29,234 - - - 29,234 Utilities 73,613 1,490 - - 75,103 Disposal charges - 651,156 - - 651,156 Other 7,718 642 259 249 8,868 TOTAL OPERATING EXPENSES 702,386 944,263 99,312 131,185 1,877,146 OPERATING INCOME (LOSS)(296,239) (86,197) 128,364 23,744 (230,328) NONOPERATING REVENUES (EXPENSES) Special assessments 138,201 - - - 138,201 Interest on investments 33,638 31,086 2,244 1,151 68,119 Intergovernmental - - - 26,198 26,198 Other income 400 - - - 400 Interest expense (18,798) - - - (18,798) TOTAL NONOPERATING REVENUES (EXPENSES)153,441 31,086 2,244 27,349 214,120 INCOME (LOSS) BEFORE CONTRIBUTIONS AND TRANSFERS (142,798) (55,111) 130,608 51,093 (16,208) CAPITAL CONTRIBUTIONS - CONNECTION FEES 3,098 2,608 - - 5,706 CAPITAL CONTRIBUTIONS FROM OTHER FUNDS 85,599 85,598 73,924 - 245,121 TRANSFERS IN - - 500,000 - 500,000 TRANSFERS OUT (98,099) (598,098) (73,924) - (770,121) CHANGE IN NET POSITION (152,200) (565,003) 630,608 51,093 (35,502) NET POSITION, JANUARY 1 AS RESTATED (NOTE 8)7,342,784 5,122,515 1,743,915 112,813 14,322,027 NET POSITION, DECEMBER 31 7,190,584$ 4,557,512$ 2,374,523$ 163,906$ 14,286,525$ The notes to the financial statements are an integral part of this statement. Business-type Activities - Enterprise Funds -47- Exhibit 10CITY OF SHOREWOOD, MINNESOTA STATEMENT OF CASH FLOWS PROPRIETARY FUNDS FOR THE YEAR ENDED DECEMBER 31, 2015 Stormwater Management Nonmajor Water Sewer Utility Recycling Totals CASH FLOWS FROM OPERATING ACTIVITIES Receipts from customers and users 406,362$ 859,492$ 227,502$ 155,914$ 1,649,270$ Other receipts related to operations 400 - - 26,198 26,598 Payments to suppliers, contractors and other governments (226,444) (724,339) (51,812) (117,593) (1,120,188) Payments to employees (176,637) (146,649) (46,557) (12,466) (382,309) NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES 3,681 (11,496) 129,133 52,053 173,371 CASH FLOWS FROM NONCAPITAL FINANCING ACTIVITIES Transfers out (12,500) (12,500) - - (25,000) CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES Transfers in - - 500,000 - 500,000 Transfers out (85,599) (585,598) (73,924) - (745,121) Connection fees received 3,098 2,608 - - 5,706 Special assessments received 74,868 - - - 74,868 Acquisition of capital assets (661,234) (89,677) (178,660) - (929,571) Principal paid on revenue bonds (260,000) - - - (260,000) Interest paid on revenue bonds (19,254) - - - (19,254) NET CASH PROVIDED (USED) BY CAPITAL AND RELATED FINANCING ACTIVITIES (948,121) (672,667) 247,416 - (1,373,372) CASH FLOWS FROM INVESTING ACTIVITIES Interest received on investments 33,823 30,372 2,123 932 67,250 NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (923,117) (666,291) 378,672 52,985 (1,157,751) CASH AND CASH EQUIVALENTS, JANUARY 1 3,981,489 3,232,484 119,086 69,716 7,402,775 CASH AND CASH EQUIVALENTS, DECEMBER 31 3,058,372$ 2,566,193$ 497,758$ 122,701$ 6,245,024$ RECONCILIATION OF CASH AND CASH EQUIVALENTS TO THE STATEMENT OF NET POSITION Cash and temporary investments 2,783,726$ 2,566,193$ 497,758$ 122,701$ 5,970,378$ Cash with fiscal agent 274,646 - - - 274,646 TOTAL CASH AND CASH EQUIVALENTS 3,058,372$ 2,566,193$ 497,758$ 122,701$ 6,245,024$ The notes to the financial statements are an integral part of this statement. Business-type Activities - Enterprise Funds -48- Exhibit 10 Stormwater Management Nonmajor Water Sewer Utility Recycling Totals RECONCILIATION OF OPERATING INCOME (LOSS) TO NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES Operating income (loss)(296,239)$ (86,197)$ 128,364$ 23,744$ (230,328)$ Adjustments to reconcile operating income (loss) to net cash provided (used) by operating activities Other income related to operations 400 - - 26,198 26,598 Depreciation 289,740 85,424 44,109 - 419,273 (Increase) decrease in assets/deferred outflows of resources Accounts receivable (1,655) (1,243) 314 499 (2,085) Special assessments receivable 1,870 2,669 (488) 486 4,537 Prepaid items (1,075) (422) (640) - (2,137) Deferred pension resources (13,091) (10,600) (3,674) (945) (28,310) Increase (decrease) in liabilities/deferred inflows of resources Accounts and contracts payable (2,091) (18,874) (21,285) (83) (42,333) Due to other governments 5,158 (58) - - 5,100 Net pension liability (8,293) (6,032) (25,715) 97 (39,943) Accrued salaries payable 298 632 105 (12) 1,023 Deferred pension resources 28,659 23,205 8,043 2,069 61,976 NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES 3,681$ (11,496)$ 129,133$ 52,053$ 173,371$ NONCASH CAPITAL AND RELATED FINANCING ACTIVITIES Contribution of assets from other funds 85,599$ 85,598$ 73,924$ -$ 245,121$ Capital assets purchased on account 22,048$ -$ -$ -$ 22,048$ The notes to the financial statements are an integral part of this statement. Business-type Activities - Enterprise Funds CITY OF SHOREWOOD, MINNESOTA STATEMENT OF CASH FLOWS - CONTINUED PROPRIETARY FUNDS FOR THE YEAR ENDED DECEMBER 31, 2015 -49- Exhibit 11CITY OF SHOREWOOD, MINNESOTA STATEMENT OF NET POSITION FIDUCIARY FUND DECEMBER 31, 2015 Agency ASSETS Cash and temporary investments 119,669$ LIABILITIES Escrow deposits payable 119,669$ The notes to the financial statements are an integral part of this statement. -50- CITY OF SHOREWOOD, MINNESOTA NOTES TO THE FINANCIAL STATEMENTS DECEMBER 31, 2015 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 City Council composed of an elected Mayor and four elected City Council members. The City Council exercises legislative authority and determines all matters of policy. The City 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 within the City in accordance with policies established by the City Council. The EDA Board is comprised of the members of the City Council and has a December 31 year end. Because the EDA’s Board is the same as the City Council, and the EDA creates both financial benefits and burdens for the primary government, the EDA is blended and reported in the Debt Service fund. 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 position 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. Amounts reported as 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 (including special assessments) 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. -51- CITY OF SHOREWOOD, MINNESOTA NOTES TO THE FINANCIAL STATEMENTS DECEMBER 31, 2015 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. Unearned 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 unearned revenue. 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. 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 accounts for the resources accumulated and payments made for the periodic reconstruction of City streets and roadways. -52- CITY OF SHOREWOOD, MINNESOTA NOTES TO THE FINANCIAL STATEMENTS DECEMBER 31, 2015 Note 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED The City reports the following major proprietary funds: The Water fund accounts for the activities of the City’s water distribution system. The Sewer fund accounts for the activities of the City’s sewage collection system. The Stormwater Management Utility fund accounts for the activities of the City’s stormwater 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. As a general rule, the effect of interfund activity has been eliminated from government-wide financial statements. Exceptions to this general rule are 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. 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, stormwater management utility, and recycling 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. -53- CITY OF SHOREWOOD, MINNESOTA NOTES TO THE FINANCIAL STATEMENTS DECEMBER 31, 2015 Note 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED D. Assets, deferred outflows of resources, liabilities, deferred inflows of resources, and net position/fund balance 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. The proprietary funds’ portion in the government-wide cash and temporary investments pool is considered to be cash and cash equivalents for purposes of the statements of cash flows. 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. Obligation of a school district with an original maturity not exceeding 13 months and (i) rated in the highest category by a national bond rating service or (ii) enrolled in the credit enhancement program pursuant to statute section 126C.55. 6. Bankers’ acceptances of United States banks eligible for purchase by the Federal Reserve System. 7. 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. 8. 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. 9. 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. The City’s investment policy has further restricted the City’s investments to items 1, 2, 3, and 7 above. 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. -54- CITY OF SHOREWOOD, MINNESOTA NOTES TO THE FINANCIAL STATEMENTS DECEMBER 31, 2015 Note 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED Property taxes The City 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. Delinquent taxes receivable include the past six years’ uncollected taxes. Delinquent taxes have been offset by a deferred inflow of resources for delinquent taxes not received within 60 days after year end in the governmental fund financial statements. Accounts receivable Accounts receivable include amounts billed for services provided before year end. All trade receivables are shown net of an allowance for uncollectible accounts. The allowance for uncollectible accounts at December 31, 2015 is $27,319. Unbilled utility enterprise fund receivables are also included for services provided in 2015. 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 in the enterprise funds. 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 inflow of resources in the fund financial statements. Lease receivable The City has a total of five leases receivable. Three of the leases are related to public safety buildings that the City has leased to the Excelsior Fire District and the South Lake Minnetonka Police Department. The other two leases were issued to the Excelsior Fire District for equipment financing assistance. As of December 31, 2015, the City has $6,591,974 of leases receivable outstanding. Prepaid items Certain payments to vendors reflect costs applicable to future accounting periods and are recorded as prepaid items in both government-wide and fund financial statements. Prepaid items of the City are accounted for using the consumption method. -55- CITY OF SHOREWOOD, MINNESOTA NOTES TO THE FINANCIAL STATEMENTS DECEMBER 31, 2015 Note 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED Capital assets Capital assets, which include property, plant, equipment and infrastructure assets (e.g., roads, bridges, sidewalks, and similar items), are reported in the applicable governmental or business-type activities columns in the government-wide financial statements. Capital assets are defined by the City as assets with an estimated useful life in excess of one year. Such assets are recorded at historical cost or estimated historical cost if purchased or constructed. Donated capital assets are recorded at estimated fair market value at the date of donation. For financial statement purposes only, a capitalization threshold is established for each capital asset category as follows: Assets Threshold Land and land improvements 10,000$ 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 Buildings and improvements 7 - 40 System improvements/infrastructure 20 - 50 Machinery and equipment 5 - 15 Vehicles 5 - 15 -56- CITY OF SHOREWOOD, MINNESOTA NOTES TO THE FINANCIAL STATEMENTS DECEMBER 31, 2015 Note 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED Deferred outflows of resources In addition to assets, the statement of financial position will sometimes report a separate section for deferred outflows of resources. This separate financial statement element, deferred outflows of resources, represents a consumption of net position that applies to a future period(s) and so will not be recognized as an outflow of resources (expense/expenditure) until then. The City has only one item that qualifies for reporting in this category. Accordingly, the item, deferred pension resources, is reported only in the statements of net position. This item results from actuarial calculations and current year pension contributions made subsequent to the measurement date. Pensions For purposes of measuring the net pension liability, deferred outflows/inflows of resources, and pension expense, information about the fiduciary net position of the Public Employees Retirement Association (PERA) and additions to/deductions from PERA’s fiduciary net position have been determined on the same basis as they are reported by PERA except that PERA’s fiscal year end is June 30. For this purpose, plan contributions are recognized as of employer payroll paid dates and benefit payments and refunds are recognized when due and payable in accordance with the benefit terms. Investments are reported at fair value. 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. 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 December 31, 2015 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 position. The recognition of bond premiums and discounts are amortized over the life of the bonds using the straight-line method. Bonds payable are reported net of the applicable bond premium or discount. Bond issuance costs are reported as an expense in the period incurred. 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. -57- CITY OF SHOREWOOD, MINNESOTA NOTES TO THE FINANCIAL STATEMENTS DECEMBER 31, 2015 Note 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED Deferred inflows of resources In addition to liabilities, the statement of financial position and fund financial statements will sometimes report a separate section for deferred inflows of resources. This separate financial statement element, deferred inflows of resources, represents an acquisition of net position that applies to a future period and so will not be recognized as an inflow of resources (revenue) until that time. The government has only one type of item, which arises only under a modified accrual basis of accounting that qualifies as needing to be reported in this category. Accordingly, the item, unavailable revenue, is reported only in the governmental funds balance sheet. The governmental funds report unavailable revenues from two sources: property taxes and lease receivables. These amounts are deferred and recognized as an inflow of resources in the period that the amounts become available. Furthermore, the City has an additional item which qualifies for reporting in this category on the statement of net position. The item, deferred pension resources, is reported only in the statement of net position and results from actuarial calculations involving net differences between projected and actuarial earnings on plan investments and changes in proportions. Fund balance In the fund financial statements, fund balance is divided into five classifications based primarily on the extent to which the City is bound to observe constraints imposed upon the use of resources reported in the governmental funds. These classifications are defined as follows: Nonspendable - Amounts that cannot be spent because they are not in spendable form, such as prepaid items, land held for resale, and amounts due from other funds. Restricted - Amounts related to externally imposed constraints established by creditors, grantors or contributors; or constraints imposed by state statutory provisions. Committed - Amounts constrained for specific purposes that are internally imposed by formal action (resolution) of the City Council, which is the City’s highest level of decision-making authority. Committed amounts cannot be used for any other purpose unless the City Council modifies or rescinds the commitment by resolution. Assigned - Amounts constrained for specific purposes that are internally imposed. In governmental funds other than the General fund, assigned fund balance represents all remaining amounts that are not classified as nonspendable and are neither restricted nor committed. In the General fund, assigned amounts represent intended uses established by the City Council itself or by an official to which the governing body delegates the authority. The City Council has adopted a fund balance policy which delegates the authority to assign amounts for specific purposes to the City Administrator. Unassigned - The residual classification for the General fund and also negative residual amounts in other funds. The City considers restricted amounts to be spent first when both restricted and unrestricted fund balance is available. Additionally, the City would first use committed, then assigned, and lastly unassigned amounts of unrestricted fund balance when expenditures are made. The City has formally adopted a fund balance policy for the General fund. The City’s policy is to maintain a minimum unassigned fund balance of 55-60 percent of operating expenditures for cash-flow timing needs. -58- CITY OF SHOREWOOD, MINNESOTA NOTES TO THE FINANCIAL STATEMENTS DECEMBER 31, 2015 Note 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED Net position Net position represents the difference between assets and deferred outflows of resources and liabilities and deferred inflows of resources. Net position is displayed in three components: a. Net investment in capital assets - Consists of capital assets, net of accumulated depreciation reduced by any outstanding debt attributable to acquire capital assets. b. Restricted net position - Consists of net position balances 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 position - All other net position balances that do not meet the definition of “restricted” or “net investment in capital assets”. When both restricted and unrestricted resources are available for use, it is the City’s policy to use restricted resources first, then unrestricted resources as they are needed. Note 2: STEWARDSHIP, COMPLIANCE AND ACCOUNTABILITY 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 30, the proposed budget is presented to the City Council for review. In early December, the City 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 City Council. The legal level of budgetary control is the department level. The City’s budget was not amended during the year. -59- CITY OF SHOREWOOD, MINNESOTA NOTES TO THE FINANCIAL STATEMENTS DECEMBER 31, 2015 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 City 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 fair 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 $1,594,496 and the bank balance was $1,388,686. The entire bank balance was covered by Federal depository insurance or by collateral held by the City’s agent in the City’s name. Investments The Minnesota Municipal Money Market fund (the 4M fund) is a customized cash management and investment program for Minnesota public funds. Sponsored and governed by the League of Minnesota Cities since 1987, the 4M fund is a unique investment alternative designed to address the daily and long-term investment needs of Minnesota cities and other municipal entities. Allowable under Minnesota statutes, the 4M fund is comprised of top quality, rated investments. The Minnesota Municipal Money Market fund and broker money market investment pools operate in accordance with appropriate State laws and regulations. The 4M fund is regulated by Minnesota statutes and the Board of Directors of the League of Minnesota Cities and is an external investment pool not registered with the Securities and Exchange Commission (SEC); however, it follows the same regulatory rules of the SEC under rule 2a7. The reported value of the pool is the same as the fair value of the pool share. Financial statements of the 4M fund can be obtained by contracting RBC Global Asset Management at 100 South Fifth Street, Suite 2300, Minneapolis, MN 55402-1240. -60- CITY OF SHOREWOOD, MINNESOTA NOTES TO THE FINANCIAL STATEMENTS DECEMBER 31, 2015 Note 3: DETAILED NOTES ON ALL FUNDS - CONTINUED At year end, the City had the following investments that are insured or registered, or securities held by the City’s agent in the City’s name: Fair Value Credit Segmented and Quality/Time Carrying Rating (1)Distribution (2)Amount Non Pooled investments U.S. Government Agency Securities Aaa 1 to 3 years 1,473,399$ U.S. Government Agency Securities Aaa more than 3 years 463,010 Municipal Bonds Aa1 less than 6 months 1,027,240 Municipal Bonds Aa2 less than 6 months 500,010 Municipal Bonds A-less than 6 months 291,685 Municipal Bonds Aa2 less than 1 year 242,612 Municipal Bonds A3 less than 1 year 509,910 Municipal Bonds MIG2 less than 1 year 402,368 Municipal Bonds Aaa 1 to 3 years 302,574 Municipal Bonds Aa1 1 to 3 years 316,080 Municipal Bonds Aa2 1 to 3 years 316,044 Municipal Bonds AA 1 to 3 years 613,752 Municipal Bonds A3 1 to 3 years 295,981 Municipal Bonds A+1 to 3 years 104,527 Municipal Bonds A-1 to 3 years 816,481 Municipal Bonds Aa2 more than 3 years 315,129 Municipal Bonds A1 more than 3 years 463,330 Municipal Bonds AA+more than 3 years 407,888 Brokered Certificates of Deposit N/A 1 to 3 years 244,853 Brokered Certificates of Deposit N/A more than 3 years 934,512 Total non pooled 10,041,385 Pooled investments Minnesota Municipal Money Market fund N/A less than 6 months 1,668,747 Broker Money Market N/A less than 6 months 622,934 Total pooled 2,291,681 Total investments 12,333,066$ Types of Investments (1) Ratings are provided by various credit ratings agency 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. -61- CITY OF SHOREWOOD, MINNESOTA NOTES TO THE FINANCIAL STATEMENTS DECEMBER 31, 2015 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 1,594,496$ Investments 12,333,066 Cash on hand 220 Total 13,927,782$ As reported on the financial statements Statement of net position 13,533,467$ Cash with fiscal agent 274,646 Fiduciary fund 119,669 Total 13,927,782$ 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 54 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. As of December 31, 2015 the City had invested 5.0 percent or more of its total investment portfolio in the following issuers: Columbia County GA, 6.7 percent, and Illinois State Taxable, 6.6 percent. • 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 percent 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. -62- CITY OF SHOREWOOD, MINNESOTA NOTES TO THE FINANCIAL STATEMENTS DECEMBER 31, 2015 Note 3: DETAILED NOTES ON ALL FUNDS - CONTINUED B. Capital assets Capital asset activity for the year ended December 31, 2015 was as follows: Beginning Ending Balance Increases Decreases Balance Governmental activities Capital assets not being depreciated Land 741,826$ -$ -$ 741,826$ Construction in progress 1,499,144 869,062 (1,585,580) 782,626 Total capital assets not being depreciated 2,240,970 869,062 (1,585,580) 1,524,452 Capital assets being depreciated Buildings 3,066,002 - - 3,066,002 Improvements other than buildings 1,012,469 26,900 - 1,039,369 Infrastructure 29,364,376 1,340,460 - 30,704,836 Machinery and equipment 2,997,544 19,439 (144,800) 2,872,183 Total capital assets being depreciated 36,440,391 1,386,799 (144,800) 37,682,390 Less accumulated depreciation Buildings (1,127,117) (76,516) - (1,203,633) Improvements other than buildings (759,825) (40,257) - (800,082) Infrastructure (23,756,030) (793,301) - (24,549,331) Machinery and equipment (2,249,343) (174,356) 144,800 (2,278,899) Total accumulated depreciation (27,892,315) (1,084,430) 144,800 (28,831,945) Total capital assets being depreciated, net 8,548,076 302,369 - 8,850,445 Governmental activities capital assets, net 10,789,046$ 1,171,431$ (1,585,580)$ 10,374,897$ -63- CITY OF SHOREWOOD, MINNESOTA NOTES TO THE FINANCIAL STATEMENTS DECEMBER 31, 2015 Note 3: DETAILED NOTES ON ALL FUNDS - CONTINUED Beginning Ending Balance Increases Decreases Balance Business-type activities Capital assets not being depreciated Land 434,113$ -$ -$ 434,113$ Construction in progress - 476,899 - 476,899 Total capital assets not being depreciated 434,113 476,899 - 911,012 Capital assets being depreciated Infrastructure 20,690,231 327,098 - 21,017,329 Machinery and equipment 83,254 350,550 - 433,804 Total capital assets being depreciated 20,773,485 677,648 - 21,451,133 Less accumulated depreciation for Infrastructure (12,246,073) (384,218) - (12,630,291) Machinery and equipment (83,254) (35,055) - (118,309) Total accumulated depreciation (12,329,327) (419,273) - (12,748,600) Total capital assets being depreciated, net 8,444,158 258,375 - 8,702,533 Business-type activities capital assets, net 8,878,271$ 735,274$ -$ 9,613,545$ Depreciation expense was charged to functions/programs of the City as follows: Governmental activities General government 70,569$ Public works 954,707 Culture and recreation 59,154 Total depreciation expense - governmental activities 1,084,430$ Business-type activities Water 289,740$ Sewer 85,424 Stormwater management utility 44,109 Total depreciation expense - business-type activities 419,273$ -64- CITY OF SHOREWOOD, MINNESOTA NOTES TO THE FINANCIAL STATEMENTS DECEMBER 31, 2015 Note 3: DETAILED NOTES ON ALL FUNDS - CONTINUED Construction commitments The City has active construction projects as of December 31, 2015. At year end, the commitment with the contractors for these projects is as follows: SpentRemaining to date Commitment 2015 Utility and Street Improvements - Star Lane 538,840$ 126,178$ 2015 Water Tower Improvements 418,902 22,048 Total 957,742$ 148,226$ Project C. Interfund transfers The City made transfers during the fiscal year 2015 as shown and described below: Stormwater Street Nonmajor Management General Debt Service Reconstruction Governmental Utility Total Transfers out General -$ 101,513$ 740,000$ 202,000$ -$ 1,043,513$ Water 12,500 - - 85,599 - 98,099 Sewer 12,500 - - 85,598 500,000 598,098 Storm Management Utility - - 73,924 - - 73,924 Total 25,000$ 101,513$ 813,924$ 373,197$ 500,000$ 1,813,634$ Fund Transfers in The City annually budgets transfers for specific purposes. Annual transfers are made for administrative costs, part of capital improvement plans, as well as annual budgets. For the year ended December 31, 2015, the City made the following significant one-time transfers: • The Sewer fund transferred $500,000 to the Stormwater Management Utility fund for future capital improvements. • The General fund transferred $740,000 to the Street Reconstruction fund and $90,000 to the Nonmajor Governmental Equipment Replacement fund for future capital purchases. • The Storm Management Utility fund transferred $73,924 to the Street Reconstruction fund to reimburse for project costs. • The Water and Sewer funds transferred $171,197 to the Nonmajor Governmental Equipment Replacement fund to reimburse for a dump truck purchase. -65- CITY OF SHOREWOOD, MINNESOTA NOTES TO THE FINANCIAL STATEMENTS DECEMBER 31, 2015 Note 3: DETAILED NOTES ON ALL FUNDS - CONTINUED D. 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 repaid from future net revenues pledged from the Water fund and are backed by the taxing power of the City. Annual principal and interest payments on the bonds are expected to require less than 69 percent of the net revenues from the Water fund. Principal and interest paid for the current year and total customer net revenues for the Water fund were $279,254 and $406,147, respectively. Authorized Issue Maturity Balance at and Issued Date Date Year End G.O. Water Revenue Bonds of 2013 2,260,000$ 0.25 - 1.45 %03/01/13 01/01/22 1,900,000$ Rate Interest Description Annual debt service requirements to maturity for general obligation revenue bonds are as follows: Year Ending December 31,Principal Interest Total 2016 265,000$ 17,640$ 282,640$ 2017 265,000 16,182 281,182 2018 270,000 14,375 284,375 2019 270,000 12,080 282,080 2020 275,000 9,216 284,216 2021 - 2022 555,000 7,878 562,878 Total 1,900,000$ 77,371$ 1,977,371$ G.O. Revenue Bonds Business-type Activities -66- CITY OF SHOREWOOD, MINNESOTA NOTES TO THE FINANCIAL STATEMENTS DECEMBER 31, 2015 Note 3: DETAILED NOTES ON ALL FUNDS - CONTINUED Lease revenue bonds The City also issues bonds through the EDA, where the City pledges income derived from the leasing of the acquired or constructed assets to pay debt service. Revenue bonds outstanding at year end are as follows: Authorized Issue Maturity Balance at and Issued DateDate Year End Public Safety Fire Facility, Refunding Series 2007A 4,130,000$ 5.30 - 5.40 %01/01/0702/01/232,685,000$ Public Safety Police Facility, Refunding Series 2007B 4,285,000 3.50 - 4.25 01/01/0702/01/232,785,000 Public Safety Fire Facility, Refunding Series 2007C 1,585,000 3.75 - 5.00 01/01/0702/01/22950,000 Public Project Lease Revenue Bonds, Series 2008A 1,310,000 2.85 - 4.80 08/19/0812/01/28980,000 Total Lease Revenue Bonds 7,400,000$ Interest RateDescription The Public Safety Fire Facility Refunding Series 2007A, 2007B and 2007C were issued for construction of the public safety building, which there is a lease receivable from the South Lake Minnetonka Police and Excelsior Fire District. This debt is excluded from the calculation of net investment in capital assets as the building is reported on the South Lake Minnetonka Police and Excelsior Fire District as a capital asset. Refer to Note 5A and B for further information. Annual debt service requirements to maturity for revenue bonds are as follows: Year Ending December 31,Principal Interest Total 2016 770,000$ 290,863$ 1,060,863$ 2017 800,000 257,068 1,057,068 2018 830,000 225,287 1,055,287 2019 870,000 191,653 1,061,653 2020 905,000 156,025 1,061,025 2021 - 2025 2,945,000 276,800 3,221,800 2026 - 2028 280,000 27,030 307,030 Total 7,400,000$ 1,424,726$ 8,824,726$ Governmental Activities Lease Revenue Bonds -67- CITY OF SHOREWOOD, MINNESOTA NOTES TO THE FINANCIAL STATEMENTS DECEMBER 31, 2015 Note 3: DETAILED NOTES ON ALL FUNDS - CONTINUED Changes in long-term liabilities Long-term liability activity for the year ended December 31, 2015, was as follows: Beginning Ending Due Within BalanceIncreasesDecreasesBalance One Year Governmental activities Lease revenue bonds 8,135,000$ -$ (735,000)$ 7,400,000$ 770,000$ Net pension liability - 956,597 *(114,895) 841,702 - Compensated absences 202,883 161,679 (149,433) 215,129 158,453 Governmental activity long-term liabilities 8,337,883$ 1,118,276$ (999,328)$ 8,456,831$ 928,453$ Business-type activities General obligation revenue bonds 2,160,000$ -$ (260,000)$ 1,900,000$ 265,000$ Net pension liability - 280,293 *(33,665) 246,628 - Business-type activity long-term liabilities 2,160,000$ 280,293$ (293,665)$ 2,146,628$ 265,000$ * Includes 1/1/2015 pension liability balance related to GASB Statement No. 68 implementation. See Note 8 for further detail. -68- CITY OF SHOREWOOD, MINNESOTA NOTES TO THE FINANCIAL STATEMENTS DECEMBER 31, 2015 Note 4: DEFINED BENEFIT PENSION PLANS - STATEWIDE A. Plan description The City participates in the following cost-sharing multiple-employer defined benefit pension plans administered by the Public Employees Retirement Association of Minnesota (PERA). PERA’s defined benefit pension plans are established and administered in accordance with Minnesota statutes, chapters 353 and 356. PERA’s defined benefit pension plans are tax qualified plans under Section 401 (a) of the Internal Revenue Code. General Employees Retirement Fund (GERF) All full-time and certain part-time employees of the City are covered by the General Employees Retirement Fund (GERF). GERF members belong to either the Coordinated Plan or the Basic Plan. Coordinated Plan members are covered by Social Security and Basic Plan members are not. The Basic Plan was closed to new members in 1967. All new members must participate in the Coordinated Plan. B. Benefits provided PERA provides retirement, disability and death benefits. Benefit provisions are established by Minnesota statute and can only be modified by the state legislature. Benefit increases are provided to benefit recipients each January. Increases are related to the funding ratio of the plan. Members in plans that are at least 90 percent funded for two consecutive years are given 2.5 percent increases. Members in plans that have not exceeded 90 percent funded, or have fallen below 80 percent, are given 1 percent increases. The benefit provisions stated in the following 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. GERF benefits 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 ten 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 ten years and 1.7 percent for each remaining year. Under Method 2, the annuity accrual rate is 2.7 percent of average salary for Basic Plan members and 1.7 percent for Coordinated Plan members for each year of service. For members hired prior to July 1, 1989, a full annuity is available when age plus years of service equal 90 and normal retirement age is 65. For members hired on or after July 1, 1989, normal retirement age is the age for unreduced Social Security benefits capped at 66. C. Contributions Minnesota statutes, chapter 353 sets the rates for employer and employee contributions. Contribution rates can only be modified by the state legislature. GERF contributions Basic Plan members and Coordinated Plan members were required to contribute 9.10 percent and 6.50 percent, respectively, of their annual covered salary in calendar year 2015. The City was required to contribute 11.78 percent of pay for Basic Plan members and 7.50 percent for Coordinated Plan members in calendar year 2015. The City’s contributions to the GERF for the years ending December 31, 2015, 2014 and 2013 were $93,614, $89,427 and $86,064, respectively. The City’s contributions were equal to the contractually required contributions for each year as set by Minnesota statute. -69- CITY OF SHOREWOOD, MINNESOTA NOTES TO THE FINANCIAL STATEMENTS DECEMBER 31, 2015 Note 4: DEFINED BENEFIT PENSION PLANS - STATEWIDE - CONTINUED D. Pension costs GERF pension costs At December 31, 2015, the City reported a liability of $1,088,330 for its proportionate share of the GERF’s net pension liability. The net pension liability was measured as of June 30, 2015, and the total pension liability used to calculate the net pension liability was determined by an actuarial valuation as of that date. The City’s proportion of the net pension liability was based on the City’s contributions received by PERA during the measurement period for employer payroll paid dates from July 1, 2014 through June 30, 2015 relative to the total employer contributions received from all of PERA’s participating employers. At June 30, 2015, the City’s proportionate share was 0.021 percent which was a decrease of 0.003 percent from its proportion measured as of June 30, 2014. For the year ended December 31, 2015, the City recognized pension expense of $76,424 for its proportionate share of GERF’s pension expense. At December 31, 2015, the City reported its proportionate share of GERF’s deferred outflows of resources and deferred inflows of resources, and its contributions subsequent to the measurement date, from the following sources: Deferred Deferred Outflows Inflows of Resources of Resources Differences between expected and actual experience 11,535$ 54,870$ Changes in actuarial assumptions 66,336 Net difference between projected and actual earnings on plan investments - 96,881 Changes in proportion - 121,738 Contributions to GERF subsequent to the measurement date 47,057 - Total 124,928$ 273,489$ Deferred outflows of resources totaling $47,057 related to pensions resulting from the City’s contributions to GERF subsequent to the measurement date will be recognized as a reduction of the net pension liability in the year ended December 31, 2016. Other amounts reported as deferred outflows and inflows of resources related to GERF pensions will be recognized in pension expense as follows: 2016 (60,813)$ 2017 (60,813) 2018 (99,748) 2019 25,756 -70- CITY OF SHOREWOOD, MINNESOTA NOTES TO THE FINANCIAL STATEMENTS DECEMBER 31, 2015 Note 4: DEFINED BENEFIT PENSION PLANS - STATEWIDE - CONTINUED E. Actuarial assumptions The total pension liability in the June 30, 2015 actuarial valuation was determined using the following actuarial assumptions: Inflation 2.75% per year Active member payroll growth 3.50% per year Investment rate of return 7.90% Salary increases were based on a service-related table. Mortality rates for active members, retirees, survivors and disabilitants were based on RP-2000 tables for males or females, as appropriate, with slight adjustments. Cost of living benefit increases for retirees are assumed to be: 1 percent effective every January 1st until 2034, then 2.5 percent for GERF. Actuarial assumptions used in the June 30, 2015 valuation were based on the results of actuarial experience studies. The experience study in the GERF was for the period July 1, 2004 through June 30, 2008, with an update of economic assumptions in 2014. Experience studies have not been prepared for PERA’s other plans, but assumptions are reviewed annually. There were no changes in actuarial assumptions in 2015. The long-term expected rate of return on pension plan investments is 7.9 percent. The State Board of Investment, which manages the investments of PERA, prepares an analysis of the reasonableness of the long-term expected rate of return on a regular basis using a building-block method in which best-estimate ranges of expected future rates of return are developed for each major asset class. These ranges are combined to produce an expected long-term rate of return by weighting the expected future rates of return by the target asset allocation percentages. The target allocation and best estimates of arithmetic real rates of return for each major asset class are summarized in the following table: Asset Class Domestic stocks 45.00 %5.50 % International stocks 15.00 6.00 Bonds 18.00 1.45 Alternative assets 20.00 6.40 Cash 2.00 0.50 Total 100.00 % Target Expected Real Allocation Rate of Return Long-term F. Discount rate The discount rate used to measure the total pension liability was 7.9 percent. The projection of cash flows used to determine the discount rate assumed that employee and employer contributions will be made at the rate specified in statute. Based on that assumption, each of the pension plan’s fiduciary net position was projected to be available to make all projected future benefit payments of current active and inactive employees. Therefore, the long-term expected rate of return on pension plan investments was applied to all periods of projected benefit payments to determine the total pension liability. -71- CITY OF SHOREWOOD, MINNESOTA NOTES TO THE FINANCIAL STATEMENTS DECEMBER 31, 2015 Note 4: DEFINED BENEFIT PENSION PLANS - STATEWIDE - CONTINUED G. Pension liability sensitivity The following presents the City’s proportionate share of the net pension liability for all plans it participates in, calculated using the discount rate disclosed in the preceding paragraph, as well as what the City’s proportionate share of the net pension liability would be if it were calculated using a discount rate 1 percentage point lower or 1 percentage point higher than the current discount rate: 1 Percent 1 Percent Decrease (6.90%)Current (7.90%)Increase (8.90%) GERF 1,711,240$ 1,088,330$ 573,900$ City Proportionate Share of NPL H. Pension plan fiduciary net position Detailed information about each defined benefit pension plan’s fiduciary net position is available in a separately-issued PERA financial report that includes financial statements and required supplementary information. That report may be obtained on the Internet at www.mnpera.org; by writing to PERA at 60 Empire Drive #200, St. Paul, Minnesota, 55103- 2088; or by calling (651) 296-7460 or (800) 652-9026. 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 (the 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 five-year average demand for service in 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, 2015. Separate financial statements can be obtained by writing to the South Lake Minnetonka Police Department, 24150 Smithtown Road, Shorewood, Minnesota 55331. -72- CITY OF SHOREWOOD, MINNESOTA NOTES TO THE FINANCIAL STATEMENTS DECEMBER 31, 2015 Note 5: JOINT VENTURES - CONTINUED The following is a summary of the Department’s Statements of Net Position as of December 31, 2015 and 2014: SOUTH LAKE MINNETONKA POLICE DEPARTMENT SUMMARY OF STATEMENTS OF NET POSITION DECEMBER 31, 2015 AND 2014 2015 2014 Assets 4,933,813$ 5,051,223$ Deferred outflows of resources 370,165 - Total assets and deferred outflows of resources 5,303,978$ 5,051,223$ Liabilities 4,717,104$ 3,326,740$ Deferred inflows of resources 312,158 - Net position 274,716 1,724,483 Total liabilities, deferred inflows of resources, and net position 5,303,978$ 5,051,223$ The following is a summary of the Department’s statements of activities for the years ended December 31, 2015 and 2014: SOUTH LAKE MINNETONKA POLICE DEPARTMENT SUMMARY STATEMENTS OF ACTIVITIES FOR THE YEARS ENDED DECEMBER 31, 2015 AND 2014 2015 2014 Revenues 2,863,327$ 2,829,638$ Expenses 2,830,418 2,692,164 Net revenues 32,909 137,474 General revenues 18,558 11,770 Change in net position 51,467 149,244 Net position, January 1 as restated 223,249 1,575,239 Net position, December 31 274,716$ 1,724,483$ 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. -73- CITY OF SHOREWOOD, MINNESOTA NOTES TO THE FINANCIAL STATEMENTS DECEMBER 31, 2015 Note 5: JOINT VENTURES - CONTINUED The following is a summary of the District’s Statements of Net Position as of December 31, 2015 and 2014: EXCELSIOR FIRE DISTRICT SUMMARY OF STATEMENTS OF NET POSITION DECEMBER 31, 2015 AND 2014 2015 2014 Assets 8,918,967$ 7,868,422$ Deferred outflows of resources 202,136 - Total assets and deferred outflows of resources 9,121,103$ 7,868,422$ Liabilities 4,156,120$ 4,454,504$ Deferred inflows of resources 210,985 - Net position 4,753,998 3,413,918 Total liabilities, deferred inflows of resources, and net position 9,121,103$ 7,868,422$ The following is a summary of the District’s statements of activities for the years ended December 31, 2015 and 2014: EXCELSIOR FIRE DISTRICT SUMMARY STATEMENTS OF ACTIVITIES FOR THE YEARS ENDED DECEMBER 31, 2015 AND 2014 2015 2014 Revenues 1,588,403$ 1,585,458$ Expenses 1,345,611 1,289,669 Net revenues 242,792 295,789 General revenues 4,921 3,803 Change in net position 247,713 299,592 Net position, January 1 as restated 4,506,285 3,114,326 Net position, December 31 4,753,998$ 3,413,918$ According to a formula in the agreement, the City’s share of the District’s budget is 38.56 percent. Payments to the District in 2015 totaled $613,471. The District issues a publicly available financial report that includes financial statements and required supplementary information. The report may be obtained by writing to the Excelsior Fire District, 24100 Smithtown Road, Shorewood, Minnesota 55331. -74- CITY OF SHOREWOOD, MINNESOTA NOTES TO THE FINANCIAL STATEMENTS DECEMBER 31, 2015 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 $43,675,353 computed as three percent of $1,455,845,111, which is 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 was for the period of July 1, 2009 to July 1, 2012 with an option to renew for another three years or renegotiate. The contract was re-negotiated in January, 2012. The City agreed to pay CRR $5,000 per month for the period of January 1, 2012 to December 31, 2012. During this time, the City paid a 15 percent commission on monthly revenues to CRR. A quarterly bonus commission of five percent was due if the quarterly program and rental income exceeded $13,500. The contract was subsequently extended on a month by month basis through March 31, 2013 when CRR ceased to provide services as the Southshore Community Center management company. Note 7: SUBSEQUENT EVENT On January 7, 2016 the City issued $2,470,000, $2,565,000 and $875,000 of Lease Revenue Crossover Refunding Bonds Series 2016A, 2016B and 2016, respectively. The bonds were issued to refund Lease Revenue Bonds Series 2007A, 2007B and 2007C. The interest rate on the future revenue bonds is 2 percent with a maturity date of February 1, 2022 (2007C) and February 1, 2023 (2007A and 2007B). -75- CITY OF SHOREWOOD, MINNESOTA NOTES TO THE FINANCIAL STATEMENTS DECEMBER 31, 2015 Note 8: CHANGE IN ACCOUNTING STANDARDS During 2015, the City implemented several new accounting pronouncements issued by the Governmental Accounting Standards Board (GASB), including Statement No. 68, Accounting and Financial Reporting for Pensions - an Amendment of GASB Statement No. 27 and Statement No. 71, Pension Transition for Contributions Made Subsequent to the Measurement Date - an Amendment of GASB Statement No. 68, for the year ended December 31, 2015. These standards required a retroactive implementation which resulted in the restatement of beginning balances in the December 31, 2014 financial statements. Changes related to these standards are reflected in the financial statements and schedules and related disclosures are included in Note 4. As a result of the restatement of beginning balances, the following schedule reconciles the previously reported December 31, 2014 balances to the December 31, 2015 financial statements: Net Position January 1, 2015 Net Position as Previously Prior Period January 1, 2015 Reported Restatement (1)as Restated Governmental activities 17,071,141$ (967,509)$ 16,103,632$ Business-type activities 14,608,598$ (286,571)$ 14,322,027$ Business-type activities Water 7,465,125$ (122,341)$ 7,342,784$ Sewer 5,220,890 (98,375) 5,122,515 Stormwater Management Utility 1,801,636 (57,721) 1,743,915 Recycling 120,947 (8,134) 112,813 Total business-type activities 14,608,598$ (286,571)$ 14,322,027$ (1) To record beginning net pension liability, deferred inflows of resources and deferred outflow of resources at December 31, 2014. December 31, 2015 Fund -76- REQUIRED SUPPLEMENTARY INFORMATION CITY OF SHOREWOOD SHOREWOOD, MINNESOTA FOR THE YEAR ENDED DECEMBER 31, 2015 -77- CITY OF SHOREWOOD, MINNESOTA REQUIRED SUPPLEMENTARY INFORMATION FOR THE YEAR ENDED DECEMBER 31, 2015 Schedule of employer’s share of PERA net pension liability - General Employees Retirement Fund State's Proportionate City's Share of Proportionate the Net Pension Share of Liability City's Fiscal the Net Pension Associated with Covered Year Liability the City Total Payroll Ending (a)(b)(a+b)(c) 06/30/15 0.0210 %1,088,330$ -$ 1,088,330$ 1,233,860$ 88.2 %78.2 % the Net Pension Payroll of the Total Liability ((a+b)/c)Pension Liability Plan Fiduciary City's Liability as a Net Position Proportion of Percentage of as a PercentageCovered Required Supplementary Information City's Proportionate Share of the Net Pension Schedule of employer’s PERA contributions - General Employees Retirement Fund Contributions in Relation to the Statutorily Statutorily Contribution City's Required Required Deficiency Covered Year Contribution Contribution (Excess)Payroll Ending (a)(b)(a-b)(c) 12/31/15 93,614$ -$ (93,614)$ 1,248,187$ 7.5 % (b/c) Required Supplementary Information Contributions as a Percentage of Covered Payroll -78- COMBINING AND INDIVIDUAL FUND FINANCIAL STATEMENTS AND SCHEDULES CITY OF SHOREWOOD SHOREWOOD, MINNESOTA FOR THE YEAR ENDED DECEMBER 31, 2015 -79- THIS PAGE IS LEFT BLANK INTENTIONALLY -80- NONMAJOR GOVERNMENTAL FUNDS NONMAJOR SPECIAL REVENUE FUNDS Special revenue funds are used to account for revenue derived from specific taxes or other earmarked revenue sources. They are usually required by Minnesota statute or local ordinances to finance particular functions or other activities of government. Southshore Community Center - This fund was established to account for the resources accumulated from events and activities held at the City’s community center, and the payment of expenditures related to operations of the community center. The City has committed charges for services revenues for operations. -81- Exhibit A-1CITY OF SHOREWOOD, MINNESOTA NONMAJOR GOVERNMENTAL FUNDS COMBINING BALANCE SHEET DECEMBER 31, 2015 Special Revenue Southshore Total Community Capital Nonmajor Center Projects Funds ASSETS Cash and temporary investments 65,779$ 1,433,271$ 1,499,050$ Receivables Accrued interest 273 7,923 8,196 Accounts - 76,315 76,315 Lease - 171,974 171,974 Land held for resale - 150,068 150,068 TOTAL ASSETS 66,052$ 1,839,551$ 1,905,603$ LIABILITIES Accounts and contracts payable 12,270$ 41,914$ 54,184$ Accrued salaries payable 403 - 403 TOTAL LIABILITIES 12,673 41,914 54,587 FUND BALANCES Assigned to capital outlay - 1,797,637 1,797,637 Assigned to community center operations 53,379 - 53,379 TOTAL FUND BALANCES 53,379 1,797,637 1,851,016 TOTAL LIABILITIES AND FUND BALANCES 66,052$ 1,839,551$ 1,905,603$ -82- Exhibit A-2CITY OF SHOREWOOD, MINNESOTA NONMAJOR GOVERNMENTAL FUNDS COMBINING STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES FOR THE YEAR ENDED DECEMBER 31, 2015 Special Revenue Southshore Total Community Capital Nonmajor Center Projects Funds REVENUES Intergovernmental -$ 65,135$ 65,135$ Charges for services 48,719 - 48,719 Interest on investments 546 14,218 14,764 Miscellaneous Park dedication fees - 6,500 6,500 Contributions and donations 254 - 254 Refunds and reimbursements - 119,470 119,470 Other 298 - 298 TOTAL REVENUES 49,817 205,323 255,140 EXPENDITURES Current Culture and recreation 88,967 - 88,967 Capital outlay Public works - 14,114 14,114 Culture and recreation 21,215 455,358 476,573 TOTAL EXPENDITURES 110,182 469,472 579,654 DEFICIENCY OF REVENUES UNDER EXPENDITURES (60,365) (264,149) (324,514) OTHER FINANCING SOURCES Transfers in 70,000 303,197 373,197 NET CHANGE IN FUND BALANCES 9,635 39,048 48,683 FUND BALANCES, JANUARY 1 43,744 1,758,589 1,802,333 FUND BALANCES, DECEMBER 31 53,379$ 1,797,637$ 1,851,016$ -83- THIS PAGE IS LEFT BLANK INTENTIONALLY -84- 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. 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. Trail Construction - This fund was established to accounts for the resources accumulated and payments made for trail improvements and construction. Community Infrastructure - This fund was established for the purpose of funding future improvements in the City. -85- Exhibit B-1CITY OF SHOREWOOD, MINNESOTA NONMAJOR CAPITAL PROJECTS FUNDS COMBINING BALANCE SHEET DECEMBER 31, 2015 Park Capital Equipment MSA Trail Community Improvement Replacement Construction Construction Infrastructure Total ASSETS Cash and temporary investments 539,940$ 344,780$ 126,387$ 307,353$ 114,811$ 1,433,271$ Receivables Accrued interest 2,604 - 632 3,835 852 7,923 Accounts - - - - 76,315 76,315 Lease - 171,974 - - - 171,974 Land held for resale - - - - 150,068 150,068 TOTAL ASSETS 542,544$ 516,754$ 127,019$ 311,188$ 342,046$ 1,839,551$ LIABILITIES Accounts and contracts payable 266$ 1,318$ -$ 9,490$ 30,840$ 41,914$ FUND BALANCES Assigned to capital outlay 542,278 515,436 127,019 301,698 311,206 1,797,637 TOTAL LIABILITIES AND FUND BALANCES 542,544$ 516,754$ 127,019$ 311,188$ 342,046$ 1,839,551$ -86- Exhibit B-2CITY OF SHOREWOOD, MINNESOTA NONMAJOR CAPITAL PROJECTS FUNDS COMBINING STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES FOR THE YEAR ENDED DECEMBER 31, 2015 Park Capital Equipment MSA Trail Community Improvement Replacement Construction Construction Infrastructure Total REVENUES Intergovernmental -$ -$ -$ 65,135$ -$ 65,135$ Interest on investments 5,455 4,029 (368) 4,126 976 14,218 Miscellaneous Park dedication fees 6,500 - - - - 6,500 Refunds and reimbursements - - - - 119,470 119,470 TOTAL REVENUES 11,955 4,029 (368) 69,261 120,446 205,323 EXPENDITURES Capital outlay Public works - 14,114 - - - 14,114 Culture and recreation 48,337 - - 231,850 175,171 455,358 TOTAL EXPENDITURES 48,337 14,114 - 231,850 175,171 469,472 DEFICIENCY OF REVENUES UNDER EXPENDITURES (36,382) (10,085) (368) (162,589) (54,725) (264,149) OTHER FINANCING SOURCES Transfers in 42,000 261,197 - - - 303,197 NET CHANGE IN FUND BALANCES 5,618 251,112 (368) (162,589) (54,725) 39,048 FUND BALANCES, JANUARY 1 536,660 264,324 127,387 464,287 365,931 1,758,589 FUND BALANCES, DECEMBER 31 542,278$ 515,436$ 127,019$ 301,698$ 311,206$ 1,797,637$ -87- Exhibit C-1CITY OF SHOREWOOD, MINNESOTA GENERAL FUND SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES - BUDGET AND ACTUAL - CONTINUED ON THE FOLLOWING PAGES FOR THE YEAR ENDED DECEMBER 31, 2015 (With comparative actual amounts for the year ended December 31, 2014) 2014 Actual Variance with Actual Original Final Amounts Final Budget Amounts REVENUES Taxes General property taxes 4,827,938$ 4,827,938$ 4,825,492$ (2,446)$ 4,752,388$ Fiscal disparities 103,526 103,526 123,634 20,108 111,707 Total 4,931,464 4,931,464 4,949,126 17,662 4,864,095 Licenses and permits Business 14,320 14,320 6,189 (8,131) 14,932 Nonbusiness 133,450 133,450 269,378 135,928 255,909 Total 147,770 147,770 275,567 127,797 270,841 Intergovernmental Federal Other - - - - 34,536 State Property tax credits - - 49 49 44 Other 75,751 75,751 91,587 15,836 79,489 Total 75,751 75,751 91,636 15,885 114,069 Charges for services General government 5,200 5,200 14,251 9,051 11,850 Culture and recreation 45,000 45,000 53,367 8,367 40,881 Total 50,200 50,200 67,618 17,418 52,731 Fines and forfeitures 57,000 57,000 65,234 8,234 64,290 Interest on investments 35,000 35,000 35,182 182 45,799 Miscellaneous revenue Refunds and reimbursements 10,000 10,000 63,574 53,574 19,792 Contributions and donations 3,500 3,500 3,570 70 4,595 Other 165,400 165,400 180,105 14,705 166,647 Total 178,900 178,900 247,249 68,349 191,034 TOTAL REVENUES 5,476,085 5,476,085 5,731,612 255,527 5,602,859 2015 Budgeted Amounts -88- Exhibit C-1CITY OF SHOREWOOD, MINNESOTA GENERAL FUND SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES - BUDGET AND ACTUAL - CONTINUED FOR THE YEAR ENDED DECEMBER 31, 2015 (With comparative actual amounts for the year ended December 31, 2014) 2014 Actual Variance with Actual Original Final Amounts Final Budget Amounts EXPENDITURES Current General government Mayor and City Council Personal services 22,600$ 22,600$ 22,176$ 424$ 16,794$ Supplies 2,000 2,000 1,751 249 1,014 Other services and charges 110,350 110,350 67,618 42,732 54,930 Total 134,950 134,950 91,545 43,405 72,738 Administrative Personal services 251,153 251,153 249,239 1,914 242,352 Supplies 20,900 20,900 13,288 7,612 17,852 Other services and charges 145,500 145,500 146,504 (1,004) 148,468 Total 417,553 417,553 409,031 8,522 408,672 Finance Personal services 134,758 134,758 143,248 (8,490) 138,465 Supplies 10,050 10,050 19,253 (9,203) 15,415 Other services and charges 16,000 16,000 21,018 (5,018) 14,191 Total 160,808 160,808 183,519 (22,711) 168,071 Professional services Other services and charges 215,060 215,060 200,096 14,964 207,153 Planning and zoning Personal services 173,157 173,157 184,405 (11,248) 182,641 Supplies 300 300 423 (123) 302 Other services and charges 11,000 11,000 28,125 (17,125) 14,461 Total 184,457 184,457 212,953 (28,496) 197,404 Municipal building Supplies 23,400 23,400 54,591 (31,191) 56,990 Other services and charges 170,800 170,800 95,370 75,430 87,679 Total 194,200 194,200 149,961 44,239 144,669 Total general government 1,307,028 1,307,028 1,247,105 59,923 1,198,707 Budgeted Amounts 2015 -89- Exhibit C-1CITY OF SHOREWOOD, MINNESOTA GENERAL FUND SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES - BUDGET AND ACTUAL - CONTINUED FOR THE YEAR ENDED DECEMBER 31, 2015 (With comparative actual amounts for the year ended December 31, 2014) 2014 Actual Variance with Actual Original Final Amounts Final Budget Amounts Budgeted Amounts 2015 EXPENDITURES - CONTINUED Current - continued Public safety Police protection Other services and charges 1,072,645$ 1,072,645$ 1,082,129$ (9,484)$ 1,051,134$ Fire protection Other services and charges 361,315 361,315 360,644 671 348,789 Protective inspection Personal services 121,323 121,323 126,667 (5,344) 120,530 Supplies 200 200 73 127 157 Other services and charges 7,700 7,700 9,887 (2,187) 6,176 Total 129,223 129,223 136,627 (7,404) 126,863 Total public safety 1,563,183 1,563,183 1,579,400 (16,217) 1,526,786 Public works General maintenance Personal services 494,547 494,547 350,006 144,541 321,038 Supplies 167,700 167,700 103,882 63,818 132,205 Other services and charges 142,600 142,600 103,058 39,542 95,277 Total 804,847 804,847 556,946 247,901 548,520 Snow and ice removal Personal services 58,339 58,339 25,274 33,065 61,363 Supplies 45,000 45,000 16,229 28,771 34,444 Total 103,339 103,339 41,503 61,836 95,807 Sanitation and waste removal Personal services - - 23,187 (23,187) 23,704 City engineer Supplies - - - - 612 Other services and charges 87,900 87,900 91,100 (3,200) 72,181 Total 87,900 87,900 91,100 (3,200) 72,793 Total public works 996,086 996,086 712,736 283,350 740,824 -90- Exhibit C-1CITY OF SHOREWOOD, MINNESOTA GENERAL FUND SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES - BUDGET AND ACTUAL - CONTINUED FOR THE YEAR ENDED DECEMBER 31, 2015 (With comparative actual amounts for the year ended December 31, 2014) 2014 Actual Variance with Actual Original Final Amounts Final Budget Amounts Budgeted Amounts 2015 EXPENDITURES - CONTINUED Current - continued Culture and recreation Personal services 146,216$ 146,216$ 192,106$ (45,890)$ 164,292$ Supplies 29,100 29,100 23,588 5,512 21,443 Other services and charges 56,800 56,800 40,132 16,668 43,387 Total culture and recreation 232,116 232,116 255,826 (23,710) 229,122 Total current 4,098,413 4,098,413 3,795,067 303,346 3,695,439 Capital outlay Public safety 501,337 501,337 501,336 1 508,187 TOTAL EXPENDITURES 4,599,750 4,599,750 4,296,403 303,347 4,203,626 EXCESS OF REVENUES OVER EXPENDITURES 876,335 876,335 1,435,209 558,874 1,399,233 OTHER FINANCING SOURCES (USES) Transfers in 25,000 25,000 25,000 - 25,000 Transfers out (1,043,513) (1,043,513) (1,043,513) - (1,315,120) TOTAL OTHER FINANCING SOURCES (USES)(1,018,513) (1,018,513) (1,018,513) - (1,290,120) NET CHANGE IN FUND BALANCES (142,178) (142,178) 416,696 558,874 109,113 FUND BALANCES, JANUARY 1 4,085,471 4,085,471 4,085,471 - 3,976,358 FUND BALANCES, DECEMBER 31 3,943,293$ 3,943,293$ 4,502,167$ 558,874$ 4,085,471$ -91- Exhibit D-1CITY OF SHOREWOOD, MINNESOTA DEBT SERVICE FUNDS COMBINING BALANCE SHEET DECEMBER 31, 2015 2007A 2007B 2007C 2008 Public Safety Public Safety Public Safety Lease Revenue Building Building Building Bond Total ASSETS Cash and temporary investments 17,220$ 6,977$ 4,889$ 2,719$ 31,805$ Lease receivable 2,685,000 2,785,000 950,000 - 6,420,000 TOTAL ASSETS 2,702,220$ 2,791,977$ 954,889$ 2,719$ 6,451,805$ DEFERRED INFLOWS OF RESOURCES Unavailable revenue - lease receivables 2,685,000$ 2,785,000$ 950,000$ -$ 6,420,000$ FUND BALANCES Restricted for debt service 17,220 6,977 4,889 2,719 31,805 TOTAL DEFERRED INFLOWS OF RESOURCES AND FUND BALANCES 2,702,220$ 2,791,977$ 954,889$ 2,719$ 6,451,805$ -92- Exhibit D-2CITY OF SHOREWOOD, MINNESOTA DEBT SERVICE FUNDS COMBINING SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES FOR THE YEAR ENDED DECEMBER 31, 2015 2007A 2007B 2007C 2008 Public Safety Public Safety Public Safety Lease Revenue Building Building Building Bond Total REVENUES Miscellaneous Lease payments 392,025$ 411,478$ 155,066$ -$ 958,569$ Other 4,000 4,000 4,000 - 12,000 TOTAL REVENUES 396,025 415,478 159,066 - 970,569 EXPENDITURES Debt service Principal 275,000 290,000 115,000 55,000 735,000 Interest and service charges 118,975 123,428 42,016 46,512 330,931 TOTAL EXPENDITURES 393,975 413,428 157,016 101,512 1,065,931 EXCESS (DEFICIENCY) OF REVENUES OVER (UNDER) EXPENDITURES 2,050 2,050 2,050 (101,512) (95,362) OTHER FINANCING SOURCES Transfers in - - - 101,513 101,513 NET CHANGE IN FUND BALANCES 2,050 2,050 2,050 1 6,151 FUND BALANCES, JANUARY 1 15,170 4,927 2,839 2,718 25,654 FUND BALANCES, DECEMBER 31 17,220$ 6,977$ 4,889$ 2,719$ 31,805$ -93- Exhibit E-1CITY OF SHOREWOOD, MINNESOTA AGENCY FUND COMBINING STATEMENT OF CHANGES IN ASSETS AND LIABILITIES FOR THE YEAR ENDED DECEMBER 31, 2015 Balance Balance January 1 Additions Deductions December 31 Developer Escrow Accounts ASSETS Cash and temporary investments 128,561$ 115,918$ (124,810)$ 119,669$ LIABILITIES Escrow deposits payable 128,561$ 115,918$ (124,810)$ 119,669$ -94- Exhibit F-1CITY OF SHOREWOOD, MINNESOTA SUPPLEMENTARY INFORMATION SUMMARY FINANCIAL REPORT REVENUES AND EXPENDITURES FOR GENERAL OPERATIONS GOVERNMENTAL FUNDS FOR THE YEARS ENDED DECEMBER 31, 2015 AND 2014 2015 2014 REVENUES Taxes 4,949,126$ 4,864,095$ 1.75 % Licenses and permits 275,567 270,841 1.74 Intergovernmental 156,771 891,055 (82.41) Charges for services 116,337 90,825 28.09 Fines and forfeits 65,234 64,290 1.47 Interest on investments 60,283 86,530 (30.33) Miscellaneous 1,344,340 1,185,219 13.43 TOTAL REVENUES 6,967,658$ 7,452,855$ (6.51)% Per Capita 938$ 991$ (5.31)% EXPENDITURES Current General government 1,247,105$ 1,198,707$ 4.04 % Public safety 1,579,400 1,526,786 3.45 Public works 726,905 743,803 (2.27) Culture and recreation 344,793 310,051 11.21 Capital outlay General government - 55,827 (100.00) Public safety 501,336 508,187 (1.35) Public works 907,830 1,525,025 (40.47) Culture and recreation 476,573 302,816 57.38 Debt service Principal 735,000 705,000 4.26 Interest and service charges 330,931 367,396 (9.93) TOTAL EXPENDITURES 6,849,873$ 7,243,598$ (5.44)% Per Capita 923$ 963$ (4.17)% Total Long-term Indebtedness 7,400,000$ 8,135,000$ (9.04)% Per Capita 997$ 1,081$ (7.82) General Fund Balance - December 31 4,502,167$ 4,085,471$ 10.20 % Per Capita 606$ 543$ 11.67 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, Shorewood, Minnesota 55331. Questions about this report should be directed to Bruce DeJong, Finance Director at 952-960-7903. Percent Increase (Decrease) Total -95- THIS PAGE IS LEFT BLANK INTENTIONALLY -96- STATISTICAL SECTION (UNAUDITED) CITY OF SHOREWOOD SHOREWOOD, MINNESOTA FOR THE YEAR ENDED DECEMBER 31, 2015 -97- THIS PAGE IS LEFT BLANK INTENTIONALLY -98- STATISTICAL SECTION (UNAUDITED) 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. 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. Revenue capacity These schedules contain information to help the reader assess the government’s most significant local revenue source, the property tax. 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. 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. 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. -99- CITY OF SHOREWOOD, MINNESOTA STATISTICAL SECTION (UNAUDITED) NET POSITION BY COMPONENT LAST TEN FISCAL YEARS (accrual basis of accounting) 2006 2007 2008 2009 Governmental activities Net investment in capital assets 11,690,620$ 10,960,550$ 9,430,566$ 9,480,314$ Restricted 24,632 - - - Unrestricted 5,716,027 6,147,185 7,400,859 7,909,106 Total governmental activities net position 17,431,279$ 17,107,735$ 16,831,425$ 17,389,420$ Business-type activities Net investment in capital assets 5,668,683$ 6,066,229$ 6,631,854$ 6,482,297$ Unrestricted 9,829,761 10,422,397 10,186,824 9,449,210 Total business-type activities net position 15,498,444$ 16,488,626$ 16,818,678$ 15,931,507$ Total primary government Net investment in capital assets 17,359,303$ 17,026,779$ 16,062,420$ 15,962,611$ Restricted 24,632 - - - Unrestricted 15,545,788 16,569,582 17,587,683 17,358,316 Total primary government 32,929,723$ 33,596,361$ 33,650,103$ 33,320,927$ Fiscal Year -100- Table 1 2010 2011 2012 2013 2014 2015 9,525,991$ 9,223,669$ 8,487,162$ 9,212,415$ 9,754,046$ 9,394,897$ - - - - - - 8,252,497 7,964,703 7,979,370 7,138,847 7,317,095 6,717,068 17,778,488$ 17,188,372$ 16,466,532$ 16,351,262$ 17,071,141$ 16,111,965$ 6,494,996$ 6,675,613$ 6,494,076$ 6,705,907$ 6,718,271$ 7,713,545$ 8,666,149 8,186,835 8,148,173 7,951,219 7,890,327 6,572,980 15,161,145$ 14,862,448$ 14,642,249$ 14,657,126$ 14,608,598$ 14,286,525$ 16,020,987$ 15,899,282$ 14,981,238$ 15,918,322$ 16,472,317$ 17,108,442$ - - - - - - 16,918,646 16,151,538 16,127,543 15,090,066 15,207,422 13,290,048 32,939,633$ 32,050,820$ 31,108,781$ 31,008,388$ 31,679,739$ 30,398,490$ Fiscal Year -101- CITY OF SHOREWOOD, MINNESOTA STATISTICAL SECTION (UNAUDITED) CHANGES IN NET POSITION - CONTINUED ON THE FOLLOWING PAGES LAST TEN FISCAL YEARS (accrual basis of accounting) 2006 2007 2008 2009 Expenses Governmental activities General government 1,357,714$ 1,321,971$ 1,483,913$ 1,486,281$ Public safety 1,806,915 1,819,250 1,906,890 1,904,966 Public works 2,275,402 1,971,571 2,485,752 1,941,272 Culture and recreation 233,881 258,906 273,054 394,110 Interest on long-term debt 600,723 1,000,230 1,002,423 638,768 Total governmental activities expenses 6,274,635 6,371,928 7,152,032 6,365,397 Business-type activities Water 488,513 636,506 657,776 659,113 Sewer 785,638 952,107 921,238 955,956 Recycling 124,354 91,157 96,945 99,286 Stormwater management utility 171,190 63,888 106,143 106,847 Liquor 2,017,217 1,885,537 16,167 129 Total business-type activities expenses 3,586,912 3,629,195 1,798,269 1,821,331 Total expenses 9,861,547$ 10,001,123$ 8,950,301$ 8,186,728$ Program revenues Governmental activities Charges for services General government 25,340$ 41,475$ 32,528$ 34,064$ Public safety 1,060,506 896,731 793,041 634,742 Public works - - - 6,279 Culture and recreation 1,800 1,960 605 35,843 Operating grants and contributions 31,730 99,800 90,493 90,681 Capital grants and contributions 395,229 132,912 674,343 43 Total governmental activities program revenues 1,514,605 1,172,878 1,591,010 801,652 Business-type activities Charges for services Water 1,350,041 782,549 752,338 784,318 Sewer 836,175 832,956 829,117 802,252 Recycling 144,886 89,934 64,629 65,112 Stormwater management utility 129,708 164,413 204,618 191,157 Liquor 1,984,344 1,788,835 - - Operating grants and contributions - - 27,950 28,488 Capital grants and contributions - - - - Total business-type activities program revenues 4,445,154 3,658,687 1,878,652 1,871,327 Total program revenues 5,959,759$ 4,831,565$ 3,469,662$ 2,672,979$ Fiscal Year -102- Table 2 2010 2011 2012 2013 2014 2015 1,235,098$ 1,405,791$ 1,331,286$ 1,310,296$ 1,277,118$ 1,318,558$ 1,893,413 1,960,894 1,947,868 2,010,338 2,036,394 2,080,769 2,231,473 2,031,136 2,162,123 1,884,986 1,991,852 1,971,483 452,437 412,257 460,879 471,784 397,365 613,494 474,082 449,773 428,887 379,685 355,378 318,357 6,286,503 6,259,851 6,331,043 6,057,089 6,058,107 6,302,661 643,886 690,363 689,205 693,193 690,479 721,184 980,173 1,151,626 1,065,926 847,097 873,711 944,263 173,896 174,857 187,713 181,537 178,457 131,185 131,107 233,035 273,846 107,935 203,825 99,312 25 - - - - - 1,929,087 2,249,881 2,216,690 1,829,762 1,946,472 1,895,944 8,215,590$ 8,509,732$ 8,547,733$ 7,886,851$ 8,004,579$ 8,198,605$ 53,381$ 108,394$ 144,883$ 187,628$ 199,394$ 260,440$ 624,330 544,749 604,400 599,810 642,680 617,557 - 6,293 4,137 226 1,222 940 58,661 72,678 79,206 120,794 102,985 108,884 99,114 113,717 102,959 144,112 48,284 86,370 114,330 - - - 811,522 184,605 949,816 845,831 935,585 1,052,570 1,806,087 1,258,796 668,676 672,793 757,395 537,713 443,467 544,748 845,043 819,496 831,640 834,320 852,254 858,066 146,002 151,894 157,585 165,713 164,666 154,929 198,593 196,070 193,931 194,950 220,658 227,676 - - - - - - 28,762 33,586 23,007 25,830 31,279 26,198 - 15,000 22,400 53,200 115,490 5,706 1,887,076 1,888,839 1,985,958 1,811,726 1,827,814 1,817,323 2,836,892$ 2,734,670$ 2,921,543$ 2,864,296$ 3,633,901$ 3,076,119$ Fiscal Year -103- CITY OF SHOREWOOD, MINNESOTA STATISTICAL SECTION (UNAUDITED) CHANGES IN NET POSITION - CONTINUED LAST TEN FISCAL YEARS (accrual basis of accounting) 2006 2007 2008 2009 Net revenues (expenses) Governmental activities (4,760,030)$ (5,199,050)$ (5,561,022)$ (5,563,745)$ Business-type activities 858,242 29,492 80,383 49,996 Total primary government (3,901,788)$ (5,169,558)$ (5,480,639)$ (5,513,749)$ General Revenues and Other Changes in Net Position General Revenues Governmental activities Taxes Property taxes, levied for general purpose 4,144,543$ 4,360,254$ 4,582,909$ 4,743,174$ Grants and contributions not restricted to specific programs 4,925 37,746 19,957 4,940 Unrestricted investment earnings 327,921 621,234 641,846 333,626 Gain on sale of capital assets - - - - Transfers of capital assets - - - - Transfers 25,000 (143,728) 40,000 1,040,000 Total governmental activities general revenues 4,502,389 4,875,506 5,284,712 6,121,740 Business-type activities Unrestricted investment earnings 310,281 434,072 289,669 102,833 Gain on sale of capital assets - 382,890 - - Transfers of capital assets - - - - Transfers (25,000) 143,728 (40,000) (1,040,000) Total business-type activities general revenues 285,281 960,690 249,669 (937,167) Total primary government 4,787,670$ 5,836,196$ 5,534,381$ 5,184,573$ Change in Net Position Governmental activities (257,641)$ (323,544)$ (276,310)$ 557,995$ Business-type activities 1,143,523 990,182 330,052 (887,171) Total primary government 885,882$ 666,638$ 53,742$ (329,176)$ Fiscal Year -104- Table 2 2010 2011 2012 2013 2014 2015 (5,336,687)$ (5,414,020)$ (5,395,458)$ (5,004,519)$ (4,252,020)$ (5,043,865)$ (42,011) (361,042) (230,732) (18,036) (118,658) (78,621) (5,378,698)$ (5,775,062)$ (5,626,190)$ (5,022,555)$ (4,370,678)$ (5,122,486)$ 4,744,348$ 4,733,948$ 4,761,213$ 4,768,989$ 4,854,521$ 4,931,075$ 4,487 4,751 6,019 5,818 5,848 5,840 132,359 56,705 61,584 37,461 86,530 60,283 31,130 28,500 - 76,981 - 30,000 - - - - - (245,121) 813,431 - - - 25,000 270,121 5,725,755 4,823,904 4,828,816 4,889,249 4,971,899 5,052,198 85,080 62,345 64,135 32,913 95,130 68,119 - - - - - - - - - - - 245,121 (813,431) - - - (25,000) (270,121) (728,351) 62,345 64,135 32,913 70,130 43,119 4,997,404$ 4,886,249$ 4,892,951$ 4,922,162$ 5,042,029$ 5,095,317$ 389,068$ (590,116)$ (566,642)$ (115,270)$ 719,879$ 8,333$ (770,362) (298,697) (166,597) 14,877 (48,528) (35,502) (381,294)$ (888,813)$ (733,239)$ (100,393)$ 671,351$ (27,169)$ Fiscal Year -105- CITY OF SHOREWOOD, MINNESOTA STATISTICAL SECTION (UNAUDITED) FUND BALANCES OF GOVERNMENTAL FUNDS LAST TEN FISCAL YEARS 2006 2007 2008 2009 General fund Reserved -$ -$ 47,750$ 500$ Unreserved 3,383,906 3,761,509 3,660,359 3,555,224 Nonspendable - - - - Unassigned - - - - Total general fund 3,383,906$ 3,761,509$ 3,708,109$ 3,555,724$ All other governmental funds Reserved 262,438$ 10,040,556$ 10,033,342$ 1,934,628$ Unreserved, reported in Special revenue funds - - - - Capital project funds 2,197,367 2,473,097 3,743,980 4,252,870 Nonspendable - - - - Restricted - - - - Assigned - - - - Unassigned - - - - Total all other governmental funds 2,459,805$ 12,513,653$ 13,777,322$ 6,187,498$ Fiscal Year Note: The City implemented GASB 54 in fiscal year 2011, resulting in significant reclassification of the components of fund balance. Years prior to 2011 have not been restated. -106- Table 3 2010 2011 2012 2013 2014 2015 49,060$ -$ -$ -$ -$ -$ 3,477,932 - - - - - - 48,000 50,000 33,016 103,996 99,216 - 3,440,227 3,574,468 3,943,342 3,981,475 4,402,951 3,526,992$ 3,488,227$ 3,624,468$ 3,976,358$ 4,085,471$ 4,502,167$ 96,333$ -$ -$ -$ -$ -$ (17,650) - - - - - 4,520,558 - - - - - - 150,068 150,068 150,068 - - - 30,439 17,700 24,450 25,654 31,805 - 4,229,528 4,368,656 3,117,434 3,339,005 3,304,064 - - (75,325) (52,437) - - 4,599,241$ 4,410,035$ 4,461,099$ 3,239,515$ 3,364,659$ 3,335,869$ Fiscal Year -107- CITY OF SHOREWOOD, MINNESOTA STATISTICAL SECTION (UNAUDITED) CHANGES IN FUND BALANCES OF GOVERNMENTAL FUNDS LAST TEN FISCAL YEARS 2006 2007 2008 2009 Revenues Taxes 4,141,539$ 4,332,741$ 4,582,602$ 4,703,368$ Licenses and permits 382,408 256,472 195,419 127,883 Intergovernmental 365,732 224,286 753,605 66,411 Charges for services 45,450 50,819 50,753 41,649 Fines and forfeitures 79,040 77,777 53,369 52,968 Special assessments 895 418 - - Interest on investments 327,921 621,234 641,846 333,626 Miscellaneous 1,110,860 1,077,012 1,053,916 1,059,914 Total revenues 6,453,845 6,640,759 7,331,510 6,385,819 Expenditures General government 1,264,509 1,253,223 1,443,549 1,386,614 Public safety 1,257,998 1,263,921 1,352,254 1,392,139 Public works 626,048 718,350 760,287 670,954 Culture and recreation 169,411 190,931 229,259 326,502 Capital outlay 2,571,204 1,123,796 2,164,366 1,953,756 Debt service Principal 486,728 534,594 485,000 520,000 Interest and service charges 607,727 956,532 977,957 818,063 Bond issuance costs - - 58,569 - Total expenditures 6,983,625 6,041,347 7,471,241 7,068,028 Excess (deficiency) of revenues over (under) expenditures (529,780) 599,412 (139,731) (682,209) Other financing sources (uses) Transfers in 635,000 770,091 933,366 2,059,773 Sale of capital assets - - - - Proceeds from sale of bonds - 10,000,000 1,310,000 - Bonds refunded - - - (8,100,000) Discount on long-term debt issued - (24,233) - - Transfers out (610,000) (913,819) (893,366) (1,019,773) Total other financing sources (uses)25,000 9,832,039 1,350,000 (7,060,000) Net change in fund balances (504,780)$ 10,431,451$ 1,210,269$ (7,742,209)$ Debt service as a percentage of Noncapital expenditures 20.1%26.3%23.1%22.4% Fiscal Year -108- Table 4 2010 2011 2012 2013 2014 2015 4,717,204$ 4,787,195$ 4,783,939$ 4,764,472$ 4,864,095$ 4,949,126$ 154,113 174,119 175,087 204,600 270,841 275,567 173,334 72,968 76,102 76,544 891,055 156,771 100,899 102,500 121,625 92,549 90,825 116,337 55,806 52,635 66,230 59,294 64,290 65,234 333 - - - - - 132,359 56,705 61,584 37,461 86,530 60,283 1,037,522 1,032,566 1,115,836 1,234,312 1,185,219 1,344,340 6,371,570 6,278,688 6,400,403 6,469,232 7,452,855 6,967,658 1,147,198 1,306,948 1,288,704 1,249,616 1,198,707 1,247,105 1,392,923 1,460,664 1,445,149 1,494,633 1,526,786 1,579,400 859,069 866,413 823,234 860,071 743,803 726,905 342,654 343,326 331,524 324,745 310,051 344,793 2,075,109 1,457,001 1,230,058 2,660,830 2,391,855 1,885,739 600,000 625,000 655,000 675,000 705,000 735,000 516,167 447,307 439,429 391,213 367,396 330,931 - - - - - - 6,933,120 6,506,659 6,213,098 7,656,108 7,243,598 6,849,873 (561,550) (227,971) 187,305 (1,186,876) 209,257 117,785 1,942,550 984,541 1,170,216 2,482,650 1,340,120 1,313,634 31,130 - - 317,182 - - - - - - - - (1,900,000) - - - - - - - - - - - (1,129,119) (984,541) (1,170,216) (2,482,650) (1,315,120) (1,043,513) (1,055,439) - - 317,182 25,000 270,121 (1,616,989)$ (227,971)$ 187,305$ (869,694)$ 234,257$ 387,906$ 19.1%18.4%18.3%18.5%18.5%17.9% Fiscal Year -109- 2006 2007 2008 2009 Taxable market value Personal property 4,361,600$ 4,591,200$ 4,336,600$ 4,764,900$ Real estate 1,318,313,000 1,475,529,200 1,597,262,400 1,651,054,700 Total taxable market value 1,322,674,600$ 1,480,120,400$ 1,601,599,000$ 1,655,819,600$ Estimated actual value of taxable property 1,416,341,600$ 1,553,767,900$ 1,645,188,300$ 1,673,720,100$ Taxable market value as a percentage of estimated actual value 93.39 %95.26 %97.35 %98.93 % Tax capacity Personal property 85,635$ 89,872$ 84,780$ 91,548$ Real estate 14,269,195 16,130,097 17,619,943 18,305,114 Total tax capacity 14,354,830 16,219,969 17,704,723 18,396,662 Contribution to fiscal disparities pool (276,939) (308,590) (351,789) (396,336) Receivable from fiscal disparities pool 399,944 407,687 445,780 513,259 Net tax capacity 14,477,835$ 16,319,066$ 17,798,714$ 18,513,585$ Tax levies General 3,678,592$ 3,835,173$ 4,056,917$ 4,158,672$ Debt service 511,803 561,135 555,078 617,620 Total 4,190,395$ 4,396,308$ 4,611,995$ 4,776,292$ Direct tax rate General 25.408 %23.501 %22.793 %22.463 % Debt service 3.535 3.439 3.119 3.336 Total 28.944 %26.940 %25.912 %25.799 % CITY OF SHOREWOOD, MINNESOTA STATISTICAL SECTION (UNAUDITED) TAX CAPACITY, MARKET VALUE AND ESTIMATED ACTUAL VALUE OF TAXABLE PROPERTY (Shown by year of tax collectability) 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. Source: Hennepin County Assessor -110- Table 5 2010 2011 2012 2013 2014 2015 4,629,900$ 4,948,300$ 5,291,700$ 6,006,500$ 6,068,600$ 6,348,000$ 1,631,938,000 1,507,900,600 1,430,712,101 1,367,209,584 1,345,804,540 1,449,497,111 1,636,567,900$ 1,512,848,900$ 1,436,003,801$ 1,373,216,084$ 1,351,873,140$ 1,455,845,111$ 1,638,118,400$ 1,514,456,700$ 1,453,867,700$ 1,392,562,700$ 1,371,752,400$ 1,472,996,800$ 99.91 %99.89 %98.77 %98.61 %98.55 %98.84 % 88,848$ 95,216$ 102,084$ 113,130$ 114,632$ 122,460$ 18,087,557 16,620,629 15,761,142 15,025,751 14,770,327 15,926,414 18,176,405 16,715,845 15,863,226 15,138,881 14,884,959 16,048,874 (432,995) (419,002) (389,965) (393,282) (393,620) (399,759) 526,521 478,935 435,462 368,528 374,494 377,934 18,269,931$ 16,775,778$ 15,908,723$ 15,114,127$ 14,865,833$ 16,027,049$ 4,160,292$ 4,158,672$ 4,158,672$ 4,763,319$ 4,858,585$ 4,931,464$ 616,000 604,647 - - - - 4,776,292$ 4,763,319$ 4,158,672$ 4,763,319$ 4,858,585$ 4,931,464$ 22.771 %24.790 %26.141 %31.516 %32.683 %30.770 % 3.372 3.604 - - - - 26.143 %28.394 %26.141 %31.516 %32.683 %30.770 % CITY OF SHOREWOOD, MINNESOTA STATISTICAL SECTION (UNAUDITED) TAX CAPACITY, MARKET VALUE AND ESTIMATED ACTUAL VALUE OF TAXABLE PROPERTY (Shown by year of tax collectability) -111- CITY OF SHOREWOOD, MINNESOTA STATISTICAL SECTION (UNAUDITED) PROPERTY TAX CAPACITY RATES - DIRECT AND OVERLAPPING GOVERNMENTS (PER $1,000 OF TAX CAPACITY IN 2006 - 2015) Year Taxes Payable City County No. 276 No. 277 2006 28.944 %41.016 %22.952 %10.522 %1.072 %0.787 %6.998 % 2007 26.940 39.110 24.793 9.911 1.121 0.743 7.310 2008 25.912 38.571 17.980 8.521 1.404 1.302 7.397 2009 25.799 40.413 17.186 8.284 1.489 1.246 7.154 2010 26.143 42.640 18.657 9.772 1.511 1.279 8.138 2011 28.394 45.840 21.274 10.900 1.606 1.352 9.172 2012 26.141 48.231 23.015 17.262 1.705 1.387 9.923 2013 31.516 49.461 24.487 18.119 1.769 1.523 10.089 2014 32.683 49.959 24.374 19.075 1.806 1.880 10.561 2015 30.770 46.398 25.093 20.377 1.738 1.855 9.785 Source: Hennepin County Assessor (1) Includes vocational school Overlapping rates are those of local and county governments that apply to property owners within the City. Not all overlapping rates apply to all City property owners (e.g. the rates for special districts apply only to the proportion of the government's property owners whose property is located within the geographic boundaries of the special district). School District (1) Watershed District Overlapping Rates No. 3 No. 4 Misc. -112- Table 6 100.982 %100.697 %88.552 % 99.274 98.896 84.392 91.264 91.162 81.805 92.041 91.798 83.139 97.089 96.857 88.204 106.286 106.032 95.912 109.015 108.697 103.262 117.322 117.076 110.954 119.383 119.457 114.084 113.784 113.901 109.068 Totals School District No. 276 District School District No. 277 Watershed District Watershed Watershed District No. 3No. 3 No. 4 -113- Table 7CITY OF SHOREWOOD, MINNESOTA STATISTICAL SECTION (UNAUDITED) PRINCIPAL TAXPAYERS CURRENT YEAR AND NINE YEARS AGO Tax Tax Taxpayer Capacity Rank Capacity Rank Mattamy Minneapolis LLC (Minnetonka Country Club)180,000$ 1 1.07 %51,890$ 4 0.36 % Krause-Anderson (Shorewood Village Ctr-Towle Real Est)158,530 2 0.94 71,790 3 0.50 Big Box One, LLC 130,310 3 0.77 92,190 1 0.64 Two S Properties (Shurgard Storage)120,404 4 0.72 73,610 2 0.51 South Lake Office Building LLC 76,210 5 0.45 - - - Jack & Gretchen Norqual 65,876 6 0.39 - - - W of Shorewood LLC (Minnetonka Portable Dredging)62,688 7 0.37 48,250 6 0.33 Beacon Bank 57,750 8 0.34 43,490 10 0.30 Waterford Center LLP 53,790 9 0.32 45,110 9 0.31 Stephen R Litman Trustee 55,888 10 0.33 - - - Kimberley & Frank Vennes - - - 50,625 5 0.35 The Mary Sue Simon Qprt - - - 46,940 7 0.32 Xcel Energy - - - 46,410 8 0.32 Totals 961,446$ 5.70 %570,305$ 3.94 % Source: Hennepin County Assessor Tax Capacity of Total Tax Capacity Percent 2015 2006 Percent of Total -114- Table 8CITY OF SHOREWOOD, MINNESOTA STATISTICAL SECTION (UNAUDITED) PROPERTY TAX LEVIES AND COLLECTIONS LAST TEN FISCAL YEARS (1) Collection Collection Fiscal Total of Current in subsequent Total Year Levy Year's Levy years Collections 2006 4,190,395$ 4,145,829$ 98.94 %41,120$ 4,186,949$ 99.92 % 2007 4,396,308 4,320,289 98.27 75,258 4,395,547 99.98 2008 4,611,995 4,546,899 98.59 61,628 4,608,527 99.92 2009 4,776,292 4,649,904 97.35 121,741 4,771,645 99.90 2010 4,776,292 4,685,060 98.09 88,075 4,773,135 99.93 2011 4,763,319 4,706,900 98.82 54,448 4,761,348 99.96 2012 4,763,319 4,717,658 99.04 40,812 4,758,470 99.90 2013 4,763,319 4,720,748 99.11 38,073 4,758,821 99.91 2014 4,858,585 4,812,478 99.05 30,373 4,842,851 99.68 2015 4,931,464 4,907,222 99.51 - 4,907,222 99.51 Percent Collections of Total (1) Includes state paid property tax credits. Percentage of Levy Collected to Levy -115- Table 9CITY OF SHOREWOOD, MINNESOTA STATISTICAL SECTION (UNAUDITED) RATIO OF NET BONDED DEBT TO ASSESSED VALUE AND NET BONDED DEBT PER CAPITA LAST TEN FISCAL YEARS Business- type Activities General Lease General Total Fiscal Obligation Revenue Capital Obligation Primary Per Year Bonds Bonds Leases Revenue Bonds Government Capita 2006 -$ 11,555,000 69,594$ 3,920,000$ 15,544,594$ 4.12 %2,073$ 2007 - 21,090,000 - 3,665,000 24,755,000 6.31 3,301 2008 - 21,915,000 - 3,415,000 25,330,000 5.87 3,199 2009 - 13,295,000 - 3,165,000 16,460,000 4.14 2,076 2010 - 10,795,000 - 2,915,000 13,710,000 3.19 1,876 2011 - 10,170,000 - 2,675,000 12,845,000 2.96 1,785 2012 - 9,515,000 - 2,500,000 12,015,000 2.86 1,615 2013 - 8,840,000 - 3,540,000 12,380,000 2.83 1,664 2014 - 8,135,000 - 2,160,000 10,295,000 2.26 1,368 2015 - 7,400,000 - 1,900,000 9,300,000 1.99 1,253 Note: Details regarding the City's outstanding debt can be found in the notes to the financial statements. See the Demographic and Economic Statistics table on page 121 for personal income and population data. Personal Income Governmental Activities Percentage of -116- Table 10CITY OF SHOREWOOD, MINNESOTA STATISTICAL SECTION (UNAUDITED) COMPUTATION OF DIRECT AND OVERLAPPING DEBT DECEMBER 31, 2015 Gross Amount Bonded of Debt Used Net Debt For Net Debt Net Applicable Calculation Debt to District Direct Debt City of Shorewood 7,400,000$ 7,400,000$ 100.00 %7,400,000$ Overlapping Debt School District #276 108,315,169$ 91,870,579$ 18.77 %17,244,108$ School District #277 27,720,000 27,006,458 2.31 623,849 Hennepin County 706,625,000 689,516,184 1.21 8,343,146 Henn Suburban Park District 63,510,000 49,596,497 1.65 818,342 Henn Regional RR Authority 34,695,000 34,389,498 1.65 567,427 Metropolitan Council 206,020,000 67,164,480 0.56 376,121 Total Overlapping Debt 1,146,885,169$ 959,543,696$ 2.92 %27,972,993$ Total Direct and Overlapping Debt 1,154,285,169$ 966,943,696$ 3.66 %35,372,993$ 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. District Applicable to Percentage -117- CITY OF SHOREWOOD, MINNESOTA STATISTICAL SECTION (UNAUDITED) LEGAL DEBT MARGIN INFORMATION LAST TEN FISCAL YEARS 2006 2007 2008 2009 Debt limit 26,453,492$ 29,602,408$ 32,031,980$ 33,116,392$ Total net debt applicable to limit - - - - Legal debt margin 26,453,492$ 29,602,408$ 32,031,980$ 33,116,392$ Total net debt applicable to the limit as a percentage of debt limit -$ -$ -$ -$ 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. Fiscal Year -118- Table 11 2010 2011 2012 2013 2014 2015 32,731,358$ 30,256,978$ 43,080,114$ 41,196,483$ 40,556,194$ 43,675,353$ - - - - - - 32,731,358$ 30,256,978$ 43,080,114$ 41,196,483$ 40,556,194$ 43,675,353$ -$ -$ -$ -$ -$ -$ Legal Debt Margin Calculation for Fiscal Year 2015 Taxable market value 1,455,845,111$ Debt limit (3% of market value)43,675,353$ Debt applicable to limit General obligation bonds - Less: amount available in debt service funds - Total net debt applicable to limit - Legal debt margin 43,675,353$ Fiscal Year -119- Table 12CITY OF SHOREWOOD, MINNESOTA STATISTICAL SECTION (UNAUDITED) PLEDGED-REVENUE COVERAGE LAST TEN FISCAL YEARS (1)Net Fiscal Gross (2)Revenue Year Revenue Expenses Available Principal Interest 2006 1,264,892$ 223,243$ 1,041,649$ 275,000$ 79,456$ 2.94 % 2007 765,717 259,056 506,661 255,000 81,165 1.51 2008 857,890 278,164 579,726 250,000 172,050 1.37 2009 821,778 250,995 570,783 250,000 142,589 1.45 2010 700,678 238,780 461,898 250,000 125,407 1.23 2011 718,561 299,962 418,599 240,000 116,728 1.17 2012 809,746 313,620 496,126 175,000 100,668 1.80 2013 595,599 300,232 295,367 185,000 75,630 1.13 2014 542,606 401,476 141,130 220,000 19,708 0.59 2015 581,484 412,646 168,838 260,000 18,798 0.61 (1) Including interest and other income (2) Excluding depreciation and interest on bonds Revenue from Fiscal Property Year Taxes Principal Interest 2006 37,544$ 31,728$ 5,816$ 1.00 % 2007 73,406 69,594 3,812 1.00 2008 - - - - 2009 - - - - 2010 - - - - 2011 - - - - 2012 - - - - 2013 - - - - 2014 - - - - 2015 - - - - Revenue from Fiscal Lease Year Payments Principal Interest 2006 1,040,693$ 455,000$ 589,056$ 1.00 % 2007 1,034,751 465,000 941,222 0.74 2008 1,037,241 485,000 970,065 0.71 2009 992,835 495,000 737,863 0.81 2010 982,037 555,000 457,840 0.97 2011 902,003 575,000 393,357 0.93 2012 978,744 605,000 372,230 1.00 2013 972,513 625,000 335,513 1.01 2014 969,650 650,000 335,513 0.98 2015 958,569 680,000 284,419 0.99 General Obligation Revenue Bonds Coverage Capital Leases Coverage Coverage Lease Revenue Bonds Debt Service Debt Service Debt Service -120- Table 13CITY OF SHOREWOOD, MINNESOTA DEMOGRAPHIC AND ECONOMIC STATISTICS LAST TEN FISCAL YEARS Total Per Capita Fiscal Personal Personal Median Year Population (1)Income (2)Income (2)Age (3) 2006 7,499 377,246,826$ 49,566$ 38.7 3.3 % 2007 7,611 392,414,022 49,566 38.7 4.7 2008 7,917 431,535,825 54,425 39.0 7.3 2009 7,929 397,683,475 54,425 39.0 7.4 2010 7,307 429,651,600 58,800 39.1 5.1 2011 7,307 433,743,520 59,360 44.2 51.1 %5.7 2012 7,312 420,264,512 57,476 44.1 49.8 4.6 2013 7,438 438,083,324 58,898 43.6 56.4 3.8 2014 7,524 455,961,924 60,601 44.5 61.8 3.0 2015 7,425 466,700,130 61,295 43.7 63.1 3.1 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 - Hennepin County Graduate Degree (4)Rate (5) Unemployment 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. Percent of Population Which Has a Bachelor's or Post -121- Table 14CITY OF SHOREWOOD, MINNESOTA PRINCIPAL EMPLOYERS CURRENT YEAR AND NINE YEARS AGO (1) Employees Rank Employees Rank Minnewashta Elementary School 123 1 9.83 %- N/A % Cub Foods 121 2 9.67 115 1 N/A Xcel Energy 75 3 6.00 90 2 N/A Beacon Bank 34 4 2.72 - N/A City of Shorewood 26 *5 2.08 54 3 N/A Park Nicollet Clinic 20 *6 1.60 - N/A Minnetonka Country Club - - 50 4 N/A Total 399 31.89 %309 - % Total City Employment 1,251 N/A Source: Minnesota Department of Employment and Economic Development * Includes part-time and temporary seasonal employees. N/A - indicates not available (1) All information for 2006 was not available. The table will be updated for future years. Employer Percentage of Total City Employment 20062015 Percentage of Total City Employment -122- Table 15CITY OF SHOREWOOD, MINNESOTA FULL-TIME EQUIVALENT CITY GOVERNMENT EMPLOYEES BY FUNCTION LAST TEN FISCAL YEARS 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 General government 13 13 13 12 12 10 10 9 9 9 Public works Engineering - - - - - 1 1 - - - Maintenance 6 6 6 6 6 5 5 6 6 6 Culture and recreation Parks 13 5 5 5 5 3 3 2 2 2 Economic development Water 1.5 1.5 1.5 1.5 1.5 1.5 1.5 1 1 1 Sewer 1.5 1.5 1.5 1.5 1.5 1.5 1.5 2 2 2 Municipal Liquor 3 2 - - - - - - - - Total 38 29 27 26 26 22 22 20 20 20 Source: City of Shorewood Function -123- Table 16CITY OF SHOREWOOD, MINNESOTA OPERATING INDICATORS BY FUNCTION LAST TEN FISCAL YEARS 2006200720082009201020112012201320142015 Building/engineering Permits issued 1,137 710 686 603 591 512 585 481 792 684 Public works Street sweeping (hours)1,000 1,614 1,500 1,550 1,400 1,600 1,600 1,400 1,400 1,400 Snowplowing (hours)2,000 1,394 1,508 765 1,024 895 616 1,403 833 530 Equipment repair (hours)2,080 2,080 2,080 2,080 1,280 1,591 1,725 1,716 1,542 1,551 Water New connections 24 22 13 11 1 2 3 9 - 4 Water mains breaks 3 7 3 3 5 6 7 3 7 6 Average daily consumption (thousands of gallons)482,000 482,000 482,000 467,600 467,600 465,300 465,300 465,300 465,300 465,300 Sewer Average daily treatment flow (thousands of gallons)1,000,000 1,000,000 1,000,000 1,000,000 1,000,000 1,000,000 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. Function -124- Table 17CITY OF SHOREWOOD, MINNESOTA CAPITAL ASSET STATISTICS BY FUNCTION LAST TEN FISCAL YEARS 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Public works Highways and streets Streets (miles)50 51 51 51 51 51 51 51 51 51 Street lights 194 194 194 194 194 194 194 194 194 194 Traffic signals 5 5 5 5 5 5 5 5 5 5 Culture and recreation Parks division Parks 7 7 7 7 7 7 7 7 7 7 Parks acreage 102 102 102 102 102 102 102 102 102 102 Baseball diamonds 5 5 5 5 5 5 5 5 5 5 Basketball courts 1 1 1 1 1 1 1 1 1 1 Bike trails (miles)2.45 2.45 2.45 2.45 2.45 2.45 2.45 4.00 4.00 5.80 Hockey rinks/outdoor 3 3 3 3 3 3 3 3 3 3 Softball diamonds 3 3 3 3 3 3 3 3 3 3 Swimming areas 1 1 1 1 1 1 1 1 1 1 Tennis courts 5 5 5 5 5 5 5 5 5 5 Volleyball courts 2 2 2 2 2 2 2 2 2 2 Utilities Water Miles of water main 27 28 28 28 28 28 28 28 28 28 Consumers 1,265 1,297 1,310 1,321 1,322 1,324 1,327 1,336 1,336 1,340 Maximum daily capacity (gallons)919,000 919,000 919,000 919,000 919,000 919,000 919,000 919,000 919,000 919,000 Sewer Miles of sanitary sewer 60 60 60 60 60 60 60 60 60 60 Lift stations 14 14 14 14 14 14 14 14 14 14 Maximum daily treatment capacity (gallons)1,000,000 1,000,000 1,000,000 1,000,000 1,000,000 1,000,000 1,000,000 1,000,000 1,000,000 1,000,000 Storm sewer Miles of storm sewer 12 12 12 12 12 12 12 12 12 12 Source: City of Shorewood Note: No capital asset indicators are available for the general government function. Function -125-