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2017 Comp. Annual Financial ReportCITY OF SHOREWOOD SHOREWOOD, MINNESOTA COMPREHENSIVE ANNUAL FINANCIAL REPORT FOR THE YEAR ENDED DECEMBER 31, 2017 GREG LERUD, CITY ADMINISTRATOR REPORT PREPARED BY SHOREWOOD'S FINANCE DEPARTMENT 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, 2017 Exhibit Page No. Introductory Section Elected and Appointed Officials Organization Chart Letter of Transmittal Certification of Achievement for Excellence in Financial Reporting Financial Section Independent Auditor's Report Management's Discussion and Analysis Basic Financial Statements Government -wide Financial Statements Nonmajor Governmental Funds Statement of Net Position 1 Statement of Activities 2 Fund Financial Statements Combining Statement of Revenues, Expenditures and Changes in Fund Balances Governmental Funds 91 Balance Sheet 3 Reconciliation of the Balance Sheet to the Statement of Net Position 4 Statement of Revenues, Expenditures and Changes in Fund Balances 5 Reconciliation of the Statement of Revenues, Expenditures B -2 and Changes in Fund Balances to the Statement of Activities 6 General Fund Statement of Revenues, Expenditures and Changes in Fund Balances - Budget and Actual Proprietary Funds Debt Service Funds Statement of Net Position 8 Statement of Revenues, Expenses and Changes in Net Position 9 Statement of Cash Flows 10 Fiduciary Fund 101 Statement of Net Position 11 Notes to the Financial Statements Combining Statement of Changes in Assets and Liabilities Required Supplementary Information Schedule of Employer's Share of Public Employees Retirement Association Net Pension Liability - General Employees Retirement Fund Schedule of Employer's Public Employees Retirement Association Contributions - General Employees Retirement Fund 8 9 11 17 21 25 39 40 44 47 48 50 51 52 53 54 55 57 84 84 Combining and Individual Fund Financial Statements and Schedules Nonmajor Governmental Funds Combining Balance Sheet A -1 90 Combining Statement of Revenues, Expenditures and Changes in Fund Balances A -2 91 Nonmajor Capital Projects Funds Combining Balance Sheet B -1 94 Combining Statement of Revenues, Expenditures and Changes in Fund Balances B -2 95 General Fund Schedule of Revenues, Expenditures and Changes in Fund Balances - Budget and Actual C -1 96 Debt Service Funds Combining Balance Sheet D -1 100 Combining Schedule of Revenues, Expenditures and Changes in Fund Balances D -2 101 Agency Fund Combining Statement of Changes in Assets and Liabilities E -1 102 Summary Financial Report Revenues and Expenditures for General Operations - Governmental Funds F -1 103 3 THIS PAGE IS LEFT BLANK INTENTIONALLY City of Shorewood, Minnesota Comprehensive Annual Financial Report Table of Contents (Continued) For the Year Ended December 31, 2017 Statistical Section (Unaudited) Net Position by Component Changes in Net Position Fund Balances of Governmental Funds Changes in Fund Balances of Governmental Funds Tax Capacity, Market Value and Estimated Actual Value of Taxable Property Property Tax Capacity Rates - Direct and Overlapping Governments Principal Taxpayers Property Tax Levies and Collections Ratio of Net Bonded Debt to Assessed Value and Net Bonded Debt Per Capita Computation of Direct and Overlapping Debt Legal Debt Margin Information Pledged- Revenue Coverage Demographic and Economic Statistics Principal Employers Full -time Equivalent City Government Employees by Function Operating Indicators by Function Capital Asset Statistics by Function 5 Table Page No. 1 108 2 110 3 114 4 116 5 118 6 120 7 121 8 122 9 123 10 125 11 126 12 128 13 129 14 130 15 131 16 132 17 133 THIS PAGE IS LEFT BLANK INTENTIONALLY INTRODUCTORY SECTION CITY OF SHOREWOOD SHOREWOOD, MINNESOTA FOR THE YEAR ENDED DECEMBER 31, 2017 City of Shorewood, Minnesota Elected and Appointed Officials For the Year Ended December 31, 2017 ELECTED Name Title Scott Zerby Mayor Patrick Johnson Council Member Jennifer Labadie Council Member Debbie Siakel Council Member Kristine Sundberg Council Member Greg Lerud Joe Rigdon APPOINTED Name Title City Administrator Interim Finance Director F:3 Term Expires 12/31/20 12/31/20 12/31/18 12/31/18 12/31/20 Joint Powers P Police Fire LMCD LMCC Finance Dir Sr Acct Clerk Contracted Services IT /Phones Mound Fire Assessor Recycling Attorney Engineer encies Plan /Zone Dir lanning, Bldg Asst Official Residents Council Administrato City Clerk Recep- tionist Comm Coord Park /Rec Coord Advisory Boards Plan Commission Park Commission Pub Works Dir Utiliites Parks Maint. Streets THIS PAGE IS LEFT BLANK INTENTIONALLY 10 April 12, 2018 CITY OF SHOREWOOD 5755 COUNTRY CLUB ROAD • SHOREWOOD, MINNESOTA 55331 -8927 • (952) 960 -7900 FAX (952) 474 -0128 • www.d.shorewood.mmus • cityhall ®ci.shorewood.mn.us Honorable Mayor and Members of the City Council City of Shorewood, Minnesota Mayor and City Council Members: The Comprehensive Annual Financial Report of the City of Shorewood, Minnesota, for the fiscal year ended December 31, 2017, is hereby transmitted. The report was prepared in accordance with accounting principles generally accepted in the United States of America (GAAP) as established by the Governmental Accounting Standards Board (GASB) and meets the requirements of the Office of Minnesota State Auditor. The report consists of management's representations concerning the finances of the City. Consequently, management assumes full responsibility for the completeness and reliability of the information presented in this report. To provide a reasonable basis for making these representations, management of the City has established internal controls designed to protect the City's assets from loss, theft, or misuse, and to provide sufficient information for the preparation of these financial statements in conformity with GAAP. Because the cost of internal controls should not outweigh the benefits, the City's internal controls have been designed to provide reasonable, rather than absolute, assurance that the financial statements are free of any material misstatements. As management, we assert that to the best of our knowledge and belief this financial report is complete and reliable in all material respects. The City of Shorewood's financial statements have been audited by the firm of Abdo, Eick & Meyers, LLP, Certified Public Accountants. The goal of the audit was to provide reasonable assurance that the financial statements of the City for the year ended December 31, 2017 are free of material misstatement. The independent audit involved examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates used by management; and evaluating the overall financial statement presentation. Based on the audit, the independent auditor concluded that there was reasonable basis for rendering an i. f M' PRINTED ON 1 1CYCLED PAPER unmodified opinion that the City's financial statements, for the year ended December 31, 2017, are fairly presented in conformity with GAAP. The independent auditor's report is presented at the front of the financial section of this report. GAAP requires that management provide a narrative introduction, overview, and analysis to accompany the basic financial statements in the form of Management's Discussion and Analysis (MD &A). The City's MD &A can be found in the financial section of this report immediately following the independent auditor's report. City Profile The City of Shorewood is a suburban community located southwest of the Twin Cities on the southern shore of Lake Minnetonka, in a setting of rolling hills and picturesque lakes and creeks. Shorewood has a convenient location, a comprehensive system of highways, and is a short distance from downtown Minneapolis and St. Paul, and the MSP International Airport. The City is predominately a residential community with limited commercial businesses and two commercial shopping malls. The City is six square miles in area and had an estimated population of 7,496 as of 2016. The City, which is currently over 95% developed, continues to experience some growth in its residential base. Incorporated as a Village in 1956, and later becoming a city in 1974, the City of Shorewood operates under the Council- Administrator; Plan A, form of government. Policy making and legislative authority are vested in a governing council consisting of the Mayor and four - member council, all elected at -large on a non - partisan basis. Council members serve four —year staggered terms, with two council members elected every two years. The Mayor is election to a four year term. The City Administrator is responsible for overseeing the day -to -day operations of the government, and to assign responsibility to City staff for the efficient and effective delivery of City services. The Economic Development Authority (EDA) of the City was created in 2001 pursuant to Minnesota Statutes to carry out economic and industrial development and redevelopment consistent with policies established by the Council. Its board is comprised of the members of the City Council. The EDA activities are blended and separate financial statements are not issued for this component unit. The City provides its residents and businesses with a broad range of municipal services consisting of police and fire protection, street maintenance, recreation programs, park maintenance, community and economic development, and administrative services, including building inspections. During 2017, the City operated four enterprises: water utility, sanitary sewer utility, storm water management utility, and a recycling program. Economic Conditions and Outlook Governance The City Council, in its leadership role, has effectively established a focus for government in Shorewood and has established overall goals and expectations for the City. The Council's budget calendar consists 12 of three phases: first is planning. This includes review of the previous year's work plan and identifies goals and priorities for the next twelve months. The second phase is capital finance planning. The City is presently examining the Capital Improvement Plan process and establishing priorities for Plan development. Those projects are then incorporated into a financial management plan that includes both operating and capital spending plans to determine the overall feasibility of the plans and the effect of that proposed spending level on the balances and tax necessary to support that level of investment. The third phase is budgeting. The annual operating budget is developed based on decisions made in the first two phases and serves as the foundation of the City of Shorewood's financial planning and control. Departments submit budget requests to Finance in July and the City Administrator presents the proposed budget to the City Council for review. Budget work sessions are held with the City Council in July and August. The City Council adopts a preliminary budget and tax levy prior to September 30 of each year. After individual property tax estimates are mailed to all property owners in November, the City Council holds a Truth -in- taxation public hearing on the proposed budget and adopts the final budget in December each year. The budget is organized by fund and function. The City's department directors develop their budgets with subsequent review and input from the City Administrator and Finance Director. Any changes in the overall budget must be approved by the City Council. Cooperative Public Service Delivery Shorewood is committed to working cooperatively with other Lake Minnetonka area cities to carefully consider methods to efficiently deliver public services. The City has various contractual arrangements with other government jurisdictions and with private entities for providing many of these services. The City is also involved in cooperative employee training, disaster preparedness and other areas of mutual interest as an active participant in the Lake Minnetonka area. The City has been a member of the South Lake Minnetonka Police Department (SLMPD) since its creation in 1973. The other members of this joint powers organization are the cities of Excelsior, Greenwood, and Tonka Bay. The City of Shorewood, along with the cities of Deephaven, Excelsior, Greenwood, and Tonka Bay, has been a member of the Excelsior Fire District since 2000. The Excelsior Fire District is a joint powers organization. A combined police and fire public safety building that serves the South Lake Minnetonka Area cities was completed in late 2003. The City contracts with Hennepin County for property assessment services. The Hennepin County Assessor analyzes property sales information, sets taxable values, and handles the valuation appeal process. 13 The City is a member of the Lake Minnetonka Communications Commission, which was formed through a Joint Powers Agreement between eleven area cities to oversee the franchise agreement with the cable operator and to promote awareness and use of community television. Debt Administration As of December 31, 2017, the City's debt outstanding totaled $7,360,000. Of this total, $1,370,000 are General Obligation Water Revenue Refunding bonds issued in 2013. The proceeds from these bonds financed water system extensions and improvements that will be repaid from special assessments and water rate revenues. In 2016, the City's Economic Development Authority (EDA) issued Public Safety Facility Lease Revenue Refunding bonds, Series 2016A, 2016B, and 2016C, in the total amount of $5,910,000. The 2016 bonds refunded the 2007A, 2007B, and 2007C Public Safety Facility Lease Revenue Refunding bonds. The outstanding principal on the 2016 bonds amounted to $5,105,000 at December 31, 2017. These bonds will be repaid from lease payments from the Excelsior Fire District and South Lake Minnetonka Police Department. On May 2, 2017 the EDA issued Lease Revenue Refunding bonds to refund the 2008 EDA Lease Revenue bonds issued for the remodeling of City Hall. The outstanding balance on the bonds was $885,000 at December 31, 2017. These bonds will be repaid with lease payments from the City. In 2013, Moody's Investors Service affirmed an Aa1 rating on the City's outstanding general obligation debt and an Aa2 rating on the City's outstanding lease revenue debt. Per Moody's, the Aa1 general obligation rating reflects the City's modestly -sized and affluent tax base in Hennepin County, healthy financial profile with minimal reliance on intergovernmental aid, and a manageable debt burden. The Aa2 lease revenue rating reflects a one -notch distinction due to the essentiality of the assets financed (fire and police facilities) and annual risk of non - appropriation. Moody's assigned a rating of Aa2 to the Series 2016 Lease Revenue refunding bonds. The 2017 EDA Lease Revenue refunding bonds were not rated. Long -term Financial Planning The City has implemented various financial /budgetary policies to guide the City Council and staff when making financial decisions to ensure the long -term stability and flexibility of City finances and operations. These policies include the following: • The original budget should be balanced with revenues equal to expenditures. • By Policy, the City Council has set the Unassigned fund balance level in the General Fund 55 -60% of the next year's expenditure budget including transfers. This policy ensures the long -term economic stability of the organization by providing adequate working capital given the periodic nature of tax receipts and by providing for unexpected shortfalls or emergencies. In accordance 14 with this policy, the City Council my use any General Fund reserve in excess of 60% to reduce the budgeted tax levy, or for one -time projects, or transfer to any of the City's capital funds. • The City will maintain a ten -year capital improvement plan to provide for capital asset acquisition, maintenance, replacement, and retirement. • The City will continue to accumulate resources for future capital equipment and improvement projects with operating transfers to various capital project funds. Budgeted transfers from the General fund for 2017 were $1,104,913, and an additional $700,000 of transfers were authorized during the year. Major Initiatives The Minnetonka Country Club (MCC) was closed at the end of 2014 and the property purchased by Mattamy Homes with a plan to develop 143 housing units. Phase I of the project began in 2015, and is anticipated to be completed by the middle of 2017. Cal Atlantic completed its purchase of the lots that Mattamy owned as well as lots that will be developed in the second and third additions of the MCC project. In 2017, Mattamy submitted a final plat application for the second addition, which was approved in June 2017. The third, and final, addition plat was approved by the City in February 2018. The Shorewood Landing project is a 105 -unit senior living complex. The complex has 85 independent or assisted living units and 25 memory care units. Construction started in 2016 and it is anticipated that the facility will opened in December 2017. Certificate of Achievement The Government Finance Officers Association of the United States and Canada (GFOA) awarded a Certificate of Achievement for Excellence in Financial Reporting to the City of Shorewood for its comprehensive annual financial report (CAFR) for the fiscal year ended December 31, 2016. The Certificate of Achievement is a prestigious national award recognizing conformance with the highest standards for preparation of state and local government financial reports. In order to be awarded a Certificate of Achievement, a government unit must publish an easily readable and efficiently organized comprehensive annual financial report whose contents conform to program standards, and must satisfy both GAAP and applicable legal requirements. A Certificate of Achievement is valid for a period of one year. The City of Shorewood has received the Certificate for the past 20 consecutive years. We believe our current report continues to conform to the Certificate of Achievement program requirements, and we are submitting it to the GFOA to determine its eligibility for another certificate. Acknowledgments We would like to express our appreciation to the employees of the Administration, Finance, Planning, and Public Works departments for their contribution to the preparation of this report. We would also like to thank the Mayor and City Council members for their continued support in planning and conducting the financial operations of the City in a responsible and prudent manner. 15 Respectfully submitted, - 4 4 9�:;� 7 Greg Leru� City Administrator 16 Joe Rigdon, Interim Finance Director 016 E Government Finance Officers Association Certificate of Achievement for Excellence in Financial Reporting Presented to City of Shorewood Minnesota For its Comprehensive Annual Financial Report for the Fiscal Year Ended December 31, 2016 r Executive Director /CEO 17 THIS PAGE IS LEFT BLANK INTENTIONALLY 18 FINANCIAL SECTION CITY OF SHOREWOOD SHOREWOOD, MINNESOTA FOR THE YEAR ENDED DECEMBER 31, 2017 19 THIS PAGE IS LEFT BLANK INTENTIONALLY 20 ABDO EICK & MARS LLP Gerlified Atilt- Accnuulcaras & ConsuAanls 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, 2017, 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, 2017, 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. 5201 Eden Avenue, Suite 250 Edina, MN 55436 21 952.835.9090 1 Fax 952.835.3261 THIS PAGE IS LEFT BLANK INTENTIONALLY 22 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 25 and the Schedule of Employer's Share of the Net Pension Liability and the Schedule of Employer's Contributions on page 84 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, schedules, and statistical section 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. 4"ILL? OL4k &OL 4 ABDO, EICK & MEYERS, LLP Minneapolis, Minnesota April 12, 2018 23 People + Process G11111 9 11e�()Il lti, Vlfilwrs THIS PAGE IS LEFT BLANK INTENTIONALLY 24 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, 2017. 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 $32,432,020 (net position). Of this amount, $12,344,441 (unrestricted net position) may be used to meet the City's ongoing obligations to residents and creditors. • The City's total net position increased $733,459, which is due to revenues exceeding expenses in both governmental and business -type activities. • As of the close of the current fiscal year, the City's governmental funds reported combined ending fund balances of $6,594,472, a decrease of $317,122 in comparison with the prior year. This decrease is primarily the result of capital expenditures exceeding current year resources. Approximately 36 percent of the total ending fund balance, $2,344,426, 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 $4,029,572, or 61.8 percent of total 2017 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 decreased $1,117,563, or 13.1 percent during the current fiscal year. This was the result of regularly scheduled principal payments as well as refunding payments on the general obligation revenue bonds and lease revenue bonds. 25 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 ........................ 4 * ...... Managements Basic Required Discussion and Financia Supplementary Analysis Statements Information Government- wide Financial Stateme nts ummaR, Fu nd Totes to the Financial Financial Statements Statements 26 Detai Figure 2 summarizes the major features of the City's financial statements, including the portion of the City government they cover and the types of information they contain. The remainder of this overview section of management's discussion and analysis explains the structure and contents of each of the statements. Figure 2 Major features of the Government -wide and Fund Financial Statements Government -wide Financial Statements. The government -wide financial statements are designed to provide readers with a broad overview of the City's finances, in a manner similar to a private- sector business. The statement of net 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. Overtime, 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). 27 Fund Financial Statements Government -wide Governmental Funds Proprietary Funds Statements Scope Entire City government The activities of the City Activities the City operates (except fiduciary funds) that are not proprietary or similar to private and the City's component fiduciary, such as police, businesses, such as the units fire and arks water and sewers stem Required financial . Statement of Net • Balance Sheet • Statements of Net statements Position • Statement of Position • Statement of Activities Revenues, • Statements of Expenditures, and Revenues, Expenses Changes in Fund and Changes in Fund Balances Net Position • Statements of Cash Flows Accounting basis and Accrual accounting and Modified accrual Accrual accounting and measurement focus economic resources focus accounting and current economic resources focus financial resources focus Type of asset /liability All assets and liabilities, Only assets expected to All assets and liabilities, information both financial and capital, be used up and liabilities both financial and capital, and short -term and long- that come due during the and short -term and long- term year or soon thereafter; no term capital assets included Type of deferred All deferred Only deferred outflows of All deferred outflows /inflows of outflows /inflows of resources expected to be outflows /inflows of resources information resources, regardless of used up and deferred resources, regardless of when cash is received or inflows of resources that when cash is received or paid come due during the year paid of son thereafter; no capital assets included Type of in flow /out flow All revenues and Revenues for which cash All revenues and information expenses during year, is received during or soon expenses during the year, regardless of when cash after the end of the year; regardless of when cash is received or paid expenditures when goods is received or paid or services have been received and payment is due during the year or soon thereafter Government -wide Financial Statements. The government -wide financial statements are designed to provide readers with a broad overview of the City's finances, in a manner similar to a private- sector business. The statement of net 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. Overtime, 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). 27 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. 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 39 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 13 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, Street Reconstruction funds, and the TIF #2 Oppidan Senior Housing fund 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 44 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 52 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 56 of this report. 28 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 57 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 90 of this report. In addition to the basic financial statements and accompanying notes, this report also presents certain required supplementary information concerning the City's progress in funding its obligation to provide pension benefits to its employees. Required supplementary information can be found starting on page 84 of this report. 29 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 $32,432,020 at the close of the most recent fiscal year. By far the largest portion of the City's net position (61.9 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 The balance of unrestricted net position is $12,344,441. This may be used to meet the City's ongoing obligations to citizens and creditors. At the end of the current fiscal year, the City is able to report positive balances in both categories of net position, both for the City as a whole, as well as for its separate governmental and business -type activities. 30 Governmental Activities Business -type Activities Increase Increase 2017 2016 (Decrease) 2017 2016 (Decrease) Assets Cash and temporary investments $ 8,065,843 $ 7,546,492 $ 519,351 $ 4,606,115 $ 5,453,811 $ (847,696) Cash with fiscal agent 8,238 8,213 25 278,189 273,984 4,205 Receivables 5,405,695 7,044,687 (1,638,992) 1,451,311 651,641 799,670 Internal balances (1,015,044) (1,015,044) - 1,015,044 1,015,044 - Prepaids 132,477 6,687 125,790 - - - Land held for resale 150,068 150,068 - - - - Capital assets 12,870,886 12,443,309 427,577 9,471,693 9,276,711 194,982 Total Assets 25,618,163 26,184,412 (566,249) 16,822,352 16,671,191 151,161 Deferred Outflows of Resources 238,734 442,017 (203,283) 65,669 148,073 (82,404) Liabilities Noncurrent liabilities 7,240,371 8,369,901 (1,129,530) 1,648,195 2,048,601 (400,406) Other liabilities 1,023,863 869,096 154,767 68,404 218,646 (150,242) Total Liabilities 8,264,234 9,238,997 (974,763) 1,716,599 2,267,247 (550,648) Deferred Inflows of Resources 260,427 180,440 79,987 71,638 60,448 11,190 Net Position Net investment in capital assets 11,985,886 11,523,309 462,577 8,101,693 7,641,711 459,982 Unrestricted 5,346,350 5,683,683 (337,333) 6,998,091 6,849,858 148,233 Total Net Position $ 17,332,236 $ 17,206,992 $ 125,244 $ 15,099,784 $ 14,491,569 $ 608,215 The balance of unrestricted net position is $12,344,441. This may be used to meet the City's ongoing obligations to citizens and creditors. At the end of the current fiscal year, the City is able to report positive balances in both categories of net position, both for the City as a whole, as well as for its separate governmental and business -type activities. 30 Governmental Activities. Governmental activities increased the City's net position by $125,244. Key elements of this increase are as follows: • There was an overall decrease of $660,019 in revenues, predominately in capital grants and contributions. Total expenses declined by $63,099, including a $200,770 drop in long -term debt interest related to bond refinancing's. Total revenues exceeded total expenses by $473,107, prior to transfers. City of Shorewood's Changes in Net Position Expenses General government Governmental Activities Business -type Activities 64,534 - - Increase Public safety 2,194,434 Increase 83,279 2017 2016 (Decrease) 2017 2016 (Decrease) Revenues - - - Culture and recreation 489,690 476,999 Program Revenues - - - Economic development 650,944 682,787 Charges for services $ 871,544 $ 1,021,013 $ (149,469) $ 1,828,184 $ 1,729,640 $ 98,544 Operating grants and contributions 90,788 95,802 (5,014) 32,152 48,724 (16,572) Capital grants and contributions 835,083 1,400,957 (565,874) 349,472 388,077 (38,605) General Revenues 994,611 989,147 5,464 Stormwater Management Utility - - Property taxes 5,189,101 5,127,950 61,151 - - - Grants and contributions not 137,693 132,654 5,039 Total Expenses 6,617,809 6,680,908 restricted to specific programs 23,644 5,844 17,800 - - - Unrestricted investment earnings 75,256 99,369 (24,113) 51,732 72,579 (20,847) Gain on disposal of capital assets 5,500 - 5,500 - - - Total Revenues 7,090,916 7,750,935 (660,019) 2,261,540 2,239,020 22,520 Expenses General government 1,568,635 1,504,101 64,534 - - - Public safety 2,194,434 2,111,155 83,279 - - - Public works 1,553,274 1,544,264 9,010 - - - Culture and recreation 489,690 476,999 12,691 - - - Economic development 650,944 682,787 (31,843) - - - Interest on long -term debt 160,832 361,602 (200,770) - - - Water - - - 751,143 775,802 (24,659) Sewer - - - 994,611 989,147 5,464 Stormwater Management Utility - - - 117,741 111,373 6,368 Recycling - - - 137,693 132,654 5,039 Total Expenses 6,617,809 6,680,908 (63,099) 2,001,188 2,008,976 (7,788) Increase (Decrease) in Net Position Before Transfers 473,107 1,070,027 (596,920) 260,352 230,044 30,308 Transfers of Capital Assets (395,707) - (395,707) 395,707 - 395,707 Transfers 47,844 25,000 22,844 (47,844) (25,000) (22,844) Change in Net Position 125,244 1,095,027 (969,783) 608,215 205,044 403,171 Net Position, January 1 17,206,992 16,111,965 1,095,027 14,491,569 14,286,525 205,044 Net Position, December 31 $ 17,332,236 $ 17,206,992 $ 125,244 $ 15,099,784 $ 14,491,569 $ 608,215 Business -type Activities. Business -type activities increased the City's net position by $608,215. Key elements of this increase are as follows: There was an overall increase of $22,520 in revenues, and an overall decrease in expenses of $7,788, resulting in a $260,352 increase in net position before transfers. Transfers in of capital assets amounted to $395,707 for 2017. 31 The following graph depicts various governmental activities and shows the revenue and expenses directly related to those activities. Expenses and Program Revenues - Governmental Activities $2,500,000 $2,000,000 $1,500,000 $1,000,000 $500,000 General government Public safety Public works Culture and recreation ■ Expenses ■ Program revenues Economic development Interest on long- term debt Revenues by Source - Governmental Activities Grants and Unrestricted Charges for oservices investment earnings 12.3/0 contributions not Operating grants and restricted to specific 0.3% contributions programs I 1.3% 1.1% Property taxes 73.2% 32 Capital grants and contributions 11.8% Business -type Activities. Business -type activities increased the City's net position by $608,215. Key elements of this increase are as follows: • There was an overall increase of $22,520 in revenues, and an overall decrease in expenses of $7,788, resulting in a $260,352 increase in net position before transfers. Transfers in of capital assets amounted to $395,707 for 2017. $1,200,000 $1,000,000 $800,000 $600,000 $400,000 $200,000 Operating grants contributions 1.4% Expenses and Program Revenues - Business -type Activities Water Sewer Recycling ■ Expenses ■ Program revenues Revenues by Source - Business -type Activities Capital grants and Unrestricted contributions irnA�ctmant i- nminnc Stormwater management utility 33 arges for services 80.8% 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 $6,594,472, a decrease of $317,122 in comparison with the prior year. Approximately 36 percent of this total amount, $2,344,426 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 ($132,477), 2) Restricted ($61,998), and 3) Assigned ($4,055,571). 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 $4,162,049. 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 61.8 percent of same year fund expenditures and transfers out, whereas, total fund balance represents 63.8 percent. The fund balance of the City's General fund decreased $442,534 during the current fiscal year. The decrease is mainly due to transfers out for street construction and other projects. The Debt Service fund has a total fund balance of $61,998, all of which is restricted for the payment of debt service. The decrease in fund balance of $43,549 was in line with the City's debt service financing plan. The Street Reconstruction fund has a fund balance of $2,418,778. The fund balance increased by $823,504 during the current fiscal year mainly due to transfers in of $1,245,000 exceeding current year capital expenditures. The TIF #2 Oppidan Senior Housing fund has an ending fund balance deficit of $925,549. The fund was created in 2016 along with the City's tax increment district to account for resources and payments related to the senior housing project. The deficit is expected to be paid with future tax increment revenues. 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 $6,998,091. The total increase in net position for the funds was $608,215. 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. Revenues were over budget by $229,318, and expenditures were under budget by $220,933. The actual amounts were different from the final budget mainly due to the following: • The largest revenue variance was in licenses and permits, which were over budget by $76,394 due to building permits received in excess of expectations. Another significant revenue variance was in intergovernmental revenue which had revenues exceeding budget by $54,171 mainly due to miscellaneous grant receipts over expectation. • The largest expenditure variance was in public works, which was $287,502 under budget mainly due to less than expected general maintenance expenditures. 34 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, 2017, amounts to $22,342,579 (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: • Roof and Gutter replacement on the Southshore Center • Expenses for the 2016 water main extension project • Expenses for Phase II Badger Park improvements • Expenses for the Freeman Park projects • Expenses for the purchase of two mowers and a tractor • Expenses for the purchase of a 2017 Ford F550 • Expenses for the 2017 street reclamation project • Completion of the public works ravine stabilization project • Completion of the Smithtown Trail East project Additional information on the City's capital assets can be found in Note 3B starting on page 70 of this report. City of Shorewood's Capital Assets (Net of Depreciation) 2017 Governmental Activities 2016 Increase (Decrease) Business -type Activities Increase 2017 2016 (Decrease) Land $ 741,826 $ 741,826 $ - $ 434,113 $ 434,113 $ - Construction in Progress 2,360,509 2,046,376 314,133 17,347 - 17,347 Buildings 2,083,162 2,139,471 (56,309) - - - Improvements other than Buildings 933,297 917,828 15,469 - - - Infrastructure 6,230,637 6,078,243 152,394 8,574,658 8,460,103 114,555 Machinery and Equipment 521,455 519,565 1,890 445,575 382,495 63,080 Total $ 12,870,886 $ 12,443,309 $ 427,577 $ 914711,693 $ 91276,711 $ 194,982 35 Long -term Debt. At the end of the current fiscal year, the City had total bonded debt outstanding of $7,360,000. Of this amount, $5,990,000 is lease revenue bonds and $1,370,000 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. General Obligation Revenue Bonds Lease Revenue Bonds Unamortized Bond Premiums City of Shorewood's Outstanding Debt Governmental Activities 2017 5,990,000 73,169 Increase Business -type Activities Increase 2016 (Decrease) 2017 2016 (Decrease) - $ - $ 1,370,000 $ 1,635,000 $ (265,000) 6,830,000 (840,000) 85,732 (12,563) Total $ 6,063,169 $ 6,915,732 $ (852,563) $ 1,370,000 $ 1,635,000 $ (265,000) 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 73 of this report. Economic Factors and Next Year's Budgets and Rates • Property valuations within the City increased 4.2% from 2016 to 2017, and increased 6.1 % from 2017 to 2018. • The unemployment rate for Hennepin County is currently (December 2017) 2.6 %. This compares favorably to the State of Minnesota's average unemployment rate of 3.4% and the national average unemployment rate of 4.1 %. All of these factors were considered in preparing the City's budget for the 2018 fiscal year. During the 2017 fiscal year, the fund balance in the General Fund increased by $442,534, including $700,000 transfers out to capital project funds. For 2017, the City budgeted a $174,097 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. Total property taxes levied for 2018 increased by 3.6% from property taxes levied for 2017. The City's tax capacity rate decreased from 29.45% for 2017 property taxes to 28.63% for 2018 property taxes. 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. 36 GOVERNMENT -WIDE FINANCIAL STATEMENTS CITY OF SHOREWOOD SHOREWOOD, MINNESOTA FOR THE YEAR ENDED DECEMBER 31, 2017 37 THIS PAGE IS LEFT BLANK INTENTIONALLY 38 City of Shorewood, Minnesota Statement of Net Position December 31, 2017 Assets Cash and temporary investments Cash with fiscal agent Receivables Accrued interest Taxes Accounts Special assessments Lease Due from other governments Internal balances Prepaid items Land held for resale Capital assets Land and construction in progress Depreciable assets (net of accumulated depreciation) Total Assets Deferred Outflows of Resources Deferred pension resources Liabilities Accounts and contracts payable Accrued salaries payable Due to other governments Accrued interest payable Noncurrent liabilities Due within one year Due in more than one year Total Liabilities Deferred Inflows of Resources Deferred pension resources Net Position Net investment in capital assets Unrestricted Total Net Position Governmental Business -type Ortiviticc Ortiviticc Exhibit 1 Total $ 8,065,843 $ 4,606,115 $ 12,671,958 8,238 278,189 286,427 67,212 18,157 85,369 138,128 - 138,128 66,300 473,206 539,506 5,425 185,265 190,690 5,105,000 774,683 5,879,683 23,630 - 23,630 (1,015,044) 1,015,044 - 132,477 - 132,477 150,068 - 150,068 3,102,335 451,460 3,553,795 9,768,551 9,020,233 18, 788, 784 25,618,163 16,822,352 42,440,515 238,734 65,669 304,403 941,370 49,582 990,952 25,267 4,269 29,536 12,693 6,859 19,552 44,533 7,694 52,227 1,006,933 270,000 1,276,933 6,233,438 1,378,195 7,611,633 8,264,234 1,716,599 9,980,833 260,427 71,638 332,065 11,985,886 8,101,693 20,087,579 in R QqR nQ1 19 X44 441 $ 17,332,236 $ 15,099,784 $ 32,432,020 The notes to the financial statements are an integral part of this statement. 39 City of Shorewood, Minnesota Statement of Activities For the Year Ended December 31, 2017 Business -type Activities Water 751,143 416,938 Program Revenues 285,693 Sewer 994,611 913,115 Operating Capital Grants Stormwater management utility 117,741 Charges for Grants and and Functions /Programs Expenses Services Contributions Contributions Governmental Activities 2,001,188 1,828,184 32,152 349,472 General government $ 1,568,635 $ 228,775 $ - $ - Public safety 2,194,434 546,388 1,695 - Public works 1,553,274 - 86,868 305,089 Culture and recreation 489,690 96,381 2,225 529,994 Economic development 650,944 - - - Interest on long -term debt 160,832 - - - Total Governmental Activities 6,617,809 871,544 90,788 835,083 Business -type Activities Water 751,143 416,938 8,138 285,693 Sewer 994,611 913,115 37 63,779 Stormwater management utility 117,741 341,180 9 - Recycling 137,693 156,951 23,968 - Total Business -type Activities 2,001,188 1,828,184 32,152 349,472 Total $ 8,618,997 $ 2,699,728 $ 122,940 $ 1,184,555 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 and Transfers Change in Net Position Net Position, January 1 Net Position, December 31 The notes to the financial statements are an integral part of this statement. 40 Exhibit 2 Net (Expense) Revenue and Changes in Net Position Governmental Business -type $ (1,339,860) $ - $ (1,339,860) (1,646,351) - (1,646,351) (1,161,317) - (1,161,317) 138,910 - 138,910 (650,944) - (650,944) (160,832) - (160,832) (4,820,394) - (4,820,394) 125,244 608,215 - (40,374) (40,374) - (17,680) (17,680) - 223,448 223,448 - 43,226 43,226 - 208,620 208,620 (4,820,394) 208,620 (4,611,774) 5,189,101 - 5,189,101 23,644 - 23,644 75,256 51,732 126,988 5,500 - 5,500 (395,707) 395,707 - 47,844 (47,844) - 4,945,638 399,595 5,345,233 125,244 608,215 733,459 $ 17,332,236 $ 15,099,784 $ 32,432,020 The notes to the financial statements are an integral part of this statement. 41 THIS PAGE IS LEFT BLANK INTENTIONALLY 42 FUND FINANCIAL STATEMENTS CITY OF SHOREWOOD SHOREWOOD, MINNESOTA FOR THE YEAR ENDED DECEMBER 31, 2017 43 Assets Cash and temporary investments Cash with fiscal agent Receivables Accrued interest Taxes Accounts Special assessments Lease Due from other governments Due from other funds Prepaid items Land held for resale Total Assets Liabilities Accounts and contracts payable Accrued salaries payable Due to other governments Due to other funds Advances from other funds Total Liabilities Deferred Inflows of Resources Unavailable revenue - property taxes Unavailable revenue - assessments Unavailable revenue - lease receivable Total Deferred Inflows of Resources Fund Balances Nonspendable prepaid items Restricted for debt service Assigned to Street reconstruction Capital outlay Community center operations Unassigned Total Fund Balances Total Liabilities, Deferred Inflows of Resources, and Fund Balances City of Shorewood, Minnesota Balance Sheet Governmental Funds December 31, 2017 $ 3,265,793 $ 6,630 138,128 25,480 5,425 23,630 760,801 132,477 Debt Street 54,964 $ 2,533,352 8,238 - - 10,268 5,105,000 - $ 4,358,364 $ 5,168,202 $ 2,543,620 $ 132,669 $ - $ 124,842 25,020 - - 12,693 - - - 1,204 - 20,508 - - 5,425 - - - 5,105,000 - 25,933 5,105,000 - 132,477 - - - 61,998 2,418,778 4,029,572 - - 4,162,049 61,998 2,418,778 $ 4,358,364 $ 5,168,202 $ 2,543,620 The notes to the financial statements are an integral part of this statement. 44 Exhibit 3 TIF 2 Other Total Oppidan Governmental Governmental Senior Housing Funds Funds $ 146,983 $ 2,064,751 $ 8,065,843 - - 8,238 539 7,233 24,670 - - 138,128 40,820 66,300 - 5,425 - - 5,105,000 - - 23,630 - - 760,801 - - 132,477 - 150,068 150,068 $ 147,522 $ 2,262,872 $ 14,480,580 $ 58,027 $ 625,832 $ 941,370 - 247 25,267 - - 12,693 - 759,597 760,801 1,015,044 - 1,015,044 1,073,071 1,385,676 2,755,175 - - 20,508 - - 5,425 - - 5,105,000 - - 5,130,933 - - 132,477 - - 61,998 - - 2,418,778 - 1,547,731 1,547,731 - 89,062 89,062 (925,549) (759,597) 2,344,426 (925,549) 877,196 6,594,472 $ 147,522 $ 2,262,872 $ 14,480,580 The notes to the financial statements are an integral part of this statement. 45 THIS PAGE IS LEFT BLANK INTENTIONALLY 46 City of Shorewood, Minnesota Exhibit 4 Reconciliation of the Balance Sheet to the Statement of Net Position Governmental Funds December 31, 2017 Amounts reported for the governmental activities in the statement of net position are different because Total Fund Balances - Governmental $ 6,594,472 Capital assets used in governmental activities are not financial resources and therefore are not reported as assets in governmental funds. Cost of capital assets 43,814,732 Less: accumulated depreciation (30,943,846) 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 (5,990,000) Unamortized premium on bonds (73,169) Compensated absences payable (165,842) Pension liability (1,011,360) 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 42,542 Taxes receivable 20,508 Special assessments receivable 5,425 Leases receivable 5,105,000 Governmental funds do not report long -term amounts to pensions Deferred outflows of pension resources 238,734 Deferred inflows of pension resources (260,427) Governmental funds do not report a liability for accrued interest until due and payable. (44,533) Total Net Position - Governmental Activities $ 17,332,236 The notes to the financial statements are an integral part of this statement. 47 City of Shorewood, Minnesota Statement of Revenues, Expenditures and Changes in Fund Balances Governmental Funds For the Year Ended December 31, 2017 Revenues Taxes Licenses and permits Intergovernmental Charges for services Fines and forfeitures Interest on investments Miscellaneous Total Revenues Expenditures Current General government Public safety Public works Culture and recreation Capital outlay General government Public safety Public works Culture and recreation Economic development Debt service Principal Interest and service charges Total Expenditures Excess (Deficiency) of Revenues Over (Under) Expenditures Other Financing Sources (Uses) Transfers in Payment to refunding bond escrow agent Refunding bonds issued Transfers out Total Other Financing Sources (Uses) Net Change in Fund Balances Fund Balances, January 1 Fund Balances, December 31 Debt Street $ 5,221,374 $ - $ - 315,574 - - 144,922 - - 59,406 - - 76,056 - - 20,024 25 37,043 215,489 962,216 - 6,052,845 962,241 37,043 1,493,020 - - 1,722,628 - - 750,353 - 1,041 279,010 - - 470,455 - - - - 439,012 870,000 - - 181,605 - 4,715,466 1,051,605 440,053 1,337,379 (89,364) (403,010) 25,000 102,913 1,245,000 - (920,000) - - 950,000 - (1,804,913) - (18,486) (1,779,913) 132,913 1,226,514 (442,534) 43,549 823,504 $ 4,162,049 $ 61,998 $ 2,418,778 The notes to the financial statements are an integral part of this statement. 48 Exhibit 5 TIF 2 Other Total Oppidan Governmental Governmental Senior Housing Funds Funds $ - $ - $ 5,221,374 - - 315,574 - 316,711 461,633 - 349,838 409,244 - - 76,056 571 17,593 75,256 - 187,888 1,365,593 1,493,020 1,722,628 - 751,394 130,000 409,010 - 7,630 7,630 - - 470,455 - 552,841 991,853 - 771,157 771,157 650,944 - 650,944 - - 870,000 - - 181,605 650,944 1,461,628 8,319,696 (650,373) (589,598) (394,966) - 498,330 1,871,243 - - (920,000) - - 950,000 - - (1,823,399) - 498,330 77,844 (650,373) (91,268) (317,122) (275,176) 968,464 6,911,594 $ (925,549) $ 877,196 $ 6,594,472 The notes to the financial statements are an integral part of this statement. 49 City of Shorewood, Minnesota Reconciliation of the Statement of Revenues, Expenditures and Changes in Fund Balances to the Statement of Activities Governmental Funds For the Year Ended December 31, 2017 Amounts reported for governmental activities in the statement of activities are different because Total Net Change in Fund Balances - Governmental Funds Capital outlays are reported in governmental funds as expenditures. However, in the statement of activities, the cost of those assets is allocated over the estimated useful lives as depreciation expense. Capital outlays Depreciation expense 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. Exhibit 6 $ (317,122) 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 Bonds issued Amortization of bond premium 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. Long -term pension activity is not reported in governmental funds. Pension expense Pension revenue Capital assets constructed in capital projects funds but intended for enterprise fund use are transferred in the government -wide financial statements. 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. Taxes Special assessments Leases Some expenses reported in the statement of activities do not require the use of current financial resources and, therefore, are not reported as expenditures in governmental funds. Compensated absences Change in Net Position - Governmental Activities The notes to the financial statements are an integral part of this statement. 50 1,839,216 (1,021,432) 5,500 1,790,000 (950,000) 12,563 8,210 (60,339) 367 (395,707) (32,273) 4,300 (811,708) 53.669 $ 125,244 City of Shorewood, Minnesota Exhibit 7 Statement of Revenues, Expenditures and Changes in Fund Balances - Budget and Actual General Fund For the Year Ended December 31, 2017 Other Financing Sources (Uses) Transfers in Budgeted Amounts Actual Variance with - Original Final Amounts Final Budget Revenues Total Other Financing Taxes $ 5,180,996 $ 5,180,996 $ 5,221,374 $ 40,378 Licenses and permits 239,180 239,180 315,574 76,394 Intergovernmental 90,751 90,751 144,922 54,171 Charges for services 38,700 38,700 59,406 20,706 Fines and forfeitures 60,000 60,000 76,056 16,056 Interest on investments 35,000 35,000 20,024 (14,976) Miscellaneous 178,900 178,900 215,489 36,589 Total Revenues 5,823,527 5,823,527 6,052,845 229,318 Expenditures Current General government 1,495,824 1,495,824 1,493,020 2,804 Public safety 1,690,075 1,690,075 1,722,628 (32,553) Public works 1,037,855 1,037,855 750,353 287,502 Culture and recreation 241,997 241,997 279,010 (37,013) Capital outlay Public safety 470,648 470,648 470,455 193 Total Expenditures 4,936,399 4,936,399 4,715,466 220,933 Excess of Revenues Over Expenditures 887,128 887,128 1,337,379 450,251 Other Financing Sources (Uses) Transfers in 25,000 25,000 25,000 - Transfers out (1,104,913) (1,104,913) (1,804,913) (700,000) Total Other Financing Sources (Uses) (1,079,913) (1,079,913) (1,779,913) (700,000) Net Change in Fund Balances (192,785) (192,785) (442,534) (249,749) Fund Balances, January 1 4,604,583 4,604,583 4,604,583 - Fund Balances, December 31 $ 4,411,798 $ 4,411,798 $ 4,162,049 $ (249,749) The notes to the financial statements are an integral part of this statement. 51 City of Shorewood, Minnesota Statement of Net Position Proprietary Funds December 31. 2017 Exhibit 8 Liabilities Current Liabilities Accounts and contracts payable 14,145 Business -type Activities - Enterprise Funds 17,845 10,354 49,582 Accrued salaries payable Stormwater 1,730 218 149 4,269 Due to other governments Management Nonmajor - - Water Sewer Utility Recycling Totals Assets 7,694 Bonds payable - current 270,000 - - Current Assets 270,000 Total Current Liabilities 300,472 9,366 18,063 Cash and temporary investments $ 943,703 $ 2,626,386 $ 804,294 $ 231,732 $ 4,606,115 Cash with fiscal agent 278,189 - - - 278,189 Receivables 1,100,000 Pension liability 141,325 100,552 25,224 Accrued interest 3,980 10,233 3,143 801 18,157 Accounts 74,000 254,623 99,507 45,076 473,206 Special assessments 36,122 21,934 6,516 3,784 68,356 Leases 148,862 - - - 148,862 Total Current Assets 1,484,856 2,913,176 913,460 281,393 5,592,885 Noncurrent Assets Net investment in capital assets 4,022,359 1,792,623 2,286,711 Special assessments receivable 107,882 6,131 1,737 1,159 116,909 Advances to other funds 1,015,044 - - - 1,015,044 Lease receivable 625,821 - 625,821 Capital assets Land - 434,113 434,113 Construction in progress - - 17,347 17,347 Machinery and equipment 306,765 362,072 - 668,837 Infrastructure 10,538,269 9,191,567 2,291,347 22,021,183 Less accumulated depreciation (5,452,675) (7,761,016) (456,096) (13,669,787) Net Capital Assets 5,392,359 1,792,623 2,286,711 9,471,693 Total Noncurrent Assets 7,141,106 1,798,754 2,288,448 1,159 11,229,467 Total Assets 8,625,962 4,711,930 3,201,908 282,552 16,822,352 Deferred Outflows of Resources Deferred pension resources 33,360 23,736 5,954 2,619 65,669 Liabilities Current Liabilities Accounts and contracts payable 14,145 7,238 17,845 10,354 49,582 Accrued salaries payable 2,172 1,730 218 149 4,269 Due to other governments 6,461 398 - - 6,859 Accrued interest payable 7,694 - - - 7,694 Bonds payable - current 270,000 - - - 270,000 Total Current Liabilities 300,472 9,366 18,063 10,503 338,404 Noncurrent Liabilities Bonds payable 1,100,000 - - - 1,100,000 Pension liability 141,325 100,552 25,224 11,094 278,195 Total Noncurrent Liabilities 1,241,325 100,552 25,224 11,094 1,378,195 Total Liabilities 1,541,797 109,918 43,287 21,597 1,716,599 Deferred Inflows of Resources Deferred pension resources 36,392 25,893 6,495 2,858 71,638 Net Position Net investment in capital assets 4,022,359 1,792,623 2,286,711 - 8,101,693 Unrestricted 3.058.774 2.807.232 871.369 260.716 6.998.091 Total Net Position $ 7,081,133 $ 4,599,855 $ 3,158,080 $ 260,716 $ 15,099,784 The notes to the financial statements are an integral part of this statement. 52 Operating Revenues Charges for services Operating Expenses Personal services Supplies Repairs and maintenance Depreciation Professional services Contracted services Insurance Water purchases Utilities Disposal charges Other Total Operating Expenses Operating Income (Loss) Nonoperating Revenues (Expenses) Special assessments Interest on investments Intergovernmental Miscellaneous Interest expense Total Nonoperating Revenues (Expenses) Income (Loss) Before Contributions and Transfers City of Shorewood, Minnesota Exhibit 9 Statement of Revenues, Expenses and Changes in Net Position Proprietary Funds For the Year Ended December 31, 2017 Business -type Activities - Enterprise Funds Stormwater Management Nonmajor Water Sewer Utility Recycling Totals $ 408,875 $ 909,965 $ 341,180 $ 156,951 $ 1,816,971 Capital Contributions From Other Funds - - 395,707 - 395,707 178,503 103,294 30,513 16,188 328,498 14,150 2,329 1,587 1,521 19,587 7,397 311 - - 7,708 322,747 90,928 57,284 - 470,959 17,557 5,006 14,689 - 37,252 65,357 43,291 12,035 118,632 239,315 2,500 2,500 - - 5,000 31,423 - - - 31,423 59,562 4,165 - - 63,727 - 740,008 - - 740,008 36,064 2,779 1,633 1,352 41,828 735,260 994,611 117,741 137,693 1,985,305 (326,385) (84,646) 223,439 19,258 (168,334) 7,253 - - - 7,253 6,965 31,551 10,525 2,691 51,732 8,087 - - 23,964 32,051 861 3,187 9 4 4,061 (15,883) - - - (15,883) 7,283 34,738 10,534 26,659 79,214 (319,102) (49,908) 233,973 45,917 (89,120) Capital Contributions 285,693 63,779 - - 349,472 Capital Contributions From Other Funds - - 395,707 - 395,707 Transfers Out (14,866) (12,500) (20,478) - (47,844) Change in Net Position (48,275) 1,371 609,202 45,917 608,215 Net Position, January 1 7,129,408 4,598,484 2,548,878 214,799 14,491,569 Net Position, December 31 $ 7,081,133 $ 4,599,855 $ 3,158,080 $ 260,716 $ 15,099,784 The notes to the financial statements are an integral part of this statement. 53 City of Shorewood, Minnesota Statement of Cash Flows Proprietary Funds For the Year Ended December 31, 2017 Cash Flows from Operating Activities Receipts from customers and users Other receipts related to operations Payments to suppliers, contractors and other governments Payments to employees Net Cash Provided (Used) by Operating Activities Cash Flows from Noncapital Financing Activities Transfers out Lease receivable issued Net Cash Used by Noncapital Financing Activities Cash Flows from Capital and Related Financing Activities Connection fees received Special assessments received Acquisition of capital assets Principal paid on revenue bonds Interest paid on revenue bonds Net Cash Provided (Used) by Capital and Related Financing Activities Cash Flows from Investing Activities Interest received on investments Net Increase (Decrease) in Cash and Cash Equivalents Cash and Cash Equivalents, January 1 Cash and Cash Equivalents, December 31 Reconciliation of Cash and Cash Equivalents to the Statement of Net Position Cash and temporary investments Cash with fiscal agent Total Cash and Cash Equivalents Exhibit 10 Business -type Activities - Enterprise Funds Stormwater 285,693 63,779 14,965 - (48,655) (72,984) (148,595) (265,000) (16,678) (29,675) (9,205) (148,595) 349,472 14,965 (270,234) (265,000) (16,678) (187,475) 12,553 32,267 9,911 2,525 57,256 (815,436) (183,417) 99,221 56,141 (843,491) 2,037,328 2,809,803 705,073 175,591 5,727,795 $ 1,221,892 $ 2,626,386 $ 804,294 $ 231,732 $ 4,884,304 $ 943,703 $ 2,626,386 $ 804,294 $ 231,732 $ 4,606,115 278,189 - 278,189 $ 1,221,892 $ 2,626,386 $ 804,294 $ 231,732 $ 4,884,304 The notes to the financial statements are an integral part of this statement. 54 Management Nonmajor Water Sewer Utility Recycling Totals $ 408,267 $ 896,635 $ 317,810 $ 156,036 $ 1,778,748 8,948 3,187 9 23,968 36,112 (239,497) (956,783) (26,467) (111,589) (1,334,336) (186,483) (137,018) (32,969) (14,799) (371,269) (8,765) (193,979) 258,383 53,616 109,255 (14,866) (12,500) (20,478) - (47,844) (774,683) (774,683) (789,549) (12,500) (20,478) (822,527) 285,693 63,779 14,965 - (48,655) (72,984) (148,595) (265,000) (16,678) (29,675) (9,205) (148,595) 349,472 14,965 (270,234) (265,000) (16,678) (187,475) 12,553 32,267 9,911 2,525 57,256 (815,436) (183,417) 99,221 56,141 (843,491) 2,037,328 2,809,803 705,073 175,591 5,727,795 $ 1,221,892 $ 2,626,386 $ 804,294 $ 231,732 $ 4,884,304 $ 943,703 $ 2,626,386 $ 804,294 $ 231,732 $ 4,606,115 278,189 - 278,189 $ 1,221,892 $ 2,626,386 $ 804,294 $ 231,732 $ 4,884,304 The notes to the financial statements are an integral part of this statement. 54 City of Shorewood, Minnesota Exhibit 14 Statement of Cash Flows (Continued) Proprietary Funds For the Year Ended December 31, 2017 Business -type Activities - Enterprise Funds Stormwater Management Nonmajor Water Sewer Utility Recycling Totals Reconciliation of Operating Income (Loss) to Net Cash Provided (Used) by Operating Activities Operating income (loss) Adjustments to reconcile operating income (loss) to net cash provided (used) by operating activities Other income related to operations Depreciation (Increase) decrease in assets /deferred outflows of resources Accounts receivable Special assessments receivable Deferred pension resources Increase (decrease) in liabilities /deferred inflows of resources Accounts and contracts payable Due to other governments Pension liability Accrued salaries payable Deferred pension resources Net Cash Provided (Used) by Operating Activities Noncash Capital and Related Financing Activities Contribution of assets from other funds $ (326,385) $ (84,646) $ 223,439 $ 19,258 $ (168,334) 8,948 3,187 9 23,968 36,112 322,747 90,928 57,284 - 470,959 (146) (10,527) (22,322) (731) (33,726) (462) (2,803) (1,048) (184) (4,497) 35,683 38,048 6,754 1,919 82,404 (3,437) (144,053) 3,477 9,916 (134,097) (2,050) (12,341) - - (14,391) (51,528) (72,025) (10,272) (1,581) (135,406) (342) (418) (245) 46 (959) 8,207 671 1,307 1,005 11,190 $ (8,765) $ (193,979) $ 258,383 $ 53,616 $ 109,255 $ $ - $ 395,707 $ $ 395,707 The notes to the financial statements are an integral part of this statement. 55 City of Shorewood, Minnesota Exhibit 11 Statement of Net Position Fiduciary Fund December 31, 2017 Assets Cash and temporary investments Liabilities Escrow deposits payable The notes to the financial statements are an integral part of this statement. 56 Agency $ 273,556 $ 273,556 City of Shorewood, Minnesota Notes to the Financial Statements December 31, 2017 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. 57 City of Shorewood, Minnesota Notes to the Financial Statements December 31, 2017 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. The TIF #2 Oppidan Senior Housing fund accounts for the resources accumulated and payments made for the senior housing project. 58 City of Shorewood, Minnesota Notes to the Financial Statements December 31, 2017 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. 59 City of Shorewood, Minnesota Notes to the Financial Statements December 31, 2017 Note 1: Summary of Significant Accounting Policies (Continued) D. Assets, Deferred Outflows of Resources, Liabilities, Deferred Inflows of Resources and Net Position /Fund Balances 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 "AX 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. Earnings on investments are allocated to the individual funds based upon the average cash and investment balances. -1 City of Shorewood, Minnesota Notes to the Financial Statements December 31, 2017 Note 1: Summary of Significant Accounting Policies (Continued) The City categorizes its fair value measurements within the fair value hierarchy established by generally accepted accounting principles. The hierarchy is based on the valuation inputs used to measure the fair value of the asset. Level 1 inputs are quoted prices in active markets for identical assets; Level 2 inputs are significant other observable inputs; Level 3 inputs are significant unobservable inputs. The City's recurring fair value measurements are listed in detail on page 68 and are valued using quoted market prices (Level 1 inputs). The City has the following recurring fair value measurements as of December 31, 2017: • US Government Agency Securities of $1,472,470 are valued using quoted market prices (Level 1 inputs) • Municipal bonds of $3,541,570 are valued using a matrix pricing model (Level 2 inputs) • Brokered Certificates of Deposit of $6,311,873 are valued using a matrix pricing model (Level 2 inputs) The Minnesota Municipal Money Market 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 Exchange Commission (SEC) that follows the regulatory rules of the SEC. In accordance with GASB Statement No. 79, the City's investment in this pool is valued at amortized cost, which approximates fair value. There are no restrictions or limitations on withdrawals from the 4M Liquid Asset Fund. Investments in the 4M Plus must be deposited for a minimum of 14 calendar days. Withdrawals prior to the 14 -day restriction period will be subject to a penalty equal to seven days interest on the amount withdrawn. Seven days' notice of redemption is required for withdrawals of investments in the 4M Term Series withdrawn prior to the maturity date of that series. A penalty could be assessed as necessary to recoup the Series for any charges, losses, and other costs attributable to the early redemption. Financial statements of the 4M Fund can be obtained by contracting RBC Global Management at 100 South Fifth Street, Suite 2300, Minneapolis, MN 55402 -1240 61 City of Shorewood, Minnesota Notes to the Financial Statements December 31, 2017 Note 1: Summary of Significant Accounting Policies (Continued) Investment Policy The City's investment policy incorporates Minnesota statutes as described above which reduces the City's exposure to credit, custodial credit and interest rate risks. Specific risk information for the City is as follows: • 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 60 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, 2017 the City had invested 5.0 percent or more of its total investment portfolio in the following issuer: New Hampshire State GO, 5.1 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. 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 has a zero balance at the end of 2017. Unbilled utility enterprise fund receivables are also included for services provided in 2017. 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. 62 City of Shorewood, Minnesota Notes to the Financial Statements December 31, 2017 Note 1: Summary of Significant Accounting Policies (Continued) Lease Receivable The City has a total of four leases receivable. 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 lease issued in 2017 to the Excelsior Fire District was to purchase a new fire truck. As of December 31, 2017, the City has $5,879,683 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. Land Held for Resale These assets represent land owned by the City with the intent to sell to developers. This land is recorded at the lessor of historical cost or net realizable value. 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 acquisition 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. 63 City of Shorewood, Minnesota Notes to the Financial Statements December 31, 2017 Note 1: Summary of Significant Accounting Policies (Continued) Property, plant and equipment of the City are depreciated using the straight -line method over the following estimated useful lives: Assets Land Improvements Buildings and Improvements System Improvements /Infrastructure Machinery and Equipment Vehicles Deferred Outflows of Resources Useful Lives in Years 15 -20 7 -40 20 -50 5 -15 5 -15 In addition to assets, the statement of net 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. 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, 2017 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. 64 City of Shorewood, Minnesota Notes to the Financial Statements December 31, 2017 Note 1: Summary of Significant Accounting Policies (Continued) 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. The General fund is typically used to liquidate the governmental net pension liability. Deferred Inflows of Resources In addition to liabilities, the statement of net 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 three sources: property taxes, special assessments, and lease receivables. These amounts are deferred and recognized as an inflow of resources in the period that the amounts become available. The City has an additional item which qualifies for reporting in this category. The item, deferred pension resources, is reported only in the statements of net position and results from actuarial calculations. 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. 65 City of Shorewood, Minnesota Notes to the Financial Statements December 31, 2017 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 A. Budgetary Information Annual budgets are adopted on a basis consistent with accounting principles generally accepted in the United States of America for the General fund. Annual appropriations lapse at fiscal yearend. 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 30th, 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 B. Deficit Fund Equity The following funds had a deficit fund balance as of December 31, 2017: Fund Major Capital Project TIF 2 Oppidan Senior Housing Nonmajor Capital Project Trail Construction Amount $ 925,549 759,597 The City plans to fund these deficits with future tax increment, miscellaneous revenue and /or interfund transfers. .. City of Shorewood, Minnesota Notes to the Financial Statements December 31, 2017 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 market value of collateral pledged must equal 110 percent of the deposits not covered by insurance or bonds, which the exception of irrevocable standby letters of credit issued by Federal Home Loan Banks as this type of collateral only requires collateral pledged equal to 100 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 "AX 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 $1,442,199 and the bank balance was $1,446,052. The entire bank balance was covered by Federal depository insurance or by collateral held by the City's agent in the City's name. 67 City of Shorewood, Minnesota Notes to the Financial Statements December 31, 2017 Note 3: Detailed Notes on All Funds (Continued) Investments At year end, the City had the following investments that are insured or registered, or securities held by the City's agent in the City's name: Total Investments $ 11,789,522 $ 1,472,470 $ 9,853,443 (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. .: Credit Segmented Quality/ Time Fair Value Measurement Using Types of Investments Rating (1) Distribution (2) Amount Level 1 Level 2 Pooled Investments at Amortized Costs Minnesota Municipal Money Market fund N/A less than 6 months $ 216,337 Broker Money Market N/A less than 6 months 247,272 Non - pooled Investments at Fair Value U.S. Government Agency Securities N/A less than 6 months 497,875 $ 497,875 $ - U.S. Government Agency Securities N/A 6 to 12 months 481,550 481,550 - U.S. Government Agency Securities AAA more than 3 years 493,045 493,045 - Municipal Bonds Aaa 6 to 12 months 299,442 - 299,442 Municipal Bonds Aaa 1 to 3 years 290,764 - 290,764 Municipal Bonds AA 1 to 3 years 602,201 - 602,201 Municipal Bonds AA- 1 to 3 years 253,870 - 253,870 Municipal Bonds A2 1 to 3 years 281,719 - 281,719 Municipal Bonds Aa3 1 to 3 years 308,955 - 308,955 Municipal Bonds AA+ more than 3 years 399,249 - 399,249 Municipal Bonds Aal more than 3 years 601,485 - 601,485 Municipal Bonds Aa2 more than 3 years 503,885 - 503,885 Brokered Certificates of Deposit N/A less than 6 months 2,449,581 - 2,449,581 Brokered Certificates of Deposit N/A 6 to 12 months 1,224,384 1,224,384 Brokered Certificates of Deposit N/A 1 to 3 years 2,156,153 - 2,156,153 Brokered Certificates of Deposit N/A more than 3 years 481,755 - 481,755 Total Investments $ 11,789,522 $ 1,472,470 $ 9,853,443 (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. .: City of Shorewood, Minnesota Notes to the Financial Statements December 31, 2017 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: Primary C,mPrnmant Carrying Amount of Deposits $ 1,442,199 Investments 11,789,522 Cash on Hand 220 Total $ 13,231,941 As Reported on the Financial Statements Statement of net position $ 12,671,958 Cash with fiscal agent 286,427 Fiduciary fund 273,556 Total $ 13,231,941 We City of Shorewood, Minnesota Notes to the Financial Statements December 31, 2017 Note 3: Detailed Notes on All Funds (Continued) B. Capital Assets Capital asset activity for the year ended December 31, 2017 was as follows: Governmental Activities Capital Assets, Net $ 12,443,309 $ 1,696,570 $ (1,268,993) $ 12,870,886 70 Beginning Ending Balance Increases Decreases Balance Governmental Activities Capital Assets not being Depreciated Land $ 741,826 $ - $ - $ 741,826 Construction in progress 2,046,376 1,583,126 (1,268,993) 2,360,509 Total Capital Assets not being Depreciated 2,788,202 1,583,126 (1,268,993) 3,102,335 Capital Assets being Depreciated Buildings 3,440,183 42,916 - 3,483,099 Improvements other than buildings 1,787,922 93,663 - 1,881,585 Infrastructure 31,434,652 873,286 - 32,307,938 Machinery and equipment 2,937,242 125,011 (22,478) 3,039,775 Total Capital Assets being Depreciated 39,599,999 1,134,876 (22,478) 40,712,397 Less Accumulated Depreciation for Buildings (1,300,712) (99,225) - (1,399,937) Improvements other than buildings (870,094) (78,194) - (948,288) Infrastructure (25,356,409) (720,892) - (26,077,301) Machinery and equipment (2,417,677) (123,121) 22,478 (2,518,320) Total Accumulated Depreciation (29,944,892) (1,021,432) 22,478 (30,943,846) Total Capital Assets being Depreciated, Net 9,655,107 113,444 - 9,768,551 Governmental Activities Capital Assets, Net $ 12,443,309 $ 1,696,570 $ (1,268,993) $ 12,870,886 70 City of Shorewood, Minnesota Notes to the Financial Statements December 31, 2017 Note 3: Detailed Notes on All Funds (Continued) Business -type Activities Water $ 322,747 Sewer 90,928 Stormwater management utility 57,284 Total Depreciation Expense - Business -type Activities $ 470,959 71 Beginning Ending Balance Increases Decreases Balance Business -type Activities Capital Assets not being Depreciated Land $ 434,113 $ - $ - $ 434,113 Construction in progress - 17,347 - 17,347 Total Capital Assets not being Depreciated 434,113 17,347 - 451,460 Capital Assets being Depreciated Infrastructure 21,494,228 526,955 - 22,021,183 Machinery and equipment 547,198 121,639 - 668,837 Total Capital Assets being Depreciated 22,041,426 648,594 - 22,690,020 Less Accumulated Depreciation for Infrastructure (13,034,125) (412,400) - (13,446,525) Machinery and equipment (164,703) (58,559) - (223,262) Total Accumulated Depreciation (13,198,828) (470,959) - (13,669,787) Total Capital Assets being Depreciated, Net 8,842,598 177,635 - 9,020,233 Business -type Activities Capital Assets, Net $ 9,276,711 $ 194,982 $ - $ 9,471,693 Depreciation expense was charged to functions /programs of the City as follows: Governmental Activities General government $ 67,952 Public works 833,145 Culture and recreation 120,335 Total Depreciation Expense - Governmental Activities $ 1,021,432 Business -type Activities Water $ 322,747 Sewer 90,928 Stormwater management utility 57,284 Total Depreciation Expense - Business -type Activities $ 470,959 71 City of Shorewood, Minnesota Notes to the Financial Statements December 31, 2017 Note 3: Detailed Notes on All Funds (Continued) Construction Commitments The City has active construction projects as of December 31, 2017. At year end, the commitment with the contractors for these projects is as follows: Project 2016 Water Main Extension 2017 Pavement Reclamation Project Badger Park Phase II Total C. Interfund Receivables, Payables and Transfers Interfund Balances The composition of interfund balances as of December 31, 2017, is as follows: Spent $ 1,126,613 106,798 Remaining $ 81,910 704,127 $ 1,705,330 $ 983,723 Receivable Fund Payable Fund Purpose Amount Major Governmental Nonmajor governmental General 2016B Public Safety Building Cash flow $ 1,204 General Trail Construction Project funding 759,597 Water TIF 2 Oppidan Senior Housing Project funding 1,015,044 Interfund Transfers The City made transfers during the fiscal year 2017 as shown and described below: Transfers in Street Nonmajor Fund General Debt Service Reconstruction Governmental Total Transfers Out General $ - $ 102,913 $ 1,245,000 $ 457,000 $ 1,804,913 Street Reconstruction - - - 18,486 18,486 Water 12,500 - - 2,366 14,866 Sewer 12,500 - - - 12,500 Storm Management Utility - - - 20,478 20,478 Total $ 25,000 $ 102,913 $ 1,245,000 $ 498,330 $ 1,871,243 72 City of Shorewood, Minnesota Notes to the Financial Statements December 31, 2017 Note 3: Detailed Notes on All Funds (Continued) 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, 2017, the City made the following significant one -time transfers: • The General fund transferred $1,245,000 to the Street Reconstruction fund for future capital purchases. • The General fund also transferred $457,000 to Nonmajor Governmental funds for future capital, including Phase II of Badger Park Improvements. • Street, Water, and Storm Water also transferred money to fund Badger Park Improvements, totaling $41,330. D. Long -term Debt General Obliaation 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 $281,678 and $408,875, respectively. Authorized Interest Issue Maturity Balance at Description and Issued Rate Date Date Year End G.O. Water Revenue Bonds of 2013 $ 2,260,000 0.25-1.45 % 03/01/13 01/01/22 $ 1,370,000 Annual debt service requirements to maturity for general obligation revenue bonds are as follows: Year Ending December 31, G.O. Revenue Bonds Business -type Activities Principal Interest Total 2018 $ 270,000 $ 14,375 $ 284,375 2019 270,000 12,080 282,080 2020 275,000 9,216 284,216 2021 275,000 5,848 280,848 2022 280,000 2,030 282,030 Total 73 $ 1,370,000 $ 43,549 $ 1,413,549 City of Shorewood, Minnesota Notes to the Financial Statements December 31, 2017 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 Interest Issue Maturity Balance at Description and Issued Rate Date Date Year End Public Safety Fire Facility, Refunding Series 2016A Public Safety Police Facility, Refunding Series 2016B Public Safety Fire Facility, Refunding Series 2016C Public Project Lease Revenue $ 2,470,000 2,565,000 875,000 2.00 % 01/07/16 2.00 01/07/16 2.00 01/07/16 02/01/23 $ 2,145,000 02/01/23 2,225,000 02/01/22 735,000 Refunding Bonds, Series 2017A 950,000 2.70 05/02/17 12/01/28 885,000 Total Lease Revenue Bonds $ 5,990,000 The Public Safety Fire Facility Refunding Series 2016A, 2016B and 2016C 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 74 Lease Revenue Bonds Year Ending Governmental Activities December 31, Principal Interest Total 2018 $ 900,000 $ 117,696 $ 1,017,696 2019 925,000 98,956 1,023,956 2020 940,000 79,866 1,019,866 2021 955,000 60,390 1,015,390 2022 990,000 40,466 1,030,466 2023 -2027 1,190,000 54,768 1,244,768 2028 90,000 2,430 92,430 Total $ 5,990,000 $ 454,572 $ 6,444,572 74 City of Shorewood, Minnesota Notes to the Financial Statements December 31, 2017 Note 3: Detailed Notes on All Funds (Continued) Changes in Long -term Liabilities Long -term liability activity for the year ended December 31, 2017, was as follows: Business -type Activities General obligation revenue bonds $ 1,635,000 $ - $ (265,000) $ 1,370,000 $ 270,000 Pension liability GERF 413,601 1,178 (136,584) 278,195 - Business -type Activity Long -term Liabilities $ 2,048,601 $ 1,178 $ (401,584) $ 1,648,195 $ 270,000 Current Refunding Bonds On April 24th 2017, the Economic Development Authority (the EDA) of the City issued $950,000 Public Private Lease Revenue Refunding Bonds, Series 2017A. The bonds issued refunded the Lease Revenue Bonds 2008A in a current refunding. As a result of the refunding issue, the EDA saved $94,325 in debt service payments and achieved an economic gain (the present value of the difference between the old and the new debt service) of $82,232. 75 Beginning Ending Due Within Balance Increases Decreases Balance One Year Governmental Activities Bonds payable Lease revenue bonds $ 6,830,000 $ 950,000 $ (1,790,000) $ 5,990,000 $ 900,000 Unamortized premium on bonds 85,732 - (12,563) 73,169 - Pension liability GERF 1,234,658 45,396 (268,694) 1,011,360 - Compensated absences 219,511 87,866 (141,535) 165,842 106,933 Governmental Activity Long -term Liabilities $ 8,369,901 $ 1,083,262 $ (2,212,792) $ 7,240,371 $ 1,006,933 Business -type Activities General obligation revenue bonds $ 1,635,000 $ - $ (265,000) $ 1,370,000 $ 270,000 Pension liability GERF 413,601 1,178 (136,584) 278,195 - Business -type Activity Long -term Liabilities $ 2,048,601 $ 1,178 $ (401,584) $ 1,648,195 $ 270,000 Current Refunding Bonds On April 24th 2017, the Economic Development Authority (the EDA) of the City issued $950,000 Public Private Lease Revenue Refunding Bonds, Series 2017A. The bonds issued refunded the Lease Revenue Bonds 2008A in a current refunding. As a result of the refunding issue, the EDA saved $94,325 in debt service payments and achieved an economic gain (the present value of the difference between the old and the new debt service) of $82,232. 75 City of Shorewood, Minnesota Notes to the Financial Statements December 31, 2017 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 Emolovees 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 2017. 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 2017. The City's contributions to the GERF for the years ending December 31, 2017, 2016 and 2015 were $97,079, $96,454 and $93,614, respectively. The City's contributions were equal to the contractually required contributions for each year as set by Minnesota statute. 76 City of Shorewood, Minnesota Notes to the Financial Statements December 31, 2017 Note 4: Defined Benefit Pension Plans - Statewide (Continued) D. Pension Costs GERF Pension Costs At December 31, 2017, the City reported a liability of $1,289,555 for its proportionate share of the GERF's net pension liability. The City's net pension liability reflected a reduction due to the State of Minnesota's contribution of $6 million to the fund in 2016. The State of Minnesota is considered a non - employer contributing entity and the State's contribution meets the definition of a special funding situation. The State of Minnesota's proportionate share of the net pension liability associated with the City totaled $16,197 . The net pension liability was measured as of June 30, 2017, 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, 2016 through June 30, 2017 relative to the total employer contributions received from all of PERA's participating employers. At June 30, 2017, the City's proportionate share was 0.0202 percent which was a decrease of 0.0001 percent from its proportion measured as of June 30, 2016. For the year ended December 31, 2017, the City recognized pension expense of $116,269 for its proportionate share of GERF's pension expense. In addition, the City recognized an additional $468 as pension expense (and grant revenue) for its proportionate share of the State of Minnesota's contribution of $6 million to the GERF. At December 31, 2017, 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: Differences between Expected and Actual Experience Changes in Actuarial Assumptions Net Difference between Projected and Actual Earnings on Plan Investments Changes in Proportion Contributions to GERF Subsequent to the Measurement Date Total Deferred Deferred Outflows Inflows of Resources of Resources $ 42,373 $ 81,336 213,234 129,278 56,927 64,524 48,796 $ 304,403 $ 332,065 Deferred outflows of resources totaling $48,796 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, 2018. Other amounts reported as deferred outflows and inflows of resources related to GERF pensions will be recognized in pension expense as follows: 2018 $ (60,000) 2019 64,149 2020 (25,872) 2021 (54,735) 77 City of Shorewood, Minnesota Notes to the Financial Statements December 31, 2017 Note 4: Defined Benefit Pension Plans - Statewide (Continued) E. Actuarial Assumptions The total pension liability in the June 30, 2017 actuarial valuation was determined using the following actuarial assumptions: Inflation Active Member Payroll Growth Investment Rate of Return 2.50% per year 3.25% per year 7.50% Salary increases were based on a service - related table. Mortality rates for active members, retirees, survivors and disabilitants were based on RP -2014 tables for the GERF for males or females, as appropriate, with slight adjustments to fit PERA's experience. Cost of living benefit increases for retirees are assumed to be: 1 percent per year for the GERF through 2044 and then 2.5 percent thereafter. Actuarial assumptions used in the June 30, 2017 valuation were based on the results of actuarial experience studies. The most recent four -year experience study in the GERF was completed in 2015. The following changes in actuarial assumptions occurred in 2017: GERF • The Combined Service Annuity (CSA) loads were changed from 0.8 percent for active members and 60 percent for vested and non - vested deferred members. The revised CSA loads are now 0.0 percent for active member liability, 15.0 percent for vested deferred member liability and 3.0 percent for non - vested deferred member liability. • The assumed post- retirement benefit increase rate was changed from 1.0 percent per year for all years to 1.0 percent per year through 2044 and 2.5 percent per year thereafter. The State Board of Investment, which manages the investments of PERA, prepares an analysis of the reasonableness on a regular basis of the long -term expected rate of return 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 geometric real rates of return for each major asset class are summarized in the following table: Total 78 100.00 % Long -term Target Expected Real Asset Class Allocation Rate of Return Domestic Stocks 39.00 % 5.10 % International Stocks 19.00 5.30 Bonds 20.00 0.75 Alternative Assets 20.00 5.90 Cash 2.00 - Total 78 100.00 % City of Shorewood, Minnesota Notes to the Financial Statements December 31, 2017 Note 4: Defined Benefit Pension Plans - Statewide (Continued) F. Discount Rate The discount rate used to measure the total pension liability in 2017 was 7.50 percent. The projection of cash flows used to determine the discount rate assumed that contributions from plan members and employers will be made at rates set in Minnesota statutes. Based on these assumptions, the fiduciary net position of the GERF was projected to be available to make all projected future benefit payments of current plan members. 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. 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: City Proportionate Share of NPL 1 Percent 1 Percent Decrease (6.50 %) Current (7.50 %) Increase (8.50 %) GERF $ 2,000,195 $ 1,289,555 $ 707,766 H. Pension Plan Fiduciary Net Position Detailed information about each 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. 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, 2016. Separate financial statements can be obtained by writing to the South Lake Minnetonka Police Department, 24150 Smithtown Road, Shorewood, Minnesota 55331. 79 City of Shorewood, Minnesota Notes to the Financial Statements December 31, 2017 Note 5: Joint Ventures (Continued) The following is a summary of the Department's Statements of Net Position as of December 31, 2016 and 2015: South Lake Minnetonka Police Department Summary of Statements of Net Position December 31, 2016 and 2015 Assets Deferred Outflows of Resources Total Assets and Deferred Outflows of Resources Liabilities Deferred Inflows of Resources Net Position Total Liabilities, Deferred Inflows of Resources, and Net Position 2016 2015 $ 4,885,721 $ 4,933,813 3,653,168 370,165 $ 8,538,889 $ 5,303,978 $ 7,953,009 $ 4,717,104 691,931 312,158 (106,051) 274,716 $ 8,538,889 $ 5,303,978 The following is a summary of the Department's statements of activities for the years ended December 31, 2016 and 2015: South Lake Minnetonka Police Department Summary Statements of Activities For the Years Ended December 31, 2016 and 2015 Revenues Expenses Net Revenues General Revenues Change in Net Position Net Position, January 1 Net Position, December 31 B. Excelsior Fire District 2016 2015 $ 2,949,600 $ 2,863,327 3,351,688 2,830,418 (402,088) 32,909 21,321 18,558 (380,767) 51,467 274,716 223,249 $ (106,051) $ 274,716 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. The most recent year of audited information is December 31, 2017. Separate financial statements can be obtained by writing to the Excelsior Fire District, 24100 Smithtown Road, Shorewood, Minnesota 55331. We City of Shorewood, Minnesota Notes to the Financial Statements December 31, 2017 Note 5: Joint Ventures (Continued) The following is a summary of the District's Statements of Net Position as of December 31, 2017 and 2016: Excelsior Fire District Summary of Statements of Net Position December 31, 2017 and 2016 Assets Deferred Outflows of Resources Total Assets and Deferred Outflows of Resources Liabilities Deferred Inflows of Resources Net Position Total Liabilities, Deferred Inflows of Resources, and Net Position 2017 2016 $ 9,407,489 $ 8,549,042 739,512 1,001,398 $ 10,147,001 $ 9,550,440 $ 4,046,038 $ 4,272,946 614,275 85,188 5,486,688 5,192,306 $ 10,147,001 $ 9,550,440 The following is a summary of the District's statements of activities for the years ended December 31, 2017 and 2016: Excelsior Fire District Summary Statements of Activities For the Years Ended December 31, 2017 and 2016 Revenues Expenses Net Revenues General Revenues Change in Net Position Net Position, January 1 Net Position, December 31 2017 2016 $ 1,759,341 $ 1,711,606 1,469,776 1,275,891 289,565 435,715 4,817 2,593 294,382 438,308 5,192,306 4,753,998 $ 5,486,688 $ 5,192,306 According to a formula in the agreement, the City's share of the District's budget is 36.81 percent. Payments to the District in 2017 totaled $604,624. 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. 81 City of Shorewood, Minnesota Notes to the Financial Statements December 31, 2017 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 $47,659,174 computed as three percent of $1,588,639,140 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 After years of unsuccessful negotiations between the City of Shorewood and the other four cities (Deephaven, Excelsior, Greenwood, and Tonka Bay) with ownership interest in the Southshore Center (SSC), in September, 2015, the City of Shorewood commenced an action in district court requesting the partition of the interest in the real estate of the Southshore Center. The District Court issued an order on May 3, 2016, granting the defending four cities their request for a summary judgment that the Shorewood partition request required that the City of Shorewood acquire the interests of the other four cities in the amount of $311,000. Effective January, 2017, the City completed the full purchase of the SSC from the other four cities. Day -to -day management and programming of the SSC is provided by City of Shorewood staff and volunteers. The City Council has approved a remodeling project to update the facility, and the Council is presently determining marketing and branding options for the SSC. FXI REQUIRED SUPPLEMENTARY INFORMATION CITY OF SHOREWOOD SHOREWOOD, MINNESOTA FOR THE YEAR ENDED DECEMBER 31, 2017 83 City of Shorewood, Minnesota Required Supplementary Information For the Year Ended December 31, 2017 Schedule of Employer's Share of PERA Net Pension Liability - General Employees Retirement Fund Note: Schedule is intended to show 10 -year trend. Additional years will be reported as they become available. Schedule of Employer's PERA Contributions - General Employees Retirement Fund Statutorily Required Year Contribution Ending (a) Required Supplementa Contributions in Relation to the Required Supplementary Information Statutorily Contribution Required Deficiency Contribution (Excess) (b) (a -b) City's State's Proportionate Proportionate Share of the City's Share of Net Pension Proportionate the Net Pension Liability as a Plan Fiduciary City's Share of Liability City's Percentage of Net Position Fiscal Proportion of the Net Pension Associated with Covered - Employee Covered - Employee as a Percentage Year the Net Pension Liability the City Total Payroll Payroll of the Total Ending Liability (a) (b) (a +b) (c) ((a +b) /c) Pension Liability 06/30/17 0.0202 % $ 1,289,555 $ 16,197 $ 1,305,752 $ 1,299,857 99.2 % 75.9 % 06/30/16 0.0203 1,648,259 21,459 1,669,718 1,257,395 131.1 68.9 06/30/15 0.0210 1,088,329 - 1,088,329 1,233,860 88.2 78.2 Note: Schedule is intended to show 10 -year trend. Additional years will be reported as they become available. Schedule of Employer's PERA Contributions - General Employees Retirement Fund Statutorily Required Year Contribution Ending (a) Required Supplementa Contributions in Relation to the Statutorily Contribution Required Deficiency Contribution (Excess) (b) (a -b) Information Contributions as City's a Percentage of Covered - Employee Covered - Employee Payroll Payroll (c) (b /c) 12/31/17 $ 97,079 $ 97,079 $ - $ 1,294,390 7.5 % 12/31/16 96,454 96,454 - 1,286,047 7.5 12/31/15 93,614 93,614 - 1,248,182 7.5 Note: Schedule is intended to show 10 -year trend. Additional years will be reported as they become available. 84 City of Shorewood, Minnesota Required Supplementary Information (Continued) For the Year Ended December 31, 2017 Notes to the Required Supplementary Information - General Employee Retirement Fund Chanaes in Actuarial Assumptions 2017 - The Combined Service Annuity (CSA) loads were changed from 0.8 percent for active members and 60 percent for vested and non - vested deferred members. The revised CSA loads are now 0.0 percent for active member liability, 15.0 percent for vested deferred member liability and 3.0 percent for non - vested deferred member liability. The assumed post- retirement benefit increase rate was changed from 1.0 percent per year for all years to 1.0 percent per year through 2044 and 2.5 percent per year thereafter. 2016 - The assumed post- retirement benefit increase rate was changed from 1.0 percent per year through 2035 and 2.5 percent per year thereafter to 1.0 percent per year for all future years. The assumed investment return was changed from 7.9 percent to 7.5 percent. The single discount rate was changed from 7.9 percent to 7.5 percent. Other assumptions were changed pursuant to the experience study dated June 30, 2015. The assumed future salary increases, payroll growth and inflation were decreased by 0.25 percent to 3.25 percent for payroll growth and 2.50 percent for inflation. 2015 - The assumed post- retirement benefit increase rate was changed from 1.0 percent per year through 2030 and 2.5 percent per year thereafter to 1.0 percent per year through 2035 and 2.5 percent per year thereafter. Chanaes in Plan Provisions 2015 - On January 1, 2015, the Minneapolis Employees Retirement Fund was merged into the General Employees Fund, which increased the total pension liability by $1.1 billion and increased the fiduciary plan net position by $892 million. Upon consolidation, state and employer contributions were revised. 85 THIS PAGE IS LEFT BLANK INTENTIONALLY M. COMBINING AND INDIVIDUAL FUND FINANCIAL STATEMENTS AND SCHEDULES CITY OF SHOREWOOD SHOREWOOD, MINNESOTA FOR THE YEAR ENDED DECEMBER 31, 2017 87 THIS PAGE IS LEFT BLANK INTENTIONALLY -M 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. We City of Shorewood, Minnesota Nonmajor Governmental Funds Combining Balance Sheet December 31, 2017 Assets Cash and temporary investments Receivables Accrued interest Accounts Land held for resale Total Assets Liabilities Accounts and contracts payable Accrued salaries payable Due to other funds Total Liabilities Fund Balances Assigned to capital outlay Assigned to community center operations Unassigned Total Fund Balances Total Liabilities and Fund Balances .o Special Community Capital Center Projects $ 133,893 $ 1,930,858 562 6,671 - 40,820 Exhibit A -1 Total Nonmajor $ 2,064,751 7,233 40,820 $ 134,455 $ 2,128,417 $ 2,262,872 $ 45,146 $ 580,686 $ 625,832 247 - 247 - 759,597 759,597 - 1,547,731 1,547,731 89,062 - 89,062 - (759,597) (759,597) 89,062 788,134 877,196 $ 134,455 $ 2,128,417 $ 2,262,872 Revenues Intergovernmental Charges for services Interest on investments Miscellaneous Contributions and donations Total Revenues Expenditures Current Culture and recreation Capital outlay General government Public works Culture and recreation Total Expenditures Deficiency of Revenues Under Expenditures Other Financing Sources Transfers in Net Change in Fund Balances Fund Balances, January 1 Fund Balances, December 31 City of Shorewood, Minnesota Exhibit A -2 Nonmajor Governmental Funds Combining Statement of Revenues, Expenditures and Changes in Fund Balances For the Year Ended December 31, 2017 Special 91 Southshore 130,000 Total Community Capital Nonmajor Center Projects Funds $ - $ 316,711 $ 316,711 52,211 297,627 349,838 2,096 15,497 17,593 225 187,663 187,888 54,532 817,498 872,030 130,000 - 130,000 - 7,630 7,630 - 552,841 552,841 - 771,157 771,157 130,000 1,331,628 1,461,628 (75,468) (514,130) (589,598) 95,000 403,330 498,330 19,532 (110,800) (91,268) $ 89,062 $ 788,134 $ 877,196 THIS PAGE IS LEFT BLANK INTENTIONALLY 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. 93 City of Shorewood, Minnesota Nonmajor Capital Projects Funds Combining Balance Sheet December 31. 2017 Exhibit B -1 94 Park Capital Equipment MSA Trail Community Improvement Replacement Construction Construction Infrastructure Total Assets Cash and temporary investments $ 1,141,210 $ 536,889 $ 129,801 $ $ 122,958 $ 1,930,858 Receivables Accrued interest 3,614 2,222 499 336 6,671 Accounts - - - 40,820 40,820 Land held for resale - - - 150,068 150,068 Total Assets $ 1,144,824 $ 539,111 $ 130,300 $ $ 314,182 $ 2,128,417 Liabilities Accounts and contracts payable $ 455,923 $ 86,610 $ - $ $ 38,153 $ 580,686 Due to other funds - - 759,597 - 759,597 Total Liabilities 455,923 86,610 - 759,597 38,153 1,340,283 Fund Balances Assigned to capital outlay 688,901 452,501 130,300 - 276,029 1,547,731 Unassigned - - - (759,597) - (759,597) Total Fund Balances 688,901 452,501 130,300 (759,597) 276,029 788,134 Total Liabilities and Fund Balances $ 1,144,824 $ 539,111 $ 130,300 $ - $ 314,182 $ 2,128,417 94 Revenues Intergovernmental Charges for services Interest on investments Miscellaneous Contributions and donations Total Revenues Expenditures Capital outlay General government Public works Culture and recreation Total Expenditures Excess (Deficiency) of Revenues Over (Under) Expenditures Other Financing Sources Transfers in Net Change in Fund Balances Fund Balances, January 1 Fund Balances, December 31 City of Shorewood, Minnesota Exhibit B -2 Nonmajor Capital Projects Funds Combining Statement of Revenues, Expenditures And Changes in Fund Balances For the Year Ended December 31, 2017 Park Capital Equipment MSA Trail Community Improvement Replacement Construction Construction Infrastructure Total $ 200,000 $ $ 116,711 $ $ $ 316,711 297,627 - - 297,627 12,878 8,515 1,558 (8,759) 1,305 15,497 - - - 187,663 187,663 510,505 8,515 118,269 (8,759) 188,968 817,498 - 7,630 - - - 7,630 - 216,878 116,711 - 219,252 552,841 717,751 - - 53,406 - 771,157 717,751 224,508 116,711 53,406 219,252 1,331,628 (207,246) (215,993) 1,558 (62,165) (30,284) (514,130) 283,330 120, 000 - 403,330 76,084 (95,993) 1,558 (62,165) (30,284) (110,800) 612,817 548,494 128,742 (697,432) 306,313 898,934 $ 688,901 $ 452,501 $ 130,300 $ (759,597) $ 276,029 $ 788,134 95 City 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, 2017 (With Comparative Actual Amounts for the Year Ended December 31, 2016) Revenues Taxes General property taxes Fiscal disparities Total Taxes Licenses and permits Business Nonbusiness Total Licenses and permits Intergovernmental Federal FEMA State Property tax credits Other Other local governments Other Total Intergovernmental Charges for services General government Culture and recreation Total Charges for services Fines and forfeitures Interest on investments Miscellaneous revenue 2017 Exhibit C -1 Budgeted Amounts Actual Variance with Actual Original Final Amounts Final Budget Amounts $ 5,077,470 $ 5,077,470 $ 5,099,395 $ 21,925 $ 5,010,215 103,526 103,526 121,979 18,453 119,405 5,180,996 5,180,996 5,221,374 40,378 5,129,620 Total Miscellanious revenue 178,900 178,900 215,489 36,589 6,930 6,930 7,756 826 5,919 715 715 1,858 - - 43 43 49 78,751 78,751 91,619 12,868 93,817 12,000 12,000 52,545 40,545 77,082 90,751 90,751 144,922 54,171 172,806 5,200 5,200 15,236 10,036 13,603 35,000 35,000 20,024 (14,976) 59,413 Refunds and reimbursements 10,000 10,000 37,173 27,173 61,590 Contributions and donations 3,500 3,500 4,650 1,150 3,819 Other 165,400 165,400 173,666 8,266 177,820 Total Miscellanious revenue 178,900 178,900 215,489 36,589 243,229 Total Revenues 5,823,527 5,823,527 6,052,845 229,318 6,042,097 0. City of Shorewood, Minnesota General Fund Schedule of Revenues, Expenditures and Changes in Fund Balances - Budget and Actual (Continued) For the Year Ended December 31, 2017 (With Comparative Actual Amounts for the Year Ended December 31, 2016) Expenditures Current General government Mayor and City Council Personal services Supplies Other services and charges Total Mayor and City Council Administrative Personal services Supplies Other services and charges Total Administrative Finance Personal services Supplies Other services and charges Total Finance Professional services Other services and charges Planning and zoning Personal services Supplies Other services and charges Total Planning and zoning Municipal building Supplies Other services and charges Total Municipal building Total General Government 2017 Exhibit C -1 7() I F Budgeted Amounts Actual Variance with Actual Original Final Amounts Final Budget Amounts $ 22,600 $ 22,600 $ 22,176 $ 424 $ 22,176 2,000 2,000 2,687 (687) 1,330 116,500 116,500 83,283 33,217 138,634 141,100 141,100 108,146 32,954 162,140 402,154 402,154 383,372 18,782 262,431 20,900 20,900 21,099 (199) 17,298 42,550 42,550 46,418 (3,868) 153,463 465,604 465,604 450,889 14,715 433,192 142,273 142,273 113,404 28,869 146,398 15,600 15,600 14,581 1,019 14,980 17,300 17,300 72,498 (55,198) 19,965 175,173 175,173 200,483 (25,310) 181,343 236,400 236,400 265,077 (28,677) 252,052 178,797 178,797 226,376 (47,579) 183,617 450 450 449 1 407 97,000 97,000 68,726 28,274 11,934 276,247 276,247 295,551 (19,304) 195,958 21,300 21,300 17,068 4,232 33,850 180,000 180,000 155,806 24,194 154,794 201,300 201,300 172,874 28,426 188,644 1 ACV; A9A 1 AQ-, A9A 1 Awi n9n 9 And 1 A1A A9Q 97 City of Shorewood, Minnesota Exhibit C -1 General Fund Schedule of Revenues, Expenditures and Changes in Fund Balances - Budget and Actual (Continued) For the Year Ended December 31, 2017 (With Comparative Actual Amounts for the Year Ended December 31, 2016) 2017 2016 Budgeted Amounts Actual Variance with Actual Original Final Amounts Final Budget Amounts Expenditures (Continued) Current (continued) Public safety Police protection Other services and charges $ 1,180,050 $ 1,180,050 $ 1,184,213 $ (4,163) $ 1,113,021 Fire protection Other services and charges Protective inspection Personal services Supplies Other services and charges Total Protective inspection Total Public Safety Public works General maintenance Personal services Supplies Other services and charges Total General maintenance Snow and ice removal Personal services Supplies Total Snow and ice removal City engineer Other services and charges Total Public Works 372,976 372,976 372,939 37 368,468 126,299 126,299 140,123 (13,824) 134,511 200 200 - 200 245 10,550 10,550 25,353 (14,803) 7,504 137,049 137,049 165,476 (28,427) 142,260 1,690,075 1,690,075 1,722,628 (32,553) 1,623,749 516,365 516,365 366,150 150,215 342,887 160,200 160,200 94,563 65,637 143,135 166,100 166,100 143,840 22,260 134,259 842,665 842,665 604,553 238,112 620,281 61,465 61,465 23,532 37,933 27,921 44,000 44,000 38,954 5,046 23,008 105,465 105,465 62,486 42,979 50,929 89,725 89,725 83,314 6,411 100,561 1 nA7 Arr, 1 n17 Arr, 7rn Ar,A 9A7 r;nq 771 771 •. Capital outlay Public safety Total Expenditures Excess of Revenues Over Expenditures Other Financing Sources (Uses) Transfers in Transfers out Total Other Financing Sources (Uses) Net Change in Fund Balances Fund Balances, January 1 Fund Balances, December 31 4,936,399 City of Shorewood, Minnesota 4,715,466 Exhibit C -1 4,577,368 General Fund 887,128 Schedule of Revenues, Expenditures and Changes in Fund Balances - 1,464,729 Budget and Actual (Continued) 25,000 25,000 25,000 For the Year Ended December 31, 2017 25,000 (1,104,913) (With Comparative Actual Amounts for the Year Ended December 31, 2016) (1,804,913) (700,000) 2017 2016 (1,079,913) Budgeted Amounts Actual Variance with Actual Original Final Amounts Final Budget Amounts Expenditures (Continued) (249,749) 102,416 Current (continued) Culture and recreation Personal services $ 156,597 $ 156,597 $ 203,847 $ (47,250) $ 193,762 Supplies 31,000 31,000 28,057 2,943 37,317 Other services and charges 54,400 54,400 47,106 7,294 52,488 Total Culture and Recreation 241,997 241,997 279,010 (37,013) 283,567 Total Current 4,465,751 4,465,751 4,245,011 220,740 4,092,416 Capital outlay Public safety Total Expenditures Excess of Revenues Over Expenditures Other Financing Sources (Uses) Transfers in Transfers out Total Other Financing Sources (Uses) Net Change in Fund Balances Fund Balances, January 1 Fund Balances, December 31 4,936,399 4,936,399 4,715,466 220,933 4,577,368 887,128 887,128 1,337,379 450,251 1,464,729 25,000 25,000 25,000 - 25,000 (1,104,913) (1,104,913) (1,804,913) (700,000) (1,387,313) (1,079,913) (1,079,913) (1,779,913) (700,000) (1,362,313) (192,785) (192,785) (442,534) (249,749) 102,416 4,502,167 $ 4,411,798 $ 4,411,798 $ 4,162,049 $ (249,749) $ 4,604,583 .. 100 City of Shorewood, Minnesota Exhibit D -1 Debt Service Funds Combining Balance Sheet December 31, 2017 2016A 2016B 2016C 2017 Public Safety Public Safety Public Safety Lease Revenue Building Building Building Bond Total Assets Cash and temporary investments $ 36,057 $ - $ 11,856 $ 7,051 $ 54,964 Cash with fiscal agent 2,260 1,764 4,214 - 8,238 Lease receivable 2,145,000 2,225,000 735,000 - 5,105,000 Total Assets $ 2,183,317 $ 2,226,764 $ 751,070 $ 7,051 $ 5,168,202 Liabilities Due to other funds $ - $ 1,204 $ - $ - $ 1,204 Deferred Inflows of Resources Unavailable revenue - lease receivable 2,145,000 2,225,000 735,000 - 5,105,000 Fund Balances Restricted for debt service 38,317 560 16,070 7,051 61,998 Total Liabilities, Deferred Inflows of Resources and Fund Balances $ 2,183,317 $ 2,226,764 $ 751,070 $ 7,051 $ 5,168,202 100 City of Shorewood, Minnesota Exhibit D -2 Debt Service Funds Combining Schedule of Revenues, Expenditures and Changes in Fund Balances For the Year Ended December 31, 2017 2016A 2016B 2016C 2017 Public Safety Public Safety Public Safety Lease Revenue Building Building Building Bond Total Revenues Interest on investments $ 7 $ 6 $ 12 $ - $ 25 Miscellaneous Lease payments 397,043 387,900 165,273 - 950,216 Other Total Revenues Expenditures Debt service Principal Interest and service charges Total Expenditures Excess (Deficiency) of Revenues Over (Under) Expenditures Other Financing Sources (Uses) Transfers in Payment to refunding bond escrow agent Refunding bonds issued Total Other Financing Sources (Uses) Net Change in Fund Balances Fund Balances, January 1 Fund Balances, December 31 325,000 340,000 140,000 65,000 870,000 48,975 51,600 18,925 62,105 181,605 373,975 391,600 158,925 127,105 1,051,605 27,075 306 10,360 (127,105) (89,364) - - - 102,913 102,913 - - - (920,000) (920,000) - - - 950,000 950,000 - - - 132,913 132,913 27,075 306 10,360 5,808 43,549 11,242 254 5,710 1,243 18,449 $ 38,317 $ 560 $ 16,070 $ 7,051 $ 61,998 101 City of Shorewood, Minnesota Agency Fund Combining Statement of Changes in Assets and Liabilities For the Year Ended December 31, 2017 Developer Escrow Accounts Assets Cash and temporary investments Liabilities Escrow deposits payable Balance January 1 Additions Deductions Exhibit E -1 Balance December 31 $ 249,166 $ 109,505 $ (85,115) $ 273,556 $ 249,166 $ 109,505 $ (85,115) $ 273,556 102 City of Shorewood, Minnesota Exhibit F -1 Summary Financial Report Revenues and Expenditures For General Operations Governmental Funds For the Years Ended December 31, 2017 and 2016 Total Revenues Per Capita Expenditures Current General government Public safety Public works Culture and recreation Capital outlay General government Public safety Public works Culture and recreation Economic development Debt service Principal Interest and service charges Total Expenditures Per Capita Total Long -term Indebtedness Per Capita General Fund Balance - December 31 Per Capita $ 7,924,730 $ 8,317,312 (4.72) % $ 1,057 $ 1,115 (5.20) % $ 1,493,020 $ Percent 5.64 Total Increase 2017 2016 (Decrease) Revenues 751,394 786,780 Taxes $ 5,221,374 $ 5,129,620 1.79 % Licenses and permits 315,574 340,112 (7.21) Intergovernmental 461,633 172,806 167.14 Charges for services 409,244 596,715 (31.42) Fines and forfeits 76,056 48,868 55.64 Interest on investments 75,256 99,369 (24.27) Miscellaneous 1,365,593 1,929,822 (29.24) Total Revenues Per Capita Expenditures Current General government Public safety Public works Culture and recreation Capital outlay General government Public safety Public works Culture and recreation Economic development Debt service Principal Interest and service charges Total Expenditures Per Capita Total Long -term Indebtedness Per Capita General Fund Balance - December 31 Per Capita $ 7,924,730 $ 8,317,312 (4.72) % $ 1,057 $ 1,115 (5.20) % $ 1,493,020 $ 1,413,329 5.64 % 1,722,628 1,623,749 6.09 751,394 786,780 (4.50) 409,010 361,128 13.26 7,630 28,635 (73.35) 470,455 484,952 (2.99) 991,853 941,716 5.32 771,157 2,038,983 (62.18) 650,944 682,787 (4.66) 870,000 6,480,000 (86.57) 181,605 434,990 (58.25) $ 8,319,696 $ 15,277,049 (45.54) $ 1,110 $ 2,048 (45.82) % $ 5,990,000 $ 6,830,000 (12.30) $ 799 $ 916 (12.74) $ 4,162,049 $ 4,604,583 (9.61) % $ 555 $ 617 (10.07) 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 the City of Shorewood at 952 - 960 -7900. 103 THIS PAGE IS LEFT BLANK INTENTIONALLY 104 STATISTICAL SECTION (UNAUDITED) CITY OF SHOREWOOD SHOREWOOD, MINNESOTA FOR THE YEAR ENDED DECEMBER 31, 2017 105 THIS PAGE IS LEFT BLANK INTENTIONALLY 106 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. 107 City of Shorewood, Minnesota Statistical Section (Unaudited) Net Position by Component Last Ten Fiscal Years (Accrual Basis of Accounting) 108 Fiscal Year 2008 2009 2010 2011 Governmental Activities Net investment in capital assets $ 9,430,566 $ 9,480,314 $ 9,525,991 $ 9,223,669 Unrestricted 7,400,859 7,909,106 8,252,497 7,964,703 Total Governmental Activities Net Position $ 16,831,425 $ 17,389,420 $ 17,778,488 $ 17,188,372 Business -type Activities Net investment in capital assets $ 6,631,854 $ 6,482,297 $ 6,494,996 $ 6,675,613 Unrestricted 10,186,824 9,449,210 8,666,149 8,186,835 Total Business -type Activities Net Position $ 16,818,678 $ 15,931,507 $ 15,161,145 $ 14,862,448 Total Primary Government Net investment in capital assets $ 16,062,420 $ 15,962,611 $ 16,020,987 $ 15,899,282 Unrestricted 17,587,683 17,358,316 16,918,646 16,151,538 Total Primary Government $ 33,650,103 $ 33,320,927 $ 32,939,633 $ 32,050,820 108 Table 1 Fiscal Year 2012 2013 2014 2015 2016 2017 $ 8,487,162 $ 9,212,415 $ 9,754,046 $ 9,394,897 $ 11,523,309 $ 11,985,886 7,979,370 7,138,847 7,317,095 6,717,068 5,683,683 5,346,350 $ 16,466,532 $ 16,351,262 $ 17,071,141 $ 16,111,965 $ 17,206,992 $ 17,332,236 $ 6,494,076 $ 6,705,907 $ 6,718,271 $ 7,713,545 $ 7,641,711 $ 8,101,693 8,148,173 7,951,219 7,890,327 6,572,980 6,849,858 6,998,091 $ 14,642,249 $ 14,657,126 $ 14,608,598 $ 14,286,525 $ 14,491,569 $ 15,099,784 $ 14,981,238 $ 15,918,322 $ 16,472,317 $ 17,108,442 $ 19,165,020 $ 20,087,579 16,127,543 15,090,066 15,207,422 13,290,048 12,533,541 12,344,441 $ 31,108,781 $ 31,008,388 $ 31,679,739 $ 30,398,490 $ 31,698,561 $ 32,432,020 109 City of Shorewood, Minnesota Statistical Section (Unaudited) Changes in Net Position (Continued on the Following Pages) Last Ten Fiscal Years (Accrual Basis of Accounting) Expenses Governmental activities General government Public safety Public works Culture and recreation Economic development Interest on long -term debt Total Governmental Activities Expenses Business -type activities Water Sewer Recycling Stormwater management utility Liquor Total Business -type Activities Expenses Total Expenses Program Revenues Governmental activities Charges for services General government Public safety Public works Culture and recreation Economic development Operating grants and contributions Capital grants and contributions Total Governmental Activities Program Revenues Business -type activities Charges for services Water Sewer Recycling Stormwater management utility Operating grants and contributions Capital grants and contributions Total Business -type Activities Program Revenues Total Program Revenues Fiscal Year 2008 2009 2010 2011 $ 1,483,913 $ 1,486,281 $ 1,235,098 $ 1,405,791 1,906,890 1,904,966 1,893,413 1,960,894 2,485,752 1,941,272 2,231,473 2,031,136 273,054 394,110 452,437 412,257 1,002,423 638,768 474,082 449,773 7 1 F7 nR7 R RRR qQ7 R 7RR rnR R 7rq RF1 657,776 659,113 643,886 690,363 921,238 955,956 980,173 1,151,626 96,945 99,286 173,896 174,857 106,143 106,847 131,107 233,035 16,167 129 25 - 1,798,269 1,821,331 1,929,087 2,249,881 $ 8,950,301 $ 8,186,728 $ 8,215,590 $ 8,509,732 $ 32,528 $ 34,064 $ 53,381 $ 108,394 793,041 634,742 624,330 544,749 - 6,279 - 6,293 605 35,843 58,661 72,678 90,493 90,681 99,114 113,717 674,343 43 114,330 - 1,591,010 801,652 949,816 845,831 752,338 784,318 668,676 672,793 829,117 802,252 845,043 819,496 64,629 65,112 146,002 151,894 204,618 191,157 198,593 196,070 27,950 28,488 28,762 33,586 - - - 15,000 1,878,652 1,871,327 1,887,076 1,888,839 $ 3,469,662 $ 2,672,979 $ 2,836,892 $ 2,734,670 110 Table 2 Fiscal Year 2012 2013 2014 2015 2016 2017 $ 1,331,286 $ 1,310,296 $ 1,277,118 $ 1,318,558 $ 1,504,101 $ 1,568,635 1,947,868 2,010,338 2,036,394 2,080,769 2,111,155 2,194,434 2,162,123 1,884,986 1,991,852 1,971,483 1,544,264 1,553,274 460,879 471,784 397,365 613,494 476,999 489,690 - - - - 682,787 650,944 428,887 379,685 355,378 318,357 361,602 160,832 6,331,043 6,057,089 6,058,107 6,302,661 6,680,908 6,617,809 $ 2,921,543 $ 2,864,296 $ 3,633,901 $ 3,076,119 $ 4,684,213 $ 4,007,223 689,205 693,193 690,479 721,184 775,802 751,143 1,065,926 847,097 873,711 944,263 989,147 994,611 187,713 181,537 178,457 131,185 132,654 137,693 273,846 107,935 203,825 99,312 111,373 117,741 2,216,690 1,829,762 1,946,472 1,895,944 2,008,976 2,001,188 $ 8,547,733 $ 7,886,851 $ 8,004,579 $ 8,198,605 $ 8,689,884 $ 8,618,997 $ 144,883 $ 187,628 $ 199,394 $ 260,440 $ 256,069 $ 228,775 604,400 599,810 642,680 617,557 608,410 546,388 4,137 226 1,222 940 263 - 79,206 120,794 102,985 108,884 156,271 96,381 102,959 144,112 48,284 86,370 95,802 90,788 - - 811,522 184,605 1,400,957 835,083 935,585 1,052,570 1,806,087 1,258,796 2,517,772 1,797,415 757,395 537,713 443,467 544,748 421,290 416,938 831,640 834,320 852,254 858,066 878,999 913,115 157,585 165,713 164,666 154,929 154,180 156,951 193,931 194,950 220,658 227,676 275,171 341,180 23,007 25,830 31,279 26,198 48,724 32,152 22,400 53,200 115,490 5,706 388,077 349,472 1,985,958 1,811,726 1,827,814 1,817,323 2,166,441 2,209,808 $ 2,921,543 $ 2,864,296 $ 3,633,901 $ 3,076,119 $ 4,684,213 $ 4,007,223 111 Net Revenues (Expenses) Governmental activities Business -type activities Total Primary Government City of Shorewood, Minnesota Statistical Section (Unaudited) Changes in Net Position (Continued) Last Ten Fiscal Years (Accrual Basis of Accounting) Fiscal Year 2008 2009 2010 2011 $ (5,561,022) $ (5,563,745) $ (5,336,687) $ (5,414,020) 80,383 49,996 (42,011) (361,042) $ (5,480,639) $ (5,513,749) $ (5,378,698) $ (5,775,062) General Revenues and Other Changes in Net Position General Revenues Governmental activities Taxes Property taxes, levied for general purpose Grants and contributions not restricted to specific programs Unrestricted investment earnings Gain on sale of capital assets Transfers of capital assets Transfers Total Governmental Activities General Revenues Business -type activities Unrestricted investment earnings Gain on sale of capital assets Transfers of capital assets Transfers Total Business -type Activities General Revenues Total Primary Government Change in Net Position Governmental activities Business -type activities $ 4,582,909 $ 4,743,174 $ 4,744,348 $ 4,733,948 19,957 4,940 4,487 4,751 641,846 333,626 132,359 56,705 - - 31,130 28,500 40,000 1,040,000 813,431 - 5,284,712 6,121,740 5,725,755 4,823,904 289,669 102,833 85,080 62,345 (40,000) (1,040,000) (813,431) - 249,669 (937,167) (728,351) 62,345 $ 5,534,381 $ 5,184,573 $ 4,997,404 $ 4,886,249 $ (276,310) $ 557,995 $ 389,068 $ (590,116) 330,052 (887,171) (770,362) (298,697) Total Primary Government $ 53,742 $ (329,176) $ (381,294) $ (888,813) 112 Table 2 Fiscal Year 2012 2013 2014 2015 2016 2017 $ (5,395,458) $ (5,004,519) $ (4,252,020) $ (5,043,865) $ (4,163,136) $ (4,820,394) (230,732) (18,036) (118,658) (78,621) 157,465 208,620 $ (5,626,190) $ (5,022,555) $ (4,370,678) $ (5,122,486) $ (4,005,671) $ (4,611,774) $ 4,761,213 $ 4,768,989 $ 4,854,521 $ 4,931,075 $ 5,127,950 $ 5,189,101 6,019 5,818 5,848 5,840 5,844 23,644 61,584 37,461 86,530 60,283 99,369 75,256 - 76,981 - 30,000 - 5,500 - - - (245,121) - (395,707) - - 25,000 270,121 25,000 47,844 4,828,816 4,889,249 4,971,899 5,052,198 5,258,163 4,945,638 64,135 32,913 95,130 68,119 72,579 51,732 - - - 245,121 - 395,707 - - (25,000) (270,121) (25,000) (47,844) 64,135 32,913 70,130 43,119 47,579 399,595 $ 4,892,951 $ 4,922,162 $ 5,042,029 $ 5,095,317 $ 5,305,742 $ 5,345,233 $ (566,642) $ (115,270) $ 719,879 $ 8,333 $ 1,095,027 $ 125,244 (166,597) 14,877 (48,528) (35,502) 205,044 608,215 $ (731239) $ (100,393) $ 671,351 $ (27,169) $ 1,300,071 $ 733,459 113 City of Shorewood, Minnesota Statistical Section (Unaudited) Fund Balances of Governmental Funds Last Ten Fiscal Years General Fund Reserved Unreserved Nonspendable Unassigned Total General Fund All Other Governmental Funds Reserved Unreserved, reported in Special revenue funds Capital project funds Nonspendable Restricted Assigned Unassigned Total All Other Governmental Funds Fiscal Year 2008 2009 2010 2011 $ 47,750 $ 500 $ 49,060 $ - 3,660,359 3,555,224 3,477,932 - - - - 48,000 - - - 3,440,227 $ 3,708,109 $ 3,555,724 $ 3,526,992 $ 3,488,227 $ 10,033,342 $ 1,934,628 $ 3,743,980 4,252,870 96,333 $ (17,650) 4,520,558 150,068 30,439 4,229,528 $ 13,777,322 $ 6,187,498 $ 4,599,241 $ 4,410,035 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. 114 Table 3 Fiscal Year 2012 2013 2014 2015 2016 2017 115 50,000 33,016 103,996 99,216 6,687 132,477 3,574,468 3,943,342 3,981,475 4,402,951 4,597,896 4,029,572 $ 3,624,468 $ 3,976,358 $ 4,085,471 $ 4,502,167 $ 4,604,583 $ 4,162,049 150,068 150,068 - - - - 17,700 24,450 25,654 31,805 18,449 61,998 4,368,656 3,117,434 3,339,005 3,304,064 3,261,170 4,055,571 (75,325) (52,437) - - (972,608) (1,685,146) $ 4,461,099 $ 3,239,515 $ 3,364,659 $ 3,335,869 $ 2,307,011 $ 2,432,423 115 City of Shorewood, Minnesota Statistical Section (Unaudited) Changes in Fund Balances of Governmental Funds Last Ten Fiscal Years Expenditures General government 1,443,549 Fiscal Year 1,147,198 1,306,948 2008 2009 2010 2011 Revenues Public works 760,287 670,954 859,069 Taxes $ 4,582,602 $ 4,703,368 $ 4,717,204 $ 4,787,195 Licenses and permits 195,419 127,883 154,113 174,119 Intergovernmental 753,605 66,411 173,334 72,968 Charges for services 50,753 41,649 100,899 102,500 Fines and forfeitures 53,369 52,968 55,806 52,635 Special assessments - - 333 - Interest on investments 641,846 333,626 132,359 56,705 Miscellaneous 1,053,916 1,059,914 1,037,522 1,032,566 Total Revenues 7,331,510 6,385,819 6,371,570 6,278,688 Expenditures General government 1,443,549 1,386,614 1,147,198 1,306,948 Public safety 1,352,254 1,392,139 1,392,923 1,460,664 Public works 760,287 670,954 859,069 866,413 Culture and recreation 229,259 326,502 342,654 343,326 Capital outlay 2,164,366 1,953,756 2,075,109 1,457,001 Debt service - - - - Principal 485,000 520,000 600,000 625,000 Interest and service charges 977,957 818,063 516,167 447,307 Bond issuance costs 58,569 - - - Total Expenditures 7,471,241 7,068,028 6,933,120 6,506,659 Debt Service as a Percentage of Excess (Deficiency) of Revenues Noncapital Expenditures Over (Under) Expenditures (139,731) (682,209) (561,550) (227,971) Other Financing Sources (Uses) Transfers in 933,366 2,059,773 1,942,550 984,541 Sale of capital assets - - 31,130 - Proceeds from sale of bonds 1,310,000 - - - Payment on refunding bonds - (8,100,000) (1,900,000) - Discount on long -term debt issued - - - - Bond premium - - - - Transfers out (893,366) (1,019,773) (1,129,119) (984,541) Total Other Financing Sources (Uses) 1,350,000 (7,060,000) (1,055,439) - Net Change in Fund Balances $ 1,210,269 $ (7,742,209) $ (1,616,989) $ (227,971) Debt Service as a Percentage of Noncapital Expenditures 23.1% 22.4% 19.1% 18.4% 116 Table 4 Fiscal Year 2012 2013 2014 2015 2016 2017 $ 4,783,939 $ 4,764,472 $ 4,864,095 $ 4,949,126 $ 5,129,620 $ 5,221,374 175,087 204,600 270,841 275,567 340,112 315,574 76,102 76,544 891,055 156,771 97,735 461,633 121,625 92,549 90,825 116,337 169,400 409,244 66,230 59,294 64,290 65,234 48,868 76,056 61,584 37,461 86,530 60,283 99,369 75,256 1,288,704 1,249,616 1,198,707 1,247,105 1,413,329 1,493,020 1,445,149 1,494,633 1,526,786 1,579,400 1,623,749 1,722,628 823,234 860,071 743,803 726,905 786,780 751,394 331,524 324,745 310,051 344,793 361,128 409,010 1,230,058 2,660,830 2,391,855 1,885,739 4,177,073 2,892,039 655,000 675,000 705,000 735,000 6,480,000 870,000 439,429 391,213 367,396 330,931 434,990 181,605 6,213,098 7,656,108 7,243,598 6,849,873 15,277,049 8,319,696 187,305 (1,186,876) 209,257 117,785 (6,959,737) (394,966) 1,170,216 2,482,650 1,340,120 1,313,634 1,412,313 1,871,243 - 317,182 - - - - - - - - 5,910,000 950,000 - - - - - (920,000) - - - - 98,295 - (1,170,216) (2,482,650) (1,315,120) (1,043,513) (1,387,313) (1,823,399) $ 187,305 $ (869,694) $ 234,257 $ 387,906 $ (926,442) $ (317,122) 18.3% 18.5% 18.5% 17.9% 57.2% 16.2% 117 City of Shorewood, Minnesota Statistical Section (Unaudited) Tax Capacity, Market Value and Estimated Actual Value of Taxable Property (Shown by Year of Tax Collectability) Taxable Market Value Personal property Real estate Total Taxable Market Value Estimated Actual Value of Taxable Property Taxable Market Value as a Percentage of Estimated Actual Value Tax Capacity Personal property Real estate Total Tax Capacity Contribution to Fiscal Disparities Pool Receivable from Fiscal Disparities Pool Net Tax Capacity Tax Levies General Debt service Total Direct Tax Rate General Debt service Total $ 4,336,600 1,597,262,400 $1,601,599,000 $1,645,188,300 2009 $ 4,764,900 1,651,054,700 $1,655,819,600 $1,673,720,100 $ 4,629,900 1, 631, 938, 000 $1,636,567,900 $1,638,118,400 2011 $ 4,948,300 1, 507, 900, 600 $1,512,848,900 $1,514,456,700 97.35 % 98.93 % 99.91 % 99.89 $ 84,780 17, 619, 943 17,704,723 (351,789) 445,780 $ 17,798,714 $ 4,056,917 555,078 $ 4,611,995 22.793 % 25.912 % $ 91,548 18, 305,114 18, 396, 662 (396,336) 513,259 $ 18,513,585 $ 4,158,672 617,620 $ 4,776,292 22.463 % 3.336 25.799 % $ 88,848 18, 087, 557 18,176,405 (432,995) 526,521 $ 18,269,931 $ 4,160,292 616,000 $ 4,776,292 22.771 % 26.143 % Source: Hennepin County Assessor Note: Property in the county is reassessed annually. The county assesses property at approximately 90 percent of actual value for all types of real and personal property. 118 $ 95,216 16,620,629 16, 715, 845 (419,002) 478,935 $ 16,775,778 $ 4,158,672 604,647 $ 4,763,319 24.790 % 3.604 28.394 % Table 5 2012 2013 2014 2015 2016 2017 $ 5,291,700 $ 6,006,500 $ 6,068,600 $ 6,348,000 $ 6,514,900 $ 7,209,300 1,430,712,101 1,367,209,584 1,345,804,540 1,449,497,111 1,517,977,665 1,581,429,840 $1,436,003,801 $1,373,216,084 $1,351,873,140 $1,455,845,111 $1,524,492,565 $1,588,639,140 $1,453,867,700 $1,392,562,700 $1,371,752,400 $1,472,996,800 $1,539,170,100 $1,602,654,100 98.77 % 98.61 % 98.55 % 98.84 % 99.05 % 99.13 % $ 102,084 $ 113,130 $ 114,632 $ 122,460 $ 125,798 $ 139,686 15,761,142 15,025,751 14,770,327 15,926,414 16,691,552 17,449,210 15, 863, 226 15,138, 881 14, 884, 959 16, 048, 874 16, 817, 350 17, 588, 896 (389,965) (393,282) (393,620) (399,759) (395,610) (420,193) 435,462 368,528 374,494 377,934 376,674 413,438 $ 15,908,723 $ 15,114,127 $ 14,865,833 $ 16,027,049 $ 16,798,414 $ 17,582,141 $ 4,158,672 $ 4,763,319 $ 4,858,585 $ 4,931,464 $ 5,079,408 $ 5,180,996 $ 4,158,672 $ 4,763,319 $ 4,858,585 $ 4,931,464 $ 5,079,408 $ 5,180,996 26.141 % 31.516 % 32.683 % 30.770 % 30.237 % 29.467 % 26.141 % 31.516 % 32.683 % 30.770 % 30.237 % 29.467 % 119 City of Shorewood, Minnesota Statistical Section (Unaudited) Property Tax Capacity Rates - Direct and Overlapping Governments (Per $1,000 of Tax Capacity in 2008 - 2017) Table 6 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). 120 Totals School District Overlapping Rates School District No. 276 No. 277 Year (1) Watershed Watershed Watershed Taxes School District Watershed District District District District Payable City County No. 276 No. 277 No.3 No.4 Misc. No.3 No.4 No.3 2008 25.912 % 38.571 17.980 % 8.521 % 1.404 % 1.302 % 7.397 % 91.264 % 91.162 % 81.805 % 2009 25.799 40.413 17.186 8.284 1.489 1.246 7.154 92.041 91.798 83.139 2010 26.143 42.640 18.657 9.772 1.511 1.279 8.138 97.089 96.857 88.204 2011 28.394 45.840 21.274 10.900 1.606 1.352 9.172 106.286 106.032 95.912 2012 26.141 48.231 23.015 17.262 1.705 1.387 9.923 109.015 108.697 103.262 2013 31.516 49.461 24.487 18.119 1.769 1.523 10.089 117.322 117.076 110.954 2014 32.683 49.959 24.374 19.075 1.806 1.880 10.561 119.383 119.457 114.084 2015 30.770 46.398 25.093 20.377 1.738 1.855 9.785 113.784 113.901 109.068 2016 30.237 45.356 22.887 19.991 1.724 1.745 9.530 109.734 109.755 106.838 2017 29.467 44.087 22.770 20.744 1.738 1.992 9.319 107.381 107.635 105.355 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). 120 City of Shorewood, Minnesota Statistical Section (Unaudited) Principal Taxpayers Current Year and Nine Years Ago Table 7 Source: Hennepin County Assessor 121 2017 2008 Percent Percent Tax of Total Tax of Total Taxpayer Capacity Rank Tax Capacity Capacity Rank Tax Capacity Kraus - Anderson $158,530 1 0.90 % $129,250 2 0.73 % Big Box One, LLC 130,310 2 0.74 159,250 1 0.89 Shurgard Storage Center 81,870 3 0.47 77,250 3 0.43 South Lake Office Building LLC 76,210 4 0.43 70,750 4 0.40 DMA Investments, LLC 58,175 5 0.33 - - - Alerus (formerly Beacon Bank) 57,750 6 0.33 64,250 5 0.36 Elaine & Gary Jarrett 56,650 7 0.32 - - - Ryan Simon 55,888 8 0.32 - - - Waterford Center LLP 53,790 9 0.31 53,250 9 0.30 Luaina Santelli 49,038 10 0.28 49,288 10 0.28 Kimberley & Frank Vennes - - - 62,025 6 0.35 The Mary Sue Simon Qprt - - - 54,638 7 0.31 Minnetonka Country Club - - - 54,090 8 0.30 Totals $ 778,211 4.43 % $ 774,041 4.35 % Source: Hennepin County Assessor 121 Fiscal 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 City of Shorewood, Minnesota Statistical Section (Unaudited) Property Tax Levies and Collections Last Ten Fiscal Years Percentage (1) of Levy Collection Total of Current Levy Year's Levy 98.59 % $ 61,628 $ 4,611,995 $ 4,546,899 4,776,292 4,649,904 4,776,292 4,685,060 4,763,319 4,706,900 4,763,319 4,717,658 4,763,319 4,720,748 4,858,585 4,812,478 4,931,464 4,907,222 5,079,408 5,091,851 5,180,996 5,184,635 Percentage Collection of Levy in subsequent Collected years 98.59 % $ 61,628 97.35 121,741 98.09 88,075 98.82 56,419 99.04 45,661 99.11 41,683 99.05 43,263 99.51 16,706 100.24 16,345 100.07 - Total $ 4,608,527 4,771,645 4,773,135 4,763,319 4,763,319 4,762,431 4,855,741 4,923,928 5,108,196 5,184,635 Table 8 Percent of Total Collections to Levy 99.92 % 99.90 99.93 100.00 100.00 99.98 99.94 99.85 100.57 100.07 (1) Includes state paid property tax credits. * Noted collections more than 100 percent of levy due to current year adjustment of market value or other adjustments. 122 City of Shorewood, Minnesota Statistical Section (Unaudited) Ratio of Net Bonded Debt to Assessed Value and Net Bonded Debt Per Capita Last Ten Fiscal Years Business - type Governmental Activities Activities General Fiscal Obligation Year Bonds 2008 $ 2009 2010 2011 2012 2013 2014 2015 2016 2017 Lease Revenue Bonds - $ 21,915,000 $ - 13,295,000 - 10,795,000 - 10,170,000 - 9,515,000 - 8,840,000 - 8,135,000 - 7,400,000 - 6,915,732 - 6,063,169 Capital Leases General Total Obligation Primary Revenue Bonds Government - $ 3,415,000 $ 25,330,000 - 3,165,000 16,460,000 - 2,915,000 13,710,000 - 2,675,000 12,845,000 - 2,500,000 12,015,000 - 3,540,000 12,380,000 - 2,160,000 10,295,000 - 1,900,000 9,300,000 - 1,635,000 8,550,732 - 1,370,000 7,433,169 Table 9 Percentage of Personal Per Income Capita 5.87 % $ 3,199 4.14 2,076 3.19 1,876 2.96 1,785 2.86 1,615 2.83 1,664 2.26 1,368 1.99 1,253 1.93 1,129 1.51 992 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 127 for personal income and population data. 123 THIS PAGE IS LEFT BLANK INTENTIONALLY 124 City of Shorewood, Minnesota Table 10 Statistical Section (Unaudited) Computation of Direct and Overlapping Debt December 31, 2017 Sources : Hennepin 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 tax capacity. Applicable percentages were estimated by determining the portion of each overlapping government's tax capacity within the City's boundaries and dividing it by that governments's total tax capacity. 125 Amount of Percentage Net Debt Net Applicable to Applicable Debt District to District Direct Debt City of Shorewood $ 6,063,170 100.00 % $ 6,063,170 Overlapping Debt School District #276 $ 121,300,944 19.13 % $ 23,204,871 School District #277 43,193,204 2.01 868,183 Hennepin County 911,083,511 1.09 9,930,810 Henn Suburban Park District 45,784,829 1.52 695,929 Henn Regional RR Authority 26,942,546 1.52 409,527 Metropolitan Council 12,606,580 0.56 70,597 Total Overlapping Debt $1,160,911,614 3.03 % $ 35,179,918 Total Direct and Overlapping Debt $1,166,974,784 3.53 % $ 41,243,088 Sources : Hennepin 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 tax capacity. Applicable percentages were estimated by determining the portion of each overlapping government's tax capacity within the City's boundaries and dividing it by that governments's total tax capacity. 125 Debt Limit Total Net Debt Applicable to Limit Legal Debt Margin Total Net Debt Applicable to the Limit as a Percentage of Debt Limit City of Shorewood, Minnesota Statistical Section (Unaudited) Legal Debt Margin Information Last Ten Fiscal Years Fiscal Year 2008 2009 2010 2011 $ 32,031,980 $ 33,116,392 $ 32,731,358 $ 30,256,978 $ 32,031,980 $ 33,116,392 $ 32,731,358 $ 30,256,978 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. 126 Table 11 Fiscal Year 2012 2013 2014 2015 2016 2017 $ 28,720,076 $ 27,464,322 $ 40,556,194 $ 43,675,353 $ 45,734,777 $ 47,659,174 $ 28,720,076 $ 27,464,322 $ 40,556,194 $ 43,675,353 $ 45,734,777 $ 47,659,174 Legal Debt Margin Calculation for Fiscal Year 2017 Taxable Market Value Debt Limit (3% of Market Value) Debt Applicable to Limit General obligation bonds Less: amount available in debt service funds Total Net Debt Applicable to Limit Legal Debt Margin 127 $1,588,639,140 47,659,174 $ 47,659,174 City of Shorewood, Minnesota Statistical Section (Unaudited) Pledged - Revenue Coverage Last Ten Fiscal Years Table 12 (1) Including interest and other income (2) Excluding depreciation and interest on bonds Fiscal Year 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Lease Revenue Bonds Revenue from Lease Debt Service Payments Principal 737,863 General Obligation Revenue Bonds $ 1,037,241 $ 485,000 992,835 (1) 982,037 Net 902,003 575,000 978,744 Fiscal Gross (2) Revenue Debt Service 958,569 Year Revenue Expenses Available Principal Interest Coverage 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 2016 727,126 439,737 287,389 265,000 18,183 1.01 2017 709,647 412,513 297,134 265,000 15,883 1.06 (1) Including interest and other income (2) Excluding depreciation and interest on bonds Fiscal Year 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Lease Revenue Bonds Revenue from Lease Debt Service Payments Principal 737,863 0.81 $ 1,037,241 $ 485,000 992,835 495,000 982,037 555,000 902,003 575,000 978,744 605,000 972,513 625,000 969,650 650,000 958,569 680,000 776,980 6,420,000 950,216 805,000 128 Interest Coverage $ 970,065 0.71 % 737,863 0.81 457,840 0.97 393,357 0.93 372,230 1.00 335,513 1.01 335,513 0.98 284,419 0.99 389,201 0.11 119,500 1.03 Fiscal 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 City of Shorewood, Minnesota Statistical Section (Unaudited) Demographic and Economic Statistics Last Ten Fiscal Years Data Sources: (1) Metropolitan Council (2) US Census Bureau (3) US Census Bureau (4) US Census Bureau (5) Bureau of Labor Statistics - Hennepin County Table 13 Unemployment Rate (5) 4.9 % 7.3 7.0 6.1 5.2 4.6 3.8 3.3 3.4 2.6 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. 129 Percent of Population Total Per Capita Which Has a Personal Personal Median Bachelor's or Post Population (1) Income (2) Income (2) Age (3) Graduate Degree (4) 7,917 $ 431,535,825 $ 54,425 39.0 7,929 397,683,475 54,425 39.0 7,307 429,651,600 58,800 39.1 7,307 433,743,520 59,360 44.2 51.1 % 7,312 420,264,512 57,476 44.1 49.8 7,438 438,083,324 58,898 43.6 56.4 7,524 455,961,924 60,601 44.5 61.8 7,425 466,700,130 61,295 43.7 63.1 7,458 436,598,778 58,541 45.3 62.8 7,496 491,250,360 65,535 46.4 65.9 Data Sources: (1) Metropolitan Council (2) US Census Bureau (3) US Census Bureau (4) US Census Bureau (5) Bureau of Labor Statistics - Hennepin County Table 13 Unemployment Rate (5) 4.9 % 7.3 7.0 6.1 5.2 4.6 3.8 3.3 3.4 2.6 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. 129 City of Shorewood, Minnesota Statistical Section (Unaudited) Principal Employers Current Year and Nine Years Ago 2017 Employer Employees Minnewashta Elementary School 123 Cub Foods 121 Xcel Energy 75 Alerus (formerly Beacon Bank) 34 City of Shorewood 26 * Park Nicollet Clinic 20 * Minnetonka Country Club - Total 399 Total City Employment 1,251 Table 14 2008 Source: City of Shorewood * Includes part -time and temporary seasonal employees. N/A - indicates not available 130 Percentage Percentage of Total City of Total City Rank Employment Employees Rank Employment 1 9.83 % 351 1 N/A % 2 9.67 125 2 N/A 3 6.00 60 3 N/A 4 2.72 39 4 N/A 5 2.08 34 6 N/A 6 1.60 - N/A - 30 5 N/A 31.89 % 639 - % N/A Source: City of Shorewood * Includes part -time and temporary seasonal employees. N/A - indicates not available 130 Function General Government Public Works Engineering Maintenance Culture and Recreation Parks Economic Development Water Sewer Total Source: City of Shorewood 131 City of Shorewood, Minnesota Table 15 Statistical Section (Unaudited) Full -time Equivalent City Government Employees by Function Last Ten Fiscal Years 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 13 12 12 10 10 9 9 9 10 10 6 6 6 5 5 6 6 6 6 6 5 5 5 3 3 2 2 2 2 2 1.5 1.5 1.5 1.5 1.5 1.2 1 1 1 1 1.5 1.5 1.5 1.5 1.5 1.5 2 2 1 1 27 26 26 22 22 20 20 20 20 20 131 Source: City of Shorewood Note: Indicators are not available for the general government function. 132 City of Shorewood, Minnesota Table 16 Statistical Section (Unaudited) Operating Indicators by Function Last Ten Fiscal Years Function 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Building /Engineering Permits issued 686 603 591 512 585 481 792 684 786 844 Public Works Street sweeping (hours) 1,500 1,550 1,400 1,600 1,600 1,400 1,400 1,400 1,450 1,600 Snowplowing (hours) 1,508 765 1,024 895 616 1,403 833 530 400 500 Equipment repair (hours) 2,080 2,080 1,280 1,591 1,725 1,716 1,542 1,551 1,705 1,950 Water New connections 13 11 1 2 3 9 - 4 5 16 Water mains breaks 3 3 5 6 7 3 7 6 4 7 Average daily consumption (gallons) 482 467 467 465 465 465 465 465 339 361 Sewer Average daily treatment flow (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. 132 City of Shorewood, Minnesota Statistical Section (Unaudited) Capital Asset Statistics by Function Last Ten Fiscal Years Table 17 Function 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Public Works Highways and streets Streets (miles) 51 51 51 51 51 51 51 51 51 51 Street lights 194 194 194 194 194 194 194 194 195 195 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 4.00 4.00 5.80 5.80 5.80 Hockey rinks /outdoor 3 3 3 3 3 3 3 3 2 2 Softball diamonds 3 3 3 3 3 3 3 3 3 3 Swimming areas 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 28 28 28 28 28 28 28 28 29 30 Consumers 1,310 1,321 1,322 1,324 1,327 1,336 1,336 1,340 1,398 1,479 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 13 Source: City of Shorewood Note: No capital asset indicators are available for the general government function. 133