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Home My WebLink About2009 06-01 CCP Joint Work Session with Financial Commission AGENDA CITY COUNCIL/FINANCIAL COMMISSION JOINT WORK SESSION June 1, 2009 6:30 P.M. Council Chambers City Hall 1. Call to Order 2. Comprehensive Annual Financial Report for 2008 a. Auditor's Opinion, Special Purpose Audit Reports, Management Report Malloy, Montague, Karnowski Radosovich, Ltd. b. Staff Comments c. Questions and Comments 3. Adjourn CITY OF BROOKLYN CENTER HENNEPIN COUNTY, MINNESOTA Special Purpose Audit Reports Year Ended December 31, 2008 I CITY OF BROOKLYN CENTER 1 HENNEPIN COUNTY, MINNESOTA Year Ended December 31, 2008 Table of Contents Page Independent Auditor's Report on Internal Control Over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements Performed in Accordance With Government Auditing Standards 1 -2 1 Independent Auditor's Report on Compliance With Minnesota State Laws and Regulations 3 Schedule of Findings and Responses 4-8 1 1 i 1 1 1 1 PRINCIPALS Kenneth W. Malloy, CPA KR Thomas M. Montague, CPA Thomas A. Karnowski, CPA Paul A. Radosevich, CPA C E R T I F I E D PUBLIC William J. Lauer, CPA ACCOUNTANTS James H. Eichten, CPA Aaron J. Nielsen, CPA Victoria L. Holinka, CPA INDEPENDENT AUDITOR'S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS City Council and Residents City of Brooklyn Center, Minnesota We have audited the financial statements of the governmental activities, the business -type activities, each major fund, and the aggregate remaining fund information of the City of Brooklyn Center (the City) as of and for the year ended December 31, 2008, which collectively comprise the City's basic financial statements, and have issued our report thereon dated May 26, 2009. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Internal Control Over Financial Reporting t In planning and performing our audit, we considered the City's internal control over financial reporting as a basis for designing our auditing procedures for the purpose of expressing our opinion on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of the City's internal control over financial reporting. Accordingly, we do not express an opinion on the effectiveness of the City's internal control over financial reporting. Our consideration of internal control over financial reporting was for the limited purpose described in the preceding paragraph and would not necessarily identify all deficiencies in internal control over financial reporting that might be significant deficiencies or material weaknesses. However, as discussed below, we identified certain deficiencies in internal control over financial reporting that we consider to be significant deficiencies. A control deficiency exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent or detect misstatements on a timely basis. A significant deficiency is a control deficiency, or combination of control deficiencies, that adversely affects the City's ability to initiate, authorize, record, process, or report financial data reliably in accordance with accounting principles generally accepted in the United States of America such that there is more than a remote likelihood that a misstatement of the City's financial statements that is more than inconsequential will not be prevented or detected by the City's internal control. We consider the deficiencies described in the accompanying Schedule of Findings and Responses as items 2008 -1, 2008 -2, 2008 -3, 2008 -4, 2008 -5, and 2008 -6 to be significant deficiencies in internal control over financial reporting. (continued) -1- 1 Malloy, Montague, Karnowski, Radosevich Co., P.A. 5353 Wayzata Boulevard Suite 410 Minneapolis, MN 55416 Telephone: 952- 545 -0424 Telefax: 952 -545 -0569 www.mmkr.com A material weakness is a significant deficiency, or combination of significant deficiencies, that results in more than a remote likelihood that a material misstatement of the financial statements will not be prevented or detected by the City's internal control. Our consideration of internal control over financial reporting was for the limited purpose described in the first paragraph of this section and would not necessarily identify all deficiencies in internal control that might be significant deficiencies and, accordingly, would not necessarily disclose all significant deficiencies that are also considered to be material weaknesses. However, we consider item 2008 -5 of the significant deficiencies listed on the previous page to be a material weakness. Compliance and Other Matters As part of obtaining reasonable assurance about whether the City's financial statements are free of material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts, and grants agreements, noncompliance with which could have a direct and material affect on the determination of financial statement amounts. However, providing an opinion on compliance with those provisions was not an objective of our audit and, accordingly, we do not express such an opinion. The results of our tests disclosed no instances of noncompliance or other matters that are required to be reported under Government Auditing Standards. The City's responses to the findings identified in our audit are described in the accompanying Schedule of Findings and Responses. We did not audit the City's responses and, accordingly, we express no opinion on them. This report is intended solely for the information and use of the City Council and management of the City and is not intended to be, and should not be, used by anyone other than these specified parties. May 26, 2009 -2- PRINCIPALS Kenneth W. Malloy, CPA V'�AKR Thomas M. Montague, CPA Thomas A. Karnowski, CPA Paul A. Radosevich, CPA C E R T I F I E D PUBLIC William J. Lauer, CPA A C C O U N T A N T S James H. Eichten, CPA Aaron J. Nielsen, CPA Victoria L. Holinka, CPA INDEPENDENT AUDITOR'S REPORT ON COMPLIANCE WITH MINNESOTA STATE LAWS AND REGULATIONS City Council and Residents City of Brooklyn Center, Minnesota We have audited the financial statements of the governmental activities, the business -type activities, each major fund, and the aggregate remaining fund information of the City of Brooklyn Center (the City) as of and for the year ended December 31, 2008, which collectively comprise the City's basic financial statements, and have issued our report thereon dated May 26, 2009. We conducted our audit in accordance with auditing standards generally accepted in the United States of America; the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States; and the provisions of the Minnesota Legal Compliance Audit Guide for Local Governments, promulgated by the State Auditor pursuant to Minnesota Statute 6.65. Accordingly, the audit included such tests of the accounting records and such other auditing procedures as we considered necessary in the circumstances. The Minnesota Legal Compliance Audit Guide for Local Governments covers seven main categories of compliance to be tested: contracting and bidding, deposits and investments, conflicts of interest, public indebtedness, claims and disbursements, miscellaneous provisions, and tax increment financing. Our study included all of the listed categories. The results of our tests indicate that, for the items tested, the City complied with the material terms and conditions of applicable legal provisions, except as noted in the Schedule of Findings and Responses. This report is intended solely for the information and use of the City Council, management of the City, and the state of Minnesota and is not intended to be, and should not be, used by anyone other than these specified parties. ,/10A/ _ogV2� 1Ca��cNlS�G•� �kdOSBt/•cLi� Cd May 26, 2009 i i -3- Malloy, Montague, Karnowski, Radosevich Co., P.A. 5353 Wayzata Boulevard Suite 410 Minneapolis, MN 55416 Telephone: 952- 545 -0424 Telefax: 952- 545 -0569 www.mmkr.com CITY OF BROOKLYN CENTER Schedule of Findings and Responses Year Ended December 31, 2008 This schedule summarizes findings and responses relating to compliance with Minnesota Statutes, internal controls, and compliance findings. The auditor, Malloy, Montague, Karnowski, Radosevich Co., P.A. (MMKR), is responsible for providing the information under the headings "Criteria," "Condition," "Cause," "Effect," and "Recommendation." The City of Brooklyn Center (the City) is responsible for providing the information under the heading "Management's Response." A. FINDINGS INTERNAL CONTROL OVER FINANCIAL REPORTING 2008 -1 PAYROLL SEGREGATION OF DUTIES Criteria Generally, a system of internal control contemplates a segregation of duties such that no individual has responsibility to execute a transaction, have physical access to the related assets, and have responsibility or authority to record the transaction. Condition The City does not have proper segregation of duties over the processing of payroll transactions. t Cause The individual processing payroll at the City is not independent of other personnel duties. This individual is able to prepare the payroll, but is not restricted from changing computerized personnel data. This individual also has the ability to create new employees and assign and change wage rate information. Effect This lack of ideal segregation of duties subjects the City to a higher risk that errors or fraud could occur and not be detected in a timely manner. Recommendation We recommend that the City segregate duties over the processing of payroll transactions. The individual responsible for the processing of payroll should not have responsibility for and be independent of any personnel duties. Further, this individual should be restricted from changing any personnel data, including creating new employees or assigning or changing wage rate information. Management's Response There is no disagreement with the audit finding. Under policies to be established, the payroll technician will not be responsible for personnel duties nor will the payroll technician modify, add, or delete any personnel data. The supervisor for the payroll technician will periodically review payroll exception reports and/or payroll changes to assure that no unauthorized additional employees have been included. In addition, the City will ask that LOGIS explore the possibility of establishing restrictions on access to the payroll database by the payroll technician. 2008 -2 LACK OF MANAGEMENT APPROVAL I Criteria Management is responsible for establishing and maintaining effective internal controls. These controls include the establishment of a review and approval process by an appropriate level of management. -4- CITY OF BROOKLYN CENTER Schedule of Findings and Responses (continued) Year Ended December 31, 2008 A. FINDINGS INTERNAL CONTROL OVER FINANCIAL REPORTING (CONTINUED) 2008 -2 LACK OF MANAGEMENT APPROVAL (CONTINUED) Condition We noted two areas within the accounting and reporting internal accounting control systems that lacked management approval: Bank reconciliations are reconciled monthly; however, these reconciliations are not approved by an appropriate level of management. There is no approval of payroll by management, nor are payroll registers reviewed throughout the year. The allocation of payroll costs should also be monitored and approved by department heads on a periodic basis. Cause Management is not requiring approval of certain transactions within the internal accounting control systems of the City. Effect This lack of approval process subjects the City to a higher risk that errors or fraud could occur and not be detected in a timely manner. Recommendation We recommend that the City establish procedures to incorporate management approval in the following areas: Incorporate into the internal controls a review of the bank reconciliation on a monthly basis. We recommend that management periodically review the P ayroll registers. t We recommend a periodic review of the allocation of payroll costs to the general ledger to ensure that they are being coded to the appropriate accounts, funds, and programs. Management's Response There is no disagreement with the audit finding. Bank reconciliations will be reviewed by the city treasurer monthly and approval or modification will be noted in writing. The supervisor for the payroll technician will periodically review the payroll register on a random sample basis to assure accurate and appropriate transactions. Department P heads will periodically review the general ledger status of the payroll accounts measured against the fiscal year's budget. 2008 -3 INADEQUATE DOCUMENTATION OF THE COMPONENTS OF INTERNAL CONTROLS Criteria Management is responsible for establishing and maintaining effective internal controls. Condition New auditing and reporting standards specify that inadequate documentation of the components of internal controls are considered a significant deficiency in the design of internal controls. The City had numerous policies and procedures within its internal control system; however, the accounting procedures are not in writing and, therefore, a finding exists. This is the case because implied or verbal procedures are subject to greater variation of meaning and the likelihood of misinterpretation increases when procedures are not in writing. -5- CITY OF BROOKLYN CENTER Schedule of Findings and Responses (continued) Year Ended December 31, 2008 A. FINDINGS INTERNAL CONTROL OVER FINANCIAL REPORTING (CONTINUED) 2008 -3 INADEQUATE DOCUMENTATION OF THE COMPONENTS OF INTERNAL CONTROLS (CONTINUED) Cause The City does not have formal written accounting and financial reporting procedures. Effect Implied or verbal accounting procedures are subject to greater variation of meaning and the likelihood of misinterpretation increases when accounting procedures are not written. Recommendation We recommend that the City establish formal written internal control accounting procedures. Management's Response There is no disagreement with the audit finding. The City will develop a procedures manual for accounting, payroll, and reporting procedures during 2009. 2008 -4 UTILITY BILLING SYSTEM t Criteria Management is responsible for establishing and maintaining effective internal controls. The design of a city's internal control system should include appropriate safeguards so that misstatements due to error or fraud are prevented or detected in a timely manner. Condition The water consumption for residential utility billing is currently dependent on the readings from individual customers. The City has minimal procedures in place to verify the accuracy in the reading being provided by each resident. The City currently only verifies the reading if it is unusual in nature or the resident is moving. Without a periodic review of the water consumption, there is a risk of underreported usage to occur and not be detected in a timely manner. Cause The City has not established procedures regarding periodic verification of residential meter readings. Effect By not having such controls, there is an increased risk that errors may occur and not be detected by city management. Recommendation We recommend that the City establish policies and procedures to conduct a more frequent verification of meter readings. Management's Response There is no disagreement with the audit finding. The City is currently in the process of replacing all water meters and installing an automated utility billing system. This project will be completed in fiscal year 2009 and should eliminate this finding. 2008 -5 CAPITAL ASSETS AND LAND HELD FOR RESALE INTERNAL CONTROLS Criteria Management is responsible for establishing and maintaining effective internal controls. The design of a city's internal control system should include appropriate safeguards so that financial statement misstatements are prevented or detected in a timely manner. -6- CITY OF BROOKLYN CENTER Schedule of Findings and Responses (continued) e Year Ended December 31, 2008 A. FINDINGS INTERNAL CONTROL OVER FINANCIAL REPORTING (CONTINUED) 2008 -5 CAPITAL ASSETS AND LAND HELD FOR RESALE INTERNAL CONTROLS (CONTINUED) Condition During the year ended December 31, 2008, the City recorded a prior period adjustment to properly record the capital assets and land held for resale of the City. This adjustment was made to eliminate land that was previously included in capital assets but should not have been, to record land that was previously excluded from the City's fixed assets and land held for resale listings, as well as to reclassify land to land improvements and properly depreciate the improvements. Cause The City was not including the cost of all land that the county identified as city- owned. The City also included a portion of land that was bought in the prior year with the intent of selling it this year. The City also had some land improvements recorded as land which were not being properly depreciated. Effect The recording of a prior period adjustment and correction of an error is an indication of a lack of control procedures and as such is required to be reported as a significant deficiency in internal controls. Recommendation We recommend that the City improve controls over the processing of capital assets and land held for resale to ensure future adjustments to prior periods are not required. Management's Response There is no disagreement with the audit finding. The situation was addressed and procedures are in place to assure that land held for resale is treated properly in the future at the point of purchase and/or sale. 2008 -6 OTHER POST EMPLOYMENT BENEFITS (OPEB) Criteria Management is responsible for establishing and maintaining effective internal controls. These internal controls include the maintenance of accounting records to support the amounts and disclosures in the City's financial statements. Condition The City provides other post employment healthcare benefits for certain retirees. The City determines eligibility for these benefits based on requirements outlined in City Council resolutions. There are two methods whereby employees can qualify for these benefits. During our audit we were unable to obtain documentation of the eligibility for these benefits for certain employees who are currently receiving these benefits. We also noted that one of the methods the City uses to determine eligibility is difficult to verify as its criteria is based on another organization's eligibility requirements that are outside the control of the City. Cause The City does not have adequate documentation of the eligibility of retirees for other post employment benefits and certain eligibility requirements of city employees for retiree benefits are difficult to determine. Effect The City may be paying other post employment benefits to retirees that do not qualify or could have difficulty determining eligibility for these benefits for current employees based on current written eligibility standards. -7- CITY OF BROOKLYN CENTER Schedule of Findings and Responses (continued) Year Ended December 31, 2008 B. FINDINGS MINNESOTA LEGAL COMPLIANCE 2008 -6 OTHER POST EMPLOYMENT BENEFITS (OPEB) (CONTINUED) Recommendation We recommend that the City improve documentation of the eligibility of retirees for other post employment benefits for those that currently qualify for these benefits. We also recommend that the City consider clarifying the language in the City Council resolutions to make it less difficult to determine eligibility for these benefits for current employees. Management's Response There is no disagreement with the finding. The policy will be changed to require that retiring employees to whom the City's OPEB program may be available will be required to provide the human resources department with written proof from the Public Employees' Retirement Association (PERA) of Minnesota prior to the retirement date that the employee is eligible for full, unreduced PERA retirement benefits at the expected date of retirement. 2008 -7 CLAIMS AND DISBURSEMENTS 1 Criteria Minnesota Statute 471.425, Subd. 2. Condition Minnesota Statute 471.425, Subd. 2 requires cities to pay each vendor obligation according to the terms of each contract within 35 days after the receipt of the goods or services or the invoice for the goods or services. If such obligations are not paid within the appropriate time period, the City must pay interest on the unpaid obligations at the rate of 1.5 percent per month or part of a month. For one disbursement selected for testing, the City did not pay the obligation within the required time period, and did not pay interest on the unpaid obligation. Cause There was a timing delay from when the invoice was approved for payment, and when it was sent back to the finance department for payment. Effect Certain payments made to vendors were not paid within the timeframe as required by state statute, and the vendors were not paid the interest to which they were entitled. Recommendation We recommend that the City review the claims and disbursement payment procedures in place to ensure future compliance with this statute. Management's Response There is no disagreement with the audit finding. The incident was reviewed by management, the cause for the violation discovered, and the invoice payment process was passed reiterated to the appropriate staff. In the future, invoices exceeding the 35 -day payment window will be paid with an additional 1.5 percent fee included as required by state law. -8- 1 Management Report for City of Brooklyn Center, Minnesota December 31, 2008 1 PRINCIPALS Kenneth W. Malloy, CPA KR Thomas M. Montague, CPA Thomas A. Karnowski, CPA Paul A. Radosevich, CPA C E R T I F I E D PUBLIC William J. Lauer, CPA ACCOUNTANTS James H. Eichten, CPA Aaron J. Nielsen, CPA Victoria L. Holinka, CPA To the City Council City of Brooklyn Center, Minnesota We have prepared this management report in conjunction with our audit of the City of Brooklyn Center's (the City) financial report for the year ending December 31, 2008. The purpose of this report is to communicate information relevant to city finances in Minnesota and to provide comments resulting from our audit process. We have organized this report into the following sections: Audit Summary Funding Cities in Minnesota Governmental Funds Overview Financial Trends and Analysis Accounting and Auditing Updates We would be pleased to further discuss any of the information contained in this report or any other concerns that you would like us to address. We would also like to express our thanks for the courtesy and assistance extended to us during the course of our audit. This report is intended solely for the information and use of management, those charged with governance of the City, and those who have responsibility for oversight of the financial reporting process. May 26, 2009 J Malloy, Montague, Karnowski, Radosevich Co., P.A. 5353 Wayzata Boulevard Suite 410 Minneapolis, MN 55416 Telephone: 952- 545 -0424 Telefax: 952 -545 -0569 www.mmkr.com AUDIT SUMMARY The following is a summary of our audit work, key conclusions, and other information that we consider important or that is required to be communicated to the City Council, administration, or audit committee of the City. UNDERSTANDING THE AUDITOR'S RESPONSIBILITY Our responsibility, as stated in our engagement letter and as described by professional standards, is to plan and perform our audit to obtain reasonable, but not absolute, assurance about whether the financial statements are free of material misstatement and are fairly presented in accordance with accounting principles generally accepted in the United States of America. Because an audit is designed to provide reasonable, but not absolute assurance and because we did not perform a detailed examination of all transactions, there is a risk that material misstatements may exist and not be detected by us. Our audit of the financial statements does not relieve you or management of your responsibilities. As part of our audit, we considered the internal control of the City. Such considerations were solely for the purpose of determining our audit procedures and not to provide any assurance concerning such internal control. As part of obtaining reasonable assurance about whether the financial statements are free of material misstatement, we performed tests of the City's compliance with certain provisions of laws, regulations, contracts, and grants. However, the objective of our tests was not to provide an opinion on compliance with such provisions. PLANNED SCOPE AND TIMING OF THE AUDIT We performed the audit according to the planned scope and timing previously discussed and coordinated in order to obtain sufficient audit evidence and complete an effective audit. AUDIT OPINION AND FINDINGS r Based on our audit of the City's financial statements for the year ended December 31, 2008: We have issued an unqualified opinion on the City's financial statements. p h' We noted six matters involving the City's internal control over financial reporting that we considered to be significant deficiencies, one of which was considered to be a material weakness. These include the following findings: Segregation of duties within payroll, Lack of management approval of various accounting transactions, Inadequate documentation of the components of internal controls, Lack of established procedures over the verification of utility meter readings, Prior period adjustment of capital assets and land held for resale records, and Documentation of eligibility for other post employment benefits. The results of our testing disclosed no instances of noncompliance that are required to be reported under Government Auditing Standards. We have reported p rted one finding based on our testing of the City's compliance with Minnesota Laws and regulations. This relates to one invoice that was not paid on a timely basis. -1- SIGNIFICANT ACCOUNTING POLICIES Management is responsible for the selection and use of appropriate accounting policies. The significant accounting policies used by the City are described in Note 1 of the notes to basic financial statements. The City implemented Governmental Accounting Standards Board (GASB) Statement No. 45, "Accounting and Financial Reporting by Employers for Post Employment Benefits Other Than Pensions," during the year ended December 31, 2008. This statement provides new guidance on accounting and financial reporting for "other post employment benefits" (OPEB) accounted for in the financial statements of plan sponsors or employers. The City did recognize in the financial statements a prior period adjustment to properly record capital assets and land held for resale in the governmental activities and eliminate an asset that should not have been in fixed assets last year. There were no other significant transactions that we noted that were recognized in the financial statements in a different period than when the transaction occurred. AUDIT ADJUSTMENTS Professional standards require us to accumulate all known and likely misstatements identified during the audit, other than those that are trivial, and communicate them to the appropriate level of management. Professional standards define an audit adjustment as a proposed correction of the financial statements that, in our judgment, may not have been detected except through our auditing procedures. An audit adjustment may or may not indicate matters that could have a significant effect on the City's financial reporting process (that is, cause future financial statements to be materially misstated). We proposed one uncorrected audit adjustment to the financial statements for the reporting of governmental activities unamortized discounts on bond proceeds totaling $261,282. Management has determined that the effects of this item are immaterial, both individually and in the aggregate, to the financial statements taken as a whole. ACCOUNTING ESTIMATES AND MANAGEMENT JUDGMENTS Accounting estimates are an integral part of the basic financial statements prepared by management and are based on management's knowledge and experience about past and current events and assumptions about future events. Certain accounting estimates are particularly sensitive because of their significance to the financial statements and because of the possibility that future events affecting them may differ significantly from those expected. The most sensitive estimates affecting the financial statements were as follows: Depreciation Management's estimates of depreciation expense are based on the estimated useful lives of the assets. Net Other Post Employment Benefit (OPEB) Liabilities Actuarial estimates of the net OPEB obligation is based on eligible participants, estimated future health insurance premiums, and estimated retirement dates. Land Held for Resale Management's estimates of this asset are based on net realizable value (lower of cost or estimated sales price). Management expects any differences between estimates and actual amounts of these estimates to be insignificant. We reviewed and tested management's procedures and underlying supporting documentation in the area discussed above. We concluded that the accounting estimates and management judgments appeared to consider all significant factors and resulted in appropriate accounting recognition. -2 MANAGEMENT REPRESENTATIONS We have requested certain representations from management that are included in the management representation letter dated May 26, 2009. DISAGREEMENTS ENCOUNTERED IN PERFORMING THE AUDIT We encountered no significant difficulties in dealing with management in performing and completing our audit. I DISAGREEMENTS WITH MANAGEMENT For purposes of this report, professional standards define a disagreement with management as a financial accounting, reporting, or auditing matter, whether or not resolved to our satisfaction, that could be significant to the financial statements or the auditor's report. We are pleased to report that no such disagreements arose during the course of our audit. MANAGEMENT CONSULTATIONS WITH OTHER INDEPENDENT ACCOUNTANTS In some cases, management may decide to consult with other accountants about auditing and accounting matters, similar to obtaining a "second opinion" on certain situations. If a consultation involves application of an accounting principle to the City's financial statements or a determination of the type of auditor's opinion that may be expressed on those statements, our professional standards require the consulting accountant to check with us to determine that the consultant has all the relevant facts. To our knowledge, there were no such consultations with other accountants. OTHER MATTERS We generally discuss a variety of matters, including the application of accounting principles and auditing standards, with management each year prior to retention as the City's auditors. However, these discussions occurred in the normal course of our professional relationship and our responses were not a condition to our retention. -3- LEGISLATION FUNDING CITIES IN MINNESOTA The following is a brief summary of recent legislative activity affecting the finances of Minnesota cities: Levy Limitations The 2008 Legislature passed a law that will limit general operating property tax levy increases for Minnesota cities with populations over 2,500 to 3.9 percent annually for the next three years. Local Government Aid (LGA) and Market Value Homestead Credit (MVHC) Due to the state's economic condition, Minnesota cities received "unallotment" notices reducing the payment of these state aids for the second half of 2008. It is expected that these payments may again be reduced to cities for the 2009 fiscal year. I FEDERAL RECOVERY ACT The American Recovery and Reinvestment Act of 2009 is expected to provide approximately $300 billion in federal funds to state and local governments, and to institutions of higher education. These funds are intended to supplement existing federal programs, create new programs, or provide more broad fiscal relief. Many cities are hoping to receive some of these temporary funds for programs and projects. The American Recovery and Reinvestment Act of 2009 mandates that there be an unprecedented amount of oversight and transparency around the spending of these funds, including specific audit requirements. The additional internal control requirements include the need for controls over the acceptance of recovery funds, appropriate controls over the segregation of these funds from other sources of revenue, compliance with the additional laws and regulations specific to each grant award, and additional financial reporting requirements back to the appropriate federal agency. 1 These additional controls also include considerations into whether control procedures are in place over the federal grant expenditures to prevent unallowable expenditures, consideration into whether additional controls and systems will be needed to ensure funds are able to be separately tracked and identified, and consideration into if controls are sufficient for any funds that are passed along to subrecipients. PROPERTY TAXES Our management reports have tracked the evolution of property tax reform in Minnesota, and explained its impact on cities and their property owners. Now, with very little change in property tax formulas, attention is turning toward our current real estate and housing environment, mortgage foreclosures, and the world economy. -4- 1 Property values within Minnesota cities experienced average increases of 11.0 percent for taxes payable in 2007 and 7.0 percent for those payable in 2008, reflecting the slowdown in growth of market values. In comparison, the City's market value increased by 5.1 percent in 2007 and 2.7 percent in 2008. It is important to remember that the 2008 market value is based on estimated values as of January 1, 2007, and the housing market is still experiencing difficult times. The following graph shows the City's changes in taxable market value over the past 10 years: Taxable Market Value $2,500,000,000 $2,000,000,000 $1,500,000,000 $1,000,000,000 $500,000,000 1 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 Tax capacity is considered the actual base available for taxation. It is calculated by applying the state's property classification system to each property's market value. Each property classification has a different calculation and uses different rates. The graphs show that tax capacities have not increased at the same rate as market values, primarily due to property tax reform occurring over this period of time. The following graph shows the City's change in tax capacities over the past 10 years: Tax Capacity $30,000,000 $25,000,000 1 $20,000,000 $15,000,000 I $10,000,000 $5,000,000 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 Although it is impossible to consider every aspect and variable of local government spending, average tax rates are often used as a benchmark. -5- i Rates expressed as a percentage of net tax capacity All Cities Seven -County City of State -Wide Metro Area Brooklyn Center 2007 2008 2007 2008 2007 2008 Average tax rate City 36.1 36.3 33.4 33.6 44.3 43.9 County 38.5 38.0 35.2 34.9 39.1 38.6 School 22.2 21.1 22.7 21.3 28.1 26.6 Special taxing 5.5 5.6 6.8 7.0 8.4 8.8 Total 102.3 101.0 98.1 96.8 119.9 117.9 Both the City's portion and the total tax capacity rates for Brooklyn Center residents are significantly 1 higher than the state -wide and metro area averages the last two years. These rates are higher than average due to a combination of factors, including lower than average property values, makeup of residential properties, and the use of tax increments within the City. -6- t GOVERNMENTAL FUNDS OVERVIEW This section of the report provides you with an overview of the financial trends and activities of the City's governmental funds. Governmental funds include the General Fund and the special revenue, debt service, and capital project funds. We have also included the most recent comparative state -wide averages available from the State Auditor. The reader needs to consider the effect of inflation and other known changes or differences when comparing this data. Also, certain data on these tables may be classified differently than how they appear on the City's financial statements in order to be more comparable to the state -wide information, particularly in separating capital expenditures from current expenditures. We have designed this section of our management report using per capita data in order to better identify unique or unusual trends and activities of your city. We intend for this type of comparative and trend information to complement, rather than duplicate, information in the Management's Discussion and Analysis. An inherent difficulty in presenting per capita information is the accuracy of the population count, which for most years is based on estimates. Governmental Funds Revenue The amounts received from the typical major sources of revenue will naturally vary between cities based on their particular situation. This would include the City's stage of development; location, size, and density of its population; property values; services it provides; and other attributes. The following table presents the per capita revenue of the City's governmental funds for the past three years, together with comparative state -wide averages: Governmental Funds Revenue per Capita With State -Wide Averages by Population Class State -Wide City of Brooklyn Center Year December 31, 2007 2006 2007 2008 Population 2,500 10,000 10,000 20,000 20,000 100,000 27,901 27,901 27,907 Property taxes 333 332 353 413 433 444 Tax increments 46 52 56 95 98 104 Franchise fees and other taxes 22 32 35 50 49 45 Special assessments 89 54 73 44 49 46 Licenses and permits 33 28 37 26 24 23 Intergovernmental revenues 273 267 169 85 114 79 Charges for services 106 88 82 26 25 27 Other 126 108 113 84 79 53 Total revenue 1,028 961 918 823 871 821 The City relies more on property tax revenue for its governmental funds revenue compared to the average Minnesota city. The City continues to generate significantly more tax increment revenue per capita than average, as it has made extensive use of this tool to finance commercial development. However, because the City is a mature suburb, it generates less special assessment revenue (typically used for new development). The City's per capita governmental funds revenue for 2008 was $821, a decrease of about 5.7 percent from the prior year. This was primarily the result of the decrease in intergovernmental revenue and other revenue. The decrease in intergovernmental revenue, which decreased $35 per capita, was mainly due to significantly less LGA received. With the decline in the market, investment earnings decreased compared to the prior year, causing other revenue to decrease $26 per capita. -7- Governmental Funds Expenditures The expenditures of governmental funds will also vary from state -wide averages and from year -to -year, based on the City's circumstances. Expenditures are classified into three types as follows: Current These are typically the general operating type expenditures occurring on an annual basis, and are primarily funded by general sources such as taxes and intergovernmental revenues. a Capital Outlay and Construction These expenditures do not occur on a consistent basis, more typically fluctuating significantly from year -to -year. Many of these expenditures are project- oriented, which are often funded by specific sources that have benefited from the expenditure, such as special assessment improvement projects. Debt Service Although the expenditures for the debt service may be relatively consistent over the term of the respective debt, the funding source is the important factor. Some debt may be repaid through specific sources such as special assessments or redevelopment funding, while other debt may be repaid with general property taxes. The City's per capita governmental funds expenditures for the past three years, together with state -wide averages, are presented in the following table: Governmental Funds Expenditures per Capita With State -Wide Averages by Population Class State -Wide City of Brooklyn Center Year December 31, 2007 2006 2007 2008 Population 2,500- 10,000 10,000 20,000 20,000 100,000 27,901 27,901 27,907 Current General government 122 106 83 102 106 128 Public safety 208 224 223 262 271 288 Street maintenance 110 105 94 65 83 77 Parks and recreation 62 83 82 79 83 86 All other 85 98 97 48 192 259 587 616 579 556 735 838 Capital outlay and construction 481 341 328 212 162 162 Debt service Principal 161 133 100 112 100 103 Interest and fiscal 71 47 39 45 41 41 232 180 139 157 141 144 The City's governmental funds current per capita expenditures are higher than state -wide averages for cities in the same population class. The City's current operating costs are higher than average mostly related to higher than average public safety costs. The City's per capita current expenditures increased significantly in 2008 as the City expended significant funds in Tax Increment District #3 for acquisition and development of properties within the City. Debt service costs per capita are very comparable to averages for other cities state -wide. -8- i i FINANCIAL TRENDS AND ANALYSIS GENERAL FUND i The City's General Fund accounts for the financial activity of the basic services provided to the community. The primary services included within this fund are the administration of the municipal operations, police and fire protection, building inspection, streets and highway maintenance, and parks i and recreation. The graph below illustrates the change in the General Fund financial position over the last six years. We have also included an expenditure line to reflect the change in the size of the General Fund operation over the same period. General Fund Financial Position Year Ended December 31, $18,000,000 i $16,000,000 $14,000,000 $12,000,000 $10,000,000 $8,000,000 $6,000,000 i $4,000,000 $2,000,000 r 2003 2004 2005 2006 2007 2008 r Fund Balance U Cash Balance (Net of Interf nid Borrowing) Expenditures The City's General Fund cash and investments balance (net of interfund borrowing) at December 31, 2008 was $8,286,381, which decreased $191,636 from 2007. Total fund balance at December 31, 2008 was $7,743,438, down $198,976 from the prior year. Having an appropriate fund balance is an important factor in assessing the City's financial health because r a government, like any organization, requires a certain amount of equity to operate. Generally, the amount of equity required typically increases as the size of the operation increases. A healthy financial position allows the City to avoid volatility in tax rates; helps minimize the impact of state funding i changes; allows for the adequate and consistent funding of services, repairs, and unexpected costs; and can be a factor in determining the City's bond rating and resulting interest costs. The City currently has an operating fund reserve policy that states the General Fund will manage its cash flow by having a targeted unreserved General Fund balance at the end of the fiscal year of between 50 percent and 52 percent of next year's General Fund budgeted expenditures. At December 31, 2008, the City's General Fund had a fund balance of 48.3 percent of the City's annual General Fund i expenditures, based on 2008 expenditure levels. -9- The following graph reflects the City's General Fund reliance on its revenue sources for 2008: General Fund Revenue Taxes Licenses/Permits Intergovernmental Charges for Services Other i 0 0 0 0 0 0 0 0 0 0 0 0 O� O� 0 O� 0 O� O� OQ O� O� O� O� 0 0 0 00 0 00 0 0 0 0 0 0 0 z Actual Budget Total General Fund revenues for 2008 were $15,027,144, a decrease of $561,777 or 3.6 percent from the previous year, and $471,692 (3.0 percent) under the final budget. Intergovernmental revenues were under budget by $539,736 due to the City receiving less LGA than budgeted. Licenses and permits were also under budget by $80,109 due to the building and mechanical permits being lower then expected. The following graph presents the City's General Fund revenue sources for the last six years. The graph reflects a common trend experienced by Minnesota cities over the past few years with decreased or minimal increases in state aids. This trend forces a higher reliance on taxes and other sources to fund the natural increases in costs over time. I General Fund Revenue by Source Year Ended December 31, $13,500,000 $12,000,000 $10,500,000 $9,000,000 $7,500,000 $6,000,000 $4,500,000 $3,000,000 $1,500,000 2003 2004 2005 2006 2007 2008 Taxes Intergovernmental Other The decrease in revenue in 2008 in the above graph was related to the decreases described above. Intergovernmental revenue decreased about $685,000 as LGA to the City decreased approximately $655,000 in 2008. -10- The following illustrations provide you with the components of the City's General Fund spending for 2008 and for the past six years: General Fund Expenditures General Government Public Safety Public Works Parks and Recreation Other II/ 000 O0 0 O0 0 00 0 00 0 00 0 00 0 00 0 0 00 0 00^ 0 00 0 00^ 0 00^ 0 00 0 00 0 00 0 Actual Budget Total General Fund expenditures for 2008 were $16,023,895, an increase of $655,331 (4.3 percent) from the prior year, and $184,941 (1.1 percent) less than budget. General Fund Expenditures by Function Year Ended December 31, t $8,000,000 $7,000,000 $6,000,000 $5,000,000 $4,000,000 $3,000,000 $2,000,000 $1,000,000 1 2003 2004 2005 2006 2007 2008 General Government 0 Public Safety Public Works Parks and Recreation Other General Fund expenditures increased in all the departments with the largest increases being in the public safety department by approximately $404,000 or 5.5 percent mainly related to increases in personnel costs for police protection and general government by about $325,000 or 10.9 percent related to increases in personnel costs, legal fees, election judge costs, heating expenses, and building repairs. -11- UTILITY FUNDS The utility funds comprise a considerable portion of the City's activities. These funds significantly help to defray overhead and administrative costs and provide additional support to general government operations by way of annual transfers. We understand the City is proactive in reviewing these activities on an ongoing basis and we want to reiterate the importance of continually monitoring these operations. Over the years we have emphasized to our city clients the importance of these utility operations being self sustaining, preventing additional burdens on general governmental funds. This would include the accumulation of net assets for future capital improvements and to provide a cushion in the event of a negative trend in operations. Water Fund The following graph presents six years of operating results for the Water Fund: Water Fund Year Ended December 31, $2,250,000 $2,000,000 $1,750,000 $1,500,000 $1,250,000 $1,000,000 $750,000 $500,000 $250,000 $(250,000) 2003 2004 2005 2006 2007 2008 1 Operating Revenue Operating Expenses Operating Income (Loss) The Water Fund ended 2008 with net assets of $11,746,572, an increase of $280,452 from the prior year. Of this, $8,759,388 represents the investment in utility distribution system capital assets, leaving $2,987,184 of unrestricted net assets. 1 Water Fund operating revenue was $1,967,534 for 2008, a decrease of $72,145 mostly due to a decrease in consumption during 2008. The City also changed utility billing systems in 2008. Previously, all penalty revenue was coded to the Water Fund, but the new system allows the City to code penalty charges to each respective fund causing revenue in the Water Fund to decrease. Operating expenses were $58,164 more than last year. -12- Sanitary Sewer Fund The following graph presents six years of operating results for the Sanitary Sewer Fund: Sanitary Sewer Fund Year Ended December 31, $3,500,000 $3,000,000 $2,500,000 $2,000,000 $1,500,000 $1,000,000 $500,000 $(500,000) 2003 2004 2005 2006 2007 2008 Operating Revenue Operating Expenses Operating Income (Loss) The Sanitary Sewer Fund ended 2008 with net assets of $12,763,481, an increase of $328,974 from the prior year. Of this, $9,596,222 represents the investment in the sanitary sewer capital assets, leaving $3,167,259 of unrestricted net assets. Sanitary Sewer Fund operating revenues for 2008 were $3,264,115, about $8,413 lower than last year. The slight decrease in revenue is due to a combination of decreased consumption and an increase in rates in 2008. Operating expenses for 2008 were $3,007,199, an increase of $75,191 from the prior year. This increase is mostly related to an increase in fees from Metropolitan Council Environmental Services for sewer treatment services. -13- Storm Drainage Fund The following graph presents six years of operating results for the Storm Drainage Fund: Storm Drainage Fund Year Ended December 31, $1,600,000 $1,400,000 $1,200,000 $1,000,000 $800,000 $600,000 $400,000 $200,000 2003 2004 2005 2006 2007 2008 =Operating Revenue Operating Expenses Operating Income (Loss) The Storm Drainage Fund ended 2008 with net assets of $17,900,117, an increase of $1,904,082 from the prior year. Of this, $15,604,876 represents the investment in capital assets, leaving $2,295,241 of unrestricted net assets. Storm Drainage Fund operating revenues for 2008 were $1,553,036, about $140,488 higher than last year. Most of the increase relates to an increase in rates in 2008. Also, due to the new billing system, penalty revenue is now allocated to each fund, which was part of the increase in revenue in 2008. Operating expenses for 2008 were $1,155,241, about $30,566 higher than the prior year. Much of this increase relates to the increase in depreciation expense in the current year. 1 1 -14- OTHER ENTERPRISE FUNDS Liquor Fund The following graph presents six years of operating results for the Liquor Fund: Liquor Fund Year Ended December 31, $6,000,000 $5,500,000 $5,000,000 $4,500,000 $4,000,000 $3,500,000 $3,000,000 $2,500,000 $2,000,000 $1,500,000 $1,000,000 1 $500,000 2003 2004 2005 2006 2007 2008 U i Sales Cost of Sales Operating Expenses Operating Income (Loss) The Liquor Fund ended 2008 with net assets of $1,939,204, an increase of $270,720 from the prior year. Of the net asset balance, $48,206 represents the investment in liquor capital assets, leaving $1,890,998 of unrestricted net assets. Liquor sales for 2008 were $5,484,529, about $9,895 (0.2 percent) more than last year. Sales have steadily increased over the last several years, increasing by about 36 percent since 2004. The Liquor Fund generated operating income of $365,989 in 2008, or about 6.7 percent of gross sales compared to 5.8 percent of gross sales in fiscal 2007. The Liquor Fund gross profit margin has been similar for the last several years, ranging from 23.7 percent to 27.1 percent between 2004 and 2008. Operating expenses for 2008 were $1,120,842, about $89,000 or 8.6 percent higher than last year. -15- i Earle Brown Heritage Center Fund i The following graph presents six years of operating results for the Earle Brown Heritage Center Fund: i Earle Brown Heritage Center Fund Year Ended December 31, $4,500,000 i $4,000,000 $3,500,000 i $3,000,000 $2,500,000 i $2,000,000 $1,500,000 $1,000,000 $500,000 $(500,000) $(1,000,000) 2003 2004 2005 2006 2007 2008 O Sales and User Fees Operating Expenses Cost of Sales Operating Income (Loss) i The Earle Brown Heritage Center Fund ended 2008 with net assets of $7,454,587, a decrease of $313,440 from the prior year. Of the net asset balance, $6,489,694 represents investments in Earle Brown Heritage Center capital assets, leaving $964,893 of unrestricted net assets. Earle Brown Heritage Center Fund sales and user fees for 2008 were $3,831,972, about $493,324 (11.4 percent) less than last year. Operating expenses for 2008 were $2,395,926, a decrease of $35,986 from the prior year. -16- i Golf Course Fund t The following graph presents six years of operating results for the Golf Course Fund: Golf Course Fund Year Ended December 31, $350,000 $300,000 $250,000 $200,000 $150,000 $100,000 $50,000 $(50,000) $(100,000) 2003 2004 2005 2006 2007 2008 M I Operating Revenue Operating Expenses Operating Income (Loss) The Golf Course Fund ended 2008 with net assets of $874,676, a decrease of $46,446 from the prior year. Of this, $1,660,857 represents the investment in golf course land and capital assets, leaving a deficit of ($786,181) of unrestricted net assets. Golf Course Fund operating revenues for 2008 were $253,824, about $1,204 more than last year. Operating expenses for 2008 were $301,140, down $13,116 from the prior year. On an annual basis, this fund has had to borrow from other funds to fund cash flow needs. This interfund borrowing was a total of $792,488 at December 31, 2008. We recommend that the City continue to monitor the financial results in this fund. We also recommend that the City continue to update the long -range financial plan for this fund, including progress toward having adequate resources for the payback of interfund borrowing. I -17- GOVERNMENT -WIDE FINANCIAL STATEMENTS The City's financial statements include fund -based information that focuses on budgetary compliance, and the sufficiency of the City's current assets to finance its current liabilities. The GASB Statement No. 34 reporting model also requires the inclusion of two government -wide financial statements designed to present a clear picture of the City as a single, unified entity. These government -wide statements provide information on the total cost of delivering services, including capital assets and long -term liabilities. Statement of Net Assets The Statement of Net Assets essentially tells you what your city owns and owes at a given point in time, the last day of the fiscal year. Theoretically, net assets represent the resources the City has leftover to use for providing services after its debts are settled. However, those resources are not always in spendable form, or there may be restrictions on how some of those resources can be used. Therefore, the Statement of Net Assets divides the net assets into three components: net assets invested in capital assets, net of related debt; restricted net assets; and unrestricted net assets. The following table presents the City's net assets as of December 31, 2008 for governmental activities and business -type activities: Governmental Business -Type Activities Activities Total Net assets Current and other assets 57,191,433 11,315,281 68,506,714 Net book value of capital assets 39,386,221 42,572,360 81,958,581 Current liabilities (6,112,138) (848,362) (6,960,500) Long -term liabilities (26,500,403) (26,500,403) i' Total net assets 63,965,113 53,039,279 117,004,392 Net assets Invested in capital assets, net of related debt 31,423,905 42,572,360 72,993,581 Restricted 31,850,784 31,850,784 Unrestricted 690,424 10,466,919 12,160,027 Total net assets 63,965,113 53,039,279 117,004,392 The City's total net assets at December 31, 2008 were $2,441,307 higher than at the beginning of the year, not including a prior period adjustment to correct capital assets and land held for resale balances in fiscal 2008. It also does not include the increase in net assets related to the change in accounting principle due to the implementation of GASB Statement No. 45, "Accounting and Financial Reporting by Employers for Post Employment Benefits Other Than Pensions." The amount invested in capital assets, net of related debt decreased by $995,992 in fiscal 2008. Restricted and unrestricted net assets increased about $3,437,299. At the end of the current fiscal year, the City is able to present positive balances in all three categories of net assets, both for the City as a whole, as well as for its separate governmental and business -type activities. The same situation held true for the prior fiscal year. e -18- ACCOUNTING AND AUDITING UPDATES GASB STATEMENT N0.45 ACCOUNTING AND FINANCIAL REPORTING BY EMPLOYERS FOR POST EMPLOYMENT BENEFITS OTHER THAN PENSIONS This statement provides new guidance on accounting and reporting for post employment benefits other than pensions by employers when the plan is not accounted for in their financial statements. OPEB refer to non pension benefits provided after the termination of employment. One example of this type of benefit is healthcare premiums paid by employers on behalf of former employees. Governmental entities have traditionally accounted for OPEB on a pay -as- you -go basis, with only a few governments funding these benefits in advance of payment. The guidance in this statement rests on the assumption that OPEB liabilities should be accrued as they are earned by employees providing service to the entity. Under GASB Statement No. 45, governments offering OPEB will recognize the cost of these benefits using a three -step approach. The government will be required to project future benefits, discount those benefits to their present value, then use an acceptable actuarial method to allocate costs to individual accounting periods. Once calculated, the difference between the present value of OPEB benefits earned by employees as the result of past service and resources set aside to pay those benefits will be considered the "unfunded actuarial liability for OPEB." Every employer will be allowed to start fresh at the time of transition to the new standard. There will be no requirement for an employer to recognize an accounting liability for underfunding prior to the implementation of the new standard. Instead, the unfunded actuarial accrued liability for OPEB at transition would be amortized over 30 years. As long as an employer funds the full amount of the actuarially determined annual required contribution (ARC) for these benefits each year, no asset or liability will be reported on the Statement of Net Assets. However, an employer will need to report a "net pension obligation" on its Statement of Net Assets as an asset or liability if it contributes more or less, respectively, than the ARC each year. Nothing in the statement is intended to alter the normal application of modified accrual accounting in the governmental funds of the entity. Thus, in governmental funds, OPEB expenditures normally would be recognized when the benefits are due and payable rather than when benefits are earned. The guidance will require that actuarial valuations for OPEB occur at least every two years for plans with 200 or more members, and every 3 years for plans with fewer than 200 members. A sole employer plan with fewer than 100 plan members has the option to apply a simplified alternative measurement method rather than obtain actuarial valuations. The statement will become effective in three phases based on the same criteria as those defined for the implementation of GASB Statement No. 34. GASB Statement No. 45 will be phased in for cities over a three -year period, which started with category one cities in the fiscal year ending December 31, 2007. GASB STATEMENT N0.47 ACCOUNTING FOR TERMINATION BENEFITS GASB Statement No. 47 provides accounting and reporting guidance for state and local governments that offer benefits such as early retirement incentives or severance to employees that are involuntarily terminated. The statement requires that similar forms of termination benefits be accounted for in the same manner and is intended to enhance both the consistency of reporting for termination benefits and the comparability of financial statements. GASB Statement No. 47 is effective for financial statements for periods beginning after June 15, 2005, or may be implemented simultaneously with GASB Statement No. 45, depending on your circumstances. -19- GASB STATEMENT N0.50 PENSION DISCLOSURES AN AMENDMENT OF GASB STATEMENT NOS. 25 AND 27 This statement expands the disclosure requirements for pension plans, similar to those requirements in GASB Statement Nos. 43 and 45. This will require additional discussion on funding status, use of assumptions, and the determination of contribution rates. This statement is effective for cities for the year ended December 31, 2008. GASB STATEMENT N0.51— ACCOUNTING AND FINANCIAL REPORTING FOR INTANGIBLE ASSETS Governments possess many different types of assets that may be considered intangible assets, including easements, water rights, timber rights, patents, trademarks, and computer software. This statement requires that all intangible assets not specifically excluded by its scope provisions be classified as capital assets. The requirements in this statement improve financial reporting by reducing inconsistencies that have developed in accounting and financial reporting for intangible assets. These inconsistencies will be reduced through the clarification that intangible assets subject to the provisions of this statement should be classified as capital assets, and through the establishment of new authoritative guidance that addresses issues specific to these intangible assets given their nature. The requirements of this statement are effective for financial statements for periods beginning after June 15, 2009. GASB STATEMENT N0.53 ACCOUNTING AND FINANCIAL REPORTING FOR DERIVATIVE INSTRUMENTS The guidance in this statement improves financial reporting by requiring governments to measure derivative instruments at fair value in their economic resources measurement focus financial statements. These improvements should allow users of those financial statements to more fully understand a government's resources available to provide services. The disclosures provide a summary of the government's derivative instrument activity and the information necessary to assess the government's objectives for derivative instruments, their significant terms, and the risks associated with the derivative instruments. The requirements of this statement are effective for financial statements for periods beginning after June 15, 2009. GASB STATEMENT NO. 54 FUND BALANCE REPORTING AND GOVERNMENTAL FUND TYPE DEFINITIONS The objective of this statement is to enhance the usefulness of fund balance information by providing clearer fund balance classifications that can be more consistently applied and by clarifying the existing governmental fund type definitions. This statement establishes fund balance classifications that comprise a hierarchy based primarily on the extent to which a government is bound to observe constraints imposed upon the use of the resources reported in governmental funds. The definitions of the general fund, special revenue fund type, capital projects fund type, debt service fund type, and permanent fund type are clarified by the provisions in this statement. The requirements are also intended to enhance the consistency between information reported in the government -wide statements and information in the governmental fund financial statements and avoid confusion about the relationship between reserved fund balance and restricted net assets. The requirements of this statement are effective for financial statements for periods beginning after June 15, 2010. -20- COMPREHENSIVE ANNUAL FINANCIAL REPORT 1 OF THE CITY OF BROOKLYN CENTER, MINNESOTA Cornelius L. Boganey City Manager Prepared By: FINANCE DIVISION DEPARTMENT OF FISCAL SUPPORT SERVICES Daniel Jordet Director Clara Hilger Assistant Finance Director FOR THE YEAR ENDED DECEMBER 31, 2008 (Member of Government Finance Officers Association of the United States and Canada) l Table of Contents INTRODUCTORY SECTION Letter of Transmittal 1 Principal Officials 6 Organizational Chart 7 Certificate of Achievement 8 FINANCIAL SECTION Independent Auditor's Report 9 Management's Discussion and Analysis 11 Basic Financial Statements: Statement of Net Assets 21 Statement of Activities 22 Governmental Funds Balance Sheet 26 Statement of Revenues, Expenditures, and Changes in Fund Balances 30 Reconciliation of the Statement of Revenues, Expenditures, and Changes in Fund Balances of the Governmental Funds to the Statement of Net Activities 33 Proprietary Funds Statement of Net Assets 34 Statement of Revenues, Expenses, and Changes in Fund Net Assets 36 Statement of Cash Flows 38 Notes to the Financial Statements 41 Reauired Sunnlementary Information: Budgetary Comparison Schedule General Fund 75 Budgetary Comparison Schedule -Tax Increment District No. 3 80 Schedule of Funding Progress Other Post Employment Benefits 81 Note to Required Supplementary Information 82 Combinine and Individual Fund Statements and Schedules: Nonmajor Governmental Funds Combining Balance Sheet 84 Combining Statement of Revenues, Expenditures and Changes in Fund Balances 85 Combining Balance Sheet Nonmajor Special Revenue Funds 88 Combining Statement of Revenues, Expenditures and Changes in Fund Balances- Nonmajor Special Revenue Funds 90 i FINANCIAL SECTION (Continued) Schedule of Revenues, Expenditures, and Changes in Fund Balance- Budget and Actual: Special Revenue Fund Housing and Redevelopment Authority 92 Special Revenue Fund Economic Development Authority 93 Special Revenue Fund -Earle Brown Tax Increment District 94 Special Revenue Fund -Tax Increment District No. 4 95 Special Revenue Fund Police Drug Forfeiture 96 Special Revenue Fund Community Development Block Grant 97 Special Revenue Fund -City Initiatives Grant 98 Combining Balance Sheet Nonmajor Debt Service Funds 100 Combining Statement of Revenues, Expenditures, and Changes in Fund Balances- Nonmajor Debt Service Funds 101 Schedule of Revenues, Expenditures, and Changes in Fund Balance- Budget and Actual: Debt Service Fund -G.O. Improvement Bonds 102 Debt Service Fund General Obligation Bonds 103 Debt Service Fund -Tax Increment Bonds 104 Combining Balance Sheet Nonmajor Capital Project Funds 106 Combining Statement of Revenues, Expenditures, and Changes in Fund Balances- Nonmajor Capital Project Funds 107 Schedule of Revenues, Expenditures, and Changes in Fund Balance- Budget and Actual: Capital Project Fund Infrastructure Construction 110 Capital Project Fund Capital Improvements 111 Capital Project Fund Municipal State Aid for Construction 112 Capital Project Fund -Earle Brown Heritage Center Improvements 113 Capital Project Fund- Street Reconstruction 114 Capital Project Fund Technology 115 Nonmajor Enterprise Funds Combining Statement of Net Assets 118 Combining Statement of Revenues, Expenses and Changes in Fund Net Assets 119 Combining Statement of Cash Flows 120 Internal Service Funds Combining Statement of Net Assets 122 Combining Statement of Revenues, Expenses and Changes in Fund Net Assets 123 Combining Statement of Cash Flows 124 ii STATISTICAL SECTION (unaudited) Net Assets by Component 126 Changes in Net Assets 127 Governmental Activities Tax Revenue by Source 131 Fund Balances Governmental Funds 132 Changes in Fund Balances Governmental Funds 134 Assessed Tax Capacity and Estimated Actual Value of Taxable Property 136 Property Tax Rates Direct and Overlapping Governments 138 Principal Property Taxpayers 140 Property Tax Levies and Collections 141 Ratios of Outstanding Debt by Type 142 Ratios of General Bonded Debt Outstanding 143 Computation of Direct and Overlapping Debt 144 Legal Debt Information 145 Pledged Revenue Coverage 146 Demographic and Economic Statistics 148 Principal Employers 149 Full Time City Government Positions by Function 150 Operating Indicators by Function 151 Capital Asset Statistics by Function 152 Hi a been left blank Intentionally This page has Y iv City of Brooklyn Center A Millennium Community June 1, 2009 Honorable Mayor and Members of the City Council City of Brooklyn Center Transmitted herewith is the Comprehensive Annual Financial Report of the City of Brooklyn Center for the fiscal year ended December 31, 2008. Management of the City of Brooklyn Center assumes full responsibility for the completeness and reliability of the information contained in this report based on the current system of internal control. Minnesota Statutes and City Charter Section 7.12 require that the financial statements of the City of Brooklyn Center be audited annually by the State Auditor or a certified public accountant selected by the City Council. These financial statements have been audited by Malloy, Montague, Karnowski, Radosevich, Co., P.A. (MMKR). Their report is included in the financial section of this report. In addition, MMKR is required to issue an opinion on the City's management and accounting for grant funds from the federal government. This "Single Audit" opinion, when included, is designed to meet the monitoring needs of federal grantor agencies. That report is not required for 2008 as the City received less than 500,000 in total federal grants. Management's Discussion and Analysis (MD&A) immediately follows the independent auditor's report and provides a narrative introduction, overview, and analysis of the basic financial statements. Management's Discussion and Analysis complements this letter of transmittal and should be read in conjunction with it. Profile of the City of Brooklyn Center The City of Brooklyn Center was incorporated in 1911 and is located in northern Hennepin County. The City has operated under the council- manager form of government since the adoption of the City Charter in 1966. The governing body is comprised of the Mayor and four Council Members elected at large. All members serve four -year terms with two of the Council Members standing for election during each national election year cycle. The Mayor and Council Members hire a City Manager who runs the daily operations of the City. The City Y P ran of Brooklyn Center provides a full a of municipal services to its citizens. 9 These include police and fire protection services, zoning and code enforcement, 6301 Shingle Creek Parkway Recreation and Community Center Phone TDD Number Brooklyn Center, MN 55430 -2199 (763) 569 -3400 City Hall TDD Number (763) 569 -3300 FAX (763) 569 -3434 FAX (763) 569 -3494 www.cityofbrooklyncenterorg municipal planning, parks, .recreation activities, construction and maintenance of streets, provision of water, wastewater collection and treatment, stormwater collection and treatment, and street lighting. Community and economic development are facilitated through the Housing and Redevelopment Authority and the Economic Development Authority. The Boards of those two organizations are comprised of the Mayor and members of the City Council. The City also has internal departments providing human resources, engineering, financial management and information technology support to these various functions. The City operates a conference and meeting facility at the Earle Brown Heritage Center, two municipal liquor stores, and Centerbrook, a nine -hole executive golf course. Financial planning and control for the City of Brooklyn Center is based on the Annual Operating Budget and the multi -year Capital Improvement Program. Under Minnesota Statutes, a preliminary property tax levy must be adopted no later than September 15 of each year for the ensuing year's collection. This establishes a maximum levy that may subsequently be lowered but not raised. A ceiling is established from time to time on that levy by the Minnesota Legislature. The ceiling is normally exclusive of levies for debt service and referendum approved levies. Effective establishment of this levy requires that a preliminary budget be prepared. The City Manager prepares such a budget each summer and presents it to the City Council in August, prior to the consideration of the preliminary tax levy. In addition, the City Council reviews the recommended rates and charges for utility funds and other operations on an annual basis as part of the budget process. Citizens receive a notice of taxes proposed for their individual properties in November based on the preliminary levies established by all taxing districts. Following the receipt of this notice citizens are invited to public hearings known as Truth in Taxation hearings in each jurisdiction. The City's hearing includes information about the budget, the property tax levy and the priorities of the City Council for the coming year as made evident by the budget allocations. Public comment is heard and considered at this hearing. The final property tax levy is adopted at a subsequent meeting. This forms the basis for the budget preparation and presentation framework. In addition a Capital Improvement Program is reviewed and revised during the budget P P 9 process each year. This includes projects for which the City may issue debt and /or assess portions of the cost to adjacent or benefited property owners. Because there are limited funds available each year and the City does not wish to issue excessive amounts of debt, these projects must be reviewed and reprioritized as the Capital Improvement Program is developed each year. Economic Condition and Outlook The City of Brooklyn Center is a northern suburb of the Twin Cities metropolitan area, adjacent to the City of Minneapolis and located 10 miles from its downtown area. The 2 City is wholly within Hennepin County and covers an area of about 8.5 square miles. The Mississippi River forms the City's eastern boundary. The City experienced its most rapid growth from 1950 to 1970 when the City's population grew from 4,300 to its peak of 35,173. The 2000 Census data for the City was 29,172, a slight increase from the 1990 Census data of 28,887. The number of housing units has remained stable at 11,430 units; there were 11,704 housing units in 1990. As in most mature, first -ring suburbs there is a slight trend toward conversion of single family homes to rental properties. The total estimated market value of real and personal property within the City increased 2.66% in 2008 over 2007, 5.13% in 2007 over 2006, and 6.39% in 2006 over 2005. Industrial values posted the largest gains going up nearly 7.6 Multi family and personal property values increased slightly from 2007 to 2008. However, the trend for increased value in the housing market reversed dramatically in 2008 and will be reflected in lower property values for residential homes for the foreseeable future. Residential foreclosures and vacant properties were another facet of the economic outlook for the City in 2008. 477 or 5.78% of non apartment residential properties in Brooklyn Center went to Sheriff's Sale during 2008 with 179 of those properties still in the redemption period as of December 31, 2008. Vacant residential properties as of December 31, 2008 numbered 293, 3.55% of the City's non apartment residential housing. Commercial /industrial properties account for 33.4% of the City's taxable net tax capacity in 2008, an increase of 3.2% over 2007. Major transportation routes in and through the City, including Interstates 94 and 694, and State Highways 100 and 252, have provided a continued impetus for development of a strong commercial tax base in the City along these corridors. Factors Affecting Financial Condition Maior Events of 2008 and Local Economv Brooklyn Center is a mature developed first ring suburb of Minneapolis that is working Y p 9 P 9 to revitalize itself. With its affordable housing, excellent schools, beautiful parks, and convenient transportation access it has the potential to continue to be a vibrant community for many years to come. There are no large, undeveloped tracts of land in Brooklyn Center and no potential for annexation of additional undeveloped land. Therefore, the revitalization of Brooklyn Center is proceeding on three tracks: replacement and renewal of the commercial areas of the City; reconstruction and enhancement of its streets, utilities, and parks; and the revitalization of neighborhoods. 3 Redevelopment continued to be the key to commercial and industrial tax base growth. The City has acquired three adjacent business properties at the intersection of Highway 100 and Interstate 94. The buildings on the sites were demolished and Phase I environmental assessments prepared. This created a 14 acre redevelopment site. Preparations for development of 140,000 square feet of Class A office space and an adjacent parking structure on 8 acres of the site are ongoing and construction is expected to begin in the fall of 2009. A 14 acre redevelopment site at the intersection of Logan and 57 Avenues has encountered delays because of environmental clean -up of contaminants from a dry cleaning establishment. The extent of the contamination has been established and remediation is underway. Study of this issue is expected to be completed early in 2009 with remediation work continuing into 2010. The City's "Opportunity Site" continues to be a focus for redevelopment efforts. The City's acquisition of a former automobile dealership site and an adjacent bar /restaurant site present an opportunity to combine parcels with adjacent properties to create redevelopment opportunities along County Road 10 and Highway 100. The hospitality industry contributes a significant amount to Brooklyn Center's economy. Lodging tax provided over 320,000 for 2008 fiscal year operations. Construction continued in 2008 on a new 260 bed hotel facility adjacent to the City's Earle Brown Heritage Center conference facility. The new hotel will be completed in 2009. Infrastructure and Transportation As part of a planned replacement of the aging infrastructure, the City continued the 9 9 tY program for street and utility improvements by reconstructing the Maranatha neighborhood streets and the Northway Drive neighborhood in 2008. When streets are reconstructed in this program, aging water, sanitary and storm sewer infrastructure is also repaired or replaced. These improvements are funded by general obligation improvement bonds supported with special assessments against benefited properties, and funds from the capital projects funds and utility enterprise funds. About one twenty -fifth of the City's streets and utilities are reconstructed each year. It is expected that this will be an ongoing process. The current Capital Improvements Plan reflects the reconstruction of all city streets and utilities by 2021. An additional benefit of these neighborhood projects has been the increased activity by residents in the maintaining and cleaning up of their properties following reconstruction projects. Development of utility rate models has improved the City's ability to generate cash flow and schedule improvements to the water and sewer systems. Separate funds for street lighting and stormwater drainage have also helped control and prioritize infrastructure improvements and operations in these areas. 4 Cash Manaaement The City of Brooklyn Center receives interest on all funds deposited by the City in its bank and investment accounts. During 2008, funds were invested in various certificates of deposit, treasury securities and mortgage back securities considered acceptable risks under the investment limitations of Minnesota Statutes 118A. At the close of the fiscal year this portfolio earned interest at rates ranging from 2.95% to 4.30% annually. In addition, the City invests in the 4M funds sponsored by the League of Minnesota Cities. 2008 saw a decrease in the rate of interest paid by the 4M funds, from 4.70% at the beginning of the year to 0.75% at the end of the year. While the return on the investment is significantly lower for 4M and 4MPlus the advantage of using these funds is liquidity. Treasury management seeks a balance between the availability of cash and investment for maximum return without undue risk of public funds. 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 Brooklyn Center for its Comprehensive Annual Financial Report (CAFR) for the fiscal year ended December 31, 2007. The City was first awarded this certificate in 1966 and has received a total of 26 certificates, including the certificate awarded for the 2007 report. In order to be awarded a Certificate of Achievement, a government must publish an easily readable and efficiently organized Comprehensive Annual Financial Report. They must satisfy both accounting principles generally accepted in the United States and applicable legal requirements. A Certificate of Achievement is valid for a period of one year. It is expected that the 2008 report conforms to Certificate of Achievement Program requirements. It will be submitted to the GFOA to determine its eligibility for another certificate. Acknowledgements The preparation and publication of this report would not have been possible without the efficient work of the Finance staff, especially Clara Hilger, Assistant Finance Director. We would like to acknowledge all staff that contributed their efforts to the Finance operations in 2008. We would also like to thank the Mayor and City Council for their support in promoting and maintaining the highest standards of professionalism and L management of the City of Brooklyn Center. Respectfully Submitted, L 2qe, Cif Comelius L Bo ney Daniel 7ordet City Manager Director of Fiscal &Support Services 5 CITY OF BROOKLYN CENTER, MINNESOTA PRINCIPAL OFFICIALS December 31, 2008 Name Position Term of Office Term Expires ELECTED OFFICIALS Tim Willson Mayor Four Years December 31, 2010 Kay Lasman Council Member Four Years December 31, 2008 Mary O'Connor Council Member Four Years December 31, 2008 Dan Ryan Council Member Four Years December 31, 2010 Mark Yelich Council Member Four Years December 31, 2010 APPOINTED OFFICIALS Cornelius L. Boganey City Manager Appointed Charles LeFevre City Attorney Y Contractual Appointee Sharon Knutson City Clerk Appointed Scott Bechthold Police Chief Appointed Steve Lillehaug Director of Public Works /City Engineer Appointed Lee Gatlin Fire Chief Appointed James Glasoe Community Activities, Recreation and Services Director Appointed Gary Eitel Community Development Director Appointed Daniel Jordet Director of Fiscal and Support Services Appointed l 6 q1/ as on r Brooklyn Center Organization City 2008 Electorate I t Advisory Commissions City Council Administration, gmnan Resources/Payroll City Manager C City Attorney Information Technology Elections Licenses City Clerk M I Community Activities, police Department. Recreation. and Services, Community Programs public Works, patrol R Program Investigation Center Engineering Community Ma intenance Crime Prevention Street Ma Commun Progl'ams •Government Buildings Sanitary Sewer Suppo Services Golf Course a Center C en tral Garage •Earle Brown geritag Storm sewe r Water D ent. •park Maintenance Communi�' Developm r Fiscal and Su�nort Services Economic Develop►nent Fire Department, Accounting .goosing Redevelopment Authority Audit planning and Zoning Fire Prevention utility Billing •Fire Suppress redness •Code Enforcemen enc Preparedness Risk Maaag Assessing Emerg Y Liquor Stores r l Certificate of Achievement for Excellence m Financial Reporting Presented to City of Brooklyn Center Minnesota For its Comprehensive Annual Financial Report for the Fiscal Year Ended December 31, 2007 A Certificate of Achievement for Excellence in Financial Reporting is presented by the Government Finance Officers Association of the United States and Canada to government units and public employee retirement systems whose comprehensive annual financial reports (CAFRs) achieve the highest standards in government accounting and financial reporting. President amp */j 0, Executive Director 8 PRINCIPALS Kenneth W. Malloy, CPA `Thomas. M. Montague, CPA Thomas A. Karnowski, CPA Paul A. Radosevich, CIA C OERT I F 14F D PUBLIC William J. Lauer, CPA ACCOUNTANTS James H. Eichren, CPA Aaron J. Nielsen, CPA Victoria L. Holinka, CPA INDEPENDENT AUDITOR'S REPORT To the City Council and Residents City of Brooklyn Center, Minnesota We have audited the accompanying financial statements of the governmental activities, the business-type activities, each major fund, and the aggregate remaining fund information of the City of Brooklyn Center (the City) as of and for the year ended December 31, 2008, which collectively comprise the City's basic financial statements as listed in the table of contents. These financial statements are the responsibility of the City's management. Our responsibility is to express opinions on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinions. In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities, the business-type activities, each major fund, and the aggregate remaining fund information of the City at December 31, 2008, and the respective changes in financial position and cash flows, where applicable thereof, for the year then ended, in conformity with accounting principles generally accepted in the United States of America. As described in Note 5 of the notes to basic financial statements, the City has implemented Governmental Accounting Standards Board Statement No. 45, "Accounting and Financial Reporting by Employers for Post-Employment Benefits Other Than Pensions," during the year ended December 31, 2008. In accordance with Government Auditing Standards, we have also issued a report dated May 26, 2009 on our consideration of the City's internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, grant agreements, and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing and not to provide an opinion on the internal control over financial reporting or on compliance. This report is an integral part of an audit performed in accordance with Government Auditing Standards and should be considered in assessing the results of our audit. (continued) Malloy, Montague, Karnowski, Radosevich Co., P.A. 5353 Wayzata Boulevard Suite 410 Minneapolis, MN 55416 9 wcphunc: 952-545-0424 Tetefax; 952-545-0569 www.mmkr.com The Management's Discussion and Analysis and required supplementary information, as listed in the table of contents, is not a required part of the basic financial statements, but is supplementary information required by accounting principles generally accepted in the United States of America. We have applied certain limited procedures, which consisted principally of inquiries of management, regarding the methods of measurement and presentation of the required supplementary information. However, we did not audit the information and express no opinion on it. 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 statements and schedules, and statistical section, as listed in the table of contents, are presented for purposes of additional analysis and are not a required part of the basic financial statements. The combining and individual fund statements and schedules have been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, are fairly stated, in all material respects, in relation to the basic financial statements taken as a whole. The introductory section and statistical section have not been subjected to the auditing procedures applied in the audit of the basic financial statements and, accordingly, we express no opinion on them. A �loN, /�o+►�'v�J�� ko.�noa/yk�� Kac�o.SQ�✓�'�.�+� �a.� PjQ May 26, 2009 10 MANAGEMENT'S DISCUSSION AND ANALYSIS As management of the City of Brooklyn Center (the City), we offer readers of the City of Brooklyn Center's Comprehensive Annual Financial Report (CAFR) this narrative overview and analysis of the financial activities of the City for the fiscal year ended December 31, 2008. We encourage readers to consider the information presented here in conjunction with additional information that we have furnished in our letter of transmittal, which can be found on pages 1 through 5 of this CAFR. Financial HiLyhlin. The assets of the City exceeded liabilities by a 4.5 to 1 margin at the close of the most recent fiscal year. Current assets exceed current liabilities by a 9 to 1 margin. The 117,004,392 of net assets includes cash and investments, streets, buildings, equipment, land and other City assets. Of this amount, 12,160,027 is classified as unrestricted net assets which may be used to meet the government's ongoing obligations to citizens and creditors in accordance with the City's fund designations and fiscal policies. The City's total net assets increased by 2,441,307 or 2.1 from 2007 to 2008. As of the close of the current fiscal year, the City's governmental funds reported combined ending fund balances of 32,547,730. Of this total amount, 33,119,083, or 102% is designated or reserved through legal restrictions and City Council authorization. At the end of the current fiscal year the general fund balance of 7,743,438 included 890 reserved for prepaid items, 21,105 reserved for inventories, and 7,721,443 designated for cash flow purposes. The City's total outstanding debt increased by 4,115,000 during the current fiscal year, from 25,410,000 to 29,525,000. Overview of the Financial Statements The discussion and analysis are intended to serve as an introduction to the City's basic financial statements. The City's basic financial statements include three components: 1) government -wide financial statements, 2) fund financial statements, and 3) notes to the financial statements. This CAFR also contains other supplementary information in addition to the basic financial statements themselves. 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 consolidated financial statement. The statement of net assets presents information on all of the City's assets and liabilities, with the difference between the two reported as net assets. Over time, increases or decreases in net assets may serve as a useful indicator of whether the financial position of the City is improving or deteriorating. The statement of activities presents information showing how the City's net assets changed during the most recent fiscal year. All changes in net assets are reported as soon as the underlying event giving rise to the change occurs, regardless of the timing of related cash flows. Thus, revenues and expenses are reported in this statement for some items that will only result in cash flows in future fiscal periods (e.g. uncollected taxes and earned but unused vacation leave). Both of the government -wide financial statements distinguish functions of the City that are principally supported by taxes and intergovernmental revenues (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, community services, recreation and economic development. The business -type activities of the City include water and sewer, street lighting, liquor operations, golf course, convention center, storm drainage and recycling. 11 Management's Discussion and Analysis The government -wide financial statements can be found on pages 21 through 23 of this CAFR. 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 two categories: governmental funds and proprietary 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 resource, as well as on balances of spendable resources available at the end of the fiscal year. Such information near- term ma be useful in evaluating a government's II I rnment s near term financial requirements. re Y g g q Because the focus of governmental funds is narrower than that of the government -wide financial statements, it is useful to compare the information resented for governmental funds with similar information resented for P presented P governmental activities in the government -wide financial statement. By doing so, readers may better understand the long-term impact of the City's near -term financial decisions. Both the governmental fund balance sheet and 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 nineteen individual governmental funds. Information is presented separately in the governmental fund balance sheet and in the governmental fund statement of revenues, expenditures, and changes in fund balances for the General fund, Tax Increment District No. 3 special revenue fund, the G.O. Improvement Bonds debt service fund, and the Infrastructure Construction capital project fund, which are considered to be major funds. Data from the other 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 elsewhere in this CAFR. The basic governmental fund financial statements can be found on pages 26 through 33 of this CAFR. Proprietary funds. The City maintains two different types of proprietary funds. Enterprise funds are used to report the same functions presented as business -type activities in the governmental -wide financial statements. The City uses enterprise funds to account for its municipal liquor, golf course, Earle Brown Heritage Center, water, sanitary sewer, storm drainage, recycling/refuse, and street lighting operations. Internal service funds are an accounting device to accumulate and allocate costs internally among the City's various functions. The City uses internal service funds for its central garage, employee retirement, and compensated absences. Because all of these services predominantly benefit governmental rather than business -type functions, they have been included within the governmental activities in the government -wide financial statements. Proprietary funds provide similar information to the government -wide financial statements but in more detail. The proprietary fund financial statements provide separate information for the municipal liquor, golf course, Earle Brown Heritage Center, water utility, sanitary sewer utility, and storm drainage utility operations, each of which are considered to be major funds of the City. Conversely, all internal service funds are combined into a single, aggregated presentation in the proprietary fund financial statements. Individual fund data for the internal service funds is provided in the form of combining statements elsewhere in this report. The basic proprietary fund financial statements can be found on pages 34 through 39 of this CAFR. Notes to the financial a cial statements. The notes P rovide additional information that is essential to a full understanding of the data provided in the gover anent wide and fund financial statements. The notes to the financial statements can be found on pages 41 through 73 of this CAFR. Other information. In addition to the basic financial statements and accompanying notes, this report also presents certain required supplementary information on budgetary compliance for its major funds. The City 12 Management's Discussion and Analysis adopts an annual appropriated budget for its general, special revenue, debt service, and capital project funds. A budgetary comparison statement has been provided for the general and major special revenue fund to demonstrate compliance with this budget. These can be found on pages 75 through 80 of this CAFR. 1 The combining statements referred to earlier in connection with nonmajor governmental funds and internal service funds are presented immediately following the required supplementary information on budgetary comparisons. Combining and individual fund statements and schedules can be found on pages 84 through 124 of this CAFR. Government -wide Financial Analvsis As noted earlier, net assets may serve over time as a useful indictor of a government's financial position. In the case of the City, assets exceeded liabilities by 117,004,392 at the close of the most recent fiscal year. The largest portion of the City's net assets 72,993,581 or 62 percent) reflects its investment in capital assets (e.g. land, infrastructure, 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'S NET ASSETS Governmental Activities Business -type Activities Total 2008 2007 2008 2007 2008 2007 Current and other assets 57,191,433 54,067,384 11,315,281 10,691,788 68,506,714 64,759,172 Capital assets 39,386,221 38,410,299 42,572,360 40,466,892 81,958,581 78,877 Total assets 96,577,654 92,477,683 53,887,641 51,158,680 150,465,295 143,636,363 Long -term liabilities outstanding 26,500,403 26,137,238 26,500,403 26,137,238 Other liabilities 6,112,138 2,089,504 848,362 846,536 6,960,500 2,936,040 Total liabilities 32,612,541 28,226,742 848,362 84636 33,460,903 29,073,278 Net assets: Invested in capital assets, net of related debt 31,423,905 31,183,887 42,572,360 40,466,892 72,993,581 70,515,709 Restricted 31,850,784 28,487,144 31,850,784 28,487,144 Unrestricted 690,424 4,579,910 10,466,919 9,845,252 12,160,027 15,560,232 Total net assets 63,965,113 64,250,941 53,039,279 50,312,144 117,004,392 114,563,085 All 2007 comparative balances are net of the adjustments described in Note 3.D. and Note 3.E. on page 52 of this CAFR. As of the close of the current year, there is 1,002,684 in G.O. Improvement bond debt included in the Long- term liabilities outstanding reported in the Governmental Activities that was issued to finance capital assets reported in the Business -type Activities. This amount is not used to reduce Invested in capital assets net of related debt in the Governmental Activities. Neither does it reduce Invested in capital Assets of the Business- type Activities. However, it does reduce the Invested in capital assets, net of related debt in the total column. A portion of the of the City's net assets represents resources that are subject to external restrictions on how they may be used. These restrictions include debt payment from assessments and taxes collected, and tax increments collected for qualified projects. The remaining balance of unrestricted net assets 12,160,027) may be used to meet the City's ongoing obligations. At the end of the current fiscal year, the City is able to report positive balances in all three categories of net assets, both for the government as a whole, as well as for its separate governmental and business -type activities. The same was true for the prior fiscal year. 13 Management's Discussion and Analysis 1 Current assets increased in the governmental activities primarily due to the issuance of bonds, the proceeds of which are to be used for redevelopment within the City. Total liabilities increased with the issuance of two new bond issues in 2008. The increase in restricted net assets can be attributed to the acquisition of redevelopment property. Current assets in the business -type activities increased due to higher per unit fees charged in 2008 on utility services and a conscious effort to minimize direct costs to provide services in those activities. G overnmental Activities Governmental activities resulted in a decrease of the City's net assets by 285,828), while the increase in total net assets was 2,441,307. Key elements of the changes are as follows: CITY'S CHANGES IN NET ASSETS Governmental Activities Business -type Activities Total 2008 2007 2008 2007 2008 2007 Revenues: Program revenues: Charges for services 2,801,121 2,733,355 11,037,648 S 11,013,506 S 13,838,769 S 13,746,861 Operating grants and contributions 1,003,884 818,989 1,003,884 818,989 Capital grants and contributions 2,706,056 2,646,320 2,706,056 2,646,320 General revenues: Property taxes 12,458,724 12,200,575 12,458,724 12,200,575 Other taxes 3,532,735 3,384,560 3,532,735 3,384,560 (rants and contributions not restricted to specific programs 607,073 1,263,753 607,073 1,263,753 Unrestricted investment earnings 903 939 1 852 117 243 322 g 406,654 1,147,261 2,258,771 Gain on sale of assets 73,036 88,508 73,036 88,508 11,420 Total revenues 24,086,568 24,988,177 11,280,970 ,160 35,367,538 36,408,337 Expenses: General government 3,498,767 2,953,328 3,498,767 2,953,328 Public safety 8,760,880 8,051,836 8,760,880 8,051,836 Public works 2,596,754 2,704,435 2,596,754 2,704,435 Community services 72,893 74,389 72,893 74,389 Parks and recreation 2,910,825 2,624,897 2,910,825 2,624,897 Economic development 3,713,340 3,966,908 3,713,340 3,966,908 Interest on long -term debt 1,125,712 1,127,276 1,125,712 1,127,276 Municipal liquor 1,125,517 1,037,427 1,125,517 1,037,427 Golfcourse 304,832 313,794 304,832 313,794 Earle Brown Heritage Center 2,403,676 2,431,719 2,403,676 2,431,719 Recycling and refuse 265,983 257,300 265,983 257,300 Street light utility 182,402 191,659 182,402 191,659 Water utility 1,783,275 1,716,497 1,783,275 1,716,497 Sanitary sewer utility 3,018,418 2,930,016 3,018,418 2,930,016 Storm drainage utility 1,162,957 1,123,636 1,162,957 1,123,636 Total expenses 22,679,171 21,503,069 10,247,060 10,002,048 32,926,231 31,505,117 Increase in net assets before transfers 1407 97 3 485 108 1 033 910 1418 112 2 441 07 4 903 ,3 >2 20 Transfers (1,693,225) (273,070) 1,693,225 273,070 Change in net assets (285,828) 3,212,038 2,727,135 1,691,182 2,441,307 4,903,220 Net assets January I (restated) 64,250,941 61,038,903 50,312,144 48,620,962 114,563,085 109,659,865 Net assets December 31 63,965,113 64,250,941 53,039,279 50,312,144 117,004,392 114,563,085 14 Management's Discussion and Analysis In the Governmental Activities, Operating grants and contributions increased due to the award of a federal grant for police officers. Total taxes increased by 400,000 because of higher taxes levied. Grants and contributions not restricted decreased due to the State's unallotment of the second half of the City's general aid awarded for 2008. General government expenses increased due to increased legal fees for the CenterPointe lawsuit, increased utility costs, and building repairs. Public safety expenses increased due to increased costs for utilities and motor fuels. Public works expenses decreased due to lower equipment repairs and replacement costs. Parks and recreation expenses increased due to increased utility costs for the Community Center and Pool as well as building repairs. Below are specific graphs which provide comparisons of the governmental activities revenues and expenses: Governmental Activities 2008 Revenues Property taxes and tax increments 51.7% Other taxes 14.7% Governmental Activities 2008 Expenses Parks and recreation 12.8% Community services 0.3% Public works 11.5% Economic development 16.4% Other revenues 2.8% 15 Unrestricted investment earnings 3.8% Charges for services 11.6% Capital grants and contributions 11.2% Interest on long -term debt 5.0% Public safety 38.6% Operating grants and contribtutions 4.2% General gove......:...; 15.4% Management's Discussion and Analysis Business-tvoe activities Business -type activities increased net assets by 2,727,135. Below are graphs showing the business -type activities revenue and expense comparisons: Business -type Activities 2008 Revenues Net charges for services 97.8% Business type Activities 2008 Expenses Sanitary sewer utility 29.4% Storm drainage utility 11.3% Non -major enterprise 4.4% Water utility 17.4% 16 Unrestricted investment earnings 2.2% unicipal liquor 11.0% Golf course 3.1% arle Brown Heritage Center 23.4% Expenses increased in 2008 in Municipal Liquor due to an increase in full time staff. Street light utility expenses decreased due to replacement of some standard streetlight fixtures with decorative light fixtures. Management's Discussion and Analysis Financial Analysis of the Government's Funds Governmental Funds. The focus of the City's governmental funds is to provide information on near -term inflows, outflows, and balances of spendable resources. Such information is useful in assessing the City's financing requirements. In particular, unreserved fund balance may serve as useful measure of a government's net resources available at the end of the fiscal year. At the end of the current fiscal year, the City's governmental funds reported combined ending fund balances of 32,547,730. Approximately 31% of this amount, 10,019,663, is reserved (restricted in its use) because it has already been committed to specific uses by outside influences or action of the City Council; 1) 5,187,263 to provide for debt service, 2) 792,488 for advances to other funds, 3) 489,928 for committed contracts, 4) 8,644 for prepaid items, 5) 21,105 for inventories, and 6) 3,520,235 for statutory housing obligation. The unreserved fund balance of 23,099,420 includes designations of 1) 7,721,443 for general fund working capital, 2) 10,391,989 for economic development, and 3) 4,985,988 for capital improvements. The remaining deficit balance of 571,353 is undesignated and unreserved. The general fund is the primary operating fund of the City. At the end of the current fiscal year, total fund balance reached 7,743,438, all of which was either reserved or designated. As a measure of the general fund's liquidity, it may be useful to compare total fund balance to total fund expenditures. Total fund balance represents 51% of total general fund expenditures for 2008. The fund balance of the City's general fund decreased by 198,976 in 2008. This decrease was due to a 540,000 unallotment of intergovernmental aid provided by the State of Minnesota late in the fiscal year. The Tax Increment District No. 3 fund had a total fund balance of 10,882,132 at the end of 2008. The net decrease in the fund balance was 1,760,556. The majority of this decrease was the net result of the issuance of 4,335,000 in bonds and the purchase of property for redevelopment of 6,475,000. The G.O. Improvement Bonds fund had a fund balance of 2,793,086 at the end of 2008, all of which was reserved for debt service. The net decrease in fund balance for 2008 was 233,299, which was due to the use of collections in previous years to pay bond principal and interest as programmed. The fund balance of the Infrastructure Construction fund at the end of 2008 had a deficit of 276,982. This represents a reduction from the 2007 deficit of 1,013,446. This reduction is the result of the City issuing improvement debt for the special assessment portion of both the 2007 and 2008 projects. Proprietary funds. The City's proprietary funds provide the same type of information found in the government -wide financial statements, but in more detail. The unrestricted net assets in the respective major proprietary funds are the municipal liquor fund 1,890,998, golf course (786,181), Earle Brown Heritage Center 964,893, water utility 2,987,184, sanitary sewer utility 3,167,259 and storm drainage utility 2,295,241. The increases (decreases) in net assets for the major enterprise funds were: municipal liquor 270,720, golf course (46,446), Earle Brown Heritage Center (313,440), water utility 280,452, sanitary sewer utility 328,974, and storm drainage utility 1,904,082. General Fund Budgetary Highlights During the year, there were no amendments to the General Fund budget appropriations. Budget exceeded actual revenues and other financing sources by 491,692. The major contributor to this was the unallotment of aids by the State in December 2008. Actual expenditures and other financing uses were lower than budgeted for the year by 292,716. This resulted from the reduction of the amounts paid to the internal service fund for compensated absences balances at the end of the year, eliminating the budgeted transfer of money to the Technology Fund, reduction of the transfers to the Central Garage Fund for vehicle replacement that was budgeted, and a conscientious effort to reduce expenditures due to the cuts in state aid. 17 Management's Discussion and Analysis It is anticipated that the unallotment of state aid that occurred in 2008 will increase in amount over the next two fiscal years. This will adversely affect the operations of the General Fund requiring reprioritization of General Fund programs and procedures. The City Council is, subsequent to the 2008 year end reports, preparing for further reductions in state aid for the 2009 and 2010 fiscal years. Capital Asset and Debt Administration Capital assets. The City's investment in capital assets for governmental and business type activities as of December 31, 2008 totals 81,958,581 (net of accumulated depreciation). This investment in capital assets includes land, buildings, infrastructure, machinery and equipment. The total increase in the City's investment in capital assets from 2007 to 2008 was 4.4 percent (3.6 percent increase for governmental activities and a 5.2 percent increase for business -type activities). Major capital asset events during the year included the following: Two major infrastructure reconstruction projects were completed during the year, with a final cost of 5,062,157. Two infrastructure reconstruction projects were begun and substantially completed during the 2008. These projects account for 5,839,511 in construction -in- progress at the end of the year. CITY'S CAPITAL ASSETS (net of depreciation) Governmental Activities Business -type Activities 2008 2007 (restated) 2008 2007 2008 2007 (restated) Land 3,537,473 3,537,473 3,194,983 3,197,342 6,732,456 6,734,815 Land improvements 237,237 225,532 237,237 225,532 Construction in progress 4,698,661 4,301,924 3,172,024 2,294,293 7,870,685 6,596,217 Buildings and structures 11,291,862 11,711,589 6,912,870 7,507,913 18,204,732 19,219,502 Departmental equipment 3,784,524 3,656,214 225,852 172,000 4,010,376 3,828,214 Other park improvements 1,153,757 1,245,042 1,153,757 1,245,042 Streets 14,919,944 13,958,057 14,919,944 13,958,057 Street light systems 83,540 83,540 Mains and lines 28,745,854 27,069,812 28,745,854 27,069,812 Total 39,386,221 38,410,299 42,572,360 40,466,892 81,958,581 78,877,191 Additional information on the City's capital assets can be found in Note 4.C. on pages 55 through 57 of this CAFR. Long -term debt. At the end of the current fiscal year, the City had long -term bonded debt outstanding of 29,525,000, all of which is backed by the full faith and credit of the government. Of the total outstanding debt, 3,275,000 is general obligation bonds payable from directly levied property tax, 20,560,000 is tax increment bonds payable with the collected proceeds of tax increment projects and 5,690,000 is improvement bonds payable from special assessment levies against individual properties adjacent to the improvements. Additional long -term liabilities include 1,075,953 for compensated absences, the accumulated vacation and vested sick leave not used by employees at the end of 2008, and 147,045 for net OPEB obligation related to health insurance costs paid by and for retirees. 18 Total Management's Discussion and Analysis CITY'S OUTSTANDING DEBT General Obligation Bonds, General Obligation Tax Increment Bonds, General Obligation Improvement Bonds, and Compensated Absences Governmental Activities 2008 2007 General obligation bonds 3,275,000 3,875,000 General obligation tax increment bonds 20,560,000 17,255,000 General obligation improvement bonds 5,690,000 4,280,000 Compensated absences 1,075,953 1,023,706 Net OPEB obligation 147,045 Total 30,747,998 26,433,706 The City's total bonded debt increased by 4,115,000 during the current fiscal year due to the net result of the issuance of two bonds, 4,335,000 of general obligation tax increment bonds and 2,390,000 of general obligation improvement bonds and the scheduled payment of bond obligations. The City maintains an Al rating from Moody's on all issues. State statutes limit the amount of general obligation debt a Minnesota city may issue to 3% of total Estimated Market Value. The current debt limitation for the City is 65,676,378. Only 2,076,766 of the City's net outstanding debt is counted within the statutory limitation representing about 3.2 percent of the total limit. Additional information on the City's long -term debt can be found in Note 4.F. on pages 60 through 62 of this CAFR. Economic Factors and Next Year's Budeet and Rates The unemployment rate for the City is 5.6 percent at the end of the 2008 fiscal year, which is an increase from the rate of 4.6 percent a year ago. This compares to the State's average unemployment rate of 4.9 percent and the national average of 4.8 percent. Redevelopment of the Central Business District and other commercial properties continues and will yield net growth in tax base and stability in tax base through mixed use development goals. Utility rates have been subjected to rigorous study and projected into a 15 year model to allow for system maintenance, technology changes and capital repair and replacements while moderating annual rate adjustments. All of these factors were considered in the preparation of the City's budget for the 2009 fiscal year. During the year, unreserved fund balance in the general fund decreased by 198,976. Policy requirements for working capital in the General Fund will be reexamined in light of the expected significant cutbacks of state aid to the Fund in future years. Water, sanitary sewer, storm, and street light utility rates were increased for the 2008 budget year. Residential water rates were increased by 5.0 percent, sanitary sewer by 2.5 percent, storm drainage by 7.2 percent and street lights by 4.9 percent. These increases were necessary to ensure that the municipal utilities be self supporting through revenue, as required by the City charter. These rates along with future projected rate increases are reviewed annually to ensure compliance with the requirements of the charter. 19 Management's Discussion and Analysis Reauests 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 government's finances. Questions concerning any of the information provided in this report or requests for additional financial information should be addressed to the Director of Fiscal and Support Services, City of Brooklyn Center, 6301 Shingle Creek Parkway, Brooklyn Center, Minnesota 55430. 20 CITY OF BROOKLYN CENTER, MINNESOTA STATEMENT OF NET ASSETS December 31, 2008 ASSETS Cash and investments Receivables: Accounts Taxes Special assessments Internal balances Due from other governments Prepaid expenses Inventories Assets held for resale Restricted assets: Cash and investments Capital assets: Nondepreciable Depreciable Total assets LIABILITIES Accounts payable Accrued salaries and wages Due to other governments Contracts payable Deposits payable Accrued interest payable Unearned revenue Liabilities payable from restricted assets: Deposits payable Compensated absences payable: Due within one year Due in more than one year Net OPEB obligation: Due in more than one year Bonds payable: Due within one year Due in more than one year Total liabilities NET ASSETS Invested in capital assets, net of related debt Restricted for: Debt service Tax increment purposes Unrestricted Total net assets 21 Governmental Activities 38,384,706 262,208 653,986 4,176,429 876,128 869,254 8,644 46,449 11,805,629 108,000 8,236,134 31,150,087 96,577,654 408,208 447,908 6,489 359,167 875 515,994 17,902 108,000 107,595 968,358 147,045 8,772,819 23,077,965 690,424 63,965,113 Business -Type Activities 8,742,598 The accompanying notes are an integral part of these financial statements. 2,059,815 562,232 (876,128) 192,120 634,644 6,367,007 36,205,353 53,887,641 223,609 66,529 67,050 147,338 232,354 111,482 4,140,000 25,385,000 32,612,541 848,362 31,423,905 42,572,360 Statement 1 Total 47,127,304 2,322,023 653,986 4,738,661 869,254 200,764 681,093 11,805,629 108,000 14,603,141 67,355,440 150,465,295 631,817 514,437 73,539 506,505 233,229 515,994 129,384 108,000 107,595 968,358 147,045 4,140,000 25,385,000 33,460,903 72,993,581 8,772,819 23,077,965 10,466,919 12,160,027 53,039,279 117,004,392 CITY OF BROOKLYN CENTER, MINNESOTA STATEMENT OF ACTIVITIES For the Year Ended December 31, 2008 Charges For FUNCTIONS/PROGRAMS Expenses Services Primary government: Government activities: General government 3,498,767 1,115,038 Public safety 8,760,880 780,080 Public works 2,596,754 127,489 Community services 72,893 Parks and recreation 2,910,825 754,079 Economic development 3,713,340 24,435 Interest on long -term debt 1,125,712 Total government activities 22,679,171 2,801,121 Business -type activities: Municipal liquor 1,125,517 1,492,644 Golf course 304,832 253,824 Earle Brown Heritage Center 2,403,676 1,959,628 Recycling and refuse 265,983 259,774 Street light utility 182,402 250,260 Water utility 1,783,275 2,003,633 Sanitary sewer utility 3,018,418 3,264,649 Storm drainage utility 1,162,957 1,553,236 Total business -type activities 10,247,060 11,037,648 Total primary government The accompanying notes are an integral part of these financial statements. 22 32,926,231 13,838,769 Program Revenues Net (Expense) Revenue and Changes in Net Assets Operating Capital Primary Government Grants and Grants and Governmental Business -Type Contributions Contributions Activities Activities Total Statement 2 100 (2,383,629) (2,383,629) 776,508 (7,204,292) (7,204,292) 90,000 2,706,056 326,791 326,791 (72,893) (72,893) (2,156,746) (2,156,746) 137,276 (3,551,629) (3,551,629) (1,125,712) (1,125,712) 1,003, 884 2,706,056 (16,168,110) (16,168,110) 367,127 367,127 (51,008) (51,008) (444,048) (444,048) (6,209) (6,209) 67,858 67,858 220,358 220,358 246,231 246,231 390,279 390,279 790,588 790,588 1,003,884 2,706,056 (16,168,110) 790,588 (15,377,522) General revenues: Property taxes 12,458,724 12,458,724 Tax increments 2,912,773 2,912,773 Lodging taxes 619,962 619,962 Grants and contributions not restricted to specific programs 607,073 607,073 Unrestricted investment earnings 903,939 243,322 1,147,261 Gain on disposal of capital asset 73,036 73,036 Transfers (1,693,225) 1,693,225 Total general revenues and transfers 15,882,282 1,936,547 17,818,829 Change in net assets (285,828) 2,727,135 2,441,307 Net assets beginning, as previously stated 60,580,262 50,312,144 110,892,406 Prior period adjustment 1,153,297 1,153,297 Change in accounting principle 2,517,382 2,517,382 Net assets beginning, restated 64,250,941 50,312,144 114,563,085 Net assets ending 63,965,113 53,039,279 117,004,392 23 This page has been left blank intentionally. 24 VI N M I I MI MI OM M r NM i I MO i MI CITY OF BROOKLYN CENTER, MINNESOTA BALANCESHEET GOVERNMENTAL FUNDS December 31, 2008 Tax Increment General District No. 3 ASSETS Cash and investments 8,178,381 10,746,426 Receivables: Accounts 81,800 Current taxes 108,166 2,728 Delinquent taxes 401,525 27,320 Special assessments Due from other governments 40,992 144,810 Interfund receivable Prepaid items 890 Inventories 21,105 Advances to other funds Asset held for resale 11,018,629 Restricted assets: Cash and investments performance deposits 108,000 Total assets 8,940,859 21,939,913 LIABILITIES AND FUND BALANCES Liabilities: Accounts payable 254,993 11,832 Accrued salaries and wages 425,539 Due to other funds Due to other governments 6,489 Contracts payable Deposits payable 875 Interfund payable Deferred revenue 401,525 11,045,949 Liabilities payable from restricted assets: Deposits payable 108,000 Total liabilities 1,197,421 11,057,781 Fund balances: Reserved: Advances to other funds Committed contracts Debt service Inventories 21,105 Prepaid items 890 Statutory housing obligation 3,520,235 Unreserved: Designated, reported in: General Fund 7,721,443 Special Revenue Funds 7,361,897 Capital Project Funds Undesignated, reported in: Special Revenue Funds Capital Project Funds Total fund balances 7,743,438 10,882,132 Total liabilities and fund balances 8,940,859 21,939,913 The accompanying notes are an integral part of these financial statements. 26 Statement 3 Page 1 of 2 Other G.O. Improvement Infrastructure Nonmajor Total Bonds Construction Governmental Governmental 2,807,597 82,119 9,967,528 31,782,051 6,418 159,196 247,414 116 33,334 144,344 16,036 64,761 509,642 4,050,704 125,725 4,176,429 683,452 869,254 11,115 11,115 7,754 8,644 21,105 792,488 792,488 787,000 11,805,629 108,000 6,874,453 214,262 12,506,628 50,476,115 29,324 9,513 71,774 377,436 13,020 438,559 135,000 135,000 6,489 359,167 359,167 875 11,115 11,115 4,052,043 122,564 869,663 16,491,744 108,000 4,081,367 491,244 1,100,572 17,928,385 792,488 792,488 426,125 63,803 489,928 2,793,086 2,394,177 5,187,263 21,105 7,754 8,644 3,520,235 7,721,443 3,030,092 10,391,989 4,985,988 4,985,988 131,754 131,754 (703,107) (703,107) 2,793,086 (276,982) 11,406,056 32,547,730 6,874,453 214,262 12,506,628 50,476,115 27 CITY OF BROOKLYN CENTER, MINNESOTA Statement 3 BALANCE SHEET Page 2 of 2 GOVERNMENTAL FUNDS December 31, 2008 Fund balance governmental funds is different from net assets governmental activities because: Total fund balances (Statement 3) 32,547,730 Capital assets used in governmental activities are not financial resources, and therefore, are not reported in the funds. 35,631,036 Other long -term assets are not available to pay for current -period expenditures and, therefore, are deferred in the funds. 16,473,842 Long -term liabilities, including bonds payable, are not due and payable in the current period and therefore are not reported in the funds. (30,040,994) Internal service funds are used by management to charge the cost of certain activities to individual funds. The assets and liabilities are included in the governmental statement of net assets. 9,353,499 Net assets of governmental activities (Statement 1) 63,965,113 1 28 it r r r r r r r it r r r This page has been left blank intentional /y, r r r r r 29 r CITY OF BROOKLYN CENTER, MINNESOTA STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES GOVERNMENTAL FUNDS For the Year Ended December 31, 2008 Tax Increment General District No. 3 REVENUES Property taxes 11,375,539 Tax increments 1,906,053 Franchise fees Lodging taxes 619,962 Special assessments Licenses and permits 643,736 Intergovernmental 1,112,272 115,046 Charges for services 749,001 Fines and forfeits 302,986 Investment earnings (net of market value adjustment) 149,484 272,709 Miscellaneous 74,164 12,500 Total revenues 15,027,144 2,306,308 EXPENDITURES Current: General government 3,308,211 Public safety 7,763,370 Public works 1,969,958 Community services 72,893 Parks and recreation 2,311,735 Economic development 296,332 7,051,514 Nondepartmental 301,396 Administrative services reimbursement (802,775) Capital outlay: General government Public works Parks and recreation Economic development 45,171 Debt service: Principal retirement Interest Fiscal agent fees Bond issuance costs 33,818 Total expenditures 15,221,120 7,130,503 Revenues over (under) expenditures (193,976) (4,824,195) OTHER FINANCING SOURCES (USES) Issuance of debt 4,335,000 Discount on issuance of debt (28,178) Premium on issuance of debt Transfers in Transfers out (5,000) (1,243,183) Total other financing sources (uses) (5,000) 3,063,639 Net increase (decrease) in fund balances (198,976) (1,760,556) Fund balances January 1 7,942,414 12,642,688 Fund balances December 31 7,743,438 10,882,132 The accompanying notes are an integral part of these financial statements. 30 Statement 4 Other G.O. Improvement Infrastructure Nonmajor Total Bonds Construction Governmental Governmental 606 1,027,769 12,403,914 988,542 2,894,595 643,934 643,934 619,962 816,192 472,956 1,289,148 643,736 984,242 2,211,560 12,403 761,404 302,986 61,133 250,551 733,877 42,159 320,238 449,061 877,931 515,115 4,227,679 22,954,177 r 266,936 3,575,147 285,159 8,048,529 55,754 114,152 2,139,864 72,893 97,556 2,409,291 318,473 7,666,319 301,396 (802,775) 362,442 362,442 2,617,144 1,337,997 3,955,141 168,249 168,249 45,171 980,000 1,904,953 2,884,953 145,121 915,044 1,060,165 8,987 2,252 11,239 28,574 62,392 1,162,682 2,672,898 5,773,213 31,960,416 (284,751) (2,157,783) (1,545,534) (9,006,239) 50,068 2,339,932 6,725,000 (28,178) 1,384 1,384 831,297 1,138,236 1,969,533 (301,175) (1,549,358) 51,452 3,171,229 837,061 7,118,381 (233,299) 1,013,446 (708,473) (1,887,858) 3,026,385 (1,290,428) 12,114,529 34,435,588 2,793,086 (276,982) 11,406,056 32,547,730 31 This page has been left blank intentional /y. 32 CITY OF BROOKLYN CENTER, MINNESOTA RECONCILIATION OF THE STATEMENT OF REVENUES, EXPENDITURESM AND CHANGES Statement 5 IN FUND BALANCES OF GOVERNMENTAL FUNDS TO THE STATEMENT OF ACTIVITIES For the Year Ended December 31, 2008 Amounts reported for governmental activities in the statement of activities are different because: Net changes in fund balances total governmental funds (Statement 4) (1,887,858) Governmental funds report capital outlays as expenditures. However, in the statement of activities the cost of those assets is allocated over their estimated useful lives and reported as depreciation expense. This is the amount by which capital outlays exceeded depreciation in the current period. 865,383 Revenues in the statement of activities that do not provide current financial resources are not reported as revenues in the funds. 5,148,523 The issuance of long -term debt (e.g., bonds, leases) provides current financial resources to governmental funds, while the repayment of the principal of long -term debt consumes the current financial resources of governmental funds. Neither transaction, however, has any effect on net assets. This amount is the net effect of these differences in the treatment of long -term debt and related items. (4,115,000) Internal service funds are used by management to charge the cost of certain activities to individual funds. This amount is net revenue attributable to governmental activities. (242,568) Accrued interest reported in the statement of activities does not require the use of current financial resources and, therefore, is not reported as expenditures in governmental funds. (54,308) Change in net assets of governmental activities (Statement 2) (285,828) The accompanying notes are an integral part of these financial statements. 33 CITY OF BROOKLYN CENTER, MINNESOTA STATEMENT OF FUND NET ASSETS PROPRIETARY FUNDS December 31, 2008 Major Municipal Golf Earle Brown ASSETS Liquor Course Heritage Center Current assets: Cash and cash equivalents 1,318,525 8,645 1,153,340 I Receivables: Accounts net 7,780 262,111 Special assessments Due from other funds 135,000 Interfund receivable Prepaid items 22,906 4,987 Inventories 594,385 1,997 31,231 Total current assets 2,078,596 10,642 1,451,669 Noncurrent assets: Capital assets: Land 1,390,402 1,493,300 Land improvements 65,637 327,830 Buildings and structures 192,771 487,946 11,267,201 Machinery and equipment 111,167 11,160 293,878 Street lights Mains and lines Construction in progress Total capital assets 303,938 1,955,145 13,382,209 Less: Allowance for depreciation (255,732) (294,288) (6,892,515) Net capital assets 48,206 1,660,857 6,489,694 Total assets 2,126,802 1,671,499 7,941,363 LIABILITIES Current liabilities: Accounts payable 118,122 2,295 67,418 Accrued salaries payable 18,888 2,011 25,535 Due to other governments 50,074 29 14,631 Interfund payable Contracts payable 147,338 Deposits payable 230,254 Unearned revenue 514 1,600 Advances from other funds 792,488 Compensated absences payable current Total current liabilities 187,598 796,823 486,776 Noncurrent liabilities: Compensated absences payable long -term Net OPEB obligation Total noncurrent liabilities Total liabilities 187,598 796,823 486,776 NET ASSETS Invested in capital assets 48,206 1,660,857 6,489,694 Unrestricted 1,890,998 (786,181) 964,893 Total net assets 1,939,204 874,676 7,454,587 Adjustment to reflect the consolidation of internal service fund activities related to enterprise funds Net assets of business -type activities The accompanying notes are an integral part of these financial statements. 34 1 Statement 6 Business -Type Activities Governmental Enterprise Other Activities Water Sanitary Sewer Storm Drainage Nonmajor Total Internal Total Utility Utility Utility Enterprise Enterprise Service Proprietary 2,068,255 2,191,302 1,929,535 72,996 8,742,598 6,602,655 15,345,253 493,372 819,675 364,834 112,043 2,059,815 14,794 2,074,609 560,178 1,823 231 562,232 562,232 135,000 135,000 4,354 4,354 4,354 500 163,727 192,120 192,120 954 7,031 634,644 25,344 659,988 3,129,336 3,176,527 2,298, 185,039 12,330,763 6,642,793 18,973,556 20,734 3,389 287,158 3,194,983 3,194,983 393,467 166,108 559,575 3,033,212 2,705,423 17,686,553 17,686,553 128,668 179,130 724,003 7,388,731 8,112,734 83,540 83,540 83,540 16,511,055 14,669,683 20,745,425 51,926,163 51,926,163 739,522 1,183,531 919,394 329,577 3,172,024 3,172,024 20,433,191 18,741,156 21,951,977 413,117 77,180,733 7,554,839 84,735,572 (11,673,803) (9,144,934) (6,347,101) (34,608,373) (3,799,654) (38,408,027) 8,759,388 9,596,222 15,604,876 413,117 42,572,360 3,755,185 46,327,545 11,888,724 12,772,749 17,903,830 598,156 54,903,123 10,397,978 65,301,101 14,794 4,796 1,664 14,520 223,609 30,772 254,381 13,574 4,472 2,049 66,529 9,349 75,878 2,316 67,050 67,050 4,354 4,354 4,354 147,338 147,338 2,100 232,354 232,354 109,368 111,482 111,482 792,488 792,488 107,595 107,595 142,152 9,268 3,713 18,874 1,645,204 147,716 1,792,920 968,358 968,358 147,045 147,045 1,115,403 1,115,403 142,152 9,268 3,713 18,874 1,645,204 1,263,119 2,908,323 8,759,388 9,596,222 15,604,876 413,117 42,572,360 3,755,185 46,327,545 2,987,184 3,167,259 2,295,241 166,165 10,685,559 5,379,674 16,065,233 11,746,572 12,763,481 17,900,117 S 579,282 53,257,919 S 9,134,859 62,392,778 (218,640) 53,039,279 35 CITY OF BROOKLYN CENTER, MINNESOTA STATEMENT OF REVENUES, EXPENSES, AND CHANGES IN FUND NET ASSETS PROPRIETARY FUNDS For the Year Ended December 31, 2008 Major Municipal Golf Earle Brown OPERATING REVENUES Liquor Course Heritage Center Sales and user fees 5,484,529 253,824 3,831,972 Cost of sales 3,997,698 1,875,280 Total operating revenues 1,486,831 253,824 1,956,692 OPERATING EXPENSES Personal services 597,687 146,453 894,062 Supplies 23,836 20,606 123,906 Other services 176,419 80,488 526,185 Insurance 11,514 6,056 51,588 Utilities 41,030 20,293 221,067 Rent 243,925 Depreciation 26,431 27,244 579,118 Total operating ex P g P enses 1,120,842 301 140 2 395 926 Operating income (loss) 365,989 (47,316) (439,234) NONOPERATING REVENUES (EXPENSES) Intergovernmental Investment earnings 33,918 870 31,443 Special assessments Gain (loss) on sale of capital asset Otherrevenue 5,813 2,936 Total nonoperating revenues (expenses) 39,731 870 34,379 Income (loss) before contributions and transfers 405,720 (46,446) (404,855 Capital contributions P 326,415 Transfers out (135,000) (235,000) Change in net assets 270,720 (46,446) (313,440) Net assets January 1, as previously reported 1,668,484 921,122 7,768,027 Change in accounting principle Net assets January 1 1,668,484 921,122 7,768,027 Net assets December 31 1,939,204 874,676 7,454,587 Adjustment to reflect the consolidation of internal service fund activities related to enterprise funds Change in net assets of business -type activities (Statement 2) The accompanying notes are an integral part of these financial statements. 36 Statement 7 Business -Type Activities Governmental Enterprise Other Activities- Water Sanitary Sewer Storm Drainage Nonmajor Total Internal Total Utility utility Utility Enterprise Enterprise Service Proprietary 1,967,534 3,264,115 1,553,036 510,034 16,865,044 1,490,179 18,355,223 5,872,978 5,872,978 1,967,534 3,264,115 1,553,036 510,034 10,992,066 1,490,179 12,482,245 449,506 175,905 79,710 2,343,323 729,655 3,072,978 138,465 18,691 13,174 1,004 339,682 486,940 826,622 407,076 2,218,759 296,203 285,532 3,990,662 152,876 4,143,538 12,598 5,202 2,618 2,743 92,319 53,120 145,439 157,055 35,093 159,106 633,644 1,879 635,523 243,925 243,925 611,328 553,549 763,536 2,561,206 631,250 3,192,456 1,776,028 3,007,199 1,155,241 448,385 10,204,761 2,055,720 12,260,481 191,506 256,916 397,795 61,649 787,305 (565,541) 221,764 10,770 10,770 52,847 71,524 48,679 4,041 243,322 170,062 413,384 33,939 147 34,086 34,086 73,036 73,036 2,160 387 200 11,496 26,806 38,302 88,946 72,058 48,879 4,041 288,904 280,674 569,578 280,452 328,974 446,674 65,690 1,076,209 (284,867) 791,342 1,457,408 329,577 2,113,400 2,113,400 (50,175) (420,175) (420,175) 280,452 328,974 1,904,082 345,092 2,769,434 (284,867) 2,484,567 11,466,120 12,434,507 15,996,035 234,190 50,488,485 6,902,344 57,390,829 2,517,382 2,517,382 11,466,120 12,434,507 15,996,035 234,190 50,488,485 9,419,726 59,908,211 11,746,572 12,763,481 17,900,117 579,282 9,134,859 62,392,778 (42,299) 2,727,135 f i 37 CITY OF BROOKLYN CENTER, MINNESOTA STATEMENT OF CASH FLOWS PROPRIETARY FUNDS For the Year Ended December 31, 2008 Major Municipal Golf Earle Brown Liquor Course Heritage Center CASH FLOWS FROM OPERATING ACTIVITIES Receipts from customers and users 5,486,174 253,824 3,886,705 Receipts from interfund services provided Payments to suppliers (4,545,575) (125,711) (2,798,310) Payments to employees (591,270) (145,929) (885,464) Miscellaneous revenue 5,813 2,936 Net cash flows provided (used) by operating activities 355,142 (17,816) 205,867 CASH FLOWS FROM NONCAPITAL FINANCING ACTIVITIES Transfers out (135,000) (235,000) Special assessments Interfund receivable (135,000) Interfund payable Net cash flows provided (used) by noncapital financing activities (270,000) (235,000) CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES Acquisition and construction of capital assets (25,379) Proceeds from sale of assets Net cash flows provided (used) by capital and related financing activities (25,379) CASH FLOWS FROM INVESTING ACTIVITIES Interest on investments 33,918 870 31,443 Net increase (decrease) in cash and cash equivalents 119,060 (42,325) 2,310 Cash and cash equivalents January 1 1,199,465 50,970 1,151,030 Cash and cash equivalents i D ecember 31 1,318,525 8,645 1,153,340 Reconciliation of operating income to net cash provided (used) by operating activities: Operating income (loss) 365,989 (47,316) (439,234) Adjustments to reconcile operating income (loss) to net cash flows from operating activities: Depreciation 26,431 27,244 579,118 Changes in assets and liabilities: (Increase) decrease in receivables 1,577 44,719 (Increase) decrease in inventories (85,935) 590 (411) (Increase) decrease in prepaid expenses (918) (319) Increase (decrease) in payables 35,700 1,142 10,460 Increase (decrease) in accrued expenses 6,417 524 8,598 Increase (decrease) in deferred revenue 68 Other nonoperating income 5,813 2,936 Total adjustments (10,847) 29,500 645,101 Net cash flows provided (used) by operating activities 355,142 (17,816) 205,867 Noncash financing activities: Capital contributions 326,416 Gain on sale of assets The accompanying notes are an integral part of these financial statements. 38 Statement 8 Business -Type Activities Governmental Enterprise Other Activities Water Sanitary Sewer Storm Drainage Nonmajor Total Internal Total Utility Utility Utility Enterprise Enterprise Service Proprietary 1,916,264 3,215,858 1,520,286 507,274 16,786,385 16,786,385 1,483,757 1,483,757 29076 (733,770) (2,,1) (313,800) (463,817) (11,271,744) (729,448) (12,001,192) (445,524) (174,365) (79,210) (2,321,762) (526,834) (2,848,596) 2,160 387 200 11,496 37,576 49,072 739,130 751,119 1,127,476 43,457 3,204,375 265,051 3,469,426 (50,175) (420,175) (420,175) 40 (67,1067 (66,699) (66,699) (4,354) (139,354) (139,354) 4,354 4,354 4,354 (67,106) 407 (4,354) (45,821) (621,874) (621,874) (725,404) (1,095,864) (623,086) (83,540) (2,553,273) (792,282) (3,345,555) 123,528 123,528 (725,404) (1,095,864) (623,086) (83,540) (2,553,273) (668,754) (3,222,027) 52,847 71,524 48,679 4,041 243,322 170,062 413,384 (533) (272,814) 548,715 (81,863) 272,550 (233,641) 38,909 2,068,788 2,464,116 1,380,820 154,859 8,470,048 6,836,296 15,306,344 2,068,255 2,191,302 1,929,535 72,996 8,742,598 6,602,655 15,345,253 191,506 256,916 397,795 61,649 787,305 (565,541) 221,764 611,328 553,549 763,536 2,561,206 631,250 3,192,456 (33,078) (48,257) (32,750) (2,760) (70,549) (6,333) (76,882) 9,039 (76,717) 7,700 (69,017) (8,955) (10,192) (10,192) (26,215) (4,061) (1,805) (15,432) (211) (42,333) (42,544) 3,982 1,540 500 21,561 202,732 224,293 (19,592) (19,524) (19,524) 2,160 387 200 11,496 37,576 49,072 547,624 494,203 729,681 (18,192) 2,417,070 830,592 3,247,662 739,130 751,119 1,127,476 43,457 3,204,375 265,051 3,469,426 1,457,408 329,577 73,036 39 This page has been left blank intentionally. 40 CITY OF BROOKLYN CENTER, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2008 The City of Brooklyn Center was incorporated in 1911 and has operated under a Council/Manager form of government since the adoption of the City charter in 1966. The governing body consists of a mayor and four City Council members elected at -large to serve four -year staggered terms. The City provides a full range of municipal services to its citizens, including public safety (police and fire protection), highways and streets, parks and. recreation, public improvements, planning and inspections, economic development, sanitary and storm sewer, water, and general administrative services. Note 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The financial statements of the City have been prepared in accordance with accounting principles generally accepted in the United States of America (GAAP), as applied to governmental units by the Governmental Accounting Standards Board (GASB). The City also applies Financial Accounting Standards Board (FASB) statements and interpretations issued prior to December 1, 1989 to its governmental and business -type activities at the government-wide financial reporting level and to its proprietary funds at the fund reporting level, provided they do not conflict with or contradict GASB pronouncements. The City's significant accounting policies are described below. A. REPORTING ENTITY The City includes all funds, organizations, institutions, agencies, departments, boards, and offices that are not legally separate from the City. Component units are legally separate organizations for which the elected officials of the City are financially accountable and are included within the basic financial statements of the City because of the significance of their operational or financial relationships with the City. The City is considered financially accountable for a component unit if it appoints a voting majority of the organization's governing body and is able to impose its will on the organization by significantly influencing the programs, projects, activities, or level of services performed or provided by the organization, or there is a potential for the organization to provide specific financial benefits to, or impose specific financial burdens on, the City. Blended component units, although legally separate, are, in substance, part of the government's operations. A blended component unit is reported as if it were a fund of the City throughout the year. It is included at both the government -wide and fund financial reporting levels. A description of the City's blended component units follows: City of Brooklyn Center Housing and Redevelopment Authority (HRA) The City Council serves as the Board of Directors for the HRA. The Council reviews and approves the tax levy and all expenditures for the HRA. The HRA is reported as a Special Revenue Fund. The HRA does not issue separate financial statements. Financial information may be obtained at the City's offices. City of Brooklyn Center Economic Development Authority (EDA) The governing board for the EDA is the City Council. The council reviews and approves major community development improvement activities. City general obligation tax increment financing bonds are issued to finance EDA activities. The EDA is reported in the Economic Development Authority, Earle Brown TIF District, TIF District No. 3, TIF District No. 4, and the Community Development Block Grant Special Revenue Funds; the Tax Increment Bonds Debt Service Fund; the Earle Brown Heritage Center Improvements Capital Project Fund; and the Earle Brown Heritage Center Enterprise Fund. The EDA does not issue separate financial statements. Financial information may be obtained at the City's offices. 41 CITY OF BROOKLYN CENTER, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2008 Note 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) B. GOVERNMENT -WIDE AND FUND FINANCIAL STATEMENTS The government -wide financial statements (i.e., the statement of net assets and the statement of changes in net assets) report information on all activities of the primary government and its component units. Governmental activities, which normally are supported by taxes and intergovernmental revenues, are reported separately from business -type activities, which rely to a significant extent on fees and charges for support. The statement of activities demonstrates the degree to which the direct expenses of a given function or segment are offset by program revenues. Direct expenses are those that are clearly identifiable with a specific function or segment. Program revenues include 1) charges to customers or applicants who purchase, use, or directly benefit from goods, services, or privileges provided by a given function or business -type activity and 2) grants and contributions that are restricted to meeting the operational or capital requirements of a particular function or business -type activity. Taxes and other items not included among program revenues are reported instead as general revenues. Separate financial statements are provided for governmental funds and proprietary funds. Major individual governmental funds and major individual enterprise funds are reported as separate columns in the fund financial statements. 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 and special assessments 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 government considers all revenues, except reimbursement grants, to be available if they are collected within 60 days of the end of the current fiscal period. Reimbursement grants are considered available if they are collected within one year 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 claims and judgments, are recorded only when payment is due. Property taxes, special assessments, intergovernmental revenues, charges for services 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 government. 42 CITY OF BROOKLYN CENTER, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2008 Note 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES C. MEASUREMENT FOCUS, BASIS OF ACCOUNTING, AND FINANCIAL STATEMENT PRESENTATION (Continued) The government reports the following major governmental funds: The General Fund is the government'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 Tax Increment District No. 3 Special Revenue Fund has the authority to collect tax increments which are used for various redevelopment projects within the City and for debt service payments of bonds which were issued for the same purpose. The G. O. Improvement Bonds Debt Service Fund is used to account for the accumulation of resources for the payment of improvement bonds. These bonds were sold to finance certain public improvements such as residential streets and storm sewers or the provision of services which are to be paid for wholly or in part from special assessments levied against benefited property. The In Construction Capital Project Fund was established to account for the resources and expenditures required for the acquisition and construction of capital facilities or improvements financed wholly or in part by special assessments levied against benefited properties. The government reports the following major enterprise funds: The Municipal Liquor Fund accounts for the operations of the City's municipal off -sale liquor stores. The Golf Course Fund accounts for operations of Centerbrook Golf Course, a 9 hole executive golf course owned by the City. The Earle Brown Heritage Center Fund accounts for the operation of a convention center. The Earle Brown Heritage Center is a pioneer farmstead that has been historically preserved and restored as a modem multipurpose facility. Its convention center can host conferences, trade shows, and concerts. The Water Utility Fund accounts for the pumping, treatment and distribution of water to customers. Administration, wells, water storage, and distribution are included. The Sanitary Sewer Utility Fund accounts for the collection and pumping of sanitary sewage through a system of sewer lines and lift stations. Sewage is treated by the Metropolitan Council Environmental Services whose fees represent about 64% of this fund's expenses. The Storm Drainage Utility Fund accounts for the collection and treatment of surface runoff water that does not require sanitary wastewater treatment. It incorporates not only the storm sewer collection system, but also structures such as holding ponds and facilities to improve water quality. Fees are based upon the quantity of water running off a property and vary with both size and absorption characteristics of the parcel. i 43 l CITY OF BROOKLYN CENTER, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2008 Note 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, C. MEASUREMENT FOCUS, BASIS OF ACCOUNTING, AND FINANCIAL STATEMENT PRESENTATION (Continued) Additionally, the government reports the following fund type: Internal Service Funds account for compensated absences, health care insurance benefits and central garage services provided to other departments of the City on a cost reimbursement basis. As a general rule, the effect of interfund activity has been eliminated from the government -wide financial statements. Exceptions to this general rule are transactions that would be treated as revenues, expenditures or expenses if they involved external organizations, such as buying goods and services or payments in lieu of taxes. Elimination of these charges would distort the direct costs and program revenues reported for the various functions concerned. Amounts reported as program revenues include 1) charges to customers or applicants for goods, services, or privileges provided, 2) operating grants and contributions, and 3) capital grants and contributions, including special assessments. Internally dedicated resources are reported as general revenues rather than as program revenues. Likewise, general revenues include all taxes. Proprietary funds distinguish operating revenues and expenses from nonoperating items. Operating revenues and expenses generally result from providing services and producing and delivering goods in connection with a proprietary fund's principal ongoing operations. The principal operating revenues of the enterprise funds and internal service funds are charges to customers for sales and services. Operating expenses for enterprise funds and internal service 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. D. CASH AND INVESTMENTS The City considers all highly liquid investments with a maturity of three months or less when purchased to be cash equivalents. All of the cash and investments allocated to the proprietary funds have original maturities of 90 days or less. 1 1 44 CITY OF BROOKLYN CENTER, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2008 Note 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES D. CASH AND INVESTMENTS (Continued) The City's investment policy authorizes the City to invest in the following: a) Securities that are direct obligations or are guaranteed or insured issues of the United States, its agencies, its instrumentalities, or organizations created by an act of congress, including governmental bills, notes, bonds and other securities. b) Commercial paper issued by U.S. corporations or their Canadian subsidiaries that is rated in the highest quality by at least two nationally recognized rating agencies and matures in 270 days or less. c) Time deposits that are fully insured by the Federal Deposit Insurance Corporation or bankers acceptances of U.S. banks. d) Repurchase agreements and reverse repurchase agreements with financial institutions identified by Minnesota Statutes Chapter I I8A. e) Securities lending agreements may be entered into with financial institutions identified by Minnesota Statutes Chapter 118A. f) Minnesota joint powers investment trusts may be entered into with trusts identified by Minnesota Statutes Chapter I I 8 g) Money market mutual funds regulated by the Securities and Exchange Commission and whose portfolios consist only of short term securities permitted by Minnesota Statutes I I8A. h) Bonds of the City of Brooklyn Center issued in prior years, may be redeemed at current market price, which may include a premium, prior to maturing using surplus funds of the debt service fund set up for that issue. Investments are reported at fair value, based on quoted market prices as of the balance sheet date. Adjustments necessary to record investments at fair value are recorded in the operating statement as increases or decreases in investment earnings. Investment income on commingled funds is allocated monthly, based on month-end balances. E. RECEIVABLES AND PAYABLES During the course of operations, numerous transactions occur between individual funds for goods provided or services rendered. Short-term interfimd loans are classified as "interfund receivable /payable." All short- term interfund receivables and payables at December 31, 2008 are planned to be eliminated in 2009. Long- term interfund loans are classified as "advances to /from other funds." Any residual balances outstanding between the governmental activities and business -type activities are reported in the government -wide financial statements as "internal balances." Advances between funds, as reported in the fund financial statements, are offset by a fund balance reserve account in applicable governmental funds to indicate that they are not available for appropriation and are not expendable financial resources. The City expects to make full collection of all trade and property tax receivables, so no allowance is considered necessary. 45 CITY OF BROOKLYN CENTER, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2008 Note I SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, E. RECEIVABLES AND PAYABLES (Continued) Property tax levies are submitted to the County in December each year. The County allocates these levies across taxable properties in the City based on valuations certified in the prior year. The County collects these levies and distributes the City's proceeds in June and December of the fiscal year. These taxes are reported as general revenues in the government -wide financial statements in the year levied. Unpaid taxes at December 31 become liens on the respective property and are classified as delinquent receivables and are fully offset by deferred revenue in the fund financial statements. F. INVENTORIES AND PREPAID ITEMS Inventories in the governmental funds are reported using the consumption method and valued at cost, using the first in/first out (FIFO) method. Inventories in the proprietary funds are valued at cost, using the weighted average method in the Municipal Liquor and Earle Brown Heritage Center Funds and the FIFO method in all other funds. 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. G. 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 government as assets with an initial, individual cost in excess of the amounts in the table below and an estimated useful life in excess of one year. Such assets are recorded at historical cost or estimated historical cost if purchased or constructed. Donated capital assets are recorded at estimated fair market value at the date of donation. Infrastructure .250,000 Buildings and Building Improvements 50,000 Land Improvements 25,000 Heavy Equipment 25,000 Furniture and furnishings 10,000 Motorized vehicles 10,000 Technology equipment 10,000 The costs of normal maintenance and repairs that do not add to the value of the asset or materially extend assets lives are not capitalized. Major outlays for capital assets and improvements are capitalized as projects are constructed. 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. For the year ended December 31, 2008 no interest was capitalized in connection with construction in progress. 46 CITY OF BROOKLYN CENTER, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2008 Note 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES G. CAPITAL ASSETS (Continued) Capital assets of the City, as well as the component units, are depreciated using the straight line method over the following estimated useful lives: Land improvements 25 years Buildings and structures 25 years Water and sewer mains and lines, wells and storage tanks, sewer lift stations 25 years Infrastructure 25 years Street and traffic light systems 15 years Machinery and equipment 5 -15 years H. COMPENSATED ABSENCES It is the City's policy to permit employees to accumulate earned but unused vacation and sick pay benefits. All vacation and vested sick leave pay is accrued in the Public Employee Compensated Absences fund. 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 accordance with the provisions of Statement of Government Accounting Standards No. 16, Accounting for Compensated Absences, a liability is recognized for that portion of accumulating sick leave benefits that is vested, or expected to vest, as severance pay. I. LONG TERM OBLIGATIONS In the government -wide financial statements and proprietary fund types in the fund financial statements, long -term debt and other long -term obligations are reported as liabilities in the applicable governmental activities, business -type activities, or proprietary fund type statement of net assets. Bond premiums and discounts, as well as issuance costs, are immaterial and are expensed in the year of bond issuance. 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. J. FUND EQUITY Fund equity in the fund financial statements is classified as fund balance for governmental funds and net assets for proprietary funds. Fund equity in the government -wide financial statements is classified as net assets for both governmental and business -type activities. Fund balance Generally, fund balance represents the difference between current assets and current liabilities. The City reserves those portions of fund balance which are legally segregated for a specific future use or which do not represent available, spendable resources and are therefore not available for general appropriation or expenditure. Unreserved fund balance indicates that portion of fund balance that is available for appropriation in future periods. Designations are management's intent to set aside these resources for specific purposes. 47 i CITY OF BROOKLYN CENTER, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2008 Note 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, J. FUND EQUITY (Continued) Net assets Net assets represent the difference between assets and liabilities. Net assets, invested in capital assets net of related debt, consists of capital assets, net of accumulated depreciation, reduced by the outstanding balances of any bonds used for the acquisition, construction, or improvement of those assets. Net assets are reported as restricted when there are limitations imposed on their use either through constitutional provisions or enabling legislation, or through external restrictions imposed by creditors, grantors, or laws or regulations of other governments. All other net assets are reported as unrestricted. When both restricted and unrestricted resources are available for an allowable use, it is the government's policy to use restricted resources first, then unrestricted resources as they are needed. K. INTERFUND TRANSACTIONS Interfund services provided and used are accounted for as revenues and expenditures or expenses. Transactions that constitute reimbursements to a fund for expenditurestexpenses initially made from it that are properly applicable to another fund, are recorded as expenditures/expenses in the reimbursing fund and as reductions of expenditures /expenses in the fund that is reimbursed. All other interfand transactions are reported as transfers. L. USE OF ESTIMATES The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect amounts reported in the financial statements and accompanying notes. Actual results could differ from such estimates. M. NEW ACCOUNTING PRONOUNCEMENTS The Governmental Accounting Standards Board (GASB) recently approved the following statements which were not implemented in these financial statements. The effect of these standards may have on future financial statements has not been determined at this time. Statement No. 51, Accounts and Financial Reporting for Intangible Assets. This statement establishes accounting and financial reporting requirements for intangible assets including easements, water rights, timber rights, patents, trademarks and computer software. The provisions of this statement are effective for financial statements for periods beginning after June 15, 2009. 48 CITY OF BROOKLYN CENTER, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2008 Note 2 RECONCILIATION OF GOVERNMENT -WIDE AND FUND FINANCIAL STATEMENTS A. EXPLANATION OF CERTAIN DIFFERENCES BETWEEN THE GOVERNMENTAL FUND STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES AND THE GOVERNMENT -WIDE STATEMENT OF ACTIVITIES The governmental fund statement of revenues, expenditures, and changes in fund balances includes a reconciliation between net changes in fund balances total governmental funds and changes in net assets of governmental activities as reported in the government -wide statement of activities. One element of that reconciliation explains that "Governmental funds report capital outlays as expenditures. However, in the statement of activities the cost of those assets is allocated over their estimated useful lives and reported as depreciation expense." The details of this 865,383 difference are as follows: Capital outlay 4,531,003 Net transfers to proprietary funds (2,113,400) Depreciation expense (1,552,220) Net adjustment to increase net changes in fund balances total governmental funds to arrive at v 865 changes m net assets of governmental activities 383 Another element of that reconciliation states that "Revenues in the Statement of Activities that do not provide current financial resources are not reported as revenues in the funds." The details of this 5,148,523 difference are as follows: General property taxes deferred revenue: At December 31, 2007 (427,510) At December 31, 2008 482,321 Tax increment taxes deferred revenue: At December 31, 2007 (9,143) At December 31, 2008 27,320 Special assessments deferred revenue: At December 31, 2007 (3,353,037) At December 31, 2008 4,158,572 Other deferred revenues: At December 31, 2007 (7,535,629) At December 31, 2008 11,805,629 Net adjustments to decrease net changes in fund balances total governmental funds to arrive at changes in net assets of governmental activities 5,148,523 49 CITY OF BROOKLYN CENTER, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2008 Note 2 RECONCILIATION OF GOVERNMENT -WIDE AND FUND FINANCIAL STATEMENTS, A. EXPLANATION OF CERTAIN DIFFERENCES BETWEEN THE GOVERNMENTAL FUND STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES ANT THE GOVERNMENT -WIDE STATEMENT OF ACTIVITIES (Continued) Another element of that reconciliation states that "The issuance of long -term debt (e.g., bonds, leases) provides current financial resources to overnmental funds, while the repayment of rinci al of the lon g principal g term debt consumes the current financial resources of governmental funds. Neither transaction, however, has any effect on net assets." The details of this 4,115,000 difference are as follows: Debt issued: General obligation improvement bonds (2,390,000) General obligation tax increment bonds (4,335,000) Principal repayments: General obligation bonds 600,000 General obligation improvement bonds 980,000 General obligation tax increment bonds 1,030,000 Net adjustment to increase net changes in fund balances total governmental funds to arrive at changes in net assets of governmental activities (4,115,000 Note 3 STEWARDSHIP. COMPLIANCE. AND ACCOUNTABILITY A. BUDGETARY INFORMATION Annual budgets are adopted on a basis consistent with accounting principles generally accepted in the United States for all governmental funds, except for the Capital Reserve Emergency Fund. All annual appropriations lapse at fiscal year end. In August, the City Manager submits to the City Council proposed operating budgets for the fiscal year commencing the following January. The proposed general fund budget and preliminary tax levy must be certified to the County prior to September 15. The Council holds public hearings on the certified budget and levy and must submit a final levy to the County prior to the end of December. The appropriated budget is prepared by fund and department. The City Council must authorize any transfer of budgeted amounts between departments or funds. Transfers of budgeted amounts within departments in the General Fund must be authorized by the City Manager. The legal level of budgetary control is the department level for the General Fund and the fund level for all other governmental funds. There were no material supplemental budgetary appropriations during the year. 50 CITY OF BROOKLYN CENTER, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2008 Note 3 STEWARDSHIP. COMPLIANCE. AND ACCOUNTABILITY (Continued) B. EXCESS OF EXPENDITURES OVER APPROPRIATIONS For the year ended December 31, 2008 expenditures exceeded appropriations in the following General Fund departments and special revenue funds: t Final Over Budget Actual Budget Major Funds: General Fund: Legal 325,000 461,454 (136,454) Government buildings 740,185 882,707 (142,522) Emergency preparedness 87,030 87,062 (32) t Engineering 564,906 570,490 (5,584) Recreation programs 664,489 721,464 (56,975) Special Revenue Funds: Tax Increment District No. 3 284,000 7,130,503 (6,846,503) Debt Service Funds: G.O. Improvement Bonds 1,140,972 1,162,682 (21,710) Nonmajor Funds: Special Revenue Funds: Tax Increment District No. 4 249,813 275,578 (25,765) Capital Project Funds: Capital Improvements 286,556 357,779 (71,223) Earle Brown Heritage Center Improvements 280,000 389,225 (109,225) C. DEFICIT FUND EQUITY Deficit fund equity exists at December 31, 2008 in the following funds: Unreserved deficit fund balance Major Funds: Infrastructure Construction 703,107 Unreserved deficit net assets Major Funds: Golf Course 786,181 Nonmajor Funds: Public Employees Compensated Absences 101,098 The deficits are being funded through internal borrowing and will be repaid from construction transfers from utility funds, future bond issuance, investment earnings, and internal transfers. 51 CITY OF BROOKLYN CENTER, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2008 Note 3 STEWARDSHIP. COMPLIANCE. AND ACCOUNTABILITY (Continued) D. CHANGES IN ACCOUNTING PRINCIPLE FUND AND GOVERNMENT -WIDE STATEMENTS In 2008, the City prospectively implemented the requirements of a new accounting pronouncement, GASB Statement No. 45, Accounting and Financial Reporting by Employers for Postemployment Benefits Other Than Pensions. Prior to 2008, the City reported a liability for other postemployment benefits other than pensions (OPEB) based on the City's best estimate of the future liability. At December 31, 2007, that liability was 2,517,382. Under GASB Statement No. 45, the only liability reported is the Net Pension Obligation, which is the difference between the annual required contribution as actuarially determined and the City's actual contribution (see Note 5.C.). The accrued health insurance liability was decreased and the beginning net assets were increased by 2,517,382. E. PRIOR PERIOD ADJUSTMENTS GOVERNMENT -WIDE STATEMENTS In 2008, land held for resale was removed from the capital assets in the Governmental Activities. A portion of the land was sold and the remaining portion was added as land held for resale in the Governmental Activities column on the Statement of Net Assets. Beginning Net Assets was decreased by the value of the land removed from capital assets, 1,077,766. Beginning Net Assets was increased b the g g Y value of the land that was reclassified as land held for resale, 750,000. In 2008, a thorough inventory of land owned by the City and its blended component units revealed several parcels not included in the capital assets in the Governmental Activities. Beginning net assets in the Governmental Activities was increased by 2,481,992, the total purchase price for all parcels. In addition, several capital assets were reclassified from Land to Land improvements. Beginning Net Assets was reduced by the accumulated depreciation of 1,000,929. The net effect of the change in accounting principle and prior period adjustments is summarized below: Governmental Activities Net Assets beginning, as previously stated 60,580,262 Change in Accounting Principle: Reduction in health insurance liability 2,517,382 Prior Period Adjustments: Remove land from capital assets (1,077,766) Add land held for resale 750,000 Add land not previously included 2,481,992 Add accumulated depreciation for assets reclassified from land to land improvements (1,000,929) Net Assets beginning, restated 64,250,941 52 CITY OF BROOKLYN CENTER, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2008 Note 4 DETAILED NOTES ON ALL FUNDS A. DEPOSITS AND INVESTMENTS In accordance with Minnesota Statutes, the City maintains deposits at only those depository banks authorized by the City Council. All such depositories 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% of the deposits not covered by insurance or bonds. Authorized collateral includes the legal investments described below, as well as certain first mortgage notes, and certain other state or local government obligations. Minnesota Statutes require that securities pledged as collateral be held in safekeeping by the City Treasurer or in a financial institution other than that furnishing the collateral. At year -end, the City's carrying value amount of deposits was 354,920 composed of bank balances of 506,050. All balances were covered by federal depository insurance or by perfected collateral held by the Federal Reserve Bank. As of December 31, 2008 the City had the following investments and maturities: Investment Maturities Less than No Investment Type Rating Fair Value 1 year 1 -5 6-10 maturity Federal Home Loan Bank Notes AAA 4,072,010 4,072,010 Federal National Mortgage Ass'n Notes AAA 1,018,855 1,018,855 Federal Home Lean Mortgage Corp AAA 4,023,787 2,026,403 1,997,384 Negotiable Certificates of Deposit N/A 5,774,586 3,229,234 2,545,352 E)demal investment pool -4M Fund N/A 31,970,267 31,970,267 Money market AAA 7,744 7,744 Total investments 46,867,249 3,229,234 9,662,620 1,997,384 $31, 978,011 Deposits 354,920 Petty cash and change funds 13,135 Total cash and investments $47,235,304 Reconciliation to Statement of Net Assets (Statement 1): Cash, cash equivalents, and investments 47,127,304 Restricted cash and investments 108,000 Total cash and investments $47,235,304 N/A not rated 53 i CITY OF BROOKLYN CENTER, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2008 Note 4 DETAILED NOTES ON ALL FUNDS A. DEPOSITS AND INVESTMENTS (Continued) Interest rate risk The City's investment policy requires interest earnings remain stable and predictable through at least the next budget cycle and that at least 50% of the investment portfolio remain for two or more years with known interest rates. The policy also states that the portfolio shall remain sufficiently liquid to meet all operating requirements that may be reasonably expected. Credit risk The City's investment policy restricts investment instruments to those authorized by Minnesota Statutes 118A. The policy also requires that any counterparty in investment transactions be pre qualified and approved by the City Council and that the portfolio be diversified to limit potential losses on individual securities. As of December 31, 2008 the City's investment in FHLB, FNMA and FHLMC notes were all rated AAA by Moody's Investor Service. The City's external investment pool is with 4M which is regulated by Minnesota Statutes and the Board of Directors of the League of Minnesota Cities. The 4M fund is an unrated 20 -like pool and the fair value of the position in the pool is the same as the value of the pool shares. Concentration of credit risk The City's investment policy requires that the investment portfolio be diversified to minimize potential losses on individual securities. Custodial credit risk The City's investment policy requires that securities purchased from any bank or dealer be placed with an independent third party for custodial safekeeping. All of the City's investments were held in an institutional trust under contract with the City for safekeeping services. B. RECEIVABLES Significant receivable balances not expected to be collected within one year of December 31, 2008 are as follows: Maior Funds Tax Increment G.O. Sanitary Storm District Improvement Infrastructure Water Sewer Drainage Nonmajor General No.3 Bonds Construction Utility Utility Utility Funds Total Delinquent property taxes S 100,385 S 4,010 S S S 16,195 S 120,590 Delinquent tax increments 6,830 6,830 Special assessments 3,417,649 81,154 163.412 1,562 231 3,664,008 S 100,385 S 6,830 $3,421,659 S 81,154 S 163,412 1,562 231 16,195 S 3,791,428 Governmental funds report deferred revenue in connection with receivables for revenues that are not considered to be available to liquidate liabilities of the current period. Governmental funds also defer revenue recognition in connection with resources that have been received, but not yet earned. At the end of the current fiscal year, the various components of deferred revenue and unearned revenue reported in the governmental funds were as follows: I 54 CITY OF BROOKLYN CENTER, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2008 Note 4 DETAILED NOTES ON ALL FUNDS B. RECEIVABLES (Continued) Unavailable Unearned Totals Delinquent property taxes receivable (General Fund) 401,525 401,525 Delinquent property taxes receivable (G. 0. Improvement Bonds) 16,036 16,036 Delinquent property taxes receivable (NonmajorFunds) 64,761 64,761 Delinquent tax increment collections (Tax Increment District No. 3) 27,320 27,320 Special assessments not yet due (G. 0. Improvement Bonds) 4,036,007 4,036,007 Special assessments not yet due (Infrastructure Construction) 122,564 122,564 Grants received but unspent (Nonmajor Funds) 17,902 17,902 Assets held for resale (Tax Increment District No. 3) 11,018,629 11,018,629 Assets held for resale (NonmajorFunds) 787,000 787,000 Total deferred /unearned revenue for governmental funds 16,473,842 17,902 16,491,744 The City has leased a portion of the police second floor expansion area to the Local Government Information Systems Association (LOGIS) as a backup computer facility. The lease has a term of six years, commencing on August 1, 2005, and calls for monthly lease payments based on the square- footage. Lease revenue for the year ended December 31, 2008 was 9,302. Future minimum lease payments are as 9,091 annually through 2010 and 5,303 for 2011. C. CAPITAL ASSETS Capital asset activity for the year ended December 31, 2008 was as follows: Beginning Beginning Balance as Prior period Balance- Ending Previously stated Adjustment Restated Increases Decreases Balance Governmental activities: Capital assets, not being depreciated: Land 3,203,904 S 333,569 S 3,537,473 S 3,537,473 Construction in progress 4,301,924 4,301,924 3.605.037 (3,208,300 4,698,661 Total capital assets, not being depreciated 7,505,828 333,569 7,839.397 3,605,037 (3,208,300) 8,236,134 Capital assets, being depreciated: Buildings and improvements 19,160,080 19,160,080 250,516 19,410,596 Park improvements 3,400,550 1,070,657 4,471,207 27,285 4,498,492 Departmental equipment 7,476,797 7,476,797 828,308 (493,239) 7,811,866 Streets 23,480,601 23,480,601 1,707,038 25,187,639 Total capital assets, being depreciated 53,518,028 1,070,657 54,588,685 2,813,147 (493,239) 56,908,593 Less accumulated depreciation for Buildings and improvements 7,448,491 7,448,491 670,243 8,118,734 Park improvements 2,225,236 1,000,929 3,226,165 118,570 3,344,735 Departmental equipment 3,820,583 3,820,583 649,506 (442,747) 4,027,342 Streets 9,522,544 9,522,544 745,151 10,267,695 Total accumulated depreciation 23,016,854 1,000.929 24,017,783 2,183,470 (442,747) 25,758,506 Total capital assets being depreciated net 30,501,174 69,728 30,570,902 629,677 (50,492) 31,150,087 Governmental activities capital assets net 38.007,002 403,297 38,410299 4,234,714 S (3258,7921 S 39,386,221 During 2008, assets valued at $1,224,308 were transferred from Governmental Activities construction in progress to Business -Type activities mains and lines. 55 CITY OF BROOKLYN CENTER, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2008 Note 4 DETAILED NOTES ON ALL FUNDS, C. CAPITAL ASSETS (Continued) Beginning Ending Balance Increases Decreases Balance Business -type activities: Capital assets, not being depreciated: Land 3,197,342 (2,359) 3,194,983 Construction in progress 2,294,293 3,009,389 (2,131,658) 3,172,024 Total capital assets, not being depreciated 5,491,635 3,009,389 (2,134,017) 6,367,007 Capital assets, being depreciated: Land improvements 368,088 25,379 393,467 Buildings and improvements 17,458,486 228,067 17,686,553 Department equipment 625,654 98,349 724,003 Street fight systems 83,540 83,540 Mains and lines 48,570,196 3,355,967 51,926,163 Total capital assets, being depreciated 67,022,424 3,791,302 70,813,726 Less accumulated depreciation for Land improvements 142,556 13,674 156,230 Buildings and improvements 9,950,573 823,110 10,773,683 Department equipment 453,654 44,497 498,151 Street light systems Mains and lines 21,500,384 1,679,925 23,180,309 Total accumulated depreciation p 32 047167 2,561,206 34608 373 Total capital assets being depreciated net 34,975,257 1,230,096 36,205,353 Business -type activities capital assets -net 40,466,892 4,239,485 (2,134,017) 42,572,360 Depreciation expense was charged to functions/programs of the primary government as follows: Governmental activities: General government 78,731 Public safety 390,064 Public works 839,601 Parks and recreation 243,824 Capital assets held by the governments internal service funds are charged to the various functions based on their usage of the assets 631,250 Total depreciation expense governmental activities 2,183,470 Business -type activities: Municipal liquor 26,431 Golf course 27,244 Earle Brown Heritage Center 579,118 W ater utility 611,328 Sanitary ewer utility ry thty 553 549 Storm drainage utility 763,536 Total depreciation expense business -type activities 2,561,206 56 CITY OF BROOKLYN CENTER, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2008 Note 4 DETAILED NOTES ON ALL FUNDS C. CAPITAL ASSETS (Continued) CONSTRUCTION COMMITMENTS At December 31, 2008 the City had construction project contracts in progress. The commitments related to remaining contract balances are summarized as follows: Contract Remaining Project Amount Commitment Freeway Blvd and Shingle Creek 1,427,782 73,105 Maranatha Neighborhood 3,688,690 266,288 Xerxes Avenue and Northway Drive 2,275,139 86,732 Fiber Optic East and West Fire Stations 63,803 63,803 7,455,414 489,928 D. INTERFUND BALANCES AND TRANSFERS Individual fund interfund receivable and payable balances at December 31, 2008 are as follows: Due from Due to Fund Other Funds Other Funds Major Funds: Municipal Liquor 135,000 Nonmajor Funds: Capital Improvements 135,000 Total 135,000 135,000 The $135,000 between the Municipal Liquor and Capital Improvement Funds is expected to be eliminated within one year of December 31, 2008. Advances to Advances From Fund Other Funds Other Funds Major Funds: Golf Course 792,488 Nonmajor Funds: Capital Improvements 792,488 792,488 792,488 The $792,488 advance between the Golf Course and Capital Improvements funds is not expected to be eliminated within one year of December 31, 2008. r 57 I �I CITY OF BROOKLYN CENTER, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2008 Note 4 DETAILED NOTES ON ALL FUNDS, D. INTERFUND BALANCES AND TRANSFERS (Continued) Interfund Interfund Fund Receivable Payable Major Funds: Storm Drainage Utility 4,354 Nonmajor Funds: Economic Development Authority 11,115 Community Development Block Grant 11,115 Recycling and Refuse 4,354 15,469 15,469 Interfund payables/receivables are representative of lending/borrowing arrangements to cover deficit cash balances at the end of the fiscal year. Balance will be paid with transfers from other funds, collections of outstanding receivables, and the issuance of bonds to finance completed infrastructure projects. Interfund transfers: Transfer In Transfer Out Governmental Funds: Major Funds: General 5,000 Tax Increment District No. 3 1,243,183 Infrastructure Construction 831,297 Nonmajor Funds: Housing and Redevelopment Authority 299,858 Economic Development Authority 299 858 p y 1,317 Tax Increment District No. 4 1,317 City Initiatives Grant 5,000 TaxIncrement Bonds 462,061 Capital Improvements 135,000 Earle Brown Heritage Center Improvements 235,000 Total govenmental funds 1,969,533 1,549,358 58 CITY OF BROOKLYN CENTER, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2008 Note 4 DETAILED NOTES ON ALL FUNDS D. INTERFUND BALANCES AND TRANSFERS (Continued) Proprietary Funds: Major Funds: Municipal Liquor 135,000 Earle Brown Heritage Center 235,000 Nonmajor Funds: Street Light Utility 50,175 Total proprietary funds 420,175 Total all funds 1,969,533 1,969,533 Governmental Business -Type Activities Activities Reconciliation to Government -Wide Statement of Activities: Net Transfers -Fund Statements 420,175 (420,175) Capital Asset Transfers (2,113,400) 2,113,400 Total Transfers Government -Wide Statement of Activities (1,693,225) 1,693,225 Interfund transfers allow the City to allocate financial resources to the funds that receive benefit from services provided by another fund or to provide additional capital and infrastructure funding. In addition, interfund transfers are occasionally authorized to allow redistribution of resources between funds for the most efficient use of funds. In 2008, the transfer from the General Fund to the City Initiatives Grant Fund is to provide the funding authorized by the City Council for the Centennial Celebration to be held in 2011. Transfers from the Tax Increment District No. 3 fund to the Tax Increment Bonds fund were made to pay the 2008 debt service requirements for the bonds. The transfer from the Street Light Utility fund to the Infrastructure Construction Fund was used to fund certain street construction projects. E. OPERATING LEASES The City leases space for its municipal liquor stores. The leases are both ten -year leases and began in 2000 and 2003. Both leases have options for a ten -year extension. The leases provide for a minimum monthly base rent payment, plus a pro -rata share of common area expenses. Additional lease payments are required if agreed -upon revenue thresholds are attained. These leases may be cancelled at the City's option if the City ceases liquor operations. Total rental expense under the lease agreements for the year ended December 31, 2008 was 243,925. Future minimum base rent payments under the current agreements are as follows: Total Year Minimum Ending Rents 2009 193,530 2010 136,158 2011 93,360 2012 93,360 2013 93,360 609,768 59 L CITY OF BROOKLYN CENTER, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2008 Note 4 DETAILED NOTES ON ALL FUNDS (Continued) F. LONG -TERM DEBT The City issues general obligation bonds to provide funds for the construction of major capital facilities, construction of infrastructure, and economic development and redevelopment. General obligation bonds have been issued for governmental activities. As of December 31, 2008 the long -term debt of the financial reporting entity consisted of the following: GOVERNMENTAL ACTIVITIES Final Interest Maturity Original Payable Rates Date Date Issue 19/31/08 General Obligation Bonds: Police and Fire Building Refunding Bonds 2.00 -3.35% 12/01/2004 02/01/2013 5,045,000 3,275,000 Total General Obligation Bonds 5,045,000 3,275,000 G.O. Tax Increment Bonds: Taxable Taxlncrement Refunding Bonds of2004 2.25 -4.40% 12/01/2004 02/01/2011 2,470,000 1,230,000 Taxable Tax Increment Bondsof2004 4.75 5.125% 12/01/2004 02/01/2020 17,245,000 14,995,000 Taxable Taxlncrement Bonds of2008 3.00 -5.30% 05/01/2008 02/01/2018 4,335,000 4,335,000 Total G.O. Tax Increment Bonds 24,050,000 20,560,000 G.O. Improvement Bonds: 1998 Improvement Bonds 3.40 4.20 12/01/1998 02/01/2009 1,085,000 95,000 1999 Improvement Bonds 4.10 5.00 12/01/1999 02/01/2010 1,585,000 305,000 2000 Improvement Bonds 4.30 12101/2000 02/01/2011 735,000 200,000 2001 Improvement Bonds 2.60 -0.40 12/01/2001 02/01/2012 730,000 265,000 2003 Improvement Bonds 1.45%4.00 01/01/2003 02/01/2013 1,205,000 560,000 2004 Improvement Bonds 2.10 3.65 12/01/2004 02/01/2015 1,010,000 675,000 2006 Improvement Bonds 3.55 3.80 12101/2006 02101/2017 1,460,000 1,200,000 2008 Improvement Bonds 3.25 12115/2008 02/01/2019 2,390,000 2,390,000 Total G.O. Improvement Bonds 10,200,000 5,690,000 Total bonded indebtedness 39,295,000 29,525,000 Other Liabilities: Compensated absences payable 1,075,953 Net OPEB obligation 147,045 Total other liabilities 1,222,998 Total City indebtedness governmental activities 30,747,998 All long -term bonded indebtedness outstanding at December 31, 2008 is backed by the full faith and credit of the City, including improvement and tax increment bond issues. Bonds in the governmental activities will be retired by future property tax levies, tax increments or special assessments accumulated in the specific debt services funds. In the event that a deficiency exists because of unpaid or delinquent tax increments or special assessments at the time a debt service payment is due, the City must provide resources to cover the deficiency until other resources are available. Delinquent tax increments in the governmental funds at December 31, 2008 were 27,320; delinquent special assessments in the governmental funds at December 31, 2008 were 56,064, which is included in the special assessments receivable balance of 4,176,429. 60 CITY OF BROOKLYN CENTER, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2008 Note 4 DETAILED NOTES ON ALL FUNDS F. LONG -TERM DEBT GOVERNMENTAL ACTIVITIES (Continued) The G.O. Improvement Bonds were issued to finance the construction and replacement of street and storm drainage capital assets. Of the 5,690,000 outstanding at December 31, 2008 the amounts applicable to street and storm capital assets is 4,687,316 and 1,002,684, respectively. Annual debt service requirements to maturity for long -term debt are as follows: Governmental Activities Year Ending General Obligation Bonds G.O. Tax Increment Bonds G.O. Improvement Bonds December 31 Principal Interest Principal Interest Principal Interest 2009 610,000 93,903 2,765,000 922,711 765,000 166,946 2010 640,000 75,153 2,785,000 783,961 920,000 167,686 2011 640,000 55,632 1,290,000 702,530 745,000 136,890 2012 685,000 34,581 925,000 651,744 670,000 111,460 2013 700,000 11,725 1,365,000 598,107 590,000 88,869 2014 -2018 7,910,000 1,916,695 1,840,000 190,459 2019 -2020 3,520,000 182,450 160,000 3,400 Total 3,275,000 270 20,560,000 5,758,198 5,690,000 865,710 CHANGE IN LONG -TERM LIABILITIES Long -term liability activity for the year ended December 31, 2008 was as follows: Beginning Ending Due Within Balance Additions Reductions Balance One Year Governmental activities: Bonds payable: General obligation bonds 3,875,000 (600,000) 3,275,000 610,000 G.O. tax increment bonds 17,255,000 4,335,000 (1,030,000) 20,560,000 2,765,000 G.O. improvement bonds 4,280,000 2,390,000 (980,000) 5,690,000 765,000 Total bonds payable 25,410,000 6,725,000 (2,610,000) 29,525,000 4,140,000 Compensated absences 1,023,706 112,047 (59,800) 1,075,953 107,595 Net OPEB obligation 314,184 (167,139) 147,045 Total government activity long -term liabilities 26,433,706 7,151,231 (2,836,939) 30,747,998 4,247,595 Compensated absences are liquidated by the Public Employees Compensated Absences Fund. 61 I CITY OF BROOKLYN CENTER, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2008 Note 4 DETAILED NOTES ON ALL FUNDS, F. LONG -TERM DEBT (Continued) CONDUIT DEBT OBLIGATIONS From time to time, the City has issued Housing Revenue Bonds and Industrial Revenue Bonds or Notes to provide assistance to qualified private sector entities for the acquisition and construction of housing, industrial, or commercial facilities deemed to be in the public interest. The bonds or notes are secured by the property financed and are payable solely from payments received on the underlying mortgage loans. The City has no obligation of its assets or of its general tax base for the repayment of any of these bonds or notes. Accordingly, the bonds or notes are not reported as liabilities in the accompanying financial statements. Upon final redemption of the bonds or notes, ownership of the property transfers to the private sector entity served by the bond or note issue. As of December 31, 2008 there were three series of fixed rate Multifamily Housing Revenue Refunding bonds, one Housing Revenue Development Refinancing Note, one series of Variable Rate Demand Refunding Industrial Revenue Bonds, two Healthcare Revenue Notes, and four Senior Housing Development Revenue Notes outstanding. The aggregate amount of conduit debt obligations at December 31, 2008 is 30,566,244. G. FUND EQUITY Net assets reported in the government -wide statement of net assets at December 31, 2008 include the following: Governmental activities Invested in capital assets, net of related debt: Land 3,537,473 Construction in progress 4,698,661 Other capital assets, net of depreciation 31,150,087 Less: related long -term debt outstanding (7,962,316) Total invested in capital assets, net of related debt 31,423,905 Restricted: Debt service 8,772,819 Tax increment purposes 23,077,965 Total restricted 31,850,784 Unrestricted 690,424 Total governmental activities net assets 63,965,113 Related debt for governmental activities capital assets includes 3,275,000 in General Obligation g p' ligation Bonds and 4,687,316 in G.O. Improvement Bonds, the amount issued to finance the street portion of construction projects. The remaining 1,002,684 of the G.O. Improvement Bonds outstanding was issued to finance the storm drainage portion of construction projects. 62 r CITY OF BROOKLYN CENTER, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2008 Note 4 DETAILED NOTES ON ALL FUNDS G. FUND EQUITY (Continued) Business -type activities Invested in capital assets: Land 3,194,983 Construction in progress 3,172,024 Other capital assets, net of depreciation 36,205,353 Total invested in capital assets 42,572,360 Unrestricted 10,466,919 Total business -type activities net assets 53,039,279 Governmental fund balances reported on the fund financial statements as of December 31, 2008 include the following: Reserved Major Funds: General: Inventories 21,105 Prepaid items 890 Tax Increment District No. 3: Statutory housing 3 520 ry smg obligation 235 G. O. Improvement Bonds: Debt service 2,793,086 Infrastructue Construction: Committed contracts 426,125 Nonmajor Funds: Advances to other funds 792,488 Committed contracts 63,803 Debt service 2,394,177 Prepaid items 7,754 Total 1 0,019,663 63 CITY OF BROOKLYN CENTER, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2008 Note 4 DETAILED NOTES ON ALL FUNDS G. FUND EQUITY (Continued) Unreserved, designated Major Funds: General: Working capital 7,721,443 Tax Increment District No. 3: Economic development 7,361,897 Nonmajor Funds: Economic development 3,030,092 Capital improvements 4,985,988 Total 23,099,420 Unreserved, Undesignated (deficit) Major Funds: Capital Project (703,107) Nonmajor Funds: Special revenue 131,754 Total (571,353) 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 and natural disasters. Property and casualty insurance is provided through the League of Minnesota Cities Insurance Trust (LMCIT), a public entity risk pool currently operating as a common risk management and insurance program for Minnesota cities: general liability, property, automobile, mobile property and marine, crime, employee dishonesty, boiler, and open meeting law. The City pays an annual insurance premium to the LMCIT for its insurance coverage. The City is subject to supplemental assessments if deemed necessary by the LMCIT. Currently, the LMCIT is self sustaining through member premiums and reinsures through commercial companies for claims in excess of various amounts. The City retains risk for the deductible portions of the insurance policies. The amount of these deductibles is considered immaterial to the financial statements. Workers' compensation coverage is provided through a pooled self-insurance program through the LMCIT. The City pays an annual premium to the LMCIT. The City is subject to supplemental assessments if deemed necessary by the LMCIT. The LMCIT reinsures through Workers' Compensation Reinsurance Association (WRCA) as required by law. For workers' compensation, the City is not subject to a deductible. The City's workers' compensation is retroactively rated. With this type of coverage, final premiums are determined after loss experience is known. The amount of premium adjustment, if any, is considered immaterial and not recorded until received or paid. There were no significant reductions in insurance from the previous year or settlements in excess of insurance coverage for any of the past three years. 64 CITY OF BROOKLYN CENTER, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2008 Note 5 OTHER INFORMATION (Continued) B. EMPLOYEE RETIREMENT PLANS 1. DEFINED BENEFIT PENSION PLAN PLAN DESCRIPTION All full -time and certain part-time employees of the City are covered by defined benefit plans administered by the Public Employees Retirement Association of Minnesota (PERA). PERA administers the Public Employees Retirement Fund (PERF) and the Public Employees Police and Fire Fund (PEPFF) which are cost sharing, multiple employer retirement plans. These plans are established and administered in accordance with Minnesota Statute, Chapters 353 and 356. PERF members belong to either the Coordinated Plan or the Basic Plan. Coordinated Plan members are covered by Social Security and Basic Plan members are not. All new members must participate in the Coordinated Plan. All police officers, firefighters and peace officers who qualify for membership by statute are covered by the PEPFF. PERA provides retirement benefits as well as disability benefits to members, and benefits to survivors upon death of eligible members. Benefits are established by State Statute, and vest after three years of credited service. The defined retirement benefits are based on a member's highest average salary for any five successive years of allowable service, age, and years of credit at termination of service. PERA issues a publicly available financial report that includes financial statements and required supplementary information for PERF and PEPFF. That report may be obtained by writing to PERA, 60 Empire Drive Suite 200, St. Paul, Minnesota, 55103 -2088 or by calling 651- 296 -7460 or 800 -652- 9026. FUNDING POLICY Minnesota Statutes Chapter 353 sets the rates for employer and employee contributions. These statutes are established and amended by the state legislature. The City makes annual contributions to the pension plans equal to the amount required by state statutes. PERF Coordinated Plan members are required to contribute 6.00% of their annual covered salary. PEPFF members are required to contribute 8.60% of their annual covered salary. The City is required to contribute the following percentages of annual covered payroll: 6.50% for Coordinated Plan PERF members and 12.90% for PEPFF members. The City's contributions to the Public Employees Retirement Fund for the years ending December 31, 2008, 2007, and 2006 were 428,616, 392,528, and 363,334, respectively. The City's contributions to the Public Employees Police and Fire Fund for the years ending December 31, 2008, 2007, and 2006 were 444,527, 374,495, and 318,913, respectively. The City's contributions were equal to the contractually required contributions for each year as set by state statute. r 65 CITY OF BROOKLYN CENTER, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2008 Note 5 OTHER INFORMATION B. EMPLOYEE RETIREMENT PLANS (Continued) 2. PENSION PLAN BROOKLYN CENTER FIRE DEPARTMENT RELIEF ASSOCIATION PLAN DESCRIPTION The City contributes to the Brooklyn Center Fire Department Relief Association (the Association) which is the administrator of a single employer, public employee defined benefit retirement system to provide a retirement plan (the Plan) to volunteer firefighters of the City who are members of the Association. The Association is organized and operates under the provisions of Minnesota State Statutes 424A, and provides benefits in accordance with those statutes. The Association provides retirement benefits to members and survivors, upon death of eligible members. Benefits are established by the Association and approved by the City Council under the applicable statutes. The defined retirement benefits are based on a member's years of service. Vesting begins after the 10th year of service with a 60% benefit increasing to 100% after the 20th year of service. Full benefits are available after 20 years of service by the member and having attained the age of 50. The current benefit available is a lump sum distribution of 7,500 per year of service. Vested, terminated members who are entitled to benefits but are not yet receiving them are bound by the provisions in effect at the time of termination of membership. The Association issues a financial report that includes financial statements and required supplementary information for the Brooklyn Center Fire Department Relief Association. That report is available at the City of Brooklyn Center City offices. FUNDING POLICY The City levies property taxes at the direction of and for the benefit of the Plan and passes through state aids allocated to the Plan, all in accordance with enabling State statutes. The minimum tax levy obligation is the financial contribution requirement for the year less anticipated state aids. CONTRIBUTIONS Total contributions to the plan in 2007 were 139,441 of which all was from the State of Minnesota. The actuarially determined contribution based on an actuarial valuation performed at January 1, 2007 was 59,159, which represents funding for normal cost of 98,697 and amortization of the excess over the actuarial accrued liability of 39,538). Actual contributions have continued at higher levels to allow for a transition to a defined contribution plan in the future. These higher payments are irrevocable and do not affect the level of future City contributions, nor do they constitute an asset of the City. The City's 139,441 contribution to the Association in 2007 was recorded as intergovernmental t revenue and fire department expenditure in the General Fund. 66 CITY OF BROOKLYN CENTER, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2008 Note 5 OTHER INFORMATION B. EMPLOYEE RETIREMENT PLANS 2. PENSION PLAN BROOKLYN CENTER FIRE DEPARTMENT RELIEF ASSOCIATION (Continued) The information below is the most recent data available. Actuarial valuation date 111/2007 Actuarial cost method Entry age normal cost method Amortization method Level dollar amount amortized on a closed basis Remaining amortization period 13 years Asset valuation method fair value Actuarial assumptions: Investment rate of return 6.0% compounded annually Discount rate for obligations 6.00% Projected salary increases Not applicable Post retirement benefits None Inflation rate Not applicable THREE YEAR TREND INFORMATION Three Year Trend Information Annual Percentage Net Year Pension ofAPC Pension Ending Cost (APQ Contributed Obligation 12/31/2005 154,346 100% 12/31/2006 161,019 100% 12/31/2007 139,441 100% SCHEDULE OF FUNDING PROGRESS Assets in Excess of Actuarial Actuarial Actuarial (Unfunded) Valuation Value of Accrued Accrued Funded Date Assets Liability Liability Ratio 01/01/2003 2,540,231 2,813,687 (273,456) 90.3% 01/01/2005 3,381,603 2,986,223 395,380 113.2% 01/01/2007 4,024,987 3,713,292 311,695 108.4% 67 I CITY OF BROOKLYN CENTER, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2008 Note 5 OTHER INFORMATION (Continued) C. OTHER POST- EMPLOYMENT BENEFITS In 2008, the City prospectively implemented the requirement of a new accounting pronouncement, GASB Statement No. 45, Accounting and Financial Reporting by Employer for Postemployment Benefits Other than Pensions. PLAN DESCRIPTION In addition to providing the pension benefits described in Note 5.B., the City provides postemployment health care benefits for retired employees and police disabled in the line of duty, through a single- employer defined benefit plan administered by the City. The authority to provide these benefits is established in Minnesota Statutes Sections 471.61 subd. 2a. and 299A.465. The benefits, benefit levels, employee contributions and employer contributions are governed by the City and can be amended by the City through its personnel manual and collective bargaining agreements with employee groups. The Plan is not accounted for as a trust fund, as an irrevocable trust has not been established to account for the Plan. The Plan does not issue a separate report. BENEFITS PROVIDED Retirees The City is required by State Statute to allow retirees to continue participation in the City's group health insurance plan if the individual terminates service with the City through service retirement or disability retirement. Former employees who are receiving, or who have met age and service requirements to receive, an annuity from a Minnesota public pension plan and those receiving a disability benefit from such a plan are immediately eligible to participate in this Plan. Retirees may obtain dependent coverage if the employee received dependent coverage immediately before leaving employment. Covered spouses may continue coverage after the death of a retiree. In addition, the surviving spouse of an active employee may continue coverage in the group health insurance plan after the employee's death. All health care coverage is provided through the City's group health insurance plans. The retiree is required to pay the premium as described below: Emnlovees hired before January 1. 1992 with continuous full -time emiolovment Employees who, on the date of their retirement, meet eligibility requirement for a full retirement annuity under PERA or PERA Police without reduction of benefits because of age, disability, or any other reason for reduction shall be eligible for the City to pay 100% of the single person premium until such time as the retiree is eligible for Medicare or at age 65, whichever is sooner. If the retiree desires to continue coverage in excess of single coverage, the additional cost for the coverage shall be paid to the City on a monthly basis. Emnlovees hired after January 1. 1992 The retiree is required to pay 100% of their premium cost for the City- sponsored group health insurance plan in which they participate. The premium is a blended rate determined on the entire active and retiree population. Since the projected claims costs for retirees exceed the blended premium paid by retirees, they are receiving an implicit rate subsidy (benefit). The coverage levels are the same as those afforded to active employees. 68 CITY OF BROOKLYN CENTER, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2008 Note 5 OTHER INFORMATION C. OTHER POST EMPLOYMENT BENEFITS BENEFITS PROVIDED (Continued) Disabled Dolice and firefiehter The City is required to continue to pay the employer's contribution toward health coverage for police or firefighters disabled in the line of duty per Minnesota Statute 299A.465, until age 65. Dependent coverage is included, if the dependents were covered at the time of the disability. 1 PARTICIPANTS As of the actuarial valuation dated January 1, 2008, participants consisted of: Retirees for which the City is paying the single premium 12 Retirees and beneficiaries currently purchasing health insurance through the City 3 Disabled police officers 3 Active employees 147 Total 165 FUNDING POLICY The additional cost of using a blended rate for actives and retirees is currently funded on a pay -as- you -go basis. The City Council may change the funding policy at any time. ANNUAL OPEB COSTS AND NET OPEB OBLIGATION The City's annual other post employment benefit (OPEB) cost is calculated based on the annual required contribution (ARC) of the employer, an amount actuarially determined in accordance with the parameters of GASB Statement No. 45. The ARC represents a level of funding that, if paid on an ongoing basis, is projected to cover the normal cost each year and amortize any unfunded actuarial obligation (or funding excess) over a period not to exceed 30 years. The net OPEB obligation as of December 31, 2008 was calculated as follows: Annual required contribution 314,184 Interest on net OPEB obligation Adjustment to ARC Annual OPEB cost 314,184 Employer Contributions Direct 96,027 Indirect Implicit Rate Subsidy 71,112 Increase (decrease) in net OPEB obligation 147,045 Net OPEB obligation, beginning of year Net OPEB obligation, end of year 147,045 1 69 CITY OF BROOKLYN CENTER, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2008 Note 5 OTHER INFORMATION C. OTHER POST EMPLOYMENT BENEFITS ANNUAL OPEB COSTS AND NET OPEB OBLIGATION (Continued) The City first had an actuarial valuation performed for the plan as of January 1, 2008 to determine the funded status of the plan as of that date as well as the employer's ARC for the fiscal year ended December 31, 2008. The City's annual OPEB cost (expense) of 314,184 was equal to the ARC for the fiscal year, as the transition liability was set to zero as of December 31, 2007. The City's annual OPEB cost, the percentage of annual OPEB cost contributed to the plan, and the net OPEB obligation for 2008 were as follows: Percentage of Fiscal Year Annual OPEB Employer Annual OPEB Cost Net OPEB Ended Cost Contributions Contributed Obligation December 31, 2008 314,184 167,139 53.20% 147,045 FUNDED STATUS AND FUNDING PROGRESS The City currently has no assets that have been irrevocably deposited into a trust for future benefits; therefore, the actuarial value of assets is zero. The funded status of the plan was as follows: Unfunded Actuarial Actuarial Actuarial Actuarial UAALas a Valuation Value of Accrued Accrued Funded Covered Percentage of Date Assets Liability (AAL) Liability (UAAL) Ratio Payroll Covered Payroll January 1, 2008 3,996,136 3,996,136 0.00% 8,882,315 44.99 Using projected unit credit actuarial cost method Note the first OPEB actuarial valuation was conducted as of January 1, 2008. There is not data available prior to the first valuation. ACTUARIAL ASSUMPTIONS Actuarial valuations of an ongoing plan involve estimates of the value of reported amounts and assumptions about the probability of occurrence of events far into the future. Examples include assumptions about future employment, mortality, and the health care cost trend. Amounts determined regarding the funding status of the plan and the annual required contribution of the employer are subject to continual revision as actual results are compared with past expectations and new estimates are made about the future. The schedule of funding progress, presented as required supplementary information following the notes to the financial statements, presents multi -year trend information that shows whether the actuarial value of the plan assets is increasing or decreasing over time relative to the actuarial accrued liabilities for benefits. 70 CITY OF BROOKLYN CENTER, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2008 Note 5 OTHER INFORMATION C. OTHER POST EMPLOYMENT BENEFITS ACTUARIAL ASSUMPTIONS (Continued) Projections of benefits for financial reporting purposes are based on the substantive plan (the plan as understood by the employer and plan members) and include the types of benefits provided at the time of each valuation and the historical pattern of sharing of benefit costs between the employer and plan members to that point. The actuarial methods and assumptions used include techniques that are designed to reduce the effect of short-term volatility in actuarial accrued liabilities and the actuarial value of assets, consistent with the long -term perspective of the calculations. In the January 1, 2008 actuarial valuation, the Projected Unit Credit actuarial cost was used. The actuarial assumptions included a 4.5% investment rate of return (net of administrative expenses) and an initial annual health care cost trend rate of 10.0% reduced by 0.5% each year to arrive at an ultimate health care cost trend rate of 5.0 The actuarial value of assets as $0. The plans' unfunded actuarial accrued liability is being amortized using a 5.0% payroll growth rate method over 30 years on a closed basis. The remaining amortization period at December 31, 2008 was 29 years. D. ARBITRAGE REBATE The Tax Reform Act of 1986 requires governmental entities to pay to the federal government income earned on the proceeds from the issuance of debt in excess of interest costs, pending the expenditure of the borrowed funds. This rebate of interest income (known as arbitrage) applies to governmental debt issued after August 31, 1986. The City issued greater than $5 million of bonds in 2004 and therefore is required to rebate excess investment income relating to these issues to the federal government. The extent of the City's liability for arbitrage rebates on the remaining bond issues is not determinable at this time. However, in the opinion of management, any such liability would be immaterial. E. LITIGATION The City is subject to certain legal claims in the normal course of business. Management does not expect the resolution of these claims will have a material impact on the City's financial condition or results of operations. F. CONTINGENT LIABILITIES Tax Increment Notes In May 2002, the City entered into two limited tax increment notes with developers whereby the City will pay the developers a percentage of the available tax increment. Whether payments will occur and the amount of the payments is unpredictable since all payments are dependent on the City receiving tax increment revenues from the developer's project. As such, this liability has not been recorded in the financial statements. Any potential liability ends with the decertification of the tax increment district. 71 CITY OF BROOKLYN CENTER, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2008 Note 5 OTHER INFORMATION F. CONTINGENT LIABILITIES (Continued) A schedule of the notes outstanding at December 31, 2008 is as follows: Amended Original 12/31 /2008 Interest Maturity Note Principal Balance Rate Date Twin Lakes Business Park 2,424,199 2,046,811 8.00% 1/31/2021 G. JOINT VENTURES AND JOINTLY GOVERNED ORGANIZATIONS The City has several agreements with other entities that provide reduced costs, better service, and additional benefits to the participants. The programs in which the City participates are listed below and amounts recorded within the current year's financial statements are disclosed. Local Government Information Svstems Association LOGIS) This consortium of approximately 30 government entities provides computerized data processing and support services to its members. LOGIS is legally separate; the City does not appoint a voting majority of its board, and the Consortium is fiscally independent of the City. The total amount recorded within the 2008 financial statements of the City is 365,684 for general services and application upgrades provided. Costs were allocated to the various funds based on applications and/or use of services. Complete financial statements for LOGIS may be obtained at the LOGIS offices located at 5750 Duluth Street, Golden Valley, Minnesota 55422. LOGIS Insurance Grout This group provides cooperative purchasing of health and life insurance benefits for approximately 45 governmental entities. The total of 2008 health and life insurance costs paid by the City was 1,183,456. Complete financial statements may be obtained from Stanton Group located at 3405 Annapolis Lane, Plymouth, Minnesota 55447. The Brooklvn Center Fire Detartment Relief Association (the Association) The Association is organized as a nonprofit organization, legally separate from the City, by its members to provide pension and other benefits to members in accordance with Minnesota Statutes. Its board of directors is elected by the membership of the Association and not by the City Council. The Association issues its own set of financial statements. All funding is conducted in accordance with applicable Minnesota Statutes, whereby state aids flow to the Association, tax levies are determined by the Association and are only reviewed by the City. The Association pays benefits directly to its members. The Association may certify tax levies to Hennepin County directly if the City does not carry out this function. Because the Association is fiscally independent of the City, the financial information of the Association has not been included within the City's financial statements. (See Note 5.13.2. for disclosures relating to the pension plan operated by the Association.) Complete financial statements for the Association may be obtained at the City offices located at 6301 Shingle Creek Parkway, Brooklyn Center, Minnesota 55430. i 72 CITY OF BROOKLYN CENTER, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2008 Note 5 OTHER INFORMATION (Continued) H. SUBSEQUENT EVENT In March 2009, the City purchased the property at 2545 County Road 10 from Jopaul Properties LLC for 677,831 for redevelopment. This property will be recorded in the Tax Increment District No. 3 fund as Assets held for resale at cost, not to exceed net realizable value, until the property is sold. i 1 73 i 1 1 1 This page has been left blank intentionally. 74 CITY OF BROOKLYN CENTER, MINNESOTA REQUIRED SUPPLEMENTARY INFORMATION Statement 9 BUDGETARY COMPARISON SCHEDULE GENERAL FUND Page 1 of 5 For the Year Ended December 31, 2008 Variance with Final Budget Budgeted Amounts Actual Positive Original Final Amounts (Negative) REVENUES Taxes: Property taxes 11,233,679 11,233,679 10,811,528 (422,151) Market value homestead credit 543,128 543,128 Penalties and interest 20,883 20,883 Lodging tax 665,000 665,000 619,962 (45,038) Total taxes 11,898,679 11,898,679 11,995,501 96,822 Licenses and permits: Liquor and beer licenses 83,000 83,000 76,370 (6,630) Building permits 300,000 300,000 211,462 (88,538) Mechanical permits 70,000 70,000 52,898 (17,102) Sewer and water permits 1,000 1,000 831 (169) Plumbing permits 30,000 30,000 45,766 15,766 Garbage licenses 3,070 3,070 3,030 (40) Mechanical licenses 3,300 3,300 5,930 2,630 Service station licenses 2,490 2,490 2,313 (177) Vehicle dealer licenses 1,500 1,500 1,250 (250) Bowling licenses 720 720 720 Cigarette licenses 3,150 3,150 3,838 688 Sign permits 2,500 2,500 2,910 410 Rental dwelling licenses 175,000 175,000 181,559 6,559 Amusement licenses 1,000 1,000 830 (170) Electrical Permits 40,000 40,000 45,306 5,306 ROW permits 1,000 1,000 4,080 3,080 Miscellaneous licenses and permits 6,115 6,115 4,643 (1,472) Total licenses and permits 723,845 723,845 643,736 (80,109) Intergovernmental: Federal: Other federal grants 1,798 1,798 State: Local government aid 1,113,243 1,113,243 572,708 (540,535) Police pension aid 283,000 283,000 290,161 7,161 PERA aid 34,365 34,365 34,365 Fireperson pension aid 160,000 160,000 117,983 (42,017) Police training 16,422 16,422 Local: Miscellaneous grants 61,400 61,400 78,835 17,435 Total intergovernmental 1,652,008 1,652,008 1,112,272 (539,736) Charges for services: General government charges 33,125 33,125 27,964 (5,161) Public safety charges 15,600 15,600 42,070 26,470 Community development fees 1,590 1,590 Recreation fees 306,229 306,229 316,564 10,335 Community Center fees 339,150 339,150 360,813 21,663 Total charges for services 694,104 694,104 749,001 54,897 75 CITY OF BROOKLYN CENTER, MINNESOTA REQUIRED SUPPLEMENTARY INFORMATION Statement 9 BUDGETARY COMPARISON SCHEDULE GENERAL FUND Page 2 of 5 For the Year Ended December 31, 2008 Variance with Final Budget Budgeted Amounts Actual Positive Original Final Amounts (Negative) Revenues (continued): Fines and forfeits 248,000 248,000 302,986 54,986 Miscellaneous: Investment earnings (net of market value change) 185,000 185,000 149,484 (35,516) Other 97,200 97,200 74,164 (23,036) Total miscellaneous 282,200 282,200 223,648 (58,552) Total revenues 15,498,836 15,498,836 15,027,144 (471,692) EXPENDITURES General government: Mayor and council: Current: Personal services 52,864 52,864 48,312 4,552 Materials and supplies 600 600 148 452 Services and other charges 80,836 80,836 77,374 3,462 Total mayor and council 134,300 134,300 125,834 8,466 Administrative (Manager, Clerk, HR) offices: Current: Personal services 617,057 617,057 617,686 (629) Materials and supplies 3,500 3,500 1,330 2,170 Services and other charges 48,675 48,675 39,861 8,814 Total administrative office 669,232 669,232 658,877 10,355 Elections and voter registration: Current: Personal services 61,107 61,107 51,828 9,279 Materials and supplies 3,000 3,000 2,608 392 Services and other charges 35,036 35,036 34,872 164 Total elections and voter registration 99,143 99,143 89,308 9,835 Assessor's office: Current: Personal services 258,218 258,218 248,903 9,315 Materials and supplies 5,175 5,175 4,738 437 Services and other charges 43,995 43,995 42,114 1,881 Total assessor's office 307,388 307,388 295,755 11,633 Finance: Current: Personal services 446,325 446,325 434,969 11,356 Materials and supplies 4,050 4,050 3,465 585 Services and other charges 12,800 12,800 10,034 2,766 Total finance 463,175 463,175 448,468 14,707 Legal: Current: Services and other charges 325,000 325,000 461,454 (136,454) 76 CITY OF BROOKLYN CENTER, MINNESOTA REQUIRED SUPPLEMENTARY INFORMATION Statement 9 BUDGETARY COMPARISON SCHEDULE GENERAL FUND Page 3 of 5 For the Year Ended December 31, 2008 Variance with Final Budget Budgeted Amounts Actual Positive Original Final Amounts (Negative) Expenditures: General government (continued): Government buildings: Current: Personal services 286,514 286,514 289,388 (2,874) Materials and supplies 93,150 93,150 89,103 4,047 Services and other charges 360,521 360,521 504,216 (143,695) Total government buildings 740,185 740,185 882,707 (142,522) Information technology: Current: Personal services 192,815 192,815 194,002 (1,187) Materials and supplies 18,000 18,000 8,918 9,082 Services and other charges 162,952 162,952 142,888 20,064 Total information technology 373,767 373,767 345,808 27,959 Total general government 3,112,190 3,112,190 3,308,211 (196,021) Public safety: Police protection: Current: Personal services 5,172,940 5,172,940 5,151,486 21,454 Materials and supplies 124,094 124,094 111,438 12,656 Services and other charges 875,067 875,067 886,424 (11,357) Total police protection 6,172,101 6,172,101 6,149,348 22,753 Fire protection: Current: Personal services 551,563 551,563 514,825 36,738 Materials and supplies 85,600 85,600 66,839 18,761 Services and other charges 278,312 278,312 237,631 40,681 Total fire protection 915,475 915,475 819,295 96,180 Protective inspection: Current: Personal services 594,560 594,560 563,528 31,032 Materials and supplies 4,800 4,800 2,837 1,963 Services and other charges 131,858 131,858 141,300 (9,442) Total protective inspection 731,218 731,218 707,665 23,553 Emergency preparedness: Current: Personal services 58,390 58,390 61,490 (3,100) Materials and supplies 22,400 22,400 21,253 1,147 Services and other charges 6,240 6,240 4,319 1,921 Total emergency preparedness 87,030 87,030 87,062 (32) Total public safety 7,905,824 7,905,824 7,763,370 142,454 77 CITY OF BROOKLYN CENTER, MINNESOTA REQUIRED SUPPLEMENTARY INFORMATION Statement 9 BUDGETARY COMPARISON SCHEDULE GENERAL FUND Page 4 of 5 For the Year Ended December 31, 2008 r Variance with Final Budget Budgeted Amounts Actual Positive Original Final Amounts (Negative) Expenditures (continued): Public works: Engineering department: Current: Personal services 509,486 509,486 513,925 (4,439) Materials and supplies 6,340 6,340 3,562 2,778 Services and other charges 49,080 49,080 53,003 (3,923) Total engineering department 564,906 564,906 570,490 (5,584) Street department: Current: Personal services 748,458 748,458 740,528 7,930 Materials and supplies 142,300 142,300 136,889 5,411 Services and other charges 553,560 553,560 522,051 31,509 Total street department 1,444,318 1,444,318 1,399,468 44,850 Total public works 2,009,224 2,009,224 1,969,958 39,266 Community services: Social services: Current: Services and other charges 73,019 73,019 72,893 126 Civic v e ents: Current: Services and other charges 5,000 5,000 5,000 Total community services 78,019 78,019 72,893 5,126 Parks and recreation: Administration: Current: Personal services 512,835 171,318 165,538 5,780 Materials and supplies 12,300 1,100 925 175 Services and other charges 67,210 5,790 4,816 974 Total administration 592,345 178,208 171,279 6,929 Recreation programs: Current: Personal services 93,628 435,145 453,553 (18,408) Materials and supplies 23,128 34,328 40,974 (6,646) Cost of good sold to public 14,046 14,046 36,666 (22,620) Services and other charges 119,550 180,970 190,271 (9,301) Total adult programs 250,352 664,489 721,464 (56,975) Community center: Current: Personal services 436,035 436,035 432,609 3,426 Materials and supplies 36,000 36,000 19,227 16,773 Services and other charges 75,750 75,750 95,597 (19,847) Total community center 547,785 547,785 547,433 352 78 CITY OF BROOKLYN CENTER; MINNESOTA REQUIRED SUPPLEMENTARY INFORMATION Statement 9 BUDGETARY COMPARISON SCHEDULE GENERAL FUND Page 5 of 5 For the Year Ended December 31, 2008 Variance with Final Budget Budgeted Amounts Actual Positive Original Final Amounts (Negative) Expenditures: Parks and recreation (continued): Park maintenance: Current: Personal services 558,003 558,003 531,061 26,942 Materials and supplies 76,690 76,690 59,137 17,553 Services and other charges 297,759 297,759 281,361 16,398 Total park maintenance 932,452 932,452 871,559 60,893 Total parks and recreation 2,322,934 2,322,934 2,311,735 11,199 Economic development: Convention bureau: Current: Services and other charges 315,875 315,875 296,332 19,543 Nondepartmental: Expenditures not charged to departments: Current: Personal services 2,093 (2,093) Materials and supplies 18,500 18,500 20,608 (2,108) Services and other charges 446,270 446,270 278,695 167,575 Total nondepartmental 464,770 464,770 301,396 163,374 Total expenditures 16,208,836 16,208,836 16,023,895 184,941 Revenues over (under) expenditures (710,000) (710,000) (996,751) (286,751) OTHER FINANCING SOURCES (USES) Transfers in administrative services reimbursed 760,000 760,000 802,775 42,775 Transfers from other funds 20,000 20,000 (20,000) Transfers to other funds (70,000) (70,000) (5,000) 65,000 Total other financing sources (uses) 710,000 710,000 797,775 87,775 Net increase (decrease) in fund balance (198,976) (198,976) Fund balance January 1 7,942,414 Fund balance December 31 7,743,438 79 e CITY OF BROOKLYN CENTER, MINNESOTA REQUIRED SUPPLEMENTARY INFORMATION Statement 10 BUDGETARY COMPARISON SCHEDULE TAX INCREMENT DISTRICT NO.3 For the Year Ended December 31, 2008 Variance with Final Budget Budgeted Amounts Positive REVENUES Original Final Actual (Negative) Taxes: Tax increments 1,890,991 1,890,991 1,900,386 9,395 Market value homestead credit 5,667 5,667 Intergovernmental 115,046 115,046 Investment earnings (net of market value adjustment) 400,000 400,000 272,709 (127,291) Miscellaneous 12,500 12,500 Total revenues 2,290,991 2,290,991 2,306,308 15,317 EXPENDITURES Current: Economic development: Personal services 33,002 (33,002) Supplies 346 (346) Services and other charges 284,000 284,000 7,018,166 (6,734,166) Capital outlay: Economic development 45,171 (45,171) Debt service: Bond issuance costs 33,818 (33,818) Total expenditures 284,000 284,000 7,130,503 (6,846,503) Revenues over (under) expenditures 2,006,991 2,006,991 (4,824,195) (6,831,186) OTHER FINANCING SOURCES (USES) Issuance of debt 4,335,000 4,335,000 Discount on issuance of debt (28,178) (28,178) Transfers out (1,834,491) (1,834,491) (1,243,183) 591,308 Total other financing sources (uses) (1,834,491) (1,834,491) 3,063,639 4,898,130 Net increase (decrease) in fund balance 172,500 172,500 (1,760,556) (1,933,056) Fund balance January 1 12,642,688 Fund balance December 31 10,882,132 e 80 t CITY OF BROOKLYN CENTER, MINNESOTA REQUIRED SUPPLEMENTARY INFORMATION Statement 11 SCHEDULE OF FUNDING PROGRESS OTHER POSTEMPLOYMENT BENEFITS For the Year Ended December 31, 2008 Unfunded Actuarial Actuarial Actuarial Actuarial UAAL as a Valuation Value of Accrued Accrued Funded Covered Percentage of Date Assets Liability (AAL) Liability (UAAL) Ratio Payroll Covered Payroll January 1, 2008 3,996,136 3,996,136 0.00% 8,882,315 44.99% Percentage Annual of Annual Fiscal Year OPEB Employer OPEB Cost Net OPEB Ended Cost Contribution Contributed Obligation December 31, 2008 314,184 167,139 53.20% 147,045 The City implemented GASB Statement No. 45 for the year ended December 31, 2008. Information for prior years is not available. i I 81 r CITY OF BROOKLYN CENTER, MINNESOTA NOTE TO REQUIRED SUPPLEMENTARY INFORMATION December 31, 2008 Note A LEGAL COMPLIANCE BUDGET The General Fund and Tax Increment District No. 3 Special Revenue Fund budgets are legally adopted on a basis consistent with accounting principles generally accepted in the United States of America. The legal level of budgetary control is the department level for the General Fund and the fund level for all other governmental funds. The following General Fund departments and major special revenue funds had expenditures in excess of budgeted appropriations: Final Over Budget Actual Budget Major Funds: General Fund: Legal 325,000 461,454 (136,454) Government buildings 740,185 882,707 (142,522) Emergency preparedness 87,030 87,062 (32) Engineering 564,906 570,490 (5,584) Recreation programs 664,489 721,464 (56,975) Special Revenue Funds: Tax Increment District No. 3 284,000 7,130,503 (6,846,503) 82 NONMAJOR GOVERNMENTAL FUNDS SPECIAL REVENUE FUNDS A Special Revenue Fund is used to account for the proceeds of specific revenue sources that are legally restricted to expenditures for specified purposes. DEBT SERVICE FUNDS The Debt Service Funds are used to account for the accumulation of resources for, and payment of, interest, principal and related costs on general long -term debt. CAPITAL PROJECT FUNDS The Capital Project Funds account for financial resources to be used for the acquisition or construction of major capital facilities (other than those financed by Proprietary Funds). i i 83 CITY OF BROOKLYN CENTER, MINNESOTA COMBINING BALANCE SHEET Statement 12 NONMAJOR GOVERNMENTAL FUNDS December 31, 2008 Total Special Debt Capital Nonmajor Revenue Service Project Governmental ASSETS Cash and investments 3,098,821 2,385,422 4,483,285 9,967,528 Receivables: Accounts 159,196 159,196 Current taxes 24,579 8,755 33,334 Delinquent taxes 17,254 47,507 64,761 Due from other governments 72,079 611,373 683,452 Interfund receivable 11,115 11,115 Prepaid items 7,754 7,754 Advances to other funds 792,488 792,488 Assets held for resale 787,000 787,000 Total assets 4,018,602 2,441,684 6,046,342 12,506,628 LIABILITIES AND FUND BALANCES Liabilities: Accounts payable 2,711 69,063 71,774 Accrued salaries and wages 13,020 13,020 Due to other funds 135,000 135,000 Interfund payable 11,115 11,115 Deferred revenue 822,156 47,507 869,663 Total liabilities 849,002 47,507 204,063 1,100,572 Fund balances: Reserved 7,754 2,394,177 856,291 3,258,222 Unreserved: Designated 3,030,092 4,985,988 8,016,080 Undesignated 131,754 131,754 Total fund balances 3,169,600 2,394,177 5,842,279 11,406,056 Total liabilities and fund balances 4,018,602 2,441,684 6,046,342 12,506,628 84 i CITY OF BROOKLYN CENTER, MINNESOTA COMBINING STATEMENT OF REVENUES, EXPENDITURES, AND Statement 13 CHANGES IN FUND BALANCES NONMAJOR GOVERNMENTAL FUNDS For the Year Ended December 31, 2008 Total Special Debt Capital Nonmajor Revenue Service Project Governmental REVENUES Property taxes 300,287 727,482 1,027,769 Tax increments 988,542 988,542 Franchise fees 643,934 643,934 Intergovernmental 282,869 701,373 984,242 Charges for services 12,403 12,403 Investment earnings (net of market value adjustment) 61,572 53,815 135,164 250,551 Miscellaneous 93,236 227,002 320,238 Total revenues 1,738,909 781,297 1,707,473 4,227,679 EXPENDITURES Current: General government 266,936 266,936 Public safety 285,159 285,159 Public works 2,575 111,577 114,152 Parks and recreation 42,480 55,076 97,556 Economic development 318,473 318,473 Capital outlay: General government 362,442 362,442 Public works 1,337,997 1,337,997 Parks and recreation 168,249 168,249 Debt service: Principal retirement 274,953 1,630,000 1,904,953 Interest 915,044 915,044 Fiscal agent fees 2,252 2,252 Total expenditures 923,640 2,547,296 2,302,277 5,773,213 Revenues over (under) expenditures 815,269 (1,765,999) (594,804) (1,545,534) OTHER FINANCING SOURCES (USES) Transfers in 306,175 462,061 370,000 1,138,236 Transfers out (301,175) (301,175) Total other financing sources (uses) 5,000 462,061 370,000 837,061 Net increase (decrease) in fund balances 820,269 (1,303,938) (224,804) (708,473) Fund balances January l 2,349,331 3,698,115 6,067,083 12,114,529 Fund balances December 31 3,169,600 2,394,177 5,842,279 11,406,056 85 This page has been left blank intentionally. 86 NONMAJOR SPECIAL REVENUE FUNDS The City of Brooklyn Center had the following Special Revenue Funds during the year: Housing and Redevelopment Authoritv Fund (HRA) This fund has authority to levy an ad valorem property tax for the purpose of conducting housing and redevelopment projects. These projects are accounted for in the EDA Fund; all tax proceeds are transferred to that fund. Economic Development Authoritv Fund (EDA) This fund was established to account for the Economic Development Authority (EDA) of Brooklyn Center. The EDA carries out development activities; it has authority to operate an enterprise. The Earle Brown Heritage Center operates under this authority, as well as the tax increment financing activities. The EDA also does redevelopment and housing projects, funded by an ad valorem property tax levy and transfers from the CDBG and HRA funds. Earle Brown Tax Increment District This fund has the authority to collect tax increments which are used for the historic restoration of the Earle Brown Farm and for debt service payments on bonds which were issued for the same purpose. Tax Increment District No. 4 Fund This fund has the authority to collect tax increments which are used for various redevelopment projects within the City and for debt service payments of bonds which were issued for the same purpose. Police Drug Forfeiture Fund This fund was established to account for property and/or cash seized by Police Department personnel. Community Development Block Grant Fund (CDBG) This fund was established to ni account for funds received under Title I of the Housing and Community Deve Act of 1974. Citv Initiatives Grant Fund Revenues and expenditures from grants received from outside entities are accounted for in this fund. Programs include several federal, state, and local public safety grants, and state and local recreation grants. 87 I'� CITY OF BROOKLYN CENTER, MINNESOTA COMBINING BALANCE SHEET NONMAJOR SPECIAL REVENUE FUNDS December 31, 2008 Housing and Economic Earle Brown Redevelopment Development Tax Increment Authority Authority District ASSETS Cash and investments 1,875,128 987,944 Receivables: Current taxes 2,718 21,861 Delinquent taxes 17,254 Due from other governments Interfund receivable 11,115 Prepaid items Asset held for resale 787,000 Total assets 19,972 2,673,243 1,009,805 LIABILITIES AND FUND BALANCES Liabilities: Accounts payable 2,428 Accrued salaries and wages 6,325 Interfund payable Deferred revenue 17,254 787,000 Total liabilities 17,254 795,753 Fund balances: Reserved: Prepaid items Unreserved: Designated: Economic development 2,718 1,877,490 1,009,805 Undesignated Total fund balances 2,718 1,877,490 1,009,805 Total liabilities and fund balances 19,972 2,673,243 1,009,805 S 88 Statement 14 Total Tax Police Community City Nonmajor Increment Drug Development Initiatives Special District No. 4 Forfeiture Block Grant Grant Revenue 140,079 24,881 70,789 3,098,821 24,579 17,254 11,115 60,964 72,079 11,115 7,754 7,754 787,000 140,079 32,635 11,115 131,753 4,018,602 266 17 2,711 6,695 13,020 11,115 11,115 17,902 822,156 266 11,115 24,614 849,002 7,754 7,754 140,079 3,030,092 24,615 107,139 131,754 140,079 32,369 107,139 3,169,600 140,079 32,635 11,115 131,753 4,018,602 S 89 CITY OF BROOKLYN CENTER, MINNESOTA COMBINING STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES NONMAJOR SPECIAL REVENUE FUNDS For the Year Ended December 31, 2008 Housing and Economic Earle Brown Redevelopment Development Tax Increment Authority Authority District REVENUES Property taxes 300,287 Tax increments 701,339 Intergovernmental Charges for services Investment earnings (net of market value adjustment) 45,707 13,668 Miscellaneous 11,935 Total revenues 300,287 57,642 715,007 EXPENDITURES Current: Public safety: Personal services Supplies Services and other charges Total public safety Public works: Supplies Parks and recreation: Personal services Supplies Services and other charges Total parks and recreation Economic development: Personal services 173,879 Supplies 1,734 Services and other charges 117,105 2,900 Total economic development 292,718 2,900 Debt service: Principal Total expenditures 292,718 2,900 Revenues over (under) expenditures 300,287 (235,076) 712,107 OTHER FINANCING SOURCES (USES) Transfers in 299,858 Transfers out (299,858) (1,317) Total other financing sources (uses) (299,858) 298,541 Net increase (decrease) in fund balances 429 63,465 712,107 Fund balances January 1 2,289 1,814,025 297,698 Fund balances December 31 2,718 1,877,490 1,009,805 90 Statement 15 Total Tax Police Community City Nonmajor Increment Drug Development Initiatives Special District No. 4 Forfeiture Block Grant Grant Revenue 300,287 287,203 988,542 852 22,230 259,787 282,869 12,403 12,403 748 199 1,250 61,572 38,449 42,852 93,236 287,951 39,500 22,230 316,292 1,738,909 240,880 240,880 5,524 6,327 11,851 16,410 16,018 32,428 21,934 263,225 285,159 2,575 2,575 6,116 6,116 9,329 9,329 27,035 27,035 42,480 42,480 173,879 1,734 625 22,230 142,860 625 22,230 318,473 274,953 274,953 275,578 21,934 22,230 308,280 923,640 12,373 17,566 8,012 815,269 II I 1,317 5,000 306,175 (301,175) 1,317 5,000 5,000 13,690 17,566 13,012 820,269 126,389 14,803 94,127 2,349,331 140,079 32,369 107,139 3,169,600 S 91 CITY OF BROOKLYN CENTER, MINNESOTA SPECIAL REVENUE FUND HOUSING AND REDEVELOPMENT AUTHORITY Statement 16 SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE BUDGET AND ACTUAL For the Year Ended December 31, 2008 Budgeted Amounts Actual Original Final Amounts REVENUES Taxes: Property taxes 302,191 302,191 285,625 Market value homestead credit 14,662 Total revenues 302,191 302,191 300,287 OTHER FINANCING SOURCES (USES) Transfers out (302,191) (302,191) (299,858) Net increase (decrease) in fund balance 429 Fund balance January 1 2,289 Fund balance December 31 2,718 l 1 1 1 1 1 1 92 CITY OF BROOKLYN CENTER, MINNESOTA SPECIAL REVENUE FUND ECONOMIC DEVELOPMENT AUTHORITY Statement 17 SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE BUDGET AND ACTUAL For the Year Ended December 31, 2008 Budgeted Amounts Actual Original Final Amounts REVENUES Investment earnings (net of market value adjustment) 65,000 65,000 45,707 Miscellaneous 11,935 Total revenues 65,000 65,000 57,642 EXPENDITURES Current: Economic development: Personal services 209,691 209,691 173,879 Supplies 2,750 2,750 1,734 Services and other charges 111,703 111,703 117,105 Total expenditures 324,144 324,144 292,718 Revenues over (under) expenditures (259,144) (259,144) (235,076) OTHER FINANCING SOURCES (USES) Transfers in 302,191 302,191 299,858 Transfers out (1,317) Total other financing sources (uses) 302,191 302,191 298,541 Net increase (decrease) in fund balance 43,047 43,047 63,465 Fund balance January 1 1,814,025 Fund balance December 31 1,877,490 1 93 CITY OF BROOKLYN CENTER, MINNESOTA SPECIAL REVENUE FUND EARLE BROWN TAX INCREMENT DISTRICT Statement 18 SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE BUDGET AND ACTUAL For the Year Ended December 31, 2008 Budgeted Amounts Actual Original Final Amounts REVENUES Taxes: Tax increments 624,102 624,102 701,339 Investment earnings (net of market value adjustment) 5,000 5,000 13,668 Total revenue 629,102 629,102 715,007 EXPENDITURES Current: Economic development: Services and other charges 22,000 22,000 2,900 Net increase (decrease) in fund balance 607,102 607,102 712,107 Fund balance January 1 297,698 Fund balance December 31 1,009,805 I 94 CITY OF BROOKLYN CENTER, MINNESOTA SPECIAL REVENUE FUND TAX INCREMENT DISTRICT NO. 4 Statement 19 SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE BUDGET AND ACTUAL For the Year Ended December 31, 2008 Budgeted Amounts Actual Original Final Amounts REVENUES Tax increments 271,536 271,536 287,203 Investment earnings (net of market value adjustment) 300 300 748 Total revenues 271,836 271,836 287,951 EXPENDITURES Current: Economic development: Services and other charges 625 Debt service: Principal 249,813 249,813 274,953 Total expenditures 249,813 249,813 275,578 Revenues over (under) expenditures 22,023 22,023 12,373 OTHER FINANCING SOURCES (USES) Transfers in 1,317 Net increase (decrease) in fund balance 22,023 22,023 13,690 Fund balance January 1 126,389 Fund balance December 31 140,079 i 95 CITY OF BROOKLYN CENTER, MINNESOTA SPECIAL REVENUE FUND POLICE DRUG FORFEITURE Statement 20 SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE BUDGET AND ACTUAL For the Year Ended December 31, 2008 Budgeted Amounts Actual Original Final Amounts REVENUES Intergovernmental 852 Investment earnings (net of market value adjustment) 1,000 1,000 199 Miscellaneous 28,000 28,000 38,449 Total revenues 29,000 29,000 39,500 EXPENDITURES Current: Public safety: Supplies 22,000 22,000 5,524 Services and other charges 7,000 7,000 16,410 Total expenditures 29,000 29,000 21,934 Net increase (decrease) in fund balance 17,566 Fund balance January 1 14,803 Fund balance December 31 32,369 96 CITY OF BROOKLYN CENTER, MINNESOTA SPECIAL REVENUE FUND COMMUNITY DEVELOPMENT BLOCK GRANT Statement 21 SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE BUDGET AND ACTUAL For the Year Ended December 31, 2008 Budgeted Amounts Actual Original Final Amounts REVENUES Intergovernmental 193,749 193,749 22,230 EXPENDITURES Current: Economic development: Services and other charges 193,749 193,749 22,230 Net increase (decrease) in fund balance Fund balance January 1 Fund balance December 31 i 1 1 1 97 CITY OF BROOKLYN CENTER, MINNESOTA SPECIAL REVENUE FUND CITY INITIATIVES GRANT Statement 22 SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE BUDGET AND ACTUAL For the Year Ended December 31, 2008 Budgeted Amounts Actual REVENUES Original Final Amounts Intergovernmental 190,250 190,250 259,787 Charges for services 11,578 11,578 12,403 Investment earnings (net of market value adjustment) 1,250 Miscellaneous (3,600) (3,600) 42,852 Total revenues 198,228 198,228 316,292 EXPENDITURES Current: Public safety: Personal services 246,281 246,281 240,880 Supplies 6,327 Services and other charges 16,018 Total public safety 246,281 246,281 263,225 Public works: Supplies 2,575 Parks and recreation: Personal services 4,874 4,874 6,116 Supplies 10,400 10,400 9,329 Services and other charges 47,720 47,720 27,035 Total parks and recreation 62,994 62,994 42,480 Total expenditures 309,275 309,275 308,280 Revenues over (under) expenditures (111,047) (111,047) 8,012 OTHER FINANCING SOURCES (USES) Transfers in 5,000 Net increase (decrease) in fund balance (111,047) (111,047) 13,012 Fund balance January 1 94,127 Fund balance December 31 107,139 98 I E FUNDS NONMAJOR DEBT SERV C The City's Debt Service Funds account for the following types of bonded indebtedness: General Oblieation Bonds Fund This fund is used to account for the accumulation of resources for payment of general obligation bonds and interest thereon. Tax Increment Bonds Fund This fund is used to account for the payment of tax increment general obligation bonds and interest thereon. These bonds were sold to finance the purchase and redevelopment of various redevelopment projects within the City. Financing for this debt is transferred from the Tax Increment District No. 3 Fund as needed. 99 1 CITY OF BROOKLYN CENTER, MINNESOTA COMBINING BALANCE SHEET Statement 23 NONMAJOR DEBT SERVICE FUNDS December 31, 2008 Total General Tax Nonmajor Obligation Increment Debt Bonds Bonds Service ASSETS Cash and investments 1,189,479 1,195,943 2,385,422 Receivables: Current taxes 8,755 8,755 Delinquent taxes 47,507 47,507 Total assets 1,245,741 1,195,943 2,441,684 LIABILITIES AND FUND BALANCE t Liabilities: Deferred revenue 47,507 47,507 Fund balances: Reserved: Debt service 1,198,234 1,195,943 2,394,177 Total liabilities and fund balances 1,245,741 1,195,943 2,441,684 100 CITY OF BROOKLYN CENTER, MINNESOTA COMBINING STATEMENT OF REVENUES, EXPENDITURES, AND Statement 24 CHANGES IN FUND BALANCES NONMAJOR DEBT SERVICE FUNDS For the Year Ended December 31, 2008 Total General Tax Nonmajor Obligation Increment Debt Bonds Bonds Service REVENUES Property taxes 727,482 727,482 Investment earnings (net of market value adjustment) 18,749 35,066 53,815 Total revenues 746,231 35,066 781,297 EXPENDITURES Debt service: Principal 600,000 1,030,000 1,630,000 Interest 110,553 804,491 915,044 Fiscal agent fees 750 1,502 2,252 Total expenditures 711,303 1,835,993 2,547,296 Revenues over (under) expenditures 34,928 (1,800,927) (1,765,999) OTHER FINANCING SOURCES (USES) Transfers in 462,061 462,061 Net increase (decrease) in fund balances 34,928 (1,338,866) (1,303,938) Fund balances January 1 1,163,306 2,534,809 3,698,115 Fund balances December 31 1,198,234 1,195,943 2,394,177 101 CITY OF BROOKLYN CENTER, MINNESOTA DEBT SERVICE FUND G.O. IMPROVEMENT BONDS Statement 25 SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE BUDGET AND ACTUAL For the Year Ended December 31, 2008 Budgeted Amounts Actual Original Final Amounts REVENUES Property taxes 606 Special assessments 988,390 988,390 816,192 Investment earnings (net of market value adjustment) 77,400 77,400 61,133 Total revenues 1,065,790 1,065,790 877,931 EXPENDITURES Debt service: Principal 980,000 980,000 980,000 Interest 145,122 145,122 145,121 Fiscal agent fees 15,850 15,850 8,987 Bond issuance fees 28,574 Total expenditures 1,140,972 1,140,972 1,162,682 Revenues over (under) expenditures (75,182) (75,182) (284,751) OTHER FINANCING SOURCES (USES) Issuance of debt 50,068 Premium on issuance of debt 1,384 Total other financing sources (uses) 51,452 Net increase (decrease) in fund balance (75,182) (75,182) (233,299) Fund balance January 1 3,026,385 Fund balance December 31 2,793,086 e 102 CITY OF BROOKLYN CENTER, MINNESOTA DEBT SERVICE FUND GENERAL OBLIGATION BONDS Statement 26 SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE BUDGET AND ACTUAL t For the Year Ended December 31, 2008 Budgeted Amounts Actual Original Final Amounts REVENUES Property taxes 730,152 730,152 727,482 Investment earnings (net of market value adjustment) 20,000 20,000 18,749 Total revenues 750,152 750,152 746,231 EXPENDITURES Debt service: Principal 600,000 600,000 600,000 Interest 110,551 110,551 110,553 Fiscal agent fees 1,500 1,500 750 Total expenditures 712,051 712,051 711,303 Net increase (decrease) in fund balance 38,101 38,101 34,928 Fund balance January 1 1,163,306 Fund balance December 31 1,198,234 e 103 CITY OF BROOKLYN CENTER, MINNESOTA DEBT SERVICE FUND TAX INCREMENT BONDS Statement 27 SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE BUDGET AND ACTUAL For the Year Ended December 31, 2008 Budgeted Amounts Actual Original Final Amounts REVENUES Investment earnings (net of market value adjustment) 35,066 EXPENDITURES Debt service: Principal 1,030,000 1,030,000 1,030,000 Interest 804,491 804,491 804,491 Fiscal agent fees 3,000 3,000 1,502 Total expenditures 1,837,491 1,837,491 1,835,993 Revenues over (under) expenditures (1,837,491) (1,837,491) (1,800,927) OTHER FINANCING SOURCES (USES) Transfers in 1,837,491 1,837,491 462,061 Net increase (decrease) in fund balance (1,338,866) Fund balance January 1 2,534,809 Fund balance December 31 1,195,943 104 NONMAJOR CAPITAL PROJECT FUNDS The City of Brooklyn Center had the following Capital Project Funds during the year: Capital Reserve Emeruencv Fund This fund was established in 1997 to account for monies held in reserve for catastrophic losses or unforeseen capital items. Capital Improvements Fund This fund was established in 1968 to provide funds, and to account for the expenditure of such funds, for major capital outlays including, but not limited to, construction or acquisition of major permanent facilities having a relatively long life; and/or to reduce debt incurred for capital outlays. The financing sources of the fund include ad valorem taxation, transfers from other funds, issuance of bonds, federal and state grants, and investment earnings. Municipal State Aid Fund This fund was established to account for the state allotment of gasoline tax collections used for transportation related construction and maintenance projects. Earle Brown Heritage Center Improvements Fund This fund was established to provide a stable source of funds to pay for periodic capital improvements needed at the facility. Street Reconstruction Fund This fund accounts for franchise fees collected, which have been dedicated to the reconstruction of the City's infrastructure. Technoloav Fund This fund, established in 2003, accounts for funds set aside for technology improvements or major technology renovations /replacements. 105 CITY OF BROOKLYN CENTER, MINNESOTA COMBINING BALANCE SHEET NONMAJOR CAPITAL PROJECT FUNDS December 31, 2008 Capital Reserve Capital Emergency Improvements ASSETS Cash and investments 1,427,690 591,981 Receivables: Accounts Due from other governments Advances to other funds 792,488 Total assets 1,427,690 1,384,469 LIABILITIES AND FUND BALANCES Liabilities: Accounts payable 135,000 Due to other funds Total liabilities 135,000 Fund balances: Reserved: Advances to other funds 792,488 Committed contracts Unreserved: Designated for capital improvements 1,427,690 456,981 T 1,427,690 1,249,469 Total fund balances Total liabilities and fund balances 1,427,690 1,384,469 106 Statement 28 Municipal Earle Brown Total State Aid Heritage Nonmajor for Center Street Capital Construction Improvements Reconstruction Technology Projects 184,281 466,299 1,398,617 414,417 4,483,285 159,196 159,196 611,373 611,373 792,488 795,654 466,299 1,557,813 414,417 6,046,342 724 53,464 14,875 69,063 135,000 724 53,464 14,875 204,063 792,488 63,803 63,803 794,930 412,835 1,557,813 335,739 4,985,988 794,930 412,835 1,557,813 399,542 5,842,279 795,654 466,299 1,557,813 414,417 6,046,342 t 107 CITY OF BROOKLYN CENTER, MINNESOTA COMBINING STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES NONMAJOR CAPITAL PROJECT FUNDS For the Year Ended December 31, 2008 Capital Reserve Capital Emergency Improvements REVENUES Franchise fees Intergovernmental Investment earnings (net of market value adjustment) 36,014 14,077 Miscellaneous 33,249 38,420 Total revenues 69,263 52,497 EXPENDITURES Current: General government: Supplies Services and other charges 86,576 Total general government 86,576 Public works: Supplies Services and other charges 21,427 23,903 Total public works 21,427 23,903 Parks and recreation: Services and other charges 55,076 Capital outlay General government Public works 23,975 Parks and recreation 168,249 Total capital outlay 192,224 Total expenditures 21,427 357,779 Revenues over (under) expenditures 47,836 (305,282) OTHER FINANCING SOURCES (USES) Transfers in 135,000 Net increase (decrease) in fund balances 47,836 (170,282) Fund balances January 1 1,379,854 1,419,751 Fund balances December 31 1,427,690 1,249,469 108 Statement 29 Municipal Earle Brown Total State Aid Heritage Nonmajor for Center Street Capital Construction Improvements Reconstruction Technology Projects 643,934 643,934 701,373 701,373 19,812 9,957 42,606 12,698 135,164 155,088 245 227,002 721,185 165,045 686,540 12,943 1,707,473 42,869 42,869 62,810 74,681 224,067 62,810 117,550 266,936 26,249 26,249 26,955 13,043 85,328 53,204 13,043 111,577 55,076 326,415 36,027 362,442 611,373 702,649 1,337,997 168,249 611,373 326,415 702,649 36,027 1,868,688 664,577 389,225 715,692 153,577 2,302,277 56,608 (224,180) (29,152) (140,634) (594, 804) 235,000 370,000 56,608 10,820 (29,152) (140,634) (224,804) 738,322 402,015 1,586,965 540,176 6,067,083 794,930 412,835 1,557,813 399,542 5,842,279 109 CITY OF BROOKLYN CENTER, MINNESOTA CAPITAL PROJECT FUND INFRASTRUCTURE CONSTRUCTION Statement 30 SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE BUDGET AND ACTUAL For the Year Ended December 31, 2008 Budgeted Amounts Actual REVENUES Original Final Amounts Special assessments 400,000 400,000 472,956 Miscellaneous 30,000 30,000 42,159 Total revenues 430,000 430,000 515,115 EXPENDITURES Current: Public works: Services and other charges 55,754 Capital outlay: Y• Public works 7,550,500 7,550,500 2,617,144 Total expenditures 7,550,500 7,550,500 2,672,898 Revenues over (under) expenditures (7,120,500) (7,120,500) (2,157,783) OTHER FINANCING SOURCES (USES) Issuance of debt 2,500,000 2,500,000 2,339,932 Transfers in 5,515,000 5,515,000 831,297 Total other financing sources (uses) 8,015,000 8,015,000 3,171,229 Net increase (decrease) in fund balance 894,500 894,500 1,013,446 Fund balance January l (1,290,428) Fund balance December 31 (276,982) 110 CITY OF BROOKLYN CENTER, MINNESOTA CAPITAL PROJECT FUND CAPITAL IMPROVEMENTS Statement 31 SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE BUDGET AND ACTUAL For the Year Ended December 31, 2008 Budgeted Amounts Actual Original Final Amounts REVENUES Investment earnings (net of market value adjustment) 9,522 9,522 14,077 Miscellaneous 15,000 15,000 38,420 Total revenues 24,522 24,522 52,497 EXPENDITURES Current: General government: Services and other charges 86,576 Public works: Services and other charges 17,056 286,556 23,903 Parks and recreation: Services and other charges 55,076 Capital outlay: Public works 269,500 23,975 Parks and recreation 168,249 Total capital outlay 269,500 192,224 Total expenditures 286,556 286,556 357,779 Revenues over(under)expenditures (262,034) (262,034) (305,282) OTHER FINANCING SOURCES (USES) Transfers in 135,000 135,000 135,000 Net increase (decrease) in fund balance (127,034) (127,034) (170,282) Fund balance January 1 1,419,751 Fund balance December 31 1,249,469 I r 111 CITY OF BROOKLYN CENTER, MINNESOTA CAPITAL PROJECT FUND MUNICIPAL STATE AID FOR CONSTRUCTION Statement 32 SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE BUDGET AND ACTUAL For the Year Ended December 31, 2008 Budgeted Amounts Actual REVENUES Original Final Amounts Intergovernmental 814,000 814,000 701,373 Investment earnings (net of market value adjustment) 10,000 10,000 19,812 Total revenues 824,000 824,000 721,185 EXPENDITURES Current: Public works: Supplies 26,900 26,900 26,249 Services and other charges 33,400 33,400 26 Total public works 60,300 60,300 53,204 Capital outlay: Public works 817,000 817,000 611,373 Total expenditures 877,300 877,300 664,577 1 Net increase (decrease) in fund balance (53,300) (53,300) 56,608 Fund balance January 1 738,322 Fund balance December 31 794,930 1 1 i i 1 1 1 1 1 112 1 CITY OF BROOKLYN CENTER, MINNESOTA CAPITAL PROJECT FUND EARLE BROWN HERITAGE CENTER IMPROVEMENTS Statement 33 SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE BUDGET AND ACTUAL For the Year Ended December 31, 2008 Budgeted Amounts Actual Original Final Amounts REVENUES Investment earnings (net of market value adjustment) 9,957 Miscellaneous 155,088 Total revenues 165,045 EXPENDITURES Current: General government: Services and other charges 280,000 280,000 62,810 Capital outlay: 1 General government 326,415 Total expenditures 280,000 280,000 389,225 Revenues over (under) expenditures (280,000) (280,000) (224,180) OTHER FINANCING SOURCES (USES) Transfers in 200,000 200,000 235,000 Net increase (decrease) in fund balance (80,000) (80,000) 10,820 Fund balance January 1 402,015 Fund balance December 31 412,835 r 113 1 CITY OF BROOKLYN CENTER, MINNESOTA CAPITAL PROJECT FUND STREET RECONSTRUCTION Statement 34 SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE BUDGET AND ACTUAL For the Year Ended December 31, 2008 Budgeted Amounts Actual Original Final Amounts REVENUES Franchise fees 660,000 660,000 643,934 Investment earnings (net of market value adjustment) 50,000 50,000 42,606 Total revenues 710,000 710,000 686,540 EXPENDITURES Current: Public works: Services and other charges 13,043 Capital outlay: Public works 1,050,000 1,050,000 702,649 Total expenditures 1,050,000 1,050,000 715,692 Net increase (decrease) in fund balance (340,000) (340,000) (29,152) Fund balance January 1 1,586,965 Fund balance December 31 1,557,813 S 114 CITY OF BROOKLYN CENTER, MINNESOTA CAPITAL PROJECT FUND TECHNOLOGY Statement 35 SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE BUDGET AND ACTUAL For the Year Ended December 31, 2008 Budgeted Amounts Actual Original Final Amounts REVENUES Investment earnings (net of market value adjustment) 9,000 9,000 12,698' Miscellaneous 245 Total revenues 9,000 9,000 12,943 EXPENDITURES Current: General government: Supplies 377,617 377,617 42,869 Services and other charges 74,681 1 Total general government 377,617 377,617 117,550 Capital outlay: General government 36,027 Total expenditures 377,617 377,617 153,577 Revenues over (under) expenditures (368,617) (368,617) (140,634) OTHER FINANCING SOURCES (USES) Transfers in 70,000 70,000 Net increase (decrease) in fund balance (298,617) (298,617) (140,634) Fund balance January 1 540,176 Fund balance December 31 399,542 1 115 r This page has been left blank intentionally. 116 NONMAJOR ENTERPRISE FUNDS The City of Brooklyn Center had the following nonmajor Enterprise Funds during the year: Recvcline and Refuse Fund This fund accounts for the operation of a state mandated recycling program. Street LiL-ht Utilitv Fund This fund was created to account for expenses related to streetlights within the City. Benefiting properties are billed for these expenses. r 117 CITY OF BROOKLYN CENTER, MINNESOTA COMBINING STATEMENT OF NET ASSETS Statement 36 NONMAJOR ENTERPRISE FUNDS December 31, 2008 Total Recycling and Street Light Nonmajor Refuse Utility Enterprise ASSETS Current assets: Cash and cash equivalents 72,996 72,996 Receivables: Accounts net 53,650 58,393 112,043 Total current assets 53,650 131,389 185,039 Noncurrent assets: Capital assets: Street light systems 83,540 83,540 Construction in progress 329,577 329,577 Net capital assets 413,117 413,117 Total assets 53,650 544,506 598,156 LIABILITIES Current liabilities: Accounts payable 864 13,656 14,520 Interfund payable 4,354 4,354 Total liabilities 5,218 13,656 18,874 NET ASSETS Invested in capital assets 413,117 413,117 Unrestricted 48,432 117,733 166,165 Total net assets 48,432 530,850 579,282 118 CITY OF BROOKLYN CENTER, MINNESOTA COMBINING STATEMENT OF REVENUES, EXPENSES, AND Statement 37 CHANGES IN FUND NET ASSETS NONMAJOR ENTERPRISE FUNDS For the Year Ended December 31, 2008 Total Recycling and Street Light Nonmajor Refuse Utility Enterprise OPERATING REVENUES Sales and user fees 259,774 250,260 510,034 OPERATING EXPENSES Supplies 89 915 1,004 Other services 264,313 21,219 285,532 Insurance 1,581 1,162 2,743 Utilities 159,106 159,106 Total operating expenses 265,983 182,402 448,385 Operating income (loss) (6,209) 67,858 61,649 NONOPERATING REVENUES (EXPENSES) 1 Investment earnings (net of market value adjustment) 103 3,938 4,041 Income (loss) before contributions and transfers (6,106) 71,796 65,690 Capital contributions 329,577 329,577 Transfers out (50,175) (50,175) Change in net assets (6,106) 351,198 345,092 Net assets January 1 54,538 179,652 234,190 Net assets December 31 48,432 530,850 579,282 119 CITY OF BROOKLYN CENTER, MINNESOTA COMBINING STATEMENT OF CASH FLOWS Statement 38 NONMAJOR ENTERPRISE FUNDS For the Year Ended December 31, 2008 Total Recycling and Street Light Nonmajor Refuse Utility Enterprise CASH FLOWS FROM OPERATING ACTIVITIES Receipts from customers 260,343 246,931 507,274 Payments to suppliers (265,568) (198,249) (463,817) Net cash flows provided (used) by operating activities (5,225) 48,682 43,457 CASH FLOWS FROM NONCAPITAL FINANCING ACTIVITIES Transfers out (50,175) (50,175) Interfun d a able 4 P Y ,354 4,354 Net cash flows provided (used) by noncapital financing activities 4,354 (50,175) (45,821) CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES Acquisition and construction of capital assets (83,540) (83,540) CASH FLOWS FROM INVESTING ACTIVITIES Interest on investments 103 3,938 4,041 Net increase (decrease) in cash and cash equivalents (768) (81,095) (81,863) Cash and cash equivalents January 1 768 154,091 154,859 Cash and cash equivalents December 31 72,996 72,996 Reconciliation of operating income (loss) to net cash provided (used) by operating activities: Operating income (loss) (6,209) 67,858 61,649 Adjustments to reconcile operating income (loss) to net cash flows from operating activities: Changes in assets and liabilities: (Increase) decrease in receivables 569 (3,329) (2,760) Increase (decrease) in payables 415 (15,847) (15,432) Total adjustments 984 (19,176) (18,192) Net cash flows provided (used) by operating activities (5,225) 48,682 43,457 Noncash financing activities: Capital contributions 329,577 120 INTERNAL SERVICE FUNDS The City's Internal Service Funds included in this section are: Central Garage Fund This fund was established to account for the acquisition and maintenance of all City vehicles and rolling stock equipment. Vehicle and equipment maintenance and repair costs are charged to the departments as incurred. Replacement costs are charged to the departments over the estimated useful life of the vehicles and equipment. Public Emnlovees Retirement Fund This fund accounts for certain health care insurance benefits for City employees who retire before age 65. Substantially all of the City's full- time police and fire employees and all other full -time employees hired before July 1, 1989 may be eligible for those benefits from the time they qualify for an unreduced PERA pension until they reach age 65 or become eligible for Medicare. In the event that future costs would exceed earnings, other funds would be charged for the costs associated with their employees. Public Emnlovees Compensated Absences Fund This fund accounts for payment of unused vacation and sick leave time and the allocation of such costs to user departments. 121 CITY OF BROOKLYN CENTER, MINNESOTA COMBINING STATEMENT OF NET ASSETS Statement 39 INTERNAL SERVICE FUNDS December 31, 2008 Total Central EE Retirement EE Comp Internal Garage Benefit Absences Service ASSETS Current assets: Cash and cash equivalents 4,180,414 1,447,386 974,855 6,602,655 Receivables: Accounts net 14,149 645 14,794 Inventories 25,344 25,344 Total current assets 4,219,907 1,448,031 974,855 6,642,793 Noncurrent assets: Capital assets: Land improvements 166,108 166,108 Machinery and equipment 7,388,731 7,388,731 Total capital assets 7,554,839 7,554,839 Less: Allowance for depreciation (3,799,654) (3,799,654 Net capital assets 3,755,185 3,755,185 Total assets 7,975,092 1,448,031 974,855 10,397,978 LIABILITIES Current liabilities: Accounts payable 30,772 30,772 Accrued salaries payable 9,349 9,349 Compensated absences payable current 107,595 107,595 Accrued health insurance liability- current Total current liabilities es 40,121 107,595 147,716 Noncurrent liabilities: Compensated absences payable- long -term 968,358 968,358 Net OPEB Obligation 147,045 147,045 Total noncurrent liabilities 147,045 968,358 1,115,403 Total liabilities 40,121 147,045 1,075,953 1,263,119 NET ASSETS Invested in capital assets 3,755,185 3,755,185 Unrestricted 4,179,786 1,300,986 (101,098) 5,379,674 Total net assets 7,934,971 1,300,986 (101,098] 9,134,859 122 CITY OF BROOKLYN CENTER, MINNESOTA COMBINING STATEMENT OF REVENUES, EXPENSES, AND Statement 40 CHANGES IN FUND NET ASSETS INTERNAL SERVICE FUNDS For the Year Ended December 31, 2008 Total Central EE Retirement EE Comp Internal Garage Benefit Absences Service OPERATING REVENUES Sales and user fees 1,399,535 71,112 19,532 1,490,179 OEPRATING EXPENSES Personal services 269,302 314,184 146,169 729,655 Supplies 486,940 486,940 Other services 152,876 152,876 Insurance 53,120 53,120 Utilities 1,879 1,879 Depreciation 631,250 631,250 Total operating expenses 1,595,367 314,184 146,169 2,055,720 Operating income (loss) (195,832) (243,072) (126,637) (565,541) NONOPERATING REVENUES (EXPENSES) Intergovernmental 10,770 10,770 Investment earnings (net of market value adjustment) 107,146 37,377 25,539 170,062 Gain (loss) on sale of capital assets 73,036 73,036 Other revenue 26,806 26,806 Total nonoperating revenues (expenses) 206,988 48,147 25,539 280,674 Change in net assets 11,156 (194,925) (101,098) (284,867) Net assets January 1 as previously reported 7,923,815 (1,021,471) 6,902,344 Change in accounting principle 2,517,382 2,517,382 Net assets January 1, restated 7,923,815 1,495,911 9,419,726 Net assets December 31 7,934,971 1,300,986 (101,098) 9,134,859 123 CITY OF BROOKLYN CENTER, MINNESOTA COMBINING STATEMENT OF CASH FLOWS Statement 41 INTERNAL SERVICE FUNDS For the Year Ended December 31, 2008 Total Central EE Retirement EE Comp Internal Garage Benefit Absences Service CASH FLOWS FROM OPERATING ACTIVITIES Receipts from interf ind services provided 1,393,113 71,112 19,532 1,483,757 Payments to suppliers (729,448) (729,448) Payments to employees (265,862) (167,050) (93,922) (526,834) Miscellaneous revenue 26,806 10,770 37,576 Net cash flows provided (used) by operating activities 424,609 (85,168) (74,390) 265,051 CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES Acquisition and construction of capital assets (792,282) (792,282) Proceeds from sale of capital assets 123,528 123,528 Net cash flows provided (used) by capital and related financing activities (668,754) (668,754) CASH FLOWS FROM INVESTING ACTIVITIES Interest on investments 107,146 37,377 25,539 170,062 Net increase (decrease) in cash and cash equivalents (136,999) (47,791) (48,851) (233,641) Cash and cash equivalents January 1 4,317,413 1,495,177 1,023,706 6,836,296 Cash and cash equivalents December 31 4,180,414 1,447,386 974,855 6,602,655 Reconciliation of operating income (loss) to net cash provided (used) by operating activities: Operating income (loss) (195,832) (243,072) (126,637) (565,541) Adjustments to reconcile operating income (loss) to net cash flows from operating activities: Depreciation 631,250 631,250 Changes in assets and liabilities: (Increase) decrease in receivables (6,422) 89 (6,333) (Increase) decrease in inventories 7,700 7,700 Increase (decrease) in payables (42,333) (42,333) Increase (decrease) in accrued expenses 3,440 147,045 52,247 202,732 Other nonoperating income 26,806 10,770 37,576 Total adjustments 620,441 157,904 52,247 830,592 Net cash provided (used) by operating activities 424,609 (85,168) (74,390) 265,051 Noncash r mancing activities: Gain on sale of assets 73,036 124 STATISTICAL SECTION This part of the City of Brooklyn Center's comprehensive annual financial report presents detailed information as a context for understanding the financial statements, note disclosures, and supplementary information. This section includes information for the primary government, including any blended component units. Contents Page Financial Trends 126 These tables contain trend information to help the reader understand the City's financial performance by placing it in historical perspective. Revenue Capacity 136 These tables contain information to help the reader assess the City's most significant "own- source revenue, property taxes. Debt Capacity 142 These tables present information to help the reader assess the affordability of the government's current levels of outstanding debt and the City's ability to issue debt in the future. Demographic and Economic Information 148 These tables offer demographic and economic indicators to help the reader understand the environment within which the City's financial activities take place. Operating Information 150 These tables contain service and infrastructure data to help the reader understand how the City's financial report relates to the services the t City provides and the activities it performs. Sour unless otherwise n the information in these schedules is derived from the comprehensive Sources: un es othe se oted, p annual financial reports for the relevant year. 1 125 Table 1 CITY OF BROOKLYN CENTER, MINNESOTA NET ASSETS BY CoMpONEN Last six fiscal years (accrual basis of accounting) 2007 2008 (Unaudited) 2005 2006 2003 2004 31,]83,887 31,423,905 25,675,4 31,850,7 ,637,465 28,487,144 690,424 of Governmental activities net 12,648,271 25,614,602 27,637,465 4,579,910 Invested in capital assets, 14,733,123 4,055,3]2 63,965, 14,853,260 39,412,423 652,963 87,368,224 64,250,941 related debt 3,226,051 55,594,493 Restricted 17,817,9 55,286,745 Unrestricted 47,404,317 40,466,892 42,572,360 Total governmental activities net assets 38,417,4 9,845, 40,647,6 10,466,91 36,129,095 7,973,3 50,312,1 53,034,279 Business type activities 37,898,615 7,137,218 7,087,8 48,620,962 Invested in capital assets 6,464,33 43,266,313 45,505,323 Unrestricted 44,362,9 Total business -type activities net assets 72,993,58 I 65,188,021 70,722,191 31,850,784 government 64,032,069 27,637,465 28,487,144 12,160,027 Primary g ital assets, net of 48,777,3 29,326,928 15,353,750 117,UU4 Invested in cap 52,631,738 ]3,]63,70 39,412,423 J related debt 14,853,260 10,363,269 101 7074 105,989 105,989,186: 114,563,08 Restricted 24,282,2 95553,058 Unrestricted ent net assets 91,767,264 Total Primary governor Note: Data for 1999 -2002 is not available, the City did not prepare government -wide financial statements on an accrual basis for those years• CITY OF BROOKLYN CENTER, MINNESOTA CHANGES IN NET ASSETS GOVERNMENTAL ACTIVITIES Table 2 Last six fiscal years Page 1 of 3 (accrual basis of accounting) (Unaudited) 2003 2004 2005 2006 2007 2008 Expenses General government 2,649,846 2,801,422 2,970,364 2,936,638 2,953,328 3,498,767 Public safety 7,182,321 7,538,277 7,848,160 8,039,356 8,051,836 8,760,880 Public works 2,654,601 1,956,119 3,821,647 2,057,018 2,704,435 2,596,754 Community services 225,365 67,324 86,043 123,172 74,389 72,893 Parks and recreation 2,169,482 2,255,231 2,305,047 2,565,364 2,624,897 2,910,825 Economic development 1,759,585 1,683,025 3,559,027 2,567,377 3,966,908 3,713,340 Interest on long -term debt 922,253 1,268,649 1,349,852 1,184,017 1,127,276 1,125,712 Total expenses 17,563,453 17,570,047 21,940,140 19,472,942 21,503,069 22,679,171 Program Revenues Charges for services: General government 227,350 927,199 960,125 947,613 902,734 1,115,038 Public safety 951,518 687,731 1,026,736 800,408 847,307 780,080 Parks and recreation 624,294 618,199 681,851 665,332 692,781 754,079 Other activities 24,554 23,533 9,234 423,804 290,533 151,924 Operating grants and contributions 1,627,020 933,104 855,633 748,888 818,989 1,003,884 Capital grants and contributions 1,079,134 2,423,411 2,398,345 2,208,751 2,646,320 2,706,056 Total program revenues 4,533,870 5,613,177 5,931,924 5,794,796 6,198,664 6,511,061 Net revenue/(expense) (13,029,583) (11,956,870) (16,008,216) (13,678,146) (15,304,405) (16,168,110) General Revenues and Transfers Taxes: Property 10 10,788,145 11,288,883 11,618,486 12,200,575 12,458,724 Tax increments 3,527,881 4,285,166 3,980,518 2,682,874 2,677,630 2,912,773 Lodging taxes 661,267 656,859 710,619 738,776 706,930 619,962 Unrestricted grants and contributions 1,413,913 923,374 577,548 702,030 1,263,753 607,073 Investment earnings 426,329 491,524 1,272,409 1,928,462 1,852,117 903,939 Gain on disposal of capital asset 13,976 29,202 31,880 23,963 88,508 73,036 Miscellaneous 588,264 660,218 Transfers 100,000 2,004,810 (1,545,893) 186,675 (273,070) (1,693,225) Total general revenues and transfers 17,139,243 19,839,298 16,315,964 17,881,266 18,516,443 15,882,282 Change in Net Assets 4,109,660 7,882,428 307,748 4,203,120 3,212,038 (285,828) CITY OF BROOKLYN CENTER, MINNESOTA CHANGES IN NET ASSETS BUSINESS -TYPE ACTIVITIES Table 2 Last six fiscal years Page 2 of 3 (accrual basis of accounting) (Unaudited) 2003 2004 2005 2006 2007 2008 Expenses Municipal liquor 724,897 939,244 978,743 970,260 1,037,427 1,125,517 Golf course 290,990 271,127 273,024 282,418 313,794 304,832 Earle Brown Heritage Center 2,109,166 2,180,229 2,262,359 2,439,709 2,431,719 2,403,676 Water utility 1,645,955 222,821 1,717,175 1,635,847 1,716,497 1,783,275 Sanitary sewer 2,567,032 165,651 2,660,706 3,176,426 2,930,016 3,018,418 Storm drainage 838,421 1,533,923 899,988 1,097,277 1,123,636 1,162,957 Recycling and refuse 223,679 2,310,645 254,661 245,853 257,300 265,983 Street light utility 147,293 756,593 213,094 161,219 191,659 182,402 Total expenses 8,547,433 8,380,233 9,259,750 10,009,009 10,002,048 10,247,060 Program Revenues Charges for services: Municipal liquor 853,353 991,058 1,099,172 1,244,738 1,362,093 1,492,644 O0 Earle Brown Heritage Center 1,749,202 1,675,267 1,857,461 2,168,861 2,168,033 1,959,628 Water utility 1,530,592 1,583,450 1,825,521 1,906,375 2,063,930 2,003,633 Sanitary sewer 2,870,109 2,833,836 2,966,222 3,186,569 3,274,678 3,264,649 Stone drainage 1,264,512 1,276,778 1,298,690 1,323,607 1,412,548 1,553,236 Other activities 706,644 707,460 706,105 714,373 732,224 763,858 Total program revenues 8,974,412 9,067,849 9,753,171 10,544,523 11,013,506 11,037,648 Net revenuel(expense) 426,979 687,616 493,421 535,514 1,011,458 790,588 General Revenues and Transfers Investment earnings 82,165 102,696 199,876 337,231 406,654 243,322 Other 241,308 117,864 Transfers (100,000) (2,004,810) 1,545,893 (186,675) 273,070 1,693,225 Total general revenues and transfers 223,473 (1,784,250) 1,745,769 150,556 679,724 1,936,547 Change in Net Assets 650,452 (1,096,634) 2,239,190 686,070 1,691,182 2,727,135 CITY OF BROOKLYN CENTER, MINNESOTA CHANGES IN NET ASSETS TOTAL Table 2 Last six fiscal years Page 3 of 3 (accrual basis of accounting) (Unaudited) 2003 2004 2005 2006 2007 2008 Expenses Governmental activities 17,563,453 17,570,047 21,940,140 19,472,942 21,503,069 22,679,171 Business -type activities 8,547,433 8,380,233 9,259,750 10,009,009 10,002,048 10,247,060 Total expenses 26,110,886 25,950,280 31,199,890 29,481,951 31,505,117 32,926,231 Program Revenues Governmental activities 4,533,870 5,613,177 5,931,924 5,794,796 6,198,664 6,511,061 Business -type activities 8,974,412 9,067,849 9,753,171 10,544,523 11,013,506 11,037,648 Total program revenues 13,508,282 14,681,026 15,685,095 16,339,319 17,212,170 17,548,709 Net revenue/(expense) (12,602,604) (11,269,254) (15,514,795) (13,142,632) (14,292,947) (15,377,522) General Revenues and Transfers Governmental activities 17,139,243 19,839,298 16,315,964 17,881,266 18,516,443 15,882,282 Business -type activities 223,473 (1,784,250) 1,745,769 150,556 679,724 1,936,547 Total general revenues and transfers 17,362,716 18,055,048 18,061,733 18,031,822 19,196,167 17,818,829 Change in Net Assets 4,760,112 6,785,794 2,546,938 4,889,190 4,903,220 2,441,307 I Note: Data for 1999 -2002 is not available; the City did not prepare government -wide financial statements on an accrual basis for those years. I This page has been left blank intentionally. 130 1 CITY OF BROOKLYN CENTER, MINNESOTA GOVERNMENTAL ACTIVITIES TAX REVENUE BY SOURCE Table 3 Last six fiscal years (accrual basis of accounting) 1 (Unaudited) 1 Property Tax Lodging Tax Increments Tax Total 2003 10,407,613 3,527,881 661,267 14,596,761 2004 10,788,145 4,285,166 656,859 15,730,170 2005 11,288,883 3,980,518 710,619 15,980,020 1 2006 11,618,486 2,682,874 738,776 15,040,136 2007 12,200,575 2,677,630 706,930 15,585,135 1 2008 12,458,724 2,912,773 619,962 15,991,459 1 Note: Data for 1999 -2002 is not available; the City did not prepare government -wide financial statements on an accrual basis for those years 1 1 i 1 1 1 1 1 i 1 131 1 CITY OF BROOKLYN CENTER, MINNESOTA FUND BALANCES GOVERNMENTAL FUNDS Last ten fiscal years (modified accrual basis of accounting) (Unaudited) 1999 2000 2001 2002 General Fund Reserved 105,074 105,074 105,074 173,353 Unreserved 7,203,633 7,346,969 7,328,798 7,756,421 Total general fund 7,308,707 7,452,043 7,433,872 7,929,774 All other governmental funds Reserved 8,313,672 7,307,297 7,015,583 7,234,260 Unreserved, reported in: Special revenue funds 1,723,559 1,816,806 3,864,347 4,453,879 Capital project funds 8,884,582 7,308,293 5,337,423 1,870,176 Total all other governmental funds 18,921,813 16,432,396 16,217,353 13,558,315 i i t 132 Table 4 i 2003 2004 2005 2006 2007 2008 110,383 106,578 11,080 500 700 21,995 7,906,697 6,862,871 7,283,871 7,508,690 7,941,714 7,721,443 8,017,080 6,969,449 7,294,951 7,509,190 7,942,414 7,743,438 7,509,315 13,230,540 5,150,818 5,176,808 11,288,685 9,997,668 i 6,211,019 25,750,179 24,853,267 22,862,211 11,738,460 10,523,743 2,133,079 4,969,506 3,232,820 4,164,400 3,466,029 4,282,881 15,853,413 43,950,225 33,236,905 32,203,419 26,493,174 24,804,292 i 1 1 t i i 133 CITY OF BROOKLYN CENTER, MINNESOTA CHANGES IN FUND BALANCES GOVERNMENTAL FUNDS Last ten fiscal years (modified accrual basis of accounting) (Unaudited) 1999 2000 2001 2002 Revenues Property taxes 7,740,375 8,265,296 7,932,469 10,739,847 Tax increments 2,902,590 3,196,108 3,967,398 3,022,252 Franchise fees Lodging taxes 808,266 836,857 826,957 717,176 Special assessments 909,894 1,287,934 1,136,454 1,190,031 Licenses and permits 763,960 632,549 788,629 823,996 Intergovernmental 8,602,166 7,899,522 5,824,513 7,039,895 Charges for services 739,054 779,060 688,453 575,748 Fines and forfeits 205,460 180,676 230,408 278,557 Investment earnings 609,879 798,229 2,082,680 648,423 Miscellaneous 168,050 125,012 150,369 267,717 Total revenues 23,449,694 24,001,243 23,628,330 25,303,642 Expenditures General government 2,260,415 2,429,196 2,504,392 2,553,426 Public safety 5,354,413 5,453,143 5,672,098 6,255,221 Public works 1,904,205 2,100,865 2,142,064 1,986,692 Community services 83,295 95,148 106,034 103,491 Parks and recreation 2,233,465 2,344,768 2,392,168 2,125,415 Economic development 2,664,904 2,763,028 2,365,732 2,095,545 Nondepartmental 343,925 419,789 372,056 366,282 Administrative services reimbursement (670,390) (795,737) (767,504) (596,541) Capital outlay 13,838,702 7,275,675 6,558,177 9,608,420 Debt service Principal 2,085,000 3,970,000 2,805,000 3,000,000 Interest 1,373,614 1,282,512 1,330,162 1,034,139 Other charges 13,930 13,426 8,931 28,712 Total expenditures 31,485,478 27,351,813 25,489,310 28,560,802 Revenues over (under) expenditures (8,035,784) (3,350,570) (1,860,980) (3,257,160) Other financing sources (uses) Issuance of debt 1,585,000 735,000 730,000 Discount on issuance of debt Premium on issuance of debt Sale of capital assets 2,411,987 194,491 572,266 474,648 Transfers in 3,655,433 5,479,120 4,124,184 4,263,453 Transfers out (3,704,790) (5,404,122) (3,798,684) (4,063,453) Refunded bonds redeemed Total other financing sources (uses) 3,947,630 1,004,489 1,627,766 674,648 Net change in fund balances (4,088,154) (2,346,081) (233,214) (2,582,512) Debt service as a percentage of noncapital expenditures 14.82% 23.05% 18.41% 16.81% 134 Table 5 2003 2004 2005 2006 2007 2008 10,268,278 10,598,478 11,641,177 11,525,040 12,094,359 12,403,914 3,466,114 3,834,060 4,680,688 2,664,144 2,727,637 2,894,595 612,079 662,614 658,410 658,620 643,934 661,267 656,858 710,619 738,776 706,930 619,962 1,232,682 1,313,782 1,226,655 1,214,571 1,364,413 1,289,148 827,685 678,077 675,530 722,633 673,156 643,736 3,479,082 3,239,020 2,578,031 2,375,697 3,171,745 2,211,560 709,623 711,526 754,575 722,218 705,736 761,404 290,408 254,980 253,748 256,600 291,423 302,986 317,749 385,022 1,078,434 1,601,731 1,519,503 733,877 607,582 609,902 427,839 477,296 404,420 449,061 21,860,470 22,893,784 24,689,910 22,957,116 24,317,942 22,954,177 2,475,323 2 951 188 3,575,147 2,594,041 2,586,993 2,839,150 6,620,481 7,025,629 7,014,528 7,299,842 7,550,434 8,048,529 2,114,378 1,814,107 2,197,127 1,817,120 2,310,846 2,139,864 91,581 67,324 86,043 123,172 74,389 72,893 2,030,402 1,981,998 2,121,130 2,212,142 2,314,099 2,409,291 1,758,257 1,006,550 2,076,023 1,386,558 5,659,331 7,666,319 331,223 333,669 315,355 363,967 354,848 301,396 (607,221) (784,084) (754,085) (529,362) (744,590) (802,775) 1,881,360 4,724,289 8,335,916 5,918,472 4,524,524 4,531,003 3,220,000 3,751,513 2,772,189 3,127,146 2,786,076 2,884,953 905,518 881,016 1,214,751 1,197,392 1,134,412 1,060,165 26,079 126,858 23,758 53,226 12,896 73,631 20,847,381 23,522,910 27,989,728 25,808,825 28,928,453 31,960,416 1,013,089 (629,126) (3,299,818) (2,851,709) (4,610,511) (9,006,239) 1,205,000 25,770,000 1,460,000 6,725,000 (8,860) (96,503) (445) (28,178) 1,384 73,175 3,703,509 5,103,613 2,811,793 2,784,116 5,881,257 1,969,533 (3,603,509) (3,098,803) (2,619,793) (2,211,209) (6,018,629) (1,549,358) (7,280,000) (529,138) 1,369,315 27,678,307 (7,088,000) 2,032,462 (666,510) 7,118,381 2,382,404 27,049,181 (10,387,818) (819,247) (5,277,021) (1,887,858) 21.88% 24.89% 18.37% 19.14% 15.90% 14.65% 135 CITY OF BROOKLYN CENTER, MINNESOTA ASSESSED TAX CAPACITY AND ESTIMATED ACTUAL VALUE OF TAXABLE PROPERTY Last ten fiscal years (Unaudited) 1999 2000 2001 2002 Real Property: Residential 9,309,893 9,976,862 8,928,738 8,495,196 Nonresidential 10,657,588 11,002,424 14,093,094 9,225,991 Area -wide allocation 537,406 1,504,330 746,438 635,875 Personal property 452,849 437,707 452,680 262,882 Less: Tax increment districts 2,054,659 2,533,878 3,296,624 2,450,218 Total Assessed Tax Capacity 18,903,077 20,387,445 20,924,326 16,169,726 Direct Tax Rate 36.269 34.645 35.996 58.901 Estimated Market Value 1,098,665,900 1,177,854,400 1,324,649,100 1,488,832,300 Total Assessed Tax Capacity as a percentage of Estimated Market Value 1.72% 1.73% 1.58% 1.09% Beginning in 2002, the State of Minnesota significantly reduced state aids to the City and allowed these amounts to be included in the proptery tax levy. Source: City Assessing Department 1 136 1 Table 6 1 2003 2004 2005 2006 2007 2008 9,362,788 10,532,558 12,177,307 13,942,981 15,436,568 16,033,784 9,430,533 9,775,352 9,903,157 9,475,576 9,573,405 9,864,552 875,145 1,097,596 1,023,618 1,161,174 1,624,108 2,155,636 273,072 281,963 294,377 298,953 283,198 291,815 2,538,825 3,134,417 3,122,665 2,559,620 2,463,631 2,405,929 17,402,713 18,553,052 20,275,794 22,319,064 24,453,648 25,939,858 52.792 53.693 51.723 48.069 45.366 45.081 1,673,812,000 1,840,115,300 1,959,999,100 2,035,666,100 2,140,133,600 2,197,067,700 1.04% 1.01% 1.03% 1.10% 1.14% 1.18% 1 r 1 r r r r r r r 137 r CITY OF BROOKLYN CENTER, MINNESOTA PROPERTY TAX RATES DIRECT AND OVERLAPPING GOVERNMENTS Last ten fiscal years (Unaudited) Overtanping Rates Metro City County Dist 11 Dist 279 Dist 281 Dist 286 Districts 1999 36.998 40.994 54.856 54.337 47.716 59.807 6.035 2000 35.369 39.655 51.792 53.284 48.492 44.356 6.039 2001 36.740 37.679 52.224 56.784 46.678 47.139 5.830 2002 58.901 50.789 29.082 30.092 30.213 26.338 3.537 2003 54.021 50.607 26.941 35.042 29.179 49.817 3.825 2004 53.693 47.324 21.050 23.709 34.258 39.892 3.502 2005 51.723 44.172 21.492 24.336 29.989 36.159 3.304 2006 48.069 41.016 20.046 21.815 28.489 39.781 2.924 2007 45.366 39.110 19.353 23.758 28.750 36.154 2.671 2008 45.081 38.571 16.983 19.710 27.243 37.519 2.562 Source: City Assessing Department and Hennepin County Property Tax Services 1 Watershed levy was levied in 2006 and 2008 in schools districts 279 and 281, and parts of school districts 11 and 286. 1 138 Table 7 t Total Direct and Overlapping Rates Other District 11 District 11 District District District 286 District 286 Districts Watershed no watershed with watershed 279 281 no watershed with watershed 3.247 142.130 141.611 134.990 147.081 3.111 135.966 137.458 132.666 128.530 2.294 134.767 139.327 129.221 129.682 3.844 146.153 147.163 147.284 143.409 5.161 140.555 148.656 142.793 163.431 3.986 129.555 132.214 142.763 148.397 4.078 124.769 127.613 133.266 139.436 4.074 0.073 116.129 116.202 117.971 124.645 135.864 135.937 4.639 111.139 115.544 120.536 127.940 4.835 0.265 108.032 108.297 111.024 118.557 128.568 128.833 r 139 CITY OF BROOKLYN CENTER, MINNESOTA PRINCIPAL PROPERTY TAXPAYERS Table 8 Current Year and Nine Years Ago (Unaudited) 2008 1999 Percentage of Percentage of Net Tax Total Tax Net Tax Total Tax Taxpayer Capacity Rank Capacity Value Capacity Rank Capacity Value Brooks Mall Properties LLC 394,290 1 1.52% 867,783 2 4.49% Luther Properties 382,452 2 1.47% Regal Cinemas, Inc. 245,758 3 0.95% i BCC Associates, LLC 223,250 4 0.86% CSM Freeway Airport, LLC 221,970 5 0.86% Twin Lakes LLC 217,800 6 0.84% Brookdale Corner, LLC 209,850 7 0.81% Medtronic, Inc. 199,398 8 0.77% Twin Lake North 175,738 9 0.68% 318,050 7 1.65% Wickes Furniture Company 171,170 10 0.66% Dayton- Hudson Corp. 1,006,102 1 5.20% Prudential Insurance Co. 503,184 3 2.60% Ryan Construction Co. 581,304 4 3.01% Lang- Nelson 364,385 5 1.88% r Bradley Real Estate Inc. 342,050 6 1.77% First Industrial Realty Trust 274,974 8 1.42% JC Penny's 260,200 9 1.35% AMB Property, LP 203,046 10 1.05% Totals 2,441,676 9.41% 4,721,078 24.42% Source: City Assessing Department 140 t CITY OF BROOKLYN CENTER, MINNESOTA PROPERTY TAX LEVIES AND COLLECTIONS Table 9 Last ten fiscal years (Unaudited) Collected within the Certified Adjusted Fiscal Year of the Levy Collections in Total Collections to Date Property Property Percentage of Subsequent Precentage Tax Levy Adjustments Tax Levy Amount Adjusted Levy Years Amount to Date 1999 7,897,379 (34,310) 7,863,069 7,824,101 99.5% 38,968 7,863,069 100.0% 2000 8,100,268 (15,259) 8,085,009 8,044,802 99.5% 40,207 8,085,009 100.0% 2001 8,420,720 (48,553) 8,372,167 8,132,527 97.1% 239,640 8,372,167 100.0% 2002 10,442,518 (925,619) 9,516,899 9,262,641 97.3% 254,258 9,516,899 100.0% 2003 10,355,103 (828,621) 9,526,482 9,280,043 97.4% 245,585 9,525,628 100.0 2004 10,779,421 (806,306) 9,973,115 9,504,581 95.3% 455,099 9,959,680 99.9% 2005 11,319,404 (743,713) 10,575,691 10,403,359 98.4% 151,906 10,555,265 99.8% I 2006 11,627,768 (676,160) 10,951,608 10,697;638 92.0% 211,685 10,909,323 93.8% 2007 11,958,743 (590,659) 11,368,084 11,070,387 92.6% 195,111 11,265,498 94.2% 2008 12,437,093 (556,617) 11,880,476 11,577,739 93.1% 11,577,739 93.1% I Source: Hennepin County Property Tax Division Adjustments for subsequent abatements. Beginning in 2002, adjustments also include Market Value Homestead Credit. I CITY OF BROOKLYN CENTER, MINNESOTA RATIOS OF OUTSTANDING DEBT BY TYPE Table 10 Last ten fiscal years (Unaudited) Business -Type Governmental Activities Activities General Tax Storm Sewer Total Percentage Obligation Increment Improvement Revenue Primary of Taxable Per Bonds Bonds Bonds Bonds Government Market Value Capita 1999 10,915,000 10,420,000 5,920,000 1,230,000 28,485,000 2.60% 998 2000 8,760,000 9,140,000 6,120,000 1,050,000 25,070,000 2.15% 859 2001 8,105,000 7,690,000 6,150,000 860,000 22,805,000 1.80% 782 2002 7,425,000 6,150,000 5,370,000 660,000 19,605,000 1.43% 672 2003 6,720,000 4,505,000 5,705,000 450,000 17,380,000 1.17% 596 N 2004 11,025,000 22,445,000 5,710,000 230,000 39,410,000 2.42% 1,359 2005 5,340,000 19,305,000 4,720,000 29,365,000 1.63% 1,044 2006 4,465,000 18,305,000 5,180,000 27,950,000 1.43% 1,002 2007 3,875,000 17,255,000 4,280,000 25,410,000 1.20% 911 2008 3,275,000 20,560,000 5,690,000 29,525,000 1.35% 1,058 Source: Taxable Market Value Hennepin County Taxpayer Services, Property Tax Divixion CITY OF BROOKLYN CENTER, MINNESOTA RATIOS OF GENERAL BONDED DEBT OUTSTANDING Table 11 Last ten fiscal years (Unaudited) Less: Amounts Percentage of General Available in Net General Estimated Obligation Debt Service Obligation Market Value Per Bonds Fund Debt of Property Capita 1999 7,575,000 725,868 6,849,132 0.58% 240 2000 7,175,000 775,911 6,399,089 0.48% 219 2001 6,760,000 831,588 5,928,412 0.40% 203 2002 6,325,000 871,970 5,453,030 0.33% 187 2003 5,875,000 907,709 4,967,291 0.27% 170 2004 10,450,000 5,903,577 4,546,423 0.23% 157 2005 5,045,000 1,054,230 3,990,770 0.20% 142 2006 4,465,000 1,104,749 3,360,251 0.16% 120 2007 3,875,000 1,163,306 2,711,694 0.12% 97 2008 3,275,000 1,198,234 2,076,766 0.09% 74 1 143 CITY OF BROOKLYN CENTER, MINNESOTA COMPUTATION OF DIRECT AND OVERLAPPING DEBT Table 12 as of December 31, 2008 (Unaudited) Estimated Estimated Share Debt Percentage of Overlapping Governmental Unit Outstanding Applicable Debt Overlapping debt: School Districts: No. 11 Anoka 146,832,199 7.00% 10,278,254 No. 279 Osseo 208,393,240 4.42% 9,210,981 No. 281 Robbinsdale 240,892,796 4.96% 11,948,283 No. 286 Earle Brown 28,801,021 100.00% 28,801,021 Metropolitan Council 137,904,653 0.62% 855,009 Hennepin County 501,975,359 1.37% 6,877,062 Hennepin Regional RR Authority 43,486,862 1.37% 595,770 Hennepin County Park Reserve District 72,794,815 1.81% 1,317,586 Total overlapping debt 1,025,855,506 69,883,966 City of Brooklyn Center direct debt 2 2,076,766 Total direct and overlapping debt 71,960,732 Source: City Finance Department, Hennepin County, and Springsted Financial Advisors. The percentage of overlapping debt applicable is estimated using tax capacity values. Applicable percentages were estimated by determining the portion of each entity's tax capacity that is within the City's boundaries and dividing it by that entity's total tax capacity. s Includes only general obligation debt which is repaid through property taxes, net of amounts available. 1 144 CITY OF BROOKLYN CENTER, MINNESOTA LEGAL DEBT INFORMATION Table 13 Last ten fiscal years (Unaudited) Total net debt applicable to the limit Total net debt as a percentage of Debt Limit applicable to limit Legal debt margin debt limit 1999 21,911,836 6,849,132 15,062,704 31.26% 2000 23,370,274 6,399,089 16,971,185 27.38% 2001 25,381,400 5,928,412 19,452,988 23.36% 2002 27,354,868 5,453,030 21,901,838 19.93% 2003 29,594,688 4,967,291 24,627,397 16.78% 2004 32,503,096 4,546,423 27,956,673 13.99% 2005 36,003,536 3,990,770 32,012,766 11.08% 2006 39,219,054 3,360,251 35,858,803 8.57% 2007 42,259,958 2,711,694 39,548,264 6.42% 2008 65,676,378 2,076,766 63 3.16% Legal Debt Margin Calculation for Fiscal Year 2008 Taxable Market Value 2,189,212,600 Debt limit (2% of Taxable Market Value) 65,676,378 Debt applicable to limit Net general obligation bonds 2,076,766 i Legal debt margin 63,599,612 145 CITY OF BROOKLYN CENTER, MINNESOTA PLEDGED- REVENUE COVERAGE Last ten fiscal years (Unaudited) Storm Sewer Bonds Storm Less: Net Sewer Operating Available Debt Service Charges Expenses Revenue Principal Interest Coverage 1999 999,867 232,405 767,462 170,000 67,558 3.23 2000 1,074,619 307,389 767,230 180,000 59,110 3.21 2001 1,129,502 327,412 802,090 190,000 49,950 3.34 2002 1,377,638 662,747 714,891 200,000 40,100 2.98 2003 1,264,512 809,130 455,382 210,000 29,540 1.90 2004 1,276,778 756,593 520,185 220,000 18,250 2.18 2005 1,293,841 1,086,600 207,241 230,000 6,210 0.88 2006 2007 2008 146 Table 14 Special Assessment Bonds Tax Increment Bonds Special Tax Assessment Debt Service Increment Debt Service Collections Principal Interest Coverage Collections Principal Interest Coverage 690,538 405,000 189,790 1.16 2,902,590 1,165,000 662,232 1.59 994,839 535,000 231,972 1.30 3,186,573 1,280,000 595,554 1.70 t 1,029,378 700,000 252,563 1.08 3,713,349 1,450,000 519,409 1.89 928,559 780,000 249,497 0.90 2,882,577 1,540,000 433,893 1.46 1,153,044 870,000 242,749 1.04 3,142,158 1,645,000 340,413 1.58 1,410,344 1,005,000 218,457 1.15 3,606,130 1,775,000 286,867 1.75 1,058,557 990,000 197,760 0.89 3,576,209 770,000 729,740 2.38 1,035,961 1,000,000 167,284 0.89 1,609,994 1,000,000 887,080 0.85 884,261 900,000 162,486 0.83 1,707,470 1,050,000 847,236 0.90 816,798 980,000 145,121 0.73 1,906,053 1,030,000 804,491 1.04 147 CITY OF BROOKLYN CENTER, MINNESOTA DEMOGRAPHIC AND ECONOMIC STATISTICS Table 15 Last ten fiscal years (Unaudited) School Enrollments Per Capita No. 286 Personal Personal Unemployment No. 11 No. 279 No. 281 Earle Population Income Income Rate Anoka Osseo Robbinsdale Brown 1999 28,535 $1,143,625,730 40,078 2.4% 40,964 22,171 13,800 1,734 2000 29,172 1,255,767,084 43,047 3.0% 41,314 22,017 13,706 1,682 2001 29,180 1,267,929,360 43,452 4.2% 41,419 22,041 13,754 1,724 2002 29,185 1,276,318,420 43,732 5.2% 41,383 21,824 13,656 1,732 2003 29,174 1,316,943,534 45,141 5.9% 41,254 21,698 13,765 1,732 2004 29,005 1,393,429,205 48,041 5.6% 41,592 21,620 16,196 1,691 2005 28,137 1,418,442,444 50,412 4.8% 41,596 21,792 13,368 1,679 2006 27,901 1,476,102,405 52,905 4.6% 41,310 22,071 13,194 1,705 2007 27,901 5.6% 40,656 21,859 12,891 1,763 2008 27,907 7.6% 40,152 21,001 12,526 2,012 Sources: Population Metropolitan Council Personal income Bureau of Economic Analysis Unemployment rate Minnesota Department of Employment and Economic Development School Enrollments Minnesota Department of Education personal income data not available for these years 1 1 148 CITY OF BROOKLYN CENTER, MINNESOTA PRINCIPAL EMPLOYERS Table 16 Current Year and Nine Years Ago (Unaudited) 2008 1999 Percentage of Percentage of Total City Total City Employer Employees Rank Employment Employees Rank Employment Brookdale Center 1,900 1 13.65% 1,700 1 10.47% Promeon, Division of Medtronics 1,350 2 9.70% 300 3 1.85% Graco, Inc. 800 3 5.75% 100 7 0.62% Independent School District #286 303 4 2.18% 1 Nations Care Link 225 5 1.62% Cub Foods 170 6 1.22% City of Brooklyn Center 153 7 1.10% 350 2 2.16% Best Buy 145 8 1.04% Target 140 9 1.01% TCR Corporation 140 10 1.01% 175 5 1.08% Hoffman Engineering 270 4 1.66% Ault, Inc. 160 6 0.99% Cass Screw Machine Products 125 8 0.77% Precision, Inc. 100 9 0.62% Haiwatha Rubber Company 85 10 0.52% Totals 5,326 38.26% 3,365 20.73% Source: Minnesota Department of Employment and Economic Development 149 CITY OF BROOKLYN CENTER, MINNESOTA FULL TIME CITY GOVERNMENT POSITIONS BY FUNCTION Table 17 Last ten fiscal years (Unaudited) 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 General goverment Administrative 6.4 6.4 6.5 6.5 6.5 6.0 6.0 6.0 6.0 7.0 Elections 1.0 1.0 1.0 1.0 1.0 1.0 1.0 1.0 1.0 1.0 Finance 7.0 7.0 7.0 7.0 6.0 6.0 6.0 6.0 6.0 5.0 Assessor 4.0 4.0 4.0 3.0 3.0 3.0 3.0 3.0 3.0 3.0 Government buildings 5.0 5.0 5.0 5.0 5.0 5.0 5.0 5.0 5.0 5.0 Information technology 1.0 1.0 1.0 1.0 2.0 2.0 2.0 2.0 2.0 2.0 Total general government 24.4 24.4 24.5 23.5 23.5 23.0 23.0 23.0 23.0 23.0 Public safety Police Officers 42.0 42.0 42.0 42.0 42.0 42.0 42.0 42.0 43.0 46.0 Civilians 17.0 17.0 16.0 16.0 15.0 15.0 15.0 15.0 12.0 12.0 Fire 1.0 1.0 1.0 1.0 1.0 1.0 1.0 2.0 2.0 2.0 Building inspection 4.0 5.0 5.0 4.0 4.0 4.0 4.0 4.0 4.0 6.0 Total public safety 64.0 65.0 64.0 63.0 62.0 62.0 62.0 63.0 61.0 66.0 Public works Engineering 10.0 10.0 10.0 10.0 8.0 7.0 7.0 6.0 6.0 5.0 Streets 10.9 10.9 10.9 11.0 11.0 10.0 9.0 10.0 10.0 11.0 Total public works 20.9 20.9 20.9 21.0 19.0 17.0 16.0 16.0 16.0 16.0 Parks and recreation Administration 6.0 6.0 6.0 6.0 5.0 6.0 6.0 6.0 6.0 6.0 Community center 5.0 5.5 5.5 5.0 5.0 3.0 3.0 3.0 3.0 3.0 Park maintenance 10.0 10.0 10.0 10.0 10.0 8.0 8.0 7.0 7.0 7.0 Total park and recreation 21.0 21.5 21.5 21.0 20.0 17.0 17.0 16.0 16.0 16.0 Economic development 4.6 4.6 4.5 4.5 4.5 4.0 4.0 4.0 4.0 4.0 Municipal liquor 3.0 4.0 4.0 3.0 3.0 3.0 3.0 3.0 4.0 4.0 Golf course 1.0 1.0 1.0 1.0 1.0 1.0 1.0 1.0 1.0 1.0 Earle Brown Heritage Center 13.0 13.0 13.0 11.0 11.0 11.0 11.0 11.0 11.0 11.0 Water 5.0 5.0 5.0 5.0 5.0 5.0 5.0 5.3 5.3 5.3 Sanitary sewer 2.0 2.0 2.0 2.0 2.0 2.0 2.0 2.3 2.3 2.3 Storm sewer 1.0 1.4 1.4 1.4 Central garage 5.1 5.1 5.1 5.0 5.0 5.0 5.0 5.0 5.0 5.0 Total 164.0 166.5 165.5 160.0 156.0 150.0 150.0 151.0 150.0 155.0 Source: City Annual Budget documents 150 CITY OF BROOKLYN CENTER, MINNESOTA OPERATING INDICATORS BY FUNCTION Table 18 Last ten fiscal years (Unaudited) Function 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 Police Violent Crimes 91 137 133 136 134 165 174 191 210 192 Serious Crimes 2,274 2,150 2,057 1,915 2,150 1,893 1,951 2,054 1,992 2,049 Total Calls for Service 23,906 23,543 26,501 25,644 25,945 26,328 26,738 28,644 34,185 36,923 Fire Fires/All other calls 642 695 658 681 617 545 692 697 677 684 Medical calls 311 299 305 373 331 279 212 326 386 419 Fire inspections performed 202 214 216 133 100 98 45 0 0 106 Streets Total miles 105.53 105.53 105.53 105.53 105.53 105.53 105.53 105.78 105.78 105.78 Miles of streets reconstructed 4.70 4.20 3.40 7.80 1.90 2.80 4.60 2.50 4.20 4.15 Parks and recreaton Community Center Admissions 59,299 61,836 67,476 42,873 66,427 62,458 59,288 61,680 61,022 60,323 Acres of park maintained 527 527 527 527 527 527 527 527 527 527 Municipal liquor Number of stores 3 3 2 1 1 2 2 2 2 2 Sales (in thousands) $3,561 $3,585 $3,552 $3,436 $3,408 $4,027 $4,610 $5,159 $5,475 $5,485 Golf course Rounds sold 31,428 34,426 29,448 21,072 27,010 22,847 20,780 21,100 15,680 15,802 Earle Brown Heritage Center Bookings 954 813 757 579 572 577 579 611 570 522 Functions 1,355 2,129 2,145 2,105 1,527 1,734 1,725 1,870 1,720 1,412 Inn occupancy (average) 1 53.34% 46.70% 23.46% 7.23% 9.53% 8.14% 8.58% 11.55% 8.16% 4.00% Water Connections 8,933 8,943 8,905 8,934 8,949 8,963 8,938 8,904 8,997 8,986 Miles of water mains 114.98 114.40 114.40 114.62 114.82 114.82 118.25 120.50 121.80 121.80 Average daily consumption 3,366,551 3,715,142 3,638,490 3,127,214 3,723,769 3,551,104 3,697,790 3,609,903 3,621,122 3,550,126 Sanitary sewer Connections 8,796 8,774 8,764 8,786 8,798 8,799 8,804 8,807 8,793 8,837 Miles of sanitary sewer 105.51 105.51 105.51 105.61 105.61 105.61 105.61 105.61 105.61 105.61 Source: Various City departments Police indicators for current year are preliminary 1 in 2002 the Heritage Center Inn ceased daily occupancy and moved to a retreat concept with an 8 room minimum I i I CITY OF BROOKLYN CENTER, MINNESOTA CAPITAL ASSET STATISTICS BY FUNCTION Table 19 Last ten fiscal years (Unaudited) Function 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 Public safety Police Stations 1 1 1 1 1 1 1 1 1 1 Patrol units Marked squads 10 10 10 10 7 7 8 8 8 9 Other vehicles 16 16 21 15 13 16 16 16 16 14 Fire Stations 1 1 2 2 2 2 2 2 2 2 Fire trucks 8 7 7 7 7 7 7 7 7 7 Public works Streets (miles) 112.35 112.35 112.35 112.35 112.35 112.35 112.35 112.60 112.60 112.60 Heavy duty trucks (snow plows) 11 10 11 11 12 13 12 13 13 13 n Parks and recreation Parks acreage 527 527 527 527 527 527 527 527 527 527 Trails (miles) 11.2 11.2 11.2 11.2 11.2 21.6 21.6 21.6 21.6 Community centers 1 1 1 1 1 1 1 1 1 1 Ground maintenance equipment 17 18 18 13 13 13 13 13 13 15 Other vehicles/equipment 19 20 21 12 11 14 14 14 14 15 Water Water mains (miles) 114.98 114.40 114.40 114.62 114.82 114.82 118.25 120.50 121.80 121.80 Wells 9 9 9 9 9 9 9 9 9 9 Sewer Sanitary sewers (miles) 105.51 105.51 105.51 105.61 105.61 105.61 105.61 105.61 105.61 105.61 Lift Stations 10 10 10 10 10 10 10 10 10 10 Storm sewers (miles) 71.65 74.20 74.20 74.20 74.20 74.20 74.20 74.20 74.20 74.20 Source: City capital asset records information not available for these years A a:?`.. ,k '.a 9 r� ,1.r' k., +U,+; y fi:' F. fi. o „'J Z r, 'L a... s "d t. 4 «`3'- Y 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P .R °+ 4. •:k &, k t'6f A':+Mo ;- r s !, ! .a _ x 'xy „± "ys 7 t'F•:.! s'r• ~< tr F } .\.. ,.f�.,< 'L :;a'r .,,..7<• }'c .t}• T�3. t aVf u:';; f J f „: .. ,. :' '! " }. 4..K.. ie: , r _yam \ '{' '' '^mot':-3 ,".:.: `K '?> :4`� ^3 Y:::+?, 2 '�''+t a, TR >.' _ 4 s, a 7 „t' ; ) i}' ,.," d '�+- .x .-:u s .,,� •£.�. ct ,y a'a a,~ t s, _ rt ,> x3 ,s.,, x }' 3 r ..8':.:.;a -»,..✓.. �}r; ..,# >. ,,s: ,.,,:.,. .... ,U:rn 4 ....w v: n ,•, f a r;;�fi "?"� t =., c, ryaw s x ..1.>_._ .,'.,. _. t ...r.. ,._.>. .,,> # e.e,,. .-.-... ( .,v.. ii ,. ., x,,a. � < �: ..- :w,.. f, ,:k -.�,. ,5 ✓x5 S. '!ix'. 1 ..t`°°, ?'.r r .< ,_<..:.�a,k_.-._' ,,.,_.,,. CERTIFIE T N City of BroOk1Y' s Center Audit Repot 2008 Year Ended December 31, MaII Montague, Karn0Wski, Radosevich, Co., P.A. by ameS H. Eichten, CPA T 11\ ruau<< CERTIFIED PUAIJC ACCOUN ppinion on Financia5 Statements Fay Prsented in Financial Statements Accordance with U.S. GAAP Testing of Internal Controls and Compliance orting Internal controls over financiau,aPons related to Compliance with laws and reg financial reporting State laws and regulations LA„Mr(il Audit Results CE 11Rl.lC ACC OUNTAN TS Internal Control Findings p Segregation of Duties ement Approval Lack of Manag ccounting and Financial Reports Lack of Formal g edre Written A te Readings Lack of Verification of Utility e Capital Assets and Land Held for Resale Prior Period Adjustme ethods for Other Post- Eligibility Determination M Employment Benefits MMKR Audit Results CERTIFIED PURIJC ACCOUNTANTS *Legal Compliance Audit Findings — Timely Payment of Invoices Manag ement Itep 0t 410q IED PUR1tC A CCOU NTANTS A Sn n d Timing of Audi planned Sc0%!C a State1It#4 I GS omm unicati ons 'Formal 1teq"ed KR ;ERTIFIED PUNiTCs A COUNT Aud Summary 0 -L e gislati on Fed eral Recovery Act 01'ropeTt)T Tares Manag ement Report DIED PUBLIC C. CgC OUNTA NTS A e of net tax capacity City of expressed as a percentage S Cou Brooklyn Center Rates exp A11 Cities Metro Area 20er 2008 State -Wide 2001 2007 2001 2008 43.9 33. 44.3 Average tax rate 33.4 36.3 39.1 38.6 36.1 34.9 City 8.5 35 2 28.1 26.6 3 38.0 21.3 County 22.1 8 21.1 8.4 22.2 7.0 School 6.8 117.9 5.6 119.9 ..�8. 5.5 96 8 Special taxing 98.1 102.3 101 r Total Management Rep ort M CERTIFI R1 T S ACCpUN *Audit Sum 01 Legislation 0f ederal Recovery Act CoProperty T ax es G o vernmen tal-Funds overview ERT F1ED S Y ear P Property taxes TaXincreme and other taXeS Fran chise fees Special assessments p an d perms is Licens menta lrevawe s Intergo ern Charges for serv ices Other T otal revenu es per �rnmentalFunds es by p Clas G o wide As ern With State' 333 46 22 89 33 213 106 State-Wid O. of 20Ob _100, 00 2 December 000- 320,4, 20,000-100,000 0, 000 901 10 3 1 332 52 32 54 28 261 88 108 961 1 353 Al 56 35 13 31 169 82 11 Brook% Center 20 2005 21� 21,901 433 444 95 104 95 49 45 50 49 46 44 24 23 26 114 19 85 25 21 26 19 x _53 84 918 8 S 821 M KR Year Population CERTIFIED PUBLIC ACCOUNTANTS Governmental Funds Expenditures per Capita With State -Wide Averages by Population Class State -Wide City of Brooklyn Center December 31, 2007 2006 2007 2008 2,500 10,000 10,000- 20,000 20,000- 100,000 27,901 27,901 27,907 Current General government 122 106 83 102 106 128 Public safety 208 224 223 262 271 288 Street maintenance 110 105 94 65 83 77 Parks and recreation 62 83 82 79 83 86 All other 85 98 97 48 192 259 587 616 579 556 735 838 Capital outlay and construction 481 341 328 212 162 162 Debt service Principal 161 133 100 112 100 103 Interest and fiscal 71 47 39 45 41 41 232 180 139 157 141 144 11 TIFiF.D PUBLIC CERTIF Q U N TA. N T S Management Report ,AUtht sum OiLegislat p► Federal Recovery Act T o G ov erflmt al vervi F ds O an d AnalySiS General Fund $18, 000,000 $16,000,000 $1 4 000,000 $1 2 000,000 $10, 000,000 $8, 000,0p0 $6,000,000 $4, 000,000 $2, 000,000 General F Financial Position Y ear Ended Decem 31, JP I 2008 2006 2007 2003 2004 2005 J C ash B (Net of Interfund Borrowing) o owing) Expenditures $13,500,000 $12,000,000 $10,500,000 $9,000,000 $7,500,000 $6,000,000 $4,500,000 $3,000,000 $1,500,000 General Fund Revenue by Source Year Ended December 31, 2003 2004 2005 2006 2007 2008 0 Taxes I Intergovernmental 0 Other $8,000,000 $7,000,000 $6,000,000 $5,000,000 $4,000,000 $3,000,000 $2,000,000 $1,000,000 General Fund Expenditures by Function Year Ended December 31, r 2003 2004 2005 2006 2007 2008 General Government Public Safety Public Works Parks and Recreation Other �T IFI ED PUBLIC AC C OUN TANTS Management Report G audit Summa co Legislation oFederal Recovery Act ,property Tares Overv1Governtal Funds ()Financial Trends and Analysis General Fund Utility and fnterPr1 $2,25 $2,00 $1; 750,000 $1,50 $1, 250,000 3 $1 000 $150, $5 00,000 $2 50,000 $(250,000) y--- 2003 Operating Reyenne Operating Income (Loss) 2006 2005 20 Exp enses SOS operating 20 200$ $3,500, $3,000, $2,500,0 $2,000, $1,500,0 $1,000, $500,000 $(500,000) 2003 2004 Sanitary Sewer Fund Year Ended December 3 1, mmENNI 2005 L_ J Operating Revenue Operating Income (Loss) 2006 Mill Operating Expense 2007 1 2008 $1, 600,000 1 400,000 $1,200,0 $1,000,000 $800,000 $600,000 $400,000 $200,000 2003 ma Storm Drainage Fund Year Ended December 31, 2004 2005 Operating Revenue Operating Income (Loss) 1 2006 OM Operating Expens 2007 2008 $6, 000,000 $5,50 $5, 000,000 $4 500 000 $4 000,000 $3,50 $3, 000,000 $2, 500,000 $2,000 $1, 500,000 $1, 000,000 $5 00000 2003 Liquor Fund Year Ended Decem ber 31, 200'1 2006 2005 20 WOO of Sales c Sales Income {Loss} Operating WOO Operating Expenses 2005 4 500 000 $4, 000 00° $3,500,000 $3,00,00° $2,5000° $2,000,000 $1, 500,000 $1, 000,000 $5 00,000 $(5 00,044) ,000,000) Brown_ e ritage C entel 1 Earle Bar Ended Year December J VII 20 03 2006 2005 2004 c Sales and User Fees E 0100 Operating WOO C ost of Sales Operating Income (Loss) 2007 S 2008 $350,000 300,00 0 $250,000 $2 00,000 $1 50000 $100 $5 0 000 $(50,000) 100,000) Golf Course ember 31, Year E i1 200'7 20 2005 Expen 2004 WOO Operating 2003 Operating .Revenue Operating Income (Loss) 2p08 M KR C T P ��N I T S CERTIF M Report A sum O i,egislation Federal Rec0very Act T Funds Overviev�' al Governmental Ana lysis al Tr ends an 0Finan'' and A P 0 accounting Summary CERTIFIED PUBLIC ACCOUN r� Clean Opinion on Finanial Statehlt *Discussion of Findings ernal Controls *Continue to Assess Financial Condition in City' S r� Overall plintng General Fund *Continued Ongoing Assessment of Financial General, Projections and Proj nd Results including Fund ether Operational and £nterPr Activities 2008 Comprehensive Annual Financial Report for the year ended 31 December 2008 low, SK C o f the CP ntroductory Section Finan6a Section Statements wide Statem Governm ents _Fund Financial5tatem Financial Statements the Notes to informa Supplementary nts R Fund Stataem Combining Individua Statistical Section ntroduct on Traflsm%tta etter Profile of the Community Economic Condition Major Events of 2008 Infrastruct Cash Management 2008) organ ►national ch(during n 2008 affected interest Fa ing nterest Ra income numb 2,258,771 in 2007 1,147,261 in 2008 Financial Section ndependent Auditor's Report Unqua ified or "c ean" opinion Due in arge part to the oversight and preparations of the Assistant Finance Director, Cara Hi ger Financial 5eCt0r n a ysis D \SCUSS►on St M at an d Informa Form _prescrib 5 and concep therei term an d Change e F u nds Defines d Balance b Business Type Net Assets �FUn 441,307, driven Y increased 2� Governmental and Business Typ e Funds of p,CtiViti a ges 15 and 16 Graph pages Debt utility infrastructure GO improvement, GO Tax Capital Assets 3,081,390; streets and 4,014,292 (WEB, CA increased Debt increased Increment Financial Section Government -Wide Statements Tota City Cash Investments Va ue of A Capita Assets Bonds Payab e 47,127,304 81,958,581 29,525,000 14,000,000 12,000,000 10,000,000 8,000,000 6,000,000 4,000,000 2,000,000 Property Taxes and Tax Increments 2003 2004 2005 2006 2007 2008 Property Taxes Tax Increments Financial Section Genera Fund reserves erating oss; covered by $198976 op Loss of 540,535 in LGA m _Fund Ba ance 48.3% Toss Would have been 50.7% J178�381 Cash at 31 December 2009; Tax ncrement Funds using the Decrease in fund ba ance good; increments for projects and improvements. 500,000 400,000 300,000 200,000 100,000 (100,000) (200,000) General Fund Operating Results 2003 2004 2005 2006 2007 2008 ge- Financial Section Municipa Liquor 405,720 profit before transfers Go f Course 42,325 negative cash f ow inc uding capita 8,645 cash ba ance Uti ities Gross cash f ows for 2008; 2,790,775 before capita Net cash f ows for 2008: 275,368 after capita Financial Section Ear e Brown Heritage Center Net Income for 2008; 404,855) Net Cash F ow for Same Operations: 237,310 Net Debt on Faci ity: 0.00 Cash Ba ance at 31 December 2008: 1,153,340 Financial Section Notes to the Financia Statemts (p.51) Excess of Expenditures over Appropriations Deficit Fund Equity (p•51) 53) Deposits and Investments ,p Long Term Debt (p.6 -62 Sold 6,25,000 of bonded debt in 2008 Paid Off 2,610,000 of bonded debt in 2008 All debt scheduled for payment within ten years S tatistical Section Reviewed by p udt0 rs but not sub:ected to of o p ion• in testing for formation ation: Five genera. types of nform Financia Trends Revenue Capacity Debt Capacity Informati Demographic and Economic Operating Information 3,500, 3,000,000 2,500, 2,000, 1,50 1,000, 500,0 2004 Total Tax Cap acity 200 2006 2007 800 LOOZ 900Z SOOZ =nteA laveW paieuills3 1,600 1,400 1,200 1,000 800 600 400 200 Debt Per Capita 2003 2004 2005 2006 er OS Debt per Capita Non -TIF OS Debt 2007 2008 • ya