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2003 06-16 CCP Joint Work Session with Financial Commission
l k , AGENDA CITY COUNCIL WORK SESSION FINANCIAL COMMISSION MEETING June 16, 2003 6:00 P.M Council Commission Conference Room Joint Meeting with Financial Commission 1. Presentation by Auditors 2. Miscellaneous 3. Adjourn Joint meeting Financial Commission Meeting 4. Community View and Goals a. Livability b. Long Term Issues 5. Cut and Revenue Update 6. Overview of Services and General Operations 7. Specific Operations and Programs 8. Revenue and Program/Service /Expenditure Targets 9. Adjourn Page 1 of 10 I View of Community 1. Livability: What is necessary to sustain livability that is reflected in property values as a place someone would want to shop, work, or live? a. Aesthetics b. Roads c. Public Safety d. Activities e. Parks 2. Long Term Issues a. Reinvestment in Infrastructure i. Issue is loss /reduction of General Fund 1. appropriations 2. fund balance transfers a. Streets i. need in both long and short term for funding b. Parks i. short term has funds for diminished program/reprioritization b. Crime/Perception of Crime i. Police staffing ii. Resources for youth c. City Work Force i. Salary competitiveness ii. Fire pay 1. City is one of few cities without run pay iii. Experiments 1. Consolidated Public Works Director & City Engineer 2. Police reorganization with greater use of non -sworn personnel iv. Training 1. direct 2. tuition reimbursement d. Technology i. Maintenance /replacement of current Page 2 of 10 1. on hold (unsustainable position) ii. Web presence iii. 800 mhz radio conversion e. Capital Replacement i. Fire truck replacement L bracket creep f. Maintenance 3. Cut and Revenue Update The rough summaries that follow are preliminary and approximate based on overviews. The amounts of LGA cuts and levy back are subject to final determinations by the State and will be certified later this summer. The State may experience additional shortfalls with the November, 2003 revenue forecast. If that happens, additional pressures on LGA would most likely occur. Given the Governor's request to former Governor Ventura that LGA payments be withheld at the end of 2002, non - payment of anticipated revenues from the State is a real possibility. Cities that were not at their maximum levy authority lost any unused levy authority in this past legislative session. a. Final Cuts i. 2003 loss of $1,181,346 ii. 2004 loss of $ 1,680,742 (2003 General Fund Budget $ 15,408,271: General Fund Budget less debt service, utilities, insurance, and lodging tax transfer is $13,408,996) 1. $1,680,742 is 10.91% of General Fund Budget 2. $1,680,742 is 12.53% of budget less debt etc. b. Levy option i. 60% of LGA loss 1. LGA loss = $1,680,742 2. 60% X $1,680,742 = $1,008,445 ii. Levy back of 60% would result in 9.94% city levy increase 1. $1,008,445/$10,141,725 2. This may be partially offset by removing some properties from TIF District #3 iii. Issues relate to: 1. use levy authority or potentially lose it forever in the face of potentially greater LGA cuts 2. impact on property tax rates 3. real estate taxes are deductible from State and Federal taxes, franchise and other fees are not a. exception is that businesses can deduct entire utility costs c. Franchise fees i. City may impose up to 4% franchise fees on gas & electric Page 3 of 10 1. Potential for approximately $1 Million a. Gas $400,000 b. Electric $600,000 2. Robbinsdale & New Brighton have adopted and Crystal is in review with a second reading of an ordinance anticipated in July for a 3% flat rate, it also appears that New Hope will adopt a franchise fee d. User fees i. User fees in recreation 1. targets a. adult i. cost + overhead contribution b. youth i. depending on program 1. cost 2. participation a. ie. After school enrichment 2. grants being solicited e. Special Assessments i. Current rates are $2,500 for street and $820 for storm water improvements 1. Water and sewer rates fund water and sewer main work 2. Are priced to be affordable to homeowner a. Issue of fairness if raised above current targets i. Everyone paid taxes for 1 St 10 years, some received streets at current rates, significant increase would mean persons who paid taxes to support first years of programs would pay higher rates when their streets reconstructed. f. Special Service Districts in Commercial Areas i. Not a large potential source 1. Requires commercial properties to consent g. Shift to Enterprise Funds i. Street reconstruction 1. greater portion attributed to utilities to cover actual street reconstruction costs could shift several hundred thousand from general fund ii. General overhead 1. could shift more overhead costs to utilities, liquor, and EBHC for general management etc. a. potential in $10,000 to $60,000 range depending on results of review of current allocation h. Use of Tax Increment Page 4 of 10 i. Could use tax increment for narrow range of activities 1. current policy /plan is for capital use only 2. downsides include how to fund a service when tax increment is gone i. Capital Reserve Emergency Fund i. Roughly $300,00 more than minimum balance is in the fund 1. If it were used, potential applications: a. Capital to fund i. Street reconstruction ii. Park b. Transition youth programs such as after school enrichment 2. Using fund balances for capital avoids operational issues later. Using fund balances for operations allows for a more gradual transition either to reduced services or to increased continuing revenues. j. Administrative Citations i. Minnetonka uses administrative process to collect "fines" k. Bonding i. The General Fund contribution to street replacement could be replaced by the use of bonds for the City's portion of the project costs, in addition to any shifts to greater cost allocation to the utilities. The downsides include greater cost over the life of the bonds verses cash and treatment by the legislature as part of the city's operating base for purposes of cuts (Our level of cuts in 2003 and 2004 are increased by virtue of the debt service in our levy for the police & fire bonds and previous street projects.). 1. Ability to reduce by carrying over from 2003 with reductions for Logis police system purchase which was completed this year and significant cost reductions through review /renegotiation of phone service, carry over of grants obtained in 2003 reducing for the next 1 to 2 years equipment needs in the Fire Department. m. The following chart demonstrates the rough ability to absorb reductions in service levels at the current level to balance the 2003 budget with some substantial savings from renegotiating phone services and Logis charges (2003 included $84,640 in new police system acquisition costs.) Page 5 of 10 f (Reductions without reference to basic operations ( 1 1 1 I 11 I I I 1 ( 1 (Phone restructuring 1 1 $16,0001 1 1 1 1 1 ILogis Charges 1 1 $43,1751 1 1 1 1 1 CCity Council 1 1 $3,000 leliminate membership Nat. Mayors/Hwy 100 I lAdministration 1 $24,500 IEliminate Iadmin I tech I I I lHuman Resources $16,000 shift to dept. medical exam/advertising (reduction in dept.) 1 1Police I I - -- I I I I I I Logis system 1 1 $84,6401 1 1 1 1 1 Logis. Operating 1 1 $12,4101 1 1 1 1 1 detective 1 1 $78,0001-- 1 1 1 1 Fire $8,112 apartment inspection I I I 1 1 $20,0001equipment due to grants I (Social Services I I 1 I I I I I i $ 18,760 (Senior Transportation I I I I $10,000 (Prism I I $4,000 Mediation I Public Works 1 1 $160,000 reduced seasonal & full time Cars 1 _ $ 108.000 12003 + closinQ on Sundav 1 $606,5971 - 606,597 1- -- - I I -- - I I 4. Overview of Services and General Operations a. Fixed and General Organizational Costs i. Debt Service ii. Insurance & risk management iii. Governance 1. City Council iv. General Management and Services 1. City Manager 2. Human Resources 3. Finance 4. Information Technology (5.13% reimbursed by Enterprise Funds) 5. City Clerk & elections a. Newsletter ($8,000 savings if reduced to 4 issues v. 6 issues) i. Contra value: Council increased number to improve communication ii. Is there greater rather than lesser need in retrenchment? Page 6 of 10 6. Legal 7. General Buildings & Grounds 8. Central Supplies b. Core Departmental Operations i. Police ii. Fire & Emergency Preparedness iii. Public Works (w /o enterprise operations of Water, Sewer, Storm Water) iv. Planning & zoning v. Building Inspection vi. Assessing c. Community Shaping i. Code Sweep and Crime prevention ii. Street reconstruction funding iii. Trash pick -up 1. sentence to serve 2. trash receptacles in business district iv. Northwest Hennepin Human Services ($12,145) v. Recreation 1. Community Center 2. Programs d. Community Enhancing i. Discretionary Social Service Programs ii. Events 1. Entertainment in the Park 2. Earle Brown Days Parade & events 3. Fireworks 4. Birthday celebration 5. Senior Transportation 6. Prism 7. North Hennepin Mediation Services 5. Specific Operations and Programs a. Police i. Core 1. Administration 2. Patrol 3. Investigation 4. Dispatch 5. Property Room 6. Records and support 7. Domestic Assault victim assistance a. Project Peace ii. Community Enhancing Page 7 of 10 1. DARE 2. Senior Fair 3. Chaplain Program b. Fire & Emergency Preparedness i. Core 1. Fire suppression 2. Fire Inspection 3. Siren operation 4. Emergency planning ii. Community Enhancing 1. Fire prevention materials and program in schools ($1,600 in firefighter special pay and $4,000 in materials) c. Public Works i. Core 1. Engineering a. Public works supervision b. Project design c. Customer service 2. Park Maintenance a. Mowing b. Trimming 3. Streets a. Maintenance i. Crack Sealing & Seal Coating ii. Street sweeping (also relates to storm water quality) b. Snow plowing & ice control 4. Traffic Sign ii. Community Enhancing 1. Forestry a. Arbor day b. Tree City USA 2. Community programs a. Landscaping contest 3. Parks a. Restrooms b. Athletic facilities i. Maintained and constructed at competitive level c. Play equipment Page 8 of 10 d. Community Activities and Recreation Services 1. Community Center a. Pool b. Exercise Room c. Constitution Hall d. Cohen Room e. Concessions i. Closed in 2003 f Child Care i. Discontinued in 2003 ii. 2. Youth programs a. After School Enrichment b. Summer Programs c. Safety Camp i. Joint with police d. Teen Dance i. Eliminated in 2003 3. Adult programs a. Senior i. Leisure Time ii. Supper Club iii. Sr. Happenings 4. Community Events a. Staff for i. Earle Brown Days ii. Birthday party b. Entertainment in the Park c. Fireworks d. Kids Carnival i. Eliminated in 2003 ($1,800) 5. Miscellaneous a. Community Band i. Funding discontinued in 2001 or 2002 ii. Free transportation of instruments discontinued in 2003 b. Showmobile 6. Dudley Softball Tournament a. Operating costs generally covered b. Cost of Public Works not covered 7. Ice Rinks a. Could save $16,000 + by discontinuing warming houses i. Options to have ice, no lights, no warming houses 6. We continue to work on identifying ways to reduce costs and to increase revenues. Increasing recreation fees is being developed, however the core underlying structure that requires Page 9 of 10 subsidy must be determined in order to know what will be retained and what will be discontinued. We are exploring or studying the use of administrative citations and vehicle replacement schedule. Over the last several years we have reorganized departments and continue to review opportunities for better service and reductions in cost. a. The targets to be developed at this stage are the broad ranges of what services are to be retained within the parameters of the rough revenues that may be raised: i. Should the City impose franchise fees? 1. yes to raise approximately $ 2. no ii. Should the City levy back under the 60% 1. no 2. yes a. the entire 60% of the loss allowed ($1,008,445) b. $ 3. If yes, explore taking properties from TIF District 3 to reduce impact of additional levy. a. Yes b. No iii. Should the City increase user fees: 1. Adult a. Yes b. No 2. Senior a. Yes b. No 3. Youth a. After School b. Sports c. Lessons (swimming etc.) 4. Should more. of the costs of street reconstruction be shifted to utilities? a. Yes b. No 5. Should more of the general overhead be shifted to the enterprise funds? a. Yes b. No iv. What are the priorities for budget retention? 1. Suggest going back over previous sections and marking them up or using the materials from the May meeting which are attached for your convenience. Page 10 of 10 To: Mayor Kragness and Council Members Carmody, Lasman, Niesen, and Peppe Financial Commission From: Michael J. McCauley City Manager Date: May 14, 2003 Re: 2003 Budget Update and Process for 2004 Budget 1. General Review of 2003 Potential Cuts a. Governor's Target i. Governor Pawlenty's 2003 cut to Brooklyn Center would be $1.17 Million b. House Republican Targets i. - House Republican 2003 cut to Brooklyn Center would be $1.18 Million c. 2003 measures to balance budget i. Use of Fund Balance 1. Capital: Transfer for Street reconstruction from General Fund Balance in amounts within current policy and look at providing some additional transfer from Liquor fund for Buildings & Parks 2. Streets: $1 Million transfer from - General Fund Balance this represents all of $480,000 2003 budgeted transfer that is removed from 2003 budget and would cover 2004 and/or provide additional monies since plan is to transfer from General Fund to Streets since $480,000 annual budgeted transfer is inadequate and assumes some fund balance transfer. 3. Capital Projects Fund (Buildings & Parks): Transfer $100,000 from Liquor Fund balance in addition to budgeted transfer from Liquor operations, this leaves transfer $25,000 below budgeted transfers ($100,000 from Liquor operations and $125,000 from General Fund). ii. Central Garage Equipment 1. We continue to defer central garage vehicle purchases until a study of vehicles is completed. i May 19, 2003 I ill. Employees 1. Three positions in the 2003 budget have been vacant since January 1 and likely will remain unfilled: a. Administration Technician in Administration b. 2 Tech III positions in Engineering/Public Works 2. Police positions unfilled as follows: a. Captain unfilled January 1 — May 15 (when replaced with Lieutenant positions b. Detective not filled after retirement in July c. Clerical position vacant in May and may be unfilled in whole or part for balance of year 3. Seasonal employPes 7s seasonal posit v acant in Public Works � s left P (General Fund) b. 1 seasonal Engineering position left vacant c. reduction to 1 seasonal assessing position with overall reduction in hours 4. Pool a. Using rt -time personnel in lieu of full-time g P p 1 time aquatics director for $14,395 savings (This was instituted last year, but 2003 budget is at a full -time person to accommodate review of using part-time personnel.) 5. Fire a. Apartment fire inspection shifted to Community Development for $8,000 savings on part-time fire inspectors in fire department 6. Leave without pay a. Two requests approved for $6,000 savings (primary savings from leave without pay for police detective up to retirement). iv. Programs 1. CARS a. Entertainment in Park/fireworks only to extent of donations b. Reduced senior programming c. Eliminated teen dance d. Summer playground is fee only (except to extent grants received) e. Concessions closed at Community Center (had been marginally profitable in past, but not in recent past since re- opening) f. Child care eliminated at Community Center v. Equipment I. Computer equipment for assessing, public works, and CARS on hold ii May 19, 2003 2. Shelving for assessing deleted 3. Total station replacement deleted for Engineering 4. Fire Department eliminated equipment from budget through successful grant application vi. Other steps to balance 2003 in face of cuts: 1. Not spending from operating budget: a. Contingency $69,111 b. Special Assessment Construction (Infrastructure Replacement) transfer $480,000 c. Capital Project Transfer $125,000 d. Assume not more than 1 election potential saves $20,800 e. Reduction in training and clothing budget in fire 2. Overview of 2004 Issues a. Governor's and House Republican Targets i. Governor's cuts to Brooklyn Center in 2004: $222 Million ii. House Republican cuts to Brooklyn Center in 2004: $1.71 Million iii. Senate Democratic proposal cuts are around $720,000 b. Revenues i. Real Estate Taxes 1. Under the Governor's plan there would be no levy to replace lost aids. 2. Under the House Republican plan the City could levy back the additional cut in 2004 above the 2003 cut. This would be $552,419 in levy authority. 3. The levy limits for 2004 and 2005 in the House Republican plan would not include any provision for inflation. They have removed the implicit price deflator from the calculations. Inflation, as used in the current formula, is running slightly above 3 %. 4. The Senate bill has complete levy freezes in 2003 and 2004. ii. Franchise Fees 1. Several cities have or are adopting franchise fees on gas and electric utilities. Robbinsdale and New Brighton have adopted franchise fees. Crystal has a franchise fee ordinance scheduled for public hearing on June.) 2. A gas franchise fee of 4% would raise just under $400,000 per year. 3. An electric franchise fee of 4% would raise $600,000 per year. May 19, 2003 4. A franchise fee could be used to replace the General Fund contributions to street reconstruction and capital projects. 5. The City needs to adopt a new franchise agreement with Centerpoint Energy by the end of June of this year. 6. The franchise agreement/ordinance with Excel provides that we can impose a franchise fee, but we will have to give them notice to impose more than approximately a 2% fee, which can be done because other cities have adopted higher fees. (The agreement provides a mechanism for higher fees if 2 other cities served by Excel impose fees higher than that specified in the ordinance /franchise agreement.) Robbinsdale has a 4% fee and New Brighton imposed $.0023 per kilowatt hour. iii. Special assessments could be increased as a percentage of the total cost of the street improvements. The issue is one of pricing and acceptance so that program is able to continue. If the homeowner cost rises to an unacceptable level we could find objections to projects that would be an impediment to continuation of the program. c. Expenditures i. Capital 1. Streets a. Shifts to Enterprise on Street Reconstruction i. The 2004 project in the western part of the City is primarily driven by the condition of the water lines. Changing the allocation of project costs to reflect the dominant reason for the project would reduce impact on Infrastructure Replacement Fund. 2. Buildings & Parks a. The Park & Recreation Commission is reviewing the Capital Improvement Plan. They have recommended and we are deferring the following 2003 projects: i. Central Park tennis court improvements ii. Evergreen Park scoreboards ill. Rink lighting at Grandview 3. Central Garage Equipment a. 2004 will reflect results of vehicle study. ii. Employees 1. Impact on employees a. At the level of cuts proposed by the Governor and House Republicans, a substantial reduction in programs will occur. This will require greater iv May 19, 2003 reductions in personnel than have been accomplished through leaving positions unfilled to this point, as well as retirements that are not being filled. A determination of how that would be accomplished cannot be made until we know the exact results of this legislative session and the options for revenues, as well as the prioritization of programs. iii. Programs/Departments 1. Attached is an overview of areas of programming etc. in the General Fund. iv. Equipment 1. Deferral of equipment will probably be part of 2004. v. Other 3. Prioritization/Focus a. During the meeting, discussion about priorities and focus will be undertaken using the attachments. 4. Process a. Public Meetings i. Dates I. Summer substitute August 18 2. Fall September 15 th ? This item is a discussion of potential timing for public informational meetings on budget options for 2004. 5. Future Council/Financial Commission Meetings on Budget a. June 16 i. Add Discussion of Budget b. Currently Scheduled i. August 18th ii. October 6 th Enterprise Funds (consider changing to October 20 th ) iii. November 17 th iv. December 1 st Truth in Taxation Hearing c. Additional Meeting i. July 21 or September 15 v May 19, 2003 Facing a $1.7 to 2.22 Million reduction in resources, prioritization based on values sought to be achieved will be required to develop budget proposals and to frame public informational/input opportunities. The following is suggested as a starting point of discussion: 1 5i Level • Physical maintenance of infrastructure • Code enforcement and sweep • Sentence to Serve trash pick -up • Good to high level of street sweeping, maintenance • Good maintenance of parks (lower level than current ?) • Good snow removal ■ Review level of service • Basic Police service c Patrol at sufficient level to engage in proactive efforts (26 patrol officers 4 sergeants and 2 lieutenants) c Investigation at current reduced level o Sufficient support personnel for core operations • Basic Fire service o Maintain current level of staffing with marginal reductions in overall costs and maximization of grants 2nd Level • Infrastructure Replacement • Continued street replacement program • Look at alternative funding such as franchise fees • Park amenities o General recreation facilities 3 rd Level • Community Services c Northwest Hennepin Human Services • Continue leveraged access to grants and programs • Youth • After school • Maximum reach of program to groups that would otherwise not have something to do or would impact ability to succeed • Adult • Community Center based • Programs providing net revenue • Community Center o Basic facilities for community activities vi May 19, 2003 4` Level • Enhanced Basic Services o Greater street/park maintenance o Forestry o Coop NW 5th Level • Community Enrichment • DARE • Entertainment in the Park o Earle Brown Days Parade o City Birthday Celebration o Various special recreation department offerings such as Holly Days, Halloween Party etc. In looking even at basic or required services, guidance is necessary on what is desired as basic level. For example; the City Watch Newsletter was increased to 6 issues per year. It could be scaled back to save money. vii May 19, 2003 General Fund 2003 General Administration & u S ort $2 016 pp ,035 Central Supplies & Contingency $334,915 Police $5,452 Fire & Emergency Prep $769,550 Community Development $423,085 Public Works $2,964 Community Activities & Rec $1,427,860 Gen. Bldg. & Grounds $550,344 Social Services $93,105 Civic Events $7 Insurance & Risk Management $172,301 Transfers $1,648,494 Convention & Tourism $332,500 Reimbursements from other funds ($784,084) $15,408,271 Viii May 19, 2003 General Fund 2003 GENER4LL, PUBLIC WORKS City Council $134,303 Pub. Works Admin $575,683 Administration $205,689 Street Maint. $1,178,625 Human Resources $225,156 Traffic control $181,164 City Clerk $82,409 Park Fac. Maint $905,434 Elections $82,096 Forestry $123,310 Finance 5425,124 52,964,216 Assessing $250,343 Data Processing $360,915 CARS Legal $250,000 CARS Admin $154,991 TOTAL: $2,016,035 Rec. Admin $357,797 Adult Rec $169,303 POLICE Teen Programs $7,152 Patrol $3,320,388 Youth Rec. $124,992 Investigation $703,090 General Rec. $64,243 Support Services $1,124,775 Community Cen. $268,225 Police Station Maint. $140,605 Pool $281,157 Administration $163,842 $1,427,860 TOTAL: $5,452,700 MISCELLANEOUS FIRE Insurance & 'Risk Mgmt. $172,301 Fire $707,844 Central Supplies/ $334,915 Emergency Prep. $61,706 Civic Events $7,250 TOTAL: $769,550 Reimbursement Other Funds ($784,084) COMMUNITY DEV. Transfers (debt)& Capital $1,648,494 Inspections $293,664 Planning & Zoning $129,421 TOTAL: $423,085 Conv. & Tourism $332,500 Social Sevices $93,105 ix May 19, 2003 2003 Budget Reductions Governor's Proposal $1,170,299 House Republican $1,181,346 APPROXIMATE LEVELS Implement # $1,155,184 $1,155,184 Net $15,115 $26,162 Department Description Potential Implemented Department Description Potential Implementec Admin /Central Supplies Elections Contingency $69,111 $69,111 no election $28,800 Admin Tech $23,531 $23,531 1 referendum $20,800 $20,800 Assessing Transfers Out delete shelves $3,000 $3,000 Special Assessment reduced part -time $2,200 $2,200 (infrastructure) $480,000 $480,000 Public Works Capital Project $125,000 $125,000 Retirements 043 $31,043 Computer Euipment $31, Assessing $1,600 $1,600 Unfilled Tech 3(2) $115,188 $115,188 Public Works Part -time Engineering Tech $4,045 $4,045 Street Maint. $2,000 $2,000 Seasonal CARS $3,200 $3,200 Park $27,625 $27,625 CARS ' Traffic Control $4,533 $4,533 Streets $16,293 $16,293 Community Center Total Station $4,500 $4,500 Close Sunday $30,000 Close 8:00 pm $24,120 Police reduce waterslide $2,500 Reorganization $25,000.00 $25,000.00 Not fill full -time agautic� $14,395 $14,395 Not Fill retired Detective $14,395.00 clerical leave without pay $1,457.66 $1,457.66 Community Band Not fill vacant clerical $27,688.42 $27,688.42 not move instruments $2,000 $2,000 Captain position 4.5 mo. vacan $34,923.00 $34,923.00 Entertaimnent in the Park $15,744 $15,744 Kid's Carnival $1,800 $1,800 Fire Reduce Senior Programming $4,500 $4,500 Capital Outlay (grant covered) $24,000 $24,000 Eliminate Teen Dance $2,000 $2,000 Schools & Con ferences $5,000 $5,000 Summer Playground fee only program $25 000 $25 000 - Clothing Close Community Center concessions ' g $3,000 $3,000 $11,000 $11,000 Shift Apartment Inspection $8,112 $8,112 Eliminate Child Care Comm. Center $1,500 $1,500 $782,381 $372,803 w N O O W $13,184,702 Revenue Governor's Plan $13,701,506 Revenue House Plan Cununulative Fixed Costs Ones that cannot be eliminated or reduced S1,735,771 $1,735,771 Debt $1,403,271 Lodging Tax Transfer $332,500 Gen. Organizational Costs: Ones that may be reduced marginally, but are necessary for overall operations or required by law $3,832,433 $2,880,746 less reimbursement City Council & Charter Comm $134,303 General Management $205,689 ($784,084) Insurance & Risk Management $172,301 Human Resources $225,156 net General Bldg. & Grounds $550,344 Finance $425,124 $2,096,662 Elections $82,096 City Clerk $82,409 Central Supplies - contingency $251,804 Information Technology $360,915 Police Building $140,605 Legal $250,000 $1,331,453 $1,549,293 Core Essential Services: Ones that are basic, essential components or City Service $13,224,976 $9,392,543 Essential Police Administration $166,765 Public Works (Gen Fund) Basic Patrol $3,121,294 Engineer g $575,683 Investigation down 1 $630,077 Street Maintenance $1,178,625 Project Peace $46,317 Traffic Control $181,164 Dispatching Services $472,586 Park Maint. 905434 CSO & Record etc $609,591 Forestry ( ?) $123,310 Assessing $250,768 Fire $707,844 Building Inspection $293,664 Planning & Zoning $129,421 City Wide Impact: ones that impact overall vitality, livability of City $5,591,062 $3,801,481 $13,940,896 $715,920 Code Sweep & Crime Prevention $78,250 Sentence To Serve trash $14,000 Trash receptacles Publ. Works emptying Northwest Hennepin Human Services $12,252.00 Coop Northwest $6,4118.00 Street Reconstruction Transfer $480,000 Capital Project Transfer $125,000 $701,920 $14,000 Specialized: provide services to specific groups /needs $15,385,712 51,444,826 Recreation Programs Admin $512,788 Miscellaneous Adult $169,303 Entertainment In Park in rec General $64,243 Fireworks Youth $124,992 EarleBrown Days Parade $12,328 Pool $281,157 Birthday Celebration $2,000 Community Center $268,225 DARE (aI o in basic patrol) Discretionary Social Service F-` Transportation 5 Cities $14,118 tv Prism $10,000 oo $1,444,826 ' ante: Coaunuaitp Center & Recreation raise $786.788 in revenues w May 19, 2003 City Council Financial Commission Work Session Overview: •2003 •Review Current Direction &Options •2004 •Review magnitude of cuts •Discuss values •Capitll v. Op erating\Pro grams *Public Safety •Physical Infrastructure Ma* ntenance w •ProgranzslYouth o •Short v. Long Term impacts a x Overview Continued • Short term impacts 2003 — Reduced services • Long term impacts w/o real revenue increases — Reduced services &inability to replace infrastructure — Impact on the quality of life in the commltnity • Impacts on residents � — Likely to have no reduction in expectations — Impacts on seniors and youth • Impacts on staff — Major loss w — Governor's thesis that this should not impact services =� •Need to focus use of staff resources N O O W k F: .20 03 Issues & R esults • Governor: Budget Reductions — $1.17 Million — Eliminate General Fund Budget Capital Transfers House Rep ublican — Reduce Recreation - $1.18 Million programming /events — Police reorganization — Leave positions unfilled Other Retirement incentives • � $66,00 savings 2003 !, Capital Transfer . — Reduced seasonal hiring (9) • Additional Enterprise - Deferred capital equipment transfer? - Shift to grants N O O w C O -- --- - _ Re publican __ $1 181 316 _ u _get Reduc _ vernor's Pro osal $1,170 299 House APPROXIMATELEVELS Implement # $1,181,597 $1,181,597 Net ($ ($251: De1>+rhnent Desc Potent Impl Denu hue Description - Potential Implemente Admin /Cer Suv Nies , - s - Gections Contingenc $69,111 $69,111 no election $28800 Admin Tech - ,8 -_ _$23,531 $23 ,531 - a 1 referendum -- -- $20,800 $20,800 �- - - - -_ -- -__ -- - -. As trans fees Out delete shelves $3,000 $3 000 _p Asse ssment - - _- reduced part -time $2,200 $2,200 (infrastructure $480 $480,000 Public «'orks Capital Project $125,000 $125,000 Retirements -- -- - - -- - - -- --- - - - - -- - --- -- - - -- - - - -- - -- 31,043 $31,043 omp Rii pnrent As sessin g - $1,600 600 Un fille d Tech 3 (2) $115,188 $__115,1 Public Works Part -time Engineering Tech $4,045 $11,045 ---- - - Str Maint $2,000 $ Seasonal , CARS $3,200 $3, 200 Park $27 ,625 $27,625 -- - -- -- - -- - - - -- -- - -- - - -- - - - -- - z - - -- - - -- - T raffic Contro $41 533 - $4,533 CARS 6 293 6 293 S treets 1 I omnwnity Center _ Total Station $4 ,500 $4,500 �- - r :lose Sunda $30,000 113lose 8:00 Pm $24,120 Police - -- - - -- - reduce waters lide $2,500 Reorganization $25,000.00 $25,000.00 1 fill frill -time aclantics $14 395 $14,395 Not Fill retired Detective - $35,598.00 $ 35,598.00 clerical leave without paX_� $1,457.66 $1,457.66 - - -- - , Community Ba _ _- Not fill vacant cler $27 ,688.42 $27 2 not move instruments $2,000 $2,000 Captain position 4.5 mo. vacant $34,923.00 $31,923.00 Enterta inment in the Park L _$15 $15,744 Leave without pay $5,210 $5 ,210 Kid's Ca rnival $1,800 $11 Ire Reduce Senior Programming $4,500 $4,500 Capital Outlay (grant covered) $24,000 $24,000 Eliminate Teen Dance $2,000 $2,000 Schools & Conferences $5,000 $5,000 ,�iunumer Playground fee only pmgram _$25 $ 25,000 Clot $3,000 $3,000 ,p Clos Com munity Center concessions $11,000 $11,000 Shi[1 Apartment inspection 1 $8,112 $8,112 -Eli minate C hild Care Comm. Cente $1,500 $1,500 t ' -- -- - $782,381 - - - -- - $399,216 0 w C 2003 Issues 1 Capital ital n a Tr sfer from General Fund Balance: . 1 Million to replace Operating budget transfer to street replacement 2. Continued Operations in all areas 3. Reduced Programming 4. Equipment Deferral 5. Additional fiend balance transfer from Liquor to Capital Improvement Fund w N O O W % • Pros of Using Fund Cons Balance for Capital 1. Reduces City to 1. Sustains street 1. Public Safety reconstruction project 2. Street and Park for longer period maintenance 2. Operating implications 3. General Government fewer, but significant 2. Difficult to rebuild 1. Engineering Staff if programs and streets not funded partnerships s p N O O W C 2004 Cuts • Governor: i $ 2.22 M llion — No levy back • House Republican $1.7 Million —Levy back $550,000 of lost aid (5.4% levy increase) • Either Plan — Dramatic changes in General Fund N O C Revenue Options 1. Levy whatever may be levied 1. House Republican $550,000 2. Governor's Plan has ii90evy back (may allow vote) 2. Franchise Fees 1. Potential of $1 Million 2. Several other cities are enacting 1. RobUinsdale, New Brighton, (Crystal ?) 3. Increased Special Assessments 4. Special Service Districts in Commercial Areas 5. Shift to enterprise Funds 1. for street reconstruction 2. Increased allocation of general operations 6. Use of Tax Increment 0 7. Capital Reserve Emergency Fund $300,000 x Prioritization of Operations 1. Major Issue is establishing framework of values and options i 2. Question is 1. Operations v. Capital 2. Residential v. Commercial services 3. Focus of Staff resources 1. Development 2. New financial reporting requirements 3. Proactive police reorganization w 4. Reduced Public Works: project focus e N O O W U ontext for Bud Cuts Police Fire Gen. Gov't Comm Dev. Public WorksRec/ Comm C Capital Trans $5,452 $769,550 $2,016,035 $423,085 $2 $1,427,860 $605 Police Grants $30,000 Pension Aid $250 $92,500 fees for service $17,450 $641,072 Court Fines $200 �MSA maillt. $30,000 Revlh. Other Funds $272,956 $511,128 License Fees $208 Pernvt Fees $404,000 Zonin Fees _ _ $24,620 _. Net Gen. Fund Cost $4,955,250 $677,050 $1,534,359 ($5 $2 423 088 $786788 $605000 c N O O W X 2004 Cut Comparisons 6000000 Gov. Cuts to Gross Dept. Cost 5000000 4000000 3000000 $ 2000000 1000000 0 0 0 w� $13,184,702' Zevenue Governor's Plan $13,701,506 Revenue house Plan Cunnnulative Mixed Cos is nes that cannot be eliminated (r reduced - $1,735,771 $1,735.771 Debt $1,403,271 Lodging Tax Transfer $332,500 en. Organizational Custs: Ones that maybe reduced mm Hin:dly, but are necessary for overall operations or required by law $3,832,433 $2,880,746 l less reimbursement City Council & Charter Comm $134,303 General Management $205,689 ( & Risk Mana ent $172,301 Human Resources $225,156 net Ocn Bldg. Grounds $550,344 F 2 5 124 nce $4, _ ld _ _ $2,096 Elections $82,096 City Clerk $82,409 Central Supplies - contingency $251,804 Infomtiotion Technology $360,915 Police Building $140,605 Legal $250,000 $1,331,453 $1,549,293 ore Essential Sery ces: Ones that are basic, essential components of City Service $13, 224,976 $9.392 Essential Police Administration $166,765 Public Works (Gen Fund) Basic Patrol $3,121,294 Engineer $575,683 Investigation down 1 $630,077 Street Maintenance $1,178,625 Project Peace $46,317 Traffic Control $181,164 Dispatching Services $472,586 Park Maint. 905434 CSO & Record etc $609,591 Forestry ( ?) $123,310 Assessing $250,768, Fire $707,844 Building Inspection j $293,664 Planning & Zoning $129,421 $5,591,062 $3,801,481 City Wide Impact: ones that impact overall vitality, livability of City $13,940,896 $715,920 Code Sweep & Crime Prevention $78,250 Sentence To Serve trash $14,000 Trash receptacles Publ. Works °mptying Northwest Hennepin Human Services $12,252.00 Coop Northwest $6,418.00 S tr e et Reconstruction Transfer $480,000 Capital Project Transfer sfe_ r $125,000] $701,920 $14,000 i51 eccalized: Provick services to specific Vroups /need- 1 $15,385,722 $1,444,826 Recreation Programs Admin $512,788 Miscellaneous _ Adult $169,303 entertainment In Park in rec General _ _ $64,243 Fireworks Youth j $124,992 rarleBrown Days Paiade $12,328 Pool $281,157 Birthday Celebration $2,000 Community Center $268,225 DARE (also in basic patrol) �C Discretionary Social Service �- Transportation Cities $14,118 Prism $10,000 Iv $1,4114,826 O O ote: Connncm __i __ _' t , Center revenues Q uesti * ons for Counc1 C ommission I. Values to be.used in Assembling 2004 budget options 1. Hierarchy of operations and infrastructure 2. Revenue options that would be considered 1. Taxes if allowed 1. Levy 2. Election to levy 3. Franchise Fees 4. Levels 1. Dedication for specific uses or general use 1. Street reconstruction 2. Keeping community center & youth programs N 3. Park equipment (or defer to bonding) O O W � C Questions for Counel Commission r 1. Focus I. Code enforcement 2. Police levels I Maintenance of streets 4. Maintenance of parks 5. Street reconstruction 1. Yearly 2. Fewer, but larger projects every 2 or - years 6. Services to be discontinued /reduced 1. City Watch frequency 2. DARE (equals .75 of an officer + supplies & training) 1. Robbinsdale has eliminated N W 3. Arbor Day Questions for Council C Continued 1. Services to be discontinued /reduced 1. City Watch frequency 2. DARE (equals .75 of an officer + supplies & training) 1. Robbinsdale has eliminated 3. Arbor Day 4. Earle Brown Days support 5. Fireworks & Entertainment in Park 6. Landscaping contest 7. Senior & medical transportation 8. Commissions 1. Number 2. frequency of meetings 9. Etc. on the margin N O O W C Questions for Council & Commission Continued • Process L Future Council Commission discussions 1. Add budget to June 16 meeting with Auditor 2. Additional summer meeting prior to August 18cn � 2. Public education and comment I. Summer August 18th 2. Fall September 15'x'? 3. City Watch 4. Web Page N O O W % X CITY OF BROOKLYN CENTER, MINNESOTA AUDIT MANAGEMENT LETTER December 31, 2002 1 � Tautges Redpath, Ltd. Certified Public Accountants and Consultants To the Honorable Mayor and Members of the City Council City of Brooklyn Center, Minnesota We have completed the 2002 p audit of the City of Brooklyn Center and have issued our report thereon Our Independent ' p pendent Auditor s Report is included m the City Comprehensive Annual Financial Report. This Audit Management Letter provides the City an independent review of * Comparisons and trend analysis of financial results. • Policies and procedures. • Outside factors influencing the City such as State funding and changes in financial accounting and reporting standards. t Following this introduction letter is a Report Summary and an Executive Summary with page references to the areas discussed. 1 Thank ou for the oppo to serve the City. We are available to discuss this Y pp tY tY report p ' with you. June 5, 2003 HLB TAUTGES REDPATH, LTD. Certified Public Accountants 1 i 1 4810 White Bear Parkway, White Bear Lake, Minnesota 55110, USA Telephone: 651 426 7000 Fax: 651 426 5004 HLB Tautges Hedpath, Ltd. is a member of ® International. A world -wide organization of accounting firms and business advisers. Audit Management Letter Report Summary REPORT SUMMARY Several reports are issued in conjunction with the audit. A brief summary is as follows: R eport of -•• Overview Discreti Reports Audit Management Letter Intended to be working tool for City Council and Administration • Comparisons and trend analysis 1 • Outside factors influencing the City, such as State funding • Policies and procedures Required Reports Comprehensive Annual Financial • Financial statements • Unqualified ( "clean ") opinion Report (CAFR) • Footnotes on the General Purpose • Supplemental information Finan St atements Report on Compliance and Internal • Internal controls over financial • Three reportable conditions Control reporting in internal control • Compliance with laws, • No findings of regulations, contracts and noncompliance with laws, grants regulations, contracts and _ — grants State Legal Compliance Report • Results of testing certain • No findings of provisions of Minnesota noncompliance Statutes Federal Single Audit Report • Report on compliance with • No compliance findings program requirements 1 1 i Audit Management Letter Executive Summary EXECUTIVE SUMMARY Several areas highlighted for your reference include the following: The City has an excellent property tax collection rate (98% for 2002). Page 7 The special assessment collection rate was 93% for 2002. Page 9 The Earle Brown Farm TIF District has an interfund loan to finance the cash deficit. Minnesota Statutes require formal approval by the City council. We ' recommend the City monitor compliance with this statutory provision. Page 10 During 2002, the City policy regarding fixed assets was amended to increase the capitalization threshold and modify the estimated useful lives. Page 12 The City's current General Fund balance policy addresses working capital. There are possible additional fund balance reserve needs. We suggest the City review its current policy and determine if additional reserves and appropriate. Page 18 The City was awarded the Certificate of Achievement for Excellence in Financial Reporting for its 2001 Comprehensive Annual Financial Report ' CAFR . ( ) Page 57 New audit standards (SAS 99) regarding fraud will be implemented for the 2003 audit. Page 58 The Government Accounting Standards Board (GASB) has approved significant changes in financial reporting requirements for cities and other local governments. This new reporting standard is required to be Page 61 implemented for 2003. Audit Management Letter General Purpose Financial Statements GENERAL PURPOSE FINANCIAL STATEMENTS The general purpose financial statements of the City of Brooklyn Center are presented in Exhibits 1 through 5 of the 2002 Comprehensive Annual Financial Report. The following comments relate to the general purpose financial statements. Summary of Financial Activitv A summary of financial activity for 2002 is as follows: Increase Fund Balance (decrease) in (Deficit) Fund Balance/ Retained Transfers Retained Earnings Fund Revenue Expenditures (Net) Earnings 12/31/02 General $16,091,236 $12,965,081 ($2,630,253) $495,902 $7,929,774 Special Revenue: Housing and Redevelopment Authority 194,766 (194,766) Economic Development Authority 612,685 331,139 208,266 489,812 1,273,346 Earle Brown TIE District 815,568 17,776 (1,410,000) (612,208) (1,814,455) TIF District No. 3 2,217,395 873,119 (570,000) 774,276 4,856,845 TIF District No. 4 140,907 187,939 (47,032) 65,222 Police Drug Forfeiture 29,773 7,936 21,837 58,870 CDBG 352,000 338,500 (13,500) - - City Initiatives Grant 142,165 168,041 (11,277) (37,153) 14,051 Debt Service: General Obligation 307,997 1,032,357 764,742 40,382 871,970 Tax Increment 22,682 1,974,843 1,980,000 27,839 2,212,462 Special Assessment 996,939 1,055,651 259,168 200,456 2,656,759 Capital Projects: Capital Reserve Emergency 47,174 58,976 (11,802) 1,329,490 Capital Improvements 81,742 2,596,999 396,277 (2,118,980) 1,760,975 Municipal State Aid for Construction 947,488 1,410,361 - (462,873) 620,731 i Special Assessment Construction" 2,777,773 5,542,084 1,321,343 (1,442,968) (447,951) Earle Brown Heritage Center Improvements 100,000 100,000 100,000 Enterprise: Mumcipal Liquor 3,465,062 3,283,368 (100,000) 81,694 1,166,519 Golf Course 281,269 274,140 7,129 298,120 Earle Brown Heritage Center 3,502,511 3,640,709 (100,000) (238,198) 544,622 Recycling and Refuse 213,513 215,211 (1,698) 99,869 Street Light Utility 214,044 152,726 61,318 61,318 Water Utility 1,432,940 1,572,235 (139,295) 5,582,533 Sanitary Sewer 2,707,680 2,550,584 157,096 4,340,599 Storm Drainage 1,813,186 699,448 1,113,738 10,010,710 Internal Service: Compensated Absences 26,124 - 26,124 26,124 Retirement 56,114 25,896 30,218 30,218 Central Garage 1,261,327 1,205,794 55,533 4,062,563 Total $40,752,060 $42,180,913 $0 ($1,428,853) $47,711,284 ) Bond proceeds of $1,200,000 were received in January 2003. I Audit Management Letter General Purp ose Financial Statements Cash and Investments Cash and investment balances of Minnesota cities are commonly restricted by statutory requirements and long range financial planning objectives. The following schedule illustrates this point by presenting cash and investment balances by fund type. Cash and Investment Balances t December 31, Increase ' Fund Type 2001 2002 (Decrease) General $8,369,854 $8,370,480 $626 Special Revenue 4,696,399 5,595,051 898,652 Debt Service 5,460,337 5,746,017 285,680 Capital Projects 6,406,570 3,082,308 (3,324,262) Enterprise 3,955,209 4,157,378 202,169 Internal Service 6,365,936 6,514,190 148,254 Totals $35,254,305 $33,465,424 ($1,788,881) Cash balances of Minnesota cities are commonly restricted by statutory requirements and long -range financial planning objectives. For the City of Brooklyn Center, the following illustrates such cash restrictions/designations: General Fund. The General Fund is supported significantly b property taxes and State PP g Y Y p p Y revenues. These amounts are received by the City primarily in June and December. Working capital designations are established to provide adequate cash flow throughout the first six months of the ensuing year. The City has established this designation (see later discussion - General Fund). 1 Audit Management Letter Gene ral Purpose Financial Statements r Special Revenue Funds. The City maintains several Special Revenue Funds which match specific purpose revenues with expenditures. The City has cash balances restricted for such special purposes as follows: r EDA $1,274,889 TIF No. 2 0 TIF No. 3 4,136,835 TIF No. 4 65,308 Police Drug Forfeiture Fund 58,870 City Initiatives Grant 59,149 Total $5,595,051 r Debt Service Funds. Minnesota statutes restrict the use of Debt Service Funds for payment of principal and interest debt. These balances are restricted until full payment of the outstanding debt is made. r Capital Proiects Funds. The primary funding sources for these funds are bond proceeds, State aids, grants and other revenues dedicated to construction and acquisition of major capital facilities. The decrease in 2002 relates primarily to the Civic Center Project, Southwest Area improvements and the Garden City South improvements. The City received bond proceeds of $1,200,000 in January 2003. r Enterprise Funds. Enterprise Funds also have cash requirements for working capital purposes, such as sufficient cash for operations prior to collection of accounts receivable. Enterprise Funds also tend to require cash reserves for unexpected major repairs vital to system operations, as well as planned system expansion and repairs. r 1 r Audit Management Letter General Purpose Finan Statements Internal Service Funds. The City's Internal Service Funds are used to acquire assets for use by other departments. The cash balance is accumulated to replace existing assets, ' add planned assets and to meet operating expenses prior to receipt of revenue sources. Lejzal Compliance Audit procedures require testing of compliance with statutory provisions regarding investments. Audit tests performed determined that the City was in compliance with applicable legal provisions. Property Taxes The City has consistently experienced a solid collection rate for property taxes. A summary of the tax levy, tax rate and collection rate for the last seven years is as follows: Tax Tax Tax Collection Capacity Year Levy Rate Rate 1996 $6,495,206 97.9% 30.344 1997 6,746,487 98.2% 32.875 1998 7,687,124 99.4% 35.214 1999 7,896,858 99.0% 36.269 2000 8,100,334 99.3% 34.645 2001 8,199,094 96.4% 35.996 2002 10,442,170 98.0% 57.704 The tax levy increase for 2002 relates to the elimination of BACA (the City received $1,380,000 in 2001). At December 31, 2002, the delinquent tax receivable was $329,237 representing approximately 2.8% of the 2002 property tax levy. , Audit Management Letter General Purpose Financi Stat ements Tax Increments A summary of tax increment activity is as follows: Delinquent Delinquent Receivable 2002 2002 Receivable No. Name 12/31/2001 Levy Collections Adjustments 12/31/2002 1 Brookwood Housing $470 $232,423 $231,605 $ - $1,288 2 Earle Brown Farm 62,195 626,406 587,032 (49,125) 52,444 3 TIF #3 Redevelopment 173,445 2,426,393 1,703,081 (800,768) 95,989 ' 4 France Avenue Business Park - 140,181 140,181 - Total $236,110 $3,425,403 $2,661,899 ($849,893) $149,721 The above adjustments relate to court awarded changes in valuations of various properties. Audit Management Letter General Purpose Financial Statements Special Assessments The City has experienced a solid collection rate for special assessments. A summary of the collection rate for the last seven years is as follows: Special Assessment Collection Rate Collection Year Rate (l) ' 1996 94.7% 1997 95.4% 1998 96.9% 1999 95.4% 2000 95.7 % 2001 90.7% 2002 93.1% Current collections as a percent of current levy. • Audit Management Letter General Purpose Financial Statements Interfund Pavables /Receivables Advances to Other Funds. The City had the following interfund advances at December 31, 2002: i Fund Receivable Payable General Fund $105,074 $ - MSA Construction Fund 593,069 - ' Earle Brown TIF Fund - 698,143 Capital Improvements Fund 900,000 - Golf Course Fund - 900,000 Total $1,598,143 $1,598,143 The interfund loan to the golf course was established in 1998. The loan is interest fee and has annual payments of $55,000 to $65,000 through 2017. j The interfund loan to the Earle Brown TIF Fund was established in 1987. This loan does not have a formal repayment plan. We recommend the City consider establishing terms for this loan. Due to Other Funds. Several funds have a negative cash balance at December 31, 2002. The funds with negative cash balances in effect "borrowed" from funds with positive cash balances. When this situation occurs, accounting standards require the cash overdraft to be reported as an interfund borrowing or "due to other funds." 1 Audit Management Letter General Purpose Financial Statements The City g had the following due to /due from other funds at December 31, 2002: Receivable Payable Tax Increment No. 3Fund $1,116,698 $ - Earle Brown Farm TIF Fund - 1,116,698 Total $1,116,698 $1,116,698 TIF District Interfund Borrowines. The Minnesota Legislature amended the TIF act by requiring cities to formally approve interfund loans to TIF districts. M.S. 469.178, Subdivision 7, reads as follows: Subd. 7 Interfund loans The authority or municipality may advance or loan money to finance expenditures under section 469.176, subdivision 4, from its general fund or any other fund under which it has legal authority to do so. The loan or advance must be approved, by resolution of the governing body, before money is transferred, advanced or spent, whichever is earliest. The terms and conditions for repayment of the loan must be provided in writing and include, at a minimum, the principal amount, the interest rate, and maximum term. The maximum rate of interest permitted to be charged is limited to the greater of the rates specified under section 270.75 or 540.09. [Effective date: This section is effective for loans and advances made after July 31, 2001, and to districts with requests for certification after July 31, 1979. Interfund loans and advances made before August 1, 2001, are ratified and approved, subject to the following restrictions: 1) the interest accrued or paid after July 31, 2001 may not exceed the limit in this section and 2) if there is no resolution or other document created contemporaneously with the making of the loan or advance that specifies the principal amount of the loan or advance, the principal amount of the loan or advance is limited to a maximum amount equal to the largest negative cash balance that existed at any time in the fund that received the undocumented loan or advance. An authority or municipality may modify the terms of an interfund loan or advance made before August 1, 2001, to Audit Management Letter General Purpose Financial Statements comply with any of the requirements of this section as the authority or municipality deems appropriate. We recommend the City determine that compliance with the above statute is monitored. Fixed Assets During 2002, the City reviewed its policy with regard to estimated useful lives of fixed assets. The following changes were implemented: Estimated Useful Life Asset Class Prior to 2002 2002 Water and sewer mains and lines 99 years 25 years Buildings and structures 20 - 40 years 25 years Water wells and storage tanks 15 - 50 years 25 years Sewer lift stations 15 - 40 years 25 years Machinery and equipment 5 - 20 years 2 - 15 years Furniture and fixtures 5 - 20 years 5 years l Also during 2002, the dollar threshold for asset capitalization was increased from $1,000 to a range of $10,000 for equipment to $250,000 for infrastructure. Audit Management Letter General Purpose Financia Statements A summary of these changes are as follows: Restated Net Estimated Net Fixed Fixed Assets Threshold Life Assets Fund 12/31/2001 Adjustment Adjustment 12/31/2001 Municipal Liquor $226,755 ($9,331) $ - $217,424 Golf Course 1,642,753 (46,909) (5,266) 1,590,578 Earle Brown Heritage Center 10,473,028 (434,061) (103,586) 9,935,381 , Water Utility 13,837,274 (1,614,746) (3,588,141) 8,634,387 Sanitary Sewer 11,256,455 (388,897) (2,703,920) 8,163,638 Storm Drainage 10,710,437 (270,059) (43,568) 10,396,810 Total $48,146,702 ($2,764,003) ($6,444,481) $38,938,218 i 1 1 Audit Management Letter General Fund GENERAL FUND The General Fund of the City accounts for current operating expenditures common to all cities. These basic services include (but are not limited to) public safety, public works, parks and recreation, community services and general government. j For the City of Brooklyn Center, the General Fund is financed by three major sources: 1) taxes; 2) intergovernmental; and, 3) charges for services. A graph of the major revenue sources is as follows: $12,000,000 - - -- - - - - - -- - -- $11,000,000 - - - - - -- $101000W(1 - - - - -- -- - - - -- - - $9,000,000 - -- - $8,000,000 An -- -- - -- $7,000,000 - - - $6,000,000 - - -- -- — $5,000,W0 - -- - - - --- - - $4,000,000 - - -- $3,000,(100 i --- - - \ -- - $2,000,000 - - $1,000,0$0 - 1998 1999 2000 2001 2002 Intergov $3, 875,392 $3,911,480 $4,076,169 $4,135282 $2,843,629 —Taxes $7,949,744 $8,219,491 $8,745,172 $8,411,513 $11,257,003 All Other $1,939,688 1 $1,902,821 $1,827,025 $2,405,376 - $1,990,604 i i Audit Management Letter General Fund The fund balance of the General Fund increased by $495,902 in 2002 as follows: Budget Actual Variance Revenue $15,173,726 $16,091,236 $917,510 Expenditures 13,528,056 12,965,081 562,975 Increase (decrease) before other financing sources 1,645,670 3,126,155 354,535 Other financing sources (uses): i Operating transfers to other funds (1,645,670) (1,863,910) (218,240) Residual equity transfer to other funds - (766,343) (766,343) Increase (decrease) in General ( ase) Fund balance $0 $495,902 ($630,048) As shown above, revenue exceeded budget by $917,510. A summary of the revenue variances are as follows: Property taxes $337,259 Tax abatement reserve 266,343 Licenses and permits 258,511 All other 55,397 $917,510 1 I i Audit Management Letter General Fund The City's December 31, 2002 fund balance was $7,929,774. The City's General Fund balance has been as follows for the past five years: $9,000,000 - -- - - - $8,000,000 - - General Fund Balance $7,000,000 - - $6,000,000 - $5,000,000 - - - $4,000,000 - - -- $3,000,000 - - - 12,000.000 - -- $1,000,000 -- -- $0 1998 1999 2000 2001 2002 • Audit Management Letter General Fund A summary of General Fund balance at December 31, 2002 and 2001 is as follows: General Fund Balance Component 12/31/2001 12/31/2002 Reserved for advances to other funds $105,074 $105,074 Designated for working capital 6,437,653 6,527,973 Subtotal 6,542,727 6,633,047 Reserved for prepaids - 68,279 Undesignated 891,145 1,228,448 Total $7,433,872 $7,929,774 Working Cabital Reserve , The City adopted an "adequate fund balance policy formula" in 1980. This policy defines the minimum fund balance elements as follows: , 2001 2002 1. Items not readily convertible to cash: a. Accounts receivable $67,160 $53,489 b. Advances to other funds 105,074 105,074 2. Amount appropriated to the ensuing year's budget 19,305 - 3. Amounts reserved to working capital (45% of current year budget less debt service) 6,351,188 6,474,484 $6,542,727 $6,633,047 i � • r Audit Management Letter General Fund Property taxes and state aids account for approximately 88% of the revenue of the General Fund. Property taxes and state aids are not received until July and December of each year (i.e., the second half of the year). As a result, the City is required to have sufficient working capital reserves at the beginning of the year to fund operations of the first half of the year. A summary f the purposes of General Fund reserve balances is as follows: Y p p e NOW leee�iac+s Cash Flow Timing Difference ji :iiijl :ii Intergovernmental Capital Outlay Revenue Cutbacks Replacement Eme rgency or Unanticipated Special Projects ec is Expenditures ro' The City's current fund balance policy addresses working capital. As shown above, there are additional fund balance reserve needs. We recommend the City review its current policy and determine if additional reserves are appropriate. OH• 3 mie Iq Audit Management Letter - General F und A summary of the benefits of General Fund reserves is illustrated below: 'D 0. ts:�iof:,R servcfl4:WlvkkO 7_< e bond rating Supplements revenues indicator with investment income 7i XX. Joe ........... Provides resources for Avoids temporary minor projects or :i overdrafts pr ior to major receipts feasibility reports i :l:l: Provides the City Avoids overburdening greater options to dea of annual budgets for ... .. .... with unePec eve nts certain capital outlay . . . . . . . . . . . . Audit Management Letter Special Revenue Funds SPECIAL REVENUE FUNDS l The financial statements of the Special Revenue Funds are presented in Exhibits B -1 through B -10 of the 2002 Comprehensive Annual Financial Report. Special Revenue Funds are a classification of funds to account for activities segregated by City policy, Federal or State statutes for specific purposes. The City maintained eight Special Revenue Funds during 2002. Housine and Redevelopment Authoritv Fund (202) The HRA has authority to levy an ad valorem property tax for housing and redevelopment purposes. The HRA Fund accounts for property tax levies. A summary of financial activity is as follows: Housing and Redevelopment Authority 2000 2001 2002 Revenue and other sources: Property taxes 149,892 147,123 194,766 Intergovernmental 19,684 19,684 - Total revenue and other sources 169,576 166,807 194,766 Expenditures and other uses: Operating transfer to EDA 169,576 166,807 194,766 Increase in fund balance 0 0 0 Fund balance - January 1 - - - Fund balance - December 31 $0 $0 $0 r Audit Management Letter Special Revenue Funds Pursuant to MS 469.033, the HRA's levy limit is an amount equal to 0.0144% of r taxable market value. For 2002 and 2003, the limit is as follows: 2002 2003 Taxable market value $1,367,743,400 $1,465,806,800 Levy limit percentage 0.0144% 0.0144% Maximum HRA levy $196,955 $211,076 , r r r r r r r r Audit Management Letter _ Special Revenue Fund Economic Development Authoritv Fund (203) The EDA Fund accounts for the financial activity of the EDA. In addition to this fund, the Earle Brown Heritage Center Fund accounts for the EDA operations of the Center. A summary of financial activity is as follows: Economic Development Authority 2000 2001 2002 Revenue and other sources: Property taxes $210,588 $205,694 $5,974 Intergovernmental 1,812,425 1,116,842 53,623 Investment earnings 84,930 139,514 29,440 Other 32,759 57,863 49,000 Sale of fixed assets 194,491 572,266 474,648 Operating transfer from CDBG 232,308 - 13,500 Operating transfer from HRA 169,576 166,807 194,766 Total revenue and other sources 2,737,077 2,258,986 820,951 Expenditures and other uses: Personal services 182,426 197,686 176,508 Supplies 251 33 579 Services and other charges 2,008,456 1,249,143 154,052 Capital outlay 1,636,491 1,076,721 - Total expenditures and other uses 3,827,624 2,523,583 331,139 Increase (decrease) in fund balance (1,090,547) (264,597) 489,812 Fund balance - January 1 2,138,678 1,048,131 783,534 Fund balance - December 31 $1,048,131 $783,534 $1,273,346 Audit Management Letter Special Revenue Funds The 2002 other services and charges consisted primarily o£ $19,200 5912 Camden demo 59,400 Joslyn site clean up 13,321 Administrative reimbursement 10,000 Housing resource center 8,374 Dues - North Metro Mayors Association 43,757 All other $154,052 Total r Audit Management Letter Special Revenue Funds TIF District No. 2 - Earle Brown Farm TIF Fund (277) The Earle Brown Farm TIF Fund accounts for TIF No. I (Brookwood Housing) and TIF No. 2 (Earle Brown Farm). A summary of financial activity is as follows: Earle Brown TIF 2000 2001 2002 Revenue and other sources: Tax increment $1,186,908 $1,035,349 $815,568 Investment earnings 11,201 6,628 - Total revenue and other sources 1,198,109 1,041,977 815,568 Expenditures and other uses: Personal services 4,210 Interest - 30,229 11,516 Services and other charges 4,019 1,657 2,050 Operating transfer to Tax Increment Bonds Debt Service 1,360,000 1,390,000 1,410,000 Total expenditures and other uses 1,364,019 1,421,886 1,427,776 Increase (decrease) in fund balance (165,910) (379,909) (612,208) Fund balance (deficit) - January 1 (656,428) (822,338) (1,202,247) I Fund balance (deficit) - December 31 ($822,338) ($1,202,247) ($1,814,455) j Audit Management Letter _ Special Revenue Fund The Minnesota Property Tax System is complex with the number of different classes of property defined in State Statutes. However, the formulas are based on a simple equation, which is as follows: Market Value I x Class Rate = Tax Capacity Market value is the starting point in the property tax equation and in theory is consistently applied to all properties. Class rate is the mechanism used to allocate property taxes on a basis other than market value. The 2001 legislature significantly changed the class rates. A sample of class rate changes from 2001 to 2002 is as follows: Percent Decrease Property Classification Market Value Class Rate Tax Capacity in Tax Capacity Residential Homestead $150,000 .. 1st $76,000 - 1.00% $1,981 Remainder - 1.65% >-< Residential Homestead $500,000 1st $76,000 - 1.00% $7,756 Remainder - 1.65% Commercial $500,000 1st $150,000 - 2.40% $11,900 Remainder - 3.40% >< Commercial $1,500,000 1 st $150,000 - 2.40% $49,500 Remainder - 3.40% >>< XX Residential Homestead $150,000 1st $500,000 - 1.00% $1,500 24% Remainder - 1.25% Residential Homestead $500,000 1st $500,000 - 1.00% $5,000 35% Remainder - 1.25% Commercial $500,000 1 st $150,000 - 1.50% $9,250 22% Remainder - 2.00% Commercial $1,500,000 1st $150,000 - 1.50% $29,250 40% Remainder - 2.00% As shown above, all properties experienced a decrease in tax capacity. However, higher value commercial property have the largest percentage decrease in tax capacity. This change also had the effect of reducing tax increment revenues. I Audit Management Letter Special Revenue Funds Tax increment revenue for 2002 is net of a refund of prior increments in the amount of $49,126. The fund deficit is financed by loans from the following funds: $105,074 General Fund 593,069 MSA Construction 1,116,698 TIF No. 3 $1,814,841 Total It is anticipated by management that future tax increment collections will be sufficient to repay the interfund loans. Obligations of this district include the following: Balance Bond Issue at 12/31/02 Tax Increment Bonds of 1991 $1,975,000 Tax Increment Refunding Bonds of 1992 765,000 Total $2,740,000 Audit Management Letter Special Revenue Funds TIF District No. 3 Fund (278) A summary of financial activity is as follows: TIF No. 3 2000 2001 2002 Revenue and other sources: Tax increment $1,999,665 $2,502,000 $2,067,009 Investment earnings 41,771 242,268 150,386 Total revenue and other sources 2,041,436 2,744,268 2,217,395 Expenditures and other uses: Personal services - - 8,945 Interest - 38,445 95,881 Services and other charges 157,301 507,423 768,293 Operating transfer to Tax Increment Bonds Debt Service 560,000 580,000 570,000 Total expenditures and other uses 717,301 1,125,868 1,443,119 Increase in fund balance 1,324,135 1,618,400 774,276 Fund balance - January 1 1,140,034 2,464,169 4,082,569 Fund balance - December 31 $2,464,169 $4,082,569 $4,856,845 Interest expense for 2002 includes: $49,215 Interest on TIF refund 46,666 Interest on Dale Tile TIF Note $95,881 Total i Audit Management Letter Special Revenue Funds Services and other charges for 2002 include the following: $333,333 Principal on Dale Tile TIF Note 375,772 TIF refund 56,594 Legal services 2,594 Other $768,293 Total The obligations of this TIF District include the following: Balance Bond/Note 12/31/02 Taxable Tax Increment Bonds of 1995 $3,410,000 Dale Tile TIF Note 333,333 Total $3,743,333 Audit Management Letter Special Reven Funds TIF District No. 4 Fund (279) A summary of financial activity is as follows: TIF No. 4 2000 2001 2002 Revenue and other sources: Tax increment $9,535 $254,049 $139,675 Investment earnings - - 1,232 Total revenue and other sources 9,535 254,049 140,907 Expenditures and other uses: Personal services - - 4,016 Interest 211 104,087 - Services and other charges 12,857 16,713 183,923 Total expenditures and other uses 13,068 120,800 187,939 Increase (decrease) in fund balance (3,533) 133,249 (47,032) Fund balance (deficit) - January 1 (17,462) (20,995) 112,254 Fund balance (deficit) - December 31 ($20,995) $112,254 $65,222 Services and other charges for 2002 consist primarily of Twin Lakes Business Park TIF Note repayment. The obligations of this TIF District include the following: Balance 12/31/02 Twin Lake Business Park TIF Note $2,131,737 • Me • . Audit Management Letter Special Revenue Funds Police Drug Forfeiture Fund (205) The Police Drug Forfeiture Fund accounts for property and /or cash seized by the police department. A summary of financial activity is as follows: Police and Drug Forfeiture 2000 2001 2002 Revenue and other sources: Investment earnings $1,173 $4,822 $2,186 Forfeiture revenue 16,880 31,950 27,587 Total revenue and other sources 18,053 36,772 29,773 Expenditures and other uses: Personal services 3,798 1,405 - Supplies 2,611 2,360 7,936 Services and other charges 33,563 Total expenditures and other uses 6,409 37,328 7,936 Increase (decrease) in fund balance 11,644 (556) 21,837 Fund balance - January 1 25,945 37,589 37,033 Fund balance - December 31 $37,589 $37,033 $58,870 1 Audit Management Letter Special Revenue Funds Community Development Block Grant Fund (2 A summary of financial activity is as follows: Community Development Block Grant Fund 2002 Revenue and other sources: CDBG $352,000 Expenditures and other uses: Shingle Creek tower project 325,000 Operating transfer to EDA (CEAP) 13,500 CEAP 13,500 Total expenditures and other uses 352,000 Increase in fund balance $0 Audit Management Letter Special Revenue Funds Citv Initiatives Grant Fund (286) The City Initiatives Grant Fund accounts for donations received from outside parties. A summary of financial activity is as follows: City Initiatives Grant 2000 2001 2002 Revenue and other sources: Intergovernmental $174,583 $206,960 $82,157 Investment earnings 134 6,300 2,289 Other 55,660 24,091 57,719 Total revenue and other sources 230,377 237,351 142,165 Expenditures and other uses: Personal services 7,964 12,611 6,219 Supplies 10,566 4,375 24,946 Services and other charges 126,948 178,169 136,845 Capital outlay 67,441 78,598 - Interest - 263 31 Operating transfer to Capital Improvements Fund 11,277 Total expenditures and other uses 212,919 274,016 179,318 Increase (decrease) in fund balance 17,458 (36,665) (37,153) Fund balance - January 1 70,411 87,869 51,204 Fund balance - December 31 $87,869 $51,204 $14,051 Audit Management Letter Special Revenue Funds For 2002 "services and other charges" include the following: $62,573 After school enrichment grants 18,721 Computer equipment 30,319 Engine #2 25,232 Other $136,845 Audit Management Letter _ Debt Service Funds DEBT SERVICE FUNDS The combining financial statements for the Debt Service Funds are presented in Exhibits C -1 and C -2 of the 2002 Comprehensive Annual Financial Report. Debt Service Funds are a type of governmental fund to account for the accumulation of resources for the payment of interest and principal on debt (other than Enterprise Fund debt). I Current governmental reporting standards do not provide for the matching of long -term debt with its related financing sources. Although this information can be found in the City's CAFR, it is located in several separate sections of the CAFR. The following schedule extracts information from sections of the 2002 Comprehensive Annual Financial Report to provide an overview analysis of long -term debt and its related funding. Assets Pledged for Debt Retirement 12/31/2002 Scheduled Final Fund Deferred Outstanding Property Maturity Fund Description Balance Revenue � Totals Principal Taxes Date Tax Increment Debt: ' Tax Increment Bonds of 1991 (TIF 2) $591,019 $ _ $591,019 $1,975,000 11l 02/01/04 Refunding Tax Increment Bonds of 1992 (TIF 2) 1,043,069 1,043,069 765,000 (l) 02/01/03 Taxable Tax Increment Bonds of 1995 (TIF 3) 578,374 578,374 3,410,000 (1) 02/01/11 Total tax increment debt 2,212,462 0 2,212,462 6,150,000 0 Special Assessment Debt: Street Improvement Bonds of 1994 (301) 200,896 21,546 222,442 275,000 136,387 02/01/05 Street Improvement Bonds of 1995 (302) 126,342 35,886 162,228 340,000 218,143 02/01/06 Street Improvement Bonds of 1996 (303) 438,783 206,771 645,554 765,000 480,309 02/01/07 Street Improvement Bonds of 1997 (304) 276,865 282,280 559,145 620,000 - 02/01/08 Street Improvement Bonds of 1998 (307) 447,856 392,206 840,062 730,000 02/01/09 Street Improvement Bonds of 1999 (308) 355,700 945,471 1,301,171 1,255,000 02/01/10 Street Improvement Bonds of 2000 (309) 488,885 452,474 941,359 655,000 02/01/11 Street Improvement Bonds of 2001 (3 10) 337,866 493,687 831,553 730,000 = 02/01/12 Street Improvement Bonds of 2003 (311) (16,434) 1,097,509 1,081,075 02/01/13 Total special assessment debt 2,656,759 3,927,830 6,584,589 5,370,000 834,839 General Obligation Debt: ' Refunding State -Aid Street Bonds (306) - - - 1,100,000 - 04/01/06 Police and Fire Building Bonds (305) 871,971 26,931 898,902 6,325,000 02/01/13 Total general obligation debt 871,971 26,931 898,902 7,425,000 0 Total - All Debt Service Funds $5,741,192 $3,954,761 $9,695,953 $18,945,000 $834,839 1i1 Future tax increment amounts subject to valuation and tax capacity rate fluctuations. ( ' ) Deferred revenue primarily consists of uncollected special assessments. I O : �� Iq Audit Management Letter Debt Service Funds General Obligation Bonds The State -Aid Street Bonds are funded by MSA construction allotments (principal portion) and MSA maintenance allotments (interest portion). The Police and Fire Building onds are funded b an annual transfer of prop tax g Y p P Y monies from the General Fund. Beginning 2004, property collection will be allocated directly to this fund. Special Assessment Bonds The Special Assessment Improvement Bonds are funded by a combination of resources. These funding sources include special assessments and transfers from the General Fund. A summary of 2002 financial activity is as follows: , 1994 1995 1996 1997 1998 1999 2000 2001 2003 ' Bonds Bonds Bonds Bonds Bonds Bonds Bonds Bonds Bonds Total Rcvcnues. Property taxes $ - $ - $ - $ - $ - $ - $ - $ - Special assessments 12.567 16,888 79.580 112.158 112,888 275,406 146.762 172,310 - 928,559 Investment income 5,348 2,650 11,091 7.734 13,561 6,307 13,960 7.729 - 68,380 Operating transfer from other funds 69,255 70,539 119,374 - - - - 259,168 Total revenues 87,170 90,077 210,045 119,892 126,449 281,713 160,722 180,039 1,256,107 Expenditures: Principal 85,000 80,000 145.000 110,000 115,000 165,000 80,000 - - 780,000 Interest 16,954 17,965 41,346 30,143 31,131 62,189 32,175 17,594 - 249,497 Fiscal agent fees 781 1 1 1,245 750 863 1,045 L419 16,434 26,154 Total expenditures 102,735 99 187,974 141,388 146,881 228,052 113,220 19,013 16,434 1,055,651 Increase (decrease) ($15,565) ($9,877) $22,071 ($21.496) ($20,432) $53,661 $47,502 $161,026 ($16,434) $200,456 The City ssued the 1 205 000 G.O. Improvement Bonds Series 2003A in January tY $ p � ' 2003. 1 • I Audit Management Letter Capital Projects Funds ' CAPITAL PROJECTS FUNDS ' The financial statements for the Capital Projects Funds are presented in Exhibits D -1 and D -2 of the 2002 Comprehensive Annual Financial Report. The fund balances (deficits) of the Capital Projects Funds were as follows at December 31, 2001 and 2002: Fund Balance (Deficit) December 31, Increase/ Fund 2001 2002 (Decrease) Capital Reserve Emergency $1,341,292 $1,329,490 ($11,802) Capital Improvements 3,879,955 1,760,975 (2,118,980) Municipal State Aid for Construction 664,228 620,731 (43,497) Special Assessment Construction 995,017 (447,951) (1,442,968) Earle Brown Heritage Center Improvements - 100,000 100,000 Totals $6,880,492 $3,363,245 ($3,517,247) • I I Audit Management Letter Capital P rojects Fund Capital Reserve Emergencv Fund (406) The Capital Reserve Emergency Fund was established to account for monies held in ' reserve for catastrophic losses or unforeseen capital items. Financial activity or the past three ear i follows: y p years s as o lows: Capital Reserve Emergency Fund 2000 2001 2002 Revenue and other sources: Investment income $42,843 $129,197 $47,174 Expenditures and other uses: Expenditures - - 58,976 Increase (decrease) in fund balance 42,843 129,197 (11,802) Fund balance - January 1 1,169,252 1,212,095 1,341,292 Fund balance - December 31 $1,212,095 $1,341,292 $1,329,490 ' Expenditures for 2002 include pool railing modifications ($49,126) and repair of tower base ($9,850). Audit Management Letter _ Capital Projects Funds Capital Improvements Fund (401) The Capital Improvements Fund was established to provide funds for major capital outlays. Financial activity for the Y ast three ears is as follows: p Capital Improvements 2000 2001 2002 Revenue and other sources: Investment income $186,112 $448,395 $60,737 Other 10,000 5,585 21,005 Residual equity transfer from General Fund 415,000 468,000 - Operating transfer from General Fund 100,000 245,700 285,000 Operating transfer from City Initiatives Fund - - 11,277 Operating transfer from Liquor Fund 75,000 110,000 100,000 Operating transfer from Golf Course Fund - 10,000 - Operating transfer from Water Utility Fund = 170,500 - Operating transfer from Storm Drainage Fund 35,000 Total revenue 786,112 1,493,180 478,019 Expenditures and other uses: Project costs 1,261,506 2,479,095 2,596,999 Increase (decrease) in fund balance (475,394) (985,915) (2,118,980) Fund balance - January 1 5,341,264 4,865,870 3,879,955 Fund balance - December 31 $4,865,870 $3,879,955 $1,760,975 1 Audit Management Letter Capital Projects Funds A summary by project is as follows: I I Expenditures Project Project 2002 to date Civic Center Addition (99 -08) $2,316,475 $4,347,760 Brooklyn Blvd Landscaping (00 -21) 25,249 25,249 Paint Garage North Wall (01 -09) 62,785 93,586 Evergreen Park Improvements (01 -10) 8,933 254,288 , Grandview Park Improvements (01 -11) 1,801 1,912 Centerbrook Storage Building (01 -14) 53,989 212,492 Twin Lake Park Improvements (02 -09) 71,160 71,160 Misc. Park Improvements (02 -10) 11,585 11,585 Central Park Ballfield Dewatering (02 -20) 25,230 25,230 City Property Special Assessments 19,792 19,792 Total $2,596,999 $5,063,054 I I I I I I I I I I • Audit Management Letter Capital Projects Funds ! Municipal State Aid for Construction Fund (402) The Municipal State Aid for Construction Fund was established to account for the state allotment of gasoline tax collections. Transactions for the past three years have been as follows: ! Municipal State Aid for Construction 2000 2001 2002 Revenue and other sources: MSA $1,293,108 $50,000 $1,337,502 Investment earnings 79,143 134,597 26,362 1 Other revenue - - 3,000 Total revenue and other sources 1,372,251 184,597 1,366,864 Expenditures and other uses: Project costs 2,298,477 1,096,980 1,410,361 Increase (decrease) in fund balance (926,226) (912,383) (43,497) Fund balance - January 1 2,502,837 1,576,611 664,228 Fund balance - December 31 $1,576,611 $664,228 $620,731 i Audit Management Letter Capital Projects Funds Special Assessment Construction Fund (407) , The Special Assessment Construction Fund was established to account for improvements financed by special assessments. The financial transactions of this fund for the past three years have been as follows: ' Special Assessment Construction Fund 2000 2001 2002 r Revenues and other sources: Special assessments $289,596 $ 102,172 $260,752 Intergovernmental - - 2,487,946 Investment earnings 34,112 75,927 16,232 Other - 6,823 12,843 Bond proceeds 735,000 730,000 - Operating transfer from General Fund 659,197 409,044 555,000 Residual equity transfer from General Fund - 225,000 766,343 Total revenue and other sources 1,717,905 1,548,966 4,099,116 Expenditures and other uses: Project costs 2,011,760 1,800,735 5,542,084 ' Increase (decrease) in fund balance (293,855) (251,769) (1,442,968) Fund balance - January 1 1,540,641 1,246,786 995,017 Fund balance (deficit) - December 31 $1,246,786 $995,017 ($447,951) The above deficit will be eliminated by the 2003 bond issue. t i I I I Audit Management Letter Capital Projects Funds A summary by project is as follows: Expenditures Project Project 2002 to date Brooklyn Blvd Improvements (99 -16) $6,165 $6,165 Garden City Central Improvement (00 -01) 4,396 1,690,993 Brooklyn Blvd Landscaping (00 -21) 6,830 6,830 Garden City North Improvement (01 -01) 99,909 1,759,197 Southwest Area Improvements (02 -01) 1,222,393 1,313,136 France Avenue Relocation (02 -04) 2,510,049 2,510,049 Garden City South Improvement (02 -05) 1,607,704 1,654,713 ' Reforestation of 2001 Improvements (02 -08) 38,845 38,845 Happy Hollow Street Improvements (03 -01) 11,828 11,828 Diseased Tree Removal 33,965 33,965 Total $5,542,084 $9,025,721 Earle Brown Heritage Center Improvements Fund (408) This fund was established to account for monies set aside for future improvements. Audit Management Letter Enterprise Funds ENTERPRISE FUNDS The City maintains eight Enterprise Funds as follows: j • Municipal Liquor , • Golf Course • Earle Brown Heritage Center ' • Recycling and Refuse • Street Light Utility ' • Water Utility • Sanitary Sewer ' • Storm Drainage i I r r Audit Management Letter Enterp Funds r Municipal Liquor Fund The financial activity of this fund for the past three years has been as follows: Municipal Liquor 2000 2001 2002 Amount Percent Amount Percent Amount Percent Sales $3,584,829 100.0% $3,552,152 100.0% $3,435,556 100.0% Cost of sales (2,734,318) (76.3 %) (2,696,042) (75.9 %) (2,593,765) (75.5 %) Gross margin 850,511 23.7% 856,110 24.1% 841,791 24.5% Operating expenses: Personal services 415,887 11.6% 333,850 9.4% 364,054 10.6% Supplies 20,989 0.6% 15,096 0.4% 11,804 0.3% Other services 99,258 2.8% 89,071 2.5% 100,202 2.9% ' Insurance 9,538 0.3% 8,928 0.3% 7,433 0.2% Utilities 19,481 0.5% 19,146 0.5% 11,828 0.3% Rent 117,659 3.3% 140,873 4.0% 158,702 4.6% Depreciation 14,018 0.4% 36,488 1.0% 35,580 1.0% r Total operating expense 696,830 19.5% 643,452 18.1% 689,603 19.9% Operating income 153,681 4.2% 212,658 6.0% 152,188 4.6% Other income (expense) - net (9,124) (0.3 %) 60,076 1.7% 29,506 0.9% Transfer to Capital Projects Fund (75,000) (2.1 %) (110,000) (3.1 %) (100,000) (2.9 %) Net increase in retained earnings $69,557 1.8% $162,734 4.6% $81,694 2.6% r r r r r r Audit Management Letter Enterprise Funds The cash flow of this fund has been as follows: 2001 2002 Net cash from operating activities $329,415 $247,882 Less purchase of fixed assets (8,599) - Subtotal 320,816 247,882 Transfer to Capital Improvements Fund (110,000) (100,000) Investment earnings 31,727 28,169 Net increase in cash and investments $242,543 $176,051 Cash and investment balance at December 31 $626,609 $801,993 Comparison With Other Municipal Liauor Stores The Office of the State Auditor (OSA) annually publishes "An Analysis of Minnesota Municipal Liquor Store Operations. " The most recent report available is for 2001. The following analysis compares Brooklyn Center's liquor operations with those reported in the OSA report. ' There are seventeen metro area cities that operate off -sale only operations. The City of Brooklyn Center ranks ninth in sales among metro area cities. It should be noted that the following comparisons are strictly a comparison of amounts reported. There are a number of factors that affect operating results that are not included in this comparison. These factors include the mix of product sold, philosophy regarding sales techniques such as high volume /lower margin, demographics and location. I Audit Management Letter Enterprise Funds Gross Martin Analvsis The gross margin of the liquor operations has averaged 21% over the past five years. Gross margin measures the sales less the direct cost of products sold. A comparison to state averages for Minnesota municipal off -sale operations is as follows: ' Cost of Gross Margin State Sales Sales Amount Percent Average j 1999 $3,560,613 $2,694,622 $865,991 24.3% 23.6% 2000 3,584,829 2,734,318 850,511 23.7% 23.8% 1 2001 3,552,152 2,696,042 856,110 24.1% 24.0% 2002 3,435,556 2,593,765 841,791 24.5% N/A ( ' ) Source: Minnesota Office of the State Auditor - Metropolitan Area Off -Sale Operations Operatiniz Expenses Operating expenses for the past several years have been as follows: Percent of Sales Year Amount City State Average 1999 $632,638 17.7% 16.2% 2000 696,830 19.5% 16.5% 2001 643,452 18.1% 16.6% 2002 689,603 19.9% N/A The City of Brooklyn Center does not compare favorably with State averages for ' operating expenses. S Audit Management Letter -... _. Enter prise Funds Net Income Net income for the past several years is as follows: ' Amount Percent of Sales State State Year City Average City Average , 1999 $249,024 $320,309 6.9% 7.5% 2000 144,577 352,238 3.9% 7.7% 2001 272,734 370,588 7.7% 7.8% 2002 181,694 N/A 5.5% N/A Golf Course Fund The financial activity of this fund for the past three years has been as follows: Golf Course 2000 2001 2002 , Operating revenue: Sales $359,511 $320,105 $278,664 Cost of sales (36,677) (33,887) (27,820) Total revenue 322,834 286,218 250,844 Operating expenses: Personal services 148,450 152,382 144,912 Supplies 20,196 25,620 29,219 Other services 44,372 46,195 36,383 Insurance 8,010 8,449 9,003 Utilities 13,617 14,264 13,758 Depreciation 13,837 14,736 13,045 Total expenses 248,482 261,646 246,320 Operating income $74,352 $24,572 $4,524 ' i Audit Management Letter Enterprise Funds The cash flow of this fund has been as follows: 2001 2002 Net cash from operating activities $41,002 $13,165 Less purchase of fixed assets (5,352) (11,161) 1 Less debt service (50,000) (50,000) Subtotal (14,350) (47,996) Investment earnings 6,569 2,606 Transfer to Capital Improvements Fund (10,000) - Other (73 7) Net increase (decrease) in cash and investments ($18,518) ($45,390) Cash and investment balance at December 31 $82,671 $37,281 i i r i t Audit Management Letter Enterprise Funds Earle Brown Heritage Center Fund The financial activity of this fund for the past three years has been as follows: E. Brown Heritage Center ' 2000 2001 2002 Amount Percent Amount Percent Amount Percent Sales $3,992,737 100.0% $3,920,676 100.0% $3,480,535 100.0% ' Cost of sales (533,428) (134%) (490,300) (12.5 %) (385,341) (11.1 %) Gross margin 3,459,309 86.6% 3,430,376 87.5% 3,095,194 88.9% Operating expenses: Personal services 1,955,572 56.5% 1,850,268 519% 1,740,912 56.2% Supplies 230,784 6.7% 215,874 6.3% 275,360 8.9% Other services 481,383 13.9% 527,716 15.4% 489,964 15.8% Insurance 30,504 0.9% 41,714 1.2% 34,776 1.1% Utilities 154,643 4.5% 181,830 5.3% 146,742 4.7% Rent 76,115 2.2% 85,786 2.5% 88,019 2.8% Depreciation 405,284 11.7% 416,296 12.1% 582,083 18.8% Total operating expense 3,334,285 96.4% 3,319,484 96.7% 3,357,856 108.3% Operating income (loss) 125,024 (9.8 %) 110,892 (9.2 %) (262,662) (19.4 %) Other income(expense) - net 3,552 0.1% 19,851 0.6% 20,878 0.7% Transfer to other funds - 0.0% - 0.0% (100,000) (3.2 %) Net increase (decrease) in retained earnings $128,576 (9.7 %) $130,743 (8.6 %) ($341,784) (21.9 %) The cash flow of this fund has been as follows: 2001 2002 Net cash from operating activities $245,281 $324,754 Less purchase of fixed assets (38,092) - Subtotal 207,189 324,754 Investment earnings 17,907 22,553 Transfer to EBHC Improvements Fund - (100,000) Other (1,235) (1,098) Net increase in cash and investments $223,861 $246,209 Cash and investment balance at December 31 $420,897 $666,529 I I Audit Management Letter Enterprise Funds Recycling and Refuse Fund The financial activity of this fund for the past three years has been as follows: t Recycling and Refuse 2000 2001 2002 Operating revenue $210,168 $211,388 $210,954 Operating expenses: Other services 214,770 214,846 215,032 Insurance 119 143 179 Total operating expenses 214,889 214,989 215,211 Operating income (loss) ($4,721) ($3,601) ($4,257) I Audit Management Letter Enterpri Funds Water Utilitv Fund The financial activity of this fund for the past three years has been as follows: Water Utility i 2000 2001 2002 Operating revenue $1,348,221 $1,520,950 $1,364,076 Operating expenses: ' Depreciation 400,358 414,965 698,773 All other 931,052 958,976 873,462 Operating income (loss) 16,811 147,009 (208,159) Non - operating: Income 149,422 228,755 68,864 Expense - - - Transfers - net - (170,500) - Net increase (decrease) in retained earnings $166,233 $205,264 ($139,295) The cash flow of this fund has been as follows: 2001 2002 Net cash from operating activities $600,261 $437,240 Less purchase of fixed assets (1,048,031) (650,253) Less debt service (56,302) (56,302) Subtotal (504,072) (269,315) Investment earnings 103,255 47,077 Transfer to Capital Improvements Fund (170,500) - Net increase in cash and investments ($571,317) ($222,238) Cash and investment balance at December 31 $1,763,546 $1,541,308 i Audit Management Letter Enterprise Funds Sanitary Sewer Fund The financial activity of this fund for the past three years has been as follows: Sanitary Sewer Fund 2000 2001 2002 Operating revenue $2,398,323 $2,604,998 $2,664,730 Operating expenses 1,921,445 2,016,942 2,550,584 Operating income (loss) 476,878 588,056 114,146 1 Non - operating: Income 54,556 133,475 42,950 Expense - - - Transfers - net - - - Net increase (decrease) in retained earnings $531,434 $721,531 $157,096 The cash flow of this fund has been as follows: 2001 2002 Net cash from operating activities $612,901 $660,035 Less purchase of fixed assets (600,176) (1,023,781) Subtotal 12,725 (363,746) Investment earnings 59,238 42,678 Net increase in cash and investments $71,963 ($321,068) Cash and investment balance at December 31 $1,003,252 $682,184 r Audit Management Letter Enterp Funds Storm Drainage Fund The financial activity of this fund for the past three years has been as follows: i Storm Drainage f i 2000 2001 2002 - Operating p g revenues User fees $1,074,619 $1,129,502 $1,377,638 Special assessments 313,068 270,365 429,873 Investment earnings - 10,375 5,675 Total operating revenues 1,387,687 1,410,242 1,813,186 Operating expenses: Personal services 100,000 100,893 100,000 Supplies 475 - 3,153 Other services 51,062 52,613 126,656 Insurance 2,646 3,604 1,932 Utilities Depreciation 153,206 170,302 474,574 Interest to est 59,144 53,166 36,701 Total operating expenses 366,533 380,578 743,016 Net income $1,021,154 $1,029,664 $1,070,170 I Audit Management Letter Enterprise Funds The cash flow of this fund has been as follows: 2001 2002 Net cash from operating activities $905,912 $1,126,992 Less purchase of fixed assets (845,165) (961,302) Less debt service (243,166) (236,701) Subtotal (182,419) (71,011) Investment income 5,674 Special assessments 270,365 429,873 Transfer to Capital Improvements Fund (35,000) - Net increase in cash and investments $52,946 $364,536 Cash and investment balance at December 31 ($21,315) $343,221 Street Liaht Utilitv Fund This fund was established in 2002. The financial activity is as follows: Street Light Utility Fund 2002 Operating revenues: User fees $213,078 Investment earnings 966 Total operating revenues 214,044 Operating expenses: Other services 152,660 Insurance 66 Total operating expenses 152,726 Net income $61,318 Audit Management Letter Internal Service Funds INTERNAL SERVICE FUNDS r Internal Service Funds are used to account for the financing on a cost reimbursement basis of goods or services provided by one department to another department within the City. During 2002, the City maintained the following Internal Service Funds: Internal Service Funds Cash and Investment Balance December 31, Fund 2001 2002 Compensated Absences $733,221 $741,038 Retirement (Post Employment Insurance Benefits) 1,543,554 1,574,666 Central Garage 4,089,161 4,198,486 Total $6,365,936 $6,514,190 i t 1 1 Audit Management Letter I nternal Control INTERNAL CONTROL A separate internal control report has been issued in conjunction with the Audit. The report cited three reportable conditions. Reportable conditions 1) Segregation of duties 2) Grant management 3) IT security and access The internal control report elaborates on specific areas related to the above findings. Audit Management Letter Certificate of Excellence in Financial Re CERTIFICATE OF EXCELLENCE IN FINANCIAL REPORTING , The City submitted the 2001 Comprehensive Annual Financial Reports (CAFR) to the ' Government Finance Officers Association of the United States and Canada (GFOA) for a comprehensive review. The program is a review of all facets of financial reporting for disclosure, clarity and consistency with national reporting standards. The City received the Certificate of Achievement for Excellence in Financial Reporting Award for 2001 and intends to submit the 2002 CAFR to the Certificate Program. We commend the City for this achievement. r • Audit Management Letter New Fraud Standard - SAS 99 New Fraud Standard - SAS 99 Statement on Auditing Standards (SAS) 99, Consideration of Fraud in a Financial StatementAudit, has been issued and will be required for audits of periods beginning on or after December 15, 2002. SAS 99 does not change the auditor's responsibility to obtain reasonable assurance that the financial statements are free of material misstatement, including material misstatement due to fraud. The reason the new SAS was issued was to increase the likelihood that the auditor will detect material misstatement in the financial statements due to fraud by increasing the amount and nature of required procedures. SAS 99 is a comprehensive, far - reaching audit standard which is expected to significantly change the way auditor's approach and perform audits. The bottom line is that SAS 99 expects auditors to perform more work in every audit in both identifying and responding to the risk of material misstatement due to fraud. Implementation of SAS 99 will require additional time to complete an audit. For the City of Brooklyn Center, SAS 99 will be required for the audit of the year ending December 31, 2003. An overview of SAS 99 is as follows: Information Gathering Phase: • A required brainstorming session among the audit team members to discuss the potential for material misstatement due to fraud. • An increased emphasis on inquiry as an audit procedure that increases the likelihood of fraud detection. i Audit Management Letter New Fr aud Standard — SAS 99 • Required management inquiries, many of which are new. • Required inquiries of "others" within the entity (i.e., non - accounting personnel). • Expanded use of analytical procedures to gather information used to identify risks of the material misstatement due to fraud. • The consideration of other information, such as client acceptance and continuance procedures, during the information- gathering phase. IdentifvinR and Assessiniz Fraud Risks • Required to presume that improper revenue recognition is a fraud risk. • Required tests in response to the risk of management override of controls. • Examining journal entries and other adjustments. • Retrospective review of accounting estimates. • Business rationale for significant unusual transactions. Responding to Assessed Risks: • Assignment of personnel and supervision should be commensurate with the auditor's assessment of the risks of material misstatement due to fraud. • The auditor should consider management's selection and application of significant accounting principles. • Auditors are required to incorporate an element of unpredictability in audit procedures from year to year. Evaluatinu Audit Evidence • Assessing risks of material misstatement due to fraud throughout the audit. • Evaluating whether analytical procedures performed as substantive tests or in the overall review stage of the audit indicate a previously unrecognized risk of material misstatement due to fraud. Audit Management Letter New Fraud Standard — SAS 99 • Evaluating the risks of material misstatement due to fraud at or near the completion of fieldwork. • Responding to misstatements that may be the result of fraud. Required Auditor Documentation • The discussion among engagement personnel in planning the audit regarding the susceptibility of the entity's financial statements to material misstatement due to fraud, including how and when the discussion occurred, the audit team members who participated, and the subject matter discussed. • The procedures performed to obtain information necessary to identify and assess the risks of material misstatement due to fraud. • Specific risks of material misstatement due to fraud that were identified, and a description of the auditor's response to those risks. • If the auditor has not identified in a particular circumstance, improper revenue recognition as a risk of material misstatement due to fraud, the reasons supporting the auditor's conclusion. • The results of the procedures performed to further address the risk of management override of controls. • Other conditions and analytical relationships that caused the auditor to believe that additional auditing procedures or other responses were required and any further responses the auditor concluded were appropriate, to address such risks or other conditions. • The nature of the communications about fraud made to management, the audit committee, and others. •I Audit Management Letter New Fra Stan dard - SAS 99 Reporting Model - GASB 34 GPM The Governmental Accounting Standards Board (GASB) recently gave approval to issue the "Governmental Financial Reporting Model" which will be the most comprehensive P g P governmental accounting rule ever developed. The new standard will significantly impact internal accounting and external financial reporting of the City. A summary f the key provisions of the exposure draft document ' r 1 y y p p e is presented below: • Fund P r u d e spective Financial Statements. These financial statements would be similar to current financial statements with modified accrual basis of accounting for governmental funds, accrual basis of accounting for business type activities (formerly Enterprise and Internal Service Funds). However, the GASB introduces a new definition e ition for Fiduciary unds and the elimination of the account groups. s. g p • Entitv -wide Perspective Financial Statements. These financial statements include full accrual accounting for all activities. The income statement will be replaced by a statement of activities using the net program cost format. Additionally, capital ' use charges (depreciation) on general fixed assets and infrastructure assets will be required to be reported in the financial statements. • Management's Discussion and Analysis of Financial Condition and Results of Operations (MD &A). The MD &A letter will be similar to (although will not replace) the current letter of transmittal. Currently, Securities and Exchange Commission (SEC) regulations require private sector registrants to provide a MD &A letter discussing financial conditions, results of operations, etc. The City will be required to implement this new accounting standard for 2003. CITY OF BROOKLYN CENTER, MINNESOTA SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS AND INDEPENDENT AUDITOR'S REPORTS For The Year Ended December 31, 2002 CITY OF BROOKLYN CENTER, MINNESOTA TABLE OF CONTENTS Page No. Independent Auditor's Report on Compliance with Minnesota Legal Compliance Audit Guide for Local Government 1 Independent Auditor's Report on Compliance and on Internal Control over Financial Reporting Based on an Audit of Financial Statements Performed in Accordance with Government Auditing Standards 2 Independent Auditor's Report on Compliance with Requirements Applicable to Each Major Program and Internal Control over Compliance in Accordance with OMB Circular A -133 4 Schedule of Expenditures of Federal Awards 7 Schedule of Findings and Questioned Costs 8 i Taut es Red path, Ltd. 9 p ' Certified Public Accountants and Consultants t Independent Auditor's Report on Compliance With Minnesota Lelval Compliance Audit Guide for Local Government To The Honorable Mayor and Members of the City Council City of Brooklyn Center, Minnesota We have audited the general purpose financial statements of the City of Brooklyn Center, Minnesota, as of and for the year ended December 31, 2002, and have issued our report thereon dated June 2, 2003. We conducted our audit in accordance with auditing standards generally accepted in the United States of America, and the provisions of the Minnesota Legal Compliance Audit Guide for Local Government promulgated by the Legal Compliance Task Force pursuant to Minnesota Statutes Section 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 Government covers five main categories of compliance to be tested: contracting and bidding, deposits and investments, conflicts of interest, public indebtedness, and claims and disbursements. Our study included all of the listed categories. The results of our tests indicate that for the items tested, the City of Brooklyn Center, Minnesota complied with the material terms and conditions of applicable legal provisions. This report is intended solely for the information and use of the City Council and management and is not intended to be and should not be used by anyone other than those specified parties. June 2, 2003 1�7- 7z L HLB TAUTGES REDPATH, LTD. Certified Public Accountants 4810 White Bear Parkway, White Bear Lake, Minnesota 55110, USA Telephone: 651 426 7000 Fax: 651 426 5004 HLB Tautges Redpath, Ltd. is a member of ® International. A world -wide organization of accounting firms and business advisers. 1 Tautges Redpath, Ltd. Certified Public Accountants and Consultants Independent Auditor's Report on Compliance and on Internal Control over Financial Reporting Based on an Audit of Financial Statements Performed in Accordance with Government Auditinz Standards To the Honorable Mayor and Members of the City Council City of Brooklyn Center, Minnesota We have audited the general purpose financial statements of the City of Brooklyn Center, Minnesota as of and for the year ended December 31, 2002, and have issued our report thereon, dated June 2, 2003. 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 i the United States. ■ Compliance As part of obtaining reasonable assurance about whether the City of Brooklyn Center, Minnesota's general purpose financial statements are free of material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts and grants, noncompliance with which could have a direct and material effect on the determination of general purpose 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 that are required to be reported under Government Auditing Standards. Internal Control Over Financial Reporting In planning and performing our audit, we considered the City of Brooklyn Center, Minnesota's internal control over financial reporting in order to determine our auditing procedures for the purpose of expressing our opinion on the general purpose financial 1 statements and not to provide assurance on the internal control over financial reporting. However, we noted certain matters involving the internal control over financial reporting and its operation that we consider to be reportable conditions. Reportable conditions involve matters coming to our attention relating to significant deficiencies in the design or operation of the internal control over financial reporting that, in our judgment, could adversely affect the City of Brooklyn Center, Minnesota's ability to record, process, summarize, and report 4810 White Bear Parkway, White Bear Lake, Minnesota 55110, USA Telephone: 651 426 7000 Fax: 651 426 5004 HLB Tautges Redpath, Ltd. is a member of E International. A world -wide organization of accounting firms and business advisers. —2— i i financial data consistent with the assertions of management in the general purpose financial statements. Reportable conditions are described in the accompanying schedule of findings and questioned costs as items 2002 -1 through 2002 -3. A material weakness is a condition in which the design or operation of one or more of the internal control components does not reduce to a relatively low level the risk that misstatements in amounts that would be material in relation to the general purpose financial statements being audited may occur and not be detected within a timely period by employees in the normal course of performing their assigned functions. Our consideration of the internal control over financial reporting would not necessarily disclose all matters in the internal control that might be reportable conditions and, accordingly, would not necessarily disclose all reportable conditions that are also considered to be material weaknesses. However, we believe that none of the reportable conditions described above are a material weakness. We also noted other matters involving the internal control over financial reporting, which we have reported to management of the City of Brooklyn Center, Minnesota in a separate letter dated June 5, 2003. This report is intended solely for the information and use of the City Council, management and federal awarding agencies and pass - through entities and is not intended to be and should not be used by anyone other than those specified parties. June 2, 2003 i 1�g ;�� , HLB TAUTGES REDPATH, LTD. Certified Public Accountants l i i -3- 1 Taut Re h Ltd. ges dpat , Certified Public Accountants and Consultants Independent Auditor's Report on Compliance with Requirements Applicable to Each Major Program and Internal Control over Compliance in Accordance with OMB Circular A -133 To the Honorable Mayor and Members of the City Council City of Brooklyn Center, Minnesota Compliance We have audited the compliance of the City of Brooklyn Center, Minnesota with the types of compliance requirements described in the U.S. Office of Management and Budget (OMB) CircularA -133 Compliance Supplement that are applicable to each of its major federal programs for the year ended December 31, 2002. The City of Brooklyn Center, Minnesota's major federal programs are identified in the summary of audit results section of the accompanying schedule of findings and questioned costs. Compliance with the requirements of laws, regulations, contracts and grants applicable to each of its major federal programs is the responsibility of the City of Brooklyn Center, Minnesota's management. Our responsibility is to express an opinion on the City of Brooklyn Center, Minnesota's ' compliance based on our audit. We conducted our audit of compliance 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 OMB Circular A -133, Audits of States, Local Governments, and Non - Profit Organizations. Those standards and OMB Circular A -133 require that we plan and perform the audit to obtain reasonable assurance about whether noncompliance with the types of compliance requirements referred to above that could have a direct and material effect on a major federal program occurred. An audit includes examining, on a test basis, evidence about the City of Brooklyn Center, Minnesota's compliance with those requirements and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. Our audit does not provide a legal determination on the City of Brooklyn Center, Minnesota's compliance with those requirements. In our opinion, the City of Brooklyn Center, Minnesota complied, in all material respects, with the requirements referred to above that are applicable to its major federal programs for the year ended December 31, 2002. 4810 White Bear Parkway, White Bear Lake, Minnesota 55110, USA Telephone: 651 426 7000 Fax: 651 426 5004 HLB Tautges Redpath, Ltd. is a member of ® International. A world -wide organization of accounting firms and business advisers. -4- Internal Control Over Compliance The management of the City of Brooklyn Center, Minnesota is responsible for establishing and maintaining effective internal control over compliance with requirements of laws, regulations, contracts, and grants applicable to federal programs. In planning and performing our audit, we considered the City of Brooklyn Center, Minnesota's internal control over compliance with requirements that could have a direct and material effect on a major federal program in order to determine our auditing procedures for the purpose of expressing our opinion on compliance and to test and report on internal control over compliance in accordance with OMB Circular A -133. Our consideration of the internal control over compliance would not necessarily disclose all p Y matters in the internal control that might be material weaknesses. A material weakness is a condition in which the design or operation of one or more of the internal control components does not reduce to a relatively low level the risk that noncompliance with applicable requirements of laws, regulations, contracts, and grants that would be material in relation to a major federal program being audited may occur and not be detected within a timely period by employees in the normal course of performing their assigned functions. We noted no matters involving the internal control over compliance and its operations that we consider to be material weaknesses. ' Schedule of Expenditures of Federal Awards We have audited the general purpose financial statements of the City of Brooklyn Center, Minnesota as of and for the year ended December 31, 2002, and have issued our report thereon dated June 2, 2003. Our audit was performed for the purpose of forming an opinion on the general purpose financial statements taken as a whole. The accompanying schedule of expenditures of federal awards is presented for purposes of additional analysis as required by OMB Circular A -133 and is not a required part of the general purpose financial statements of the City of Brooklyn Center, Minnesota. Such information has been subjected to the auditing procedures applied in the audit of the general purpose financial statements and, in our opinion, is fairly stated, in all material respects, in relation to the general purpose financial statements taken as a whole. t -5- This report is intended solely for the information and use of the City Council, management and federal awarding agencies and pass- through entities and is not intended to be and should not be used by anyone other than those specified parties. June 2, 2003 HLB TAUTGES REDPATH, LTD. Certified Public Accountants -6- CITY OF BROOKLYN CENTER, MINNESOTA SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS Year Ended December 31, 2002 Federal Funding Source/ Federal 2002 Pass Through Agency/ CFDA Federal Program Title Number Expenditures Department of Housing and Urban Development: Passed- through Hennepin County: CDBG - Shingle Creek Towers 14.218 * $325,000 CDBG - CEAP 14.218 27,000 U.S. Department of Justice: Direct: LLEBG 16.592 29,901 Passed - through State of Minnesota: Underage Compliance 16.541 1,575 Department of Transportation: Passed - through State of Minnesota: Operation Nitecap 20.601 1,461 Passed - through City of Brooklyn Park: Safe and Sober 20.600 and 20.601 5,525 Total Federal Expenditures $390,462 * Major Program Notes to the schedule of expenditures of federal awards Note 1. Basis afPresentation The above schedule of expenditures of federal awards includes the federal grant activity of the City of Brooklyn Center, Minnesota (including its component units) and is presented on the modified accrual basis of accounting. The information in this schedule is presented in accordance with the requirements of OMB Circular A -133, Audits of States, Local Governments, and Non - Profit Organizations. Expenditures are recognized when incurred, therefore, some amounts presented in this schedule may differ from amounts presented in, or used in the preparation of, the general purpose financial statements. Note 2. Subrecipients During 2002, the City of Brooklyn Center did not pass federal money to Subrecipients. Note 3. Reporting Entity The City of Brooklyn Center, Minnesota, for purposes of this schedule includes all funds of the primary government as defined by GASH Statement No. 14, The Financial Reporting Entity. This schedule also includes the Housing and Redevelopment Authority (HRA), and the Economic Development Authority (EDA) which are the sole component units of the City. -7- i CITY OF BROOKLYN CENTER, MINNESOTA SCHEDULE OF FINDINGS AND QUESTIONED COSTS Year Ended December 31, 2002 r SECTION I - SUMMARY OF AUDIT RESULTS 1. The Independent Auditor's Report expresses an unqualified opinion on the financial statements of the City of Brooklyn Center, Minnesota. 2. There were three reportable conditions disclosed during the audit of the financial statements as reported in the Independent Auditor's Report on Compliance and on Internal Control over Financial Reporting Based on an Audit of Financial Statements Performed in accordance with Government Auditine Standards. The above conditions were not determined to be material weaknesses. 3. No instances of noncompliance material to the financial statements of the City of Brooklyn Center, Minnesota were disclosed during the audit. 4. No reportable conditions relating to the audit f he major f award p g o f �o federal a a d programs were reported in the Independent Auditor's Report on Compliance with Requirements Applicable to each Maior Program and Internal Control over Compliance in Accordance with OMB Circular A -133. 5. The auditor's report on compliance for the major federal award programs for the City of Brooklyn Center, Minnesota expresses an unqualified opinion. 6. Audit findings relative to the major federal award programs for the City of Brooklyn Center, Minnesota are reported in Section III of this Schedule. 7. The Community Development Block Grant Shingle Creek Towers — CFDA #14.218 was tested as a major program. 8. The threshold for distinguishing Types A and B programs was $300,000. 9. The City of Brooklyn Center, Minnesota was not determined to be a low -risk auditee. r r r -g- CITY OF BROOKLYN CENTER, MINNESOTA SCHEDULE OF FINDINGS AND QUESTIONED COSTS Year Ended December 31, 2002 SECTION II - FINANCIAL STATEMENT FINDINGS 2002 -1: SEGREGATION OF ACCOUNTING DEPARTMENT DUTIES Condition: Although the size of the City's office staff limits the extent of segregation of duties, we believe certain steps can be taken to separate incompatible duties. The basic premise that no one employee should have access to both physical assets and the related accounting records or to all phases of a transaction. In the utility billing area, we noted the same employee receives payments, prepares the l bank deposits, codes the receipts, and maintains the subsidiary ledger. (i.e., the cash collection and deposit preparation function is not segregated from the recording function.) Recommendation: We recommend someone other than the utility billing clerk receive payments and prepare the deposit. A copy of the deposit should be forwarded to the utility billing clerk. Corrective Action Plan: We concur with the finding. This item has been identified in past g p reports and directly relates to the receipt and posting of utility payments. A drop box had been suggested such that payments could be directly deposited to our account and payments subsequently posted to the customers account. There are several drawbacks that include missing or lost payment stubs, posting payments after due dates without penalties and i concerns by customers about payment posting dates. In response to the finding, we are suggesting that the Utility Billing personnel alternate receipt and posting duties such that one person receipts the amounts received while a second billing person records the payments on the account. This should eliminate the concern. CITY OF BROOKLYN CENTER, MINNESOTA SCHEDULE OF FINDINGS AND QUESTIONED COSTS Year Ended December 31, 2002 2002 -2: GRANT MANAGEMENT Condition: T he he City is the recipient of several grants from various agencies. Many of the grant documents and financial reports are prepared and maintained outside the finance department. This decentralized system does not allow for oversight by the finance department which would facilitate proper revenue recognition, monitoring of grant compliance provisions, and accurate preparation of grant financial reporting forms. Recommendation: We recommend a copy of all grant agreements be forwarded to the finance department. We also recommend all grant applications /reports that involve financial information be forwarded to the finance department prior to submission for review. Corrective Action Plan: We concur with the finding and have initiated several actions to ensure better communication. For state funded projects, a matrix will be established that permits the recording of amounts due (billed) with date, amount and source identification. Upon receipt, the matrix will be updated with receipt information that permits the tracking of receipts for specific projects and programs. For other grants, federal, county, school district, etc., a similar system will be established to reconcile amounts received and identify them to a specific grant activity. This will require the grantee department to update the matrix when amounts are billed for reimbursement. With the extended use of JD Edwards reports are available to reconcile departmental reporting to granting agencies. Training has been provided as to how these reports are requested, prepared and printed. Most grants have specific subledger numbers to identify a specific grant, project or program making reporting from the financial system much simpler for the department receiving the grant. -10- �j CITY OF BROOKLYN CENTER, MINNESOTA SCHEDULE OF FINDINGS AND QUESTIONED COSTS Year Ended December 31, 2002 2002 -3: IT SECURITY AND ACCESS Condition: Audit inquiries disclosed that access to the various programs within the J.D. Edwards system is not restricted. Lack of security increases the risk of intentional or unintentional changes to data. Recommendation: We re commend commend management determine the security options available and restrict access to the various menus and programs. Corrective Action Plan: We concur with the finding. The City, through its service provider, LOGIS, are currently working to identify additional security measures to permit/limit access to the financial management and human resource systems. In the interim, the issue has been addressed by limiting access to the system to those individuals that have a need to access the system. All others are permitted view only rights and have limited menus available that limit access to report preparation and inquiry only. With the implementation of the latest release, Change #8, additional security measures will be implemented. This is a high priority for LOGIS in 2003 -2004. SECTION III - FEDERAL AWARD FINDINGS AND QUESTIONED COSTS i There were no findings or questioned costs involving Federal programs for 2002. SECTION IV - PRIOR YEAR FINDINGS i There were no findings or questioned costs involving Federal programs for 2001. i -11- 1 COMPREHENSIVE r ANNUAL r FINANCIAL REPORT r of the r ' CITY OF BROOKLYN CENTER, MINNESOTA For The Year Ended December 31, 2002 r 1 1 Prepared by 1 THE DEPARTMENT OF FINANCE 1 r 1 r (Member of Government Finance Officers 1 Association of the United States and Canada) r ' i City of Brooklyn Center, Minnesota COMPREHENSIVE ANNUAL FINANCIAL REPORT Year Ended December 31, 2002 TABLE OF CONTENTS Exhibit Page Number Number I. INTRODUCTORY SECTION Title Page i Table of Contents ii - vi City Officials 1 Organization Chart 2 City Manager's Letter 3 Letter of Transmittal 4-13 Certificate of Achievement 14 II. FINANCIAL SECTION Independent Auditors' Report 15-16 A. General Purpose Financial Statements (Combined Statements - Overview): 17 ' Combined Balance Sheet - All Fund Types and Account Groups 1 18-19 Combined Statement of Revenues, Expenditures and Changes in Fund Balances - All Governmental ' Fund Types 2 20 Combined Statement of Revenues, Expenditures and Changes in Fund Balances - Budget And Actual - General and Special Revenue Funds 3 21 Combined Statement of Revenues, Expenses and Changes in Retained Earnings - Proprietary Fund Types 4 22 ' Combined Statement of Cash Flows - Proprietary Fund Types 5 23 Notes to Financial Statements 24-49 ii City f Brooklyn Center Minn ' y y Minnesota COMPREHENSIVE ANNUAL FINANCIAL REPORT Year Ended December 31, 2002 , TABLE OF CONTENTS Statement/ , Schedule Page Number Number ' B. Combining, Individual Fund and Account Group Financial Statements and Schedules: General Fund: ' Comparative Balance Sheet A -1 51 Comparative Statement of Revenues, Expenditures and Changes in Fund Balance - Budget and Actual A -2 52 ' Schedule of Revenues & Other Financing Sources - Budget and Actual S -1 53-54 Schedule of Expenditures & Other S -2 55-59 Financing Uses - Budget and Actual ' Special Revenue Funds: Combining Balance Sheet B -1 61 -62 Combining Statement of Revenues, Expenditures and Changes in Fund ' Balances B -2 63-64 Statement of Revenues, Expenditures and ' Changes in Fund Balance - Budget and Actual Housing and Redevelopment Authority Fund B -3 65 Statement of Revenues Expenditures and Changes in Fund Balance - Budget and Actual Economic Development Authority Fund B -4 66 ' Statement of Revenues, Expenditures and Changes in Fund Balance - Budget and Actual ' Earle Brown Tax Increment Financing District Fund B -5 67 Statement of Revenues, Expenditures and Changes in Fund Balance - Budget and Actual Tax Increment District No. 3 Fund B -6 68 iii City f Brooklyn Center Minnesota Y Y , COMPREHENSIVE ANNUAL FINANCIAL REPORT Year Ended December 31, 2002 ' TABLE OF CONTENTS Statement/ Schedule Page Number Number Statement of Revenues, Expenditures and ' Changes in Fund Balance - Budget and Actual Tax Increment District No. 4 Fund B -7 69 ' Statement of Revenues, Expenditures and Changes in Fund Balance - Budget and Actual Police Drug Forfeiture Fund 8-8 70 Statement of Revenues, Expenditures and Changes in Fund Balance - Budget and Actual Community Development Block Grant Fund B -9 71 Statement of Revenues, Expenditures and Changes in Fund Balance - Budget and Actual City Initiatives Grant Fund B -10 72 ' Debt Service Funds: Combining Balance Sheet C -1 74 Combining Statement of Revenues, Expenditures and Changes in Fund Balances C -2 75 Capital Projects Funds: Combining Balance Sheet D -1 77 Combining Statement of Revenues, Expenditures and Changes in Fund Balances D -2 78 f Enterprise Funds: Combining Balance Sheet E -1 80-81 Combining Statement of Revenues, Expenses and Changes in Retained Earnings E -2 82-83 i Combining Statement of Cash Flows E -3 84-85 Internal Service Funds: Combining Balance Sheet F -1 87 iv r City f Brooklyn ' y y Center, Minnesota COMPREHENSIVE ANNUAL FINANCIAL REPORT , Year Ended December 31, 2002 TABLE OF CONTENTS Statement/ Schedule Page r Number Number Combining Statement of Revenues, Expenses and Changes in Retained Earnings F -2 88 Combining Statement of Cash Flows F -3 89 General Fixed Asset Account Group: Schedule of Changes in General Fixed Assets ' by Source S -6 91 Schedule of General Fixed Assets , by Function and Activity S -7 92 Schedule of Changes in General Fixed Assets , by Function and Activity S -8 93 General Long -Term Debt Account Group: ' Comparative Statement of General Long -Term Debt G 95 Summary of Debt Service Requirements ' to Maturity H 96 III. STATISTICAL SECTION Table Page Number Number General Governmental Expenditures by Function 1 98 General Governmental Revenues and Other Financing Sources by Source 2 gg Tax Levies and Tax Collections 3 100 Assessed Value and Estimated Market Value of All Taxable Property 4 101 ' Direct and Overlapping Tax Rates and Tax Levies 5 102 Special Assessment Billings and Collections 6 103 Ratio of Net Bonded Debt to Assessed Value and , Net Bonded Debt Per Capita 7 104 v City of Brooklyn Center, Minnesota COMPREHENSIVE ANNUAL FINANCIAL REPORT Year Ended December 31, 2002 TABLE OF CONTENTS Table Page Number Number Computation of Legal Debt Margin 8 105 Computation of Direct and Overlapping Debt 9 106 Ratio of Annual Debt Service Expenditures for ' General Bonded Debt to Total General Fund Expenditures 10 107 ' Schedule of Revenue Bond Coverage 11 108 Property Value and Construction 12 109 Principal Taxpayers 13 110 Schedule of Insurance Coverage 14 111 -112 Demographic Statistics 15 113 Miscellaneous Statistical Facts 16 114-115 r t vi i ' City of Brooklyn Center, Minnesota PRINCIPAL OFFICIALS For the Year Ended December 31, 2002 Term of Office Term Expires Mayor Myrna Kragness Four Years 12/31/2006 Councilmember Kathleen Carmody Four Years 12/31/2006 Councilmember Kay Lasman Four Years 12/31/2004 . Councilmember Diane Niesen Four Years 12/31/2006 Councilmember Robert Peppe Four Years 12/31/2004 City Manager, Michael J. McCauley 1 City of Brooklyn Center Organization 2002 ELECTORATE City Council Advisory Commissions ADMINISTRATION - Purchasing City Attorney -------- - - - - -- City Manager -Human Resources - Communications -Mgmt. Info. Systems - Elections �. - Licenses ` -City Clerk PUBLIC WORKS POLICE DEPARTMENT' FISCALAND I ' COMMUNITY ACTIVITIES, j i FIRE DEPARTMENT I i I SUPPORT SERVICES RECREATION, AND SERVICES COMMUNITY DEVELOPMENT - Engineering I - Patrol � ENTERPRISE Street Maint I - Investigation - Accounting I - Community Programs Inspections Fir e Prevention - Sanitary Sewer Suppression -Crime Prevention -Audit I Recreation Programs - Economic Development Authority Liquor Fire Central Garage - Community Programs - Utility Billing Community Center - Housing & Redevelopment Authority - Heritage Center I Emergency Preparedness -Storm Sewer I � J - Support Services -Risk Management i -Gov't Bldgs I - Zoning Water Dept - Dispatch I - Assessing I -Golf Course - Planning -Park Maint j - Senior Transportation N T City of Brooklyn Center A Millennium Community - June 2, 2003 HONORABLE MAYOR AND MEMBERS OF CITY COUNCIL CITY OF BROOKLYN CENTER I hereby transmit the Comprehensive Annual Financial Report of the i p p City of Brooklyn Center for the fiscal year ended December 31, 2002. Minnesota Statutes and City Charter, Section 7.12, require that the financial statements of the City of Brooklyn Center be audited by the State Auditor or a certified public accountant selected by the City Council. This requirement has been complied with by the engagement of the firm of HLB Tautges Redpath, Ltd. and their report is included in the financial section of this report. This report has been prepared following the guidelines recommended by the Government Finance Officers Association of the United States and Canada. The Government Finance Officers Association awards Certificates of Achievement for Excellence in Financial e Reporting to those governments whose Comprehensive Annual Financial Reports are judged to conform substantially with high standards of public financial reporting, including generally accepted accounting principles promulgated by the Governmental Accounting Standards Board. Our financial reports for the past nineteen years have received this award. It is my belief that the accompanying report meets program standards, and it will be submitted to the Government Finance Officers Association for review. RespeclAilly submi , Michael J. McC y City Manager 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 3 FAX (763) 569 -3494 T City of Brooklyn Center ' A Millennium Community June 2, 2003 Mr. Michael J. McCauley i City Manager City of Brooklyn Center Dear Mr. McCauley: The comprehensive annual financial report of the City of Brooklyn Center (the City) for the fiscal year ended December 31, 2002 is hereby submitted. Responsibility for both the accuracy of the data and the completeness and fairness of the presentation, including all disclosures, rests with the City. To the best of our knowledge and belief, the enclosed data are accurate in all material respects and are reported in a manner designed to present fairly the financial position, results of operations, and cash flows of the various funds and account groups of the City. All disclosures necessary to enable the reader to gain an understanding of the government's financial activities have been included. The comprehensive annual financial report is presented in three sections: introductory, financial, and statistical. Included in the introductory section is this transmittal letter, the government's organizational chart and a list of principal officials. The financial section includes the general purpose financial statements and the combining and individual fund and account group financial statements and schedules, as well as the independent auditors' report on the general purpose financial statements. The statistical section includes selected financial and demographic information, generally presented on a multi year basis. The City is required to comply with the provisions of the Single Audit Act Amendments of 1996 and the U.S. Office of Management and Budget Circular A -133, "Audits of States, Local Governments, and Non - Profit Organizations." This requires a single audit when expenditures of federal grants exceed $300,000 in one year. Expenditures of federal grants were more than $300,000 during the year ended December 31, 2002; therefore, a single audit was required for the year ended December 31, 2002. REPORTING ENTITY The financial reporting entity includes all funds and account groups of the primary government (i.e., the City of Brooklyn Center as legally defined), as well as all of its component units. Component units are legally separate entities for which the primary government is financially accountable. Blended component units, although legally separate entities, are, in substance, part of the primary government's operations and are included as part of the primary government. Accordingly, the Economic Development Authority and the Housing and Redevelopment Authority are reported as special revenue IN funds of the City of Brooklyn Center. 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 4 FAX (763) 569 -3494 The City provides a full range of munici al services includin public safety (police and fire 9 P 9 P Y �p ), streets, sanitation, social services, culture- recreation, public improvements, planning and zoning, and general administrative services. The City operates an off -sale liquor store, a water, sewer, recycling, street light and storm drainage utility, a golf course, and a convention center known as the Earle Brown Heritage Center. ECONOMIC C CONnITInN AND OUTLOOK The City of Brooklyn Center is a northern suburb of the Minneapolis /St. Paul metropolitan area, adjacent to the City of Minneapolis and located 10 miles from downtown Minneapolis. The City is wholly within Hennepin County and encompasses an area of approximately 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. The estimated market value of property within the City increased 12.42% in 2002 over j 2001 and it increased 12.39% in 2001 over 2000. Residential values are continuing to show increases in early 2003 although commercial /industrial values are less robust. Strong demand for starter homes has continued to drive up values of residential property in the City. 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 and adjacent to these corridors. Commercial and industrial properties comprise 39.82% of the City's taxable net tax capacity. The largest commercial property in the City is Brookdale Mall, a 1,093,931 square -foot regional shopping center anchored by Marshall Fields, Sears, J.C. Penney's, and Mervyn's of California. Other retail shopping centers in the City include Brookdale Square, a 125,000 square -foot strip center; Shingle Creek Center, a 157,000 square -foot building anchored by Target; and Brookview Plaza, a 70,000 square -foot center anchored by Best Buy. Other freestanding retail establishments include Kohl's Department Store, Cub Foods Supermarket, and Rainbow Supermarket. The Brookdale Corner retail development, with a Cub Foods Supermarket and small retail shops, has enhanced the area surrounding the Brookdale Mall. The City's municipal liquor store is located in this newly developed area. New construction projects in 2002 include: a new retail mall and a Culver's Restaurant at 69 and Brooklyn Boulevard for $1,616,243 and $638,658 respectively; a new IHOP Restaurant adjacent to Brookdale Mall for $540,000; a single story office building at 3280 Northway Drive for $460,000 and an upgraded SuperAmerica gas station /convenience store for $804,600. Other commercial and industrial remodeling projects include Brookdale Mall projects for $8,379,150; Medtronic for $1,587,437; and an expansion of City County Credit Union for $694,700. 5 The convergence of highways in Brooklyn Center and the close proximity to downtown Minneapolis make the City an attractive site for hotels and motels. Establishments now operating in the City include Americlnn, Baymont Inn, Best Western, Comfort Inn, Country Inn & Suites, Extended StayAmerica, Hilton Hotel, Motel 6, and Super 8 Motel. MAJOR EVENTS OF 2002 Brooklyn Center is a mature, developed suburb that is working to revitalize itself. With its affordable housing, excellent schools, beautiful parks, and convenient access, it has the potential to continue to be a vibrant community for many years to come. The revitalization of Brooklyn Center is proceeding on three tracks: replacement and renewal of the commercial areas of the City; replacement and enhancement of its aging streets, utilities, and parks; and the reinvigoration of neighborhoods. The City continued its redevelopment effort in the Brooklyn Boulevard and 69th Avenue , area with the completion of a Culver's Restaurant on the northeast corner. The City's Economic Development Authority continues to work with a private developer for construction of a neighborhood retail center on the property. This approximately 5.2 acre site contained some of the older commercial property along Brooklyn Boulevard. Redevelopment of the Joslyn pole yard site located in the southwest corner of the City continued in 2002. In September 2001, a 109,588 square foot industrial building was completed, adding to the 203,000 square foot building completed in 1999. This former , Environmental Protection Agency Super Fund site is being privately developed with financial assistance provided for the cleanup from the State of Minnesota and the Metropolitan Council. Tax increment financing is being provided by the City to facilitate the development through public improvements such as streets and storm water management amenities. As part of a planned replacement of the aging infrastructure, the City is in the process of completing several street and utility improvements. These improvements were funded by general obligation improvement bonds supported with special assessments against benefited properties, an operating transfer from the general fund, 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 a perpetual process, since at the end of twenty -five years, it will be necessary to begin the process anew with the streets that were done first. An additional benefit of these neighborhood projects has been the increased interest by residents and their efforts to paint, repair, landscape and further enhance their properties. In 1997, Equitable Real Estate sold Brookdale Mall to Talisman Brookdale, LLC. j Brookdale Mall is one of seven regional shopping centers in the seven county metropolitan area. With a new owner and cooperation of existing tenants, more than $40 million is being invested to remodel and expand the current facility. Additionally, several tenants are investing in upgrades to the fagade and interior spaces to accomplish a complete renovation. Several new tenants such as Old Navy and Barnes and Noble have been added as part of the renovation. They will enhance the Mall's customer drawing ability and will add significantly to the local tax base. A new food court will be completed in 2003. 6 ' FINANCIAL INFORMATION Management of the City is responsible for establishing and maintaining internal controls designed to ensure that the assets of the City are protected from loss, theft or misuse and to ensure that adequate accounting data are compiled to allow for the preparation of financial statements inconformity with generally accepted accounting principles. Internal controls are designed to provide reasonable, but not absolute, assurance that these objectives are met. The concept of reasonable assurance recognizes that: (1) the cost of a control should not exceed the benefits likely to be derived; and (2) the valuation of costs and benefits requires estimates and judgments by management. In addition, the City maintains budgetary controls. The objective of these budgetary controls is to ensure compliance with legal provisions embodied in the annual budget appropriation approved by the City's governing body. Activities of the General Fund and special revenue funds are included in the annual appropriated budget. Project - length financial plans are adopted for the Capital Projects Funds. The level of budgetary control (that is, the level at which expenditures cannot exceed the appropriated amount without budget amendment by the City Council) is established by department forthe General Fund and at the aggregate fund level for all other governmental funds that adopt annual budgets. I' Appropriations lapse at year -end and generally are not re- appropriated in the following year's budget. As demonstrated by the statements and schedules included in the financial section of this report, the City continues to meet its responsibility for sound financial management. GENERAL FUND The following schedule presents a summary of general fund budgeted revenues for 2003, and actual revenues for the fiscal year ended December 31, 2002 compared to 2001. General Fund Revenues and Other Financing Sources 2002 Increase 2003 2002 2001 (Decrease) Budget Actual Actual from 2001 Taxes $10,537,474 $10,990,660 $8,469,023 $2,521,637 Reserve for tax abatements 266,343 (57,510) 323,853 Licenses & permits 612,720 823,996 788,629 35,367 Intergovernmental revenue 2,999,185 2,843,629 4,135,282 (1,291,653) Charges for services 683,892 575,748 688,453 (112,705) Court fines 200,000 278,557 230,408 48,149 Investment and other Miscellaneous revenues 375,000 312,303 697,886 (385,583) Total $15,4 08,271 $ 16,091,236 $14,952,171 $1,139,065 7 Revenues and other financing sources for the General Fund totaled $16,091,236 in 2002, an increase of $1,139,065 from the previous year. From the table above, it is apparent that the major sources of revenue available for funding of general governmental functions are taxes and intergovernmental revenue, which, when combined, provided 88% of the total revenues. The principal source of intergovernmental aid to the City is local government aid of $2,265,267. The decrease in intergovernmental revenue received in 2002 is directly related to a shift by the Legislature to fund the basic K -12 education levy for school districts by reducing aids to cities. In turn, cities were permitted to levy back the aid reductions within specific limitations. , In response to potential property tax abatements, the City had established a tax abatement reserve in the General Fund. Since the early 1990's, City management had estimated the potential future abatements on large commercial properties. The balance in the reserve in the General Fund was $266,343 on December 31, 2001. The City eliminated the reserve in 2002. City management believes that potential tax abatements would not materially affect the finances of the City. The large decrease in investment and other revenues is primarily due to the reversal of an investment writedown taken in 2000 and reversed in 2001 resulting in higher than normal revenue in 2001. The difference in the fair value of investment adjustments accounted for $334,249 of the decrease. The prevailing low interest rate environment also lowered interest earnings in 2002. The following schedule presents a summary of general fund budgeted expenditures for 2003, and actual expenditures for the fiscal year ended December 31, 2002, compared to 2001. General Fund Expenditures and Other Financing Uses 2002 Increase , 2003 2002 2001 (Decrease) Budget Actual Actual from 2001 General Government $2,566,379 $2,553,426 $2,504,392 $49,034 Public Safety 6,645,335 6,184,663 5,660,600 524,063 Public Works 1,935,472 1,986,692 2,142,064 (155,372) Community Service 93,105 103,491 106,034 (2,543) Parks and Recreation 2,456,604 2,026,409 2,205,018 (178,609) Economic Development 332,500 340,659 392,805 (52,146) Non departmental 514,466 516,282 372,056 144,226 Admin. Services Reimb. (784,084) (596,541) (767,504) 170,963 Other Financing Uses 1,648,494 1,863,910 1,661,877 202,033 Total $15,408,271 $14 $ 14,277,342 $551,649 8 Total expenditures a expen and other financing uses in 2001 increased by a total of $551,649 over 2000, a 3.86% increase. Salaries and benefits account for $271,399 of the increase, due primarily to the 3% wage adjustment for most employees. The increase in public safety spending includes a $533,164 increase for police protection; $135,814 of the increase relates to police building expenditures, which were categorized as public safety in 2002 instead of general government as in prior years. Personal services expenditures not related to the police building increased $331,964, an 8.81% increase from 2001. The General Fund transferred $555,000 to the Special Assessment Construction Fund for infrastructure replacement. This transfer allows the City to pay cash for street improvements instead of borrowing through a bond issue for construction costs that would be supported with an additional property tax. The City hopes to continue this transfer in the future as part of the planned replacement of the City's aging infrastructure. The General Fund had an excess of revenues and other financing sources over expenditures and other financing uses of $1,262,245 in 2002; the excess in 2001 was $674,829. Most of the increase in revenues is due to higher tax collections. The levy was established to compensate for the loss of State aid as well as provide an additional $720,936 for ongoing operations. Additional sums were programmed for street reconstruction projects. The net increase in revenues for taxes and intergovernmental revenue was $1,229,984 or $509,048 more than planned. Delinquent tax collections of $219,067 and the discontinuation of the $266,343 tax abatement reserve accounted for the higher than planned net increase. GENERAL FUND BALANCE As of December 31, 2002, the fund balance of the General Fund totaled $7,929,774. This ending fund balance is the equivalent of approximately six months of budgeted expenditures for the 2003 budget. Property taxes and intergovernmental revenue represent 88% of the budgeted general fund revenue for 2003. The State of Minnesota has structured city finances so most of these revenues are received in the second half of the fiscal year. Minnesota cities typically receive as little as 10% of their total revenues in the first six months of the year. In recognition of this fact, a major portion of the fund balance is being designated for working capital. The designation amount is determined by a formula adopted by the City Council. The Financial Management Policies adopted by the City Council on June 8, 1992 established a formula for determining a minimum level of fund balance to be maintained in the General Fund. Major elements of the formula include coverage of assets not readily convertible to cash and a provision for capital 9 Y p g p al equal to 45% of the next year's General Fund budget. The Financial Management Policies go on to state that no more that 50% of any year's surplus over the minimum level shall be committed to other uses in that year. 9 EARLE BROWN FARM TAX INCREMENT DISTRICT This tax increment financing (TIF) district had a deficit fund balance as of December 31, 2002. This condition is caused by a series of reductions in property tax class rates made by the State of Minnesota, which have eroded the revenue base for TIF districts throughout Minnesota. Borrowing from other City funds is required in order for the district to meet its obligations. If the current situation continues, the district will experience annual deficits. The TIF district will make its last transfer to the Debt Service Funds in the year 2003. It has the authority to continue to exist and collect tax increments through the year 2008. Three years of tax collections beyond 2003 should be sufficient to repay all internal borrowing to reduce the deficit. ENTERPRISE OPERATIONS The City's enterprise operations are composed of eight separate and distinct activities: Liquor store, Golf Course, Earle Brown Heritage Center, Recycling, Water utility, Sanitary Sewer utility, Street Light utility and Storm Drainage utility. The liquor store operates in a leased facility adjacent to a Cub Foods Supermarket. Operating income for 2002 was about $80,000 less than in 2001. However, the Liquor Fund still earned $81,694 after a $100,000 operating transfer to the Capital Improvements Fund. Centerbrook Golf Course is a nine -hole, par three golf course owned and operated by the City. Green fees have been increasing each year to keep pace with inflation and the cost of operations. An interfund loan used to build the golf course is being repaid over a planned schedule covering twenty years. The business is increasingly competitive with many new courses being added within the area. Poorweather in 2002 pressured revenues and net income. The Earle Brown Heritage Center is a pioneer farmstead that has been historically preserved and restored as a modern multipurpose facility. Its convention center can host conferences, trade shows, and concerts seating 1,000 people in either banquet or theater style. The City's policy for this enterprise is to set fees and user charges at a level that allows the operation to break -even excluding depreciation on contributed assets. That standard was met in 2002 and 2001. The dwindling supply of landfill space for the disposal of solid waste continues to be a major concern � ce n in Minnesota. State and count mandated oats for the diversion y g of solid waste to recycling programs took effect in 1989. In response, the City opened a Recycling and Refuse Fund as an enterprise fund. Thus far, the City is only operating a recycling program in cooperation with several neighboring communities. Expansion into solid waste collection would only take place if there are clear advantages to be achieved. Recycling participation levels should increase with a recent change in collection policy. Customers are no longer required to sort certain recyclable items as all recyclable items can be placed into a single container for sorting by the recycling collection entity at a central location. 10 The Street Light Utility Fund was established g y b fished m 2002 to account for expenses related to streetlights in the City. The majority of the City's streetlights are owned by Xcel Energy; the City is responsible for electrical and maintenance fees for these lights. Additionally, the City owns about 200 lights; the City is also responsible for repair and replacement of these lights in addition to electrical and maintenance fees. By creating this utility fund, the City has transferred funding responsibility for streetlight costs to benefiting properties rather than absorbing the cost in the General Fund. i The Water and Sanitary Sewer utilities are largely developed and already reach all parts of the City. During 2002, 1.14 billion gallons of water were supplied through 115 miles of water main from the City's nine wells and 1.1 billion gallons of sewage flowed through the City's 105 miles of sewer mains. Rates for both water and sanitary sewer are reviewed annually and are increased as needed to provide for increased operating costs, debt and capital outlays. Three - fourths of the sewer operating expenses are fees paid to the Metropolitan Council Environmental Services for contracted sewage treatment. Planned rate increases should be sufficient to keep both funds profitable. Mains and customer service lines are being replaced as needed concurrent with the City's 25 -year program for reconstructing infrastructure. During the 1980's, the State of Minnesota passed legislation that requires cities to take greater responsibility for controlling storm water runoff. In response to this, the City created a Storm Drainage Utility Fund. Fees to property owners to support operations, maintenance and capital improvements are based on the amount of water runoff from the properties. The fees vary according to the size and absorption characteristics of the respective properties. Construction of storm sewer lines has been incorporated into the City's 25 -year program for reconstructing infrastructure. INTERNAL SERVICE FUNDS ■ The Central Garage Fund was established to own and maintain all operating vehicles and equipment of the City valued over $10,000. At present, the fund maintains over 150 pieces of rolling and non rolling stock with a net book value of $2,704,950. Equipment maintenance, repair and fuel are charged based on usage. Replacement costs are provided from rental rates which the Central Garage Fund charges City operating departments for the use of the equipment. The Public Employees Retirement Fund was established to provide certain health care benefits for qualifying City employees who retire before age 65. The fund had assets of $1,580,601 at year -end. The liability of the City is analyzed on an annual basis. The Public Employees Compensated Absences Fund accounts for liabilities to the City resulting from the accrual of vacation and sick leave time earned by City employees. The liability is fully funded. Departments are charged for any increase in the liability for its employees on an annual basis. M 11 DEBT ADMINISTRATION At December 31, 2002, the City had thirteen debt issues outstanding. These issues include $7,425,000 of general obligation bonds, $5,370,000 of general obligation special assessment debt, $660,000 of general obligation revenue bonds and $6,150,000 of general obligation tax increment bonds. The City maintained its A -1 rating from Moody's Investors Service. The City issued $1,205,000 of bonds supported solely by special assessments during January 2003. The special assessment bond issue provided financing for various infrastructure improvement projects in the City. CASH MANAGEMENT The Finance Department keeps abreast of current trends and procedures for cash management and forecasting so as to ensure efficient and profitable use of the City's cash resources. Cash is invested only in investments authorized by Minnesota Statutes Chapter 118A. Interest earned during 2002 amounted to $1,024,202 compared to $3,073,862 during 2001. Changes in the fair value of investments increased 2001 earnings by $1,553,780; they decreased 2002 earnings by $28,677. The large change in fair market value in 2001 was attributed to the reversal of a writedown in 2000 of a defaulted commercial paper issue. The City has historically held all investments to maturity. Therefore unless the City liquidates the investment(s) prior to maturity, it is expected that the change in fair market value is temporary and will be reversed in future periods. The City adopted a written investment policy in 1990 and adopted an updated policy in 2001. The policy's objectives are to minimize credit and market risk, provide needed liquidity, and maintain a competitive yield on the portfolio. Revisions to the policy in 2001 preclude the City from purchasing individual commercial paper issues. Commercial paper can only be purchased through a brokerage as part of a professionally managed fund. All deposits were either insured by federal depository insurance or collateralized. Investment securities are held in a custody arrangement with a bank trust department. All investments are listed in the lowest custodial credit risk category, Category I. Cash and investment balances from all funds are combined and invested to the extent available in authorized investments. Earnings from securities are allocated to the various funds in proportion to their relative cash book balances. The City has not purchased any collateralized mortgage obligations, derivatives, or strip investments. In the recent past, the City has not needed to use any short-term debt and does not anticipate such a need in the future. 12 RISK MANAGEMENT The City insures for all significant risks. A schedule of such insurance is included in the Statistical Section. INDEPENDENT AUDIT The City Charter and State Statutes require the City Council to provide for an audit of the financial transactions of the City. HLB Tautges Redpath, Ltd. has been retained for that purpose and their unqualified opinion has been included in this report. 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 for the fiscal year ended ! December 31, 2001. The City of Brooklyn Center was first awarded a Certificate of Achievement for Excellence in Financial Reporting for its 1966 fiscal year report and has received a total of 24 certificates, including 19 consecutive certificates forthe years 1983 through 2001. In order to be awarded a Certificate of Achievement for Excellence in Financial Reporting, a governmental unit must publish an easily readable and efficiently organized comprehensive annual financial report; its contents must conform to program standards. Such reports must satisfy both generally accepted accounting principles and applicable legal requirements. A Certificate of Achievement is valid for a period of one year only. We believe our current report continues to conform to Certificate of Achievement Program requirements and we are submitting it to GFOA to determine its eligibility for another certificate. ! Respectfully submitted, Dou as Sell Director of Fiscal & Support Services 13 Certificate of Achievement for Excellence in Financial Rep ortin g Presented to City of Brooklyn Center, Minnesota For its Comprehensive Annual Financial Report for the Fiscal Year Ended December 31, 2001 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 h p � ) g standards in government accounting and financial reporting. TATES y ° "" A° " Pmnm President 9� �Oti CRCA64 *'f�oe I Executive Director I 14 Tautges Redpath, Ltd. Certified Public Accountants and Consultants INDEPENDENT AUDITOR'S REPORT To the Honorable Mayor and Members of the City Council City of Brooklyn Center, Minnesota ' We have audited the accompanying general purpose financial statements of the City of Brooklyn Center, Minnesota, as of and for the year ended December 31, 2002 as listed in the table of contents. These general purpose financial statements are the responsibility of the City of Brooklyn Center, Minnesota's management. Our responsibility is to express an opinion on these general purpose 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 general purpose financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the general purpose financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall general purpose financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the general purpose financial statements referred to above present fairly, in all material respects, the financial position of the City of Brooklyn Center, Minnesota, as of December 31, 2002, and the results of its operations and cash flows of its proprietary fund types for the year then ended in conformity with accounting principles generally accepted in the United States of America. In accordance with GovernmentAuditing Standards, we have also issued a report dated June 2, 2003 on our consideration of the City of Brooklyn Center, Minnesota's internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, and grants. That report is an integral part of an audit performed in accordance with GovernmentAuditing Standards and should be read in conjunction with this report in considering the results of our audit. Our audit was conducted for the purpose of forming an opinion on the general purpose financial statements taken as a whole. The combining, individual fund and account group financial statements and schedules listed in the table of contents are presented for purposes of additional analysis and are not a required part of the general purpose financial statements of the City of Brooklyn Center, Minnesota. Such information, has been subjected to the auditing procedures applied in the audit of the general purpose financial statements and, in our opinion, is fairly stated in all material respects, in relation to the general purpose financial statements taken as a whole. The statistical data has not been subjected to auditing procedures applied by in our audit of the general purpose financial statements and, accordingly, we express no opinion on it. June 2, 2003 At ` HLB TAUTGES REDPATH, LTD. Certified Public Accountants 4810 White Bear Parkway, White Bear Lake, Minnesota 55110, USA Telephone: 651 426 7000 Fax: 651 426 5004 15 HLB Tautges Redpath, Ltd. is a member of ® International. A world -wide organization of accounting firms and business advisers 1 1 (This page intentionally left blank.) j 1 1 1 1 1 1 1 1 16 City of Brooklyn Center, Minnesota GENERAL PURPOSE FINANCIAL STATEMENTS The general purpose financial statements are intended to provide a financial overview of municipal operations. These reports are at a summary level and include those data needed to control and analyze current operations to determine compliance with legal and r budgetary limitations and to assist in the financial planning process. r ' 17 City of Brooklyn Center COMBINED BALANCE SHEET All Fund Types and Account Groups ' December 31, 2002 Governmental Fund Types ' Special Debt Capital General Revenue Service Projects ASSETS AND OTHER DEBITS ' Assets: Cash and investments $7,937,436 $5,595,051 $5,746,017 $3,082,308 Receivables: Interest 433,044 Accounts 63,823 9,000 1,537 Delinquent taxes 289,726 158,625 79,111 3,837 Special assessments 3,875,650 155,181 Due from other funds 1,116,698 Due from other governments 53,489 890 11,608 209,257 Inventories and supplies , Prepaid expenses 68,279 849 Advances to other funds 105,074 1,493,069 Fixed assets, net Other Debits: Amount available in Debt Service b ce Amount to be provided for General Long -Term Debt Total Assets and Other Debits $8,950,871 $6,881,113 $9,712,386 $4,945,189 , LIABILITIES. EQUITY AND OTHER CREDITS ' Liabilities: Accounts payable $370,407 $414,616 $16,434 $1,171,329 Due to other funds 1,116,698 Due to other governments 8,019 ' Accrued salaries and wages 360,931 7,979 1,838 Accrued vacation & sick pay Accrued health insurance Accrued interest payable ' Advances from other funds 698,143 Deferred revenue 289,759 181,779 3,954,761 408,777 General obligation bonds payable ' Other long -term liabilities Special assessment bonds with governmental commitment Revenue bonds payable Total Liabilities 1,021,097 2,427,234 3,971,195 1,581,944 Equity and Other Credits: Contributed capital ' Investment in general fixed assets Retained earnings: Reserved ' Unreserved Fund Balances: Reserved 173,353 5,741,191 1,493,069 Unreserved: ' Designated 6,527,973 Undesignated 1,228,448 4,453,879 1,870,176 Total Equity and Other Credits 7,929,774 4,453,879 5,741,191 3,363,245 ' Total Liabilities, Equity and Other Credits $8,950,871 $6,881,113 $9,712,386 $4,945,189 (See notes to financial statements) ' 18 EXHIBIT 1 Totals Proprietary Fund Types Account Groups (Memorandum Only) General General Internal Fixed Long -Term December 31, Enterprise Service Assets Debt 2002 2001 $4,157,378 $6,514,190 $33,032,380 $35,133,415 433,044 120,890 1,444,542 9,218 1,528,120 1,551,247 531,299 414,608 291,889 4,322,720 3,853,551 1,116,698 523,762 64,493 339,737 849,158 337,450 15,461 352,911 330,024 153,985 223,113 132,559 1,598,143 1,648,143 39,574,772 2,704,950 $25,075,861 67,355,583 79,020,423 $5,741,191 5,741,191 5,472,514 13,203,809 13,203,809 16,476,649 $46,024,509 $9,243,819 $25,075,861 $18,945,000 $129,778,748 $145,526,943 $558,376 $17,657 $2,548,819 $2,733,542 1,116,698 523,762 8,019 60,867 7,719 439,334 409,552 714,914 714,914 733,221 1,549,681 1,549,681 1,549,681 14,583 14,583 18,833 900,000 1,598,143 1,648,143 118,188 4,953,264 4,827,444 $13,575,000 13,575,000 15,795,000 4,163 5,370,000 5,370,000 6,150,000 660,000 660,000 860,000 2,312,014 2,289,971 18,945,000 32,548,455 35,253,341 ' 21,608,205 2,834,943 24,443,148 25,226,346 $25,075,861 25,075,861 28,006,847 1 531,429 531,429 501,532 21,572,861 4,118,905 25,691,766 32,887,652 7,407,613 7,120,657 6,527,973 6,437,653 7,552,503 10,092,915 43,712,495 6,953,848 25,075,861 97,230,293 110,273,602 $46,024,509 $9,243,819 $25,075,861 $18,945,000 $129,778,748 $145,526,943 19 r City of Brooklyn Center EXHIBIT 2 ' COMBINED STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES All Governmental Fund Types For the Year Ended December 31, 2002 Totals Special Debt Capital (Memorandum Only) , Revenues General Revenue Service Projects 2002 2001 Taxes and special assessments $11,257,003 $3,222,992 $928,559 $260,752 $15,669,306 $13,863,278 Licenses and permits 823,996 823,996 788,629 Intergovernmental 2,843,629 487,780 292,014 3,416,472 7,039,895 5,824,513 ' Charges for services 575,748 575,748 688,453 Court fines 278,557 278,557 230,408 Investment earnings 211,198 190,496 110,099 154,757 666,550 1,020,291 Change in fair value of investments (5,858) (4,963) (3,054) (4,252) (18,127) 1,062,389 , Miscellaneous 106,963 134,306 26,448 267,717 150,369 Total Revenues 16,091,236 4,030,611 1,327,618 3,854,177 25,303,642 23,628,330 , Expenditures Current: General government 2,553,426 2,553,426 2,504,392 ' Public safety 6,184,663 70,558 6,255,221 5,672,098 Public works 1,986,692 1,986,692 2,142,064 Community services 103,491 103,491 106,034 Parks and recreation 2,026,409 99,006 2,125,415 2,392,168 Economic development 340,659 1,754,886 2,095,545 2,365,732 Non departmental 366,282 366,282 372,056 Administrative Services Reimbursement (596,541) (596,541) (767,504) ' Capital outlay 9,608,420 9,608,420 6,558,177 Debt service: Principal retirement 3,000,000 3,000,000 2,805,000 , Interest and fiscal charges 1,062,851 1,062,851 1,339,093 Total Expenditures 12,965,081 1,924,450 4,062,851 9,608,420 28,560,802 25,489,310 Excess (Deficiency) of Revenues r Over Expenditures 3,126,155 2,106,161 (2,735,233) (5,754,243) (3,257,160) (1,860,980) Other Financina Uses( -) or Sources ' Proceeds from sale of bonds 730,000 Sale of land 474,648 474,648 572,266 Operating transfers in 208,266 3,003,910 1,051,277 4,263,453 4,124,184 r Operating transfers out (1,863,910) (2,199,543) (4,063,453) (3,798,684) Total Other Financing (Uses) Sources (1,863,910) (1,516,629) 3,003,910 1,051,277 674,648 1,627,766 Excess (Deficiency) of Revenues and Other , Sources Over Expenditures and Other Uses 1,262,245 589,532 268,677 (4,702,966) (2,582,512) (233,214) Fund Balances January 1, as previously reported 7,433,872 3,864,347 5,472,514 6,880,492 23,651,225 23,884,439 r Prior period adjustment 419,376 419,376 Fund Balances January 1, as restated 7,433,872 3,864,347 5,472,514 7,299,868 24,070,601 23,884,439 Equity transfers (Out) In (766,343) 766,343 Fund Balances December 31 $7,929,774 $4,453,879 $5,741,191 $3,363,245 $21,488,089 $23,651,225 (See notes to financial statements) , 20 ' ' EXHIBIT 3 City of Brooklyn Center COMBINED STATEMENT OF REVENUES, EXPENDITURES, ' AND CHANGES IN FUND BALANCES - BUDGET AND ACTUAL General and Special Revenue Funds For the Year Ended December 31, 2002 General Fund Special Revenue Funds Actual Over Actual Over Under( -) Under( -) Budget Actual Budget Budget Actual Budget Revenues Taxes and special assessments $10,658,829 $11,257,003 $598,174 $3,415,444 $3,222,992 ($192,452) Licenses and permits 565,485 823,996 258,511 Intergovernmental 2,769,840 2,843,629 73,789 242,294 487,780 245,486 Charges for services 605,267 575,748 (29,519) ' Court fines 190,000 278,557 88,557 Investment earnings 350,000 211,198 (138,802) 50,000 190,496 140,496 Change in fair value of investments (5,858) (5,858) (4,963) (4,963) Miscellaneous 34,305 106,963 72,658 68,000 134,306 66,306 Total Revenues 15,173,726 16,091,236 917,510 3,775,738 4,030,611 254,873 ' Expenditures General government 2,441,150 2,553,426 112,276 Public safety 6,451,978 6,184,663 (267,315) 20,000 70,558 50,558 Public works 2,076,714 1,986,692 (90,022) ' Community services 103,419 103,491 72 Parks and recreation 2,288,897 2,026,409 (262,488) 99,006 99,006 . Economic development 342,000 340,659 (1,341) 237,067 1,754,886 1,517,819 Non - departmental 606,582 366,282 (240,300) 48,000 Admin. Services Reimbursement (782,684) (596,541) 186,143 Total Expenditures 13,528,056 12,965,081 (562,975) 305,067 1,924,450 1,667,383 Excess (Deficiency) of Revenues Over Expenditures 1,645,670 3,126,155 1,480,485 3,470,671 2,106,161 (1,412,510) ' Other Financing (Uses) Sources Sale of land 474,648 474,648 Operating transfers in 208,266 208,266 t Operating transfers out (1,645,670) (1,863,910) (218,240) (2,760,217) (2,199,543) 560,674 Total Other Financing (Uses) Sources (1,645,670) (1,863,910) (218,240) (2,760,217) (1,516,629) 1,243,588 Excess (Deficiency) of Revenues and Other Sources Over Expenditures and Other Uses 1,262,245 1,262,245 710,454 589,532 (168,922) Fund Balances January 1 7,433,872 7,433,872 3,864,347 3,864,347 Equity Transfer Out (766,343) (766,343) Fund Balances December 31 $7,433,872 $7,929,774 $495,902 $4,574,801 $4,453,879 ($168,922) (See notes to financial statements) ' 21 City of Brooklyn Center EXHIBIT 4 ' COMBINED STATEMENT OF REVENUES, EXPENSES, AND CHANGES IN RETAINED EARNINGS Proprietary Fund Types ' For the Year Ended December 31, 2002 Internal Totals Enterprise Service (Memorandum Only) Operatina Revenues Funds Funds 2002 2001 Sales and user fees $13,025,231 $1,118,824 $14,144,055 $14,344,817 Cost of sales 3,006,926 3,006,926 3,220,229 Net Operating Revenues 10,018,305 1,118,824 11,137,129 11,124,588 Operatina Expenses ' Personal services 2,819,334 277,160 3,096,494 3,298,805 Supplies 465,859 222,228 688,087 676,690 , Other services 3,223,104 106,183 3,329,287 2,936,042 Insurance 68,945 52,326 121,271 133,586 Utilities 297,647 3,688 301,335 373,409 Rent 246,721 246,721 226,659 ' Depreciation 2,222,086 570,105 2,792,191 1,844,259 Total Operating Expenses 9,343,696 1,231,690 10,575,386 9,489,450 ' Operating Income (Loss) 674,609 (112,866) 561,743 1,635,138 Nonoperatino Revenues (Expenses) ' Investment earnings 155,176 231,153 386,329 499,791 Change in fair value of investments (4,138) (6,412) (10,550) 491,391 Special assessments 451,322 451,322 290,907 ' Other revenue 2,614 2,614 4,840 Interest and fiscal agent fees (37,799) (37,799) (55,138) Total Net Nonoperating Revenue 567,175 224,741 791,916 1,231,791 , Income Before Contributions and Operating 1,241,784 111,875 1,353,659 2,866,929 Transfers ' Capital Contributions 212,142 212,142 Operating Transfers Out (200,000) (200,000) (325,500) f Net Income 1,253,926 111,875 1,365,801 2,541,429 Depreciation on contributed assets that reduces contributed capital 686,971 96,228 783,199 396,477 Retained Earnings January 1, as previously reported 29,371,877 4,017,307 33,389,184 30,451,278 Prior period adjustment (6,444,481) (6,444,481) Cumulative effect of change in accounting principle (2,764,003) (106,505) (2,870,508) , Retained Earnings January 1, as restated 20,163,393 3,910,802 24,074,195 30,451,278 Retained Earnings December 31 $22,104,290 $4,118,905 $26,223,195 $33,389,184 (See notes to financial statements) 22 , City of Brooklyn Center EXHIBIT 5 COMBINED STATEMENT OF CASH FLOWS Proprietary Fund Types For the Year Ended December 31, 2002 Internal Totals Enterprise Service (Memorandum Only) Cash flows from ooeratina activities: Funds Funds 2002 2001 Operating income (loss) $674,609 ($112,866) $561,743 $1,635,138 Adjustments to reconcile operating income (loss) to net cash provided by operating activities: Depreciation 2,222,086 570,105 2,792,191 1,844,259 Changes in assets and liabilities: Receivables 58,778 1,161 59,939 (54,963) Inventories (20,684) (2,203) (22,887) 78,530 Prepaid expenses (21,426) (21,426) (9,741) ' Payables (108,911) 1,591 (107,320) (377,176) Accrued expenses 8,906 (19,589) (10,683) 593,951 Accrued interest payable (4,250) (4,250) (3,962) Accrued health insurance liability 126,438 Other nonoperating income 453,936 453,936 295,747 Net cash provided by operating activities 3,263,044 438,199 3,701,243 4,128,221 Cash flows from noncapital financing activities: Proceeds from borrowings due to other funds (21,315) (21,315) (63,321) Principal payments on long -term debt (56,302) (56,302) (56,302) Principal payments on advance from other funds (50,000) (50,000) (50,000) Interest paid to other entities (1,098) (1,098) (1,972) Operating transfers out (200,000) (200,000) (325,500) ' Net cash used for noncapital financing activities (328,715) (328,715) (497,095) Cash flows from capital and related financing activities: Acquisition and construction of capital assets (2,646,497) (619,371) (3,265,868) (2,975,419) Proceeds of sale of fixed assets 104,685 Principal paid on revenue bonds (200,000) (200,000) (190,000) Interest paid on revenue bonds (36,701) (36,701) (53,166) Net cash used for capital and related financing activities (2,883,198) (514,686) (3,502,569) (3,218,585) Cash flows from investina activities: Investments purchased (3,722,312) (5,837,474) (9,559,786) (530,283) Investments sold or matured 1,829,791 2,938,566 4,768,357 3,928,596 Investment earnings 155,176 231,153 386,329 499,791 Net cash (used for) provided by investing activities (1,737,345) (2,667,755) (4,405,100) 3,898,104 Net (decrease) increase in cash and cash equivalents (1,686,214) (2,744,242) (4,535,141) 4,310,645 Cash and cash equivalents at beginning of year 2,391,289 3,848,946 6,240,235 1,932,490 Cash and cash equivalents at end of year $705,075 $1,104,704 $1,705,094 $6,243,135 Non cash items: Change in fair value of investments ($4,138) ($6,412) ($10,550) $491,391 ' Golf Course Fund Capital Contribution $212,142 $212,142 (See notes to financial statements) 23 City of Brooklyn Center ' NOTES TO FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2002 Note 1: Summary of Significant Accountina Policies The City of Brooklyn Center, Minnesota (the City) was formed and operates pursuant to applicable Minnesota laws and statutes. The governing body consists , of a mayor and four City Council members elected at large to serve four -year staggered terms. A. Reporting Entitv ' As required by accounting principles generally accepted in the United States of ' America, the City's financial statements include all funds and departments of the City and the City's component units. The component units discussed below are included in the City's reporting entity because of the significance of their operational , or financial relationship with the City. BLENDED COMPONENT UNITS: ' Blended component units, although legally separate, are in substance, part of the government's operations; data from these units are combined with data of the ' primary government. These additional units are the Economic Development Authority (EDA) and the Housing and Redevelopment Authority (HRA) in and forthe City of Brooklyn Center. The governing board for each Authority is the City Council. The Council reviews r and approves the HRA tax levy and the City provides major community development financing for EDA and HRA activities. Debts issued for EDA and HRA ' activities are City general obligations. Although the EDA and HRA are legally separate from the City, they are reported as part of the City because the governing boards are the same. Complete financial statements forthe EDA and HRA may be , obtained at the City offices located at 6301 Shingle Creek Parkway, Brooklyn Center, Minnesota 55430. 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. ' 24 ' r Note 1: Summary of Sianificant Accountina Policies (cont'd) ' Local Government Information Systems 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 2002 financial statements of the City is $403,659 for services provided, allocated to the various funds based on applications and /or use of services. Complete financial statements may be obtained at the LOGIS offices located at 5750 Duluth Street, Golden Valley, ' Minnesota, 55422. LOGIS Insurance Group: ' This group provides cooperative purchasing of health and life insurance benefits for approximately 45 governmental entities. The total of 2002 health and life insurance costs paid by the City was $783,817. Complete financial statements may be obtained from Stanton Group located at 3405 Annapolis Lane, Plymouth, MN 55447. r OTHER: The Brooklyn Center Fire Department 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 such 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 15 for disclosures relating to the pension plan operated by the Association.) The City's portion of the costs of the Association's pension benefits is included in the General Fund under public safety. Complete financial statements for the Association may be obtained at the City offices located at 6301 Shingle Creek Parkway, Brooklyn Center, Minnesota 55430. r 25 Note 1: Summary of Sianificant Accountina Policies (cont'd) B. Fund Accountina , The accounts of the City are organized on the basis of funds and account groups, each of which is considered a separate accounting entity. The operations of each , fund are accounted for with a separate set of self - balancing accounts that comprise its assets, liabilities, fund equity, revenues, and expenditures or expenses, as appropriate. Government resources are allocated to and accounted for in individual funds based upon the purposes for which they are to be spent and the means by which spending activities are controlled. The various funds are grouped, in the financial statements in this report, into six generic fund types and two broad fund categories as follows: GOVERNMENTAL FUNDS: General Fund - The General Fund is the general operating fund of the City. It is used to account for all financial resources except those required to be accounted for in another fund. Special Revenue Funds - Special Revenue Funds are used to account for the proceeds of certain specific revenue sources that are legally restricted to expenditures for specified purposes. t Debt Service Funds - Debt Service Funds are used to account for the accumulation of resources for, and the payment of, general long -term debt principal, interest, and , related costs. Capital Projects Funds - Capital Projects Funds are used to account for financial resources to be used for the acquisition or construction of major capital facilities, other than those financed by proprietary funds. ' PROPRIETARY FUNDS: Enterprise Funds - Enterprise Funds are used to account for operations that are financed and operated in a manner similar to private business enterprises - where the intent is that the costs (expenses, including depreciation) of providing goods or services to the general public on a continuing basis be financed or recovered primarily through user charges. Internal Service Funds - Internal Service Funds are used to account for the financing of goods or services provided by one department to other departments of the City on a cost reimbursement basis. 26 ' Note 1: Summary of Sianificant Accountina Policies (cont'd) ' C. Fixed Assets and Lona -Term Liabilities The accounting and reporting of fixed assets and long -term liabilities associated with a fund are determined by its measurement focus. All governmental funds are accounted for on a spending or "financial flow" measurement, which means that only current assets and current liabilities are generally included on their balance sheets. Their reported fund balance is considered a measure of "available spendable resources." Governmental fund operating statements present increases (revenues and other financing sources) and decreases (expenditures and other financing uses) in net current assets. Accordingly, they are said to present a summary of sources and uses of "available spendable resources" during a period. Fixed assets used in governmental fund type operations are accounted for in the General Fixed Assets Account Group, ratherthan in the governmental funds. Public domain general fixed assets consisting of certain improvements other than buildings, including roads, curbs and gutters, streets and sidewalks, drainage systems, and lighting systems, have been excluded from general fixed assets, as such items are immovable and of value only to the City. No depreciation has been provided on general fixed assets. All fixed assets are valued at historical cost or estimated historical cost if historical cost is unavailable. Donated fixed assets are valued at their estimated market value as of the date donated The fixed assets of the proprietary funds are depreciated using the straight -line method over the estimated useful lives of the assets. The current estimated useful lives are as follows: Water & Sewer Mains & Lines 25 years Buildings and Structures 25 years Water Wells and Storage Tanks 25 years Sewer Lift Stations 25 years ' Machinery and Equipment 2 -15 years Furniture and Fixtures 5 years Long -term liabilities that are expected to be financed from governmental funds are accounted for in the General Long -Term Debt Account Group, not in the governmental funds. All proprietary funds are accounted for on a flow of economic resources measurement focus. With this measurement focus, all assets and all liabilities associated with the operations of these funds are included on the balance sheet. Fund equity (e.g., net total assets) is segregated into contributed capital and retained earnings components. Proprietary fund -type operating statements present increases (e.g., revenues) and decreases (e.g., expenses) in net total assets. ' 27 Note 1: Summary of Sianificant Accountina Policies (cont'd) , D. Basis of Accountina ' Governmental funds are accounted for using the modified accrual basis of accounting. Their revenues are recognized when they become measurable and available. Available means collectible within the current period or soon enough thereafter to be used to pay liabilities of the current period. Major revenues that are susceptible to accrual include taxes, special assessments, , intergovernmental revenues, charges for services, and investment earnings. Major revenues that are not susceptible to accrual include licenses and permits, fees, and miscellaneous revenues; such revenues are recorded only as received because they are not measurable until collected. Interest on special assessments is recognized as revenue when due, net of delinquencies. I Expenditures are generally recognized under the modified accrual basis of accounting when the related fund liability is incurred, except for principal and , interest on general long -term debt which is recognized when due. All proprietary funds are accounted for using the accrual basis of accounting. Their revenues are recognized when they are earned, and expenses are recognized when they are incurred. Unbilled Water and Sewer Fund utility service receivables are recorded at year -end. The City applies all applicable Financial Accounting , Standards Board (FASB) pronouncements issued prior to November 30, 1989 in accounting for its proprietary operations. E. Budaets and Budaetary Accountin N The City follows these procedures establishing the budgetary data reflected in the ' financial statements: 1. In August, the City Manager submits to the City Council proposed operating budgets for the fiscal year commencing the following January. The operating budgets include expenditures and the means of financing them. 2. The County mails individual property tax notices showing the taxes that would result from the proposed budgets of all taxing units to each property owner in November. 3. Public hearings are conducted to obtain taxpayer comments. 4. The budgets are legally enacted with the passage of resolutions by the City Council in the month of December. 5. The City Council must authorize any transfer of budgeted amounts between departments within the General Fund. A transfer of budgeted amounts within individual departments must be authorized by the City Manager. 28 Note 1: Summary of Sianificant Accountina Policies (cont'd) 6. Supplemental appropriations during the year may only be made by the City Council. These amounts must be financed by funds from the contingency reserve set up in the General Fund or by additional revenues. 7. All budget amounts lapse at the end of the year to the extent they have not been expended or re- encumbered by City Council directive in the following fiscal year. 8. Formal budgetary integration is employed as a management control device during the year for all governmental funds with the exception of Debt Service Funds and Capital Projects Funds. Formal budgetary integration is not employed for Debt Service Funds because effective budgetary control is alternatively achieved through general obligation bond indenture provisions. Budgetary control for Capital Projects Funds is accomplished through the use of project controls and project - length budgets. 9. Budgets are adopted on a basis consistent with accounting principles generally accepted in the United States of America. Annual appropriated budgets are adopted for all governmental funds except for the project - length Capital Projects Funds and the Debt Service Funds. 10. Budgetary control is maintained at the department level for the General Fund and at the fund level for all other governmental funds that adopt annual budgets. 11. Budgeted amounts are as originally adopted, or as amended by the City Council. Individual and aggregate amendments were not material in relation to the original appropriations. F. Cash, Cash Eauivalents and Investments, Cash balances from all funds are combined and invested to the extent available in authorized investments (see Note 2). Earnings from such investments are allocated to the respective funds on the basis of applicable cash balance participation by ' each fund. Cash and investments are stated at fair value. Unless individual investments become impaired, all certificates of deposit with a maturity of one year or less when purchased are stated at amortized cost which approximates market value. All highly liquid unrestricted investments with a maturity of three months or less when purchased are considered to be cash equivalents. G. Inventories and SuDolies Inventories in the proprietary funds are valued at cost, using the weighted average method in the Municipal Liquor Fund and the first -in /first -out (FIFO) method in the other proprietary funds. The costs of governmental fund type supplies are recorded as expenditures when purchased. 29 i Note 1: Summary of Sianificant Accountina Policies (cont'd) H. Accrued Vacation and Sick Pav The City pays employees severance pay upon termination of employment based on accumulated sick leave and accrued vacation. Such pay is accrued as an expenditure /expense as it is earned and accounted for in the Compensated Absences Fund, an internal service fund established for that purpose. I. Fund Eauitv Contributed capital is recorded in proprietary funds that have received capital grants or contributions from developers, customers, or other funds. Reserves represent those portions of fund equity not available for appropriation or expenditure, or legally segregated for a specific future use. Designated fund ■ balance represents tentative plans for future use of financial resources. J. Property Tax Property tax levies are set by the City Council in December of each year and are certified to Hennepin County for collection in the following year. In Minnesota, counties act as collection agents for all property taxes. The County spreads all levies over taxable ro ert . Such taxes become liens on , p p Y properties on January 1 in the year of collection. Revenues are accrued and recognized in the year collectible, net of delinquencies. Real estate property taxes may be paid by taxpayers in two equal installments on May 15 and October 15. Personal property taxes may be paid on February 28 and , June 30. The County provides tax settlements to cities and other taxing districts two times a year, in July and December. , Taxes that remain unpaid at December 31 are classified as delinquent taxes receivable and are fully offset by deferred revenue because they are not known to be available to finance current expenditures. , K. Total Columns on Combined Statements Total columns on the Combined Statements are captioned "Memorandum Only" to indicate that they are presented only to facilitate financial analysis. Data in these columns do not present financial position, results of operations or cash flows in conformity with accounting principles generally accepted in the United States of America. Interfund eliminations have not been made in the aggregation of this data. 30 Note 1: Summary of Sianificant Accounting Policies (cont'd) L. New Accounting Pronouncement In June 1999, the GASB issued Statement No. 34, Basic Financial Statements and Management's Discussion and Analysis - for State and Local Governments. This statement is effective for the City for the year ending December 31, 2003. Statement No. 34 will affect the presentation of the City's annual financial report. The statement also requires the City to utilize the economic resources measurement focus as well as the accrual basis of accounting. The City has not yet determined the effects Statement No. 34 will have on its financial statements. M. Use of Estimates The preparation of financial statements in accordance with generally accepted accounting principles (GAAP) requires management to make estimates that affect amounts reported in the financial statements during the reporting period. Actual results could differ from such estimates. N. Deferred Revenue The City reports deferred revenue i y p on is combined balance sheet. Deferred revenues arise when potential revenue does not meet both the "measurable" and "available" criteria for recognition in the current period. Deferred revenues also arise when resources are received by the government before it has a legal claim to them, as when grant monies are received prior to the incurrence of qualifying expenditures. In subsequent periods, when both revenue recognition criteria are met, or when the government has a legal claim to the resources, the liability for deferred revenue is removed from the combined balance sheet and revenue is recognized. The City's reported deferred revenues are $4,953,264. The amount includes special assessments of $4,083,171; property taxes of $478,958; grants of $224,504; water tower rental fees of $116,588 and $50,043 of other miscellaneous deferred items. Note 2. Cash and Investments Deposits In accordance with Minnesota Statutes, the City maintains deposits at 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. 31 i Note 2: Cash and Investments (cont'd) 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 with a financial institution other than that furnishing the collateral. Credit Risk Category Bank Carrying , Balances Amount (1) Insured or collateralized by securities held by the City or its agent in the City's name $103,197 $104,225 (2) Collateralized with securities held by the pledging institution's trust department in the City's name 846,972 481,384 (3) Uncol lateral ized or collateralized with securities held by the pledging institution but not in the City's name - - $950 $585,609 B. Investments The City may also invest idle funds as authorized by Minnesota Statutes, as follows: , a. Direct obligations or obligations guaranteed by the United States or its agencies. b. Shares of investment companies registered under the Federal Investment Company Act of 1940 and whose only investments are in securities described in (a) above. C. General obligations of the State of Minnesota or any of its municipalities. d. Banker's acceptances of United States banks eligible for purchase by the Federal Reserve System. e. Commercial paper issued by United States corporations or their Canadian subsidiaries, of the highest quality, and maturing in 270 days or less. f. Repurchase or reverse repurchase agreements with banks that are members of the Federal Reserve System with capitalization exceeding $10,000,000, a primary reporting dealer in U.S. , government securities to the Federal Reserve Bank of New York, or certain Minnesota securities broker - dealers. 32 Note 2: Cash and Investments (cont'd) The City has not purchased any collateralized mortgage obligations, derivatives or strip investments. The City does not purchase individual commercial paper issues; commercial paper is only held through shares of money market pools that invest in multiple issues. Investments are typically held to maturity. The City participates in an external investment pool sponsored by the League of Minnesota Cities. The pool is established in accordance with Minnesota Statutes, Section 471.59. Only municipalities as defined by State Statute are permitted to participate in the fund. As of December 31, 2002, the fair value of the City's position in the pool is the same as the value of the pool shares. The City's investments are categorized below to give an indication of the level of custodial credit risk assumed at year -end. Category 1 includes investments that are insured or registered or for which the securities are held by the City or its agent in the City's name. Category 2 includes uninsured and unregistered investments for which the securities are held by the counter party's trust department or agent in the City's name. Category 3 includes uninsured and unregistered investments for which the securities are held by the counter party, or by its trust department or agent, but not in the City's name. Balances at December 31, 2002: Carrying Credit Risk Category Amount/ Securities Type 1 2 3 Fair Value Investments - Categorized: U.S. Government $4,858,750 $4,858,750 Federal agencies 22,494,787 22,494,787 $27,353,537 $ - $ - 27,353,537 Investment pools 5,088,859 Total investments 32,442,396 Deposits 585,609 Petty cash /change funds 4,375 Total cash and investments $33,032,380 33 Note 3: Fixed Assets Changes in the General Fixed Assets Account Group during 2002 were as follows: Balance Balance Jan. 1, 2002 Additions Adjustments* Dec. 31, 2002 Land $3,646,630 $347,726 $3,298,904 Buildings & Improvements 17,894,507 $2,282,032 1,651,469 18,525,070 Park Improvements 3,971,979 218,064 1,283,902 2,906,141 Furniture & Fixtures 1,299,232 1,299,232 0 Departmental Equipment 1,194,499 25,699 874,452 345,746 TOTAL GENERAL FIXED ASSETS $28,006,847 $2,525,795 $5,456,781 $25,075,861 * The City Council approved an amended fixed asset policy. The policy increased capitalization thresholds and shortened most useful lives. The following is a summary of proprietary fund -type fixed assets at December 31, 2002: Internal Enterprise Service Funds Funds Land $3,197,342 Land Improvements 368,088 , Buildings & Improvements 17,328,964 Mains & Lines 37,157,768 Departmental Equipment 617,505 $5,811,026 Total 58,669,667 5,811,026 Less accumulated depreciation (19,094,895) (3,106,076) Net $39,574,772 $2,704,950 Note 4: Contributed Capital During 2002 contributed capital changed by the following amounts: Internal Enterprise Service Funds Funds Deductions: Depreciation on contributed assets ($686,971) ($96,228) Contributed Capital, January 1, 2002 22,295,175 2,931,171 Contributed Capital, December 31, 2002 $21,608,205 $2,834,943 34 I� Note 5: Operating Leases The City leased space for its municipal liquor store in 2002. The ten - year lease, which began in June 2000, has an option of a ten -year extension. This lease provides for a minimum monthly base rent payment, plus a pro -rata share of common area expenses. In addition, it requires additional lease payments if agreed -upon revenue thresholds are attained. This lease may be cancelled at the City's option if the City ceases liquor operations. Total rental expense under the lease agreements for the years ended December 31, 2002 and 2001 was $158,702 and $140,873, respectively. Future minimum rent payments under the current agreement are as follows: Year Endina Amount 2003 -2004 $ 91,350 per year 2005 96,226 ' 2006 -2009 100,170 per year 2010 44,798 $724.404 The Earle Brown Heritage Center Fund, which operates as an enterprise fund, leased space to two tenants in 2002. One tenant signed a lease for a ten -year period commencing January 1, 1999. Another tenant has signed a two -year lease for $19,200 per year commencing January 1, 2003. Payment from this tenant will be in the form of audio /visual equipment trade -out. This equipment will be used by the Heritage Center for client events. Rental revenues and expenses under the lease agreements were as follows: 2002 2001 Rental Revenues $ 62,620 $ 62,629 Rental Expenses $ 58,510 $ 26,688 Future minimum rentals to be received are as follows: YEAR 2003 2004 12005 12006 2007 12008 f CASH $41,563 I $41,533 $41,200 $41,307 $42,488 $38,947 TRADE- $22,800 $22,800 OUT 'l '1 1 35 Note 6: Lono -Term Debt t The City's long -term debt includes general obligation bonds, tax increment bonds, and ' special assessment improvement bonds, all of which are recorded in the General Long - Term Debt Account Group. In addition, the City issued storm sewer revenue bonds which are recorded as a liability in the Storm Drainage Fund. The following is a summary of bond transactions for the year ended December 31, 2002: General Tax Special Storm Sewer Obligation Increment Assessment Revenue Bonds Bonds Bonds Bonds Total Bonds payable January 1 $8,105,000 $7,690,000 $6,150,000 $860,000 $22,805,000 l Bonds retired 680,000 1,540,000 780,000 200,000 3,200,000 Bonds payable , December 31 $7,425,000 $6,150,000 $5,370,000 $660,000 $19,605,000 The annual requirements to amortize all outstanding debt as of December 31, 2002, including interest of $4,026,690, are as follows: General Tax Special Storm Sewer Obligation Increment Assessment Revenue Bonds Bonds Bonds Bonds Total 2003 $1,027,356 $1,985,412 $1,092,596 $239,540 $4,344,904 2004 1,032,318 2,012,303 1,044,960 238,250 4,327,831 2005 1,035,374 531,123 1,006,455 236,210 2,809,162 2006 1,036,412 507,362 864,846 2,408,620 2007 on 5,176,962 2,356,516 2,207,695 9,741,173 $9,308,422 $7,392,716 $6,216,552 $714,000 $23,631,690 If special assessments are not adequate to retire the outstanding debt, the City's full faith , and credit are pledged for their redemption. The general obligation, tax increment, and storm sewer revenue bonds are backed by the full faith and credit of the City. 36 Note 6: Lonq Term Debt (cont d) Long -term debt obligations outstanding at year -end are summarized as follows: Bond Payment Issue Maturity Authorized Rates % Dates Date Date And Issued Retired Outstanding General Obligation Bonds Refunding State -Aid Street Bonds 3.55 -4.0 4 -01 10 -01 12 -01 -98 04 -01 -06 $1,585,000 $485,000 $1,100,000 Police and Fire Building Bonds 4.1 -4.9 2 -01 8 -01 12 -01 -97 02 -01 -13 7,900,000 $1,575,000 6,325,000 Total $9,485,000 $2,060,000 $7,425,000 General Obligation Tax Increment Bonds 1991 Tax Increment Bonds 4.7 -6.0 2 -01 8 -01 03 -01 -91 02 -01 -04 $6,050,000 $4,075,000 $1,975,000 1992 Refunding Tax Increment 4.5 -5.6 2 -01 8 -01 02 -01 -92 02 -01 -03 4,270,000 3,505,000 765,000 1995 Taxable Tax Increment Bonds 6.0 -6.75 2 -01 8 -01 11 -01 -95 02 -01 -11 4,560,000 1,150,000 3,410,000 Total $14,880,000 $8,730,000 $6,150,000 General Obligation Special Assessment Bonds 1994 Street Improvement Bonds 4.1 -5.5 2 -01 8 -01 08 -01 -94 02 -01 -05 $835,000 $560,000 $275,000 1995 Street Improvement Bonds 4.0 -4.9 2 -01 8 -01 11 -01 -95 02 -01 -06 780,000 440,000 340,000 1996 Street Improvement Bonds 4.2 -5.1 2 -01 8 -01 11 -01 -96 02 -01 -07 1,440,000 675,000 765,000 1997 Street Improvement Bonds 4.0 -4.7 2 -01 8 -01 12 -01 -97 02 -01 -08 1,075,000 455,000 620,000 1998 Street Improvement Bonds 3.4 -4.2 2 -01 8 -01 12 -01 -98 02 -01 -09 1,085,000 355,000 730,000 1999 Street Improvement Bonds 4.1 -5.0 2 -01 8 -01 12 -01 -99 02 -01 -10 1,585,000 330,000 1,255,000 2000 Street Improvement Bonds 4.3 -4.9 2 -01 8 -01 12 -01 -00 02 -01 -11 735,000 80,000 655,000 2001 Street Improvement Bonds 2.6 -4.4 2 -01 8 -01 12 -01 -01 02 -01 -12 730,000 - 730,000 Total $8,265,000 $2,895,000 $5,370,000 General Obligation Revenue Bonds 1994 Storm Sewer Revenue Bonds 4.2 -5.4 2 -01 8 -01 08 -01 -94 02 -01 -05 $1,830,000 $1,170,000 $660,000 Total $1,830,000 $1,170,000 $660,000 37 Note 6: Lonq Term Debt (cont'd) In addition to the bonded debt listed above, the City of Brooklyn Center had an amount recorded as "Other long term liabilities" in 2001. This was a loan extended to the City by Northern States Power for the purpose of promoting energy conservation improvements to City owned facilities. The loan was recorded in the General Long -term Debt Group of Accounts and was used for installation of low energy lamps in traffic signals. It was repaid by the General Fund in 41 monthly installments of $1,388 which commenced on November 4, 1998. The debt was paid off in 2002. General Long -Term Debt Other long term liabilities payable January 1 $4,163 ' Liabilities retired during 2002 (4,163) Other long term liabilities payable December 31 $0 ' Conduit debt obligations From time to time, the City has issued Housing Revenue Bonds and Industrial Revenue Bonds to provide assistance to private sector entities for the acquisition and construction of housing, industrial, and commercial facilities deemed to be in the public interest. The bonds are secured by the property financed and are payable solely from payments received on the underlying mortgage loans. Upon repayment of the bonds, ownership of the acquired facilities transfers to the private sector entity served by the bond issue. Neither the City, the State, nor any political subdivision thereof is obligated in any manner for the repayment of the bonds. Accordingly, the bonds are not reported as liabilities in the accompanying financial statements. As of December 31, 2002, there were five series of Housing Revenue or Industrial Revenue Bonds outstanding, with an aggregate principal amount payable of $24,225,000. Several variable debt issues are also outstanding. 38 rl r rw r �r rr ■r rr� rr rr rr rr rr rr r rr rl rl r Note 7: Segment Information Segment information as of and for the year ended December 31, 2002 was as follows: E. Brown Enterprise Funds: Municipal Golf Heritage Recycling Street Light Water Sanitary Storm Liquor Course Center & Refuse Utility Utility Sewer Drainage Fund Fund Fund Fund Fund Fund Fund Fund Total Operating Revenues $3,435,556 $278,664 $3,480,535 $210,954 $213,078 $1,364,076 $2,664,730 $1,377,638 $13,025,231 Depreciation Expense 35,580 13,045 478,497 698,773 565,185 431,006 2,222,086 Operating Income (Loss) 152,188 4,524 (159,076) (4,257) 60,352 (208,159) 114,146 714,891 674,609 Nonoperating Revenues: Special Assessments 21,178 271 429,873 451,322 Operating Transfers Out (100,000) (100,000) (200,000) Net Income (Loss) 81,694 219,271 (238,198) (1,698) 61,318 (139,295) 157,096 1,113,738 1,253,926 Current Capital Contributions 212,142 212,142 Property, Plant & Equipment: Additions 223,302 650,253 1,023,781 961,302 2,858,638 Deletions 16,856 111,358 1,220,377 3,346,811 715,704 295,691 5,706,797 Net Working Capital 984,675 (8,990) 522,317 99,869 61,318 1,994,177 1,386,790 397,567 5,437,723 Total Assets 1,333,131 1,845,504 10,349,793 100,966 72,728 10,735,267 10,037,247 11,549,873 46,024,509 Bonds and Other Liabilities Payable from Operating Revenues 900,000 660,000 1,560,000 Total Equity 1,166,519 941,845 9,979,202 99,869 61,318 10,580,043 10,009,025 10,874,674 43,712,495 W I 1 Note 8: Reserved /Designated Fund Eauitv Fund balances and retained earnings in the various funds have been reserved or designated for the following purposes: Reserved Fund Eauitv Retained Earnings: Enterprise Funds: Water Utility Fund - Special Assessments $275,437 Sanitary Sewer Fund - Special Assessments 3,455 Storm Drainage Fund Debt Service 239,540 Special Assessments 12,997 Total Reserved Retained Earnings 531,429 Fund Balances: General Fund: Advances to Other Funds 105,074 Prepaid Expenses 68,279 173,353 Debt Service Funds. General Obligation Bonds - Debt Service 871,970 , Tax Increment Bonds - Debt Service 2,212,462 Special Assessment Bonds - Debt Service 2,656,759 Total Debt Service Funds 5,741,191 Capital Projects Funds: Capital Improvements Fund Advances to Other Funds 900,000 Municipal State Aid for Construction Fund Advances to Other Funds 593,069 Total Capital Projects Funds 1,493,069 Total Reserved Fund Balances 7,407,613 Total Reserved Fund Equity $7,870,763 Desianated Fund Equity General Fund: Working Capital $6,527,973 Total Designated Fund Equity $6,527,973 40 I� Note 9: Interfund Receivables and Pavables Due to /from other funds are short -term receivables /payables. Advances to /from other funds are considered long -term receivables /payables. Advances have maturities extending through the year 2017. Advances between funds are offset by a fund balance reserve account and are not expendable or available financial resources. Advance and due to amounts are subtracted from the respective funds' monthly cash balances which form the basis for interest allocation. Subsequently, these liabilities result in an interest rate charge equal to the City's investment return. Negative cash balances result in interest charges for affected funds. Due from Due to Other Funds Other Funds Special Revenue Funds: Tax Increment #3 Fund $ 1,116,698 Earle Brown Farm Tax Increment Fund $ 1,116,698 Total $ 1,116,698 $ 1,116,698 Advances to Advances from Other Funds Other Funds General Fund $ 105,074 Special Revenue Funds: Earle Brown Farm Tax Increment Fund $ 698,143 Capital Projects Funds: Capital Improvements Fund 900,000 Municipal State Aid Construction Fund 593,069 Enterprise Funds: Golf Course Fund 900,000 Total $ 1,598,143 $ 1,598,143 41 Note 1 n 0. Individual Fund Disclosures A deficit fund balance exists at December 31, 2002 in the following funds: Earle Brown Tax Increment Financing District: Unreserved deficit fund balance $1,814,455 Special Assessment Construction Fund: Unreserved deficit fund balance $447,951 The deficit of the Tax Increment Fund is being funded through internal borrowing and will be repaid from future surplus tax increments. The deficit of the Construction Fund will be funded by bonds issued in 2003. Excess of Expenditures over Appropriations: For the year ended December 31, 2002, expenditures exceeded budget at the department level for the General Fund or the fund level for all other funds (i.e., the legal level of budgetary control) as follows: General Fund Departments: Finance $4,415 Legal 102,716 Government Buildings 62,067 Protective Inspection 8,696 Streets 56,274 Social Services 72 Children's Programs 1,115 Administrative Reimbursement 186,143 Other Financing Uses 218,240 Special Revenue Funds: Economic Development Authority $ 94,072 Earle Brown Tax Increment District 7,776 Tax Increment District No. 3 718,119 Tax Increment District No. 4 2,393 Community Development Block Grant 96,206 City Initiatives Grant 123,299 Note 11: Continaencies, Subseauent Events and Commitments Arbitrage Rebate Liability: 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. 42 Note 11: Continaencies, Subseauent Events and Commitments cont. The City issued greater then $5 million of bonds in the years 1991, 1992 and 1997 and therefore is required to rebate excess investment income relating to these issues to the federal government. The City rebated $99,232 during 2002 for the 19978 Bonds. 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. Program Compliance: Federal program activities are subject to financial and compliance regulation. To the extent that any expenditures are disallowed or other compliance features are not met, a liability to the respective grantor agency could result. Legal Claims: 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. Federal and State Funds: Amounts received or receivable from federal and state agencies are subject to agency audit and adjustment. Any disallowed claims, including amounts already collected, may constitute a liability of the applicable funds. The amount, if any, of funds which may be disallowed by the agencies cannot be determined at this time although the City expects such amounts, if any, to be immaterial. Tax Increment Districts: The City's tax increment districts are subject to review by the State of Minnesota Office of the State Auditor (OSA). Any disallowed claims or misuse of tax increments could become a liability of the applicable fund. Management has indicated that they are not aware of any instances of non - compliance which would have a material effect on the financial statements. Grants: The City approved grants in the amount of $325,000 to Boca Limited Partnership. The grant requires repayment if certain requirements are not met. In turn, the City would be required to return the funds to Hennepin County. Subsequent Events: On January , 2003, the City closed on a ten year debt rY Y Y issue of $1,205,000 to finance the 2002 street improvement projects. Contractual Commitments: The City as entered to several y en a ed in sev e contractual commitments which are in process at year end. At December 31, 2002, the City's committed obligation for such projects was approximately $806,000. Contingent Liability: The City entered into two limited tax increment notes with j developers whereby the City shall pay the developers the lesser of the scheduled payment or available tax increment. Whether a payment will occur and if so, the amount of the payment (s) are uncertain since all payments are dependent on the City receiving tax increment from the developer's project. As such, this liability has not been recorded in the financial statements. A schedule of the notes outstanding at December 31, 2002 is as follows: 43 Note 11: Contingencies, Subsequent Events and Commitments (cont.) Original 12/31/2002 Interest Maturity j Note Principal Balance Rate Date Twin Lakes Business Park $1,000,000 $333,333 8.00% 8/1/2003 Twin Lakes Business Park $2,169,938 $2,131,737 8.00% * No maturity date is set. Payments will continue until the principal is paid. Note 12: 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 for which the City carries commercial insurance policies. The City retains risk for the deductible portions of the insurance policies. The amount of these deductibles is considered immaterial to the financial statements. 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. Note 13: Post- Emglovment Health Care Benefits The City has provided post- retirement health care benefits, as per the requirements of a City Council resolution, for certain retirees and their dependents since 1986. Full time employees have the option of retaining membership in the City's health insurance plan for which the City will pay the single person premium until such time as the retiree is eligible for Medicare coverage or at age 65, whichever is sooner. If the retiree desires to continue family coverage, the additional cost for family coverage shall be paid by the retiree to the City. There are two methods whereby an employee can qualify under this program. First, the employee, on the date of his /her retirement, must meet eligibility requirements for a full retirement annuity under PERA (Note 14A) without reduction of benefits because of age, disability, or any other reason for reduction. In addition, the employee must have been employed full time by the City for the last ten consecutive years prior to the effective date of retirement. Additionally, employees who are retiring after twenty -five years of consecutive service with the City and are eligible to receive a pension from PERA shall have the option of retaining membership in the City's health insurance plan for which the employee will pay the premium until such time as the retiree is eligible to receive a full - retirement annuity under PERA or PERA police. At that time, the City will pay the single - person premium until such time as the retiree is eligible for Medicare coverage or at age 65, whichever is sooner. Employees participate in this program on a voluntary basis. As of December 31, 2002, eight employees currently participate in this program. The cost of City paid health care premiums for the years ended December 31, , 2002 and 2001 was $25,896 and $24,520, respectively. Fund liabilities are paid on a pay as you go basis with investment earnings of the Fund. The $1,549,681 recorded as a liability reflects the City's balance expensed and accrued for future years for this obligation. The liability will remain unchanged until a thorough analysis of future liabilities is performed. 44 Note 14: Defined Benefit Pension Plans - Statewide A. Plan Description All full -time and certain part -time employees of the City of Brooklyn Center are covered by defined benefit pension 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 Statutes, Chapters 353 and 356. PERF members belong to either the Coordinated Plan or the Basic Plan. Coordinated Plan members are covered by Social Security and Basic members are not. All new members must participate in the Coordinated Plan. All police officers, fire fighters, 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 member's highest average salary for any five successive years of allowable service, age, and years of credit at termination of service. Two methods are used to compute benefits for PERF's Coordinated and Basic members. The retiring member receives the higher of step rate benefit accrual formula (Method 1) or a level accrual formula (Method 2). Under Method 1, the annuity accrual rate for a Basic Plan member is 2.2 percent of average salary for each of the first 10 years of service and 2.7 percent for each remaining year. The annuity accrual rate for a Coordinated Plan member is 1.2 percent of average salary for each of the first 10 years and 1.7 percent for each remaining year. Under Method 2, the annuity accrual rate is 2.7 percent of average salary for Basic Plan members and 1.7 percent for Coordinated Plan members for each year of service. For all PEPFF members and PERF members whose annuity is calculated using Method 1, a full annuity is available when age plus years of service equal 90. A reduced annuity is also available to eligible members seeking early retirement. There are different types of annuities available to members upon retirement. A normal annuity is a lifetime annuity that ceases upon the death of the retiree -- no survivor annuity is payable. There are also various types of joint and survivor annuity options available which will reduce the monthly normal annuity amount, because the annuity is payable over joint lives. Members may also leave their contributions in the fund upon termination of public service in order to qualify for a deferred annuity at retirement age. Refunds of contributions are available at anytime to members who leave public service, before retirement benefits begin. I 45 Note 14: Defined Benefit Pension Plans - Statewide (cont d) The benefit provisions stated in the previous paragraphs of this section are current provisions and apply to active plan participants. Vested, terminated employees who are entitled to benefits but are not receiving them yet, are bound by the provisions in effect at the time they last terminated their public service. PERA issues a publicly available financial report that includes financial statements and required supplementary information for PERF and PEPFF. That report may be obtained by writing to PERA, 60 Empire Drive, #200, St. Paul, Minnesota, 55103 or by calling (651) 296 -7460 or 1- 800 - 652 -9026. B. Funding Policv Minnesota Statutes Chapter 353 sets the rate 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 Basic Plan members and Coordinated Plan members are required to contribute 9.10% and 5.10 %, respectively, of their annual covered salary. PEPFF members are required to contribute 6.20% of their annual covered salary. The City of Brooklyn Center is required to contribute the following percentages of annual covered payroll: 11.78% for Basic Plan PERF members, 5.53% for Coordinated Plan PERF members, and 9.30% for PEPFF members. The City's contributions to the Public Employees Retirement Fund for the years ended December 31, 2002, 2001, and 2000 were $299,954, $296,052, and $299,879, respectively. The City's contributions to the Public Employees Police & Fire Fund for the years ended December 31, 2002, 2001, and 2000 were $255,923, $239,799, and $223,541, respectively. The City's contributions were equal to the contractually required contributions for each year as set by State Statute. Note 15: Pension Plan - Brooklvn 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 retirement system to provide a retirement plan (the Plan) to volunteer fire fighters of the City who are members of the Association. The Association issues a financial report which is available at City offices. Fundina Policv and Annual Pension Cost 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. 46 Note 15: Pension Plan - Brooklvn Center Fire Department Relief Association (cont d) Contributions: Total contributions to the Plan in 2002 were $118,508, of which $16,239 was levied by the City of Brooklyn Center and $102,269 was from the State of Minnesota. The actuarially determined contribution based on an actuarial valuation performed at January 1, 2001 was $56,879, which represents funding for normal cost of $45,795 and administration of $11,084. 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. They do not constitute an asset of the City. ' Annual pension cost and changes in the net pension obligation during the year were as follows: Annual Required Contribution $73,563 Interest on Net Pension Obligation 11,084 Adjustments to the Annual Required Contribution (27,768) Annual Pension Cost 56,879 Contributions Made 118,508 Increase in Negative Net Pension Obligation 61,629 Beginning Balance, Negative Net Pension Obligation 621,028 Ending Balance, Negative Net Pension Obligation 682,657 ' The information below is the most recent data available. Actuarial valuation date: 1/1/01. Actuarial cost method: Entry age normal cost method. Amortization method: Level dollar amount amortized on a closed basis. Remaining amortization period: 18 years. Actuarial assumptions: Investment rate of return 7.5% compounded annually. Discount rate for obligations 7.5 %. Projected salary increases Not applicable. Post retirement benefits None. Three -vear Trend Information Annual Percentage of Negative Net ' Pension Cost APC Pension Year Ended (APC) APC Contributed contributed Obligation 12/31/98 $95,176 $107,215 112.64% $438,538 12/31/99 1 $96,617 $116,570 120.65% $789,400 ' 12/31/00 ( $96,617 $120,175 124.38% $621,028 i , 47 Note 15: Pension Plan - Brooklvn Center Fir D ti (cont' d) epartment Relief Association (co d) Schedule of Fundina Proaress Actuarial Excess of Actuarial Value Accrued Assets over Funded Fiscal of Assets Liability Liability Funded Ratio Year (A) (B) (A) -(B) A/B 1998 $3,056,068 $2,617,530 $438,538 116.8% 1999 $3,319,342 $2,529,942 $789,400 131.2% 2000 $3,078,163 $2,457,135 $621,028 125.3% Related Partv Investments ' As of December 31, 2002, the Association held no securities issued by the City or other related parties. Note 16: Fund Chanqes The following funds were opened during 2002: Capital Project: Earle Brown Heritage Center Improvements Fund Debt Service: ' GO Street Improvement Bonds of 2003 Fund No funds were closed during 2002. Note 17: Cumulative Effect of Chanae in Accountina Principle, During 2002, the City Council approved an amended capital asset policy. This policy increased the capitalization threshold from $1,000 to $10,000 for equipment and $250,000 for infrastructure. This change has resulted in the City adjusting their fixed asset listing to only include assets that comply with the amended policy. The effects of this change for prior years cannot be reasonably estimated. The cumulative effect of this change is as follows: Fund Amount Municipal Liquor Fund $9,331 Golf Course Fund $46,909 Earl Brown Heritage Center Fund $434,061 Water Utility Fund $1,614,746 Sanitary Sewer Utility Fund $388,897 Storm Drainage Utility Fund $270,059 Central Garage Fund $106,505 Total for All Funds $2,870,508 48 ' Note 18: Prior Period Adiustment Receivables: The fund balance of the Capital Project fund type at December 31,2001 has been restated from amounts previously reported to correct an error in the amount reported for Due from other Governments. As a result of the i restatement, the City's fund balance at the beginning of the year has been increased by $419,376. Fixed Assets: During 2002 the City amended its policy regarding estimated useful lives of fixed assets. The prior and current estimated useful lives are as follows: ' Asset Tvpe Prior to 2002 2002 I Water & Sewer Mains & Lines 99 years 25 years Buildings and Structures 20 -40 years 25 years Water Wells and Storage Tanks 15 -50 years 25 years Sewer Lift Stations 15 -40 years 25 years Machinery and Equipment 5 -20 years 2 -15 years Furniture and Fixtures 5 -20 years 5 years Because of the significance of this change, it was treated as a prior period adjustment rather than a prospective adjustment. The depreciation expense reported for 2002 is the amount determined using the revised estimated useful life. A summary of the prior period adjustment by fund is as follows: Fund Amount Golf Course Fund $5,266 Earl Brown Heritage Center Fund $103,586 Water Utility und y $3,588,141 Sanitary Sewer Utility Fund $2,703,920 Storm Drainage Utility Fund $43,568 Total for All Funds $6,444,481 49 City of Brooklyn Center, Minnesota ' GENERALFUND ' The City of Brooklyn Center Home Rule Charter provides in Section 7.11 that "there shall be maintained in the City Treasury a classification of Funds which shall provide for a General Fund for the payment of such expenses of the City as the Council may deem proper, and such other funds as may be required by statute, ordinance or resolution." The General Fund was established to account for all revenues and expenditures which are ' not required to be accounted for in other funds. It has more diverse revenue sources than other funds. These revenue sources include property taxes, licenses, permits, fines and forfeits, intergovernmental, service charges, and investment earnings. The Fund's resources finance a wide range of functions, including the current operations of general government, public safety, public works, health and welfare, recreation, and non - departmental expenditures. This fund utilizes the modified accrual basis of accounting. Revenues are recognized in the accounting period in which they become available and measurable. Expenditures are recognized in the accounting period in which the related liability is incurred. 50 City of Brooklyn Center A_1 General Fund COMPARATIVE BALANCE SHEET December 31, 2002 2002 2001 ' ASSETS Cash and investments $7,937,436 $8,248,964 ' Accrued interest $433,044 $120,890 Accounts receivable 63,823 67,160 ' Delinquent taxes receivable 289,726 263,126 Due from other governments 53,489 65,190 Prepaid expenses 68,279 Advance to other funds 105,074 105,074 TOTAL ASSETS $8,950,871 $8,870,404 LIABILITIES AND FUND BALANCE Liabilities: Accounts payable $370,407 $508,939 Accrued salaries payable 360,931 335,501 Deferred revenue 289,759 325,749 Deferred revenue - tax abatements 266,343 Total Liabilities 1,021,097 1,436,532 Fund Balance: Reserved for advances to other funds 105,074 105,074 ' Reserved for prepaid expenses 68,279 Unreserved fund balance Designated: Working capital 6,527,973 6,437,653 Undesignated 1,228,448 891,145 ' Total Fund Balance 7,929,774 7,433,872 TOTAL LIABILITIES AND FUND BALANCE $8,950,871 $8,870,404 51 ' i A -2 ' City of Brooklyn Center General Fund COMPARATIVE STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE - BUDGET AND ACTUAL For the Year Ended December 31, 2002 2002 Actual Over (Under) 2001 Budget Actual Budget Actual Revenues Property taxes $10,658,829 $10,990,660 $331,831 $8,469,023 Property tax abatements reserve 266,343 $266,343 (57,510) Licenses and permits 565,485 823,996 258,511 788,629 Intergovernmental 2,769,840 2,843,629 73,789 4,135,282 Charges for services 605,267 575,748 (29,519) 688,453 ' Court fines 190,000 278,557 88,557 230,408 Investment earnings 350,000 211,198 (138,802) 345,438 Change in fair value of investments (5,858) (5,858) 328,391 Miscellaneous 34,305 106,963 72,658 24,057 1 Total Revenues 15,173,726 16 091,236 917,510 14,952,171 ' Expenditures General government 2,441,150 2,553,426 112,276 2,504,392 Public safety 6,451,978 6,184,663 (267,315) 5,660,600 Public works 2,076,714 1,986,692 (90,022) 2,142,064 Community services 103,419 103,491 72 106,034 Parks and recreation 2,288,897 2,026,409 (262,488) 2,205,018 Economic development 342,000 340,659 (1,341) 392,805 1 Non departmental 606,582 366,282 (240,300) 372,056 Administrative Services Reimbursement (782,684) (596,541) 186,143 (767,504) ' Total Expenditures 13,528,056 12,965,081 (562,975) 12,615,465 Excess of Revenues Over Expenditures 1,645,670 3,126,155 1,480,485 2,336,706 Other Financing Uses Operating transfers out (1,645,670) (1,863,910) (218,240) (1,661,877) Total Other Financing Uses (1,645,670) (1,863,910) (218,240) (1,661,877) Excess of Revenues and Other Financing Sources Over Expenditures and Other Financing Uses 1,262,245 1,262,245 674,829 Fund Balance January 1 7,433,872 7,433,872 7,452,043 1 Equity Transfers Out (766,343) (693,000) Fund Balance December 31 $7,433,872 $7,929,774 $1,262,245 $7,433,872 52 S -1 (Continued next page) City of Brooklyn Center ' General Fund SCHEDULE OF REVENUES AND OTHER FINANCING SOURCES BUDGET AND ACTUAL , For the Year Ended December 31, 2002 2002 ' Actual Over (Under) 2001 Budget Actual Budget Actual Ad Valorem Taxes Gross property taxes $9,938,829 $10,276,088 $337,259 $7,635,539 Penalties and interest (3,324) (3,324) 1,623 Lodging tax 720,000 717,176 (2,824) 826,957 Special assessments 720 720 4,904 Total Taxes 10,658,829 10,990,660 331,831 8,469,023 , Reserve for Property Tax Abatements Tax abatements under litigation 266,343 266,343 (57,510) Total Property Tax Abatements 266,343 266,343 (57,510) Licenses and Permits , Liquor and beer 99,900 111,598 11,698 104,219 Building permits 310,000 475,471 165,471 497,283 Mechanical permits 50,000 82,341 32,341 77,806 Sewer and water permits 1,000 1,693 693 904 Plumbing permits 35,000 42,327 7,327 40,823 Garbage licenses 2,955 3,155 200 3,130 ' Taxicab licenses 300 600 300 1,000 Mechanical licenses 4,500 6,169 1,669 6,025 Pawn shop licenses 12,000 12,000 12,000 ' Service station licenses 3,500 2,820 (680) 2,877 Vehicle dealer licenses 2,000 1,750 (250) 2,250 Bowling licenses 480 720 240 725 Cigarette licenses 4,050 2,869 (1,181) 4,090 ' Sign permits 3,000 2,733 (267) 3,715 Rental dwelling permits 28,000 69,222 41,222 24,004 Amusement licenses 1,300 2,130 830 1,369 ' Dog licenses 4,079 ROW permits 5,000 4,668 (332) Miscellaneous business license 2,500 1,730 (770) 2,330 ' Total Licenses and Permits 565,485 823,996 258,511 788,629 Intergovernmental Federal grants: Miscellaneous grants 5,000 (5,000) 4,555 Total Federal Grants $5,000 ($5,000) $4,555 53 S -1 (Continued from prior page) City of Brooklyn Center General Fund SCHEDULE OF REVENUES AND OTHER FINANCING SOURCES ' BUDGET AND ACTUAL For the Year Ended December 31, 2002 2002 Actual Over (Under) 2001 Budget Actual Budget Actual Intergovernmental (continued) State grants: Local government aid $2,265,267 $2,265,267 $2,179,744 Homestead credit aid 1,380,106 Police pension aid 250,000 244,840 ($5,160) 228,208 ' PERA aid 34,365 34,365 34,365 Fireperson pension aid 90,000 102,269 12,269 90,148 Police training 14,000 17,393 3,393 19,166 E -911 phone service 15,000 19,650 4,650 18,296 Street maintenance aid 30,000 90,000 60,000 90,000 Low income housing aid 64,808 64,808 87,738 Miscellaneous grants 1,400 5,037 3,637 2,956 Total State Grants 2,764,840 2,843,629 78,789 4,130,727 Total Intergovernmental 2,769,840 2,843,629 73,789 4,135,282 r Charges for Services General government charges 23,620 40,099 16,479 39,301 Public safety charges 16,250 25,468 9,218 30,760 Recreation fees 565,397 510,181 (55,216) 618,392 Total Charges for Services 605,267 575,748 (29,519) 688,453 ' Court Fines Fines 190,000 278,557 88,557 230,408 Total Court Fines 190,000 278,557 88,557 230,408 Miscellaneous Interest on investments 350,000 211,198 (138,802) 345,438 Change in fair value of investments (5,858) (5,858) 328,391 Other 34,305 106,963 72,658 24,057 Total Miscellaneous 384,305 312,303 (72,002) 697,886 Total Revenues $15,173,726 $16,091,236 $917,510 $14,952,171 �i i t � 54 S-2 City of Brooklyn Center (Continued next page) General Fund SCHEDULE OF EXPENDITURES AND OTHER FINANCING USES BUDGET AND ACTUAL For the Year Ended December 31, 2002 ' 2002 Actual Over (Under) 2001 General Government Budget Actual Budget Actual Mayor and Council: Personal services $47,604 $45,492 ($2,112) $42,927 Supplies 1,650 750 (900) 691 Services and other charges 77,555 79,557 2,002 78,828 Total Mayor and Council 126,809 125 799 1 01 ( 0) 122,446 ' Administrative Office: Personal services 409,935 411,578 1,643 377,646 Supplies 11,250 6,729 (4,521) 3,473 Services and other charges 67,395 41,146 (26,249) 57,084 Capital outlay 1,200 Total Administrative Office 488,580 459,453 (29,127) 439,403 Elections and Voter Registration: Personal services 74,816 50,309 (24,507) 55,888 Supplies 3,000 1,077 (1,923) 95 ' Services and other charges 8,200 32,536 24,336 1,932 Total Elections and Voter Registration 86,016 83,922 (2,094) 57,915 Assessor's Office: Personal services 191,844 181,185 (10,659) 177,779 Supplies 4,050 5,229 1,179 877 Services and other charges 32,501 28,942 (3,559) 31,085 Capital outlay 1,071 , Total Assessor's Office 228,395 215,356 (13,039) 210,812 Finance: ' Personal services 442,926 451,648 8,722 436,803 Supplies 9,350 5,575 (3,775) 1,068 Services and other charges 9,450 8,918 (532) 9,040 Capital outlay 2,015 ' Total Finance 461,726 466,141 4,415 448,926 Legal: ' Services and other charges 240,000 342,716 102,716 262,061 Total Legal 240,000 342,716 102,716 262,061 Government Buildings: ' Personal services 239,649 238,398 (1,251) 229,959 Supplies 60,325 70,542 10,217 66,943 Services and other charges 242,765 295,866 53,101 386,985 ' Capital outlay 3,200 Total Government Buildings $542,739 $604,806 $62,067 $687,087 55 ' S -2 City of Brooklyn Center (Continued next page) General Fund SCHEDULE OF EXPENDITURES AND OTHER FINANCING USES BUDGET AND ACTUAL For the Year Ended December 31, 2002 2002 Actual Over ' (Under) 2001 General Government (continued) Budget Actual Budget Actual Data Processing: Personal services $81,837 $83,296 $1,459 $77,036 Supplies 27,520 20,719 (6,801) 10,489 Services and other charges 157,528 151,218 (6,310) 138,241 Capital outlay 49,976 Total Data Processing 266,885 255,233 (11,652) 275,742 Total General Government 2,441,150 2,553,426 112,276 2,504,392 ' Public Safetv Police Protection: Personal services 4,211,564 4,148,742 (62,822) 3,766,585 Supplies 136,545 108,223 (28,322) 96,607 Services and other charges 908,328 746,419 (161,909) 635,792 Capital outlay 56,236 Total Police Protection 5,256,437 5,003,384 (253,053) 4,555,220 Fire Protection: Personal services 414,848 405,867 (8,981) 397,910 Supplies 69,100 82,699 13,599 41,087 Services and other charges 204,056 179,456 (24,600) 183,231 Capital outlay 20,200 24,999 4,799 43,208 Total Fire Protection 708,204 693,021 (15,183) 665,436 Protective Inspection: Personal services 364,208 373,651 9,443 332,952 Supplies 11,000 9,338 (1,662) 2,854 Services and other charges 50,882 51,797 915 56,531 Capital outlay 4,361 Total Protective Inspection 426,090 434,786 8,696 396,698 Emergency Preparedness: Personal services 46,432 40,973 (5,459) 34,719 Supplies 2,400 2,436 36 1,681 Services and other charges 12,415 10,063 (2,352) 6,846 Total Emergency Preparedness 61,247 53,472 (7,775) 43,246 Total Public Safety $6,451,978 $6,184,663 ($267,315) $5,660,600 ' 56 S -2 i City of Brooklyn Center (Continued next page) General Fund SCHEDULE OF EXPENDITURES AND OTHER FINANCING USES BUDGET AND ACTUAL For the Year Ended December 31, 2002 2002 ' Actual Over (Under) 2001 , Public Works Budget Actual Budget Actual Engineering Department: Personal services $644,406 $421,440 ($222,966) $613,042 , Supplies 27,200 23,268 (3,932) 3,743 Services and other charges 54,457 135,059 80,602 33,639 Capital outlay 17,825 Total Engineering Department 726,063 579,767 (146,296) 668,249 ' Street Department: Personal services 665,483 756,604 91,121 642,978 ' Supplies 172,900 163,871 (9,029) 163,680 Services and other charges 512,268 486,450 (25,818) 567,889 Capital outlay 99,268 Total Street Department 1,350,651 1,406,925 56,274 1,473,815 Total Public Works 2,076,714 1,986,692 (90,022) 2,142,064 Communitv Services ' Social Services: Service and other charges 103,419 103,491 72 106,034 Total Community Services 103,419 103,491 72 106,034 Parks and Recreation Administration: ' Personal services 403,326 426,786 23,460 378,491 Supplies 35,025 32,019 (3,006) 7,125 Services and other charges 64,250 41,687 (22,563) 47,646 Capital outlay 6,966 ' Total Administration 502,601 500,492 (2,109) 440,228 Adult Programs: ' Personal services 124,092 61,758 (62,334) 66,445 Supplies 19,625 30,867 11,242 20,690 Services and other charges 51,050 78,683 27,633 97,120 Total Adult Programs 194,767 171,308 (23,459) 184,255 Teen Programs: Personal services 5,905 2,606 (3,299) 3,674 Supplies 600 3 (597) 1,207 Services and other charges 1,300 870 (430) 997 Total Teen Programs $7,805 $3,479 ($4,326) $5,878 ' r 57 ' ' S -2 City of Brooklyn Center (Continued next page) ' General Fund SCHEDULE OF EXPENDITURES AND OTHER FINANCING USES BUDGET AND ACTUAL For the Year Ended December, 31, 2002 2002 Actual Over (Under) 2001 Parks and Recreation (continued) Budget Actual Budget Actual Children's Programs: Personal services $84,410 $87,590 $3,180 $89,889 Supplies 13,102 10,874 (2,228) 16,191 Services and other charges 4,404 4,567 163 4,555 Total Children's Programs 101,916 103,031 1,115 110,635 General Programs: Personal services 30,290 20,291 (9,999) 29,863 Supplies 150 227 77 76 Services and other charges 40,032 35,508 (4,524) 39,150 Total General Programs 70,472 56,026 (14,446) 69,089 Community Center: Personal services 372,189 311,291 (60,898) 423,075 Supplies 20,600 13,751 (6,849) 9,266 Services and other charges 70,100 52,380 (17,720) 77,048 Capital outlay 8,840 Total Community Center 462,889 377,422 (85,467) 518,229 Park Maintenance: Personal services 585,706 503,409 (82,297) 513,694 Supplies 65,500 42,383 (23,117) 58,335 Services and other charges 297,241 268,859 (28,382) 301,444 Capital outlay 3,231 Total Park Maintenance 948,447 814,651 (133,796) 876,704 Total Parks and Recreation 2,288,897 2,026,409 (262,488) 2,205,018 Economic Develooment Convention Bureau: Services and other charges 342,000 340,659 (1,341) 392,805 Total Economic Development 342,000 340,659 (1,341) 392,805 Nondeaartmental Expenditures not Charged to Departments: Personal services 47,547 2,499 (45,048) 5,215 Supplies 31,200 30,708 (492) 28,029 Services and other charges 527,835 333,075 (194,760) 335,800 Capital outlay 3,012 Total Nondepartmental $606,582 $366,282 ($240,300) $372,056 58 SS = 2 City of Brooklyn Center (Continued from prior page) General Fund SCHEDULE OF EXPENDITURES AND OTHER FINANCING USES ' BUDGET AND ACTUAL For the Year Ended December 31, 2002 , 2002 Actual Over (Under) 2001 ' Administrative Service Reimbursement Budget Actual Budget Actual , Charged to other funds ($782,684) ($596,541) $186,143 ($767,504) Total Administrative Service Reimbursement (782,684) (596,541) 186,143 767 ( ,504) Other Financing Uses Operating transfers out: ' Special Assessment Construction Fund 480,000 555,000 75,000 409,044 Capital Project Fund 125,000 285,000 160,000 245,700 Debt Service Funds 1,040,670 1,023,910 (16,760) 1,007,133 Total Other Financing Uses 1,645,670 1,863,910 218,240 1,661,877 , Total Expenditures and Other Financing Uses $15,173,726 $14,828,991 ($344,735) $14,277,342 i 59 City of Brooklyn Center, Minnesota SPECIAL REVENUE FUNDS The Special Revenue Funds are established to account for revenues derived from taxes and /or other specific revenue sources. These resources are usually restricted by State statute or by City Charter or ordinance to finance specific City functions or activities. This fund type utilizes the modified accrual basis of accounting. Revenues are recognized in the accounting period in which they become available and measurable. Expenditures are recognized in the accounting period in which the related liability is incurred. Housing and Redevelopment Authority Fund (H. R.A.): 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 E.D.A. Fund; all tax proceeds are transferred to that fund. Economic Development Authoritv Fund (E.D.A.): This fund was established to account for the Economic Development Authority (E.D.A.) of Brooklyn Center. The E.D.A. carries out development activities; it has authority to operate an enterprise. The Earle Brown Heritage Center operates under this authority and a statement of its operations can be found in the enterprise fund section of this report. The E.D.A. also does redevelopment and housing projects, funded by an ad valorem property tax levy and transfers from the C.D.B.G. and H.R.A. funds. Earle Brown Farm Tax Increment Financina District Fund: 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 of bonds which were issued for the same purpose. I Tax Increment Districts No. 3 and No. 4 Funds: These funds have 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 Drua Forfeiture Fund: This fund was established to account for property and /or cash seized by Police Department personnel. Community Development Block Grant Fund (C.D.B.G.1: The fund was established to account for funds received under Ti f the Housing Title I o g and Community Development Act of 1974. Transfers are made from this fund to the Economic Development Authority Fund; projects are accounted for in the Economic Development Authority Fund. City Initiatives Grant Fund: Revenues and expenditures from grants received from outside entities are accounted for in this fund. Grant programs for 2002 include several public safety grants, an after school enrichment recreation grant and a local planning assistance grant. r 60 City of Brooklyn Center Special Revenue Funds COMBINING BALANCE SHEET December 31, 2002 Economic Earle Brown Tax Development Tax Incr. Increment Authority Financing District Fund District No.3 ASSETS Cash and investments $1,274,889 $4,136,835 Accounts receivable 9,000 Delinquent taxes receivable 8,904 $53,734 95,987 Due from other funds 1,116,698 Due from other governments 504 386 Prepaid expenses 849 TOTAL ASSETS $1,294,146 $54,120 $5,349,520 LIABILITIES AND FUND BALANCES (DEFICITS) Liabilities: ' Accounts payable $5,211 $395,494 Due to other funds $1,116,698 Due to other governments Accrued salaries payable 6,685 1,194 Advances from other funds 698,143 Deferred revenue 8,904 53,734 95,987 Total Liabilities 20,800 1,868,575 492,675 , Fund Balances (Deficits): Unreserved 1,273,346 (1,814,455) 4,856,845 Total Fund Balances (Deficits) 1,273,346 (1,814,455) 4,856,845 TOTAL LIABILITIES AND FUND BALANCES (DEFICITS) $1,294,146 $54,120 $5,349,520 i 61 B -1 Tax Increment Police Drug City District Forfeiture Initiatives Totals No. 4 Fund Grant Fund 2002 2001 $65,308 $58,870 $59,149 $5,595,051 $4,696,399 9,000 9,021 158,625 13,602 1,116,698 502,447 890 192,952 849 $65,308 $58,870 $59,149 $6,881,113 $5,414,421 $13,911 $414,616 $328,752 1,116,698 502,447 8,019 8,019 $86 14 7,979 7,130 698,143 698,143 23,154 181,779 13,602 86 45,098 2,427,234 1,550,074 65,222 $58,870 14,051 4,453,879 3,864,347 65,222 58,870 14,051 4,453,879 3,864,347 $65,308 $58,870 $59,149 $6,881,113 $5,414,421 ' 62 City of Brooklyn Center Special Revenue Funds COMBINING STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE For the Year Ended December 31, 2002 Housing and Economic Earle Brown Tax Redevelopment Development Tax Increment Increment Authority Authority Financing District Fund Fund District No.3 Revenues Property taxes $194,766 $5,974 $815,568 $2,067,009 Intergovernmental 53,623 Investment earnings 30,280 154,348 , Change in fair value of investments (840) (3,962) Miscellaneous 49,000 Total Revenues 194,766 138,037 815,568 2,217,395 ' Expenditures Personal services 176,508 4,210 8,945 Supplies 579 Services and other charges 154,052 2,050 768,293 Capital outlay Interest 11,516 95,881 Total Expenditures 331,139 17,776 873,119 Excess (Deficiency) of Revenues , Over Expenditures 194,766 (193,102) 797,792 1,344,276 Other Financina (Uses) Sources Sale of land 474,648 ' Operating transfers in 208,266 Operating transfers out (194,766) (1,410,000) (570,000) Total Other Financing (Uses) Sources (194,766) 682,914 (1,410,000) (570,000) Excess (Deficiency) of Revenues and Other Financing Sources Over Expenditures and Other Financing Uses 489,812 (612,208) 774,276 Fund Balances (Deficits) January 1 783,534 (1,202,247) 4,082,569 Fund Balances (Deficits) December 31 $0 $1,273,346 ($1,814,455) $4,856,845 63 B -2 Tax Police City Increment Drug Community Initiatives District Forfeiture Development Grant Totals No. 4 Fund Block Grant Fund 2002 2001 $139,675 $3,222,992 $4,144,215 $352,000 $82,157 487,780 1,343,486 1,267 $2,248 2,353 190,496 192,359 (35) (62) (64) (4,963) 207,173 27,587 57,719 134,306 113,904 140,907 29,773 $352,000 142,165 4,030,611 6,001,137 4,016 6,219 199,898 210,297 7,936 24,946 33,461 5,813 183,923 338,500 136,845 1,583,663 1,955,465 1,188,882 31 107,428 173,024 187,939 7,936 338,500 168,041 1,924,450 3,533,481 (47,032) 21,837 13,500 (25,876) 2,106,161 2,467,656 474 648 7 5 2,266 208,266 166,807 (13,500) (11,277) (2,199,543) (2,136,807) (13,500) (11,277) (1,516,629) (1,397,734) (47,032) 21,837 (37,153) 589,532 1,069,922 112,254 37,033 51,204 3,864,347 2,794,425 $65,222 $58,870 $0 $14,051 $4,453,879 $3,864,347 64 B -3 City of Brooklyn Center Housing and Redevelopment Authority Fund STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE - BUDGET AND ACTUAL For the Year Ended December 31, 2002 ' 2002 Actual Over (Under) 2001 Budget Actual Budget Actual Revenues Property taxes $191,393 $194,766 $3,373 $147,123 Intergovernmental 19,684 Total Revenues 191,393 194,766 3,373 166,807 Other Financing Uses Operating transfers out 197,313 194,766 (2,547) (166,807) (Deficiency) Excess of Revenues Over Other Financing Uses (5,920) 5,920 Fund Balance January 1 Fund Balance December 31 ($5,920) $0 $5,920 $0 i 1 1 1 65 B -4 City of Brooklyn Center Economic Development Authority Fund STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE - BUDGET AND ACTUAL For the Year Ended December 31, 2002 2002 Actual Over (Under) 2001 Budget Actual Budget Actual Revenues Property taxes $5,974 $5,974 $205,694 Intergovernmental 53,623 53,623 1,116,842 Investment earnings $30,000 30,280 280 39,312 Change in fair value of investments (840) (840) 100,202 Miscellaneous 49,000 49,000 57,863 Total Revenues 30,000 138,037 108,037 1,519,913 Expenditures Personal services 168,478 176,508 8,030 197,686 Supplies 1,750 579 (1,171) 33 Services and other charges 66,839 154,052 87,213 1,249,143 Capital outlays 1,076,721 Total Expenditures 237,067 331,139 94,072 2,523,583 ' Deficiency of Revenues Over Expenditures (207,067) (193,102) 13,965 (1,003,670) Other Financing_ Sources Sale of land 474,648 474,648 572,266 Operating transfers in 433,687 208,266 (225,421) 166,807 Total Other Financing Sources 433,687 682,914 249,227 739,073 Excess (Deficiency) of Revenues and Other Financing Sources Over Expenditures 226,620 489,812 263,192 (264,597) Fund Balance January 1 783,534 783,534 1,048,131 t Fund Balance December 31 $1,010,154 $1,273,346 $263,192 $783,534 66 B -5 City f Brook Center Y Y Earle Brown Farm Tax Increment Financing District Fund STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE - BUDGET AND ACTUAL For the Year Ended December 31, 2002 2002 Actual Over (Under) 2001 Budget Actual Budget Actual Revenues Property taxes $785,682 $815,568 $29,886 $1,035,349 Investment earnings 5,000 (5,000) Change in fair value of investments 6,628 Total Revenues 790,682 815,568 24,886 1,041,977 Expenditures Personal services 4,210 4,210 Services and other charges 10,000 2,050 (7,950) 1,657 Interest 11,516 11,516 30,229 Total Expenditures 10,000 17,776 7,776 31,886 Excess of Revenues Over Expenditures 780,682 797,792 17,110 1,010,091 Other Financing Uses Operating transfers out (1,410,000) (1,410,000) (1,390,000) Total Other Financing Uses (1,410,000) (1,410,000) (1,390,000) (Deficiency) Excess of Revenues Over Expenditures and Other Financing Uses (629,318) (612,208) 17,110 (379,909) Fund Deficit January 1 (1,202,247) (1,202,247) (822,338) Fund Deficit December 31 ($1,831,565) ($1,814,455) $17,110 ($1,202,247) 67 IL B -6 City of Brooklyn Center Tax Increment District No. 3 Fund STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE - BUDGET AND ACTUAL For the Year Ended December 31, 2002 2002 Actual Over (Under) 2001 Budget Actual Budget Actual Revenues Property taxes $2,216,457 $2,067,009 ($149,448 ) $2 Investment earnings 10,000 154,348 144,348 146,493 Change in fair value of investments (3,962) (3,962) 95,775 Total Revenues 2,226,457 2,217,395 (9,062) 2,744,268 Expenditures Personal services 8,945 8,945 Services and other charges 155,000 768,293 613,293 507,423 Interest 95,881 95,881 38,445 Total Expenditures 155,000 873,119 718,119 545,868 ' Excess of Revenues Over Expenditures 2,071,457 1,344,276 (727,181) 2,198,400 Other Financina Uses Operating transfers out (570,000) (570,000) (580,000) Total Other Financing Uses (570,000) (570,000) (580,000) Excess of Revenues Over Expenditures and Other Financing Uses 1,501,457 774,276 (727,181) 1,618,400 Fund Balance January 1 4,082,569 4,082,569 2,464,169 Fund Balance December 31 $5,584,026 $4,856,845 ($727,181) $4,082,569 68 B -7 City of Brooklyn Center Tax Increment District No. 4 Fund STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE - BUDGET AND ACTUAL For the Year Ended December 31, 2002 2002 Actual Over (Under) 2001 Budget Actual Budget Actual Revenues Property taxes $221,912 $139,675 ($82,237) $254,049 Investment earnings 5,000 1,267 (3,733) Change in fair value of investments (35) (35) Total Revenues 226,912 140,907 (86,005) 254,049 Expenditures Personal services 4,016 4,016 Services and other charges 181,530 183,923 2,393 16,713 Interest 104,087 Total Expenditures 181,530 187,939 2,393 120,800 Excess (Deficiency) of , Revenues Over Expenditures 45,382 (47,032) (88,398) 133,249 Fund Balance (Deficit) January 1 112,254 112,254 (20,995) , Fund Balance December 31 $157,636 $65,222 ($88,398) $112,254 69 I B -8 City of Brooklyn Center Police Drug Forfeiture Fund STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE - BUDGET AND ACTUAL For the Year Ended December 31, 2002 2002 Actual Over (Under) 2001 Revenues Budget Actual Budget Actual Forfeited drug money $20,000 $27,587 $7,587 $31,950 Investment earnings 2,248 2,248 2,829 Change in fair value of investments (62) (62) 1,993 Total Revenues 20,000 29,773 9,773 36,772 Expenditures Supplies 8,000 7,936 (64) 1,405 Services and other charges 2,000 (2,000) 2,360 Capital outlays 10,000 (10,000) 33,563 Total Expenditures 20,000 7 936 1 (2,064) 37,328 ' Excess (Deficiency) of Revenues Over Expenditures 21,837 21,837 (556) Fund Balance January 1 37,033 37,033 37,589 Fund Balance December 31 $37,033 $58,870 $21,837 $37,033 70 B -9 City of Brooklyn Center Community Development Block Grant Fund STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE - BUDGET AND ACTUAL For the Year Ended December 31, 2002 2002 Actual Over (Under) 2001 Budget Actual Budget Actual Revenues Intergovernmental: Federal Grants $242,294 $352,000 $109,706 $232,308 Total Revenues 242,294 352,000 109,706 232,308 Expenditures Services and other charges 242,294 338,500 $96,206 Total Expenditures 242,294 338,500 96,206 Excess of Revenues Over Expenditures 13,500 13,500 232,308 Other Financing Sources (Uses) , Operating transfers out (13,500) (13,500) (232,308) Excess (Deficiency) of Revenues Over Other Financing Uses Fund Balance January 1 Fund Balance December 31 $0 $0 $0 $0 71 B -10 City of Brooklyn Center City Initiatives Grant Fund STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE - BUDGET AND ACTUAL For the Year Ended December 31, 2002 2002 Actual Over (Under) 2001 Revenues Budget Actual Budget Actual Intergovernmental $82,157 $82,157 $206,960 Investment earnings 2,353 2,353 3,725 Change in fair value of investments (64) (64) 2,575 Miscellaneous $48,000 57,719 9,719 24,091 Total Revenues 48,000 142,165 94,165 237,351 Expenditures Personal services 8,000 6,219 (1,781) 12,611 Supplies 24,946 24,946 4,375 1 Services and other charges 40,000 136,845 96,845 178,169 Capital outlays 78,598 Interest 31 31 263 Total Expenditures 48,000 168,041 120,041 274,016 (Deficiency) Excess of Revenues Over Expenditures (25,876) (25,876) (36,665) Other Financina (Uses) Sources Operating transfers out (11,277) (11,277) Total Other Financing (Uses) Sources (11,277) (11,277) (Deficiency) Excess of Revenues Over Expenditures and Other Financing Uses (37,153) (37,153) (36,665) Fund Balance January 1 51,204 51,204 87,869 Fund Balance December 31 $51,204 $14,051 ($37,153) $51,204 72 City of Brooklyn Center, Minnesota DEBT SERVICE FUNDS ' The Debt Service Funds were established to account for the accumulation of resources for and the payment of principal and interest on long -term general obligation debt other than revenue bonds and the City's liability for compensated absences. ' This fund type utilizes the modified accrual basis of accounting. Revenues are recognized in the accounting period in which they become available and measurable. Expenditures are recognized in the accounting period in which the principal and interest are due. The City's Debt Service Funds included in this section are: General Obliqation 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 accumulation of resources for payment of tax increment general obligation bonds and interest thereon. These bonds were 1 sold to finance the purchase and redevelopment of the historic Earle Brown Farm and other various redevelopment projects within the City. Special Assessment Bonds Fund: This fund is used to account for the accumulation of resources for the payment of special assessment 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. 73 CC = 1 City of Brooklyn Center Debt Service Funds COMBINING BALANCE SHEET December 31, 2002 General Tax Special Obligation Increment Assessment Totals Bonds Bonds Bonds 2002 2001 ' ASSETS Cash and investments $871,970 $2,212,462 $2,661,585 $5,746,017 $5,460,337 ' Unremitted taxes 11,608 11,608 13,803 Delinquent taxes receivable 26,931 10,380 37,311 9,645 Special assessments receivable: Deferred 3,875,650 3,875,650 3,428,179 Delinquent 41,800 41,800 92,073 TOTAL ASSETS $898,901 $2,212,462 $6,601,023 $9,712,386 $9,004,037 LIABILITIES AND FUND BALANCES Liabilities: , Accounts Payable $16,434 $16,434 $1,626 Deferred revenue $26,931 3,927,830 3,954,761 3,529,897 Total Liabilities 26,931 3,944,264 3,971,195 3,531,523 Fund Balances: Reserved for debt service 871,970 $2,21 2,462 2,656,759 5,741,191 5,472,514 Total Fund Balances 871,970 2,212,462 2,656,759 5,741,191 5,472,514 TOTAL LIABILITIES AND FUND BALANCES $898,901 $2,212,462 $6,601,023 $9,712,386 $9,004,037 74 City of Brooklyn Center CC =2 Debt Service Funds COMBINING STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES For the Year Ended December 31, 2002 General Tax Special Obligation Increment Assessment Totals Bonds Bonds Bonds 2002 2001 Revenues Property taxes $176,000 Special assessments $928,559 $928,559 1,029,378 Intergovernmental $292,014 292,014 295,745 Investment earnings 16,439 $23,328 70,332 110,099 121,235 Change in fair value of investments (456) (646) (1,952) (3,054) 99,968 Total Revenues 307,997 22,682 996,939 1,327,618 1,722,326 Expenditures Principal 680,000 1,540,000 780,000 3,000,000 2,805,000 Interest 350,749 433,893 249,497 1,034,139 1,149,623 Fiscal agent fees 1,608 950 26,154 28,712 8,931 Total Expenditures 1,032,357 1,974,843 1,055,651 4,062,851 3,963,554 (Deficiency) Excess of Revenues Over Expenditures (724,360) (1,952,161) (58,712) (2,735,233) (2,241,228) Other Financina Sources (Uses) Operating transfers in 764,742 1,980,000 259,168 3,003,910 2,977,133 Total Other Financing Sources 764,742 1,980,000 259,168 3,003,910 2,977,133 ' Excess (Deficiency) of Revenues and Other Sources Over Expenditures and Other Uses 40,382 27,839 200,456 268,677 735,905 Fund Balances January 1 831,588 2,184,623 2,456,303 5,472,514 4,736,609 Fund Balances December 31 $871,970 $2,212,462 $2,656,759 $5,741,191 $5,472,514 ' 75 ' City Y of Brooklyn Center Minnesota ' CAPITAL PROJECTS FUNDS The Capital Projects Funds are established to account for all resources used for the construction or acquisition of capital facilities by the City except those financed by Enterprise Funds. This fund type utilizes the modified accrual basis of accounting. Revenues are recognized in the accounting period in which they become available and measurable. Expenditures are recognized in the accounting period in which the related liability is incurred. ' The City's Capital Projects Funds included in this section are: ' Capital Reserve Emerqencv 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 for Construction Fund: This fund was established to account for the state allotment of gasoline tax collections used for transportation related construction projects. ' Special Assessment Construction Fund: This 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. Earle Brown Heritaqe Center Improvements Fund: This fund was established to p rovide a stable source of funds to pay for periodic capital improvements needed at the facility. r ' 76 City of Brooklyn Center Capital Projects Funds COMBINING BALANCE SHEET ' December 31, 2002 Municipal Earle Brown Capital State Aid Special Heritage Reserve Capital for Assessment Center Totals Emergency Improvements Construction Construction Improvements Fund Fund Fund Fund Fund 2002 2001 , ASSETS Cash and Investments $1,329,490 $1,062,521 $194,254 $396,043 $100,000 $3,082,308 $6,406,570 Accounts receivable 1,537 1,537 2,878 Special assessments: Unremitted 7,907 7,907 Deferred 155,181 155,181 198,209 Delinquent 3,837 3,837 1,893 , Due from other governments 201,350 201,350 462,067 Advance to other funds 900,000 593,069 1,493,069 1,543,069 TOTAL ASSETS $1,329,490 $1,962,521 $988,673 $564,505 $100,000 $4,945,189 $8,614,686 ' LIABILITIES AND FUND BALANCES ' Liabilities: Accounts payable $199,708 $166,592 $805,029 $1,171,329 $1,036,382 , Accrued salaries and wages 1,838 1,838 5,959 Deferred revenue 201,350 207,427 408,777 691,853 Total Liabilities 201,546 367,942 1,012,456 1,581,944 1,734,194 ' Fund Balances: Reserved: Advances to other funds 900,000 593,069 1,493,069 1,543,069 Unreserved $1,329,490 860,975 27,662 (447,951) $100,000 1,870,176 5,337,423 Total Fund Balances 1,329,490 1,760,975 620,731 (447,951) 100,000 3,363,245 6,880,492 TOTAL LIABILITIES AND FUND BALANCES $1,329,490 $1,962,521 $988,673 $564,505 $100,000 $4,945,189 $8,614,686 77 ' r ' City of Brooklyn Center D -2 Capital Projects Funds r COMBINING STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES For the Year Ended December 31, 2002 Municipal Earle Brown Capital State Aid Special Heritage Reserve Capital for Assessment Center Emergency Improvements Construction Construction Improvements Totals Fund Fund Fund Fund Fund 2002 2001 Revenues Special assessments $260,752 $260,752 $102,172 r Intergovernmental $10,400 $918,126 2,487,946 3,416,472 50,000 Investment earnings $48,520 62,470 27,114 16,653 154,757 361,259 Change in fair value of investments (1,346) (1,733) (752) (421) (4,252) 426,857 Miscellaneous 10,605 3,000 12,843 26,448 12,408 Total Revenues 47,174 81,742 947,488 2,777,773 3,854,177 952,696 ' Expenditures Personal services 17,176 4,942 22,118 266,755 Supplies 4,701 57 4,758 20,466 Services and other charges 9,850 46,604 112,868 169,322 1,098,586 Capital outlay 49,126 2,528,518 1,292,551 5,542,027 9,412,222 3,983,488 Interest 7,515 Total Expenditures 58,976 2,596,999 1,410,361 5,542,084 9,608,420 5,376,810 ' (Deficiency) Excess of Revenues Over Expenditures (11,802) (2,515,257) (462,873) (2,764,311) (5,754,243) (4,424,114) r Other Financina Sources Proceeds from sale of bonds 730,000 Operating transfers in 396,277 555,000 $100,000 1,051,277 980,244 Total Other Financing Sources 396,277 555,000 100,000 1,051,277 1,710,244 (Deficiency) Excess of Revenues and Other Financing Sources Over Expenditures (11,802) (2,118,980) (462,873) (2,209,311) 100,000 (4,702,966) (2,713,870) Fund Balances January 1, as previously reported 1,341,292 3,879,955 664,228 995,017 6,880,492 8,901,362 Prior period adjustment 419,376 419,376 Fund Balances January 1, as restated 1,083,604 7,299,868 ' Equity Transfers In 766,343 766,343 693,000 Fund Balances December 31 $1,329,490 $1,760,975 $620,731 ($447,951) $100,000 $3,363,245 $6,880,492 �1 r r r r r 78 City of Brooklyn Center, Minnesota ENTERPRISE FUNDS The Enterprise Funds were established to account for the financing of self- supporting activities of the City which render services on a user charge basis to the general public. Revenues and expenses in these funds are recognized on the accrual basis of accounting. Revenues are recognized in the accounting period in which they are earned and become objectively measurable. Expenses are recognized in the period incurred, if objectively measurable. The City's Enterprise Funds included in this section are: Municipal Liauor Fund: This fund accounts for the operations of the City's municipal off -sale liquor stores. Golf Course Fund: This fund accounts for operations of Centerbrook Golf Course, a 9 hole, par 3 course owned by the City. Earle Brown Her• itaae Center Fund: This 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 modern multipurpose facility. Its convention center can host conferences, trade shows, and concerts seating 1,000 people in either banquet or theater ' style. The facility hosts many meetings, parties, weddings and receptions. Recvclina and Refuse Fund: This fund accounts for the operation of a state - mandated recycling program. Expansion into refuse collection will take place only when there is a clear advantage to be achieved by it. ' Water Utilitv Fund,: This fund accounts for the provision of water to customers. Administration, wells, water storage, and distribution are included. Sanitary Sewer Fund: This 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 75% of this fund's expenses. Storm Drainaae Fund: This fund accounts for the operations and improvements p p ovements of the storm water drainage system. It incorporates not only the storm sewer system, but also water structures such as holding ponds and facilities to improve water quality. Fees are based upon the amount of water running off a property and vary with both size and absorption characteristics of the parcel. Street Liaht Utilitv Fund This fund was created to account streetlights within the City. Benefitting properties are billed for the enexpenses. to 79 City of Brooklyn Center Enterprise Funds COMBINING BALANCE SHEET December 31, 2002 E. Brown ' Municipal Golf Heritage Recycling Liquor Course Center & Refuse ASSETS Fund Fund Fund Fund Current Assets: Cash and investments $801,993 $37,281 $666,529 $54,501 Accounts receivable - net 160 187,596 20,534 Accrued revenue 25,931 Special assessments receivable: Deferred Delinquent , Due from other governments 57,351 Due from other funds Inventories 279,203 7,388 26,750 Prepaid expenses 12,580 12,033 Total Current Assets 1,151,287 44,669 892,908 100,966 Fixed Assets: Mains and lines Structures 487,947 11,091,389 Equipment 253,003 11,160 45,544 , Land 1,390,402 1,493,300 Land improvements 40,258 327,830 253,003 1,929,767 12,958,063 , Less: Accumulated Depreciation 71,159 128,932 3,501,178 Total Net Fixed Assets 181,844 1,800,835 9,456,885 Total Assets $1,333,131 $1,845,504 $10,349,793 $100,966 ' LIABILITIES AND FUND EQUITY Current Liabilities: Accounts payable $150,737 $1,329 $341,862 $1,097 Due to other funds Accrued salaries payable 15,875 2,330 27,129 Accrued interest payable ' Deferred revenue 1,600 Current portion of long -term debt 50,000 Total Current Liabilities 166,612 53,659 370,591 1,097 , Long -Term Liabilities: Advances from other funds 850,000 Bonds payable Total Long -term Liabilities 850,000 Fund Equity: Contributed Capital 643,725 9,434,580 Retained earnings Reserved: Debt service , Special assessments Unreserved 1,166,519 298,120 544,622 99,869 Total Fund Equity 1,166,519 941,845 9,979,202 99,869 Total Liabilities and Fund Equity $1,333,131 $1,845,504 $10,349,793 $100,966 80 E -1 Street Light Water Sanitary Storm utility utility Sewer Drainage Totals Fund Fund Fund Fund 2002 2001 $30,361 $1,541,308 $682,184 $343,221 $4,157,378 $3,955,209 16,641 171,729 255,319 $99,831 751,810 753,823 25,726 129,676 344,682 166,717 692,732 707,986 222,498 3,455 12,903 238,856 227,163 52,939 94 53,033 34,269 7,142 64,493 115,146 21,315 24,109 337,450 316,766 129,372 153,985 132,559 72,728 2,149,401 1,415,012 622,766 6,449,737 6,264,236 13,405,200 12,096,356 11,656,212 37,157,768 35,738,550 3,331,384 2,418,244 17,328,964 20,430,842 128,668 179,130 617,505 1,658,703 23,093 3,389 287,158 3,197,342 3,198,651 368,088 491,078 16,888,345 14,697,119 11,943,370 58,669,667 61,517,824 8,302,479 6,074,884 1,016,263 19,094,895 13,371,122 8,585,866 8,622,235 10,927,107 39,574,772 48,146,702 $72,728 $10,735,267 $10,037,247 $11,549,873 $46,024,509 $54,410,938 $11,410 $28,323 $23,002 $616 $558,376 $841,777 21,315 10,313 5,220 60,867 51,961 14,583 14,583 18,833 116,588 118,188 210,000 260,000 250,000 11,410 155,224 28,222 225,199 1,012,014 1,183,886 850,000 900,000 450,000 450,000 660,000 450,000 1,300,000 1,560,000 4,997,510 5,668,426 863,964 21,608,205 22,295,175 239,540 239,540 240,100 275,437 3,455 12,997 291,889 261,432 61,318 5,307,096 4,337,144 9,758,173 21,572,861 28,870,345 61,318 10,580,043 10,009,025 10,874,674 43,712,495 51,667,052 $72,728 $10,735,267 $10,037,247 $11,549,873 $46,024,509 $54,410,938 81 I City of Brooklyn Center Enterprise Funds COMBINING STATEMENT OF REVENUES, EXPENSES, AND CHANGES IN RETAINED EARNINGS For the Year Ended December 31, 2002 E. Brown Municipal Golf Heritage Recycling Liquor Course Center & Refuse Fund Fund Fund Fund ' Operatinq Revenues Sales and user fees $3,435,556 $278,664 $3,480,535 $210,954 Cost of sales 2,593,765 27,820 385,341 - Gross Margin 841,791 250,844 3,095,194 210,954 Operatinq Expenses Personal services 364,054 144,912 1,740,912 Supplies 11,804 29,219 275,360 Other services 100,202 36,383 489,964 215,032 Insurance 7,433 9,003 34,776 179 Utilities 11,828 13,758 146,742 Rent 158,702 88,019 Depreciation 35,580 13,045 478,497 Total Operating Expenses 689,603 246,320 3,254,270 215,211 Operating Income (Loss) 152,188 4,524 (159,076) (4,257) ' Nonoperatina Revenues or Expenses( -) Investment earnings 28,169 2,679 22,553 2,632 Change in fair value of investments (667) (74) (577) (73) Special assessments Other revenue 2,004 Interest and fiscal agent fees (1,098) ' Total Nonoperating Revenues or Expenses( -) 29,506 2,605 20,878 2,559 Income Before Contributions and Operating 181,694 7,129 (138,198) (1,698) Transfers Capital Contributions 212,142 Operating Transfers Out (100,000) (100,000) Net Income (Loss) 81,694 219,271 (238,198) (1,698) Depreciation on contributed uted assets that reduces contributed capital 686,971 Retained Earnings Jan. 1, as previously reported 1,094 156 131 024 633 496 P 101,567 Prior r' pe iod adjustment J (5,266) (103,586) Cumulative effect of change in accounting principle g g p p e (9,331) (46,909) (434,061) Retained Earnings Jan. 1, as restated 1,084,825 78,849 95,849 101,567 1 Retained Earnings Dec. 31 $1,166,519 $298,120 $544,622 $99,869 82 EE = 2 Street Light Water Sanitary Storm Utility Utility Sewer Drainage Totals Fund Fund Fund Fund 2002 2001 $213,078 $1,364,076 $2,664,730 $1,377,638 $13,025,231 $13,259,771 3,006,926 3,220,229 213,078 1,364,076 2,664,730 1,377,638 10,018,305 10,039,542 318,567 150,889 100,000 2,819,334 2,889,399 131,985 14,338 3,153 465,859 426,605 152,660 310,468 1,791,739 126,656 3,223,104 2,870,457 66 10,851 4,705 1,932 68,945 81,798 101,591 23,728 297,647 370,780 246,721 226,659 698,773 565,185 431,006 2,222,086 1,292,168 152,726 1,572,235 2,550,584 662,747 9,343,696 8,157,866 60,352 (208,159) 114,146 714,891 674,609 1,881,676 993 48,416 43,897 5,837 155,176 222,410 (27) (1,340) (1,218) (162) (4,138) 225,952 21,178 271 429,873 451,322 290,907 610 2,614 4,840 (36,701) (37,799) (55,138) 966 68,864 42,950 398,847 567,175 688,971 61,318 (139,295) 157,096 1,113,738 1,241,784 2,570,647 212,142 (200,000) (325,500) 61,318 (139,295) 157,096 1,113,738 1,253,926 2,245,147 686,971 323,422 10,924,715 7,276,320 9,210,599 29,371,877 26,803,308 (3,588,141) (2,703,920) (43,568) (6,444,481) (1,614,746) (388,897) (270,059) (2,764,003) 5,721,828 4,183,503 8,896,972 20,163,393 26,803,308 6 $ 1,318 $5,582,533 $4,340,599 $10,010,710 $22,104,290 $29,371,877 83 City of Brooklyn Center Enterprise Funds COMBINING STATEMENT OF CASH FLOWS For the Year Ended December 31, 2002 E. Brown Municipal Golf Heritage Recycling Liquor Course Center & Refuse Cash flows from ooeratina_ activities:, Fund Fund Fund Fund Operating income (loss) $152,188 $4,524 ($159,076) ($4,257) Adjustments to reconcile operating income (loss) to net cash provided by (used for) operating activities: Depreciation 35,580 13,045 478,497 Changes in assets and liabilities: Receivables 55,540 807 56,189 (2,507) Inventories (20,375) 3,568 (1,900) Prepaid expenses (3,283) (7,200) Payables 22,330 (8,394) (46,376) 472 Accrued expenses 3,898 (385) 4,620 Accrued interest payable Other nonoperating income 2,004 Net cash provided by (used for) operating activities 247,882 13,165 324,754 (6,292) Cash flows from noncaoital financing activities:, Proceeds from interfund payables /receivables Principal repayments on long term debt Principal repayments on advance (50,000) Interest paid to other entities (1,098) Operating transfers out (100,000) (100,000) Net cash used for noncapital financing activities (100,000) (50,000) (101,098) Cash flows from caoital and related financina activities: Acquisition and construction of capital assets (11,161) Principal paid on revenue bonds Interest paid on revenue bonds Net cash used for capital and related financing activities (11,161) Cash flows from investina activities: Investments purchased (716,080) (33,004) (597,108) (48,839) Investments sold or matured 294,392 34,677 209,459 26,533 Interest on investments 28,169 2,679 22,553 2,632 Net cash (used for) provided by investing activities (393,519) 4,352 (365,096) (19,674) Net (decrease) increase in cash and cash equivalents (245,637) (43,644) (141,440) (25,966) Cash and cash equivalents at beginning of the year 381,151 50,340 254,639 35,209 Cash and cash equivalents at end of the year $135,514 $6,696 $113,199 $9,243 Non cash items: Change in fair value of investments ($667) ($74) ($577) ($73) Capital contribution $212,142 84 ' E -3 Street Light Water Sanitary Storm Utility Utility Sewer Drainage Totals Fund Fund Fund Fund 2002 2001 $60,352 ($208,159) $114,146 $714,891 $674,609 $1,881,676 698,773 565,185 431,006 2,222,086 1,292,168 (42,367) 3,806 (10,419) (2,271) 58,778 (52,598) (1,977) (20,684) 80,515 (10,943) (21,426) (9,741) 11,410 (76,007) 38 (12,384) (108,911) (377,118) (984) 1,757 8,906 (109,006) (4,250) (4,250) (3,962) 21,788 271 429,873 453,936 295,747 29,395 437,240 660,035 1,556,865 3,263,044 2,997,681 (21,315) (21,315) (63,321) (56,302) (56,302) (56,302) (50,000) (50,000) (1,098) (1,972) (200,000) (325,500) (56,302) (21,315) (328,715) (497,095) 650,253 1,023 781 (961,302) (2,646,497) 2,545,415 (200,000) (200,000) (190,000) (36,701) (36,701) (53,166) (650,253) (1,023,781) (1,198,003) (2,883,198) (2,788,581) (27,207) (1,381,192) (611,316) (307,566) (3,722,312) (99,636) 1,967 797,205 440,271 22,387 1,826,891 1,734,601 993 48,416 43,897 5,837 155,176 222,410 (24,247) (535,571) (127,148) (279,342) (1,740,245) 1,857,375 5,148 (804,886) (490,894) 58,205 (1,689,114) 1,569,380 1,066,268 606,582 2,394,189 824,809 $5,148 $261,382 $115,688 $58,205 $705,075 $2,394,189 ($27) ($1,340) ($1,218) ($162) ($4,138) $225,952 $212,142 85 City of Brooklyn Center, Minnesota INTERNAL SERVICE FUNDS Internal Service Funds are used to account on a cost reimbursement basis forth the financing of goods or services provided by one department to other departments of the City. Revenues and expenses in these funds s are recognized on the accrual basis of accounting. Revenues are recognized in the accounting period in which they are earned and become measurable. Expenditures are recognized in the accounting period in which they are incurred. The City's Internal Service Funds included in this section are: Public Emplovees Compensated Absences Fund: This fund accounts for payment of unused vacation and sick leave time and the allocation of such costs to user departments. Public Employees 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. 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, repair, and replacement will be provided from rental rates which the Central Garage charges City operating departments for use of the equipment. ' 86 F -1 City of Brooklyn Center Internal Service Funds COMBINING BALANCE SHEET December 31, 2002 Public Employees Public Compensated Employees Central Absences Retirement Garage Totals ASSETS Fund Fund Fund 2002 2001 Current Assets: Cash and investments $741,038 $1,574,666 $4,198,486 $6,514,190 $6,365,936 Accounts receivable 5,935 3,283 9,218 10,379 Inventories 15,461 15,461 13,258 Total Current Assets 741,038 1,580,601 4,217,230 6,538,869 6,389,573 Fixed Assets: Equipment 5,811,026 5,811,026 5,934,770 Less: Accumulated depreciation 3,106,076 3,106,076 3,067,896 Total net fixed assets 2,704,950 2,704,950 2,866,874 TOTAL ASSETS $741,038 $1,580,601 $6,922,180 $9,243,819 $9,256,447 LIABILITIES AND FUND EQUITY Current Liabilities: Accounts payable $702 $16,955 $17,657 $16,066 Accrued salaries payable 7,719 7,719 9,001 Total Current Liabilities 702 24,674 25,376 25,067 Long -term Liabilities: Accrued vacation and sick pay $714,914 714,914 733,221 Accrued health insurance liability 1,549,681 1,549,681 1,549,681 Total Long -term Liabilities 714,914 1,549,681 2,264,595 2,282,902 Fund Equity: Contributions: General Fund 776,657 776,657 803,020 Debt Service Funds 1,091,766 1,091,766 1,128,825 Capital Projects Funds 6,605 6,605 6,829 Enterprise Funds 480,959 480,959 497,284 General Fixed Asset Account Group 478,956 478,956 495,213 Total Contributions 2,834,943 2,834,943 2,931,171 Retained Earnings: Unreserved 26,124 30,218 4,062,563 4,118,905 4,017,307 Total Fund Equity 26,124 30,218 6,897,506 6,953,848 6,948,478 TOTAL LIABILITIES AND FUND EQUITY $741,038 $1,580,601 $6,922,180 $9,243,819 $9,256,447 87 , F_2 City of Brooklyn Center Internal Service Funds COMBINING STATEMENT OF REVENUES, EXPENSES, AND CHANGES IN RETAINED EARNINGS For the Year Ended December 31, 2002 Public Employees Public Compensated Employees Central Absences Retirement Garage Totals Fund Fund Fund 2002 2001 Ooeratino Revenues Billings to departments $1,104,873 $1,104,873 $1,069,164 Sales $1,652 12,299 13,951 15,882 Total Operating Revenues 1,652 1,117,172 1,118,824 1,085,046 Ooeratino Exoenses Personal services 25,896 251,264 277,160 409,406 Supplies 222,228 222,228 250,085 Other services 106,183 106,183 65,585 Insurance 52,326 52,326 51,788 Utilities 3,688 3,688 2,629 Depreciation 570,105 570,105 552,091 Total Operating Expenses 25,896 1,205,794 1,231,690 1,331,584 Operating (Loss) Income (24,244) (88,622) (112,866) (246,538) Nonoperatino Revenues (Exoenses) Investment earnings $26,869 56,016 148,268 231,153 277,381 Change in fair value of investments (745) (1,554) (4,113) (6,412) 265,439 Total Nonoperating Revenues (Expenses) 26,124 54,462 144,155 224,741 542,820 Net Income (Loss) 26,124 30,218 55,533 111,875 296,282 Depreciation on contributed assets that reduces contributed capital 96,228 96,228 73,055 Retained Earnings January 1, as previously reported 4,017,307 4,017,307 3,647,970 Cumulative effect of change in accounting principle (106,505) (106,505) Retained Earnings January 1, as restated 3,910,802 3,910,802 3,647,970 Retained Earnings December 31 $26,124 $30,218 $4,062,563 $4,118,905 $4,017,307 88 City of Brooklyn Center FF =3 Internal Service Funds COMBINING STATEMENT OF CASH FLOWS For the Year Ended December 31, 2002 Public Employees Public Compensated Employees Central Absences Retirement Garage Totals Cash flows from operating activities: Fund Fund Fund 2002 2001 Operating loss ($24,244) ($88,622) ($112,866) ($246,538) Adjustments to reconcile operating loss to net cash (used for) provided by operating activities: Depreciation 570,105 570,105 552,091 Changes in assets and liabilities: Accounts receivable 329 832 1,161 (2,365) Inventories (2,203) (2,203) (1,985) Accounts payable 565 1,026 1,591 (58) Accrued salaries and leave ($18,307) (1,282) (19,589) 702,957 Accrued health insurance liability 126,438 Net cash (used for) provided by operating activities (18,307) (23,350) 479,856 438,199 1,130,540 Cash flows from capital and related financina activities: Acquisition of fixed assets (619,371) (619,371) (430,004) Proceeds of sale of fixed assets 104,685 104,685 Net cash used for capital and related financing activities (514,686) (514,686) (430,004) Cash flows (used for) provided by investing activities: Investments purchased (664,056) (1,411,085) (3,762,333) (5,837,474) (430,647) Investments sold or matured 337,845 712,201 1,888,520 2,938,566 2,193,995 Interest on investments 26,869 56,016 148,268 231,153 277,381 Net cash (used for) provided by investing activities (299,342) (642,868) (1,725,545) (2,667,755) 2,040,729 Net (decrease) increase in cash and cash equivalents (317,649) (666,218) (1,760,375) (2,744,242) 2,741,265 Cash and cash equivalents at beginning of the year 443,317 933,257 2,472,372 3,848,946 1,107,681 Cash and cash equivalents at end of the year $125,668 $267,039 $711,997 $1,104,704 $3,848,946 Non cash items: Change in fair value of investments ($745) ($1,554) ($4,113) ($6,412) $265,439 89 ' City of Brooklyn Center, Minnesota GENERAL FIXED ASSET ACCOUNT GROUP The General Fixed Asset Account Group was established to account forthe City's fixed assets which are not accounted for in an enterprise fund, are tangible in nature, have a life longer than the current fiscal year, and have a significant value. Depreciation is not recorded on ' those assets. it r 90 ' City of Brooklyn Center SS =6 SCHEDULE OF CHANGES IN GENERAL FIXED ASSETS BY SOURCE For the Year Ended December 31, 2002 ' January 1, December 31, 2002 2002 Balance Acquisitions Adiustments* Balance Investments in General Fixed Assets Land $3,646,630 $347,726 $3,298,904 Buildings and improvements 17,894,507 $2,282,032 1,651,469 18,525,070 Park improvements 3,971,979 218,064 1,283,902 2,906,141 Furniture 1,299,232 1,299,232 0 Departmental equipment 1,194,499 25,699 874,452 345,746 Total Investments in General , Fixed Assets $28,006,847 $2,525,795 $5,456,781 $25,075,861 Sources of Investments , General indebtedness $11,326,547 $1,115,436 $10,211,111 General Fund revenues 7,970,914 $25,699 7,996,613 i Liquor store income 579,848 436,836 143,012 Contributions 403,247 403,247 0 Capital projects funds 6,948,457 2,500,096 2,723,428 6,725,125 Federal grants 777,834 777,834 0 Total Sources of Investments $28,006,847 $2,525,795 $5,456,781 $25,075,861 * All adjustments were due to new asset thresholds established January 1, 2002. 91 ' SS = 7 City of Brooklyn Center ' SCHEDULE OF GENERAL FIXED ASSETS BY FUNCTION AND ACTIVITY December 31, 2002 Buildings and Furniture and Function Land Improvements Improvements Equipment Total General government $1,285,478 $2,604,727 $38,286 $3,928,491 Public safety 116,800 9,532,053 242,656 9,891,509 Public works 80,124 2,120,397 29,066 2,229,587 Recreation 75,741 4,124,881 $215,075 35,738 4,451,435 Parks 1,740,761 143,012 2,691,066 4,574,839 Totals $3,298,904 $18,525,070 $2,906,141 $345,746 $25,075,861 1 92 S = 8 City of Brooklyn Center SCHEDULE OF CHANGES IN GENERAL FIXED ASSETS ' BY FUNCTION AND ACTIVITY For the Year Ended December 31, 2002 General Fixed General Fixed Assets Assets January 1, December 31, Function 2002 Additions Adjustments* Reclassed ** 2002 ' General government $1,590,107 $357,277 $2,695,661 $3,928,491 Government buildings 18,188,090 $1,869,718 1,650,217 (18,407,591) Public safety 1,163,657 25,699 975,365 9,677,518 9,891,509 Public works 218,147 189,081 2,200,521 2,229,587 Recreation 250,892 581,806 215,154 3,833,891 4,451,435 Parks 6,595,954 48,572 2,069,687 4,574,839 Totals $28,006,847 $2,525,795 $5,456,781 $0 $25,075,861 * All adjustments were due to new asset thresholds established January 1, 2002. ' ** Reclassifications were used to move assets to their functional areas in preparation for GASB 34 implementation. ' 1 93 ' City of Brooklyn Center, Minnesota ' GENERAL LONG -TERM DEBT ACCOUNT GROUP The General Long -Term Debt Account Group was established to account for the City's unmatured general obligation long -term debt that is secured by the full faith and credit of the City and is not the primary obligation of an Enterprise Fund of the City. r 94 _G 1 City of Brooklyn Center COMPARATIVE STATEMENT OF GENERAL LONG -TERM DEBT 1 December 31, 2002 December 31 1 2002 2001 1 Amounts Available and to be Provided Amounts Available in Debt Service Funds $5,741,191 $5,472,514 Amounts to be Provided: From future property tax levies 5,453,030 5,932,579 From future gas tax allocations 1,100,000 1,345,000 1 From future tax increments 3,937,538 5,505,376 From future special assessments 2,713,241 3,693,694 Total Amounts Available and to be Provided $18,945,000 $21,949,163 1 1 General Lona -Term Debt Pavable 1 General obligation bonds $7,425,000 $8,105,000 Other long term liabilities 4,163 Tax increment bonds 6,150,000 7,690,000 1 General obligation special assessment bonds with governmental commitment 5,370,000 6,150,000 Total General Long -Term Debt $18,945,000 $21,949,163 1 1 1 1 1 r 1 95 1 ' H City of Brooklyn Center e SUMMARY OF DEBT SERVICE REQUIREMENTS TO MATURITY December 31, 2002 Total Debt General Obligation Bonds Tax Increment Bonds Special Assessment Bonds Service Requirements Year Principal Interest Principal Interest Principal Interest Principal Interest ' 2003 $705,000 $322,356 $1,645,000 $340,413 $870,000 $222,596 $3,220,000 $885,365 2004 740,000 292,318 1,775,000 237,302 860,000 184,960 3,375,000 714,580 2005 775,000 260,374 360,000 171,123 860,000 146,455 1,995,000 577,952 2006 810,000 226,412 360,000 147,362 755,000 109,846 1,925,000 483,620 2007 540,000 196,640 385,000 122,585 665,000 77,525 1,590,000 396,750 2008 565,000 171,219 385,000 96,694 495,000 51,165 1,445,000 319,078 2009 595,000 144,100 400,000 70,200 390,000 31,145 1,385,000 245,445 ' 2010 625,000 115,274 415,000 42,694 280,000 15,564 1,320,000 173,532 2011 655,000 84,710 425,000 14,344 130,000 5,866 1,210,000 104,920 ' 2012 690,000 52,257 65,000 1,430 755,000 53,687 2013 725,000 17,762 725,000 17,762 ' $7,425,000 $1,883,422 $6,150,000 $1,242,717 $5,370,000 $846,552 $18,945,000 $3,972,691 i r ' 96 City of Brooklyn Center, Minnesota STATISTICAL SECTION 1 The statistical section presents comparative statistical data for the past ten years, and other pertinent information involving taxes, revenues, expenditures, bonded debt, property valuations, insurance coverage and miscellaneous statistics. This information is intended to be useful and of interest to investors in City bonds, financial institutions, and others interested in municipal government financial statistics. 1 1 i 1 ' 97 TABLE 1 City of Brooklyn Center GENERAL GOVERNMENTAL EXPENDITURES BY FUNCTION Last Ten Fiscal Years (Unaudited) Fiscal General Public Public Community Parks and Economic Non- Admin. Services Other Financing Total Year Government Safety Works Services Recreation Development Departmental Reimbursement Uses Expenditures 1993 $1,787,179 $3,870,563 $1,996,256 $41,325 $1,999,270 $178,703 $300,803 - $466,574 $9,707,525 1994 1,925,003 4,409,490 1,526,514 41,495 2,055,479 199,982 312,779 (528,684) 9,942,058 1995 2,069,978 4,598,618 1,653,358 41,146 2,226,121 209,576 289,747 (529,047) 10,559,497 1996 1,968,780 5,022,324 1,649,526 78,442 2,282,054 201,600 317,148 (611,534) 10,908,340 1997 1,992,251 5,089,072 1,868,130 79,800 2,186,686 248,779 311,436 (661,058) $624,637 11,739,733 1998 2,133,829 5,137,108 1,955,108 73,066 2,075,180 313,792 312,625 (731,737) 1,427,001 12,695,972 1999 2,257,957 5,336,622 1,904,205 83,295 2,132,511 383,927 343,925 (670,390) 1,591,039 13,363,091 2000 2,421,762 5,437,360 2,100,865 95,148 2,216,098 397,507 419,789 (795,737) 1,532,238 13,825,030 2001 2,504,392 5,660,600 2,142,064 106,034 2,205,018 392,805 372,056 (767,504) 1,661,877 14,277,342 2002 2,553,426 6,184,663 1,986,692 103,491 2,026,409 340,659 366,282 (596,541) 1,863,910 14,828,991 Note: Table includes General Fund only. Source: City Finance Department records 00 s� r r r� r r� r r r r r .r s i■r � r� TABLE 2 City of Brooklyn Center GENERAL GOVERNMENTAL REVENUES AND OTHER FINANCING SOURCES BY SOURCE Last Ten Fiscal Years (Unaudited) General Other Fiscal Property Licenses Intergovern- Charges for Court Financing Total Year Taxes * & Permits mental * Services Fines Misc. Sources Revenue 1993 $5,006,710 $300,480 $3,167,214 $838,883 $140,104 $279,211 $295,000 $10,027,602 1994 5,703,773 317,620 3,443,247 825,959 113,573 241,570 100,000 10,745,742 1995 5,946,363 318,202 3,543,009 822,530 178,263 271,509 100,000 11,179,876 1996 6,120,877 402,000 3,618,075 839,583 186,761 328,750 100,000 11,596,046 1997 6,327,890 485,232 3,811,900 757,640 183,270 458,831 100,000 12,124,763 1998 7,949,744 549,067 3,875,392 771,614 193,688 425,319 13,764,824 1999 8,219,491 763,960 3,911,480 739,054 205,460 194,353 14,033,798 2000 8,745,172 632,549 4,076,169 779,060 180,676 234,740 14,648,366 2001 8,411,513 788,629 4,135,282 688,453 230,408 697,886 14,952,171 2002 11,257,003 823,996 2,843,629 575,748 278,557 312,303 16,091,236 * State aids were reduced for cities in 2002. Cities were permitted to levy back the aid reductions within specific limitations. Note: Table includes General Fund only. Source: City Finance Department records TABLE 3 City of Brooklyn Center TAX LEVIES AND TAX COLLECTIONS Last Ten Fiscal Years (Unaudited) Collections Percentage Collections of Current of Levy . of Prior Total Delinquent Year's Taxes Collected Year's Taxes Collections Delinquent Taxes as Year During Fiscal During Fiscal During Fiscal Total as a % of Taxes a % of Collected Tax Levy * Period Period Period Collections Tax Levy Receivable Tax Levy 1993 $5,491,707 $5,204,161 94.76% ($121,158) $5,083,003 92.56% $189,400 3.45% 1994 5,857,342 5,634,255 96.19% (176,148) 5,458,107 93.18% 246,311 4.21% 1995 6,501,197 6,367,437 97.94% (75,645) 6,291,792 96.78% 288,717 4.44% 1996 6,495,206 6,358,392 97.89% (11,917) 6,346,475 97.71% 208,862 3.22% 1997 6,746,487 6,626,336 98.22% (57,329) 6,569,007 97.37% 186,089 2.76% 1998 7,686,521 7,643,080 99.43% (51,327) 7,591,752 98.77% 146,907 1.91% 1999 7,896,858 7,824,214 99.08% 30,110 7,854,324 99.46% 165,926 2.10% 2000 8,099,965 8,044,715 99.32% 178,306 8,223,021 101.52% 75,070 0.93% 2001 8,420,298 8,119,854 96.43% (36,320) 8,083,534 96.00% 414,608 4.92% 2002 10,442,170 10,232,645 97.99% 219,067 10,451,712 100.09% 329,237 3.15% * Total tax levy is net of Homestead and Agricultural Credit Aid. State aids were reduced for cities in 2002. Cities were permitted to levy back the aid reductions within specific limitations. 0 0 Source: City Finance Department records ■r +rr r r r r r r rr rr r� r +�s rr r r� �r r r TABLE 4 City of Brooklyn Center ASSESSED VALUE AND ESTIMATED MARKET VALUE OF ALL TAXABLE PROPERTY Last Ten Fiscal Years (Unaudited) 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 Population (1) 28,533 28,484 28,463 28,502 28,515 28,535 28,535 29,172 29,172 29,172 Real Property Assessed value: Tax Tax Tax Tax Tax Tax Tax Tax Tax Tax City: Capacity Capacity Capacity Capacity Capacity Capacity Capacity Capacity Capacity Capacity Residential $9,077,238 $9,110,096 $9,045,048 $9,485,333 $9,182,859 $9,309,893 $9,976,862 $8,928,738 $8,495,196 $9,362,788 Non - residential 14,654,123 13,665,143 13,567,573 12,837,157 11,082,436 10,657,588 11,002,424 14,093,094 9,225,991 9,430,533 Area -wide allocation (1,533,767) (954,616) (687,295) (586,003) 226,287 537,406 1,504,330 746,438 635,875 875,145 22,197,594 21,820,623 21,925,326 21,736,487 20,491,582 20,504,887 22,483,616 23,768,270 18,357,062 19,668,466 Less Tax Increment District 1,184,328 1,165,933 1,230,055 1,495,154 1,665,054 2,054,659 2,533,878 3,296,624 2,450,218 2,538,825 Total assessed value 21,013,266 20,654,690 20,695,271 20,241,333 18,826,528 18,450,228 19,949,738 20,471,646 15,906,844 17,129,641 Estimated Market Value 978,404,100 959,668,700 961,811,400 976,115,400 1,010,170,000 1,085,605,600 1,164,801,300 1,311,055,600 1,475,520,200 1,659,884,400 Personal Property Assessed value 549,751 622,500 622,500 573,984 502,668 452,849 437,707 452,680 262,882 273,072 Estimated market value 11,951,100 13,532,600 13,532,600 12,477,900 12,566,700 13,006,300 13,053,100 13,593,500 13,312,100 13,927,600 Total Taxable Property Assessed value (2) $21,563,017 $21,277,190_ $21,317,771 $20,815,317 $19,329,196 $18,903,047 $20,387,445 $20,924,326 $18,032,672 $17,402,713 Estimated market value $990,355,200 $973,201,300 $975,344,000 $988,593,300 $1,022,736,700 $1,098,611,900 $1,177,854,400 $1,324,649,100 $1,488,832,300 $1,673,812,000 Assessed Value as a percent of Estimated Market Value 2.18% 2.19% 2.19% 2.11% 1.89% 1.72% 1.73% 1.58% 1.21% 1.04% Per Capita Valuations Assessed Value $756 $747 $749 $730 $678 $662 $714 $717 $618 $597 Estimated Market Value $34,709 $34,167 $34,267 $34,685 $35,867 $38,501 $41,278 $45,408 $51,036 $57,377 Source: City Assessing Department and Hennepin County records (1) The Metropolitan Council is the source of population estimates. (2) The Minnesota Legislature has repeatedly reduced property tax class rates so that assessed value has fallen even as market values increased. O TABLE 5 City of Brooklyn Center DIRECT AND OVERLAPPING TAX RATES (PER $1,000) AND TAX LEVIES Last Ten Fiscal Years (Unaudited) TAX RATES IN TAX CAPACITY RATES (1) Hennepin School Districts (2) County & Total City, School, and County Year Vo -Tech No. 286 No. 279 No. 281 No. 11 Special No. 286 No. 279 No. 281 No. 11 Collectible City (2) School Earle Brown Osseo Robbinsdale Anoka Districts Earle Brown Osseo Robbinsdale Anoka 1993 23.969 1.095 67.008 64.948 61.807 63.717 42.457 134.529 132.469 129.328 130.143 1994 27.603 0.809 56.614 66.786 64.401 57.161 44.248 128.701 138.873 136.488 128.439 1995 31.090 76.861 70.142 67.197 61.402 45.370 151.763 145.044 142.099 136.304 1996 30.344 58.682 67.155 64.762 64.387 44.170 133.196 141.669 139.276 138.901 1997 32.875 56.260 62.666 63.757 55.588 42.174 131.309 137.715 138.806 130.637 1998 35.214 51.567 56.386 65.350 51.824 45.869 132.650 137.469 146.433 132.907 1999 36.269 59.807 54.337 47.716 54.856 50.276 146.352 140.882 134.261 141.401 2000 34.645 44.356 53.284 48.492 51.792 37.679 127.806 136.743 131.942 135.242 2001 35.996 47.139 56.764 46.678 52.224 45.803 128.938 138.583 128.477 134.023 2002 58.901 26.338 30.213 30.092 29.082 57.795 143.034 146.788 146.909 145.778 Hennepin TAX LEVIES IN DOLLARS School Districts County & Total City, Year Vo -Tech No. 286 No. 279 No. 281 No. 11 Special Schools, Collectible City (1) School Earle Brown Osseo Robbinsdale Anoka Districts and County 1993 $5,491,707 $218,460 $5,173,925 $3,289,896 $4,842,750 $1,354,534 $8,877,060 $29,248,332 1994 5,857,342 166,681 4,175,027 3,472,013 4,526,288 1,287,264 9,384,582 28,869,197 1995 6,501,197 5,367,479 3,288,144 4,814,025 1,269,585 8,557,035 29,797,465 1996 6,495,206 4,850,400 3,863,698 4,397,705 1,441,657 9,403,100 30,451,766 1997 6,746,487 4,472,206 3,708,238 3,899,126 1,361,059 8,854,518 29,041,634 1998 7,686,521 4,322,965 4,042,283 3,750,650 1,420,301 8,964,681 30,187,401 1999 7,896,858 4,293,610 3,800,203 3,150,416 1,276,178 9,471,114 29,888,379 2000 8,099,965 4,218,907 3,670,533 3,116,096 1,316,096 9,916,918 30,338,515 2001 8,420,298 4,238,284 4,073,436 3,076,541 1,407,502 9,677,991 30,894,052 2002 10,442,170 2,032,254 2,064,398 2,015,705 685,458 9,001,798 26,241,783 0 N Source: City Assessing Department and Hennepin County records (1) Tax levy includes Brooklyn Center E.D.A. and H.R.A.. (2) Beginning in 1998, a portion of the school levy shown was paid by the state as an education homestead credit. The state -paid portion totaled $2,333,306 in 2001. rr Irr r rl Illr rr Ir Illllllrr it Illlr Ir r r Illllr Illllr r� Illllr Ir Illr TABLE 6 City of Brooklyn Center SPECIAL ASSESSMENT BILLINGS AND COLLECTIONS Last Ten Fiscal Years (Unaudited) Percent Current Collections Total Special Percent Collection Collections Year Assessment of of Prior Total to Current Collected Billings Amount Billinqs Years Collections Levy 1993 $488,163 $469,814 96.24% $21,188 $491,002 100.58% 1994 466,784 444,670 95.26% 7,592 452,262 96.89% 1995 476,852 458,439 96.14% 5,497 463,936 97.29% 1996 485,019 459,316 94.70% 4,617 463,933 95.65% 1997 498,022 475,080 95.39% 2,470 477,550 95.89% 1998 541,477 524,609 96.88% 24,870 549,479 101.48% 1999 688,691 657,537 95.48% 34,532 692,069 100.49% 2000 900,481 861,888 95.71% 20,620 882,508 98.00% 2001 868,414 787,769 90.71% 20,620 808,389 93.09% 2002 927,799 863,460 93.07% 65,678 929,138 100.14% 0 w Source: City Finance Department records i TABLE 7 City of Brooklyn Center RATIO OF NET BONDED DEBT TO ASSESSED VALUE AND NET BONDED DEBT PER CAPITA , Last Ten Fiscal Years (Unaudited) Less: Ratio of Amounts Net Bonded Net Tax Gross in Debt Net Debt to Tax Bonded ' Fiscal Estimated Capacity Bonded Service Bonded Capacity Debt Per Year Population Value Debt (1) Fund Debt Value Capita 1993 28,533 $21,563,017 - - - 0.00% - 1994 28,484 21,277,190 - - - 0.00% - 1995 28,463 21,317,771 - - - 0.00% - 1996 28,502 20,815,317 - - - 0.00% - 1997 28,515 19,329,196 $7,900,000 $82,056 $7,817,944 40.45% $274.17 1998 28,535 18,903,047 7,900,000 616,778 7,283,222 38.53% 255.24 ' 1999 28,535 20,387,445 7,575,000 725,868 6,849,132 33.59% 240.03 2000 29,172 20,924,326 7,175,000 725,930 6,449,070 30.82% 221.07 2001 29,172 18,357,062 6,760,000 831,651 5,928,349 32.29% 203.22 2002 29,172 18,793,321 6,325,000 871,970 5,453,030 29.02% 186.93 Source: City Finance Department and Hennepin County records (1) Amount does not include tax increment, state aid street, special assessment, or revenue bonds. 104 City of Brooklyn Center Table 8 COMPUTATION OF LEGAL DEBT MARGIN December 31, 2002 (Unaudited) ' Market Value $1,673,812,000 Debt limit, 2% of market value 33,476,240 Total bonded debt 19,605,000 Deductions (See Note 6): Bonds: 1. Special Assessment Bonds 5,370,000 2. State Aid Street Bonds 1,100,000 3. Tax Increment Bonds 6,150,000 4. Utility Revenue Bonds 660,000 Total Deductions 13,280,000 Total Debt Applicable to Debt Limit 6,325,000 Legal Debt Margin, December 31, 2002 $27,151,240 Source: City Finance and Assessing Department records 105 TABLE 9 City of Brooklyn Center COMPUTATION OF DIRECT AND OVERLAPPING DEBT December 31, 2002 (Unaudited) City's Share Governmental Unit Gross Debt Sinking Funds Net Debt Percent Amount Direct Debt: City of Brooklyn Center (1) $6,325,000 $871,970 $5,453,030 100.0% $5,453,030 Overlapping Debt: School Districts: No. 281 Robbinsdale 155,070,000 7,297,893 147,772,107 5.51% 8,142,243 No.11 Anoka 219,612,177 47,012,261 172,599,916 1.38% 2,381,879 No. 279 Osseo 274,880,000 77,953,767 196,926,233 5.47% 10,771,865 No. 286 Earl Brown 31,480,000 337,523 31,142,477 100.00% 31,142,477 Metropolitan Council 209,515,000 54,465,000 155,050,000 1.18% 1,829,590 Hennepin County 325,845,000 5,389,373 320,455,627 1.58% 5,063,199 Hennepin Regional RR Authority 49,395,000 591,197 48,803,803 1.69% 824,784 Hennepin County Park Reserve District 29,335,000 4,053,783 25,281,217 2.25% 568,827 Total Overlapping Debt 1,295,132,177 197,100,797 1,098,031,380 60,724,864 Total Direct and Overlapping Debt $1,301,457,177 $197,972,767 $1,103,484,410 $66,177,894 Direct Overlapping Comparative Net Debt Ratios Charaeable to Citv Total Debt Debt Debt to tax capacity value $18,793,321 352.14% 29.02% 323.12% Debt to market value $1,673,812,000 3.95% 0.33% 3.63% Per capita debt, population 29,172 $2,268.54 $186.93 $2,081.61 Source: City Finance Department, Hennepin County, and I.S.D. #11 records 0 a, (1) Includes only general obligation debt which is being repaid through property taxes. City of Brooklyn Center TABLE 10 RATIO OF ANNUAL DEBT SERVICE EXPENDITURES FOR GENERAL BONDED DEBT TO TOTAL GENERAL FUND EXPENDITURES Last Ten Fiscal Years (Unaudited) Debt Service ' Total Total as a Percent Debt General Fund of General Year Principal Interest Service Expenditures Expenditures 1993 $1,710,000 $1,186,585 $2,896,585 $9,707,525 29.84% 1994 780,000 1,080,555 1,860,555 9,942,058 18.71% 1995 825,000 1,075,976 1,900,976 10,559,497 18.00% 1996(1) 5,125,000 1,106 661 6,231,661 10 908 340 57.13% 1997 1,135, 000 1,017,128 2,152,128 11, 739,733 18.33% 1998 1,285,000 1,244,923 2,529,923 12,695,972 19.93% 1999 2,085,000 1,323,609 3,408,609 13,363,091 25.51% 2000 3,970,000 1,282,512 5,252,512 13,825,030 37.99% 2001 2,805,000 1,149,623 3,954,623 14,277,342 27.70% 2002 3,000,000 1,034,139 4,034,139 14,828,991 27.20% Source: City Finance Department records (1) Amounts for 1996 are higher because of the defeasance of the Tax Increment Bonds of 1985. 107 TABLE 11 City of Brooklyn Center SCHEDULE OF REVENUE BOND COVERAGE Last Ten Fiscal Years (Unaudited) Net Non- Net Revenue Operating Operating Gross Revenue to Debt Year Revenue Revenue Revenue Expenses(1) Available Principal Interest Total Service Storm Drainaqe Fund 1993 $639,837 $28,138 $667,975 $160,044 $507,931 $0 $0 $0 N/A 1994 685,011 39,930 724,941 211,425 513,516 0 30,208 30,208 17.00 :1 1995 788,897 72,881 861,778 184,990 676,788 0 90,625 90,625 7.47 :1 1996 822,980 47,363 870,343 204,969 665,374 110,000 86,390 196,390 3.39 :1 1997 856,920 130,651 987,571 198,662 788,909 155,000 79,754 234,754 3.36 :1 1998 940,012 916,860 1,856,872 199,694 1,657,178 165,000 72,227 237,227 6.99 :1 1999 999,867 1,257,928 2,257,795 156,562 2,101,233 170,000 64,193 234,193 8.97 :1 2000 1,074,619 313,068 1,387,687 154,183 1,233,504 180,000 59,144 239,144 5.16 :1 2001 1,129,502 280,740 1,410,242 157,110 1,253,132 190,000 53,166 243,166 5.15 :1 2002 1,377,638 435,548 1,813,186 231,741 1,581,445 200,000 36,701 236,701 6.68 :1 Source: City Finance Department records (1) Excludes depreciation and interest on bonds. 0 00 rr� rr ors r rr r rr r �r rr rr rr r■� rr rr rr �r r� rr TABLE 12 City of Brooklyn Center PROPERTY VALUE AND CONSTRUCTION Last Ten Fiscal Years (Unaudited) Building Permits Commercial New Residential Issued Construction Construction Property Value Year Number Estimated Cost Value Units Value Commercial Residential Non - Taxable 1993 520 $11,437,250 $7,598,108 7 $505,000 $322,295,300 $668,059,900 $108,955,700 1994 607 13,418,453 5,504,477 9 587,000 301,702,300 671,499,000 109,600,200 1995 603 11,948,205 9,541,847 2 153,000 297,268,000 678,076,000 110,458,200 1996 607 16,647,400 12,527,095 18 1,126,000 284,786,600 703,806,700 108,473,400 1997 796 18,274,806 10,905,475 3 225,000 287,163,000 722,917,000 111,226,700 1998 1,482 23,216,525 14,261,800 4 612,900 314,457,700 770,883,400 152,964,200 1999 1,745 44,188,569 10,528,100 7 679,600 333,929,200 832,334,600 155,999,500 2000 1,299 20,450,844 13,254,213 3 311,800 358,293,500 837,022,400 164,002,100 2001 956 63,947,218 10,750,000 4 464,000 367,026,000 970,653,400 165,437,000 2002 976 58,089,510 18,680,014 10 1,335,000 529,390,100 1,130,494,300 163,517,000 Source: City Finance, Assessing and Community Development Department records 0 i ' City of Brooklyn Center TABLE 13 PRINCIPAL TAXPAYERS December 31, 2002 (Unaudited) Percentage 2002 of Total Market City Market Taxpayers Type of Business Valuation Value Talisman Brookdale, LLC Shopping Center $45,000,000 2.69% Target Stores Retail 20,670,000 1.23% BCC Associates, LLC /Reliastar Office 13,570,000 0.81% Regal Cinemas, Inc. Theater 11,500,000 0.69% Brookdale Corner, LLC Retail 9,800,000 0.59% Hennepin County Hotel Association Hotel 9,750,000 0.58% TLN LA NEL Apartment 13,188,000 0.79% Sears Roebuck and Co. Department Store 7,548,500 0.45% DJS Holdings, Inc. Industrial 7,652,000 0.46% Wickes Furniture Company Industrial 7,190,000 0.43% Total Market Value $145,868,500 8.71% TOTAL CITY MARKET VALUE $1,673,812,000 Source: City Assessing Department records 110 City of Brooklyn Center Table 14 SCHEDULE OF INSURANCE COVERAGE (Continued next page) Effective January 1, 2003 (Unaudited) Policy Period Tvoe of Coverage and Details From To Liability Limits I. Statutory Liabilitv to Emolovees a. Workers' Compensation 04 -01 -02 04 -01 -03 Statutory (participant in the League of Minnesota Cities Insurance Trust Self - Insured Workers' Compensation Program) II. Liabilitv to the Public a. Comprehensive general liability includes the following additional coverages: (a) All employees as additional insureds (b) Personal injury coverage to include false arrest, libel, slander, wrongful entry or eviction, or invasion of right of privacy. (c) Broad contractual liability (d) Products liability (e) Public Officials' liability (1) Bodily injury 04 -01 -02 04 -01 -03 $1,000,000 occurrence (2) Property damage 04 -01 -02 04 -01 -03 $1,000,000 occurrence (3) Personal injury 04 -01 -02 04 -01 -03 $1,000,000 occurrence b. Automobile liability, comprehensive 04 -01 -02 04 -01 -03 (1) Bodily injury $1,000,000 occurrence (2) Property damage $1,000,000 occurrence (3) Uninsured motorist $1,000,000 occurrence C. Liquor stores' dram shop 01 -01 -02 01 -01 -03 $1,000,000 occurrence $1,000,000 annual aggregate d. Golf Course and Central Park 01 -01 -02 01 -01 -03 $1,000,000 occurrence liquor liability $1,000,000 annual aggregate e. Personal accident, Volunteers 01 -01 -02 01 -01 -03 $100,000 accidental death $100,000 permanent impairment $400 /week short -term disability $1,000 medical $500,000 per accident 111 City of Brooklyn Center Table 14 SCHEDULE OF INSURANCE COVERAGE (Continued from prior page) Effective January 1, 2003 (Unaudited) Buildings, Structures, Policy Period and Contents (Replacement Type of Coverage and Details From To Cost) III. Insurance on City Property 04 -01 -02 04 -01 -03 a. Public and institutional property, all risk, blanket $38,437,934; $1,000 deductible replacement value on buildings. (1) Civic Center $10,427,178 (2) East Fire Station $1,551,125 (3) West Fire Station $3,339,000 (4) Municipal Service Garage $3,344,830 (5) Elevated Water Towers - 3 locations $4,186,407 (6) Park Shelter Buildings - 17 locations $1,608,825 (7) Pump Houses - 10 locations $1,098,161 (8) Lift Stations - 10 locations $1,339,434 (9) Meter Station $19,462 (10) Storage Building $509,245 (11) Outdoor lighting systems - 7 locations $345,984 (12) Leased Liquor Store $477,000 (13) Pedestrian Bridge - 2 locations $1,295,278 (14) Picnic Shelters (4) $144,372 (15) Earle Brown Heritage Center $11,884,287 (16) Centerbrook Golf Course Club House $403,288 j (17) Centerbrook Golf Course - Garage $49,736 (18) Lions Park Concession Stand $43,460 (19) Police Station $5,618,000 (20) Centerbrook Golf Course Maintenance Building $210,000 (21) Centerbrook Golf Course - Property in the Open $106,000 Liability Limits b. Boiler and machinery 04 -01 -02 04 -01 -03 $5,000,000 per accident C. Automotive physical damage 04 -01 -02 04 -01 -03 (1) Comprehensive ACV - $1,000 deductible (2) Collision ACV - $1,000 deductible IV. Criminal Acts a. Faithful performance blanket position $500,000 per occurrence b. Money and securities (broad form) Various C. Depositor's forgery $100,000 112 TABLE 15 City of Brooklyn Center DEMOGRAPHIC STATISTICS Last Ten Fiscal Years (Unaudited) School Enrollments (4) City No. 286 Fiscal Unemployment Mpls- St.Paul No. 11 No. 279 No. 281 Earle Year Population (1) Rate (2) C.P.I. (3) Anoka Osseo Robbinsdale Brown 1993 28,533 5.1% 4.4% 37,777 20,998 13,519 1,750 1994 28,484 3.4% 3.2% 38,344 21,216 14,072 1,875 1995 28,463 3.1% 2.9% 39,152 21,479 13,595 1,658 1996 28,502 3.0% 3.1% 39,874 21,664 14,099 1,664 1997 28,515 2.3% 2.5% 40,402 21,992 14,010 1,746 1998 28,535 1.9% 2.0% 40,923 22,028 13,966 1,788 1999 28,535 2.4% 2.2% 40,964 22,171 13,800 1,734 2000 29,172 3.0% 2.6% 41,314 22,017 13,706 1,682 2001 29,172 3.9% 3.3% 41,419 22,041 13,754 1,724 2002 29,172 4.8% 4.2% 41,383 21,824 13,656 1,732 (1) Source: Metropolitan Council (2) Source: Minnesota Department of Economic Security; average rate for the past year (3) Source: U.S. Bureau of Labor (4) Source: Minnesota Department of Children, Families & Learning (Brooklyn Center has parts of these four Districts within the City) i 113 TABLE 16 City of Brooklyn Center (Continued MISCELLANEOUS STATISTICAL FACTS next page) December 31, 2002 (Unaudited) Date of incorporation February 14, 1911 Date of adoption of City Charter November 8, 1966 Date City Charter effective December 8, 1966 Form of government Council- Manager Fiscal year begins January 1 Area of City 8 1/2 square miles Miles of streets: City 105.856 County 6.49 State 10.79 Miles of sidewalks 34.8 Miles of trails 11.2 Miles of storm sewers 84.02 Number of street lights: Owned by N.S.P 915 Owned by City 172 City employees as of December 31, 2002 Authorized regular full -time 160 Temporary or part -time 250 Total 410 Fire protection: Number of stations 2 Number of full -time employees 1 Number of volunteer firefighters 34 Police protection: Number of stations 1 Number of sworn police officers 45 Number of other full -time employees 15 Number of part -time employees 9 114 i City of Brooklyn Center TABLE 16 MISCELLANEOUS STATISTICAL FACTS (Continued from December 31, 2002 prior page) (Unaudited) Parks and Recreation: Park property totals 527 acres developed to serve a wide variety of recreational interests. The areas include playlots, playgrounds, playfields, trails, nature areas and an arboretum. Archery range 1 Playgrounds 20 Park shelters 9 Picnic shelters 10 Ice skating rinks 13 Hockey rinks 6 Softball diamonds 19 Baseball diamonds 5 Tennis courts 14 Basketball courts 19 Football /soccer fields 3 Municipal water plant: Number of connections 8,934 Average daily consumption in gallons 3,127,214 Peak daily consumption in gallons 6,373,000 Plant capacity - gallons per day 17,652,000 Miles of water mains 115 Number of fire hydrants 974 Number of wells 9 Number of elevated reservoirs 3 Storage capacity in gallons 3,000,000 Water rate per thousand gallons $0.98 Municipal sewer plant: Number of connections 8,786 Miles of sanitary sewer 105.61 Daily disposal capacity in gallons 10,938,240 Number of lift stations 10 Residential rate per quarter $52.50 Municipal liquor stores (Off - sale): Number of leased stores 1 2002 sales $3,435,556 Elections: Last general election - November 5, 2002 Registered voters 16,676 Votes cast 10,678 Percentage of registered voters voting 64.03% Last municipal election - November 5, 2002 Registered voters 16,676 Votes cast 10,678 Percentage of registered voters voting 64.03% ' 115 f n LETTER OF REPRESENTATION To document awareness of (and compliance with) Minnesota Statute, Section 471.87 (Public Offices, Interest in Contract, Penalty) and related legislation, our auditors are requesting all elected officials, commission members, department heads and employees who may influence transactions of the City to sign this letter. We will retain this letter on file to document City awareness of (and compliance with) Minnesota Statutes, Section 471.8 and related legislation. We have attached excerpts of Minnesota Statutes for your reference. I have read the attached Minnesota Statutes, Section 471.87, 471.88, 471.881, 471.89, 412.311 and 365.37. I understand that the term "contract" includes the purchase of goods and services. I hereby certify that during the preceding calendar year I, or a direct member of my family, have not voluntarily had a personal financial interest in the sale, lease or contract of the City nor have 1, or a direct member of my family, personally benefited from any such transaction. Signed Title Date I hereby certify that during the preceding calendar year I, or a direct member of my family, have (had) a personal financial interest in a sale, lease and /or contract of the City and /or have personally benefited financially from such a transaction. The circumstances and statutory exception (authority) for all such financial interest are described as follows: Signed Title Date w • 471.87 PUBLIC OFFICERS, INTEREST IN CONTRACT; PENALTY. Except as authorized in section 471.88, a public officer who is authorized to take part in any manner in making any sale, lease, or contract in official capacity shall not voluntarily have a personal financial interest in that sale, lease, or contract or personally benefit financially therefrom. Every public officer who violates this provision is guilty of a gross misdemeanor. History: 1951 c 379 s 1; 1955 c 41 s 1; 1986 c 444 471.88 EXCEPTIONS Subdivision 1. Coverage. The governing body of an port authority, seaway port authority, g g g Y YP Y� YP Y� development authority, town, school district, hospital district, county, or city, by unanimous vote, may contract for goods or services with an interested officer of the governmental unit in any of the following cases. Subdivision 2. Bank or Savings Association. In the designation of a bank or savings association in which the officer is interested as an authorized depository for public funds and as a source of borrowing, no restriction shall apply to the deposit or borrowing of any funds or the designation of a depository by such authority or governmental unit in any bank or savings association in which a member of an authority or officer of a governmental unit shall have an interest if such deposited funds are protected in accordance with chapter 118A; provided, however, that any member or officer having such an interest shall disclose that the member is a director or employee of the bank or savings association, which disclosure shall be entered upon the minutes of the authority or governmental unit, such disclosure shall be made when such bank or savings association is first designated as a depository or as a source of borrowing, or when such member or officer is elected whichever is later, and such disclosure shall serve as notice of such interest and need not be made with each successive transaction. Subdivision 3. Official Newspaper. The designation of an official newspaper, or publication of official matters therein, in which the officer is interested when it is the only newspaper complying with statutory or charter requirements relating to the designation or publication; Subdivision 4. Cooperative Association. A contract with a cooperative association of which the officer is a shareholder or stockholder but not an officer or manager. Subdivision 5. Contract with no bids required. A contract for which competitive bids are not required by law. Subdivision 6. Contract with Volunteer Fire Department. A contract with a volunteer fire department for the payment of compensation to its members or for the payment of retirement benefits to these members; Subdivision 7. Contract with Municipal Band. A contract with a municipal band for the payment of compensation to its members; Subdivision 8. [Repealed, 1992 c 380 s 8]; Page 2 of 5 Subdivision 9. Import, Export, Trade; Port Commissioner. When a port authority commissioner or economic development authority commissioner is engaged in or employed by a firm engaged in the business of importing or exporting or general trade, it shall be lawful for the authority to do business with the commissioner or the commissioner's employer provided that in the fixing of any rates affecting shippers or users of the terminal facility, said commissioner shall not vote thereon. Subdivision 10. Import, Export, Trade; Seaway Port. When a seaway port authority commissioner is engaged in or employed by a firm engaged in the business of importing or exporting or general trade, it shall be lawful for the authority to do business with the commissioner or the commissioner's employer provided that in the fixing of any rates affecting shippers or users of the terminal facility, said commissioner shall not take part in the determination of, except to testify, nor vote thereon. Subdivision 11. Bank loans or trust services. When a commissioner of any public housing, port authority, or economic development authority is employed by a bank engaged in making loans or performing trust services involving real or personal property affected by any plan or such housing or port authority, no restriction shall apply to any such loans made or trust services performed by said bank if the commissioner shall disclose the nature of such loans or trust services of which the commissioner has personal knowledge, which disclosure shall be entered upon the minutes of such authority. Subdivision 12. Population of 1,000 or less. An officer of a government unit may contract with the unit to provide construction materials or services, or both, when the sealed bid process is used and the unit has a population of 1,000 or less according to the last federal census. The officer may not vote on the question of the contract when it comes before the governing body for consideration. Subdivision 13. Rent. A public officer may rent space in a public facility at a rate commensurate with that paid by other members of the public. Subdivision 14. Local development organization. (a) For the purposes of this subdivision: (1) "local development organization" means a housing and redevelopment authority, economic development authority, community action program, port authority, or private consultant; and (2) "government unit" has the meaning given in section 471.59, subdivision 1. (b) When a local development organization administers a loan or grant program for individual property owners within the geographical boundaries of a government unit by an agreement entered into by the government unit and the local development organization, an officer of the government unit may apply for a loan or grant from the local development organization. If an officer applies for a loan or grant, the officer must disclose as part of the official minutes of a public meeting of the governmental unit that the officer has applied for a loan or grant. Subdivision 15. Franchise agreement. When a home rule charter or statutory city and a utility enter into a franchise agreement or a contract for the provision of utility services to the city, a city council member who is an employee of the utility is not precluded from continuing to serve as a city council member during the term of the franchise agreement or contract if the council member abstains from voting on any official action relating to the franchise agreement or contract and discloses the member's reason for abstention in the official minutes of the council meeting. Page 3 of 5 Subdivision 16. Renumbered. 123B.195 Subdivision 17. Federal or state grant programs. The governing body may apply for and accept a state or federal grant for housing, community, or economic development in which a public officer may benefit, if the public officer abstains from voting on measures related to the grant. Subdivision 18. Small cities in St. Louis county; certain federal funding programs. If a city with a population of 5,000 or less in St. Louis county administers a loan or grant program with community development block grant funds or federal economic development administration funds for property owners within the geographic boundaries of the city, the city may make a grant or loan from these funds to a public officer of the city who applies, if the public officer first discloses, as part of the official minutes of a meeting of the city, that the public officer has applied for the funds and the public officer abstains from voting on the public officer's application. Subdivision 19. Loan for HRA officer, if disclosed. If a city or county housing and redevelopment authority, or an agency having powers of a city or county housing and redevelopment authority, administers a loan or grant program with state or federal funds, the authority may make a grant or loan from these funds to a public officer of the authority who applies, if the public officer first discloses, as part of the official minutes of a meeting of the authority, that the public officer has applied for the funds and the public officer abstains from voting on the public officer's application. History: 1961 c 651 s 1; 1965 c 806 s 1 -4; 1969 c 26 s 1; 1973 c 123 art 5 s 7; 1977 c 55 s 1 -3; 1978 c 651 s 1; 1979 c 20 s 1; 1986 c 399 art 2 s 38 -40, 1986 c 400 s 38 -40; 1986 c 444; 1Sp1986 c 3 art 2 s 41; 1991 c 65 s 1,2; 1992 c 380 s 7; 1992 c 522 s 42, 43; 1993 c 224 art 9 s 43; 1996 c 471 art 7 s 18; 1998 c 269 s 1; 2001 c 7 s 90; 2001 c 132 s 1,2; 2002 c 356 s 1 471.881 EXCEPTIONS; APPLICATION. The exceptions provided in section 471.88 shall apply notwithstanding the provisions of any other statute or city charter. History: 1967 c 18 s I 471.89 CONTRACT, WHEN VOID. Subdivision 1. Procedure followed. A contract made pursuant to section 471.88, subdivision 5, is void unless the procedure prescribed by subdivisions 2 and 3 is followed. Subdivision 2. Resolution by governing body. Except in an emergency making such procedure impracticable, the governing body of the governmental unit shall authorize the contract in advance of its performance by adopting a resolution setting out the essential facts and determining that the contract price is as low as or lower than the price at which the commodity or services could be obtained elsewhere. In case of an emergency when the contract cannot be authorized in advance, payment of the claims shall be authorized by a like resolution in which the facts of the emergency are also stated. Subdivision 3. Claims, affidavits filed. Before such a claim is paid, the interested officer shall file with the clerk of the governing body an affidavit stating: (a) The name of the officer and the office held by the officer; (b) An itemization of the commodity or services furnished; (c) The contract price; (d) The reasonable value; Page 4 of 5 s (e) The interest of the officer in the contract; and (f) That to the best of the officer's knowledge and belief the contract price is as low as, or lower than, the price at which the commodity or services could be obtained from other sources. History: 1951 c 379 s 3; 1965 c 45 s 64 -66; 1967 c 125 s 1,2; 1978 c 651 s 2,3; 1986 c 444 412.311 CONTRACTS. Except as provided in sections 471.87 to 471.89, no member of a council shall be directly or indirectly interested in any contract made by the council. Whenever the amount of a contract for the purchase of merchandise, materials or equipment or for any kind of construction work undertaken by the city is estimated to exceed the amount specified by section 471.345, subdivision 3, the contract shall be let to the lowest responsible bidder, after notice has been published once in the official newspaper at least ten days in advance of the last day for the submission of bids. If the amount of the contract exceeds $1,000, it shall be entered into only after compliance with section 471.345. History: 1949c119s38; 1951 c378s11; 1951 c379s5; 1953c735s5; 1957c429s1; 1965c175sI, 1973 c 123 art 2 s I subd 2; 1976 c 44 s27; 1992 c 380 s 2 365.37 CONFLICTS, BIDS, EMERGENCIES, PENALTY, REMOVAL Subdivision 1. No conflicts; exceptions. Except as provided in sections 471.87 to 471.89, a supervisor or town board must not be a party to, or be directly or indirectly interested in, a contract made or payment voted by the town board. Subdivision 2. To lowest responsible bidder. A contract let on bid must be let to the lowest responsible bidder. Subdivision 3. Notice. Before a contract is let on bid, ten days' public notice of the time and place of receiving bids must be given. The notice must be posted in the three most public places in the town or published for two weeks in a newspaper generally circulated in the town. Subdivision 4. Special emergency exception. If a special emergency comes up, a contract may be let without notice or competitive bidding. A special emergency is a situation requiring immediate action essential to the health, safety, or welfare of the town. Subdivision 5. Violation; misdemeanor and removal. A contract made or payment voted or made contrary to this section is void. A town officer who violates this section is guilty of a misdemeanor and must leave office. History: (1096) RL s 688; 1913 c 164 s 1; 1951 c 74 s 1; 1951 c 379 s 4; 1957 c 76 s 1; 1984 c 562 s 15; 1985c169s8; ISp1985c16 art 2s11; 1987c90s3; 1987 c 229 art 8 s I Page 5 of 5 CONFLICTS OF INTEREST LEGAL COMPLIANCE MANUAL CONFLICTS OF INTEREST Introduction Rule A public officer authorized to take part in the making of a sale, lease, or contract shall not voluntarily have a personal financial interest in the transaction or personally benefit financially from it. The following persons are specifically forbidden from having any interest in any contract made by their respective governing bodies: 1 . elected officers; 2. town supervisors and town board members; 3. county officials, county deputies, county clerks, and employees of such officials; or 4. school board members. Exceptions: For practical reasons, the legislature has created certain limited exceptions to the general prohibition. Part I of this questionnaire will assist you in making a determination as to whether an otherwise forbidden transaction fits within any of the statutory exceptions. For the purposes of this checklist, "interested officer" shall mean any public officer or employee, as listed above, who directly or through his or her spouse (see "Discussion" below) has one of the following positions or interests in either the entity making or the subject matter of the sale, lease, or contract with the governing body: 1. officer; 2. director; 3. employee (see "Discussion" below); 4. partner; 5. owner (complete or partial); 6. shareholder; or 7. prior long -term contractual relationship. Discussion The determination as to whether a particular transaction involves an "interested officer" often calls for a judgment on the part of the auditor. A helpful concept to remember for analysis is that it is a conflict of interest to be on both sides of a contract or transaction. Most problems in this regard arise in the examination of the "interest" the public officer has in the person or entity making the contract with the governing body. Two frequent problem areas are: 12101 2 -1 1. Contracts with Officer's or Employee's Spouse or Family Member. It is not a conflict of interest per se for a governing body to contract or otherwise economically transact with a member officer's spouse or family member. However, if the facts indicate an economic benefit to the member officer as a result of the contract or transaction, a conflict of interest exists. For example, if a husband and wife, one of whom is a public officer, share a common pool of funds and likewise share debts, conflicts may exist because there is benefit to the public officer or employee flowing from the economic benefit to his or her spouse. Likewise, if a governmental officer or employee and his or her spouse, in fact, do not economically benefit from each other, a conflict may not exist. This analysis would apply to all familial relationships. The auditor will need to factually determine whether an emancipated child living away from home has a financial interest with his or her parents. 2. Contracts with Companies in Which the Officer is an Employee. If the involved governmental officer or employee is simply a company employee without managerial powers and receives the same salary or raise regardless of the company's contract with the governing body, there probably is no conflict of interest. However, if said officer receives a bonus or commission or other benefit as a result of the contractual transaction between his or her company and the government entity, there is definitely a conflict of interest. There are numerous aspects to be examined by the auditor in order to understand the totality of interests involved in a given contract or transaction between the governing body and an entity or person with a relationship to a member officer. If, after review of the facts and applicable statutes, you are still unsure as to whether a particular set of circumstances constitutes a conflict of interest, you should contact an attorney for advice prior to preparing the "Audit Conclusion" at the end of this manual section. Other Statutory References to Conflicts of Interest. In addition to the general statutory prohibition on conflicts of interest cited in the checklist, auditors should be aware that other statutory prohibitions and requirements exist with regard to certain types of municipal entities: Persons /Entities Statute Public and local officials of metropolitan governmental § 10A.07 units (as defined by Minn. Stat. § 10A.01, subds. 35, 22, & 24) Housing and Redevelopment Authorities (commissioners § 469.009 and employees) Economic Development Authorities (commissioners, § 469.098 officers, and employees) 12101 2 -2 Minn. Stat. Yes No Workpaper Section C OF INTEREST Reference Part 1. Contracts Generall § 471.87 - Unless a statutory exception applies, a public officer who is authorized to take part in any manner in making any sale, lease, or contract in official capacity shall not voluntarily have a personal financial interest in that sale, lease, or contract or personally benefit therefrom. - The governing body may contract for goods or services with an interested officer only by unanimous vote. See A, infra. In I addition to the unanimous vote, one of the statutory exceptions must apply. See B, infra. § 471.88, A. Unanimous Approval subd. 1 If there were any transactions between the governing body and an interested officer, did the governing body approve the transaction by unanimous vote? NOTE: All members present, except the interested officer, must vote in order to produce a unanimous vote. i § 471-88, B. Statutory Exceptions subd. 2 1 . Designation of Bank or Savings Association If the transaction involved the designation of a bank or savings association as an authorized depository for public funds and as a source of borrowing: a. Did the interested officer disclose to the governing body that he or she was a director or employee of the bank or savings association? b. Was such disclosure entered into the minutes of the governing body's meeting prior to the first designation of the bank or savings association as a depository or at the time of the interested officer's election, whichever was later? § 471.88, 2. Designation of Official Newspaper subd. 3 If a transaction involved the designation of an official newspaper or publication of official matters therein: I a. Was the newspaper in which the officer had an interest the only newspaper complying with statutory or charter requirements relating to designation or publication? 12101 2 -3 Minn. Stat. Yes No Workpaper Section CONFLICTS OF INTEREST Reference Part I. Contracts Generally (Continued) § 471 .88, 3. Stockholder of Cooperative Association subd. 4 If the transaction involved a contract with a cooperative association: a. Was the officer a shareholder or stockholder and not an officer or manager of the cooperative association? § 471 .88, 4. Contracts That Do Not Need to Be Bid subd. 5 If an interested officer entered into a contract for goods and services with the governing body: a. Was the contract one that did not need to be bid? (See discussion of contracts that are subject to bidding on page 4-1.) (If the interested officer is a school board member and employee of the district, see Part B.6., infra, "Employment Contracts with School Board Members.") § 471 .89, b. Did the governing body, prior to performance of the subd. 2 contract or contracts, adopt a resolution setting forth the essential facts and determining that the contract price was as low or lower than the price at which the commodity or service could be obtained elsewhere? § 471 .89, C. Prior to payment of the contract, did the involved subd. 3 officer file with the clerk of the governing body an affidavit stating: (1) the name of the officer and office held; (2) an itemization of the commodity or services furnished; (3) the contract price; (4) the reasonable value; (5) the interest of the officer in the contract; (6) that to the best of his /her knowledge and belief the contract price was as low or lower than the price at which the commodities or services could have been obtained from other sources? 12/01 2 -4 Minn. Stat, Yes No Workpaper Section C O F I Reference Part I. Contracts Generally (Continued) § 471 .89, d. If the contract was entered into under emergency subd. 2 conditions, did the governing body adopt such a resolution prior to payment of the claims in which the ' facts of the emergency are also stated? § 471 .88, 5. Contract with Fire Department subd. 6 If the governing body entered into a contract with a fire department in which an interested officer was a member: a. Was the fire department a volunteer fire department? b. Was the contract for payment of compensation or payment of retirement benefits? § 1238.195 6. Employment Contracts with School Board Members If the interested officer was a school board member and an employee of the school district: a. Was the employment contract not reasonably anticipated to exceed $5,000 during the fiscal year? b. Was the contract entered into or renewed at a meeting I where all board members were present and was the contract approved by a majority? § 471 .88, 7. Contract for Construction Materials or Contracting Services subd. 12 If an interested officer contracted with the government unit to provide construction materials or services, or both: i a. Was the contract done by a sealed bid process? b. Does the unit have a population of 1,000 or less according to the last federal census? c. When the question of the contract came before the unit for consideration, did the officer refrain from voting? § 471 .88, 8. Contract for Renting Space _subd. 13 If a public officer rented space in a public facility, was the rate commensurate with that paid by other members of the I public? 12101 2 -5 Minn. Stat. Yes No Workpaper Section CONFLI OF INTEREST Reference Part 1. Contracts Generally (Continued) § 471 .88, 9. Contract or Franchise Agreement for Utilities subd. 15 If the city has entered into a contract or franchise agreement with a utility for the provision of utility services and the council member is an employee of the utility: a. Did the council member abstain from voting on any official action relating to the contract or franchise agreement? b. Did the council member disclose the reason for the abstention in the official minutes of the council meeting? § 382.18 10. County Officials and Employees Did the county official or employee receive reimbursement from a county for providing licensed or tribally approved family foster care? or Was the county official or employee a coroner, deputy coroner, coroner's investigator, or medical examiner who received compensation for professional services from a professional corporation or medical provider under contract to provide coroner services to a county? §§ 1 1 . Conflicts of Interest: All Other Contracts or Transactions 412.311, 365.37, If there were any contracts or transactions between an subd. 1, interested officer and a governing body, were the contracts 382.18, & or transactions included in the exceptions above (B 1 -10)? 12313.52, subd. 5 NOTE: If your audit involves a port authority, a public housing authority, a municipal band, a housing and redevelopment authority, an economic development authority, or a community action program or private consultant, review subdivisions 7, 9, 10, 11, or 14 of Minn. Stat. § 471.88 for additional exceptions. Part II. Purchase of Merchandise from Governmental Agency § 15.054 A. Officers and employees of political subdivisions are prohibited from selling or buying property or materials owned by the political subdivisions. EmDIOVees may make purchases from political subdivisions if the following criteria are met. For all purchases: I 1 . Was the property purchased by the public employee not real property? 12101 2.6 Minn. Stat. Yes No Workpaper Section CONFLICTS OF INTEREST Reference I Part 11. Purchase of Merchandise from Governmental Agency (Continued) 2. Was the property or materials purchased by the public employee not needed for public purposes? 3. Was the purchase made through sealed bids or public auction? 4. Was the employee not directly involved with the sealed bid or auction process? 5. Was the applicable "notice" law followed, and did the same require at least one week of published notice? This section does not apply to property or materials acquired or produced by political subdivisions for sale to the general public in the ordinary course of business. Part Ill. Audit Conclusion The auditor must state a conclusion - -based on this questionnaire and any other audit procedures performed -- whether the client has complied with the legal provisions reviewed relating to conflicts of interest. Conclusion: i 12101 2 -7 q City of . Brooklyn Center, s Minnesota 7 2002 Audit Review June 16, 2003 Member of HLB intemational Tautges Redpath, Ltd. r R ep orts I ssued : W anula a ag ca .......... . ........ e o .. .. ....... .............. . 0 0 tm� Re: 1h: t t Lei a, a F Wi l U NO Xx XX orb < ff Member of HLB International Tautges Redpath, Ltd. i Comprehensive Annual Financial Report ♦ City's financial statements ♦ Independent auditor reports on the fair presentation of the financial statements E ♦ "Clean opinion" on the 2002 .......... financial statements ............. r m Member of HOB International 3 � 7autges Redpakh, Ltd. Ma i �r *u State Legal Compliance Report Required by Minnesota Statute §6.65 �� ♦ OSA established a task force to develop audit guide for legal N& compliance � Audit guide covers five categories 1) contracting and bidding 2) deposits and investments 3) conflicts of interest 4) public indebtedness 5) claims and disbursement ♦ No compliance findings Member of HL8lnternational 4 ! Tautges fiec➢ps$tt, Ltd. Report on Internal Control Required by audit standards Based on inquiries and observations Identifies reportable conditions Reportable condition defined as . . . . . . . . . . . . . . . . . . . . . . "significant deficiencies in the design or operation of the internal control over financial reporting that would adversely affect the City's ability to record, process, summarize, and report financial data Three reportable conditions noted — Segregation of duties —Grant management — IT security and access Member of HL6 lniemational 5 _ __ � TaUtg,7e3e Redp.)ath, G.tt!• Fe Sing Audit ♦ Required when City ex ends more p than $300,000 of federal funds ♦ OMB developed audit guide for comp liance testing g ♦ A covers ei ht g eneral 9 categories 1) political activity 2) davis -bacon act 3) civil rights 4) cash management 5) relocation assistance 6) federal financial reports 7) allowable costs 8) drug -free workplace Member €,� e ber of HLB International ............ Federal Single Audit ♦ 2002 federal expenditures: CDBG $352,000 U.S. Department of Justice: LLEBG 29,901 Underage compliance 1,572 Department of Transportation: Operating Nitecap 1,461 Safe and Sober 5,525 Total $390,459 ♦ No compliance findings p Member of HLB International 7 Redpath, Ltd. ............ Management R +All funds summary: v Increase Fund Balance (decrease) in (Deficit) Fund Balance/ Retained Transfers Retained Earnings Fund Revenue Expenditures (Net) Earnings 12/31/02 General $16,091,236 $12,965,081 ($2,630,253) $495,902 $7,929,774 Special Revenue: Housing and Redevelopmnt Authority 194,766 - (194,766) Economic Development Authority 612,685 331,139 208,266 489,812 1,273,346 Earle Brown TIF District 815,568 17,776 (1,410,000) (612,208) (1,814,455) TIF District No. 3 2,217,395 873,119 (570,000) 774,276 4,856,845 TIF District No. 4 140,907 187,939 (47,032) 65,222 Police Drug Forfeiture 29,773 7,936 21,837 58,870 CDBG 352,000 338,500 (13,500) - - City Initiatives Grant 142,165 168,041 (11,277) (37,153) 14,051 Debt Service: General Obligation 307,997 1,032,357 764,742 40,382 871,970 Tax Increment 22,682 1,974,843 1,980,000 27,839 2,212,462 Special Assessment 996,939 1,055,651 259,168 200,456 2,656,759 Capital Projects: Capital Reserve Emergency 47,174 58,976 - (11,802) 1,329,490 CapitalImprove-rits 81,742 2,596,999 396,277 (2,118,980) 1,760,975 Municipal State Aid for Construction 947 ,488 1,410,361 - (462,873) 620,731 Special AssessmentConstructiod'l 2 5,542,084 1,321,343 (1,442,968) (447,951) Earle Brown Heritage Center Irnprovernents - - 100,000 100,000 100,000 Enterprise: Municipal Liquor 3,465,062 3,283,368 (100,000) 81,694 1,166,519 Golf Course 281,269 274,140 7,129 298,120 Earle Brown Heritage Center 3,502,511 3,640,709 (100,000) (238,198) 544,622 Recycling and Refuse 213,513 215,211 (1,698) 99,869 Street Light Utility 214,044 152,726 61,318 61,318 Water Utility 1,432,940 1,572,235 (139,295) 5,582,533 Sanitary Sewer 2,707,680 2,550,584 157,096 4,340,599 Storm Drainage 1,813,186 699,448 1,113,738 10,010,710 Internal Service: Compensated Absences 26,124 - 26,124 26,124 Retirement 56,114 25,896 30,218 30,218 Central Garage 1,261,327 1,205,794 55,533 4,062,563 Total $40,752,060 $42,180,913 $0 ($1,428,853) $47,711,284 "Bond proceeds of $1,200,000 were received in January 2003. Member of HLB Intemational $ Tautges Redpath, Ltd. Management Report General Fund: • Fund balance increased $496,000 during 2002. ROO Ad" Valiance Revenue $15,173,726 $16,091,236 $917,510 Expenditures 13,528,056 12,965,081 562,975 ho ease (dew) before other financing sources 1,645,670 3,126,155 354,535 Other financing sauces (uses): Operating transfers to other funds (1,645,670) (1,863,910) (218,240) Residual equity transfer to other funds - (766,343) (766,343) Increase (decrease) in G=al Fund balance $0 $495,902 ($630 (k)S) • Revenue budget variances are as follows: Property taxes $337,259 Tax abatement reserve 266,343 Licenses and permits 258,511 All other 55,397 $917,510 ''` Member of HLB International Management R • Fund balance at December 31, 2002 was $7,930,000 General Fund Balance Component 12/31/2001 12/31/2002 Reserved for advances to other funds $105,074 $105,074 Designated for working capital 6,437,653 6,527,973 Subtotal 6,542,727 6,633,047 Reserved for prepaids - 68,279 Undesignated 891,145 1,228,448 Total $7,433,872 $7,929,774 • Working Capital Reserve 2001 2002 1. Items not readily convertible to cash: a. Accounts receivable $67,160 $53,489 b. Advances to other funds 105,074 105,074 2. Amount appropriated to the ensuing year's budget 19,305 3. Amounts reserved to working capital (45% of current year budget less debt service) 6,351,188 6,474,484 $6,542,727 $6,633,047 Member of HLB International 10 Tautges Redpath, Lade Management Report Th policy fund I o c The current u d ba nce a p Y addresses working capital. Cities may have additional fund balance reserve needs. Examples include — Intergovernmental revenue cutbacks — Emergency or unanticipated expenditures — Special projects — Capital outlay replacement • We suggest the City review it's current policy and determine if additional reserves are appropriate. Member of HLB International 1 Tautges Redpath, Ltd. Management Report Si3ecial RFunds: Fund Balance (Deficit) December 31, Increase/ Fund 2001 2002 (Decrease) Housing and Redevelopment Authority - Economic Development Authority 783,532 1,273,346 489,814 Earle Brown TIF (1,202,247) (1,814,455) (612,208) TIF District No. 3 4,082,569 4,856,845 774,276 TIF District No. 4 112,254 65,222 (47,032) Police and Drug Forfeiture 37,033 58,870 21,837 CDBG - - - City Initiatives Grant 51,204 14,051 (37,153) Totals $3,864,345 $4,453,879 $589,534 Member of HLB international 12 Tautges Redpath, Ltd. L Management Report Sr)ecia Revenue Funds: • Housina and Redevelopment Authority fund — Property tax revenue of $195,000 — Transfer to EDA of $195,000 • Economic Development Authority Fund — Increase in fund balance of $490,000 in 2002 primarily from the sale of land • TI F District #2 — Earl Brown Farm TIF fund — Deficit fund balance at December 31, 2002 of $1,814,000 — Anticipated future tax increment collections will finance the deficit Member of HLB International 1 Tautges Redpath, Ltd, i Management R Special RFunds: • Community Development Block Grant Fund — Federal grant revenues of $352,000 — Expenditures of $325,000 were rebated to the Shingle Creek Tower project Member of HLB Intemati©nal Tautges Redpath, Ltd. M anagement R Debt Service Funds: • 14 bond issues outstanding: A Pledged far aft ]?edrwr e nt 12/3]/2002 Sdreduled Final Fvdd Defwred Outstanndh9 Property Maturity Fund Description Balance Revanue Tows find al Taxes IAte Tax Innawi>ent IJebt: Tax lrtaen>ert Bonds of1991(IIFZ) $591,019 $ $591,019 $1,975,000 t � 02111/04 Refunding Tax InamW Bands of 1992(11F2) 1,043,0619 1,043,069 765,000 (n) Q? ,0l/0i Tax"e Tax Immix nt Bails of 1995 ('BF'3) 57$374 57$374 3,41g000 (f) 02,01111 Total tax incrawt debt 2,212,462 0 2,272,462 6,150,000 0 Special Assessnoant Dft Strew Imlxoverrwnt Bands of 1994 (301) 200,896 21, 546 222,442 275,000 136,387 02101105 Strew I Twmrwnt Bards of 1995 (302) 126„#2 35,886 162,223 340,000 218,143 02101106 SftW Iml mwunnt Bawls of 1996 (303) 438,783 206771 645,554 765,000 480,309 02101107 Street hWmw mt Bads of 1 997 (304) 276,865 282,280 559,145 620,000 02101/08 Street bnlxovwrant Bonds of 1998 (307) 447,856 3W- 848062 730,000 02101/09 Street Irxwerrmt Bads of 1999 (308) 355, itl0 945,471 1,301,171 1,255,000 02101110 Strew tfrgwenuA Bads of 2000 (309) 488,845 452,474 941,359 655,000 0201/11 Street InUrover rent Bads of 2001 (310) 337,866 493,687 831,553 730,000 02/01112 Strew hMovement Bards of 2003 (311) (16,434) 1,097 501 1,081,075 02/01/13 Tonal special asseg2rent debt 2 3,927,830 6,584,589 5372000 834 General Obligation Ikbt Refiud State -Ad St W Bonds (306) - - 1,100,000 001/06 Police and Fne Building Bonds (305) 871,971 26,931 89$902 6,325,W0 02101113 Total g-al cbhgah- debt 871,971 26,931 898,902 7,425,000 0 Total - Al D&A Service Fords $5,741,192 $3,954,761 $9,695,953 $18,945,000 $434,839 t � tax ir>< etmat wmats subject to valuation and tax capacity rate fluctuations, (2) Defaned revenue priniinly consists of unoolleded special a%mvrwnts. MEN Member of HLB I ntemational '°° Ltd. 15 Management R Capital Proiect Funds: • A comparison of fund balance of all Capital Project Funds is as follows: Fund Balance (Deficit) December 31, Increase/ Fund 2001 2002 (Decrease) Capital Reserve Emergency $1,341,292 $1,329,490 ($11,802) Capital Improvements 3,879,955 1,760,975 (2,118,980) Municipal State Aid for Construction 664,228 620,731 (43,497) Special Assessment Construction 995,017 (447,951) (1,442,968) Earle Brown Heritage Center Improvements - 100,000 100,000 Totals $6,880,492 $3,363,245 ($3,517,247) Member of HLB International 1 T Management Report Fixed Assets: • During 002, the City reviewed its 9 Y policy regard and to estimated useful g lives of fixed assets. The following changes were implemented: Estimated Useful Life Asset Class Prior to 2002 2002 Water and sewer mains and lines 99 years 25 years Buildings and structures 20 - 40 years 25 years Water wells and storage tanks 15 - 50 years 25 years Sewer lift stations 15 - 40 years 25 years Machinery and equipment 5 - 20 years 2 - 15 years Furniture and fixtures 5 - 20 years 5 years ` < Member of HLB International 1 Tautges Redpath, Ltd. Management Report Fixed Assets: • Also during 2002, the dollar threshold for asset capitalization was increased from 1 000 to a range of $10,000 for equipment to $250,000 for infrastructure. A summary of changes is as follows: Wstated Net Estimated Net Fixed Fixed Assets Threshold Life Assets Fund 12/31/2001 Adjustmat Adjustment 12/31/2001 Municipal Liquor $226,755 ($9,331) $ - $217,424 Golf Course 1,642,753 (46,909) (5,266) 1,590,578 Earle Brown Heritage Center 10,473,028 (434,061) (103,586) 9,935,381 Water Utility 13,837,274 (1,614,746) (3,588,141) 8,634,387 Sanitary Se"er 11,256,455 (388,897) (2,703,920) 8,163,638 StomaDminage 10,710,437 (270,059) (43,568) 10,396,810 Total $48,146,702 ($2,764,003) ($6,444,481) $38,938,218 .: <<> Member of HLB Internati©nat 18 Tautges Redpath, Ltd. Vii' Management Report Interfund Loans: • Two types — Advances to Other Funds — Due to Other Funds • Advances to other funds: Fund Receivable Payable General Fund $105,074 $ - MSA Construction Fund 593,069 - Earle Brown TIF Fund - 698,143 Capital Improvements Fund 900,000 - Golf Course Fund - 900,000 Total $1,598,143 $1,598,143 • Due to other funds: Receivable Payable Tax Increment No. 3 Fund $1,116,698 $ - Earle Brown Farm TIF Fund - 1,116,698 Total $1,116,698 $1,116,698 • Statutory requirements when TIF funds involved Member of HLB International 1 Tautges Redpath, Ltd. Management Report Other Matters: • New audit standard for 2003 — SAS 99 • GAS B 34: Required for 2 03 uired t implemented o 0 e o be q Member of HOB International 20 Tautges Redpath., ,«°fie To: Chair Donn Escher and Financial Commission Members CC: City Council Members, Michael McCauley, Doug Sell From: Council Member Kathleen Carmody Date: 5/28/03 RE: Financial Priorities The discussion concerning the 2004 budget on May 19 with the Financial Commission and the City Council did not result in a discussions of priorities, as I had expected. So I decided that I would share with you some of the priorities I have. I think this step is one that is so important, that I would like to have some input. I just ask that you read this memo and consider my ideas when setting priorities. Cuts: After looking again at the outline of levels of priority prepared by Mr. McCauley, I agree with the police and fire remaining basically at the same level. As we discussed, the dispatch services are still in discussion as to what our options are and I would be supportive of any change that keeps the level of service similar to what we currently have but at a lower cost. The other police budget portion that I would consider cutting is the DARE program. I have had two recent (within the last four years) graduates and I think it's long term impact is questionable. I also agree with maintaining the current level of infrastructure whenever possible. However, I would make the Street Replacement Program as the only number two level item. I feel it is imperative that we keep up the program at as high a level as we can afford, whether that is once every two years or every year. I would like to see the park amenities deferred except where items have gone into a state of disrepair or are not safe. I would put this as a level four. Northwest Hennepin Human Services I would leave at level three and would like to keep. If there is money to spend in the CARS area, I prefer money directed to youth programs. The Crime Prevention Organization's summer bus is not funded this year, several school districts serving Brooklyn Center are cutting back on summer school and we have cut youth programs. I feel any money spent keeping the 9 -13 year age bracket busy, especially in the summer, would result in a savings of police calls. I would prefer most or all of CARS programs to be self funded. Most of the items in level five, I would agree cutting with the exception of some funding for Earle Brown Days. I believe it is important to have some sort of community celebration. I would like to see funding to cover either the cost of police during the parade or the cost of Sue LaCrosse as the staff liaison, or preferably both. tr Revenues: Of the revenue sources we looked at on the 19 , I would not consider a � ()D referendum to get extra money. I would consider an increase of not more than in the total budget (assuming no levy limits). I would be more likely to consider franchise fees as a viable alternative to our funding cuts. I thought the remaining items were of smaller consequence and I will determine that later, if necessary. Thanks for taking the time to consider my ideas and I hope all goes well with your discussions. It is a difficult job and I am glad that we have the advantage of a financial commission that understands the needs of the council. I