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2015 06-01 CCP Budget Work Session
AGENDA CITY COUNCIL/FINANCIAL COMMISSION JOINT WORK SESSION June 1, 2015 6:30 P.M. Council Chambers City Hall 1.Call to Order 2.Approval of Agenda 3.Presentation of Audit Report and Management Letter 4.Council/Commission Questions 5. Staff Overview of Comprehensive Annual Financial Report 6, Council/Commission Questions 7.Miscellaneous 8.Adjourn MEMORANDUM - CITY COUNCIL/FINANCIAL COMMISSION JOINT WORK SESSION DATE: June 1, 2015 TO: Curt Boganey, City Manager FROM: Nathan Reinhardt, Finance Director SUBJECT: Joint Work Session for Review of the City of Brooklyn Center's 2014 Comprehensive Annual Financial Report (CAFR) Recommendation: No action will be requested. Each year the City prepares a Comprehensive Annual Financial Report (CAFR) in accordance with City charter and State statutory regulations. As required by those regulations, the City is annually audited by an independent auditing firm. This session will be held to provide an overview of the 2014 Comprehensive Annual Financial Report (CAFR) and Management Report to the City Council and the Financial Commission. James Eichten, from Malloy, Montague, Karnowski & Radosevich (MMKR) will present this information and will be available to respond to questions. Background: Enclosed please find the 2014 CAFR, Management Report and Special Purpose Report. The CAFR sets forth the City's financial position, results of operations, cash flows and all disclosures necessary to enable maximum understanding of the City's financial affairs. Responsibility for both the accuracy and completeness of the presented data and the fairness of the presentation, including all disclosures, rests with the City. A copy of the 2014 CAFR will also be available on the Fiscal & Support Services page of the City's website. I would like to point out several items that you might find particularly interesting: 1.Page 10: The Certificate of Achievement for Excellence in Financial Reporting for the 2013 CAFR, 2.Pages 1-7: Letter of Transmittal, which provides a profile of the City and information of the City's long-tern financial planning, major initiatives and financial policies. 3.Pages 15-26: The Management Discussion and Analysis, which is the Executive Summary of the City's financial statements. 4.Pages 30-31: Balance Sheet shows the General Fund balance at year-end was $11,020,081. Unassigned/Assigned General Fund balance represents 56.7% of 2015 General fund budgeted expenses. 5. Page 34-35: The Statement of Revenues, Expenditures, & Changes in Fund Balances provides the net change in fund balances of the governmental funds. The General Fund had excess revenues over expenditures of $1,361,948 (prior to transfers). The General Fund transferred $2,754,124 to the Capital Improvements Fund in 2014 to provide funding for future capital improvements. Mission: Ensuring an attractive, clew,, safe, inclusive coinnzunit v that enhances the qziuliti' of life for all people wulpieserves the public trust k'A I kTA [I] 1WI 1IJh'A SJ I I'LSIIlIMSJ I 4 I[SI I [i[IAA WA I Ii [I]PII] hi j'LI] a 4I'Th1 (Skl 6.Pages 44-45: The Statement of Cash Flows shows the changes in cash balances of all the enterprise and utility funds. 7.Management Report (Issued under a separate cover): Includes summarized and comparison information of the City's funds and financial information. 8. Special Purpose Audit Reports (Issued under a separate cover): Includes results of the audit of federal awards, internal controls and legal compliance. MMKR audited the City's financial statements and issued an unmodified opinion, which is commonly referred to as a "clean audit opinion". This means that, in the auditor's opinion, the financial statements conform with applicable accounting standards. In addition to formulating an opinion on the City's financial statements, the auditors reviewed the City's internal controls, legal compliance and financial management practices. Those results were included in the Special Purpose Audit Reports which did contain any legal compliance findings. Budget Issues: The 2014 CAFR conveys the fiscal condition of the City as of December 31, 2014 and lays the groundwork for understanding the financial resources available to the City when planning for the future. Strategic Priorities: o Resident Economic Stability Mission: Ensuring an attractive, clean, safe, inclusive community that enhancesces the quality of life for all people and preserves (lie public (just 5/22/2015 CITY OF BROOKLYN CENTER James H. Eichten, CPA MMK'Ki ERT1rPC - ! A . IiM:Ids]Ij o Opinion on Financial Statements Financial statements are fairly presented in accordance with accounting principles generally accepted in the United States of America o Testing of Internal Controls and Compliance Internal controls over financial reporting Compliance with laws and regulations related to financial reporting o State Laws and Regulations Compliance with Minnesota laws and regulations 0 Single Audit of Federal Awards Schedule of Federal Awards Internal controls over federal award programs Compliance with laws and regulations related federal programs 1 5/22/2015 PM, MKj MANAGEMENT REPORT . IINI 1A 111A CC uAudt Summary Planned scope and timing of audit Audit opinions and findings üFinancial Report Unmodified or clean opinion Hnternal Controls Over Financial Reporting "No findings üSingle Audit of Federal Awards "No findings °Legal Compliance Audit Findings No findings 2 5/22/2015 1AYLYA1r11 ,'_tMANAGEMENT REPORT (CONT.) LAvdt Summary E1 Govrfnrnefltjll Funds Ovevew M MKR Taab1e Market Value S2500,000,000 S2000M00.000 :::: I 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 3 5/22/2015 WMWKRW-k CIIID^ERT5L1 lAD.... Tax Rates Rates expressed as a percentage of net tax capacity All Cities Sewn-County City of State-Wide Metro Area Brooklyn Center 2013 2014 2013 2014 2013 2014 Average tax rate City 48.8 48.8 46.1 46.0 71.1 74.1 County 48.5 47.6 47.1 46.6 49.5 50.0 School 28.5 28.9 30.3 30.9 39.1 39.8 Special taxing 7.2 7.3 9.4 9.5 11.3 12.2 Total 133.0 132.6 132.9 133.0 170.9 176.0 M K' R RT1D PUBLIC CC OUNTANTS MANAGEMENT REPORT (CONT.) Governmental Funds Revenue per Capita With State-Wide Averages by Population Class State-Wide City of Thooklyn Center Year December 3l,2013 2012 2013 2014 Population 2,500-10,000 10,000-21.000 20,000-100,000 30,569 30,426 30,426 Property taxes $ 422 $ 388 S 423 $ 471 S 496 S 494 Tax increments 30 42 40 88 104 125 Franchise fees and other taxes 31 39 34 50 50 51 Special assessments 63 58 72 42 62 59 Licenses andpennits 27 26 38 28 36 34 Intergovernmental revenues 253 268 148 118 104 89 Charges for services 109 84 91 35 35 40 Other 56 33 30 36 22 30 Total revenue S 991 $ 938 5 876 S868 5 909 5 922 5/22/2015 Governmental Funds Expenditures per Capita With State-Wide Aceroges by Population Class State-P/ida City of Brooklyn Center Your Decerober3l.2013 2012 2013 2014 Population 2500-10.000 10.005-20000 20.000-100.000 30,569 30,426 30,426 Current General povemneerl S 129 S 100 S 83 S 97 S 100 S 104 Public nudely 244 235 239 297 300 316 Street ntuioleoaoee 123 121 91 65 65 69 Parks and recreation 83 99 85 83 82 81 All other 65 73 91 185 119 111 645 S 628 S 589 _L_727 S 666 S 681 Capital outlay and construction S 303 $ 288 S 219 S 23 S 284 S 130 Debt tenSer Principal S 164 $133 5 102 S 87 5 87 5 63 Interact and Steal 55 43 39 26 29 27 S 219 S 176 S 141 S 103 S 116 S 90 Total expenditures S 1.147 5 1092 5 949 S863 51.066 S901 j REPORT(CONT) Gosernrneutst Funds Cbssgr inFand Itotaune Fmd8sluuce as sfDucnmber3l. locresse 2014 2013 (As Restated)(Decrease) Food baboons of gnvesnrnsntsl foods Total byolossiliostion Nonspesdabbs 1 21,967 S 26,139 S (4,179) Restricted.26,534,t13 26,399.322 83,791 Cosoroitted 10,514,87l 7,579,689 2,935,583 Assipoed 908,761 2,754,124 (l,045,363) Unossigred 8.325.475 0.569.915 155.521 Total— goceneroestol furrdn 146.205.103 S 44.060.228 S 1.324.960 Total byfmrd Ijeosrul S 11,120.051 S 12,312.713 8 (1,362,632) Tax Increment District No.3 17.198,749 17,827.951 70,758 Too Increment District No.3 (1,299,659)(1,477,495)132,636 Debt lorsics 1,909.441 1.190.972 718,419 Capital lonprosemeota 6.509,230 3.072.758 3,436,472 Mooieipst State Aid for Coscatrxotioo 1.030.100 2,323.722 (493,622) tefrostroaturn Corrstrootino (463,193)970,142 (1,433,375) Nonmsjoefurrds 8.800.639 8.644.425 256.214 Tntd—govenrrnentslforrds $ 46205.188 5 44.880.228 S 1.324.960 5 5/22/2015 ' ^N 1 C" rR' ^h F-- ikMAKNILak EMENT REPOR -)C E MAI 1 I tLisi General Fund Financial Position Year Ended December31. S20,000,000 S14000.00O 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 rFuad Balance t Cash and Investments (Net of lnterftmnd Bonowing) =-=-Expeaditures General FundRevenue by Source Year Ended December 3 L S16,500:000$15,000,000$13,500,000 612.000,000 $10,500,000 69.000.00067.500,00066.000,000 34.500,000 S3,000,000 S 1,500,0005— Taxes Intergovernmental 010cr 02010 E12011 02012 02013 132014 6 5/22/2015 W KW-M A N AGEMENT R E PORT ,^^ED PUB^LIC General Fund Expenditures by Function Year Ended December 31, s101 000,000 S7.000.000 S6,000,000 S5.000.000 S4MOO.000 General Public Safety Public Wodcs Parks and Other Government Recreation 02010 02011 02012 02013 02014 ^C r RCT Audllt Summary LGovernmeflafl Funds Overvew L]EnterprcSe Funds Overvew 7 5/22/2015 Enterprise Funds Change in Financial Position Not Position as ofDecember3l.Increase 2014 2013 (Deceeose) Net position of enterprise foods Total by classification Net investment in capital meets $ 40,537,132 S 42,466,488 S 6,070644 Unrestricted 7164.916 12.546.185 (5301.269) Total - enterprise foods J ,.702.048 .012.673 2375 Total by food Municipal Liquor $ 2,512,431 $ 2,605,412 S (172,901) Golf Course 751,336 657,060 94,268 Earle BrossmHceitoe Center 5,519,579 6,065,638 (546,059) WaterUlility 12,120,465 11,709,616 410,149 SsasitarySetser Utility 13,660,176 13,204,619 463,417 Storm Drainage Utility 20,016,700 19,874,022 212,766 Street Light Utility 963.994 752,477 211,517 Recyclin g Utility 79.279 63.751 15.520 Total - enterprise foods 655.702.048 . 55,0l2.671_$ 619.375 EO- Water Fond Year Ended December 31, S2.500.000 S2.250,000 S2,000,000 51,750,000 SI.500,000 S1.2 50.000 S1.000.000 S 750.000 85453,000 $250,000 5- S)250,(100) 2905 2005 2007 2098 2000 2010 2011 2012 2013 2011 Opeettis Revtstse Operatat5 Expenses =Project Coats --Operating borate (Loss). Esclstding Project Costa 5/22/2015 Sanitary Server Fund Year Ended December 31, S4,000,000 03,800000 $3,600,000 $3,400,000 $3,200,000 33,000.600 02,000,000 S2,600,000 $2,400,000 $2,200,000 $2.600,000 01.000,000 $1,600.000 S 1,400,000 S1.200,000 200,000 $1,600,000 $000,000 0600,000 $-I00.000 S200,000 0(200,000) 2003 2000 2007 2000 2000 2010 2011 2012 2013 2014 =Operating Revenue OpnmlingExpnnsnr Project Cods ' --Opernting!ncomn (Lure), Excluding Project Curls M MKR REPORT CONTj Liquor Fund Year Ended December 3 1, S6,000,000 — _____ •_ iI= •_,u_I_Il *W1SI U U - U - 'U U - U -iI 1 U - iI - •i1 - 11! El El E EII EI!ElE El $1,0 3 7IL!UL!JI!=..i!!-ii!!1!L.4!ltfl 205 2006 2007 2008 2009 2010 2011 2012 2013 2014 -— — LIII$n.dr 9 5/22/2015 kAAVD MANAGEMENT REPORT (GONT.) CERTIFIED ACCOUNTANTS Earle Brown Heritnee Center Fund Year Ended December 31. sAoorj,000•1• S(506) 0(1,000000) 2005 2006 2007 2000 2009 2010 2011 2012 2013 2014 =Sales audUserFe'rs czmoperaliaz E'epeusas ICos1 of Sales —OpetutIttS Income (Loss) LAudFtt Summary Governmental Funds Overview rEnteprse Funds Overview LGovef(flmefltWllde Financial Statements DLegsQatve Updates [AccOUintllng and Auditing Updates 10 5/22/2015 LClean Opinion on Financial Statements []Single Audit of Federal Awards No Findings Reported Continued Ongoing Assessment of Financial Projections and Results lncWding General, Other Operational and Enterprise Fund Activities 11 5/22/2015 Cüty of [Brookilyn Cent 2014 Comprehensive Annual Financial Report June 1, 2015 Gnera Fund Positive operating budget results of $1,491 ,492 Total decrease in fund balance of $1 ,362,632, as a result of a transfer to the Capital Improvements Fund of $2,754,124 General Fund Assigned and Unassigned fund balance represents 56.7% of next year's budgeted expenditures Fund Balance >52% will be transferred to the capital projects fund ($908,761) :1. 5/22/2015 Genrall Fud Revenues Revenues exceeded budget by $549,372 I Property tax revenue $45,000 Building permits 310,000 Delinquent/deferred assessments 53,000 Police/fire pension aid 110,000 General government charges 52,000 Public safety charges (45,000) Community center charges (74,000) Court fines (55,000) Gnall Fund Expenses Expenses were under budget by $862,576 Police - Personnel $423,000 Police - Services & Charges 122,000 Assessing Contract Savings 115,000 Government Buildings - Maintenance and Services 136,000 CARS - Contractual Services 44,000 Parks - Personnel, Services & Charges 119,000 Vacancy Savings (125,000) 2 5/22/2015 Enterpdse Funds Municipal Liquor o Operating income of $204,959 compared to $389,258 in 2013 (prior to capital project transfer of $362,190) Golf Course Operating loss of $87,918 compared to $96,979 in 2013 EBHC ° Operating loss of $619825 compared to $559,707 in 2013 ° Increase in revenues of $246,653 IlTri - Municipal Liquor ($215,852) Golf Course (77,397) EBHC 79,443 Utflty Funds CO ldw^ 41 Water ($405,331) Sanitary Sewer (167,392) Storm Drainage (129,500) Street Light 93,826 Recycling 14,860 • Water includes $3.54 million borrowed from the Capital Improvements fund at year-end to pay for the Water Treatment Plant Construction, this amount was reimbursed from the PFA loan in 2015 • Decreases in Water/Sanitary Sewer/Storm Drainage cash balances a result of infrastructure spending for Wangstad Neighborhood Street improvements 3 5/22/2015 Other Net investment gain of $345586, compared to a loss of $108,661 in 2013 • Net investment loss includes: • Investment income of $261975 • Unrealized gain on investments at of $83,611 • Unrealized (paper gain) due to interest rate fluctuations • Investments anticipated to be held to maturity Wangstad Area infrastructure improvements $3.7 million added to construction in progress Water Treatment Plant construction • $4.7 million added to construction in progress Central Garage • Added/replaced 15 pieces of equipment ($654,6 89 ) • Including: Trackless sidewalk snowplow, police vehicles, mower and multi- purpose public works trucks. 0 heir Paid $2,045,000 of principal on previously issued bonds No new debt issues (The PFA Loan was issued in 2015) Purchase of $2,344,304 of property • 6121 Brooklyn Blvd. • 5939 John Martin Drive • 902 531dAvenue City/EDA at year-end owned $16.2 million in assets held for resale 5/22/2015 Questons City of BROOKLYN CENTER Comprehensive Annual Financial Report For the year ended December 31, 2014 City of Brooklyn Center, Minnesota A low. Member of the Government Finance Officers Association of the United States COMPREHENSIVE ANNUAL FINANCIAL REPORT OF THE CITY OF BROOKLYN CENTER, MINNESOTA Cornelius L. Boganey City Manager Prepared By: FINANCE DIVISION DEPARTMENT OF FISCAL & SUPPORT SERVICES Nathan Reinhardt Finance Director Adam Flaherty Assistant Finance Director FOR THE YEAR ENDED DECEMBER 31, 2014 Member of Government Finance Officers Association of the United States and Canada This page has been left blank intentionally. CITY OF BROOKLYN CENTER, MINNESOTA TABLE OF CONTENTS Page No. INTRODUCTORY SECTION Letter of Transmittal 1 Principal Officials 8 Organizational Chart 9 Certificate of Achievement 10 FINANCIAL SECTION Independent Auditor's Report 11 Management's Discussion and Analysis 15 Basic Financial Statements Government-wide Financial Statements Statement of Net Position 27 Statement of Activities 28 Fund Financial Statements Governmental Funds Balance Sheet 30 Reconciliation of the Balance Sheet of the Governmental Funds to the Statement of Net Position 33 Statement of Revenues, Expenditures and Changes in Fund Balances 34 Reconciliation of the Statement of Revenues, Expenditures and Changes in Fund Balances of the Governmental Funds to the Statement of Activities 36 Statement of Revenues, Expenditures and Changes in Fund Balances: Budget-to-Actual General Fund 37 Tax Increment District No. 3 Special Revenue Fund 38 Proprietary Funds Statement of Net Position 40 Statement of Revenues, Expenses and Changes in Net Position 42 Statement of Cash Flows 44 Notes to the Financial Statements 47 Required Supplementary Information Schedule of Funding Progress - Other Postemployment Benefits 81 Combining and Individual Fund Statements and Schedules Governmental Funds Nonmajor Governmental Funds Combining Balance Sheet 86 Combining Statement of Revenues, Expenditures and Changes in Fund Balances 87 Nonmajor Special Revenue Funds Combining Balance Sheet 88 Combining Statement of Revenues, Expenditures and Changes in Fund Balances 90 Nonmajor Capital Projects Funds Combining Balance Sheet 92 Combining Statement of Revenues, Expenditures and Changes in Fund Balances 93 Schedule of Revenues, Expenditures and Changes in Fund Balances: Budget-to-Actual General Fund 94 Special Revenue Funds Housing and Redevelopment Authority 99 CITY OF BROOKLYN CENTER, MINNESOTA TABLE OF CONTENTS Economic Development Authority 100 Community Development Block Grant 101 Tax Increment District No. 3 102 Tax Increment District No. 4 103 City Initiatives Grant 104 Debt Service Fund 105 Capital Projects Funds Capital Improvements 106 Municipal State-Aid for Construction 107 Infrastructure Construction 108 Street Reconstruction 109 Technology 110 Debt Service Fund by Account Combining Balance Sheet 112 Combining Schedule of Revenues, Expenditures and Changes in Fund Balances 114 Schedule of Revenues, Expenditures and Changes in Fund Balances: Budget-to-Actual G.O. Improvement Bonds, 2004C 116 G.O. Improvement Bonds, 2006A 117 G.O. Improvement Bonds, 2008B 118 G.O. Improvement Bonds, 2013B 119 G.O. Tax Increment Bonds, 2013A 120 G.O. Tax Increment Bonds, 2008A 121 G.O. Tax Increment Bonds, 2004D 122 Proprietary Funds Internal Service Funds Combining Statement of Net Position 124 Combining Statement of Revenues, Expenses and Changes in Net Position 125 Combining Statement of Cash Flows 126 STATISTICAL SECTION (UNAUDITED) Financial Trends Net Position by Component 128 Changes in Net Position 130 Governmental Activities Tax Revenue by Source 136 Fund Balances of Governmental Funds 138 Changes in Fund Balances of Governmental Funds 140 Revenue Capacity Assessed Tax Capacity and Estimated Actual Values of Taxable Property 142 Property Tax Rates - Direct and Overlapping Governments 144 Principal Property Taxpayers 146 Property Tax Levies and Collections 147 Debt Capacity Ratios of Outstanding Debt by Type 148 Ratios of General Bonded Debt Outstanding 149 Computation of Direct and Overlapping Debt 150 Legal Debt Margin Information 152 Pledged Revenue Coverage 154 Demographic and Economic Information Demographic and Economic Statistics 155 Principal Employers 156 Operating Information Full-Time City Government Positions by Function 157 Operating Indicators by Function 158 Capital Asset Statistics by Function 159 Introductor4 .MR City of Brooklyn Center A Ivlilienniuin Connn unity May 18, 2015 Honorable Mayor and Members of the City Council City of Brooklyn Center Transmitted herewith is the Comprehensive Annual Financial Report of the City of Brooklyn Center for the fiscal year ended December 31, 2014. Management of the City of Brooklyn Center assumes full responsibility for the completeness and reliability of the information contained in this report based on the current system of internal control. Because the cost of internal control should not exceed anticipated benefits, the objective is to provide reasonable, rather than absolute, assurance that the financial statements are free of any material misstatements. Minnesota Statutes and City Charter Section 7.12 require that the financial statements of the City of Brooklyn Center be audited annually by the State Auditor or a certified public accountant selected by the City Council. These financial statements have been audited by Malloy, Montague, Karnowski, Radosevich, & Co., P.A. (MMKR). Their opinion is included in the financial section of this report. In addition, IVLIVIKR is required to issue an opinion on the City's management and accounting for grant funds from the federal government, often called the "Single Audit" report. That Single Audit report is required for 2014 because the City received more than $500,000 in total federal grants. It has been issued under separate cover. Management's Discussion and Analysis (MD&A) immediately follows the independent auditor's report and provides a narrative introduction, overview, and analysis of the basic financial statements. Management's Discussion and Analysis complements this letter of transmittal and should be read in conjunction with it. Profile of the City of Brooklyn Center The City of Brooklyn Center was incorporated in 1911. It is a northern suburb of the Twin Cities metropolitan area, adjacent to the City of Minneapolis and located 10 miles from its downtown area. The City is wholly within Hennepin County and covers an area of about 8.5 square miles. The Mississippi River forms the City's eastern boundary. The City has operated under the council-manager form of government since the adoption of the City Charter in 1966. The governing body is comprised of the Mayor and four Council Members elected at large. All members serve four-year terms with two of the Council Members standing for election during each national election year cycle. The Mayor and Council Members hire a City Manager who is responsible for the daily operations of the City. 6301 Shingle creek Parkii'ay Recreation and Connnwiity Center Phone & TDD Nwnber Brooklyn Center, MN 55430-2199 (763) 569-3400 City Hall and TDD Number (763) 569-3300 FAX (763) 569-3434 FAX (763) 569-3494 ri ri i'. cityojbrooklyncentei. org 1 The City provides a full range of municipal services to its citizens. These include police and fire protection and services, zoning and code enforcement, municipal planning, parks, recreation activities, construction and maintenance of streets, provision of water, wastewater collection and treatment, stormwater collection and treatment, and street lighting. Community and economic development are facilitated through a Housing and Redevelopment Authority and an Economic Development Authority. The Boards of those two organizations are comprised of the Mayor and members of the City Council. The City also has internal departments providing human resources, engineering, financial management and information technology support to these various functions. The City operates a conference and meeting facility at the Earle Brown Heritage Center, two municipal liquor stores, and Centerbrook, an executive nine-hole golf course. Financial planning and control for the City of Brooklyn Center is based on the Annual Operating Budget and the multi-year Capital Improvement Program. Under Minnesota Statutes, a preliminary property tax levy must be adopted no later than September 30 of each year for the ensuing year's collection. This establishes a maximum levy that may subsequently be lowered but not raised. Effective establishment of this levy requires that a preliminary budget be prepared. The City Manager, with the assistance of staff, prepares such a budget each year and presents it to the City Council in August, prior to the consideration of the preliminary tax levy. In addition, the City Council reviews the recommended rates and charges for utility funds and other operations on an annual basis as part of the budget process. Citizens receive a notice of taxes proposed for their individual properties in November based on the preliminary levies established by all taxing districts. Following the receipt of this notice citizens are invited to public meetings in each taxing jurisdiction. The City's meeting includes information about the budget, the property tax levy and the priorities of the City Council for the coming year as reflected by the budget allocations proposed. Public comment is received and considered at this meeting. The final property tax levy and the resulting operational budgets for the ensuing fiscal year are adopted at a subsequent meeting. In addition, a Capital Improvement Program is reviewed and revised during the budget process each year. This includes projects for which the City may issue debt and/or assess portions of the cost to adjacent or benefited property owners. Because there are limited funds available each year and the City does not wish to issue excessive amounts of debt, these projects are reviewed and reprioritized each year. For the last several years the City Council has remained focused on the achievement of strategic goals. City financial planning, policies, spending and initiatives reflect these goals. The City Council adopted the five strategic priorities of Civic Engagement, Focused Redevelopment, Community Image, Financial Stability and Vibrant Neighborhoods defined as follows: Civic Engagement In order to clearly understand and effectively respond to community needs, the City will consistently seek the input from a broad range of stakeholders from the general public, non-profit and for profit sectors. Efforts to engage the community will be transparent and responsive. Our engagement efforts will be deliberately inclusive and culturally sensitive. 2 Focused Redevelopment Redevelopment and renewal of commercial, industrial and residential property is essential to the health and vitality of the City. The City will lead efforts to maintain and increase the value of private properties and will make the necessary supporting infrastructure investments. We will encourage entrepreneurial investment and make strategic public investments to create jobs and grow the City's tax base. Community Image Our ability to attract and retain citizens and businesses is directly influenced by the perception of the City. We will take specific actions to assure that Brooklyn Center is recognized as a high quality, attractive and safe community. We will accomplish this by providing exceptional customer experience, vibrant neighborhoods and a sense of community thereby attracting private investment. Financial Stability We will maintain a positive financial position with a long term perspective by diversifying revenue sources, aligning fees to adequately reflect service costs, stabilizing property taxes while reducing the City's reliance on State shared revenues, and ensuring that revenues are adequate to fund services and infrastructure needs. Vibrant Neighborhoods Neighborhoods will be attractive, safe, inclusive of a diverse housing stock with owner occupied and quality rental properties. Citizens will feel connected to each other and the natural environment will be protected and preserved for the enjoyment of future generations. Local Economy Brooklyn Center is a mature, fully developed first ring suburb of Minneapolis. With its affordable housing, excellent schools, beautiful parks, and convenient transportation access it has the attributes to continue as a vibrant community for many years to come. 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 2010 Census estimates the population for Brooklyn Center at 30,104. The number of housing units has decreased from 11,704 in 1990 to an estimated 10,756 units in the 2010 Census. As in many mature, first-ring suburbs there is a trend toward conversion of single family homes to rental properties. The City's taxable market value is $1,489,548,076 for taxes payable 2015, which is an increase of $160,279,648 or 12.1 percent from last year. The taxable market value increase is driven by large increase in residential (19.9%) and apartment (12.0%). The total tax capacity of the City is estimated at $20,720,321 compared to $19,665,833 in 2014, which is an increase of $1,054,488 (5.4%). The increase in tax capacity has resulted in the first decrease in the City property tax rate since 2008. Residential housing makes up 45.7% of the 2015 tax capacity base which is an increase of 3.2% from the 2014 tax capacity base, while the industrial portion of the tax base decreased by 2.8%. According to the Hennepin County Assessor's Office, for the valuation used to calculate the 2015 property tax payments, the median value home in Brooklyn Center is $131,400 compared to $114,200 in the previous valuation. 3 Major transportation routes in and through the City, including Interstates 94 and 694, and State Highways 100 and 252, have provided a continued impetus for development of a strong commercial tax base in the City along these corridors. There are no large, undeveloped tracts of land in Brooklyn Center and no potential for annexation of additional undeveloped land. Therefore, the revitalization of Brooklyn Center is proceeding on three tracks: redevelopment and renewal of the commercial and industrial areas of the City; reconstruction and enhancement of its streets, utilities, and parks; and the revitalization of neighborhoods. The hospitality industry contributes a significant amount to Brooklyn Center's economy. Lodging tax receipts for fiscal year 2014 totaled $914,651. City issued building permits in 2014 had a total permit value of $76,355,183, which is an increase from $42,052,442 in 2013. Thirty-two large projects (over $200,000) occurred in 2014, compared to 22 in 2013. Long Term Financial Planning The State of Minnesota has provided significant funding to local governments through the Local Government Aid (LGA) program over the past three decades. Funding shortfalls at the State budgetary level have affected the allocation and distribution of LGA negatively. However in 2013, the State's tax bill included an increase and a new formula for the distribution of LGA beginning in 2014. For the City of Brooklyn Center the certified LGA under the new formula for 2014 is $1,352,440, which is an increase of $941,062 from 2013. The City maintains a comprehensive Capital Improvement Plan to facilitate the replacement of its aging infrastructure. When streets are reconstructed in this program, aging water, sanitary and storm sewer infrastructure is also repaired or replaced. These improvements are funded by a combination of general obligation improvement bonds supported with special assessments against benefited properties and cash from the capital projects funds and utility enterprise funds. About one twenty-fifth of the City's streets and utilities are reconstructed each year. It is expected that this will be an ongoing process and the Plan is reviewed and amended as a part of each budget cycle. In addition, cash flows for all funds providing financing for the Plan are updated for cash flow projections during the 15 year timeframe of the Plan. The Capital Improvements Plan projects completion of the first citywide round of reconstruction of the streets and utilities throughout the entire community by 2021. An additional benefit of these neighborhood projects has been the increased investment by residents in their properties following reconstruction projects. The development of utility rate models and of non-utility cash flow projection models has improved the City's ability to plan and generate cash for operations, scheduled maintenance and capital improvements. A plan for the maintenance and upgrading of the City's buildings and facilities is being incorporated into spending plans for both operational repairs and for large capital expenditure type improvements. Major Initiatives A new water treatment plant is under construction and is expected to be up and running by the end of 2015. The (estimated) total cost of the water treatment plant is $19.98 million. Financing will be achieved through a low interest loan under the Drinking Water Revolving Loan Fund through the Minnesota Public Facility Authority (PFA) loan program. The loan will be repaid over twenty years at an interest rate of one percent. Water rates will be adjusted over the next three years to provide sufficient revenue for the annual loan repayments. Successful redevelopment continues to be the key to commercial and industrial tax base growth including: Shingle Creek Crossing, an 80-acre P.U.D. that includes the redevelopment of the former Brookdale Mall. • In 2011, a significant portion of Brookdale Mall was removed and planned for redevelopment of a shopping center that included the existing Sears and Kohl's department stores and the Applebee's restaurant. The initial phase included the partial daylighting of Shingle Creek and the infrastructure improvements for an 183,000 square-foot Walmart store, 15 new building pads, and the renovation of 169,000 square-feet of the former Brookdale Mall. • In 2012, the Walmart store was opened and construction began on a 38,000 square-foot building for LA Fitness and three retail buildings providing 29,134 square-feet of new commercial tenant space. • In 2013, the 2nd phase of the site improvements was completed. LA Fitness was opened and several tenant improvements within the three retail buildings were completed and the buildings occupied. Site plans were approved for the Discount Tire Store, a fourth multi-tenant retail building, and replacement of the food court portion of the former mall with ten retail buildings to facilitate several junior box retailers. • Development activity scheduled for 2014 include the demolition of the 169,000 square-foot food court building with the immediate construction of 92,000 square-feet of retail buildings, the construction of an 11,200 square-foot multi-tenant building, the construction of a 6,673 square- foot multi-tenant retail/restaurant building and site plan approvals for the remaining four lots within the former Food Court lot. Major tenants scheduled to occupy these new retail spaces in the spring of 2015, include Michaels, TJ Maxx, Jimmy John Restaurant and Aspen Dental. • Development planned for 2015 construction includes Discount Tire Store, an 11,200 square-foot multi-tenant retail building, an 11,200 square foot building for two restaurants, and the renovation of a 75,000 square-foot two story retail building (Kohl's Department Store). The southern portion of the 80 acre Opportunity Site, comprises 46 acres planned for a mixed use commercial, office and residential P.U.D. • A housing market study was completed by the McCombs Group and the architectural firm of ESG was retained to prepare a mixed use concept plan for this 46 acre site. • On December 20, 2013, the EDA acquired the 23.2 acre Brookdale Square shopping center site which adjoins the EDA's 8.4 acre former Brookdale Ford dealership property. • In 2014, the EDA acquired an additional 1.6 acre site and has discussed future redevelopment plans with the four remaining businesses and/or property owner along John Martin Drive (the northern portion of this redevelopment area). • In 2015, the EDA adopted the necessary findings of blighted building conditions that would qualify this area as a future Tax Increment Redevelopment District or a Renewal and Renovation District. Demolition of the building is scheduled to commence in spring of 2015. • The EDA continues to pursue redevelopment opportunities for market rate apartments that include the type of units and amenities associated with move up housing options. Luther Auto Group has completed a major portion of their redevelopment plans for the 39 acres located on the north side of the 1-694 and Brooklyn Boulevard interchange. • The 2010 major renovations to the Chevrolet and Buick & GMC dealerships. • The 2012 completion of a 52,228 square-foot Honda dealership and a 53,830 square-foot Toyota dealership. • The 2013 approvals for the construction of a 42,360 square-foot Volkswagen dealership and a 2.8 acre expansion of the Honda Dealership's sales lot which will open up space for a 6th dealership along 694. • In 2014, Luther demolished the old Honda dealership buildings and began construction of the new Volkswagen dealership and completed expansion of Honda sales lot. The Volkswagen dealership is scheduled to open in 2015. • Additionally, Luther's master plans for this area include the acquisition, demolition, and incorporation of two adjacent commercial buildings into the dealership lots. Redevelopment of industrial properties include: • The completion of France Avenue IV Business Park, a 90,000 square-foot multi-tenant building in December of 2012 with the leasing completed in early 2015. • In 2014, the Minnesota Department of Agriculture and the Minnesota Pollution Control Agency approved a Soils Investigation and Remediation Action Plan for the former Howe Fertilizer Site and adjoin railroad property which enabled the processing of applications for environmental cleanup funds from Hennepin County, DEED and the Met Council. The three grant applications totaling $1.45 million were approved and cleanup plans have begun that will enable the developer to proceed with the approved development of a 60,000 square foot multi-tenant building on this five acre industrial site. • In 2014, Sign Zone completed the acquisition and renovation of the 140,000 square-feet of office/industrial space at the former Palmer Lake Plaza office industrial buildings which enabled Sign Zone plans to consolidate their business operations and have their corporate headquarters in Brooklyn Center. Additional development activities in 2014 include: • The EDA acquired the former Chrysler Auto Dealership, also known as Cars with Heart, a 5 acre commercial site at 6121 Brooklyn Boulevard. The buildings have been demolished and the EDA has entered into a letter of intent for the redevelopment of this area for an assisted senior housing project consistent with the Brooklyn Boulevard Corridor Planning Study. • The Northport Elementary School completed the expansion of their parking lot with a parent drop off zone, additional of a separate bus unloading area that also provides 38 parking stalls for park use during non-school hours, and new playfields which complement the Northport Community Park. • The Three River Park District provided funding for a realignment of Twin Lakes Regional Trail Corridor within the eastern portion of planned renovation of the Lake Pointe Apartments. Additionally, planning for the 2016-17 construction of an extension of this regional trail along 571h Avenue, east of State Highway 100, to connect to the Mississippi Regional Corridor has begun. • The Brooklyn Boulevard bridge and trail improvements over State Highway 100 were completed and a cooperative grant application with Hennepin County has received favorable scoring for the funding of the reconstruction of the southern portion of the Brooklyn Boulevard Corridor Study (southern border of the City to Co. Rd. 10/Bass Lake Road). Relevant Financial Policies The City of Brooklyn Center includes in its Financial Policies a requirement that the General Fund balance at year end must be between 500% and 52.0% of the ensuing year's General Fund operating budget. This provides both for cash flow needs and emergency expenditures in the short term. The City Council adopted a Capital Project Funding Policy in January 2014, to provide recurring sources of funding for the City's 15-year Capital Improvement Plan. The Policy specifically identifies three main funding sources as follows: 1.Audited year-end General Fund unassigned fund balance above 52% of the next year's General Fund operating budget 2.Audited year-end Liquor Fund unrestricted cash balance that exceeds three and a half months of the next year's operating budget and one year of budgeted capital equipment needs. 3. Local Governmental Aid (LGA) received in the amount of $650,000 or half of the amount received by the City (whichever is greater) Also included in the Financial Policies are internal control directives to protect the City's assets from loss, theft or misuse. These controls provide reasonable assurance of the safety of the City's assets while recognizing that management estimates and judgments as to the cost of such controls are also important to deriving maximum benefit from these controls. Awards and Acknowledgements The Government Finance Officers Association of the United States and Canada (GFOA) awarded a Certificate of Achievement for Excellence in Financial Reporting to the City of Brooklyn Center for its Comprehensive Annual Financial Report (CAFR) for the fiscal year ended December 31, 2013. The City was first awarded this certificate in 1966. In order to be awarded a Certificate of Achievement, a government must publish an easily readable and efficiently organized CAFR. The CAFR must satisfy both accounting principles generally accepted in the United States and applicable federal, state and local legal requirements. A Certificate of Achievement is valid for a period of one year. It is expected that the 2014 report conforms to Certificate of Achievement Prograin requirements. It will be submitted to the GFOA to determine its eligibility for another certificate. The preparation and publication of this report would not have been possible without the dedicated and efficient work of the Finance staff, most especially Adam Flaherty, the Assistant Finance Director. We would like to acknowledge all staff that contributed their efforts to the Finance operations in 2014. We would also like to thank the Mayor and City Council for their support in promoting and maintaining the highest standards of professionalism and management of the City of Brooklyn Center. Respectfully Submitted, IleI rl 17 Nathan J. Reinhardt Finance Director CITY OF BROOKLYN CENTER, MINNESOTA PRINCIPAL OFFICIALS December 31, 2014 Name Position Term of Office Term Expires ELECTED OFFICIALS Tim Willson Mayor Four Years December 31, 2014 Carol Kieven Council Member Four Years December 31, 2014 Kris Lawrence-Anderson Council Member Four Years December 31, 2016 Dan Ryan Council Member Four Years December 31, 2014 Lin Myszkowski Council Member Four Years December 31, 2016 APPOINTED OFFICIALS Cornelius L. Boganey City Manager Appointed Charles LeFevre City Attorney Contractual Appointee Sharon Knutson City Clerk Appointed Vickie Schleuning Assistant City Manager/Building and Community Standards Director Appointed Kevin Benner Police Chief Appointed Gary Eitel Business and Development Director Appointed Lee Gatlin Fire Chief Appointed James Glasoe -Community Activities, Recreation and Services Director Appointed Steve Lillehaug Director of Public Works/City Engineer Appointed Nathan Reinhardt Finance Director Appointed 8 ii I 11!i : _______ 0 j Iui . I : h 11 I LiiP1 - :L U I -. h 0) Government Finance Officers Association Reporting Presented to City of Brooklyn Center Minnesota For its Comprehensive Annual Financial Report for the Fiscal Year Ended December 31, 2013 Executive Director/CEO 10 Iiiii i V ^ VA <\\\f\, R CERTIFIED PURLIC ACCOUNTANT S PRINCIPALS Ihnnis NI. N1njuc, C I\ Thomas A. Ka r owski (TA P,iul A. R.idocvich CPA \X'iIi,i;n J. I.;itir. CT A James H. Eichten, CPA Aaron J. Nielsen, CPA Victoria L. Holinka, CPA INDEPENDENT AUDITOR'S REPORT To the City Council and Management City of Brooklyn Center, Minnesota REPORT ON THE FINANCIAL STATEMENTS We have audited the financial statements of the governmental activities, the business-type activities, each major fund, and the aggregate remaining fund information of the City of Brooklyn Center, Minnesota (the City) as of and for the year ended December 31, 2014, and the related notes to the financial statements, which collectively comprise the City's basic financial statements as listed in the table of contents. MANAGEMENT'S RESPONSIBILITY FOR THE FINANCIAL STATEMENTS Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. AUDITOR'S RESPONSIBILITY Our responsibility is to express opinions on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the City's preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the City's internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions. (continued) 11 NIaIIoy, NIOn.15u, Karnowski, Radoscvicl,, & Co., PA, 5353 WyiL IL.uIevrd • 4 1 11 • Munip4Iis, MN 55416 • ikphon 'JS2-54-()424 • kkfx 552-545-0569 • www,rnnikron OPINIONS In our opinion, the financial statements referred to on the previous page present fairly, in all material respects, the respective financial position of the governmental activities, the business-type activities, each major fund, and the aggregate remaining fund information of the City as of December 31, 2014, and the respective changes in financial position and, where applicable, cash flows thereof, and the budgetary comparison for the General Fund and budgeted major special revenue funds for the year then ended, in accordance with accounting principles generally accepted in the United States of America. OTHER MATTERS Required Supplementary Information Accounting principles generally accepted in the United States of America require that the Management's Discussion and Analysis and the Schedule of Funding Progress, as listed in the table of contents, be presented to supplement the basic financial statements. Such information, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management's responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance. Other Information Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the City's basic financial statements. The introductory section, combining and individual fund statements and schedules, and statistical section, as listed in the table of contents, are presented for purposes of additional analysis and are not required parts of the basic financial statements. The combining and individual fund statements and schedules are the responsibility of management and were derived from and relate directly to the underlying accounting and other records used to prepare the basic financial statements. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the basic financial statements or to the basic financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the combining and individual fund statements and schedules are fairly stated, in all material respects, in relation to the basic financial statements as a whole. The introductory and statistical sections have not been subjected to the auditing procedures applied in the audit of the basic financial statements and, accordingly, we do not express an opinion or provide any assurance on them. (continued) 12 OTHER REPORTING REQUIRED BY GOVERNMENT AUDITING STANDARDS In accordance with Government Auditing Standards, we have also issued our report dated May 18, 2015 on our consideration of the City's internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, grant agreements, and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the City's internal control over financial reporting and compliance. Minneapolis, Minnesota May 18, 2015 13 THIS PAGE INTENTIONALLY LEFT BLANK Financial Highlights • The assets of the City exceeded its liabilities at the close of the most recent fiscal year by $138,723,647 (net position). Of this amount, $19,176,961 (unrestricted net position) may be used to meet the City's ongoing obligations to citizens and creditors. • The City's total net position increased by $3,343,455 (2.47%) from the previous year. A portion of this increase is attributed to General Fund revenues exceeding budget expectations by $549,372 and General Fund expenditures under budget by $862,576. The City received $646,175 in tax increment revenues more than the previous year, as a result of tax capacity increases within the tax increment financing districts. Additionally, the Debt Service fund had a net change in fund balance of $718,469 as a result of property tax and special assessment revenue collected in advance of the February debt payment on the 2013B General Obligation Bonds. • As of the close of the current fiscal year, the City's governmental funds reported combined ending fund balances of $46,205,188, which is an increase of $1,324,960 (2.95%) from the previous year. Of the total fund balance, $8,325,476 (18.02%) is unassigned, which is free from any internal or external constraints of its use. • The General fund has a fund balance of $11,020,081 at the close of the current fiscal year. During 2014, the fund balance decreased $1,362,632 (11.00%) from the previous year. The unassigned fund balance at year end is $10,089,353, which represents 52% of the following years budget. The remaining portion of the fund balance is nonspendable or assigned (for the capital improvement funding plan). • The City's total outstanding bonded debt decreased by $2,045,000 during the current fiscal year, from $26,330,000 to $24,285,000. The City had no new debt issuances during 2014. Overview of the Financial Statements The discussion and analysis are intended to serve as an introduction to the City's basic financial statements. The City's basic financial statements include three components: 1) government-wide financial statements, 2) fund financial statements, and 3) notes to the financial statements. This CAFR also contains other supplementary information in addition to the basic financial statements themselves. Government-Wide Financial Statements: The government-wide financial statements are designed to provide readers with a broad overview of the City's finances, in a manner similar to a private-sector business. The statement of net position presents information on all of the City's assets and liabilities, with the difference reported as net position. Over time, increases or decreases in net position may serve as a useful indicator of whether the financial position of the City is improving or deteriorating. iE1 CITY OF BROOKLYN CENTER, MINNESOTA MANAGEMENT'S DISCUSSION AND ANALYSIS December 31, 2014 The statement of activities presents information showing how the City's net position changed during the most recent fiscal year. All changes in net position are reported as soon as the underlying event giving rise to the change occurs, regardless of the timing of the related cash flows. Thus, revenues and expenses are reported in this statement for some items that will only result in cash flows in future fiscal periods (e.g. uncollected taxes and earned but unused vacation leave). Both of the government-wide financial statements distinguish functions of the City that are principally supported by taxes and intergovernmental revenues (governmental activities) from other functions that are intended to recover all or a significant portion of their costs through user fees and charges (business-type activities). The governmental activities of the City include: general government, public safety, public works, community services, parks & recreation, economic development, and interest on long-term debt. The business- type activities of the City include: municipal liquor, golf course, earle brown heritage center, water utility, sanitary sewer utility, storm drainage utility, street light utility, and the recycling utility. The government-wide financial statements include not only the City itself (known as the primary government), but also a legally separate Housing and Redevelopment Authority and Economic Development Authority, for which the City is financially accountable. Although legally separate, these component units, function for all practical purposes as a department of the City, and therefore have been included as an integral part of the primary government. The government-wide financial statements can be found on pages 27 through 29 of this CAFR. Fund Financial Statements: A fund is a grouping of related accounts that is used to maintain control over resources that have been segregated for specific activities or objectives. The City, like state and local governments, uses fund accounting to ensure and demonstrate compliance with finance-related legal requirements. All of the funds of the City can be divided into two categories: governmental funds and proprietary funds. Governmental Funds: Governmental funds are used to account for essentially the same functions reported as governmental activities in the government-wide financial statements. However, unlike the government-wide financial statements, governmental fund financial statements focus on near-term inflows and outflows of spendable resources, as well as on balances of spendable resources available at the end of the fiscal year. Such information may be useful in evaluating a government's near-term financial requirements. Because the focus of governmental funds is narrower than that of the government-wide financial statements, it is useful to compare the information presented for governmental funds with similar information presented for governmental activities in the government-wide financial statements. By doing so, readers may better understand the long-term impact of the City's near-term financial decisions. Both the governmental fund balance sheet and governmental fund statement of revenues, expenditures, and changes in fund balances provide a reconciliation to facilitate this comparison between governmental funds and governmental activities. The City maintains 18 individual governmental funds. Information is presented separately in the governmental fund balance sheet and in the governmental fund statement of revenues, expenditures, and changes in fund balances for the following: General fund, Tax Increment District No. 3, Tax Increment District No. 5, Debt Service, Capital Improvements, Municipal State Aid for Construction, and the Infrastructure Construction fund, which are considered to be major funds. Data from the other 11 governmental funds are combined into a single, aggregated presentation. Individual fund data for each of these nonmajor governmental funds is provided in the form of comibing statements or schedules, elsewhere in this CAFR. IN CITY OF BROOKLYN CENTER, MINNESOTA MANAGEMENT'S DISCUSSION AND ANALYSIS December 31, 2014 The City adopts an annual appropriated budget for nearly all funds presented in this CAFR. A budgetary comparison statement has been provided in the basic financial statements for the General fund and the Tax Increment District No. 3 fund. The budgetary comparison statements for any nonmajor funds are provided elsewhere in this CAFR. The basic governmental fund financial statements can be found on pages 30 through 38 of this CAFR, Proprietary Funds: Proprietary funds provide similar information to the government-wide financial statements, but in more detail. The City maintains two different types of proprietary funds. Enterprise funds are used to report the same functions presented as business-type activities in the government-wide financial statements. The City uses enterprise funds to account for its: municipal liquor, golf course, Earle Brown Heritage Center, water utility, sanitary sewer utility, storm drainage utility, street light utility, and recycling utility. All of the City's enterprise funds are considered to be major funds, and separate information is provided for each of them in the basic financial statements. Internal service funds are an accounting device to accumulate and allocate costs internally among the City's various functions. The City uses internal service funds to account for its: central garage, employee retirement, and compensated absences accumulations. All internal service funds are combined into a single, aggregated presentation in the proprietary fund financial statements. Individual data for the internal service funds is provided in the form of combining statements elsewhere in this CAFR. Because all of these services predominately benefit governmental rather than business-type functions, they have been included as governmental activities in the government-wide financial statements. The basic proprietary fund financial statements can be found on pages 40 through 45 of this CAFR. Notes to the Financial Statements: The notes provide additional information that is essential to a full understanding of the data provided in the government-wide and fund financial statements. The notes to the financial statements can be found on pages 47 through 80 of this CAFR. Other Information: In addition to the basic financial statements and accompanying notes, this report also presents certain required supplementary information, which is a schedule of funding progress for other post-employment benefits (OPEB). The schedule of funding progress can be found on page 81 of this CAFR. The combining and budgetary comparison statements referred to earlier in connection with nonmajor governmental funds and internal service funds are presented immediately following the required supplementary information. Combining and budgetary comparison statements can be found on pages 86 through 126 of this CAFR. 17 CITY OF BROOKLYN CENTER, MINNESOTA MANAGEMENT'S DISCUSSION AND ANALYSIS December 31, 2014 Government-wide Financial Analysis As noted earlier, net position may serve over time as a useful indictor of a government's financial position. In the case of the City, assets exceeded liabilities by $138,723,647 at the close of the most recent fiscal year. The largest portion of the City's net position ($91,484,709 or 65.95%) reflects its investment in capital assets, which includes: land infrastructure, buildings, and machinery & equipment, less any related debt used to acquire those assets that is still outstanding. The City uses these capital assets to provide services to citizens; consequently, these assets are not available for future spending. Although the City's investment in its capital assets is reported net of related debt, it should be noted that the resources needed to repay this debt must be provided from other sources, since the capital assets themselves cannot be used to liquidate these liabilities. CITY OF BROOKLYN CENTER - SUMMARY OF NET POSITION Governmental Activities Business-Type Activities Total 2014 2013 2014 2013 2014 2013 Current and other assets $ 60,464,701 $ 65,182,089 $ 11,047,209 $ 15,413,732 $ 71,511,910 $ 80,595,821 Capital Assets 49,392,577 49,201,203 48,537,132 42,466,488 97,929,709 91,667,691 Total assets 109,857,278 114,383,292 59,584,341 57,880,220 169,441,619 172,263,512 Long-term liabilities outstanding 21,243,878 24,180,322 1,660,000 1,800,000 22,903,878 25,980,322 Other liabilities 5,246,650 9,497,393 2,567,444 1,405,606 7,814,094 10,902,999 Total liabilities 26,490,528 33,677,715 4,227,444 3,205,606 30,717,972 36,883,321 Net investment in capital assets 42,947,577 42,281,203 48,537,132 42,466,488 91,484,709 84,747,691 Restricted 28,061,977 27,219,086 --28,061,977 27,219,086 Unrestricted 12,357,196 11,205,289 6,819,765 12,208,126 19,176,961 23,413,415 Total Net Position $ 83,366,750 $ 80,705,578 $ 55,356,897 $ 54,674,614 $ 138,723,647 $ 135,380,192 At the end of the current fiscal year, the City is able to report positive balances in all three categories of net position, both for the government as a whole, as well as for its separate governmental and business-type activities. A portion of the City's net position (20.23%) represents resources that are subject to external restrictions on how they may be used. The remaining portion (13.82%) may be used to meet the City's ongoing obligations. The governmental activities have a significant decrease in current assets from the previous year. The largest factor in this decrease is with the cash & investments balances. Some of this decrease however, was due to an error by the County, who significantly over-settled the last property tax settlement of 2013. This amount was recorded as a liability to the County in 2013, which can be noted in the decrease of other liabilities. The business-type activities also have a large decrease in current assets from the previous year. This decrease is due to the City constructing a water treatment plant, which is also the reason for the large increase in capital assets over the previous year. The City has to front the cash for the project expenses, but then is reimbursed with debt proceeds from the Minnesota Public Facilities Authority (PFA) loan program. The governmental activities, also had a significant decrease in the amount of long-term liabilities from the previous year. The City retired $1,905,000 in governmental bonds outstanding during 2014. 18 CITY OF BROOKLYN CENTER, MINNESOTA MANAGEMENT'S DISCUSSION AND ANALYSIS December 31, 2014 Governmental Activities Governmental activities resulted in an increase of the City's net position by $2,661,172 (79.59%), accounting for the majority of the City's increase in net position. Key elements of the changes are as follows: CITY OF BROOKLYN CENTER - CHANGES IN NET POSITION Governmental Activities Business-Type Activities Total Revenues:2014 2013 2014 2013 2014 2013 Program revenues Charges for services $ 2,607,035 $ 2,331,973 $ 19,383,056 $ 18,866,176 $21,990,091 $21,198,149 Operating grants and contributions 1,746,637 3,089,220 63,547 52,775 1,810,184 3,141,995 Capital grants and contributions 1,671,830 4,427,586 --1,671,830 4,427,586 General revenues Property taxes 14,988,007 14,943,008 --14,988,007 14,943,008 Other taxes 4,705,014 3,979,872 --4,705,014 3,979,872 Grants and contributions not restricted to specific programs 1,499,015 590,916 --1,499,015 590,916 Unrestricted investment earnings 236,936 (81,438)108,650 (27,223)345,586 (108,661) Gain on disposal of assets 27,100 54,211 --27,100 54,211 Total revenues 27,481,574 29,335,348 19,555,253 18,891,728 47,036,827 48,227,076 Expenses: General government 3,736,487 3,165,401 --3,736,487 3,165,401 Public safety 10,186,645 9,618,906 --10,186,645 9,618,906 Public works 3,688,238 4,215,855 --3,688,238 4,215,855 Community services 145,503 149,203 --145,503 149,203 Parks and recreation 2,977,707 2,752,539 --2,977,707 2,752,539 Economic development 3,234,623 3,833,915 --3,234,623 3,833,915 Interest on long-term debt 887,190 490,162 --887,190 490,162 Municipal liquor --5,690,792 5,674,937 5,690,792 5,674,937 Golf course --271,698 263,425 271,698 263,425 Earle Brown Heritage Center --5,137,712 4,835,131 5,137,712 4,835,131 Water utility --1,900,518 2,025,496 1,900,518 2,025,496 Sanitary sewer utility --3,514,687 3,382,810 3,514,687 3,382,810 Storm drainage utility --1,784,907 1,552,327 1,784,907 1,552,327 Street light utility --245,426 257,079 245,426 257,079 Recycling utility --291,239 289,043 291,239 289,043 Total expenses 24,856,393 24,225,981 18,836,979 18,280,248 43,693,372 42,506,229 Change in net position before transfers 2,625,181 5,109,367 718,274 611,480 3,343,455 5,720,847 Transfers 675,257 200,000 (675,257)(200,000)-- Transfers - capital assets (639,266)-639,266 --- Change in net position 2,661,172 5,309,367 682,283 411,480 3,343,455 5,720,847 Net Position - January 1 80,705,578 75,396,211 54,674,614 54,263,134 135,380,192 129,659,345 Net Position - December 31 $ 83,366,750 $ 80,705,578 $ 55,356,897 $ 54,674,614 $ 138,723,647 $135,380,192 Governmental activities accounted for 79.59% of the increase in the City's net position. The change in net position from the previous year can be attributed to favorable budget variances in General Fund revenues and expenditures,additional local government aid received, and tax increment revenues.Additionally,the Debt Service fund collected property tax and special assessment revenue in advance of the debt payment due in February for the 2013B General Obligation Bonds. 19 CITY OF BROOKLYN CENTER, MINNESOTA MANAGEMENT'S DISCUSSION AND ANALYSIS December 31, 2014 A significant change from the previous year is show in capital grants, mostly due to a municipal state aid receivable recognized as revenue in the government-wide statements. The City had completed a significant street infrastructure improvement project in 2013, which was funded from special assessments to the respective property owners and municipal state-aid construction grant funds. Governmental activities also has a large change in operating grants from the previous year. During 2013, the City was awarded Community Block Grant and Neighborhood Stablization Program Grant funds. The funding available from these grant finds were reduced in 2014. Below are specific graphs which provide comparisons of the governmental activities revenues and expenses: Function Expenses vs. Piogi'arn Revenues 12,000,000 10,000,000 8,000,000 6000,000 4,000,000 2,000,000 General Public safety Public works Community Parks and Economic Interest on government services recreation development long-term debt 0 Expense D Program Revenue Revenues by Source Other general revenues Investment earningsOther taxes 5.6% 17.1% Charges for services Operating grants Capitalrants property taxes 20 cycling utility 1.5% viunicipal liquor 30.2% Water utility 10.1% Golf course 1.4% Earle Brown Heritage Center 27.3% cs,rr, dr,,in,rn tits' ,.... Street Light Utility Sanitary sewer utility 187% CITY OF BROOKLYN CENTER, MINNESOTA MANAGEMENT'S DISCUSSION AND ANALYSIS December 31, 2014 Business-type Activities Business-type activities increased net position by $682,283, which accounts for only 20.41% of the total growth in the City's net position. The factors contributing to this change are illustrated below: Function Expenses vs. Program Revenues 6,000 000 5,000,000 4,000,000 3,000,000 2,000,000 1,000,000 LLJ Municipal Golf course Earle Brown Water utility Sanitary Storm Street light Recycling liquor Heritage sewer utility drainage utility utility Center utility DExpense U Program Revenue Business-type Activities - Function Expenses The net position of the business-type activities increased, but operations of the Liquor Fund and Earle Brown Heritage Center provided for decreases in net position individually. The Liquor Fund transferred $362,190 of fund balance to provide funding to City capital projects. The Earle Brown Heritage Center had a positive cash flow in 2014, but a decrease in net position as a result of a large depreciation expense. 21 CITY OF BROOKLYN CENTER, MINNESOTA MANAGEMENT'S DISCUSSION AND ANALYSIS December 31, 2014 Financial Analysis of the Government's Funds Governmental Funds: The focus of the City's governmental funds is to provide information on near-term inflows, outflows, and balances of spendable resources. Such information is useful in assessing the City's financing requirements. In particular, unassigned fund balance may serve as useful measure of a government's net resources available at the end of the fiscal year. At the end of the current fiscal year, the City's governmental funds reported combined ending fund balances of $46,205,188, which is an increase of $1,324,960 (2.95%) from the previous year. The unassigned fund balance, which is not subject to internal or external constraints upon its use, is $8,325,476, or 18,02% of total fund balance. A small portion of the fund balance, $21,967 (0.05%) is in nonspendable form. The remaining fund balance has either internal or external constraints upon its use, and can be broken down into the following components: $26,434,113 (57.21%) of restricted fund balance; $10,514,871 (22.76%) of committed fund balance; and $908,761 (1.96%) of assigned fund balance. A more detailed breakdown of fund balance components can be found in the basic financial statements. The General fund is the primary operating fund of the City. At the end of the current fiscal year, total fund balance is $11,020,081. As a measure of the General fund's liquidity, it may be useful to compare both unassigned and total fund balance, to total fund expenditures. Unassigned balance, which is $10,089,353, represents 57.64% of the current year General fund expenditures. Total General fund balance represents 62.96% of those same expenditures. The fund balance of the City's general fund decreased by $1,362,632 (11.00%) from the previous year. The City had budgeted for a break-even year in 2014, however the City Council approved a transfer to the Capital Improvements Fund of $2,754,124 of available fund balance. Prior to the transfer the City had an increase in fund balance, which was attributed to positive variances for both revenues and expenditures. Revenues were in excess of budget due to building permit revenue exceeding expectations and additional intergovernmental revenue, mainly as a result of additional police and fire state pension aid. The most significant expenditure budget variance was in the police department, due to the patrol division being short handed in the personnel area for a majority of 2014 and lower fuel costs. The Tax Increment District No. 3 fund has a total fund balance of $17,898,749 at the end of the year. The increase in fund balance was $70,758 (0.40%) from the previous year. The fund received $3,038,983 in tax increment revenues, which exceeded the budget amount by $100,333. As of December 31, 2014 the fund has total assets held for resale of $15,623,075, which was an increase of $1,847,900. The Tax Increment District No. 5 fund has a total fund balance deficit of $1,299,859 at the end of the year. The increase in fund balance was $132,636 (9.26%) from the previous year. The fund received tax increment revenues of $292,064 and a pay as you go payment on a tax increment note of $114,405. As of December 31, 2014 the fund had notes oustanding of $1,210,000 and an advance from Tax Increment District No. 2 outstanding of $2,442,676. The Debt Service fund has a total fund balance of $1,909,441 at the end of the year. The increase in fund balance was $718,469 (60.33%) from the previous year. The increase in fund balance is primarily the result of property tax and special assessment revenue collected in advance of the February 2015 debt payment on the 2013B General Obligation Bonds. The Capital Improvements fund has a total fund balance of $6,509,230, an increase of $3,436,472 (111.84%) from the previous year. The increase in fund balances is the result of the City Council implementing a Capital Projects Funding Policy during 2014. The results of that policy were $3,116,314 of transfers in, which was the primary result for the increased fund balance. The Municpal State Aid Construction fund has a total fund balance of $1,830,100 at the end of the year. The decrease in fund balance was $493,622 (21.24%) from the previous year. As of December 31, 2014 the fund had a receivable balance in the amount of $1,077,504 in Municipal State Aid Construction funds. 22 CITY OF BROOKLYN CENTER, MINNESOTA MANAGEMENT'S DISCUSSION AND ANALYSIS December 31, 2014 The Infrastructure Construction fund has an ending deficit fund balance of $463,193 a decrease of $1,433,335 (147.74%) from the previous year. The fund incurred $1,542,554 of capital expenditures during the year for the Wangstad neighborhood re-construction project. The Infrastructure Construction fund transferred $2,785,269 to the Streets Reconstruction fund to allocate the proceeds of the 2013B G.O. Improvement bonds, as total project costs were not known at the time of the bond issuance. As part of the completion of the Kylawn Area Infrastructure Improvements project, there was a total of $1,922,693 of transfers between the following funds: Municipal State-Aid for Construction, Infrastructure Construction, Streets Reconstruction, Water Utility, Sanitary Sewer Utility, Storm Drainage Utility and Street Light Utility. Proprietary Funds: The City's proprietary funds provide the same type of information presented as business-type activities found in the government-wide financial statements, but in more detail. The enterprise funds have a combined ending net position of $55,702,048, of which $7,164,916 (12.86%) is unrestricted and can be used to meet the operations. As a measure of the liquidity of the enterprise funds, it may be useful to compare the unrestricted net position to the operating expenses. For the current year, unrestricted net position is 58.10% of the current year operating expenses. Other factors concerning the finances of these funds have already been addressed in the discussion of the City's business-type activities. General Fund Budgetary Highlights During the year, there were no amendments to the General Fund budget. Actual revenues and other financing sources exceeded the adopted budget by $528,916. The major contributors to this were increases in licenses and permits for redevelopment activities, additional revenues related to rental dwelling conversions and inspections, and the receipt of additional police and fire state pension aid. Actual expenditures and other financing uses were higher than the final budget for the year by $1,891,548. This was the result of a transfer of $2,754,124 to the Capital Improvement Fund in accordance with City policy to transfer unassigned fund balance of the General Fund that exceeds 52% of General Fund budgeted expenditures following the completion of the annual audit. The reduction in fund balance from the transfer was partially offset in savings from several staff positions being left unfilled during a portion of 2014, in the Police Department and General Government Buildings. 23 CITY OF BROOKLYN CENTER, MINNESOTA MANAGEMENT'S DISCUSSION AND ANALYSIS December 31, 2014 Capital Asset and Debt Administration Capital Assets: The City's investment in capital assets for its governmental and business-type activities at the end of the current year, amounts to $97,929,709 (net of accumulated depreciation). This investment in capital assets includes: land, buildings, infrastructure, machinery and equipment and construction in progress. The City's investment in capital assets increased $6,262,018 (6.83%) from the previous year. Major capital asset events during the current year included the following: • The Wangstad Neighborhood infrastructure reconstruction project is near completion, with $3,697,737 of additions to construction in progress. This amount includes work on streets, as well as water, sewer and storm utilities. • The City started construction of a water treatment plant. At the end of 2014, the City had completed $4,727,774 of the $19,662,352 project. The project is being funded through a low interest loan with the Minnesota Public Facilities Authority • The Central Garage replaced 15 pieces of machinery & equipment during the year. The total outlay for machinery and equipment during the year was $645,689. The additions include, but are not limited to: a trackless sidewalk snow plow, mower, police vehicles and multipurpose public works trucks. CITY OF BROOKLYN CENTER - CAPITAL ASSETS (net of depreciation) Governmental Activities Business-type Activities Total 2014 2013 2014 2013 2014 2013 Land $ 3,537,473 $ 3,537,473 $ 3,194,983 $ 3,194,983 $ 6,732,456 $6,732,456 Easements 95,132 99,670 16,039 20,102 111,171 119,772 Construction in progress 3,276,213 3,375,955 8,425,511 2,793,558 11,701,724 6,169,513 Land improvements --196,571 213,198 196,571 213,198 Other park improvements 5,955,889 6,087,696 --5,955,889 6,087,696 Buildings and structures 7,718,930 8,375,053 3,441,378 4,010,475 11,160,308 12,385,528 Machinery and equipment 3,763,003 3,931,850 297,976 349,008 4,060,979 4,280,858 Streets 25,045,937 23,793,506 --25,045,937 23,793,506 Street light systems --630,342 575,610 630,342 575,610 Mains and lines --32,334,332 31,309,554 32,334,332 31,309,554 Total $ 49,392,577 $ 49,201,203 $ 48,537,132 $ 42,466,488 $ 97,929,709 $91,667,691 Additional information on the City's capital assets can be found in Note 3 (C) on pages 62 through 63 of this CAFR. 24 CITY OF BROOKLYN CENTER - OUTSTANDING DEBT Governmental Activities Business-type Activities Total 2014 2013 2014 2013 2014 2013 General obligation tax increment bonds $ 16,040,000 $ 17,470,000 $ - $ - $ 16,040,000 $ 17,470,000 General obligation improvement bonds 6,445,000 6,920,000 - - 6,445,000 6,920,000 General obligation revenue bonds - - 1,800,000 1,940,000 1,800,000 1,940,000 Compensated absences 1,282,093 1,232,551 - - 1,282,093 1,232,551 Net OPEB obligation 629,994 586,026 - - 629,994 586,026 Total $ 24,397,087 $ 26,208,577 $ 1,800,000 $ 1,940,000 $ 26,197,087 $ 28,148,577 The City's total bonded debt decreased $2,045,000 (7.77%) from the previous year. The City reduced its bonded debt during the year by paying off $2,045,000 of principal on previously issued bonds. The City's bond rating is AA from Standard & Poor's Ratings Services. State statutes limit the amount of general obligation debt a Minnesota city may issue to 3% of total Estimated Market Value. The current debt limitation for the City is $39,878,053. The City does not currently have any debt outstanding that is applicable to the limit. Additional information on the City's long-term debt can be found in Note 3 (F) on pages 67 through 69 of this CAFR. Economic Factors and Next Year's Budget and Rates All of these factors were considered in the preparation of the City's budget for the 2015 fiscal year. • The unemployment rate for the City is 3.60% at the end of the 2014 fiscal year, which is a decrease from the rate of 5.10% a year ago. This compares to the State's average unemployment rate of 3.60% and the national average of 5.40%. • An increase in estimated taxable market value of 12.1 percent from taxes payable 2014 to 2015. The taxable market value increase is driven by significant increases in residential (19.9%) and apartment (12.08%). • Continuing redevelopment throughout the City will yield net growth in tax base and stability in tax base along with providingjob growth in the City. • Development activity in 2014 of the Shingle Creek Crossing site, included the demolition of the 169,000 square-foot food court building with the immediate construction of 92,000 square-feet of retail buildings, the construction of an 11,200 square-foot multi-tenant building, the construction of a 6,673 square-foot muti-tenant retail/restaurant building and site plan approvals for the remaining four lots within the former food court lot. Major tenants scheduled to occupy these new retail spaces in the spring of 2015, include Michaels, TJ Maxx, Jimmy John's Restaurant and Aspen Dental. • Development planned for 2015 construction includes a Discount Tire Store, an 11,200 square foot multi-tenant retail building, an 11,200 square foot multi-tenant building, an 11,200 square foot building for two restaurants and the renovation of a 75,000 square foot two story retail building. 25 CITY OF BROOKLYN CENTER, MINNESOTA MANAGEMENT'S DISCUSSION AND ANALYSIS December 31, 2014 • In December 2013 the EDA purchased a 23.2 acre property formerly known as the Brookdale Square shopping center which adjoins the EDA's 8.4 acre former Brookdale Ford dealership site. The EDA continues to pursue redevelopment opportunities for market rate apartments that include the type of units and amenities associated with move up housing options. • Luther Auto Group has completed a major portion of their redevelopment plans for the 39 acres located on the north side of the 1-694 and Brooklyn Boulevard interchange. In 2014, Luther began the construction of the new Volkswagen dealership and completed the expansion of the Honda sales lot. The Volkswagen dealership is scheduled to open in 2015. • Hennepin County, Minnesota Department of Employment and Economic Development (DEED), and the Metropolitan Council approved three grant applications totalling $1.45 million to complete a soils investigation and remediation action plan for the former Howe Fertilizer Site. This enables development of an approved 60,000 square-foot multi-tenant building on the five acre industrial site. • In 2014 the EDA acquired the former Chrysler Auto Dealership, a five acre commercial site at 6121 Brooklyn Boulevard. The buildings have been demolished and the EDA has entered into a letter of intent for the redevelopment of this area for an assisted senior housing project. Construction is underway of a water treatment plant, which will reduce the level of manganese from our water supply. The water treatment plant is currently under construction and is expected to be up and running by the end of 2015. The estimated total cost for the water treatment plant is $19.98 million. Financing will be achieved through a low interest loan under the Drinking Water Revolving Fund through the Minnesota Public Facilities (PFA) loan program. The loan will be repaid over twenty years at an interest rate of one percent. As of December 31, 2014 the City had not drawn down any of these funds, however the City incurred expenses for the construction of the water treatment plant. The City received its first reimbursement on January 30, 2015 in the amount of $4,468,266. • Utility rates have been projected into a rolling 15 year model to allow for funding of system maintenance, technology changes and capital repair and replacements while moderating annual rate adjustments. On January 1, 2015 the sanitary sewer utility quarterly base charge increased from $74.70 to $78.45 and the recycling quarterly charge increased from $8.94 to $9.21. • Beginning on April 1, 2015 the water utility rates increased for both base and consumption charges. The quarterly base charge of $8.20 per residential and commercial irrigation meter increased to $10.00 per meter. The consumption charge of $1.36 per 1,000 gallons (up to 30,000 gallons per quarter), increased by $0.30 per 1,000 gallons. Multi-family, commercial and industrial properties pay a quarterly base charge depending on the size of the meters and a consumption rate per 1,000 gallons. The consumption rate increased $0.37 to $2.07 per 1,000 gallons. The City's policy is to maintain a General fund unassigned fund balance of 50% - 52% of the ensuing year's budgeted General fund operations. In January 2014, the City Council adopted a capital project funding policy that transfers the amount of fund balance exceeding 52% to the Capital Improvements fund following the completed audit of the City's CAFR. The City transferred $2,754,124 for Capital Improvements from the General Fund. The City has assigned $908,761 (the amount exceeding 52%) for capital improvements within the General Fund. Total unassigned and assigned fund balance at the end of 2014 was $10,998,114 (56.68%) of the adopted 2015 budgeted expenditures. Requests for Information This financial report is designed to provide a general overview of the City of Brooklyn Center's finances for all those with an interest in the government's finances. Questions concerning any of the information provided in this report or requests for additional financial information should be addressed to the Director of Finance, 6301 Shingle Creek Parkway, Brooklyn Center, MN 55430. 26 Basic Financial Statements $ 32,282,209 $12,249,705 $44,531,914 316,630 2,185,385 2,502,015 229,288 -229,288 4,170,019 485,805 4,655,824 4,834,218 (4,834,218)- 1,216,758 5,560 1,222,318 -211,781 211,781 45,504 743,191 788,695 1,210,000 -1,210,000 16,160,075 -16,160,075 6,902,390 11,630,779 18,533,169 42,490,187 36,906,353 79,396,540 109,857,278 59,584,341 169,441,619 864,706 1,632,477 2,497,183 565,744 108,984 674,728 368,879 31,631 400,510 79,891 72,021 151,912 213,121 354,275 567,396 1,100 228,056 229,156 128,209 - 128,209 1,153,884 - 1,153,884 629,994 - 629,994 3,025,000 140,000 3,165,000 19,460,000 1,660,000 21,120,000 26,490,528 4,227,444 30,717,972 42,947,577 48,537,132 91,484,709 772,843 -772,843 20,030,161 -20,030,161 1,542,349 -1,542,349 98,321 -98,321 309,548 -309,548 3,478,655 -3,478,655 1,830,100 -1,830,100 12,357,196 6,819,765 19,176,961 $ 83,366,750 $55,356,897 $ 138,723,647 CITY OF BROOKLYN CENTER, MINNESOTA STATEMENT OF NET POSITION December 31, 2014 Governmental Business-Type Activities Activities Total ASSETS Cash and investments Receivables: Accounts - net Taxes Special assessments Internal balances Due from other governments Prepaid items Inventories Notes receivable Assets held for resale Capital assets: Nondepreciable Depreciable Total assets LIABILITIES Accounts payable Accrued salaries and wages Accrued interest payable Due to other governments Deposits payable Unearned revenue Compensated absences payable: Due within one year Due in more than one year Net OPEB obligation: Due in more than one year Bonds payable: Due within one year Due in more than one year Total liabilities NET POSITION Net investment in capital assets Restricted for: Statutory housing obligations Tax increment financing Economic development Law enforcement enhancements Community amphitheater Debt service State-aid street systems Unrestricted Total net position The notes to the financial statements are an integral part of this statement. 27 CITY OF BROOKLYN CENTER, MINNESOTA STATEMENT OF ACTIVITIES For the Year Ended December 31, 2014 Charges For FUNCTIONS/PROGRAMS Expenses Services Government activities: General government $ 3,736,487 $ 651,188 Public safety 10,186,645 722,697 Public works 3,688,238 157,889 Community services 145,503 - Parks and recreation 2,977,707 598,173 Economic development 3,234,623 477,088 Interest on long-term debt 887,190 - Total government activities 24,856,393 2,607,035 Business-type activities: Municipal liquor 5,690,792 5,861,066 Golf course 271,698 365,497 Earle Brown Heritage Center 5,137,712 4,578,433 Water utility 1,900,518 2,235,332 Sanitary sewer utility 3,514,687 3,942,534 Storm drainage utility 1,784,907 1,638,575 Street light utility 245,426 454,958 Recycling utility 291,239 306,661 Total business-type activities 18,836,979 19,383,056 Total $ 43,693,372 $ 21,990,091 The notes to the financial statements are an integral part of this statement. 28 Program Revenues Net (Expense) Revenue and Changes in Net Position Operating Capital Grants and Grants and Governmental Business-Type Contributions Contributions Activities Activities Total $ -$ -S (3,085,299) $ -$ (3,085,299) 1,146,485 -(8,317,463) -(8,317,463) 110,000 1,661,044 (1,759,305) -(1,759,305) --(145,503) -(145,503) 68,287 10,786 (2,300,461) -(2,300,461) 421,865 -(2,335,670) -(2,335,670) --(887,190) -(887,190) 1,746,637 1,671,830 (18,830,891) -(18,830,891) - - -170,274 170,274 - - -93,799 93,799 - - -(559,279)(559,279) 47,660 - -382,474 382,474 15,887 - -443,734 443,734 - - -(146,332)(146,332) - - -209,532 209,532 - - -15,422 15,422 63,547 - -609,624 609,624 $ 1,810,184 5 1,671,830 (18,830,891)609,624 (18,221,267) General revenues: Property taxes Tax increments Lodging taxes Grants and contributions not restricted to specific programs Unrestricted investment earnings Gain on disposal of capital asset Transfers Transfers - capital assets Total general revenues and transfers Change in net position Net position - January 1 Net position - December 31 14,988,007 - 14,988,007 3,790,363 - 3,790,363 914,651 - 914,651 1,499,015 -1,499,015 236,936 108,650 345,586 27,100 -27,100 675,257 (675,257)- (639,266)639,266 - 21,492,063 72,659 21,564,722 2,661,172 682,283 3,343,455 80,705,578 54,674,614 135,380,192 $ 83,366,750 $55,356,897 $ 138,723,647 29 CITY OF BROOKLYN CENTER, MINNESOTA BALANCE SHEET GOVERNMENTAL FUNDS December 31, 2014 Tax Tax Increment Increment General District No. 3 District No. 5 ASSETS Cash and investments $ 11,600,967 $ 2,336,256 $ 258,681 Receivables: Accounts - net 88,900 -- Current taxes 81,372 -- Delinquent taxes 58,298 54,347 9,784 Special assessments 171,140 -- Due from other funds 153,810 -- Due from other governments 22,677 -- Notes receivable --1,210,000 Inventories 21,967 -- Advances to other funds --- Assets held for resale -15,623,075 - Total assets 12,199,131 18,013,678 1,478,465 LIABILITIES Accounts payable 222,294 8,151 114,405 Accrued salaries and wages 534,292 -- Due to other funds --- Due to other governments 24,383 52,431 1,459 Deposits payable 177,546 -- Unearned revenue 1,100 -- Advances from other funds --2,442,676 Total liabilities 959,615 60,582 2,558,540 DEFERRED INFLOWS OF RESOURCES Unavailable revenue - property taxes 58,298 - - Unavailable revenue - tax increments - 54,347 9,784 Unavailable revenue - special assessments 161,137 - - Unavailable revenue - notes receivable - - 210,000 Unavailable revenue - intergovernmental - - - Total deferred inflows of resources 219,435 54,347 219,784 FUND BALANCES (DEFICITS) Nonspendable 21,967 - - Restricted - 17,898,749 - Committed - .. - Assigned 908,761 - - Unassigned 10,089,353 - (1,299,859) Total fund balances (deficits) 11,020,081 17,898,749 (1,299,859) Total liabilities, deferred inflows of resources and fund balances (deficits) $ 12,199,131 $ 18,013,678 $ 1,478,465 The notes to the financial statements are an integral part of this statement. 30 ---47,797 161,615 298,312 3,220 222 --1,478 86,292 5,546 9,893 --5,128 142,996 1,946,836 2,593 -2,049,450 -4,170,019 -3,724,957 ---3,878,767 --1,077,504 -116,577 1,216,758 -----1,210,000 -----21,967 -792,488 --2,442,676 3,235,164 ----537,000 16,160,075 3,848,634 6,521,315 2,907,604 2,097,247 8,989,023 56,055,097 1,925 --335,135 128,412 810,322 ----17,699 551,991 ---182,188 -182,188 ----1,570 79,843 ----35,575 213,121 -----1,100 -----2,442,676 1,925 --517,323 183,256 4,281,241 5,546 9,893 --5,128 78,865 -----64,131 1,931,722 2,192 -2,043,117 -4,138,168 -----210,000 --1,077,504 --1,077,504 1,937,268 12,085 1,077,504 2,043,117 5,128 5,568,668 -----21,967 1,910,266 -1,830,100 -4,794,998 26,434,113 -6,509,230 --4,005,641 10,514,871 -----908,761 (825)--(463,193)-8,325,476 1,909,441 6,509,230 1,830,100 (463,193)8,800,639 46,205,188 $ 3,848,634 $ 6,521,315 $ 2,907,604 $ 2,097,247 $ 8,989,023 $ 56,055,097 31 I This page has been left blank intentionally. 32 CITY OF BROOKLYN CENTER, MINNESOTA RECONCILIATION OF THE BALANCE SHEET OF GOVERNMENTAL FUNDS TO THE STATEMENT OF NET POSITION December 31, 2014 Fund balances - governmental funds $ 46,205,188 Amounts reported for the governmental activities within the statement of net position are different because: Capital assets used in governmental activities are not financial resources, and therefore, are not reported as assets in governmental funds. Cost of capital assets 79,344,461 Accumulated depreciation (33,644,735) Long-term liabilities, including bonds payable, are not due and payable in the current period, and therefore, are not reported as liabilities in governmental funds. Bonds payable (22,485,000) Accrued interest payable (368,879) Some receivables are not available soon enough to pay for the current period's expenditures, and therefore, are unavailable in governmental funds. Delinquent property taxes receivable 78,865 Delinquent tax increments receivable 64,131 Special assessments receivable 4,138,168 Interest on notes receivable 210,000 Intergovernmental receivable 1,077,504 Internal service funds are used by management to charge the cost of certain activities to individual funds. The assets and liabilities are included in the governmental statement of net position. 8,747,047 Total net position - governmental activities $ 83,366,750 The notes to the financial statements are an integral part of this statement. CITY OF BROOKLYN CENTER, MINNESOTA STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES GOVERNMENTAL FUNDS For the Year Ended December 31, 2014 REVENUES Propei'ty taxes Tax increments Franchise fees Lodging taxes Licenses and permits Intergovernmental Charges for services Special assessments Fines and forfeits Investment earnings (net of market value adjustment) Miscellaneous Total revenues EXPENDITURES Current: General government Public safety Public works Community services Parks and recreation Economic development Nondepartmental Capital outlay: General government Public works Parks and recreation Economic development Debt service: Principal Interest Fiscal agent fees Total expenditures Excess (deficiency) of revenues over (under) expenditures OTHER FINANCING SOURCES (USES) Transfers in Transfers out Total other financing sources (uses) Net change in fund balance Tax Tax Increment Increment General District No. 3 District No. 5 $ 14,077,130 $ -$ - -3,038,983 292,064 914,651 -- 1,021,410 -- 1,401,447 -- 810,597 363,788 - 128,138 -- 312,130 -- 61,770 23,123 880 138,349 32,843 - 18,865,622 3,458,737 292,944 2,736,593 - - 9,444,438 - - 1,963,110 - - 145,503 - - 2,402,766 - - 434,459 936,949 160,308 364,501 - - 8,453 - - 3,851 - - - 377,685 - I I,JUJ,OV-t I,J1-t,uJt IuJ,JJo 1,361,948 2,144,103 132,636 129,544 - - (2,854,124) (2,073,345) - (2,724,580) (2,073,345) - (1,362,632) 70,758 132,636 Fund balances (deficits) - January 1 - Restated 12,382,713 17,827,991 (1,432,495) Fund balances (deficits) - December 31 $ 11,020,081 $ 17,898,749 $ (1,299,859) The notes to the financial stateineilts are an integral part of this statement. 34 Municipal State Aid Other Debt Capital for Infrastructure Nonmajor Total Service Improvements Construction Construction Governmental Governmental $ 678,966 $ 2,156 $ - $ - S 278,350 $ 15,036,602 - - - - 464,661 3,795,708 - - - - 647,071 647,071 - - - - - 914,651 - - - - - 1,021,410 - 580,133 110,000 - 614,719 2,706,299 - 38 - 45,405 9,685 1,229,513 674,253 1,938 - 989,797 - 1,794,126 - - - - 52,797 364,927 8,836 34,082 17,922 1,536 40,764 188,913 - 81,217 - 31,229 61,052 344,690 1,362,055 699,564 127,922 1,067,967 2,169,099 28,043,910 - - - - 436,689 3,173,282 - - - - 177,801 9,622,239 - - 89,544 55,305 - 2,107,959 - - - - - 145,503 - - - - 54,856 2,457,622 - - - - 1,324,267 2,855,983 - - - - - 364,501 - - - - 76,333 84,786 - - 250,000 1,542,554 1,311,905 3,104,459 - 379,406 - - - 383,257 - - - - - 377,685 1,905,000 - - - - 1,905,000 802,892 - - - 802,892 9,039 - - - - 9,039 2,716,931 379,406 339,544 1,597,859 3,381,851 27,394,207 (1,354,876) 320,158 (211,622) (529,892) (1,212,752) 649,703 2,073,345 3,116,314 78,000 1,902,259 3,164,033 10,463,495 - - (360,000) (2,805,702) (1,695,067) (9,788,238) 2,073,345 3,116,314 (282,000) (903,443) 1,468,966 675,257 718,469 3,436,472 (493,622) (1,433,335) 256,214 1,324,960 1,190,972 3,072,758 2,323,722 970,142 8,544,425 44,880,228 $ 1,909,441 $ 6,509,230 $ 1,830,100 $ (463,193) $ 8,800,639 $ 46,205,188 I1 CITY OF BROOKLYN CENTER, MINNESOTA RECONCILIATION OF THE STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES OF GOVERNMENTAL FUNDS TO THE STATEMENT OF ACTIVITIES For the Year Ended December 31, 2014 Total net change in fund balances - governmental funds 1,324,960 Amounts reported for governmental activities in the statement of activities are different because: Governmental funds report capital outlays as expenditures. However, in the statement of activities the cost of those assets is allocated over their estimated useful lives as depreciation. Capital outlays 3,353,244 Depreciation expense (2,392,916) Contributions of capital assets to the proprietary funds decrease net position in the statement of activities, but do not appear in the governmental funds because they are not financial resources. (639,266) The issuance of long-term debt provides current financial resources to governmental funds, while the repayment of principal of long-term debt consumes the current financial resources of governmental funds. Neither transaction, however, has any effect on net position. Principal repayments 1,905,000 Interest on long-term debt in the statement of activities differs from the amount reported in the governmental funds because interest is recognized as an expenditure in the funds when it is due, and thus requires the use of current financial resources. In the statement of activities, however, interest expense is recognized as the interest accrues, regardless of when it is due. (75,259) Certain revenues are recognized as soon as they are earned. Under the modified accrual basis of accounting, certain revenues cannot be recognized until they are available to liquidate liabilities of the current period. Property taxes (48,595) Tax increments (5,345) Special assessments 173,999 Interest on notes receivable 60,000 Intergovernmental (826,014) Internal service funds are used by management to charge the cost of certain activities to individual funds. This amount is net revenue attributable to governmental activities. (168,636) Change in net position - governmental activities $ 2,661,172 The notes to the financial statements are an integral part of this statement. 36 CITY OF BROOKLYN CENTER, MINNESOTA GENERAL FUND - STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE - BUDGET AND ACTUAL For the Year Ended December 31, 2014 Variance with Final Budget - Budgeted Amounts Actual Positive Original Final Amounts (Negative) REVENUES Property taxes Lodging taxes Licenses and permits Intergovernmental Charges for services Special assessments Fines and forfeits Investment earnings (net of market value adjustment) Miscellaneous Total revenues EXPENDITURES Current: General government Public safety Public works Community services Parks and recreation Economic development Nondepartmental Capital outlay: General government Public safety Parks and recreation Total expenditures Excess (deficiency) of revenues over (under) expenditures OTHER FINANCING SOURCES (USES) Transfers in Transfers out Total other financing sources (uses) Net change in find balance Fund balance - January 1 Fund balance - December 31 $ 14,032,326 $ 14,032,326 $ 14,077,130 $ 44,804 860,000 860,000 914,651 54,651 743,668 743,668 1,021,410 277,742 1,253,800 1,253,800 1,401,447 147,647 883,081 883,081 810,597 (72,484) 75,000 75,000 128,138 53,138 349,500 349,500 312,130 (37,370) 32,000 32,000 61,770 29,770 86,875 86,875 138,349 51,474 18,316,250 18,316,250 18,865,622 549,372 2,960,209 2,960,209 2,736,593 223,616 9,976,226 9,976,226 9,444,438 531,788 2,046,634 2,046,634 1,963,110 83,524 161,000 161,000 145,503 15,497 2,502,811 2,502,811 2,402,766 100,045 408,500 408,500 434,459 (25,959) 249,370 249,370 364,501 (115,131) 22,500 22,500 8,453 14,047 16,400 16,400 -16,400 22,600 22,600 3,851 18,749 18,366,250 18,366,250 17,503,674 862,576 (50,000)(50,000)1,361,948 1,411,948 150,000 150,000 129,544 (20,456) (100,000)(100,000)(2,854,124)(2,754,124) 50,000 50,000 (2,724,580)(2,774,580) - - (1,362,632) (1,362,632) 12,382,713 12,382,713 12,382,713 - $ 12,382,713 $ 12,382,713 $ 11,020,081 $ (1,362,632) The notes to the financial statements are an integral part of this statement. 37 CITY OF BROOKLYN CENTER, MINNESOTA TAX INCREMENT DISTRICT NO. 3- STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE - BUDGET AND ACTUAL For the Year Ended December 31, 2014 Variance with Final Budget - Budgeted Amounts Actual Positive Original Final Amounts (Negative) $ 2,938,650 $ 2,938,650 $ 3,038,983 $ 100,333 - - 363,788 363,788 - - 23,123 23,123 - - 32,843 32,843 2,938,650 2,938,650 3,458,737 520,087 973,550 973,550 936,949 36,601 - - 377,685 (377,685) 973,550 973,550 1,314,634 (341,084) 1,965,100 1,965,100 2,144,103 179,003 (1,965,100) (1,965,100) (2,073,345) (108,245) - - 70,758 70,758 REVENUES Tax increments Charges for services Investment earnings (net of market value adjustment) Miscellaneous Total revenues EXPENDITURES Current: Economic development Capital outlay: Economic development Total expenditures Excess of revenues over expenditures OTHER FINANCING SOURCES (USES) Transfers out Net change in fund balance Fund balance - January 1 - Restated 17,827,991 17,827,991 17,827,991 Fund balance - December 3l $ 17,827,991 $ 17,827,991 $ 17,898,749 $ 70,758 The notes to the financial statements are an integral part of this statement. 38 D!4 This page has been left blank intentionally. 39 CITY OF BROOKLYN CENTER, MINNESOTA STATEMENT OF NET POSITION PROPRIETARY FUNDS December 31, 2014 Business-Type Activities Municipal Golf Earle Brown Water Liquor Course Heritage Center Utility ASSETS Current assets: Cash and cash equivalents $ 1,858,031 $ -$ 1,951,676 $ 2,505,727 Receivables: Accounts - net 7,780 -218,686 527,512 Special assessments ---485,805 Due from other governments -5,560 -- Prepaid items 27,657 -8,817 - Inventories 675,067 1,589 31,193 35,342 Total current assets 2,568,535 7,149 2,210,372 3,554,386 Noncurrent assets: Capital assets: Land -1,390,402 1,493,300 20,734 Easements ---- Land improvements -65,637 377,254 - Buildings and improvements 192,771 664,322 12,401,132 3,033,212 Machinery and equipment 251,735 11,160 376,258 128,668 Street light systems ---- Mains and lines ---21,030,496 Construction in progress ---6,055,116 Total capital assets 444.506 2,131,521 14,647,944 30,268,226 Less: accumulated depreciation (307,923)(436,628)(10,720,580)(15,325,797) Net capital assets 136,583 1,694,893 3,927,364 14,942,429 Total assets 2,705,118 1,702,042 6,137,736 18,496,815 LIABILITIES Current liabilities Accounts payable 107,796 843 210,582 1,205,237 Accrued salaries and wages 28,527 3,565 42,575 21,633 Accrued interest payable ---23,723 Due to other funds -153,810 -3,542,769 Due to other governments 53,582 -15,950 2,489 Deposits payable --347,450 6,825 Unearned revenue 2,782 -1,600 223,674 Bonds payable ---105,000 Compensated absences payable ---- Total current liabilities 192,687 158,218 618,157 5,131,350 Noncurrent liabilities: Bonds payable ---1,245,000 Advances from other funds -792,488 -- Compensated absences payable ---- Net OPEB obligation ---- Total noncurrent liabilities -792,488 -1,245,000 Total liabilities 192,687 950,706 618,157 6,376,350 NET POSITION Investment in capital assets 136,583 1,694,893 3,927,364 14,942,429 Unrestricted 2,375,848 (943,557)1,592,215 (2,821,964) Total net position $ 2,512,431 $ 751,336 $ 5,519,579 $ 12,120,465 Net position from this Statement Adjustment to reflect the consolidation of internal service fund activities related to enterprise funds Net position of business-type activities The notes to the financial statements are an integral part of this statement. 40 Governmental Business-Type Activities Activities- Sanitary Sewer Storm Drainage Street Light Recycling Total Internal Utility Utility Utility Utility Enterprise Service $ 1,755,459 $ 3,987,403 $176,221 $15,188 $ 12,249,705 $ 6,647,462 913,028 351,916 101,768 64,695 2,185,385 18,318 ----485,805 - ----5,560 - 175,307 ---211,781 - ----743,191 23,537 2,843,794 4,339,319 277,989 79,883 15,881,427 6,689,317 3,389 287,158 --3,194,983 - 20,335 10,285 --30,620 - ----442,891 166,108 2,705,424 ---18,996,861 - 179,130 12,718 --959,669 8,738,312 --774,886 -774,886 - 20,236,112 26,463,773 --67,730,381 - 1,176,067 1,136,425 57,903 -8,425,511 - 24,320,457 27,910,359 832,789 -100,555,802 8,904,420 (12,978,432)(12,104,765) (144,545)-(52,018,670)(5,211,569) 11,342,025 15,805,594 688,244 -48,537,132 3,692,851 14,185,819 20,144,913 966,233 79,883 64,418,559 10,382,168 55,691 49,485 2,239 604 1,632,477 54,384 4,044 8,640 --108,984 13,753 7,908 ---31,631 - ----3,696,579 - ----72,021 48 ----354,275 - ----228,056 - 35,000 ---140,000 - -----128,209 102,643 58,125 2,239 604 6,264,023 196,394 415,000 ---1,660,000 - ----792,488 - -----1,153,884 -----629,994 415,000 ---2,452,488 1.783,878 517,643 58,125 2,239 604 8,716,511 1,980,272 11,342,025 15,805,594 688,244 - 48,537,132 3,692,851 2,326,151 4,281,194 275,750 79,279 7,164,916 4,709,045 $ 13,668,176 $ 20,086,788 $ 963,994 $ 79,279 $ 55,702,048 $ 8,401,896 $ 55,702,048 (345,151) $ 55,356,897 41 CITY OF BROOKLYN CENTER, MINNESOTA STATEMENT OF REVENUES, EXPENSES, AND CHANGES IN NET POSITION PROPRIETARY FUNDS For the Year Ended December 31, 2014 Business-Type Activities Municipal Golf Earle Brown Water Liquor Course Heritage Center Utility $ 5,852,465 $ 183,311 $ 4,518,231 $ 2,206,311 4,293,383 -2,089,293 - 1,559,082 183,311 2,428,938 2,206,311 642,642 128,453 1,032,898 460,950 79,719 25,980 235,620 132,669 241,801 75,758 849,747 407,157 16,677 3,736 40,052 22,533 45,848 18,564 206,821 157,369 303,108 --- 24,328 18,738 683,625 658,163 1,354,123 271,229 3,048,763 1,838,841 204,959 (87,918)(619,825)367,470 ---47,660 -176,377 -- 13,209 -13,564 24,487 ---29,500 (37,560)--- 8,601 5,809 60,202 (479) ---(57,789) (15,750)182,186 73,766 43,379 189,209 94,268 (546,059)410,849 - - - 95,974 (362,190) - - (95,974) (172,981) 94,268 (546,059) 410,849 2,685,412 657,068 6,065,638 11,709,616 $ 2,512,431 $ 751,336 $ 5,519,579 $ 12,120,465 OPERATING REVENUES Sales and user fees Cost of sales Total operating revenues OPERATING EXPENSES Personal services Supplies Other services Insurance Utilities Rent Depreciation Total operating expenses Operating income (loss) NONOPERATING REVENUES (EXPENSES) Intergovernmental Insurance recoveries Investment earnings (net of market value adjustment) Special assessments Gain (loss) on sale of capital assets Other revenue (expense) Interest and fiscal agent fees Total nonoperating revenues (expenses) Income (loss) before transfers Capital contributions from other funds Transfers in Transfers out Change in net position Net position - January 1 Net position - December 31 Change in net position from this Statement Adjustment to reflect the consolidation of internal service fund activities related to enterprise funds Change in net position of business-type activities The notes to the financial statements are an integral part of this statement. 42 Governmental Business-Type Activities Activities- Sanitary Sewer Storm Drainage Street Light Recycling Total Internal Utility Utility Utility Utility Enterprise Service $ 3,945,115 $ 1,638,475 $455,216 $307,277 $19,106,401 $1,905,353 ----6,382,676 - 3,945,115 1,638,475 455,216 307,277 12,723,725 1,905,353 204,257 197,356 --2,666,556 794,303 27,513 23,447 323 165 525,436 513,684 2,459,898 507,471 34,726 289,609 4,866,167 169,982 31,262 3,016 1,077 1,465 119,818 54,525 37,539 -161,079 -627,220 364 ----303,108 - 735,595 1,055,774 48,221 -3,224,444 720,199 3,496,064 1,787,064 245,426 291,239 12,332,749 2,253,057 449,051 (148,589)209,790 16,038 390,976 (347,704) 15,887 ---63,547 8,496 ----176,377 - 20,243 35,056 1,985 106 108,650 48,023 ----29,500 - ----(37,560)27,100 (2,581)100 (258)(616)70,778 88,357 (19,113)---(76,902)- 14,436 35,156 1,727 (510)334,390 171,976 463,487 (113,433)211,517 15,528 725,366 (175,728) 134,574 305,766 102,952 -639,266 - -20,433 --20,433 - (134,574)-(102,952)-(695,690)- 463,487 212,766 211,517 15,528 689,375 (175,728) 13,204,689 19,874,022 752,477 63,751 55,012,673 8,577,624 $ 13,668,176 $ 20,086,788 $963,994 $79,279 $55,702,048 $8,401,896 $689,375 (7,092) $682,283 43 CITY OF BROOKLYN CENTER, MINNESOTA STATEMENT OF CASH FLOWS PROPRIETARY FUNDS For the Year Ended December 31, 2014 Business-Tvne Activities CASH FLOWS FROM OPERATING ACTIVITIES Receipts from customers and users Receipts from interfund services provided Other operating receipts Payments to suppliers Payments to employees Other operating payments Net cash flows provided (used) by operating activities CASH FLOWS FROM NONCAPITAL FINANCING ACTIVITIES Transfers in Intergovernmental Special assessments Interfund payable Principal paid on revenue bonds Interest paid on revenue bonds Transfers out Net cash flows provided (used) by noncapital financing activities Municipal Golf Earle Brown Water Liquor Course Heritage Center Utility $ 5,853,228 $ 183,311 $ 4,554,948 $ 2,212,560 8,601 249 60,202 - (5,084,529)(132,251)(3,405,248)(693,866) (644,171)(128,706)(1,032,496)(459,783) ---(479) 133,129 (77,397)177,406 1,058,432 - - - 87,241 - - - 10,279 - 76,997 - 3,542,769 - - - (105,000) - - - (58,774) (362,190) - - (95,974) (362,190) 76,997 - 3,380,541 CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES Acquisition and construction of capital assets - (176,377) (111,636) (4,868,791) Proceeds from insurance recoveries - 176,377 - - Proceeds from sale of assets - - - - Net cash flows provided (used) by capital and related financing activities - - (111,636) (4,868,791) CASH FLOWS FROM INVESTING ACTIVITIES Interest on investments 13,209 - 13,564 24,487 Net increase (decrease) in cash and cash equivalents Cash and cash equivalents - January 1 Cash and cash equivalents - December 31 RECONCILIATION OF OPERATING INCOME (LOSS) TO NET CASH FLOWS PROVIDED (USED) BY OPERATING ACTIVITIES Operating income (loss) Adjustments to reconcile operating income (loss) to net cash flows provided (used) by operating activities: Depreciation Other income (expense) related to operations (Increase) decrease in assets: Accounts receivable Due from other governments Prepaid items Inventories Increase (decrease) in liabilities Accounts payable Accrued salaries and wages Unearned revenue Net cash flows provided (used) by operating activities NONCASH FINANCING ACTIVITIES Acquisitions of capital assets on account Capital assets contributed from other funds Gain (loss) on sale of capital assets (215,852) (400) 79,334 (405,331) 2,073,883 400 1,872,342 2,911,058 $ 1,858,031 $ - $ 1,951,676 $ 2,505,727 $ 204,959 $ (87,918) $ (619,825) $ 367,470 24,328 18,738 683,625 658,163 8,601 5,809 60,202 (479) - - 36,717 (4,103) - (5,560) - - (412) (4,026) 17,680 1,349 2,861 (547) (121,261) (9,562) 17,450 26,409 (1,529) (253) 402 1,167 763 - - 10,352 $ 133,129 $ (77,397) $ 177,406 $ 1,058,432 $ - $ - $ - $ 1,170,313 $ - $ - $ - $ 95,974 $ (37,560) $ - $ - $ - The notes to the financial statements are an integral part of this statement. 44 Governmental Business-Type Activities Activities- Sanitary Sewer Storm Drainage Street Light Recycling Total Internal Utility Utility Utility Utility Enterprise Service $ 3,892,531 $ 1,635,448 $ 449,863 $ 306,548 $ 19,088,437 $ - -----1,908,069 -100 --69,152 88,357 (2,532,646)(486,623) (196,909)(291,178)(12,823,250)(758,997) (208,938)(197,490)--(2,671,584)(705,170) (2,581)-(258)(616)(3,934)- 1,148,366 951,435 252,696 14,754 3,658,821 532,259 - 20,433 -- 20,433 - 29,081 - -- 116,322 8,496 - - -- 10,279 - - - -- 3,619,766 - (35,000) - -- (140,000) - (19,441) - -- (78,215) - (134,574) - (102,952)- (695,690) - (159,934) 20,433 (102,952)- 2,852,895 8,496 (1,176,067) (1,136,424) (57,903) - (7,527,198) (695,571) - - - - 176,377 - - - - - - 33,978 (1,176,067) (1,136,424) (57,903) - (7,350,821) (661,593) 20,243 35,056 1,985 106 108,650 48,023 (167,392)(129,500)93,826 14,860 (730,455)(72,815) 1,922,851 4,116,903 82,395 328 12,980,160 6,720,277 $1,755,459 $3,987,403 $176,221 $15,188 $12,249,705 $6,647,462 $449,051 $(148,589)$209,790 $16,038 $390,976 $(347,704) 735,595 1,055,774 48,221 -3,224,444 720,199 (2,581)100 (258)(616)70,778 88,357 (52,584)(3,027) (5,353)(729)(29,079)2,716 ----(5,560) (6,610)---(11,048)- ----21,343 (1,923) 30,176 47,311 296 61 (9,120)(18,519) (4,681)(134)--(5,028)89,133 ----11,115 - $1,148,366 $951,435 $252,696 $14,754 $3,658,821 $532,259 $-$-$-$-$1,170,313 $38,670 $134,574 $305,766 $102,952 $-$639,266 $- $-$-$-$-$(37,560)$(6,878) 45 This page has been left blank intentionally. 46 AhWRIM M 72TIMPM CITY OF BROOKLYN CENTER, MINNESOTA NOTES TO THE FINANCIAL STATEMENTS December 31, 2014 The City of Brooklyn Center was incorporated in 1911 and has operated under a Council/Manager form of government since the adoption of the City charter in 1966. The governing body consists of a Mayor and four City Council members. elected at-large to serve four-year staggered terms. The City provides a full range of municipal services to its citizens, including public safety (police and fire protection), highways and streets, parks and recreation, public improvements, planning and inspections, economic development, sanitary and storm sewer, water, and general administrative services. Note 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The financial statements of the City have been prepared in accordance with accounting principles generally accepted in the United States of America (GAAP), as applied to governmental units by the Governmental Accounting Standards Board (GASB). The City's significant accounting policies are described below. A. REPORTING ENTITY The City includes all funds, organizations, institutions, agencies, departments, boards, and offices that are not legally separate from the City. Component units are legally separate organizations for which the elected officials of the City are financially accountable and are included within the basic financial statements of the City because of the significance of their operational or financial relationships with the City. The City is considered financially accountable for a component unit if it appoints a voting majority of the organization's governing body and is able to impose its will on the organization by significantly influencing the programs, projects, activities, or level of services performed or provided by the organization, or there is a potential for the organization to provide specific financial benefits to, or impose specific financial burdens on, the City. Blended component units, although legally separate, are, in substance, part of the government's operations. A blended component unit is reported as if it were a fund of the City throughout the year. It is included at both the government-wide and fund financial reporting levels. A description of the City's blended component units follows: City of Brooklyn Center Housing and Redevelopment Authority (HRA) - The City Council serves as the Board of Directors for the HRA. The Council reviews and approves the tax levy and all expenditures for the HRA. The HRA is reported as a Special Revenue fund. The HRA does not issue separate financial statements. Financial information may be obtained at the City's offices. City of Brooklyn Center Economic Development Authority (EPA) The governing board for the EDA is the City Council. The council reviews and approves major community development improvement activities. City general obligation tax increment financing bonds are issued to finance EDA activities. The EDA is reported as a Special Revenue fund. The EDA does not issue separate financial statements. Financial information may be obtained at the City's offices. 47 CITY OF BROOKLYN CENTER, MINNESOTA NOTES TO THE FINANCIAL STATEMENTS December 31, 2014 B.GOVERNMENT-WIDE AND FUND FINANCIAL STATEMENTS The government-wide financial statements (i.e., the statement of net position and the statement of activities) report information on all activities of the primary government and its component units. Governmental activities, which normally are supported by taxes and intergovernmental revenues, are reported separately from business-type activities which rely to a significant extent on fees and charges for support. The statement of activities demonstrates the degree to which the direct expenses of a given function or segment are offset by program revenues. Direct expenses are those that are clearly identifiable with a specific function or segment. Program revenues include 1) charges to customers or applicants who purchase, use, or directly benefit from goods, services, or privileges provided by a given function or business-type activity and 2) grants and contributions that are restricted to meeting the operational or capital requirements of a particular function or business-type activity. Taxes and other items not included among program revenues are reported instead as general revenues. Separate financial statements are provided for governmental funds and proprietary funds. Major individual governmental funds and major individual enterprise funds are reported as separate columns in the fund financial statements. C.MEASUREMENT FOCUS, BASIS OF ACCOUNTING, AND FINANCIAL STATEMENT PRESENTATION The government-wide financial statements are reported using the economic resources measurenent focus and the accrual basis of accounting, as are the proprietary fund financial statements. Revenues are recorded when earned and expenses are recorded when a liability is incurred, regardless of the timing of related cash flows. Property taxes and special assessments are recognized as revenues in the year for which they are levied. Grants and similar items are recognized as revenue as soon as all eligibility requirements imposed by the provider have been met. Governmental fund financial statements are reported using the current financial resources measwement focus and the modified accrual basis of accounting. Revenues are recognized as soon as they are both measurable and available. Revenues are considered to be available when they are collectible within the current period or soon enough thereafter to pay liabilities of the current period. For this purpose, the City considers all revenues, except reimbursement grants, to be available if they are collected within 60 days of the end of the current fiscal year. Reimbursement grants are considered available if they are collected within one year of the end of the current fiscal year. Expenditures generally are recorded when a liability is incurred, as under accrual accounting. However, debt service expenditures, as well as expenditures related to claims and judgments, are recorded only when payment is due. Property taxes, special assessments, intergovernmental revenues, charges for services and interest associated with the current fiscal year are all considered to be susceptible to accrual and so have been recognized as revenues of the current fiscal year. Only the portion of special assessments receivable due within the current fiscal year is considered to be susceptible to accrual as revenue of the current period. All other revenue items are considered to be measurable and available only when cash is received by the government. 48 General Fund This is the City's primary operating fund. It accounts for all financial resources of the general government, except those required to be accounted for in another fund. Most of the current day-to-day operations of the governmental units are financed from this fund. Tax Increment District No. 3 Special Revenue Fund This fund was established to account for the collection of tax increment generated revenues for parcels within the District. These funds are used to finance the various redevelopment activities throughout the City. This fund also provides the resources to repay the debt service on bonds issued to finance these redevelopment activities. Tax Increment District No. 5 Special Revenue Fund This fund was established to account for the collection of tax increment generated revenues for parcels within the District. These funds are used to finance the various redevelopment activities within the District, which consisted of the redevelopment of the former Brookdale mall site, which is now called Shingle Creek Crossing. Debt Service Fund This fund is used to account for the collection of property taxes, special assessments and other resources which are used to repay the principal and interest on debt issued for various improvements in the City. Capital Improvements Capital Project Fund This fund was established to provide funds and to account for the expenditure of such funds, for major capital outlays. The accumulation of funds to provide for such outlays is an attempt to reduce future debt issuance. The financing sources of the fund primarily consist of transfers from other funds. Municipal Sate-Aidfor Construction Capital Project Fii,id This fund was established to account for the state allotment of construction and maintenance aid. The source of the State funding is provided for through the collection of gasoline taxes. The funds accumulated must be used on transportation related construction and maintenance projects. Infrastructure Construction Capitol Project 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. 49 CITY OF BROOKLYN CENTER, MILNNESOTA NOTES TO THE FINANCIAL STATEMENTS December 31, 2014 The government reports the following major enterprise funds: Municipal Liquor Fund The fund accounts for the operations of the City's municipal off-sale liquor stores. Golf Course Fund The fund accounts for operations of Centerbrook Golf Course, a 9 hole executive golf course owned by the City. Earle Brown Heritage Center Fund 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. Water Utility Fund The fund accounts for pumping, treatment and distribution of water to customers. Administration, wells, water storage, and distribution are included. Sanitary Sewer Utility Fund The 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 58% of this fund's operating expenses. Storm Drainage Utility Fund The fund accounts for the collection and treatment of surface runoff water that does not require sanitary wastewater treatment. It incorporates not only the storm sewer collection system, but also structures such as holding ponds and facilities to improve water quality. Fees are based upon the quantity of water running off a property and vary with both size and absorption characteristics of the parcel. Street Light Utility Fund The fund accounts for the electrical service, maintenance, repair and replacement of lights owned by the City as well as those lights owned by Xcel Energy. Recycling Utility Fund The fund accounts for the contracted services to provide a City wide recycling program. Additionally, the City reports the following fund type: Internal Service Funds Account for compensated absences, health care insurance benefits for retired employees, and central garage services provided to other departments of the City on a cost reimbursement basis. As a general rule, the effect of interfund activity has been eliminated from the government-wide financial statements. Exceptions to this general rule are transactions that would be treated as revenues, expenditures or expenses if they involved external organizations, such as buying goods and services or payments in lieu of taxes. Elimination of these charges would distort the direct costs and program revenues reported for the various functions concerned. 50 CITY OF BROOKLYN CENTER, MINNESOTA NOTES TO THE FINANCIAL STATEMENTS December 31, 2014 Proprietary funds distinguish operating revenues and expenses from non-operating items. Operating revenues and expenses generally result from providing services and producing and delivering goods in connection with a proprietary fund's principal ongoing operations. The principal operating revenues of the enterprise funds and internal service funds are charges to customers for sales and services. Operating expenses for enterprise funds and internal service funds include the cost of sales and services, administrative expenses, and depreciation on capital assets. All revenues and expenses not meeting this definition are reported as nonoperating revenues and expenses. D. CASH AND INVESTMENTS The City considers all highly liquid investments with a maturity of three months or less when purchased to be cash equivalents. All of the cash and investments allocated to the proprietary funds have original maturities of 90 days or less. Cash balances from all funds are pooled and invested, to the extent available, in certificates of deposit and other authorized investments. Earnings from such investments are allocated on the basis of applicable participation by each of the funds. The City's investment policy authorizes the City to invest in the following: a)Securities which are direct obligations or are guaranteed or insured issues of the United States, its agencies, its instrumentalities, or organizations created by an act of Congress, including governmental bonds, notes, bills, mortgages (excluding high-risk mortgage-backed securities), and other securities. b)Commercial paper issued by U.S. corporations or their Canadian subsidiaries that is rated in the highest quality by at least two nationally recognized rating agencies and matures in 270 days or less. c)Time deposits that are fully insured by the Federal Deposit Insurance Corporation or bankers acceptances of U.S. banks. d)Repurchase agreements and reverse repurchase agreements with financial institutions identified by Minnesota Statutes Chapter lISA. e) Securities lending agreements may be entered into with financial institutions identified by Minnesota Statutes Chapter 118A. Minnesota joint powers investment trusts may be entered into with trusts identified by Minnesota Statutes Chapter 118A. g) Money market mutual funds regulated by the Securities and Exchange Commission and whose portfolios consist only of short term securities permitted by Minnesota Statutes 11 8A. ii) Bonds of the City of Brooklyn Center issued in prior years, may be redeemed at current market price, which may include a premium, prior to maturing using surplus funds of the debt service fund set up for that issue. 51 CITY OF BROOKLYN CENTER, MINNESOTA NOTES TO THE FINANCIAL STATEMENTS December 31, 2014 Investments are reported at fair value, based on quoted market prices as of the balance sheet date, except for investments in 20-like external investment pools, which are stated at amortized cost. Adjustments necessary to record investments at fair value are recorded in the operating statement as increases or decreases in investment earnings. Investment income on commingled funds is allocated monthly, based on month-end balances. E. RECEIVABLES AND PAYABLES During the course of operations, numerous transactions occur between individual funds for goods provided or services rendered. Short-term interfund loans are classified as "due to/from other funds." All short-term interfund receivables and payables at December 31, 2014 are planned to be eliminated in 2015. Long-term interfund loans are classified as "advances to/from other funds." Any residual balances outstanding between the governmental activities and business-type activities are reported in the government-wide financial statements as "internal balances. Advances between funds, as reported in the fund financial statements, are offset by restricted or committed fund balance in applicable governmental funds. This classification is based on the restraint that will be placed on the advanced funds when they are returned to the lending fund. All miscellaneous accounts receivable and trade receivables, other than utilities, are presented net of an allowance for doubtful accounts. All utility trade receivables are reported at gross because it is the City's policy to certify delinquent account balances as special assessments. The City expects to make full collection of all property tax and special assessment receivables, so no allowance is considered necessary. Property tax levies are submitted to the County in December each year. The County allocates these levies across taxable properties in the City based on valuations certified in the prior year. The County collects these levies and distributes the City's proceeds in June and December of the fiscal year. These taxes are reported as general revenues in the government-wide financial statements in the year levied. Unpaid taxes at December 31 become liens on the respective property and are classified as delinquent receivables and are frilly offset by a deferred inflow of resources in the fund financial statements. Delinquent taxes receivable includes the past six years of uncollected taxes. Special assessments represent the financing for public improvements paid for by benefiting property owners. These assessments are recorded as receivables upon certification to the County. Govermnental special assessments have been offset by a deferred inflow of resources for collections not received within 60 days after year end in the fund financial statements. 52 CITY OF BROOKLYN CENTER, MINNESOTA NOTES TO THE FINANCIAL STATEMENTS December 31, 2014 F.INVENTORIES AND PREPAID ITEMS Inventories in the governmental funds are reported using the consumption method and valued at cost, using the first in/first out (FIFO) method. Inventories in the proprietary funds are valued at cost, using the weighted average method in the Municipal Liquor and Earle Brown Heritage Center Funds and the FIFO method in all other funds. Certain payments to vendors reflect costs applicable to future accounting periods and are recorded as prepaid items in both government-wide and fund financial statements. Prepaid items are reported using the consumption method and recorded as expenditures/expenses at the time of consumption. G.ASSETS HELD FOR RESALE Assets held for resale represent various property purchases made by the City with the intent to sell in order to increase tax base or to attract new businesses. These assets are stated at the lower of cost or net realizable value. During the year ended December 31, 2014 management has reviewed the cost value reported for these assets and has indicated the properties are fairly presented for financial reporting purposes. H. CAPITAL ASSETS Capital assets, which include property, plant, equipment, infrastructure assets (e.g., roads, bridges, sidewalks, and similar items), and intangible assets such as easements and computer software, are reported in the applicable governmental or business-type activities columns in the government-wide financial statements. Capital assets are defined by the City as assets with an initial, individual cost in excess of the amounts in the table below and an estimated useful life in excess of one year. Such assets are recorded at historical cost or estimated historical cost if purchased or constructed. Donated capital assets are recorded at estimated fair market value at the date of donation. Infrastructure 5 250,000 Buildings and Building Improvements 50,000 Land Improvements 25,000 Heavy Equipment 25,000 Furniture and furnishings 10,000 Motorized vehicles 10,000 Technology equipment 10,000 The costs of normal maintenance and repairs that do not add to the value of the asset or materially extend assets lives are not capitalized. 53 CITY OF BROOKLYN CENTER, MINNESOTA NOTES TO THE FINANCIAL STATEMENTS December 31, 2014 Major outlays for capital assets and improvements are capitalized as projects are constructed. Interest incurred during the construction phase of capital assets of business-type activities is included as part of the capitalized value of the assets constructed . For the year ended December 31, 2014 no interest was capitalized in connection with construction in progress. Capital assets of the City, as well as the component units, are depreciated using the straight line method over the following estimated useful lives: Easements - temporal)' 5 years Land improvements 25 years Buildings and structures 25 years Water and sewer mains and lines, wells and storage tanks, sewer lift stations 25 years Infrastructure 25 years Street light systems 15 years Machinery and equipment 5 - 15 years I.DEFERRED INFLOWS OF RESOURCES In addition to liabilities, statements of financial position or balance sheets will sometimes report a separate section for deferred inflows of resources. This separate financial statement element represents an acquisition of net position that applies to future periods and so will not be recognized as an inflow of resources (revenue) until that time. The City has only one type of item, which arises under a modified accrual basis of accounting, which qualifies for reporting in this category. Accordingly, the item, unavailable revenue, is reported only in the governmental funds Balance Sheet. The governmental funds report unavailable revenue from sources such as: property taxes, tax increments, special assessments and other receivables not collected within 60 days of year-end. These amounts are deferred and recognized as an inflow of resources in the period the amounts become available. J.COMPENSATED ABSENCES It is the City's policy to permit employees to accumulate earned but unused vacation and sick pay benefits. All vacation and vested sick leave pay is accrued in the Public Employees Compensated Absences internal service fund. In accordance with the provisions of Statement of Government Accounting Standards No. 16, Accounting for Compensated Absences, a liability is recognized for that portion of accumulating sick leave benefits that is vested. K. POSTE MPLOYMENT BENEFITS OTHER THAN PENSIONS Under Minnesota Statute 471.61, subdivision 2(b), public employers must allow retirees and their dependents to continue coverage indefinitely in an employer-sponsored health care plan, under the following conditions: 1) retirees must be receiving (or eligible to receive) an annuity from a Minnesota public pension plan; 2) coverage must continue in group plan until age 65 and pay no more than the group premium; and 3) retirees may obtain dependent coverage immediately before retirement. All premiums are funded on a pay-as-you-go basis. The liability was actuarially determined, in accordance with GASB Statement 45, at January 1, 2014. The liability is accrued in the Public Employees Retirement internal service fund. 54 CITY OF BROOKLYN CENTER, MINNESOTA NOTES TO THE FINANCIAL STATEMENTS December 31, 2014 L.LONG TERM OBLIGATIONS In the government-wide financial statements and proprietary fund types in the fund financial statements, long-term debt and other long-term obligations are reported as liabilities in the applicable governmental activities, business-type activities, or proprietary fund type statement of net position. Bond premiums and discounts, as well as issuance costs, are immaterial and are expensed in the year of bond issuance. In the fund financial statements, governmental fund types recognize bond premiums and discounts, as well as bond issuance costs, during the current period. The face amount of debt issued is reported as other financing sources. Premiums received on debt issuances are reported as other financing sources while discounts on debt issuances are reported as other financing uses. Issuance costs, whether or not withheld from the actual debt proceeds received, are reported as debt service expenditures. M.FUND EQUITY Fund equity in the fund financial statements is classified as fund balance for governmental funds and net position for proprietary funds. Fund equity in the government-wide financial statements is classified as net position for both governmental and business-type activities. Fund Balance - In the fund financial statements, governmental funds report fund balance in classifications that disclose restraints for which amounts in those funds can be spent. These classifications are as follows: Nonspendable - consists of amounts that are not in spendable form or are required to be maintained intact Restricted - consists of amounts related to externally imposed constraints established by creditors, grantors oi contributors; or constraints imposed by state statutory provisions. Committed - consists of internally imposed constraints. These constraints are imposed by formal action (resolution of the City Council, which is the highest level of decision making authority. Assigned - consists of internally imposed constraints. These constraints reflect the specific purpose for which it is the City's intended use. These constraints are established by the City Council or, pursuant to council resolution, the City Manager or the Director of Finance. Unassigned - is the residual classification for the general fund and also reflects negative residual amounts in other funds. When both restricted and unrestricted fund balances are available for an allowable use, it is the City's policy to use restricted resources first, then unrestricted resources as they are needed. When committed, assigned, or unassigned resources are available for an allowable use, it is the City's policy to use resources in the following order; 1) committed, 2) assigned, and 3) unassigned. The City has formally adopted a fund balance policy for the General Fund. The policy establishes a year-end target unassigned fund balance amount of 50-52% of the next year's operating budget for cash flow needs (working capital). At December 31, 2014 the unassigned fund balance of the General fund was 52% of the subsequent year's budgeted expenditures. 55 CITY OF BROOKLYN CENTER, MINNESOTA NOTES TO THE FINANCIAL STATEMENTS December 31, 2014 Net Position - Net position represents the difference between assets and liabilities. Net position, net investment in capital assets, consists of capital assets, net of accumulated depreciation, reduced by the outstanding balances of any bonds used for the acquisition, construction, or improvement of those assets. Net position is reported as restricted when there are limitations imposed on their use either through constitutional provisions or enabling legislation, or through external restrictions imposed by creditors, grantors, or laws or regulations of other governments. All remaining net position is reported as unrestricted. When both restricted and unrestricted net position are available for an allowable use, it is the government's policy to use restricted resources first, then unrestricted resources as they are needed. N. INTERFUND TRANSACTIONS Interfund services provided and used are accounted for as revenues and expenditures or expenses. Transactions that constitute reimbursements to a fund for expenditures/expenses initially made from it that are properly applicable to another fund, are recorded as expenditures/expenses in the reimbursing fund and as reductions of expenditures/expenses in the fund that is reimbursed. All other interfund transactions are reported as transfers. 0. USE OF ESTIMATES The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect amounts reported in the financial statements and accompanying notes. Actual results could differ from such estimates. P. NEW ACCOUNTING PRONOUNCEMENTS The Governmental Accounting Standards Board recently approved the following statements which were not implemented in these financial statements. The effect these standards may have on future financial statements has not been determined at this time. Statement No. 68, Accounting and Financial Reporting for Pensions. The primary objective of this statement is to improve accounting and financial reporting by state and local governments for pensions. It revises existing standards of financial reporting for most pension plans. The provisions of this statement are effective for periods beginning after June 15, 2014. Statement No. 71, Pension Contributions Subsequent to Measurement Date. The primary objective of this statement is to address an issue regarding the application of the transition provisions of GASB Statement No. 68. The issue relates to amounts contributed by an employer to a defined benefit pension plan after the measurement date of the government's net pension liability. The provisions of this statement are effective for periods beginning after June 15, 2014. Statement No. 72, Fair Value Measurement and Application . The primary objective of this statement is to enhance the comparability of financial statements among governments by requiring measurement of certain assets and liabilities at fair value using a more detailed definition of fair value and accepted valuation techniques. The provisions of this statement are effective for periods beginning after June 15, 2015. 56 CITY OF BROOKLYN CENTER, MINNESOTA NOTES TO THE FINANCIAL STATEMENTS December 31, 2014 Q. CHANGE IN ACCOUNTING PRINCIPLES During the year ended December 31, 2013, the City implemented GASB Statement No. 65, Ite,ns Previously Reported as Assets and Liabilities. Statement No. 65 identified specific items previously reported as assets that will now be classified as either deferred outflows of resources or outflows (expenditures/expenses), and items previously reported as liabilities that will now be reported as either deferred inflows of resources or inflows (revenues). For the year ended December 31, 2013, the City had reported balances of assets held for resale as a deferred inflow of resources, similar to reporting prior to GASB 65, as deferred revenue. However, under GASB 65, the reporting of the balances should be included in equity. Therefore, the City determined it was necessary to restate the beginning fund balances for the Economic Development Authority and the Tax Increment District No. 3 special revenue funds. The details and respective amounts of the restatements are below: As Reported in 2013 2014 Ending Restated Fund Deferred Beginning Balance Inflows Fund Balance Economic Development Authority $ 1,050,239 $ 537,000 $ 1,587,239 Tax Increment District No. 3 4,051,816 13,776,175 17,827,991 Note 2 STEWARDSHIP, COMPLIANCE, AND ACCOUNTABILITY A. BUDGETARY INFORMATION Annual budgets are adopted on a basis consistent with accounting principles generally accepted in the United States for all governmental funds, except for the Tax Increment District No. 2, Tax Increment District No. 5, Police Drug Forfeiture, Centennial Amphitheater, and Capital Reserve Emergency Funds. All annual appropriations lapse at fiscal year end. In August, the City Manager submits to the City Council proposed operating budgets for the fiscal year commencing the following January. The proposed general fund budget and preliminary tax levy must be certified to the County prior to September 30. The Council holds public hearings on the certified budget and levy and must submit a final levy to the County prior to the end of December. 57 CITY OF BROOKLYN CENTER, MINNESOTA NOTES TO THE FINANCIAL STATEMENTS December 31, 2014 The appropriated budget is prepared by fund and department. The City Council must authorize any transfer of budgeted amounts between departments or funds. Transfers of budgeted amounts within departments in the General Fund must be authorized by the City Manager. The legal level of budgetary control is the department level for the General Fund and the fund level for all other governmental funds. There were no supplemental budgetary appropriations or amendments during the year. For the year ended December 31, 2014 expenditures exceeded appropriations in the following General Fund departments and other governmental funds: Final Excess of Budget Actual Appropriations Major Funds: General Fund: Administrative $ 786,682 $ 808,664 $ (21,982) Legal 393,750 403,021 (9,271) Information technology 460,720 465,200 (4,480) Fire protection 1,049,682 1,089,170 (39,488) Park and recreation administration 205,464 208,809 (3,345) Convention bureau 408,500 434,459 (25,959) Nondepartmental 249,370 364,501 (115,131) Transfers out 100,000 2,854,124 (2,754,124) Special Revenue Funds: Tax Increment District No. 3 2,938,650 3,387,979 (449,329) Debt Service Fund 2,624,072 2,716,931 (92,859) Capital Project Funds: Municipal State Aid for Construction 340,000 699,544 (359,544) Infrastructure construction 1,430,000 4,403,561 (2,973,561) Nonmajor Funds: Special Revenue Funds: Economic Development Authority 438,231 513,406 (75,175) Community Development Block Grant 200,000 251,471 (51,471) Tax Increment District No. 4 384,310 422,028 (37,718) City Initiatives Grant 40,947 213,200 (172,253) Capital Project Funds: Street Reconstruction 1,560,000 2,598,664 (1,038,664) 58 B. DEFICIT FUND EQUITY Deficit fund equity exists at December 31, 2014 in the following funds: Unassigned deficit fund balance Major Funds: Tax Increment District No. 5 $ 1,299,859 Debt Service 825 Infrastructure Construction 463,193 Unrestricted deficit net position Major Funds: Golf Course 943,557 Water Utility 2,821,964 The deficits are being funded through internal borrowing and will be repaid from future collections of tax increment, future collections of special assessments, internal transfers, and future bond issuance. Note 3 DETAILED NOTES ON ALL FUNDS A. DEPOSITS AND INVESTMENTS In accordance with Minnesota Statutes, the City maintains deposits at only those depository banks authorized by the City Council. All such depositories are members of the Federal Reserve System. Minnesota Statutes require that all City deposits be protected by insurance, surety bond, or collateral. The market value of collateral pledged must equal 110% of the deposits not covered by insurance or bonds. Authorized collateral includes the legal investments described in Note I.D., as well as certain first mortgage notes, and certain other state or local government obligations. Minnesota Statutes require that securities pledged as collateral be placed in safekeeping in a restricted account at the Federal Reserve bank, or in an account at a trust department of a commercial bank or other financial institution that is not owned or controlled by the financial institution furnishing the collateral. At year-end, the City's carrying value amount of deposits was $101,538 composed of bank balances of $0. 59 CITY OF BROOKLYN CENTER, MINNESOTA NOTES TO THE FINANCIAL STATEMENTS December 31, 2014 As of December 31, 2014 the City had the following investments and maturities: Investment Maturities (in years) Investment Type Fair Value No maturity < 1 1 -3 3-5 Negotiable certificates ofdeposit $ 12,129,571 $ - $ 5,636,691 $ 4,542,759 $ 1,950,121 Federal agency notes 15,730,435 - 1,100,342 13,108,543 1,521,550 External investment pool - 4M Fund 14,114,708 14,114,708 - - - Money market 2,441,877 2,441,877 Total Investments $ 44,416,591 $ 16,556,585 $ 6,737,033 $ 17,651,302 $ 3,471,671 As of December 31, 2014, the City had the following summary of investments related to the credit risk, par values and fair values of securities: % of total Investment Type Credit Risk (*)Par Fair Value Portfolio Negotiable certificates of deposit n/a $ 12,150,000 $ 12,129,571 27.30% Federal agency notes AA 15,700,000 15,730,435 35.42% External investment pool - 4M Fund n/a 14,057,174 14,114,708 31.78% Money market AAA 2,441,867 2,441,877 5.50% Total Investments $ 44,349,041 $ 44,416,591 100.00% (*) The credit risk for the Federal Agency Notes and Money Market ratings are provided by S&P. The deposits and investments of the City are presented in the financial statements as follows: Investments $ 44,416,591 Deposits 101,538 Petty cash and change funds 13,785 Total cash, cash equivalents, and investments $ 44,531,914 Interest rate risk - The City's investment policy requires interest earnings remain stable and predictable through at least the next budget cycle and that at least 50% of the investment portfolio remain for two or more years with known interest rates. The policy also states that the portfolio shall remain sufficiently liquid to meet all operating requirements that may be reasonably expected. Credit risk - The City's investment policy restricts investment instruments to those authorized by Minnesota Statutes § 11 8A as listed in Note I .D. The policy also requires that any counterparty in investment transactions be pre-qualified and approved by the City Council and that the portfolio be diversified to limit potential losses on individual securities. As of December 31, 2014 the City's investment in FHLMC, FNMA, FHLB and FFCB federal agency notes were rated AA by Standard & Poors (S&P). The City's external investment pool is with the Minnesota Municipal Money Market Fund which is regulated by Minnesota Statutes and the Board of Directors of the League of Minnesota Cities. The 4M fund is a 20-like pool and is based on an amortized cost method that approximates fair value. 60 CITY OF BROOKLYN CENTER, MINNESOTA NOTES TO THE FINANCIAL STATEMENTS December 31, 2014 Concentration of credit risk — The City's investment policy requires that the investment portfolio be diversified tc minimize potential losses on individual securities. As of year end, the City had portfolio concentrations in excess of five percent (excluding external investment pools) in the following federal agencies: Federal Home Loan Mortgage Corporation (10.09%), Federal National Mortgage Association (13.44%) Federal Farm Credit Bank (5.97%) and Federal Home Loan Bank (5.90%). Custodial credit risk— The City's investment policy requires that securities purchased from any bank or dealer be placed with an independent third party for custodial safekeeping. Investments in investment pools and money markets are not evidenced by securities that exist in physical or book entry form, and therefore are not subject to custodial credit risk disclosures. All of the City's remaining investments were held in an institutional trust under contract with the City for safekeeping services. B. RECEIVABLES Significant receivable balances not expected to be collected within one year of December 31, 2014 are as follows: Delinquent Delinquent Property Tax Special Municipal Notes Taxes Increments Assessments State-Aid Receivable Major Funds: General $ Tax Increment District No. 3 Tax Increment District No. 5 Debt Service Capital Improvements Municipal State Aid for Construction Infrastructure Construction Nonmajor Funds Housing and Redevelopment Authority 58,298 $ - $ 161,137 $ - 54,347 - - - - 9,784 - - 210,000 5,546 - 1,931,722 - - 9,893 - 2,192 - - - - - 1,077,504 - - - 2,043,117 - - 5.128 - - - - Total $ 78,865 $ 64,131 $ 4,138,168 $ 1,077,504 $ 210,000 The Economic Development Authority (EDA) offers a down payment and closing cost assistance program to home buyers purchasing foreclosed or vacant properties as their principal residence. The program offers up to a $10,000, no-interest deferred loan that is forgivable if the borrower resides in the property for five consecutive years. As of December 31, 2014, the balance of these loans is $669,750. There has been an allowance for doubtful accounts recorded for the same amount, as it is fully expected that these loans will be forgiven. 61 CITY OF BROOKLYN CENTER, MINNESOTA NOTES TO THE FINANCIAL STATEMENTS December 31, 2014 Beginning Ending Balance Increases Decreases Balance Governmental activities: Capital assets, not being depreciated: Land Easements - perpetual Construction in progress Total capital assets, not being depreciated Capital assets, being depreciated: Easements - temporary Buildings and improvements Park improvements Machinery and equipment Street infrastructure Total capital assets, being depreciated Less accumulated depreciation for: Easements - temporary Buildings and improvements Park improvements Machinery and equipment Street infrastructure Total accumulated depreciation Total capital assets being depreciated - net Governmental activities capital assets - net $ 3,537,473 $ - $ - $ 3,537,473 88,704 - - 88,704 3,375,955 3,353,244 (3,452,986) 3,276,213 7,002,132 3,353,244 (3,452,986) 6,902,390 22,715 -- 22,715 19,566,900 -- 19,566,900 10,341,934 158,310 - 10,500,244 9,071,355 645,689 (470,230) 9,246,814 39,354,407 2,655,411 - 42,009,818 78,357,311 3,459,410 (470,230) 81,346,491 11,749 4,538 - 16,287 11,191,847 656,123 - 11,847,970 4,254,238 290,117 - 4,544,355 5,139,505 759,357 (415,051) 5,483,811 15,560,901 1,402,980 - 16,963,881 36,158,240 3,113,115 (415,051) 38,856,304 42,199,071 346,295 (55,179) 42,490,187 $ 49,201,203 $ 3,699,539 $ (3,508,165) $ 49,392,577 Depreciation expense was charged to functions/programs of the City as follows: Governmental activities: General government Public safety Public works Parks and recreation Capital assets held by the City's internal service funds are charged to the various functions based on their usage of the assets Total depreciation expense - govermnental activities $ 85,636 396,871 1,674,836 235,573 720,199 $ 3,113,115 62 CITY OF BROOKLYN CENTER, MINNESOTA NOTES TO THE FINANCIAL STATEMENTS December 31, 2014 Beginning Ending Balance Increases Decreases Balance Business-type activities: Capital assets, not being depreciated: Land Easements - perpetual Construction in progress Total capital assets, not being depreciated Capital assets, being depreciated: Easements - temporary Land improvements Buildings and improvements Machinery and equipment Street light systems Mains and lines Total capital assets, being depreciated Less accumulated depreciation for: Easements - temporary Land improvements Buildings and improvements Machinery and equipment Street light systems Mains and lines Total accumulated depreciation Total capital assets being depreciated - net Business-type activities capital assets - net $ 3,194,983 $ - $ - $ 3,194,983 10,285 - - 10,285 2,793,558 9,044,636 (3,412,683) 8,425,511 5,998,826 9,044,636 (3,412,683) 11,630,779 20,335 -- 20,335 442,891 -- 442,891 18,757,600 239,261 - 18,996,861 1,008,176 48,751 (97,258) 959,669 671,933 102,953 - 774,886 64,420,651 3,309,730 - 67,730,381 85,321,586 3,700,695 (97,258) 88,925,023 10,518 4,063 - 14,581 229,693 16,627 - 246,320 14,747,125 808,358 - 15,555,483 659,168 62,223 (59,698) 661,693 96,323 48,221 - 144,544 33,111,097 2,284,952 - 35,396,049 48,853,924 3,224,444 (59,698) 52,018,670 36,467,662 476,251 (37,560) 36,906,353 $ 42,466,488 $ 9,520,887 $ (3,450,243) $ 48,537,132 Depreciation expense was charged to functions/programs of the City as follows: Business-type activities: Municipal liquor Golf course Earle Brown Heritage Center Water utility Sanitary sewer utility Storm drainage utility Street light utility Total depreciation expense - business-type activities $ 24,328 18,738 683,625 658,163 735,595 1,055,774 48,221 $ 3,224,444 63 CITY OF BROOKLYN CENTER, MINNESOTA NOTES TO THE FINANCIAL STATEMENTS December 31, 2014 CONSTRUCTION COMMITMENTS At December 31, 2014 the City had construction project contracts in progress.The commitments related to remaining contract balances are summarized as follows: Contract Remaining Project Amount Commitment Wangstad Park Area Infrastructure Improvements $ 6,351,444 $ 140,015 Water Treatment Plant 18,066,121 14,255,122 Total $ 24,417,565 $ 14,395,137 D. INTERFUND BALANCES AND TRANSFERS The composition of due to/from other fund balances at December 31, 2014 are as follows: Fund Major Funds: General Capital Improvements Infrastructure Construction Golf Course Water Utility Total Due from Due to Other Funds Other Funds $ 153,810 $ - 3,724,957 - - 182,188 - 153,810 - 3,542,769 $ 3,878,767 $ 3,878,767 Interfund due to/from balances are representative of lending/borrowing arrangements to cover deficit cash balances at the end of the fiscal year. Balances will be paid with future operating revenues and/or interfund transfers, collections of special assessments on benefiting property owners, and with the issuance of bonds to finance the water treatment plant. Individual fund advances to and advances from other funds at December 31, 2014 are as follows: Fund Major Funds: Tax Increment District No. 5 Capital Improvements Golf Course Nonmajor Funds: Tax Increment District No. 2 Advances to Advances From Other Funds Other Funds $ - $ 2,442,676 792,488 - - 792,488 2,442,676 - $ 3,235,164 $ 3,235,164 64 CITY OF BROOKLYN CENTER, MINNESOTA NOTES TO THE FINANCIAL STATEMENTS December 31, 2014 The $ 2,442,676 advance between the Tax Increment District No. 2 and the Tax Increment District No. 5 funds was made to provide funding for a specific development project within the City. The financing plan adopted for the Tax Increment District No. 5 has the repayment of principal scheduled to begin in 2024, however current cash flow projections imply a more immediate repayment plan, beginning in 2022. The $792,488 advance between the Golf Course and Capital Improvements fund was made for improvements to the golf course. A repayment schedule for this advance has not yet been adopted. The composition of interfund transfers as of December 31, 2014 are as follows: Transfer In Transfer Out Governmental Funds: Major Funds: General $ 129,544 $ 2,854,124 Tax Increment District No. 3 -2,073,345 Debt Service 2,073,345 - Capital Improvements 3,116,314 - Municipal State-Aid for Construction 78,000 360,000 Infrastructure Construction 1,902,259 2,805,702 Nonmajor Funds: Housing and Redevelopment Authority -278,764 Economic Development Authority 278,764 - Community Development Block Grant -129,544 Street Reconstruction 2,785,269 1,286,759 Technology 100,000 - Total governmental funds 10,463,495 9,788,238 Proprietary Funds: Major Funds: Municipal Liquor - 362,190 Water Utility - 95,974 Sanitary Sewer Utility - 134,574 Storm Drainage Utility 20,433 - Street Light Utility - 102,952 Total proprietary funds 20,433 695,690 Total all funds $10,483,928 $10,483,928 Interfund transfers allow the City to allocate financial resources to the funds that receive benefit from services provided by another fund or to provide additional capital and infrastructure funding. In addition, interfund transfers are occasionally authorized to allow redistribution of resources between funds for the most efficient use of funds. In 2014, the following non-routine transfers were made between funds: • The General fund transferred $2,754,124, and the Municipal Liquor fund transferred $362,190 to the Capital Improvements fund in accordance with a project funding policy that was adopted by the City Council in early 2014. • The Street Reconstruction fund transferred $78,000 to the Municipal State-Aid for Construction fund. This was a reimbursement of previous years expenditures in relation to liquidated damages for an older infrastructure project. 65 CITY OF BROOKLYN CENTER, MINNESOTA NOTES TO THE FINANCIAL STATEMENTS December 31, 2014 • The Infrastructure Construction fund transferred $2,785,269 to the Streets Reconstruction fund to allocate the proceeds of the 2013B G.O. Improvement bonds, as total project costs were not known at the time of the bond issuance. • As part of the completion of the Kylawn Area Infrastructure Improvements project, there was a total of $1,922,693 of transfers between the following funds: Municipal State-Aid for Construction, Infrastructure Construction, Streets Reconstruction, Water Utility, Sanitary Sewer Utility, Storm Drainage Utility and Street Light Utility. Once the project was completed, it was necessary to make sure all funds contributed their appropriate share of the project costs. E. OPERATING LEASES The City has leased a portion of the police second floor expansion area to the Local Government Information Systems Association (LOGIS) as a backup computer facility. The lease has a term of five years, commencing on August 1, 2011 and calls for monthly lease payments based on square-footage. Lease revenue for the year ended December 31, 2014 was $ 13,200. Future minimum lease revenues under the current agreement is as follows: Year Total Ending Minimum Rents 2015 $ 13,200 2016 7,700 $ 20,900 The City leases space for its municipal liquor stores. The leases are ten-year leases and began in 2010 and 2013. The leases provide for a minimum monthly base rent payment, plus a pro-rata share of common area expenses. Additional lease payments are required if agreed-upon revenue thresholds are attained. These leases may be cancelled at the City's option if the City ceases liquor operations. Total rental expense under the lease agreements for the year ended December 31, 2014 was $ 303,108. Future minimum base rent payments under the current agreements are as follows: Year Total Ending Minimum Rents 2015 $ 229,914 2016 234,888 2017 234,888 2018 234,888 2019 234,888 2020-2023 444,204 $ 1,613,670 66 CITY OF BROOKLYN CENTER, MINNESOTA NOTES TO THE FINANCIAL STATEMENTS December 31, 2014 The City is the lessor in an operating lease for building and office facilities. The leased space includes multiple tenants, all of which have different lease terms, but include: short and long term lease expiration dates. Two of the tenants do have the option to extend their lease terms by five years, however, the City acquired the respective property in 2013 as part of a redevelopment plan, so the likelihood of the leases being extended are minimal. For the year ended 2014, the City received $363,788 in rental revenue. Future minimum base rent revenues under the current agreements are as follows: Year Total Ending Minimum Rents 2015 $ 238,361 2016 237,899 2017 254,439 2018 262,877 2019 102,942 2020-2021 208,238 $ 1,304,756 F. LONG-TERM DEBT GOVERNMENTAL ACTIVITIES The City issued general obligation improvement bonds to provide funds for the construction of major capita facilities and construction of infrastructure. These bonds are reported in the governmental activities of the City. The City issued general obligation tax increment bonds to finance various redevelopment projects and redevelopment property acquisitions within the City. These bonds are reported in the governmental activities of the City. Final Interest Maturity Original Payable Rates Date Date Issue 12/31/14 G.O. Tax Increment Bonds: Taxable Tax Increment Bonds of 2004 Taxable Tax Increment Bonds of 2008 Taxable Tax Increment Bonds of 2013 Total G.O. Tax Increment Bonds G.O. Improvement Bonds: Improvement Bonds, 2004C Improvement Bonds, 2006A Improvement Bonds, 2008B Improvement Bonds, 2013B Total G.O. Improvement Bonds 4.75 - 5.13% 12/01/2004 02/01/2020 3.00- 5.30% 05/01/2008 02/01/2018 2.00 -3.25% 12/19/2013 02/01/2022 2.10-3.65%12/01/2004 02/01/2015 3.55 -3.80%12/15/2006 02/01/2017 3.25 -4.25%12/15/2008 02/01/2019 3.00%12/19/2013 02/01/2024 $ 17,245,000 $ 9,500,000 4,335,000 500,000 6,040,000 6,040,000 27,620,000 16,040,000 1,010,000 90,000 1,460,000 330,000 2,390,000 1,105,000 4,920,000 4,920,000 9,780,000 6,445,000 Total - bonded indebtedness $37,400,000 22,485,000 Other Liabilities: Compensated absences payable 1,282,093 Net OPEB obligation 629,994 Total governmental activities $ 24,397,087 67 CITY OF BROOKLYN CENTER, MINNESOTA NOTES TO THE FINANCIAL STATEMENTS December 31, 2014 All long-term bonded indebtedness outstanding at December 31, 2014 is backed by the full faith and credit of the City, including improvement and tax increment bond issues. Bonds in the governmental activities will be retired by future property tax levies, tax increments or special assessments accumulated in the specific debt services funds. In the event that a deficiency exists because of unpaid or delinquent taxes or special assessments at the time a debt service payment is due, the City must provide resources to cover the deficiency until other resources are available. At the end of the current year, there are $3,848,634 of assets accumulated in the debt service funds for future debt service. Included within those accumulated assets, there are a combined $36,326 of delinquent property taxes and special assessments receivable. Annual debt service requirements to maturity for governmental activities long-term debt are as follows: Governmental Activities Year Ending G.O. Tax Increment Bonds G.O. Improvement Bonds December 31 Principal Interest Principal Interest 2015 $ 1,755,000 $ 638,831 $1,270,000 $187,220 2016 1,835,000 560,238 885,000 151,210 2017 1,930,000 475,425 820,000 122,480 2018 2,005,000 383,350 750,000 96,173 2019 2,045,000 286,788 690,000 72,250 2020 -2024 6,470,000 325,794 2,030,000 123,600 Total $ 16,040,000 $ 2,670,426 $6,445,000 $752,933 BUSINESS-TYPE ACTIVITIES The City issued general obligation revenue bonds to finance the metering of all City connected water and sewer utility services. These bonds are reported in the business-type activities of the City. Final Interest Maturity Original Payable Rates Date Date Issue 12/31/14 General Obligation Taxable Utility Revenue Bonds (Build America Bonds - Direct Pay) 0.70- 5.10% 03/08/2010 02/01/2025 $ 2,350,000 $ 1,800,000 Annual debt service requirements to maturity for business-type activities long-term debt are as follows: Year Ending December 31 Business-Type Activities G .O. Revenue Bonds Principal Interest 2015 $ 140,000 $ 74,095 2016 145,000 70,100 2017 150,000 65,375 2018 155,000 59,880 2019 155,000 53,796 2020-2024 865,000 156,474 2025 190,000 4,845 Total $ 1,800,000 $ 484,565 68 CITY OF BROOKLYN CENTER, MINNESOTA NOTES TO THE FINANCIAL STATEMENTS December 31, 2014 The utility revenue bonds are backed by the fijil faith and credit of the City. Bonds in the business-type activities will be retired with the net revenues of the Water Utility and Sanitary Sewer Utility systems. (Net revenues of each system are defined as the excess of gross revenues and earnings over the normal, reasonable, and current costs of operating and maintaining the system.) In the event that a deficiency exists because of inadequate net revenues at the time a debt service payment is due, the City must provide resources to cover the deficiency until other resources are available. For the year ended December 31, 2014, the water and sewer utility funds provided net revenues of $816,521, which accounts for a debt-service coverage ratio of 376.45%. CHANGE IN LONG-TERM LIABILITIES Long-term liability activity for the year ended December 31, 2014 was as follows: Beginning Ending Due Within Balance Additions Reductions Balance One Year Governmental activities: Bonds payable: G.O. tax increment bonds $17,470,000 $ - $ (1,430,000)$ 16,040,000 $ 1,755,000 G.O. improvement bonds 6,920,000 - (475,000)6,445,000 1,270,000 Total bonds payable 24,390,000 - (1,905,000)22,485,000 3,025,000 Compensated absences 1,232,551 153,693 (104,151)1,282,093 128,209 Net OPEB obligation 586,026 226,724 (182,756)629,994 - Total government activity long-term liabilities $26,208,577 $ 380,417 $ (2,191,907)$ 24,397,087 $ 3,153,209 Business-type activities: Bonds payable: G.O. revenue bonds $ 1,940,000 $ - $ (140,000)$ 1,800,000 $ 140,000 Compensated absences are liquidated by the Public Employees Compensated Absences internal service find and the net OPEB obligation by the Public Employees Retirement internal service fund: CONDUIT DEBT OBLIGATIONS From time to time, the City has issued Housing Revenue Bonds and Industrial Revenue Bonds or Notes to provide assistance to qualified private sector entities for the acquisition and construction of housing, industrial, or commercial facilities deemed to be in the public interest. The bonds or notes are secured by the property financed and are payable solely from payments received on the underlying mortgage loans. The City has no obligation of its assets or of its general tax base for the repayment of any of these bonds or notes. Accordingly, the bonds or notes are not reported as liabilities in the accompanying financial statements. Upon final redemption of the bonds or notes, ownership of the property transfers to the private sector entity served by the bond or note issue. As of December 31, 2014 there were two series of fixed rate Multifamily Housing Revenue Refunding bonds, one Housing Revenue Development Refinancing Note, two Healthcare Revenue Notes, four Senior Housing Development Revenue Notes, and two Charter School Lease Revenue bonds outstanding. The aggregate amount of conduit debt as of December 31, 2014 is $23,806,721. 69 CITY OF BROOKLYN CENTER, MINNESOTA NOTES TO THE FINANCIAL STATEMENTS December 31, 2014 Governmental activities Net investment in capital assets: Cost of capital assets $ 88,248,881 Less: accumulated depreciation (38,856,304) Less: related long-term debt outstanding (6,445,000) Total net investment in capital assets 42,947,577 Restricted: Statutory housing obligations 772,843 Tax increment financing 20,030,161 Economic development 1,542,349 Law enforcement enhancements 98,321 Community amphitheater 309,548 Debt service 3,478,655 State-Aid street systems 1,830,100 Total restricted 28,061,977 Unrestricted 12,357,196 Total governmental activities net position $ 83,366,750 Related debt for governmental activities capital assets includes $6,445,000 in G.O. Improvement Bonds which was the amount issued to finance the street portion of construction projects. Business-type activities Net investment in capital assets: Cost of capital assets Less: accumulated depreciation Less: related long-term debt outstanding Total net investment in capital assets Unrestricted Total business-type activities net position $ 100,555,802 (52,018,670) 48,537,132 6,819,765 $ 55,356,897 The long-term debt reported in the Water and Sewer utility funds was used to finance capital improvements, however those items individually were small in scope and not capitalized in the financial statements. Therefore there is no long-term debt applied against the calculation above. 70 Governmental funds Nonspendable Restricted Committed Assigned General Inventories $ 21,967 $ -$ $ - Capital Improvements -- 908,761 Tax Increment District No. 3 Statutory Housing Obligation - 772,843 - - Tax Increment Financing - 17,125,906 - - Debt Service Debt Service - 1,910,266 - - Capital Improvements Capital Improvements - -6,509,230 - Municipal State-Aid for Construction State-Aid Street Systems - 1,830,100 - - Nonmajor Funds Tax Increment Financing - 2,849,908 - - Economic Development - 1,537,221 - - Law Enforcement Enhancements - 98,321 - - Community Amphitheater - 309,548 - - Public Safety - -77,772 - Cable Communications - -256,297 - Community Recreation - -40,350 - Emergency Capital Improvements - -1,066,216 - Street Improvements - -2,541,388 - Technology Improvements - -23,618 - Total fund balances $ 21,967 $26,434,113 $ 10,514,871 $ 908,761 71 Note 4 OTHER INFORMATION A.RISK MANAGEMENT The City is exposed to various risks of loss related to torts; theft of, damage to and destruction of assets; errors and omissions and natural disasters. Property and casualty insurance is provided through the League of Minnesota Cities Insurance Trust (LMCIT), a public entity risk pool currently operating as a common risk management and insurance program for Minnesota cities: general liability, property, automobile, mobile property and marine, crime, employee dishonesty, boiler, and open meeting law. The City pays an annual insurance premium to the LMCIT for its insurance coverage. The City is subject to supplemental assessments if deemed necessary by the LMCIT. Currently, the LMCIT is self-sustaining through member premiums and reinsures through commercial companies for claims in excess of various amounts. The City retains risk for the deductible portions of the insurance policies. The amount of these deductibles is considered immaterial to the financial statements. Workers' compensation coverage is provided through a pooled self-insurance program through the LMCIT. The City pays an annual premium to the LMCIT. The City is subject to supplemental assessments if deemed necessary by the LMCIT. The LMCIT reinsures through Workers' Compensation Reinsurance Association (WCRA) as required by law. For workers' compensation, the City is not subject to a deductible. The City's workers' compensation is retroactively rated. With this type of coverage, final premiums are determined after loss experience is known. The amount of premium adjustment, if any, is considered immaterial and not recorded until received or paid. There were no significant reductions in insurance from the previous year or settlements in excess of insurance coverage for any of the past three years. B.EMPLOYEE RETIREMENT PLANS 1. DEFINED BENEFIT PENSION PLAN PLAN DESCRIPTION All full-time and certain part-time employees of the City are covered by defined benefit plans administered by the Public Employees Retirement Association of Minnesota (PERA). PERA administers the General Employees Retirement Fund (GERF) 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. GERF members belong to either the Coordinated Plan or the Basic Plan. Coordinated Plan members are covered by Social Security and Basic Plan members are not. All new members must participate in the Coordinated Plan. All police officers and fire-fighters who qualify for membership by statute are covered by the PEPFF. 72 CITY OF BROOKLYN CENTER, MINNESOTA NOTES TO THE FINANCIAL STATEMENTS December 31, 2014 BENEFITS PROVIDED 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 five years of credited service. The defined retirement benefits are based on a member's highest average salary for any five successive years of allowable service, age, and years of credit at termination of service. Two methods are used to compute benefits for PERA's Coordinated and Basic Plan members. The retiring member receives the higher of a step-rate benefit accrual formula (method 1) or a level accrual formula (method 2). Under Method 1, the annuity accrual rate for a Basic Plan member is 2.20 percent of average salary for each of the first 10 years of service and 2.70 percent for each remaining year. The annuity accrual for a Coordinated Plan member is 1.20 percent of average salary for each of the first 10 years, and 1.70 percent for each remaining year. Under Method 2, the annuity accrual rate is 2.70 percent of average salary for Basic Plan members and 1.70 percent for Coordinated Plan members for each year of service. For PEPFF members, the annuity accrual rate is 3.00 percent for each year of service. For all members hired prior to July 1, 1989 whose annuity is calculated using Method 1, a full annuity is available when age plus years of service equal 90. Normal retirement age is 55 for PEPFF members, and 65 for Basic and Coordinated members hired prior to July 1, 1989. Normal retirement age is the age for unreduced Social Security benefits capped at 66 for Coordinated members hired on or after July 1, 1989. A reduced retirement annuity is also available to eligible members seeking early retirement. There are different types of annuities available to members upon retirement. A single-life annuity is a lifetime annuity that ceases upon the death of the retiree, of which no survivor annuity is payable. There are also various types of joint and survivor annuity options available which will be payable ofjoint lives. Members may also leave their contributions in the fund upon termination of public service in order to qualify for a deferred annuity at retirement age. Refunds of contributions are available at any time to members who leave public service, but before retirement benefits begin. The benefit provisions stated in the previous paragraphs of this section are current provisions and apply to active plan participants. Vested, terminated employees who are entitled to benefits but are not receiving them yet are bound by the provisions in effect at the time they last terminated public service. PERA issues a publicly available financial report that includes financial statements and required supplementary information for GERF and PEPFF. That report may be obtained by writing to PERA, 60 Empire Drive Suite #200, St. Paul, Minnesota, 55103-2088 or by calling (651) 296-7460 or 1-800-652-9026. CONTRIBUTIONS Minnesota Statutes Chapter 353 sets the rates for employer and employee contributions. These statutes are established and amended by the state legislature. The City makes annual contributions to the pension plans equal to the amount required by state statutes. GERF Coordinated Plan members are required to contribute 6.25% of their annual covered salary. PEPFF members are required to contribute 10.20% of their annual covered salary. The City is required to contribute the following percentages of annual covered payroll: 7.25% for Coordinated Plan GERF members and 15.30% for PEPFF members. The City's contributions to the General Employees Retirement Fund for the years ending December 31, 2014, 2013, and 2012 were $531,385, $521,512, and $498,832, respectively. The City's contributions to the Public Employees Police and Fire Fund for the years ending December 31, 2014, 2013, and 2012 were $600,402, $560,053, and $544,497, respectively. The City's contributions were equal to the contractually required contributions for each year as set by state statute 73 2. PENSION PLAN - BROOKLYN CENTER FIRE DEPARTMENT RELIEF ASSOCIATION PLAN DESCRIPTION The City contributes to the Brooklyn Center Fire Department Relief Association (the Association) which is the administrator of a single employer, public employee defined benefit retirement system to provide a retirement plan (the Plan) to volunteer firefighters of the City who are members of the Association. The Association is organized and operates under the provisions of Minnesota State Statutes 424A, and provides benefits in accordance with those statutes. The Association provides retirement benefits to members and survivors, upon death of eligible members. Benefits are established by the Association and approved by the City Council under the applicable statutes. The defined retirement benefits are based on a member's years of service. Vesting begins after the 10th year of service with a 60% benefit increasing to 100% after the 20th year of service. Full benefits are available after 20 years of service by the member and having attained the age of 50. The current benefit available is a lump sum distribution of $7,500 per year of service. Vested, terminated members who are entitled to benefits but are not yet receiving them are bound by the provisions in effect at the time of termination of membership. The Association issues a financial report that includes financial statements and required supplementary information for the Brooklyn Center Fire Department Relief Association. That report is available at the City of Brooklyn Center City offices. FUNDING POLICY The City levies property taxes at the direction of and for the benefit of the Plan and passes through state aids allocated to the Plan, all in accordance with enabling State statutes. The minimum tax levy obligation is the financial contribution requirement for the year less anticipated state aids. CONTRIBUTIONS Total contributions to the plan in 2014 were $140,216, of which the City contributed $6,471, and the remaining, $133,745 was contributed by the State of Minnesota. The actual contribution was in excess of the contribution determined by an actuarial valuation, which was $101,453. That actuarial valuation was performed at January 1, 2013, and represents funding for normal cost. 74 CITY OF BROOKLYN CENTER, MINNESOTA NOTES TO THE FINANCIAL STATEMENTS December 31, 2014 The information below is the most recent data available. Actuarial valuation date Actuarial cost method Amortization method Remaining amortization period Asset valuation method Actuarial assumptions: Investment rate of return Discount rate for obligations Projected salary increases Post retirement benefits Inflation rate THREE YEAR TREND INFORMATION 1/1/2013 Entry age normal cost method Level dollar amount amortized on a closed basis 8 years fair value 6.0% compounded annually 6.00% Not applicable None Not applicable Annual Percentage Net Year Pension Contributions of APC Pension Ending Cost (APC) State-Aid City Total Contributed Obligation 12/31/2012 $ 105,363 $ 95,982 $ 55,521 $ 151,503 144% $ 12/31/2013 100,728 134,340 13,329 147,669 147% 12/31/2014 108,883 133,745 6,471 140,216 129% SCHEDULE OF FUNDING PROGRESS Assets in Excess of Actuarial Actuarial Actuarial (Unfunded) Valuation Value of Accrued Accrued Funded Date Assets Liability Liability Ratio 01/01/2009 $ 2,654,832 $ 3,240,590 $ (585,758) 81.9% 01/01/2011 3,303,595 3,253,686 49,909 101.5% 01/01/2013 3,282,317 3,279,231 3,086 100.1% C. OTHER POST-EMPLOYMENT BENEFITS PLAN DESCRIPTION In addition to providing the pension benefits described in Note 4.13., the City provides postemployment health care benefits for retired employees and police disabled in the line of duty, through a single-employer defined benefit plan administered by the City. The authority to provide these benefits is established in Minnesota Statutes Sections 471.61 subd. 2a. and 299A.465. The benefits, benefit levels, employee contributions and employer contributions are governed by the City and can be amended by the City through its personnel manual and collective bargaining agreements with employee groups. The Plan is not accounted for as a trust fund, as an irrevocable trust has not been established to account for the Plan. The Plan does not issue a separate report. 75 CITY OF BROOKLYN CENTER, MINNESOTA NOTES TO THE FINANCIAL STATEMENTS December 31, 2014 BENEFITS PROVIDED Retirees The City is required by State Statute to allow retirees to continue participation in the City's group health insurance plan if the individual terminates service with the City through service retirement or disability retirement. Former employees who are receiving, or who have met age and service requirements to receive, an annuity from a Minnesota public pension plan and those receiving a disability benefit from such a plan are immediately eligible to participate in this Plan. Retirees may obtain dependent coverage if the employee received dependent coverage immediately before leaving employment. Covered spouses may continue coverage after the death of a retiree. In addition, the surviving spouse of an active employee may continue coverage in the group health insurance plan after the employee's death. All health care coverage is provided through the City's group health insurance plans. The retiree is required to pay the premium as described below: Employees hired before January 1. 1992 with continuous full-time employment Employees who, on the date of their retirement, meet eligibility requirement for a full retirement annuity under PERA or PERA Police without reduction of benefits because of age, disability, or any other reason for reduction shall be eligible for the City to pay 100% of the single-person premium until such time as the retiree is eligible for Medicare or at age 65, whichever is sooner. If the retiree desires to continue coverage in excess of single coverage, the additional cost for the coverage shall be paid to the City by the retiree on a monthly basis. Employees hired after January 1. 1992 The retiree is required to pay 100% of their premium cost for the City-sponsored group health insurance plan in which they participate. The premium is a blended rate determined on the entire active and retiree population. Since the projected claims costs for retirees exceed the blended premium paid by retirees, they are receiving an implicit rate subsidy (benefit). The coverage levels are the same as those afforded to active employees. Disabled police and firefighter The City is required to continue to pay the employer's contribution toward health coverage for police or firefighters disabled in the line of duty per Minnesota Statute 299A.465, until age 65. Dependent coverage is included, if the dependents were covered at the time of the disability. PARTICIPANTS As of the actuarial valuation dated January 1, 2014, participants consisted of: Retirees for which the City is paying the single premium 14 Retirees and beneficiaries currently purchasing health insurance through the City Disabled police officers Active employees 151 Total 168 76 The City's annual other post-employment benefit (OPEB) cost is calculated based on the annual required contribution (ARC) of the employer, an amount actuarially determined in accordance with the parameters of GASB Statement No. 45. The ARC represents a level of funding that, if paid on an ongoing basis, is projected to cover the normal cost each year and amortize any unfunded actuarial obligation (or funding excess) over a period not to exceed 30 years. The net OPEB obligation as of December 31, 2014 was calculated as follows: Annual required contribution $ 222,477 Interest on net OPEB obligation 26,371 Adjustment to ARC (22,124) Annual OPEB cost 226,724 Employer Contributions Direct 137,445 Indirect Implicit Rate Subsidy 45,311 Increase (decrease) in net OPEB obligation 43,968 Net OPEB obligation, beginning of year 586,026 Net OPEB obligation, end of year $ 629,994 The City had an actuarial valuation performed for the plan as of January 1, 2014 to determine the funded status of the plan as of that date as well as the employer's ARC for the fiscal year ended December 31, 2014, The City's annual OPEB cost, the percentage of annual OPEB cost contributed to the plan, and the net OPEB obligation for the past three years were as follows: Percentage of Fiscal Annual Annual Net Year OPEB Employer OPEB Cost OPEB Ended Cost Contributions Contributed Obligation 12/31/2012 $ 235,918 $ 159,375 67.56% $ 487,353 12/31/2013 238,744 140,071 58.67% 586,026 12/31/2014 226,724 182,756 80.61% 629,994 77 CITY OF BROOKLYN CENTER, MINNESOTA NOTES TO THE FINANCIAL STATEMENTS December 31, 2014 FUNDED STATUS AND FUNDING PROGRESS The City currently has no assets that have been irrevocably deposited into a trust for future benefits; therefore, the actuarial value of assets is zero. Instead of depositing funds into an irrevocable trust, the City has chosen to accumulate funding into an internal service fund. The cash and investment balance of the internal service fund is $675,036 for the year ended December 31, 2014. The funded status of the plan was as follows: Unfunded Actuarial Actuarial UAAL as a Actuarial Actuarial Accrued Accrued Percentage Valuation Value of Liability Liability Funded Covered of Covered Date Assets (AAL) (UAAL) Ratio Payroll Payroll 1/1/2010 $ - $ 3,012,383 $ 3,012,383 0.00% $ 9,143,276 32.95% 1/1/2012 - 2,620,367 2,620,367 0.00% 9,472,237 27.66% 1/1/2014 - 2,574,529 2,574,529 0.00% 9,934,960 25.91% ACTUARIAL METHODS AND ASSUMPTIONS Actuarial valuations of an ongoing plan involve estimates of the value of reported amounts and assumptions about the probability of occurrence of events far into the future. Examples include assumptions about future employment, mortality, and the health care cost trend. Amounts determined regarding the funding status of the plan and the annual required contribution of the employer are subject to continual revision as actual results are compared with past expectations and new estimates are made about the future. The schedule of funding progress, presented as required supplementary information following the notes to the financial statements, presents multi-year trend information that shows whether the actuarial value of the plan assets is increasing or decreasing over time relative to the actuarial accrued liabilities for benefits. Projections of benefits for financial reporting purposes are based on the substantive plan (the plan as understood by the employer and plan members) and include the types of benefits provided at the time of each valuation and the historical pattern of sharing of benefit costs between the employer and plan members to that point. The actuarial methods and assumptions used include techniques that are designed to reduce the effect of short-term volatility in actuarial accrued liabilities and the actuarial value of assets, consistent with the long-term perspective of the calculations. In the January 1, 2014 actuarial valuation, the Projected Unit Credit actuarial cost was used. The actuarial assumptions included a 4.5% investment rate of return (net of administrative expenses) and an initial annual health care cost trend rate of 9.0% reduced by 0.33% each year to arrive at an ultimate health care cost trend rate of 5.0%. Both rates include a 3.0% inflation assumption. The actuarial value of assets is $0, however the City does have $675,036 of funds accumulated in an internal service fund. The plans' unfunded actuarial accrued liability is being amortized as of the valuation date with a payroll growth rate of 3.75% over 30 years on an open basis. D. ARBITRAGE REBATE The Tax Reform Act of 1986 requires governmental entities to pay to the federal government income earned on the proceeds from the issuance of debt in excess of interest costs, pending the expenditure of the borrowed funds. This rebate of interest income (known as arbitrage) applies to governmental debt issued after August 31, 1986. The City issued greater than $5 million of bonds in 2004 and therefore is required to rebate excess investment income relating to these issues to the federal government. The extent of the City's liability for arbitrage rebates on the remaining bond issues is not determinable at this time. However, in the opinion of management, any such liability would be immaterial. 78 CITY OF BROOKLYN CENTER, MINNESOTA NOTES TO THE FINANCIAL STATEMENTS December 31, 2014 E.LITIGATION The City is subject to certain legal claims in the normal course of business. Management does not expect the resolution of these claims will have a material impact on the City's financial condition or results of operations. F.CONTINGENT LIABILITIES Tax Increment Notes In May 2002, the City entered into two limited tax increment notes with developers whereby the City will pay the developers a percentage of the available tax increment. Whether payments will occur and the amount of the payments is unpredictable since all payments are dependent on the City receiving tax increment revenues from the developer's project. As such, this liability has not been recorded in the financial statements. Any potential liability ends with the decertification of the tax increment district. In December 2012, the City entered into a tax increment revenue note with a developer whereby the City will pay the developer the available tax increments as defined in the Tax Increment Development Agreement. Whether payments will occur and the amount of the payments is unpredictable since all payments are dependent on the City receiving tax increment revenues from the developer's project. As such, this liability has not been recorded in the financial statements. Any potential liability ends with the decertification of the tax increment district. A schedule of the notes outstanding at December 31, 2014 is as follows: Amended or Original 12/31/2014 Interest Maturity Note Principal Balance Rate Date Twin Lakes Business Park $ 2,424,199 $ 731,460 8.00% 01/31/2021 Shingle Creek Crossing Project 2,300,000 2,300,000 6.00% 02/01/2028 G. JOINT VENTURES AND JOINTLY GOVERNED ORGANIZATIONS The City has several agreements with other entities that provide reduced costs, better service, and additional benefits to the participants. The programs in which the City participates are listed below and amounts recorded within the current year's financial statements are disclosed. Local Government Information 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 2014 financial statements of the City is $598,764 for general services and application upgrades provided. Costs were allocated to the various funds based on applications and/or use of services. Complete financial statements for LOGIS may be obtained at the LOGIS offices located at 5750 Duluth Street, Golden Valley, Minnesota 55422. LOGIS Insurance Group This group provides cooperative purchasing of health and life insurance benefits for approximately 45 governmental entities. The total of 2014 health and life insurance costs paid by the City was $1,368,949. Complete financial statements may be obtained from Gallagher Benefit services, Inc. located at 3600 American Blvd West, Bloomington, MN 55431. ,A] CITY OF BROOKLYN CENTER, MINNESOTA NOTES TO THE FINANCIAL STATEMENTS December 31, 2014 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 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 4.B.2. for disclosures relating to the pension plan operated by the Association.) Complete financial statements for the Association may be obtained at the City offices located at 6301 Shingle Creek Parkway, Brooklyn Center, Minnesota 55430. H. SUBSEQUENT EVENTS On January 21, 2015, the City issued a Taxable General Obligation Water Revenue Note. The note was issued by the Minnesota Public Facilities Authority to finance the construction of water treatment plant. Total funding available from this note is $19,662,352, and bears an interest rate of 1.00%. Repayment of the note will be made semi-annually in February and August annually, with the first interest payment due in August 2015, and the first principal payment due in August 2016. The final maturity of the note will be in August 2034. The note will be repaid with increases on user rates within the Water Utility fund, with those rate increases becoming effective April 1, 2015. The note is backed by the full faith and credit of the City. As of December 31, 2014, the City had not drawn down any of these funds, however the City had incurred expenses for the construction of the water treatment plant. The City received its first reimbursement, on January 30, 2015, in the amount of $4,468,266. 80 Su plementarV Infor m atio n CITY OF BROOKLYN CENTER, MINNESOTA REQUIRED SUPPLEMENTARY INFORMATION SCHEDULE OF FUNDING PROGRESS - OTHER POSTEMPLOYMENT BENEFITS For the Year Ended December 31, 2014 Unfunded Actuarial Actuarial Actuarial Actuarial UAAL as a Valuation Value of Accrued Accrued Funded Covered Percentage of Date Assets Liability (AAL)Liability (UAAL)Ratio Payroll Covered Payroll January 1, 2010 - $ 3,012,383 $ 3,012,383 0.00%$ 9,143,276 32.95% January 1, 2012 - 2,620,367 2,620,367 0.00%9,472,237 27.66% January 1, 2014 - 2,574,529 2,574,529 0.00%9,934,960 25.91% 81 I This page has been left blank intentionally. 82 ]1111111111111 Individual ! au I ill Statements & Schedules CITY OF BROOKLYN CENTER, MINNESOTA NONMAJOR SPECIAL REVENUE FUNDS A special revenue fund is used to account for and report the proceeds of specific revenue sources that are restricted or committed to expenditure for specified purposes other than debt service or capital projects. Housing and Redevelopment Authority (HRA) This fund was established to account for housing and redevelopment projects within the City of Brooklyn Center. The BRA has the authority to levy an ad-valorem property tax levy, which is the primary funding source for the expenditures from this fund. Annually, the cash balance at the end of the year is transferred into the EDA fund. Economic Development Authority (EDA) This fund was established to account for the development related activities in the City of Brooklyn Center. The EDA generates the funding to accomplish the development projects from grants, excess funding from the HRA property tax levy, or from transfers from other funds of the City. Community Development Block Grant This fund was established to account for the collection of grant funding for related projects within the City. During the year, the City received grant funding through the Neighborhood Stabilization Program, which is for the acquisition of run-down properties, the improvement of said properties, and then marketing them to the public. Police Forfeitures This fund was established to account for the proceeds from property seized by Police Department personnel. Tax Increment District No. 2 This fund was established to account for the collection of tax increment generated revenues for parcels within the District. These funds are used to finance the various redevelopment activities within the District, which consisted of the redevelopment of the properties historically referred to as the Earle Brown Farm. Tax Increment District No. 4 This fund was established to account for the collection of tax increment generated revenues for parcels within the District. These funds are used to finance the various redevelopment activities within the District, which consisted of soil remediation projects within the France Avenue Business Park. City Initiative Grants Revenues and expenditures from grants received from outside entities are accounted for in the fund. The Police Department receive several federal, state and other local grants, which are accounted for here. Other activities include grant funding for local recreation programs and cable television. Centennial Ampitheater This fund was established to account for the accumulation of donations and other funding sources that will be used to build the Centennial Civic & Veterans Memorial Ampitheater. 83 CITY OF BROOKLYN CENTER, MINNESOTA DEBT SERVICE FUND Debt service funds are used to account for and report financial resources that are restricted, committed or assigned to expenditure for principal, interest and other charges related to long-term debt. General Obligation Improvement Bonds, 2004C This fund was established to accumulate collections of special assessments which were levied on the property owners who benefited from the improvements that were constructed with the proceeds of this bond. This bond has a final maturity date of February 1, 2015. General Obligation Improvement Bonds, 2006A This fund was established to accumulate collections of special assessments which were levied on the property owners who benefited from the improvements that were constructed with the proceeds of this bond. This bond has a final maturity date of February 1, 2017. General Obligation Improvement Bonds, 2008B This fund was established to accumulate collections of special assessments which were levied on the property owners who benefited from the improvements that were constructed with the proceeds of this bond. This bond has a final maturity date of February 1, 2019. General Obligation Improvement Bonds, 2013B This fund was established to accumulate collections of special assessments which were levied on the property owners who benefited from the improvements that were constructed with the proceeds of this bond. This bond has a final maturity date of February 1, 2024. Tax Increment Bonds, 2013A This fund was established to account for the collection of tax-increment generated revenues, which are annually transferred from Tax Increment District No. 3 fund, This bond was issued to finance various redevelopment projects within the City. This bond has a final maturity date of February 1, 2022. Tax Increment Bonds, 2008A This fund was established to account for the collection of tax-increment generated revenues, which are annually transferred from Tax Increment District No. 3 fund. This bond was issued to finance various redevelopment projects within the City. This bond has a final maturity date of February 1, 2018. Tax Increment Bonds, 2004D This fund was established to account for the collection of tax-increment generated revenues, which are annually transferred from Tax Increment District No. 3 fund. This bond was issued to finance various redevelopment projects within the City. This bond has a final maturity date of February 1, 2020. 84 CITY OF BROOKLYN CENTER, MINNESOTA NONMAJOR CAPITAL PROJECTS FUNDS Capital projects funds are used to account for and report financial resources that are restricted, committed, or assigned to expenditure for capital outlays, including the acquisition or construction of capital facilities and other capital assets. Capital Reserve Emergency This fund was established to account for monies held in reserve for catastrophic losses or unforeseen capital items. Street Reconstruction This fund was established to provide funds and to account for the expenditure of such funds, for major street infrastructure improvements. The accumulation of funds to provide for such improvements is an attempt to reduce future debt issuance. The primary financing source for such improvements are franchise fees. Technology This fund was established to provide funds and to account for the expenditure of such funds, for technological improvements/renovations. 85 CITY OF BROOKLYN CENTER, MINNESOTA COMBINING BALANCE SHEET NONMAJOR GOVERNMENTAL FUNDS December 31, 2014 Total Special Capital Nonmajor Revenue Project Governmental $ 2,200,955 $ 3,523,594 $ 5,724,549 -161,615 161,615 1,478 -1,478 5,128 -5,128 116,577 -116,577 2,442,676 -2,442,676 537,000 -537,000 5,303,814 3,685,209 8,989,023 74,425 53,987 128,412 17,699 -17,699 1,570 -1,570 35,575 -35,575 129,269 53,987 183,256 5,128 -5,128 2,849,908 -2,849,908 1,537,221 -1,537,221 98,321 -98,321 309,548 -309,548 77,772 -77,772 256,297 -256,297 40,350 -40,350 -1,066,216 1,066,216 -2,541,388 2,541,388 -23,618 23,618 5,169,417 3,631,222 8,800,639 $ 5,303,814 $ 3,685,209 $ 8,989,023 ASSETS Cash and investments Receivables: Accounts - net Current taxes Delinquent taxes Due from other governments Advances to other funds Assets held for resale Total assets LIABILITIES Accounts payable Accrued salaries and wages Due to other governments Deposits payable Total liabilities DEFERRED INFLOWS OF RESOURCES Unavailable revenue - property taxes FUND BALANCES Restricted Tax increment financing Economic development Law enforcement enhancements Community amphitheater Committed Public safety Cable communications Community recreation Emergency capital improvements Street improvements Technology improvements Total fund balances Total liabilities, deferred inflows of resources and fund balances 86 CITY OF BROOKLYN CENTER, MINNESOTA COMBINING STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES NONMAJOR GOVERNMENTAL FUNDS For the Year Ended December 31, 2014 REVENUES Property taxes Tax increments Franchise fees Intergovernmental Charges for services Fines and forfeits Investment earnings (net of market value adjustment) Miscellaneous Total revenues EXPENDITURES Current: General government Public safety Parks and recreation Economic development Capital outlay: General government Public Works Total expenditures Excess (deficiency) of revenues over (under) expenditures OTHER FINANCING SOURCES (USES) Transfers in Transfers out Total other financing sources (uses) Net change in fund balance Fund balances - January 1 - Restated Total Special Capital Nonmajor Revenue Project Governmental — $ 278,350 $ -$ 278,350 464,661 -464,661 -647,071 647,071 614,719 -614,719 9,685 -9,685 52,797 -52,797 14,180 26,584 40,764 61,052 -61,052 1,495,444 673,655 2,169,099 - 436,689 436,689 177,801 - 177,801 54,856 - 54,856 1,324,267 - 1,324,267 -76,333 76,333 -1,311,905 1,311,905 1,556,924 1,824,927 3,381,851 (61,480)(1,151,272)(1,212,752) 278,764 2,885,269 3,164,033 (408,308)(1,286,759)(1,695,067) (129,544)1,598,510 1,468,966 (191,024)447,238 256,214 5,360,441 3,183,984 8,544,425 Fund balances - December 3l $ 5,169,417 $ 3,631,222 $ 8,800,639 87 CITY OF BROOKLYN CENTER, MINNESOTA COMBINING BALANCE SHEET NONMAJOR SPECIAL REVENUE FUNDS December 31, 2014 Housing and Economic Community Redevelopment Development Development Police Authority Authority Block Grant Forfeitures ASSETS Cash and investments $ -$ 1,027,659 $ -$ 118,896 Receivables: Current taxes 1,478 --- Delinquent taxes 5,128 --- Due from other governments --72,383 - Advances to other funds ---- Assets held for resale -537,000 -- Total assets 6,606 1,564,659 72,383 118,896 LIABILITIES Accounts payable -891 72,383 - Accrued salaries and wages -13,025 -- Due to other governments ---- Deposits payable -15,000 -20,575 Total liabilities -28,916 72,383 20,575 DEFERRED INFLOWS OF RESOURCES Unavailable revenue - property taxes 5,128 --- FUND BALANCES Restricted Tax increment financing ---- Economic development 1,478 1,535,743 -- Law enforcement enhancements ---98,321 Community amphitheater ---- Committed Public safety ---- Cable communications ---- Community recreation ---- Total fund balances 1,478 1,535,743 -98,321 Total liabilities, deferred inflow's of resources and fund balances $ 6,606 $ 1,564,659 $ 72,383 $ 118,896 88 Total Tax Tax City Nonmajor Increment Increment Initiative Centennial Special District No. 2 District No. 4 Grants Amphitheater Revenue $ 142,254 $ 266,629 $ 335,969 $ 309,548 $ 2,200,955 --- -1,478 ---5,128 --44,194 -116,577 2,442,676 -- -2,442,676 ---537,000 2,584,930 266,629 380,163 309,548 5,303,814 441 -710 -74,425 --4,674 -17,699 -1,210 360 -1,570 ----35,575 441 1,210 5,744 -129,269 ----5,128 2,584,489 265,419 --2,849,908 ----1,537,221 ----98,321 ---309,548 309,548 --77,772 -77,772 --256,297 -256,297 --40,350 -40,350 2,584,489 265,419 374,419 309,548 5,169,417 $ 2,584,930 $ 266,629 $ 380,163 $ 309,548 $ 5,303,814 89 Housing and Economic Community Redevelopment Development Development Police Authority Authority Block Grant Forfeitures $ 278,350 $ - $ - $ - - 170,394 251,471 - - - - 52,797 - 7,250 - 721 - 5,502 - - 278,350 183,146 251,471 53,518 - - - 12,378 - 513,406 121,927 - = 513,406 121,927 12,378 278,350 (330,260) 129,544 41,140 - 278,764 - - (278,764) - (129,544) - (278,764) 278,764 (129,544) - (414) (51,496) - 41,140 1,892 1,587,239 - 57,181 $ 1,478 $ 1,535,743 $ - $ 98,321 REVENUES Property taxes Tax increments Intergovernmental Charges for services Fines and forfeits Investment earnings (net of market value adjustment) Miscellaneous Total revenues EXPENDITURES Current: Public safety Parks and recreation Economic development Total expenditures Excess (deficiency) of revenues over (under) expenditures OTHER FINANCING SOURCES (USES) Transfers in Transfers out Total other financing sources (uses) Net change in fund balance Fund balances - January 1 - Restated Fund balances - December 31 90 Total Tax Tax City Nonmajor Increment Increment Initiative Centennial Special District No. 2 District No. 4 Grants Amphitheater Revenue $ -$ -$ -$ -$ 278,350 -464,661 --464,661 --192,854 -614,719 --9,685 -9,685 ----52,797 1,524 779 2,467 1,439 14,180 14,955 -29,809 10,786 61,052 16,479 465,440 234,815 12,225 1,495,444 - - 165,423 - 177,801 - - 47,777 7,079 54,856 266,906 422,028 - - 1,324,267 266,906 422,028 213,200 7,079 1,556,924 (250,427) 43,412 21,615 5,146 (61,480) - - - - 278,764 - - - - (408,308) - - - - (129,544) (250,427) 43,412 21,615 5,146 (191,024) 2,834,916 222,007 352,804 304,402 5,360,441 $ 2,584,489 $ 265,419 $ 374,419 $ 309,548 $ 5,169,417 91 CITY OF BROOKLYN CENTER, MINNESOTA COMBINING BALANCE SHEET NONMAJOR CAPITAL PROJECT FUNDS December 31, 2014 Receivables: Accounts - net Total assets LIABILITIES Accounts payable FUND BALANCES Committed Emergency capital improvements Street improvements Technology improvements Total fund balances Total liabilities, deferred inflows of resources and fund balances - 161,615 - 161,615 1,066,216 2,541,388 77,605 3,685,209 53,987 53,987 1,066,216 - - 1,066,216 - 2,541,388 - 2,541,388 - - 23,618 23,618 1,066,216 2,541,388 23,618 3,631,222 $ 1,066,216 $ 2,541,388 $ 77,605 $ 3,685,209 92 CITY OF BROOKLYN CENTER, MINNESOTA COMBINING STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES NONMAJOR CAPITAL PROJECT FUNDS For the Year Ended December 31, 2014 Total Capital Nonmajor Reserve Street Capital Emergency Reconstruction Technology Projects REVENUES Franchise fees $-$ 647,071 $ - $ 647,071 Investment earnings (net of market value adjustment)8,445 17,975 164 26,584 Total revenues 8,445 665,046 164 673,655 EXPENDITURES Current: General government Capital outlay: General government Public works Total expenditures Excess (deficiency) of revenues over (under) expenditures OTHER FINANCING SOURCES (USES) Transfers in Transfers out Total other financing sources (uses) Net change in fund balance Fund balances - January 1 Fund balances - December 31 398,688 -38,001 436,689 --76,333 76,333 -1,311,905 -1,311,905 398,688 1,311,905 114,334 1,824,927 (390,243) (646,859)(114,170)(1,151,272) -2,785,269 100,000 2,885,269 -(1,286,759)-(1,286,759) -1,498,510 100,000 1,598,510 (390,243)851,651 (14,170)447,238 1,456,459 1,689,737 37,788 3,183,984 $ 1,066,216 $ 2,541,388 $23,618 $ 3,631,222 [e1 CITY OF BROOKLYN CENTER, MINNESOTA GENERAL FUND SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE - BUDGET AND ACTUAL For the Year Ended December 31, 2014 Page 1 of 5 Variance with Final Budget - Budgeted Amounts Actual Positive Original Final Amounts (Negative) REVENUES Taxes: Property taxes $ 14,032,326 $ 14,032,326 $ 14,068,286 $ 35,960 Penalties and interest --8,844 8,844 Lodging tax 860,000 860,000 914,651 54,651 Total taxes 14,892,326 14,892,326 14,991,781 99,455 Special assessments 75,000 75,000 128,138 53,138 Licenses and permits: Liquor and beer licenses 92,750 92,750 56,318 (36,432) Building permits 275,000 275,000 501,016 226,016 Mechanical permits 40,000 40,000 74,768 34,768 Sewer and water permits 1,500 1,500 3,325 1,825 Plumbing permits 30,000 30,000 63,830 33,830 Garbage licenses 3,150 3,150 3,435 285 Mechanical licenses 7,500 7,500 9,292 1,792 Service station licenses 2,500 2,500 3,090 590 Vehicle dealer licenses 1,750 1,750 1,250 (500) Bowling licenses 720 720 720 - Cigarette licenses 3,300 3,300 3,513 213 Sign permits 5,000 5,000 4,545 (455) Rental dwelling licenses 226,628 226,628 229,724 3,096 Amusement licenses 785 785 710 (75) Electrical Permits 45,000 45,000 59,476 14,476 ROW permits 3,000 3,000 1,814 (1,186) Miscellaneous licenses and permits 5,085 5,085 4,584 (501) Total licenses and permits 743,668 743,668 1,021,410 277,742 Intergovernmental: State: Local government aid 772,307 772,307 772,307 - Police pension aid 265,500 265,500 340,815 75,315 PERA aid 34,365 34,365 34,365 - Fireperson pension aid 98,828 98,828 133,745 34,917 Police training -14,803 14,803 Other state grants --24,947 24,947 Local: Miscellaneous grants 82,800 82,800 80,465 (2,335) Total intergovernmental 1,253,800 1,253,800 1,401,447 147,647 Charges for services: General government charges 156,150 156,150 208,175 52,025 Public safety charges 58,100 58,100 13,239 (44,861) Community development fees 10,000 10,000 2,653 (7,347) Recreation fees 254,731 254,731 256,340 1,609 Community Center fees 404,100 404,100 330,190 (73,910) Total charges for services 883,081 883,081 810,597 (72,484) 94 CITY OF BROOKLYN CENTER, MINNESOTA GENERAL FUND SCHEDULE OF REVENUES, EXPENDITURES, AND Page of5 CHANGES IN FUND BALANCE - BUDGET AND ACTUAL For the Year Ended December 31, 2014 Variance with Final Budget Budgeted Amounts Actual Positive Original Final Amounts (Negative) Revenues (continued): Fines and forfeits Miscellaneous: Investment earnings (net of market value change) Other Total miscellaneous Total revenues EXPENDITURES General government: Mayor and council: Current: Personal services Supplies Services and other charges Total mayor and council Administrative (Manager, Clerk, HR) offices: Current: Personal services Supplies Services and other charges Total administrative office Elections and voter registration: Current: Personal services Supplies Services and other charges Total elections and voter registration Finance: Current: Personal services Supplies Services and other charges Total finance Assessing Current: Personal services Supplies Services and other charges Total assessing Legal: Current: Services and other charges $ 349,500 $ 349,500 $ 312,130 $ (37,370) 32,000 32,000 61,770 29,770 86,875 86,875 138,349 51,474 118,875 118,875 200,119 81,244 18,316,250 18,316,250 18,865,622 549,372 52,797 52,797 51,747 1,050 400 400 530 (130) 91,400 91,400 72,269 19,131 144,597 144,597 124,546 20,051 717,322 717,322 771,037 (53,715) 6,200 6,200 5,568 632 63,160 63,160 32,059 31,101 786,682 786,682 808,664 (21,982) 70,563 70,563 70,076 487 1,200 1,200 810 390 44,904 44,904 36,440 8,464 116,667 116,667 107,326 9,341 493,386 493,386 467,450 25,936 7,600 7,600 4,269 3,331 28,875 28,875 29,616 (741) 529,861 529,861 501,335 28,526 306,896 306,896 114,855 192,041 5,625 5,625 598 5,027 62,274 62,274 144,138 (81,864) 374,795 374,795 259,591 115,204 393,750 393,750 403,021 (9,271) 95 CITY OF BROOKLYN CENTER, MINNESOTA GENERAL FUND SCHEDULE OF REVENUES, EXPENDITURES, AND Page 3 of 5 CHANGES IN FUND BALANCE - BUDGET AND ACTUAL For the Year Ended December 31, 2014 Variance with •Final Budget - Budgeted Amounts Actual Positive Original Final Amounts (Negative) $ 272,547 $ 272,547 $179,944 $ 92,603 73,200 73,200 54,402 18,798 441,420 441,420 431,264 10,156 787,167 787,167 665,610 121,557 22,500 22,500 8,453 14,047 809,667 809,667 674,063 135,604 225,447 225,447 225,964 (517) 4,600 4,600 2,072 2,528 230,673 230,673 237,164 (6,491) 460,720 460,720 465,200 (4,480) 3,616,739 3,616,739 3,343,746 272,993 Expenditures (continued): General government (continued): Government buildings: Current: Personal services Supplies Services and other charges Total current Capital outlay Total government buildings Information technology: Current: Personal services Supplies Services and other charges Total information technology Total general government Public safety: Police protection: Current: • Personal services Supplies Services and other charges Total current Capital outlay Total police protection Fire protection: Current: Personal services Supplies Services and other charges Total fire protection Protective inspection: Current: Personal services Supplies Services and other charges Total current Capital outlay Total protective inspection Emergency preparedness: Current: Personal services Supplies Services and other charges Total emergency preparedness Total public safety 6,376,376 6,376,376 141,865 141,865 1,160,889 1,160,889 7,679,130 7,679,130 16,000 16,000 7,695,130 7,695,130 620,136 620,136 98,000 98,000 331,546 331,546 1,049,682 1,049,682 5,953,875 422,501 155,180 (13,315) 1,038,951 121,938 7,148,006 531,124 -16,000 7,148,006 547,124 662,405 (42,269) 90,024 7,976 336,741 (5,195) 1,089,170 (39,488) 944,206 944,206 897,115 47,091 21,000 21,000 14,425 6,575 196,883 196,883 225,041 (28,158) 1,162,089 1,162,089 1,136,581 25,508 400 400 400 1,162,489 1,162,489 1,136,581 25,908 72,025 72,025 66,842 5,183 7,050 7,050 -7,050 6,250 6,250 3,839 2,411 85,325 85,325 70,681 14,644 9,992,626 9,992,626 9,444,438 548,188 96 CITY OF BROOKLYN CENTER, MINNESOTA GENERAL FUND SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE - BUDGET AND ACTUAL For the Year Ended December 31, 2014 Page 4 of 5 Variance with Final Budget - Budgeted Amounts Actual Positive Original Final Amounts (Negative) Expenditures (continued): Public works: Engineering department: Current: Personal services $ 767,450 $ 767,450 $ 739,236 8 28,214 Supplies 1,815 1,815 1,569 246 Services and other charges 59,395 59,395 65,151 (5,756) Total engineering department 828,660 828,660 805,956 22,704 Street department: Current: Personal services 781,602 781,602 793,927 (12,325) Supplies 128,550 128,550 131,817 (3,267) Services and other charges 722,822 722,822 697,012 25,810 Total street department 1,632,974 1,632,974 1,622,756 10,218 Total public works 2,461,634 2,461,634 2,428,712 32,922 Community services: Social services: Current: Services and other charges 161,000 161,000 145,503 15,497 Parks and recreation: Administration: Current: Personal services 200,614 200,614 206,397 (5,783) Supplies --249 (249) Services and other charges 4,850 4,850 2,163 2,687 Total administration 205,464 205,464 208,809 (3,345) Recreation programs: Current: Personal services 492,791 492,791 502,067 (9,276) Supplies 42,880 42,880 39,658 3,222 Services and other charges 178,580 178,580 146,176 32,404 Total recreation programs 714,251 714,251 687,901 26,350 Community center: Current: Personal services 303,114 303,114 302,361 753 Supplies 24,350 24,350 40,250 (15,900) Services and other charges 193,250 193,250 175,634 17,616 Total current 520,714 520,714 518,245 2,469 Capital outlay 22,600 22,600 3,851 18,749 Total community center 543,314 543,314 522,096 21,218 97 CITY OF BROOKLYN CENTER, MINNESOTA GENERAL FUND SCHEDULE OF REVENUES, EXPENDITURES, AND Page 5 of 5 CHANGES IN FUND BALANCE - BUDGET AND ACTUAL For the Year Ended December 31, 2014 Variance with Final Budget - Budgeted Amounts Actual Positive Original Final Amounts (Negative) Expenditures (continued): Parks and recreation (continued): Park maintenance: Current: Personal services Supplies Services and other charges Total park maintenance Total parks and recreation Economic development: Convention bureau: Current: Services and other charges Nondepartmental: Expenditures not charged to departments: Current: Personal services Supplies Services and other charges Total nondepartmental Total expenditures Excess (deficiency) of revenues over (under) expenditures OTHER FINANCING SOURCES (USES) Transfers in Transfers in - administrative services reimbursed Transfers out Total other financing sources (uses) Net change in fund balance Fund balance - January 1 Fund balance - December 31 $ 612,795 $ 612,795 $ 586,441 $26,354 53,275 53,275 38,438 14,837 396,312 396,312 362,932 33,380 1,062,382 1,062,382 987,811 74,571 2,525,411 2,525,411 2,406,617 118,794 408,500 408,500 434,459 (25,959) (125,000)(125,000)-(125,000) 26,500 26,500 15,030 11,470 347,870 347,870 349,471 (1,601) 249,370 249,370 364,501 (115,131) 19,415,280 19,415,280 18,567,976 847,304 (1,099,030)(1,099,030)297,646 1,396,676 150,000 150,000 129,544 (20,456) 1,049,030 1,049,030 1,064,302 15,272 (100,000)(100,000)(2,854,124)(2,754,124) 1,099,030 1,099,030 (1,660,278)(2,759,308) - - (1,362,632) (1,362,632) 12,382,713 12,382,713 12,382,713 - $ 12,382,713 $ 12,382,713 $ 11,020,081 $ (1,362,632) 98 REVENUES Taxes: Property taxes OTHER FINANCING SOURCES (USES) Transfers out Net change in fund balance Fund balance - January 1 Fund balance - December 31 $ 282,110 $ 282,110 $ 278,350 (282,110) (282,1 10) (278,764) - - (414) 1,892 1,892 1,892 $ 1,892 $ 1,892 $ 1,478 99 Budgeted Amounts Actual Original Final Amounts $ - $ - $ 170,394 - - 7,250 - - 5,502 - - 183,146 262,516 262,516 276,375 500 500 36 175,215 175,215 236,995 438,231 438,231 513,406 (438,231) (438,231) (330,260) 282,110 282,110 278,764 (156,121) (156,121) (51,496) 1,587,239 1,587,239 1,587,239 $ 1,431,118 $ 1,431,118 $ 1,535,743 REVENUES Intergovernmental Investment earnings (net of market value adjustment) Miscellaneous Total revenues EXPENDITURES Current: Economic development: Personal services Supplies Services and other charges Total expenditures Excess (deficiency) of revenues over (under) expenditures OTHER FINANCING SOURCES Transfers in Net change in fund balance Fund balance - January 1 - Restated Fund balance - December 31 100 EXPENDITURES Current: Economic development: Services and other charges Excess of revenues over expenditures OTHER FINANCING SOURCES (USES) Transfers out Net change in fund balance Fund balance - January 1 Fund balance - December 31 50,000 50,000 121,927 150,000 150,000 129,544 (150,000) (150,000) (129,544) $ - $ - $ 101 CITY OF BROOKLYN CENTER, MINNESOTA SPECIAL REVENUE FUND - TAX INCREMENT DISTRICT NO.3 SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE - BUDGET AND ACTUAL For the Year Ended December 31, 2014 Budgeted Amounts Actual Original Final Amounts REVENUES Tax increments Charges for services Investment earnings (net of market value adjustment) Miscellaneous Total revenues EXPENDITURES Current: Economic development: Services and other charges Capital outlay: Economic development Total expenditures Excess of revenues over expenditures OTHER FINANCING SOURCES (USES) Transfers out Net change in fund balance Fund balance - January I - Restated Fund balance - December 31 $ 2,938,650 $ 2,938,650 $ 3,038,983 - - 363,788 - - 23,123 - - 32,843 2,938,650 2,938,650 3,458,737 973,550 973,550 936,949 - - 377,685 973,550 973,550 1,314,634 1,965,100 1,965,100 2,144,103 (1,965,100) (1,965,100) (2,073,345) - 70,758 17,827,991 17,827,991 17,827,991 $ 17,827,991 $ 17,827,991 $ 17,898,749 102 Investment earnings (net 01 market value a(Ijustment) Total revenues EXPENDITURES Current: Economic development: Services and other charges Net change in fund balance Fund balance - January I Fund balance - December 31 384,310 384,310 465,440 384,310 384,310 422,028 - - 43,412 222,007 222,007 222,007 $ 222,007 $ 222,007 $ 265,419 103 CITY OF BROOKLYN CENTER, MINNESOTA SPECIAL REVENUE FUND - CITY INITIATIVES GRANT SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE - BUDGET AND ACTUAL For the Year Ended December 31, 2014 Budgeted Amounts Actual Original Final Amounts REVENUES Intergovernmental Charges for services Investment earnings (net of market value adjustment) Miscellaneous Total revenues EXPENDITURES Current: Public safety: Personal services Supplies Services and other charges Parks and recreation: Personal services Supplies Services and other charges Total expenditures Net change in fund balance Fund balance - January 1 Fund balance - December 31 $ 17,500 $ 17,500 $ 192,854 9,825 9,825 9,685 - - 2,467 11,725 11,725 29,809 39,050 39,050 234,815 5,772 5,772 150,440 - - 11,834 - - 3,149 13,150 13,150 11,814 8,250 8,250 16,239 13,775 13,775 19,724 40,947 40,947 213,200 (1,897)(1,897)21,615 352,804 352,804 352,804 $ 350,907 $350,907 $374,419 104 CITY OF BROOKLYN CENTER, MINNESOTA DEBT SERVICE FUND SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE - BUDGET AND ACTUAL For the Year Ended December 31, 2014 Budgeted Amounts Actual Original Final Amounts REVENUES Property taxes Special assessments Investment earnings (net of market value adjustment) Total revenues EXPENDITURES Debt service: Principal Interest Fiscal agent fees Total expenditures Excess (defiency) of revenues over (under) expenditures OTHER FINANCING SOURCES Transfers in Net change in fund balance Fund balance - January 1 Fund balance - December 31 $ 687,000 $687,000 $678,966 603,046 603,046 674,253 1,350 1,350 8,836 1,291,396 1,291,396 1,362,055 1,905,000 1,905,000 1,905,000 711,872 711,872 802,892 7,200 7,200 9,039 2,624,072 2,624,072 2,716,931 (1,332,676)(1,332,676)(1,354,876) 2,075,445 2,075,445 2,073,345 742,769 742,769 718,469 1,190,972 1,190,972 1,190,972 $ 1,933,741 $1,933,741 $1,909,441 105 Budgeted Amounts Original Final REVENUES Property taxes $ - $ - Intergovernmental - - Charges for services - - Special assessments - - Investment earnings (net of market value adjustment) - - Miscellaneous - - Total revenues - - Actual Amounts $ 2,156 580,133 38 1,938 34,082 81,217 699,564 EXPENDITURES Capital outlay: Parks and recreation 5,082,000 5,082,000 379,406 Excess (deficiency) of revenues over (under) expenditures (5,082,000) (5,082,000) 320,158 OTHER FINANCING SOURCES Transfers in 200,000 200,000 3,116,314 Net change in fund balance (4,882,000) (4,882,000) 3,436,472 Fund balance - January 1 3,072,758 3,072,758 3,072,758 Fund balance - December 31 $ (1,809,242) $(1,809,242) $ 6,509,230 rii;] CITY OF BROOKLYN CENTER, MINNESOTA CAPITAL PROJECT FUND - MUNICIPAL STATE AID FOR CONSTRUCTION SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE - BUDGET AND ACTUAL For the Year Ended December 31, 2014 Budgeted Amounts Actual Original Final Amounts REVENUES Intergovernmental Investment earnings (net of market value adjustment) Total revenues EXPENDITURES Current: Public works: Supplies Services and other charges Capital outlay: Public works Total expenditures Excess (deficiency) of revenues over (under) expenditures OTHER FINANCING SOURCES (USES) Transfers in Transfers out Total other financing sources (uses) Net change in fund balance Fund balance - January 1 $ 1,025,000 $ 1,025,000 $ 110,000 - - 17,922 1,025,000 1,025,000 127,922 42,800 42,800 42,345 47,200 47,200 47,199 250,000 250,000 250,000 340,000 340,000 339,544 685,000 685,000 (211,622) 78,000 (360,000) (282,000) 685,000 685,000 (493,622) 2,323,722 2,323,722 2,323,722 Fund balance - December 3l $ 3,008,722 $ 3,008,722 $ 1,830,100 107 CITY OF BROOKLYN CENTER, MINNESOTA CAPITAL PROJECT FUND - INFRASTRUCTURE CONSTRUCTION SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE - BUDGET AND ACTUAL For the Year Ended December 31, 2014 Budgeted Amounts Actual Original Final Amounts $ - $ - $ 989,797 - - 45,405 - - 1,536 - - 31,229 - - 1,067,967 - 29 - 55,276 1,430,000 1,430,000 1,542,554 1,430,000 1,430,000 1,597,859 (1,430,000) (1,430,000) (529,892) 1,430,000 1,430,000 1,902,259 - - (2,805,702) 1,430,000 1,430,000 (903,443) - (1,433,335) 970,142 970,142 970,142 $ 970,142 $ 970,142 $ (463,193) REVENUES Special assessments Charges for services Investment earnings (net of market value adjustment) Miscellaneous Total revenues EXPENDITURES Current: Public works Supplies Services and other charges Capital outlay: Public works Total expenditures Excess (deficiency) of revenues over (under) expenditures OTHER FINANCING SOURCES (USES) Transfers in Transfers out Total other financing sources (uses) Net change in fund balance Fund balance - January 1 Fund balance (deficit) - December 31 108 CITY OF BROOKLYN CENTER, MINNESOTA CAPITAL PROJECT FUND - STREET RECONSTRUCTION SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE - BUDGET AND ACTUAL For the Year Ended December 31, 2014 Budgeted Amounts Actual Original Final Amounts REVENUES Franchise fees Investment earnings (net of market value adjustment) Total revenues EXPENDITURES Capital outlay: Public works Excess (deficiency) of revenues over (under) expenditures $ 680,000 $ 680,000 $ 647,071 - - 17,975 680,000 680,000 665,046 1,560,000 1,560,000 1,311,905 (880,000) (880,000) (646,859) OTHER FINANCING SOURCES (USES) Transfers in Transfers out Total other financing sources (uses) Net change in fund balance (880,000) (880,000) 2,785,269 (1,286,759) 1,498,510 851,651 Fund balance - January 1 1,689,737 1,689,737 1,689,737 Fund balance - December 31 $ 809,737 $ 809,737 $ 2,541,388 109 EXPENDITURES Current: General government: Supplies Capital outlay: General government Total expenditures Excess (deficiency) of revenues over (under) expenditures OTHER FINANCING SOURCES Transfers in Net change in fund balance Fund balance - January 1 Fund balance - December 31 64,125 64,125 38,001 132,000 132,000 76,333 196,125 196,125 114,334 (196,125) (196,125) (114,170) 100,000 100,000 100,000 (96,125) (96,125) (14,170) 37,788 37,788 37,788 $ (58,337) $ (58,337) $ 23,618 110 This page has been left blank intentionally. CITY OF BROOKLYN CENTER, MINNESOTA COMBINING BALANCE SHEET DEBT SERVICE FUN]) BY ACCOUNT December 31, 2014 General General General Obligation Obligation Obligation Improvement Improvement Improvement Bonds Bonds Bonds 2004C 2006A 2008B $ 86,892 $ 291,852 $ 640,956 5,874 144,166 637,751 92,766 436,018 1,278,707 275 275 275 4,235 143,405 625,942 4,235 143,405 625,942 88,256 292,338 652,490 88,256 292,338 652,490 $ 92,766 $ 436,018 $ 1,278,707 ASSETS Cash and investments Receivables; Current taxes Delinquent taxes Special assessments Total assets LIABILITIES Accounts payable DEFERRED INFLOWS OF RESOURCES Unavailable revenue - property taxes Unavailable revenue - special assessments Total deferred inflows of resources FUND BALANCES (DEFICITS) Restricted for debt service Unassigned Total fund balances (deficits) Total liabilities, deferred inflows of resources and fund balances (deficits) 112 General Obligation Tax Tax Tax Improvement Increment Increment Increment Total Bonds Bonds Bonds Bonds Debt 2013B 2013A 2008A 2004D Service $ 873,332 $ -$ -$ -$ 1,893,032 3,220 ---3,220 5,546 ---5,546 1,159,045 ---1,946,836 2,041,143 ---3,848,634 275 275 275 275 1,925 5,546 ---5,546 1,158,140 ---1,931,722 1,163,686 ---1,937,268 877,182 ---1,910,266 -(275)(275)(275)(825) 877,182 (275)(275)(275)1,909,441 $ 2,041,143 $ -$ -$ -$ 3,848,634 113 CITY OF BROOKLYN CENTER, MINNESOTA COMBINING SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES DEBT SERVICE FUND BY ACCOUNT For the Year Ended December 31, 2014 General General General Obligation Obligation Obligation Improvement Improvement Improvement Bonds Bonds Bonds 2004C 2006A 2008B REVENUES Property taxes Special assessments Investment earnings (net of market value adjustment) Total revenues EXPENDITURES Debt service: Principal Interest Fiscal agent fees Total expenditures $ - $- $ 30,286 114,016 242,043 523 1,697 3,828 30,809 115,713 245,871 90,000 140,000 245,000 4,928 14,960 49,539 956 1,187 3,711 95,884 156,147 298,250 Excess (deficiency) of revenues over (under) expenditures (65,075) (40,434) (52,379) OTHER FINANCING SOURCES Transfers in Net change in fund balances (65,075) (40,434) (52,379) Fund balances - January 1 153,331 332,772 704,869 Fund balances (deficits) - December 31 $ 88,256 $ 292,338 $ 652,490 114 ZUIili ZUIiA ZUUI-/_Uu'HJ erviee $ 678,966 $ -$ -$ -$ 678,966 287,908 ---674,253 2,788 ---8,836 969,662 ---1,362,055 --125,000 1,305,000 1,905,000 91,020 110,345 28,781 503,319 802,892 1,460 275 725 725 9,039 92,480 110,620 154,506 1,809,044 2,716,931 877,182 (110,620)(154,506)(1,809,044)(1,354,876) -110,345 154,231 1,808,769 2,073,345 877,182 (275)(275)(275)718,469 - - - - 1,190,972 $ 877,182 $ (275) $ (275) $ (275) $ 1,909,441 115 CITY OF BROOKLYN CENTER, MINNESOTA DEBT SERVICE FUND - G.O. IMPROVEMENT BONDS, 2004C SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE - BUDGET AND ACTUAL For the Year Ended December 31, 2014 Budgeted Amounts Actual Original Final Amounts REVENUES Special assessments Investment earnings (net of market value adjustment) Total revenues EXPENDITURES Debt service: Principal Interest Fiscal agent fees Total expenditures Net change in fund balance Fund balance - January 1 Fund balance - December 31 $ 110,342 $110,342 $30,286 200 200 523 110,542 110,542 30,809 90,000 90,000 90,000 4,928 4,928 4,928 1,200 1,200 956 96,128 96,128 95,884 14,414 14,414 (65,075) 153,331 153,331 153,331 $ 167,745 $167,745 $88,256 iI[.1 CITY OF BROOKLYN CENTER, MINNESOTA DEBT SERVICE FUND - G.O. IMPROVEMENT BONDS, 2006A SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE - BUDGET AND ACTUAL For the Year Ended December 31, 2014 Budgeted Amounts Actual Original Final Amounts $ 169,459 $169,459 $ 114,016 400 400 1,697 169,859 169,859 115,713 140,000 140,000 140,000 14,960 14,960 14,960 1,500 1,500 1,187 156,460 156,460 156,147 13,399 13,399 (40,434) 332,772 332,772 332,772 $ 346,171 $346,171 $ 292,338 REVENUES Special assessments Investment earnings (net of market value adjustment) Total revenues EXPENDITURES Debt service: Principal Interest Fiscal agent fees Total expenditures Net change in fund balance Fund balance - January 1 Fund balance - December 31 iIP CITY OF BROOKLYN CENTER, MINNESOTA DEBT SERVICE FUND - G.O. IMPROVEMENT BONDS, 2008B SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE - BUDGET AND ACTUAL For the Year Ended December 31, 2014 Budgeted Amounts Actual Original Final Amounts REVENUES Special assessments Investment earnings (net of market value adjustment) Total revenues EXPENDITURES Debt service: Principal Interest Fiscal agent fees Total expenditures Net change in fund balance Fund balance - January 1 Fund balance - December 31 $ 323,245 $323,245 $242,043 750 750 3,828 323,995 323,995 245,871 245,000 245,000 245,000 49,539 49,539 49,539 1,500 1,500 3,711 296,039 296,039 298,250 27,956 27,956 (52,379) 704,869 704,869 704,869 $ 732,825 $732,825 $652,490 118 CITY OF BROOKLYN CENTER, MINNESOTA DEBT SERVICE FUND - G.O. IMPROVEMENT BONDS, 2013B SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE BUDGET AND ACTUAL For the Year Ended December 31, 2014 Budgeted Amounts Actual Original Final Amounts REVENUES Property taxes Special assessments Investment earnings (net of market value adjustment) Total revenues EXPENDITURES Debt service: Interest Fiscal agent fees Total expenditures Net change in fund balance Fund balance - January 1 Fund balance - December 31 $ 687,000 $ 687,000 $ 678,966 - - 287,908 - - 2,788 687,000 687,000 969,662 - - 91,020 - - 1,460 - - 92,480 687,000 687,000 877,182 $ 687,000 $ 687,000 $ 877,182 119 $ 110,345 $ EXPENDITURES Debt service: Interest Fiscal agent fees Total expenditures OTHER FINANCING SOURCES Transfers in Net change in fund balance Fund balance - January 1 Fund balance (deficit) - December 31 110,345 $ 110,345 - 275 110,345 110,345 110,620 110,345 110,345 110,345 - - (275) $ - $ - $ (275) 120 Budgeted Amounts Actual Original Final Amounts EXPENDITURES Debt service: Principal $ 125,000 $ 125,000 $ 125,000 Interest 28,781 28,781 28,781 Fiscal agent fees 1,500 1,500 725 Total expenditures 155,281 155,281 154,506 OTHER FINANCING SOURCES Transfers in 155,281 155,281 154,231 Net change in fund balance - - (275) Fund balance - January 1 Fund balance (deficit) - December 31 $ $ (275) 121 CITY OF BROOKLYN CENTER, MINNESOTA DEBT SERVICE FUND - G.O. TAX INCREMENT BONDS, 2004D SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE - BUDGET AND ACTUAL For the Year Ended December 31, 2014 EXPENDITURES Debt service: Principal Interest Fiscal agent fees Total expenditures Budgeted Amounts Original Final $ 1,305,000 $ 1,305,000 503,319 503,319 1,500 1,500 1,809,819 1,809,819 Actual Amounts $ 1,305,000 503,319 725 1,809,044 OTHER FINANCING SOURCES Transfers in Net change in fund balance Fund balance - January 1 Fund balance (deficit) - December 31 1,809,819 1,809,819 1,808,769 - - (275) $ - $ - $ (275) 122 CITY OF BROOKLYN CENTER, MINNESOTA INTERNAL SERVICE FUNDS Internal service funds are used to account for and report financial resources for the purchase of goods or services provided by one department to other departments of the City on a cost reimbursement basis. Central Garage This fund was established to account for the acquisition and maintenance of all City vehicles and rolling stock equipment. Vehicle and equipment maintenance and repair costs are charged to the departments as incurred. Replacement costs are charged to the departments over the estimated useful life of the vehicles and equipment. Employees (EE) Retirement Benefits 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 employeers 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. Employees (EE) Compensated Absences This fund accounts for payment of unused vacation and vested sick leave benefits, and the allocation of such costs to the respective departments and funds of the City. 123 CITY OF BROOKLYN CENTER, MINNESOTA COMBINING STATEMENT OF NET POSITION INTERNAL SERVICE FUNDS December 31, 2014 Total Central EE Retirement EE Comp Internal Garage Benefit Absences Service ASSETS Current assets: Cash and cash equivalents $ 4,690,333 $ 675,036 $ 1,282,093 $ 6,647,462 Receivables: Accounts - net 18,318 --18,318 Inventories 23,537 --23,537 Total current assets 4,732,188 675,036 1,282,093 6,689,317 Noncurrent assets: Capital assets: Land improvements 166,108 --166,108 Machinery and equipment 8,738,312 --8,738,312 Total capital assets 8,904,420 --8,904,420 Less: accumulated depreciation (5,211,569)--(5,211,569) Net capital assets 3,692,851 --3,692,851 Total assets 8,425,039 675,036 1,282,093 10,382,168 LIABILITIES Current liabilities: Accounts payable 54,384 --54,384 Accrued salaries and wages 14,496 (743)-13,753 Due to other governments 48 --48 Compensated absences payable --128,209 128,209 Total current liabilities 68,928 (743)128,209 196,394 Noncurrent liabilities: Compensated absences payable --1,153,884 1,153,884 Net OPEB obligation -629,994 -629,994 Total noncurrent liabilities -629,994 1,153,884 1,783,878 Total liabilities 68,928 629,251 1,282,093 1,980,272 NET POSITION Investment in capital assets 3,692,851 --3,692,851 Unrestricted 4,663,260 45,785 -4,709,045 Total net position $ 8,356,111 $45,785 $ - $ 8,401,896 124 CITY OF BROOKLYN CENTER, MINNESOTA COMBINING STATEMENT OF REVENUES, EXPENSES, AND CHANGES IN NET POSITION INTERNAL SERVICE FUNDS For the Year Ended December 31, 2014 Total Central EE Retirement EE Comp Internal Garage Benefit Absences Service OPERATING REVENUES Sales and user fees OPERATING EXPENSES Personal services Supplies Other services Insurance Utilities Depreciation Total operating expenses Operating income (loss) NONOPERATING REVENUES Intergovernmental Investment earnings (net of market value adjustment) Gain on sale of capital assets Other revenue Total nonoperating revenues Change in net position Net position - January 1 Net position - December 31 $ 1,760,636 $- $144,717 $ 1,905,353 352,313 288,297 153,693 794,303 513,684 --513,684 169,982 --169,982 54,525 --54,525 364 --364 720,199 --720,199 1,811,067 288,297 153,693 2,253,057 (50,431)(288,297)(8,976)(347,704) -8,496 -8,496 33,299 5,748 8,976 48,023 27,100 --27,100 88,357 --88,357 148,756 14,244 8,976 171,976 98,325 (274,053)-(175,728) 8,257,786 319,838 -8,577,624 $ 8,356,111 $45,785 $-$ 8,401,896 125 Garage Benefit Absences aervice $ 1,763,352 $ -$ 144,717 $ 1,908,069 88,357 --88,357 (758,997)--(758,997) (354,785)(246,234)(104,151)(705,170) 737,927 (246,234)40,566 532,259 -8,496 -8,496 (695,571)-(695,571) 33,978 --33,978 (661,593)--(661,593) 33,299 5,748 8,976 48,023 109,633 (231,990)49,542 (72,815) CASH FLOWS FROM OPERATING ACTIVITIES Receipts from interfund services provided Other operating receipts Payments to suppliers Payments to employees Net cash flows provided (used) by operating activities CASH FLOWS FROM NONCAPITAL FINANCING ACTIVITIES Intergovernmental CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES Acquisition and construction of capital assets Proceeds from sale of assets Net cash flows provided (used) by capital and related financing activities CASH FLOWS FROM INVESTING ACTIVITIES Interest on investments Net increase (decrease) in cash and cash equivalents Cash and cash equivalents - January 1 4,580,700 907,026 1,232,551 6,720,277 Cash and cash equivalents - December 31 $4,690,333 $ 675,036 $ 1,282,093 $ 6,647,462 RECONCILIATION OF OPERATING INCOME (LOSS) TO NET CASH FLOWS PROVIDED (USED) BY OPERATING ACTIVITIES Operating income (loss) $(50,431)$ (288,297) $ (8,976)$ (347,704) Adjustments to reconcile operating income (loss) to net cash flows provided (used) by operating activities: Other income related to operations 88,357 - -88,357 Depreciation 720,199 - -720,199 (Increase) decrease in assets: Accounts receivable 2,716 - -2,716 Inventories (1,923)- -(1,923) Increase (decrease) in liabilities: Accounts payable (18,519)- -(18,519) Accrued salaries and wages (2,472)42,063 49,542 89,133 Net cash provided (used) by operating activities $737,927 $ (246,234) $ 40,566 $ 532,259 NONCASH FINANCING ACTIVITIES Acquisitions of capital assets on account $38,670 $ - $ -$ 38,670 Gain (loss) on sale of capital assets $(6,878)$ - $ -$ (6,878) 126 KF.TIM.N.M74'rorl STATISTICAL SECTION This part of the City of Brooklyn Center's comprehensive annual financial report presents detailed information as a context for understanding the financial statements, note disclosures, and supplementary information. This section includes information for the primary government, including any blended component units. Contents Page Financial Trends 128 These tables contain trend information to help the reader understand the City 'sfinancial performance by placing it in historical perspective. Revenue Capacity 142 These tables contain information to help the reader assess the City's most significant "own-source" revenue, property taxes. Debt Capacity 148 These tables present information to help the reader assess the affordability of the government's current levels of outstanding debt and the City's ability to issue debt in the future. Demographic and Economic Information 155 These tables offer demographic and economic indicators to help the reader understand the environment within which the City 'sjinancial activities take place. Operating Information 157 These tables contain service and infrastructure data to help the reader understand how the City 'sJmnanciai report relates to the services the City provides and the activities itpeiforms. Sources: unless otherwise noted, the information in these schedules is derived from the comprehensive annual financial reports for the relevant year. 127 CITY OF BROOKLYN CENTER, MINNESOTA STATISTICAL SECTION (UNAUDITED) NET POSITION BY COMPONENT Last ten fiscal years (accrual basis of accounting) 2005 2006 2007 2008 Governmental activities Net investment in capital assets $ 21,992,263 $28,191,206 $30,780,590 $31,423,905 Restricted 29,326,928 27,637,465 21,738,515 31,850,784 Unrestricted 6,793,778 4,055,312 8,061,157 690,424 Total governmental activities net position $ 58,112,969 $59,883,983 $60,580,262 $63,965,113 Business-type activities Investment in capital assets $ 37,988,441 $ 38,248,496 $ 40,466,892 $ 42,572,360 Unrestricted 7,087,856 7,973,318 9,845,252 10,466,919 Total business-type activities net position $ 45,076,297 $ 46,221,814 $ 50,312,144 $ 53,039,279 Primary government Net investment in capital assets $ 59,980,704 $66,439,702 $71,247,482 $73,996,265 Restricted 29,326,928 27,637,465 21,738,515 31,850,784 Unrestricted 13,881,634 12,028,630 17,906,409 11,157,343 Total primary government net position $ 103,189,266 $106,105,797 $110,892,406 $117,004,392 Sources: The data for this table has been extracted from the respective years CAFR document. Note: During 2011, the City implemented GASB Statement No. 54, Fund Balance and Governmental Fund Type Definitions. As part of this implementation, certain reclassifications occurred for funds that were reported as Governmental activities prior to 2011, that are now reported as business-type activities. Those balances prior to 2011 have not been restated in this statistical schedule. 128 Table 1 2009 2010 2011 2012 2013 2014 $33,550,664 $40,978,165 $45,761,042 $45,261,629 $42,281,203 $42,947,577 29,027,991 22,067,726 24,847,507 24,259,292 27,219,086 28,061,977 4,082,990 6,985,972 4,376,334 5,875,289 11,205,289 12,357,196 $66,661,645 $70,031,863 $74,984,883 $75,396,210 $80,705,578 $83,366,750 $42,297,110 $42,800,624 $45,051,128 $42,406,210 $42,466,488 $48,537,132 8,835,644 8,673,168 8,300,659 11,856,924 12,208,126 6,819,765 $51,132,754 $51,473,792 $53,351,787 $54,263,134 $54,674,614 $55,356,897 $75,847,774 $83,778,789 $90,812,170 $87,667,839 $84,747,691 $91,484,709 29,027,991 22,067,726 24,847,507 24,259,292 27,219,086 28,061,977 12,918,634 15,659,140 12,676,993 17,732,213 23,413,415 19,176,961 $117,794,399 $121,505,655 $128,336,670 $129,659,344 $135,380,192 $138,723,647 129 CITY OF BROOKLYN CENTER, MINNESOTA STATISTICAL SECTION (UNAUDITED) CHANGES IN NET POSITION - CONTINUED ON THE FOLLOWING PAGES Last ten fiscal years (accrual basis of accounting) 2005 2006 2007 2008 GOVERNMENTAL ACTIVITIES Expenses General government Public safety Public works Community services Parks and recreation Economic development Interest on long-term debt Total expenses Program Revenues Charges for services: General government Public safety Public works Parks and recreation Economic development Operating grants and contributions Capital grants and contributions Total program revenues Net (expense) I revenue General Revenues and Transfers Taxes: Property Tax increments Lodging taxes Unrestricted grants and contributions Investment earnings (net) Gain on disposal of capital asset Transfers Transfers - capital assets Total general revenues and transfers Restatements for: prior period adjustments or change in accounting principle Change in Net Position $ 2,970,364 $2,936,638 $2,953,328 $3,498,767 7,848,160 8,039,356 8,051,836 8,760,880 3,856,992 2,087,259 2,704,435 2,596,754 86,043 123,172 74,389 72,893 2,305,047 2,565,364 2,624,897 2,910,825 1,217,294 2,567,377 3,966,908 3,713,340 1,349,852 1,184,017 1,127,276 1,125,712 19,633,752 19,503,183 21,503,069 22,679,171 297,511 289,203 902,734 1,115,038 1,026,736 800,408 847,307 780,080 9,661 259,273 241,035 127,489 681,851 665,332 692,781 754,079 35,933 164,531 49,498 24,435 795,633 748,888 818,989 1,003,884 2,398,345 2,208,751 2,646,320 2,706,056 5,245,670 5,136,386 6,198,664 6,511,061 (14,388,082) (14,366,797) (15,304,405) (16,168,110) 11,951,497 12,276,896 12,200,575 12,458,724 4,216,246 2,682,874 2,677,630 2,912,773 710,619 738,776 706,930 619,962 577,548 702,030 1,263,753 607,073 1,272,409 1,928,462 1,852,117 903,939 31,880 23,963 88,508 73,036 (1,545,893)303,286 (273,070)(1,693,225) 17,214,306 18,656,287 18,516,443 15,882,282 - (2,518,476) (2,515,759) 3,670,679 $ 2,826,224 $ 1,771,014 $ 696,279 $ 3,384,851 130 Table 2 Page 1 of 3 2009 2010 2011 2012 2013 2014 $ 3,653,956 $3,553,737 $3,216,321 $3,246,015 $3,165,400 $3,736,487 9,036,176 9,125,547 9,268,897 9,604,521 9,618,906 10,186,645 2,687,980 2,747,641 2,771,602 3,561,914 4,215,855 3,688,238 71,519 82,645 100,849 141,505 149,203 145,503 2,773,528 2,732,401 2,895,769 2,796,561 2,752,539 2,977,707 2,151,916 6,504,034 2,542,520 5,438,372 3,833,915 3,234,623 1,143,546 974,950 865,799 768,241 490,162 887,190 21,518,621 25,720,955 21,661,757 25,557,129 24,225,980 24,856,393 1,102,360 1,081,998 1,078,109 1,082,741 798,088 651,188 1,234,678 1,501,513 1,547,446 1,402,204 786,828 722,697 26,027 43,194 16,191 270,680 5,879 157,889 740,782 725,891 721,663 897,592 650,522 598,173 445 5,525 88,737 19,734 90,656 477,088 1,034,905 2,013,099 1,637,743 3,165,588 3,089,220 1,746,637 1,566,224 6,627,777 5,299,705 491,404 4,427,586 1,671,830 5,705,421 11,998,997 10,389,594 7,329,943 9,848,779 6,025,502 (15,813,200)(13,721,958)(11,272,163)(18,227,186)(14,377,201)(18,830,891) 12,899,250 12,949,069 13,336,056 14,307,993 14,943,008 14,988,007 3,616,157 3,127,373 2,525,057 2,751,249 3,098,620 3,790,363 591,291 696,746 852,302 882,620 881,252 914,651 1,019,990 411,378 549,649 496,679 590,916 1,499,015 309,715 33,885 191,510 85,560 (81,438)236,936 40,632 -111,530 113,976 54,211 27,100 32,697 (126,275)(749,308)436 200,000 675,257 -----(639,266) 18,509,732 17,092,176 16,816,796 18,638,513 19,686,569 21,492,063 $ 2,696,532 $ 3,370,218 $ 5,544,633 $ 411,327 $ 5,309,368 $ 2,661,172 131 2005 2006 2007 2008 BUSINESS-TYPE ACTIVITIES Expenses Municipal liquor Golf course Earle Brown Heritage Center Water utility Sanitary sewer utility Storm drainage utility Recycling utility Street light utility Total expenses Program Revenues Charges for services: Municipal liquor Earle Brown Heritage Center Water utility Sanitary sewer utility Storm drainage utility Other activities Operating grants and contributions Capital grants and contributions Total program revenues Net (expense) I revenue General Revenues and Transfers Investment earnings (net) Transfers Transfers - capital assets Total general revenues and transfers Restatements for: prior period adjustments or change in accounting principle Change in Net Position $ 978,743 $970,260 $1,037,427 $1,125,517 273,024 282,418 313,794 304,832 2,262,359 2,439,709 2,431,719 2,403,676 1,795,759 1,635,847 1,716,497 1,783,275 2,808,644 3,176,426 2,930,016 3,018,418 1,102,672 950,425 1,123,636 1,162,957 254,661 245,853 257,300 265,983 213,094 161,219 191,659 182,402 9,688,956 9,862,157 10,002,048 10,247,060 1,099,172 1,244,738 1,362,093 1,492,644 1,857,461 2,168,861 2,168,033 1,959,628 1,825,521 1,906,375 2,063,930 2,003,633 2,966,222 3,186,569 3,274,678 3,264,649 1,298,690 1,323,607 1,412,548 1,553,236 706,105 714,373 732,224 763,858 9,753,171 10,544,523 11,013,506 11,037,648 64,215 682,366 1,011,458 790,588 199,876 337,231 406,654 243,322 1,545,893 (303,286) 273,070 1,693,225 1,745,769 33,945 679,724 1,936,547 - 429,206 2,399,148 - $ 1,809,984 $ 1,145,517 $ 4,090,330 $ 2,727,135 132 Table 2 Page 2 of 3 2009 2010 2011 2012 2013 2014 $ 1,249,946 $1,262,076 $1,218,399 $1,274,375 $5,674,937 $5,690,792 323,340 317,539 284,673 273,023 263,425 271,698 2,363,085 2,345,920 2,602,074 2,768,719 4,835,131 5,137,712 3,448,819 1,792,628 1,825,558 1,855,345 2,025,496 1,900,518 3,736,989 3,282,472 3,277,874 3,317,427 3,382,810 3,514,687 1,282,505 1,348,974 1,407,712 1,501,652 1,552,327 1,784,907 276,058 278,381 284,440 285,853 257,079 245,426 220,020 213,752 232,716 222,835 289,043 291,239 12,900,762 10,841,742 11,133,446 11,499,229 18,280,248 18,836,979 1,530,175 1,538,403 1,620,315 1,656,125 6,072,334 5,861,066 1,725,858 1,879,902 2,026,063 2,293,386 4,294,723 4,578,433 2,019,325 1,959,684 1,990,664 2,321,539 2,318,176 2,235,332 3,315,726 3,321,373 3,474,588 3,592,530 3,675,936 3,942,534 1,577,879 1,575,679 1,621,104 1,660,849 1,622,012 1,638,575 770,472 760,757 778,584 853,585 882,995 1,127,116 ----52,775 63,547 --80,186 --- 10,939,435 11,035,798 11,591,504 12,378,014 18,918,951 19,446,603 (1,961,327)194,056 458,058 878,785 638,703 609,624 87,499 20,707 79,016 32,998 (27,223)108,650 (32,697)126,275 749,308 (436)(200,000)(675,257) -----639,266 54,802 146,982 828,324 32,562 (227,223)72,659 $ (1,906,525) $341,038 $1,286,382 $911,347 $411,480 $682,283 133 2005 2006 2007 2008 TOTAL PRIMARY GOVERNMENT Expenses Governmental activities $ 19,633,752 $19,503,183 $21,503,069 $22,679,171 Business-type activities 9,688,956 9,862,157 10,002,048 10,247,060 Total expenses 29,322,708 29,365,340 31,505,117 32,926,231 Program Revenues Governmental activities 5,245,670 5,136,386 6,198,664 6,511,061 Business-type activities 9,753,171 10,544,523 11,013,506 11,037,648 Total program revenues 14,998,841 15,680,909 17,212,170 17,548,709 Net (expense) / revenue (14,323,867)(13,684,431)(14,292,947)(15,377,522) General Revenues and Transfers Governmental activities 17,214,306 18,656,287 18,516,443 15,882,282 Business-type activities 1,745,769 33,945 679,724 1,936,547 Total general revenues and transfers 18,960,075 18,690,232 19,196,167 17,818,829 Restatements for: prior period adjustments or change in accounting principle Governmental activities -(2,518,476)(2,515,759)3,670,679 Business-type activities -429,206 2,399,148 - Total restatements -(2,089,270)(116,611)3,670,679 Change in Net Position $ 4,636,208 $2,916,531 $4,786,609 $6,111,986 Sources: The data for this table has been extracted from the respective years CAFR document. Note: During 2011, the City implemented GASB Statement No. 54, Fund Balance and Governmental Fund Type Definitions. As part of this implementation, certain reclassifications occurred for funds that were reported as Governmental activities prior to 2011, that are now reported as business-type activities. Those balances prior to 2011 have not been restated in this statistical schedule. 134 Table 2 Page 3 of 3 2009 2010 2011 2012 2013 2014 $ 21,518,621 $25,720,955 $21,661,757 $25,557,129 $24,225,980 $24,856,393 12,900,762 10,841,742 11,133,446 11,499,229 18,280,248 18,836,979 34,419,383 36,562,697 32,795,203 37,056,358 42,506,228 43,693,372 5,705,421 11,998,997 10,389,594 7,329,943 9,848,779 6,025,502 10,939,435 11,035,798 11,591,504 12,378,014 18,918,951 19,446,603 16,644,856 23,034,795 21,981,098 19,707,957 28,767,730 25,472,105 (17,774,527)(13,527,902)(10,814,105)(17,348,401)(13,738,498)(18,221,267) 18,509,732 54,802 17,092,176 146,982 16,816,796 828,324 18,638,513 32,562 19,686,569 (227,223) 21,492,063 72,659 18,564,534 17,239,158 17,645,120 18,671,075 19,459,346 21,564,722 $ 790,007 $ 3,711,256 $ 6,831,015 $ 1,322,674 $ 5,720,848 $ 3,343,455 135 Property Tax Lodging Taxes Increments Taxes Total 2005 $11,951,497 $4,216,246 $710,619 $16,878,362 2006 12,276,896 2,682,874 738,776 15,698,546 2007 12,200,575 2,677,630 706,930 15,585,135 2008 12,458,724 2,912,773 619,962 15,991,459 2009 12,899,250 3,616,157 591,291 17,106,698 2010 12,949,069 3,127,373 696,746 16,773,188 2011 13,336,056 2,525,057 852,302 16,713,415 2012 14,307,993 2,751,249 882,620 17,941,862 2013 14,943,008 3,098,620 881,252 18,922,880 2014 14,988,007 3,790,363 914,651 19,693,021 Sources: The data for this table has been extracted from the respective years CAFR document. 136 This page has been left blank intentionally. 137 CITY OF BROOKLYN CENTER, MINNESOTA STATISTICAL SECTION (UNAUDITED) FUND BALANCES - GOVERNMENTAL FUNDS Last ten fiscal years (modified accrual basis of accounting) 2005 2006 2007 2008 $11,080 $500 $700 $21,995 7,283,871 7,508,690 7,941,714 7,721,443 $7,294,951 $7,509,190 $7,942,414 $7,743,438 $5,150,818 $5,176,808 $11,288,685 $9,997,668 24,853,267 22,862,211 11,738,460 10,523,743 3,232,820 4,164,400 3,466,029 4,282,881 $33,236,905 $32,203,419 $26,493,174 $24,804,292 General Fund Reserved Unreserved Nonspendable Assigned Unassigned Total general fund All other governmental funds Reserved Unreserved, reported in: Special revenue funds Capital project funds Restricted Committed Unassigned Total all other governmental funds Sources: The data for this table has been extracted from the respective years CAFR document. Note: During 2011, the City implemented GASB Statement No. 54, Fund Balance and Governmental Fund Type Definitions. As part of this implementation, certain reclassifications occurred for funds that were reported as Governmental activities prior to 2011, that are now reported as business-type activities. Those balances prior to 2011 have not been restated in this statistical schedule. Note: The 2013 fund balances have been restated to align the City's reporting with GASB No. 65. See note IQ for more information on this restatement. 138 Table 4 2009 2010 2011 2012 2013 2014 $27,993 $26,405 $-$-$-$- 8,502,012 8,803,942 ---- --32,308 88,952 26,139 21,967 --2,614 -2,754,124 908,761 --9,695,913 10,597,944 9,602,450 10,089,353 $8,530,005 $8,830,347 $9,730,835 $10,686,896 $12,382,713 $11,020,081 $8,696,324 $7,388,488 $-$-$-$- 9,399,556 7,095,645 ---- 3,609,961 2,203,823 ---- --13,331,705 12,912,357 26,350,322 26,434,113 --3,021,318 3,651,995 7,579,688 10,514,871 --(2,515,053)(3,425,001)(1,432,495)(1,763,877) $21,705,841 $16,687,956 $13,837,970 $13,139,351 $32,497,515 $35,185,107 139 CITY OF BROOKLYN CENTER, MINNESOTA STATISTICAL SECTION (UNAUDITED) CHANGES IN FUND BALANCES - GOVERNMENTAL FUNDS Last ten fiscal years (modified accrual basis of accounting) 2005 2006 2007 2008 2009 $ 11,641,177 $ 11,525,040 $12,094,359 $12,403,914 $12,897,002 4,680,688 2,664,144 2,727,637 2,894,595 3,601,747 662,614 658,410 658,620 643,934 656,772 710,619 738,776 706,930 619,962 591,291 1,226,655 1,214,571 1,364,413 1,289,148 1,352,908 675,530 722,633 673,156 643,736 616,135 2,578,031 2,375,697 3,171,745 2,211,560 2,789,007 754,575 722,218 705,736 761,404 1,120,341 253,748 256,600 291,423 302,986 340,536 1,078,434 1,601,731 1,519,503 733,877 247,260 427,839 477,296 404,420 449,061 370,508 24,689,910 22,957,116 24,317,942 22,954,177 24,583,507 2,232,908 2,409,788 2,508,945 3,127,917 3,427,024 7,014,528 7,299,842 7,550,434 8,048,529 8,452,348 1,797,127 1,717,120 2,008,499 1,784,319 1,722,680 86,043 123,172 74,389 72,893 71,519 2,121,130 2,212,142 2,314,099 2,409,291 2,462,275 2,076,023 1,386,558 5,659,331 7,666,319 2,531,062 315,355 363,967 354,848 301,396 313,723 8,335,916 5,918,472 4,524,524 4,531,003 2,820,761 2,772,189 3,127,146 2,786,076 2,884,953 4,445,471 1,214,751 1,197,392 1,134,412 1,060,165 1,183,560 23,758 53,671 12,896 101,809 15,170 27,989,728 25,809,270 28,928,453 31,988,594 27,445,593 (3,299,818)(2,852,154)(4,610,511)(9,034,417)(2,862,086) 2,811,793 2,784,116 5,881,257 1,969,533 3,632,013 -1,460,000 -6,725,000 - ---1,384 - (7,280,000)-(529,138)- (2,619,793)(2,211,209)(6,018,629)(1,549,358)(3,081,811) (7,088,000)2,032,907 (666,510)7,146,559 550,202 $ (10,387,818) $ (819,247) $ (5,277,021) $ (1,887,858) $ (2,311,884) Revenues Property taxes Tax increments Franchise fees Lodging taxes Special assessments Licenses and permits Intergovernmental Charges for services Fines and forfeits Investment earnings (net) Miscellaneous Total revenues Expenditures General government Public safety Public works Community services Parks and recreation Economic development Nondepartmental Capital outlay Debt service Principal Interest Other charges Total expenditures Excess (deficiency) of revenues over (under) expenditures Other financing sources (uses) Transfers in Issuance of debt Premium on issuance of debt Sale of capital assets Refunded bonds redeemed Transfers out Total other financing sources (uses) Restatements for: prior period adjustments or change in accounting principle Net change in fund balances Debt service as a percentage of noncapital expenditures 18.26% 18.90% 15.85% 14.38% 22.86% Sources: The data for this table has been extracted from the respective years CAFR document. Note: During 2011, the City implemented GASB Statement No. 54,Fund Balance and Governmental Fund Type Definitions. As part of this implementation, certain reclassifications occurred for funds that were reported as Governmenta activities prior to 2011, that are now reported as business-type activities. Those balances prior to 2011 have not been restated in this statistical schedule. Note: The 2013 fund balances have been restated to align the City's reporting with GASB No. 65. See note 1Q for more information on this restatement. 140 Table 5 2010 2011 2012 2013 2014 $ 13,012,317 $ 13,396,611 $ 14,389,842 $ 15,094,464 $ 15,036,602 3,111,882 2,527,316 2,685,822 3,149,533 3,795,708 647,796 659,066 647,346 651,832 647,071 696,746 852,302 882,620 881,252 914,651 1,491,194 1,975,470 1,294,521 1,877,116 1,794,126 1,063,945 961,947 858,593 1,084,003 1,021,410 6,859,817 4,929,902 3,607,218 3,159,571 2,706,299 1,001,019 1,122,350 1,056,241 1,073,917 1,229,513 359,937 340,356 336,740 315,982 364,927 24,212 143,661 48,322 (71,059) 188,913 285,425 296,427 742,269 423,822 344,690 28,554,290 27,205,408 26,549,534 27,640,433 28,043,910 3,280,340 2,930,516 2,978,738 3,045,365 3,173,282 8,524,140 8,674,195 9,090,324 9,117,541 9,622,239 1,662,343 2,030,930 1,982,540 1,982,311 2,107,959 82,645 100,849 141,505 149,203 145,503 2,442,938 2,412,952 2,532,827 2,481,763 2,457,622 3,105,007 2,337,253 5,215,619 3,076,454 2,855,983 300,549 316,376 287,692 400,835 364,501 8,549,489 5,558,718 699,563 4,319,756 3,950,187 4,676,066 2,965,613 2,666,790 2,655,000 1,905,000 1,026,800 895,053 797,785 698,702 802,892 14,104 14,581 7,677 179,044 9,039 33,664,421 28,237,036 26,401,060 28,105,974 27,394,207 (5,110,131) (1,031,628) 148,474 (465,541) 649,703 4,888,536 3,083,093 2,320,883 4,860,459 10,463,495 - - - 10,960,000 - - - - 367,405 - - - 108,532 - - (4,495,948) (3,409,350) (2,320,447) (4,660,459) (9,788,238) 392,588 (326,257) 108,968 11,527,405 675,257 - - - 9,992,117 - $ (4,717,543) $ (1,357,885) $ 257,442 $ 21,053,981 $ 1,324,960 22.71% 17.02% 13.48% 11.52% 11.26% 141 CITY OF BROOKLYN CENTER, MINNESOTA STATISTICAL SECTION (UNAUDITED) ASSESSED TAX CAPACITY AND ESTIMATED ACTUAL VALUE OF TAXABLE PROPERTY Last ten fiscal years 2005 2006 2007 2008 Estimated actual value: Real estate $ 2,182,205,700 Personal property 14,862,000 Total estimated actual value Tax Capacity Real estate Personal property Contribution to fiscal disparities Receipt from fiscal disparities Tax increments Net tax capacity for direct rate Net Tax Capacity as a Percentage of Estimated Actual Market Value Property Tax Levies General revenues Debt service Housing and Redevelopment Authority Total property taxes levied $ 1,959,999,100 $ 2,035,666,100 $ 2,140,133,600 $ 2,197,067,700 $22,080,464 $23,418,557 $25,009,973 $25,898,336 294,377 298,953 283,198 291,815 (2,208,046)(2,341,856)(2,500,997)(2,470,328) 3,231,664 3,503,030 4,125,105 4,625,964 (3,122,665)(2,559,620)(2,463,631)(2,405,929) $20,275,794 $22,319,064 $24,453,648 $25,939,858 1.03%1.10%1.14%1.18% $10,308,649 $10,612,956 $10,939,788 $11,404,750 759,074 757,394 753,955 730,152 251,295 257,065 265,000 302,191 $11,319,018 $11,627,415 $11,958,743 $12,437,093 Tax Rates General revenues Debt service Housing and Redevelopment Authority Total Direct Tax Rate 46.740 43.524 3.744 3.393 1.239 1.152 41.199 41.081 3.083 2.815 1.084 1.185 51.723 48.069 45.366 45.081 Sources: The data for this table has been provided by Hennepin County. Note: The breakdown of real estate vs. personal property for estimated actual value, was not available prior to 2008. This information will be updated on a go-forward basis. IEP Table 6 2009 2010 2011 2012 2013 2014 $2,079,719,700 $1,882,823,900 $1,682,317,900 $1,633,327,900 $1,506,661,400 $1,497,679,200 14,386,500 14,219,700 15,487,000 16,139,200 18,257,700 18,319,800 $2,094,106,200 $1,897,043,600 $1,697,804,900 $1,649,467,100 $1,524,919,100 $1,515,999,000 $25,158,441 $23,099,333 $20,759,133 $18,351,627 $17,129,016 $17,358,722 283,070 278,984 304,150 316,491 358,867 360,506 (2,719,868)(2,998,145)(2,774,593)(2,619,012)(2,335,813)(2,495,133) 5,259,685 7,002,213 7,123,008 7,194,133 6,844,540 7,117,154 (2,739,457)(2,420,044)(2,093,764)(1,922,253)(2,169,035)(2,675,416) $25,241,871 $24,962,341 $23,317,934 $21,320,986 $19,827,575 $19,665,833 1.21%1.32%1.37%1.29%1.30%1.30% $11,804,016 $12,504,044 $12,905,340 $13,207,954 $13,632,326 $13,673,970 703,903 715,183 695,632 708,581 711,725 687,000 385,289 349,745 310,831 302,288 246,160 282,110 $12,893,208 $13,568,972 $13,911,803 $14,218,823 $14,590,211 $14,643,080 44.732 48.230 54.234 61.036 67.485 70.587 2.789 2.865 2.983 3.323 3.590 3.547 1.617 1.317 1.341 1.457 1.128 1.609 49.138 52.412 58.558 65.816 72.202 75.742 143 CITY OF BROOKLYN CENTER, MINNESOTA STATISTICAL SECTION (UNAUDITED) PROPERTY TAX RATES - DIRECT AND OVERLAPPING GOVERNMENTS Last ten fiscal years Overlapping Rates School School School School Metro City County District 11 District 279 District 281 District 286 Districts (1) 2005 51.723 44.172 21.492 24.336 29.989 36.159 3.304 2006 48.069 41.016 20.046 21.815 28.489 39.781 2.924 2007 45.366 39.110 19.353 23.758 28.750 36.154 2.671 2008 45.081 38,571 16.983 19.710 27.243 37.519 2.562 2009 49.138 40.413 18.263 21.033 27.214 43.163 2.579 2010 52.412 42.640 19.939 22.381 28.621 51.173 2.620 2011 58.558 45.840 23.999 24.217 34.387 47.697 2.949 2012 65.816 48.231 23.325 24.930 32.810 48.020 3.084 2013 72.202 49.461 26.801 27.973 32.347 56.031 3.242 2014 75.742 49.959 28.265 29.819 34.777 54.422 3.335 Sources: The data for this table has been provided by Hennepin County. Note (1) - Metro Districts include: Mosquito Control, Metropolitan Council, and Metro Transit Note (2) - Other Districts include: Hennepin Parks, Park Museum, Regional Railroad Authority, and Hennepin HRA. Note (3) - The Watershed levy is applicable to all of School Districts 279 & 281, and portions of School Districts 11 & 286. 144 Table 7 Total Direct and Overlapping Rates Other Watershed ISD 11 &ISD 286 & Districts (2)Districts (3)ISD 11 Watershed ISD 279 ISD 281 ISD 286 Watershed 4.078 -124.769 124.769 127.613 133.266 139.436 139.436 4.074 0.073 116.129 116.202 117.971 124.645 135.864 135.937 4,639 -111.139 111.139 115.544 120.536 127.940 127.940 4.835 0.265 108.032 108.297 111.024 118.557 128.568 128.833 4.575 0.047 114.968 115.015 117.785 123.966 139.868 139.915 5.518 0.081 123.129 123.210 125.652 131.892 154.363 154.444 6.223 0.568 137.569 138.137 138.355 148.525 161.267 161.835 6.439 0.001 146.895 146.896 148.501 156.381 171.590 171.591 6.847 0.101 158.553 158.654 159.826 164.200 187.783 187.884 7.226 -164.527 164.527 166.081 171.039 190.684 190,684 145 --Percentage of Percentage of Net Tax Total Tax Net Tax Total Tax Taxpayer Classification Capacity Rank Capacity Value Capacity Rank Capacity Value The Luther Company, LLP Commercial $ 604,350 1 3.07% The Molasky Group Commercial 461,250 2 2.35% Wal-Mart Stores Inc.Commercial 333,600 3 1.70% Ax Rer, LP Industrial 192,850 4 0.98% Medtronic, Inc.Industrial 192,250 5 0.98%$ 173,238 8 0.85% Brookdale Corner, LLC Commercial 188,250 6 0.96%195,250 4 0.96% TLN Lanel, LTD Apartment 187,638 7 0.95% Lake Point, LLC Apartment 177,500 8 0.90% GB Homes, LLC Apartment 159,313 9 0.81% Brooklyn Hotel Partners, LLC Commercial 150,190 10 0.76% Talisman Brookdale, LLC Commercial 952,960 I 4.70% Target Stores Commercial 412,350 2 2.03% Regal Cinemas, Inc.Commercial 229,250 3 1.13% BCC Associates LLC Commercial 191,250 5 0.94% Hennepin County Hotel Assoc.Commercial 183,250 6 0.90% Twin Lakes North Apartment 182,900 7 0.90% B.C. Leased Housing Apartment 150,738 9 0.74% Sears Roebuck and Co.Commercial 150,220 10 0.74% Totals $ 2,647,191 13.46%$ 2,821,406 13.89% Sources: The data for this table has been provided by Hennepin County. 146 CITY OF BROOKLYN CENTER, MINNESOTA STATISTICAL SECTION (UNAUDITED) PROPERTY TAX LEVIES AND COLLECTIONS Table 9 Last ten fiscal years Collected within the Certified Fiscal Year of the Levy Collections in Total Collections to Date Property Percentage Subsequent Percentage Tax Levy Amount of Levy Years Amount to Date 2005 11,319,018 $ 10,403,359 91.9%$ 915,659 $ 11,319,018 100.0% 2006 11,627,415 10,697,638 92.0%929,777 11,627,415 100.0% 2007 11,958,743 11,070,387 92.6%888,356 11,958,743 100.0% 2008 12,437,093 11,577,739 93.1%859,354 12,437,093 100.0% 2009 12,893,208 11,983,738 92.9%909,470 12,893,208 100.0% 2010 13,568,972 12,633,425 93.1%935,547 13,568,972 100.0% 2011 13,911,803 12,947,358 93.1%964,445 13,911,803 100.0% 2012 14,218,823 13,942,766 98.1%241,625 14,184,391 99.8% 2013 14,590,211 14,472,075 99.2%90,131 14,562,206 99.8% 2014 14,643,080 14,470,227 98.8%-14,470,227 98.8% Sources: The data for this table has been provided by Hennepin County and from City financial maintenance documents. Note: The components of the Certified Property Tax Levy can be viewed in table 6 of the statistical section. 147 CITY OF BROOKLYN CENTER, MINNESOTA STATISTICAL SECTION (UNAUDITED) RATIOS OF OUTSTANDING DEBT BY TYPE Table 10 Last ten fiscal years Business-Type Governmental Activities Activities General Tax G.O.Utility Percentage Obligation Increment Improvement Revenue Total of Personal Per Bonds Bonds Bonds Bonds (BAB)Debt Income Capita 2005 $ 5,340,000 $ 19,305,000 $ 4,720,000 $ -$ 29,365,000 2.08%$ 1,044 2006 4,465,000 18,305,000 5,180,000 -27,950,000 1.88%1,002 2007 3,875,000 17,255,000 4,280,000 -25,410,000 1.63%911 2008 3,275,000 20,560,000 5,690,000 -29,525,000 1.71%973 2009 2,665,000 17,795,000 4,925,000 -25,385,000 1.61%852 2010 2,025,000 15,010,000 4,005,000 2,350,000 23,390,000 1.42%777 2011 1,385,000 13,720,000 3,260,000 2,210,000 20,575,000 1.19%681 2012 700,000 12,795,000 2,590,000 2,075,000 18,160,000 1.01%594 2013 -17,470,000 6,920,000 1,940,000 26,330,000 1.43%865 2014 -16,040,000 6,445,000 1,800,000 24,285,000 1.32%798 Sources: The data for this table has been provided from City financial maintenance documents. Note: More detailed information for Population and Personal Income can be viewed in table 15 of the statistical section. 148 CITY OF BROOKLYN CENTER, MINNESOTA STATISTICAL SECTION (UNAUDITED) RATIOS OF GENERAL BONDED DEBT OUTSTANDING Table 11 Last ten fiscal years Percentage of General Less: Amounts Net General Estimated Obligation Restricted to Obligation Market Value Per Bonds Debt Service Debt of Property Capita 2005 $ 5,340,000 $ 1,012,791 $4,327,209 0.22%$ 154 2006 4,465,000 1,083,063 3,381,937 0.17%121 2007 3,875,000 1,159,331 2,715,669 0.13%97 2008 3,275,000 1,202,802 2,072,198 0.09%68 2009 2,665,000 1,211,620 1,453,380 0.07%49 2010 2,025,000 1,201,263 823,737 0.04%27 2011 1,385,000 1,203,611 181,389 0.01%6 2012 700,000 1,186,758 -0.00%- 2013 ---0.00%- 2014 ---0.00%- Sources: The data for this table has been provided from City financial maintenance documents. Note: More detailed information for Population can be viewed in table 15 of the statistical section. Note: More detailed information for Estimated Property Values can be viewed in table 6 of the statistical section. 149 CITY OF BROOKLYN CENTER, MINNESOTA STATISTICAL SECTION (UNAUDITED) COMPUTATION OF DIRECT AND OVERLAPPING Table 12 GOVERNMENTAL ACTIVITIES DEBT December 31, 2014 Estimated Estimated Share Debt Percentage of Overlapping Governmental Unit Outstanding Applicable Debt Overlapping debt: School Districts: No. llAnoka No. 279 Osseo No. 281 Robbinsdale No. 286 Brooklyn Center Metropolitan Council Hennepin County Hennepin Regional RR Authority Hennepin County Park Reserve District Total overlapping debt City of Brooklyn Center direct debt Total direct and overlapping debt $ 71,216,896 1.33%$ 947,185 76,943,127 3.21%2,469,874 167,683,181 4.21%7,059,462 27,803,566 100.00%27,803,566 93,953,739 0.53%497,955 753,266,880 1.02%7,683,322 35,200,157 1.40%492,802 52,209,049 1.40%730,927 $ 1,278,276,595 47,685,093 22,485,000 $ 70,170,093 Sources: The majority of the data for this table has been provided by Hennepin County. Sources: The remaining data for this table was provided by Anoka County and School District No. 11. Note: More detailed information for the City's outstanding debt can be viewed in table 10 of the statistical section. Note: Overlapping governments are those that coincide, at least in part, with the geographic boundaries of the City. The schedule estimates the portion of the outstanding debt of those overlapping governments that is borne by the residents and businesses of the City. This process recognizes that, when considering the City's ability to issue and repay long-term debt, the entire debt burden borne by the residents and businesses should be taken into account. However, this does not imply that every taxpayer is a resident, and therefore responsible for repaying the debt, of each overlapping government. Note: The percentage of overlapping debt applicable is estimated using tax capacity values. Applicable percentages were estimated by determining the the portion of each entity's tax capacity that is within the City's boundaries, and dividing it by the entity's total tax capacity. 150 I This page has been left blank intentionally. 151 Taxable Market Value Debt Limit Percentage Debt Limit Total net debt applicable to limit Legal debt margin Total net debt applicable to the limit as a percentage of debt limit 2005 2006 2007 2008 $ 1,800,176,800 $ 1,960,952,700 $ 2,112,997,900 $ 2,189,212,600 2.00%2.00%2.00%3.00% 36,003,536 39,219,054 42,259,958 65,676,378 4,327,209 3,381,937 2,715,669 2,072,198 $ 31,676,327 $ 35,837,117 $ 39,544,289 $ 63,604,180 12,02%8.62%6.43%3.16% Sources: The data for this table has been provided by Hennepin County and from City financial maintenance documents. 152 Table 13 2009 2010 2011 2012 2013 2014 $ 2,087,517,800 $ 1,891,591,400 $ 1,692,594,600 $ 1,468,159,885 $ 1,338,405,415 $1,329,268,428 3.00%3.00%3.00%3,00%3,00%3.00% 62,625,534 56,747,742 50,777,838 44,044,797 40,152,162 39,878,053 1,453,380 823,737 181,389 --- $ 61,172,154 $ 55,924,005 $ 50,596,449 $ 44,044,797 $ 40,152,162 $39,878,053 2.32%1.45%0.36%0.00%0.00%0.00% 153 CITY OF BROOKLYN CENTER, MINNESOTA STATISTICAL SECTION (UNAUDITED) Lonecuons rrmcipai ILIWRSL OVcI ar,c 2005 $ 1,058,557 $ 990,000 $197,760 89.12% 2006 1,035,961 1,000,000 167,284 88.75% 2007 884,261 900,000 162,486 83.23% 2008 816,798 980,000 145,121 72.60% 2009 1,173,435 765,000 166,946 125.91% 2010 750,168 920,000 167,686 68.97% 2011 747,145 745,000 136,890 84.72% 2012 561,618 670,000 111,460 71.87% 2013 485,034 590,000 88,870 71.45% 2014 674,253 475,000 160,447 106.11% Tax Increment Bonds Tax Increment Debt Service Collections Principal Interest Coverage 2005 $ 3,576,209 $ 770,000 $729,740 238.46% 2006 1,609,994 1,000,000 887,080 85.32% 2007 1,707,470 1,050,000 847,236 90.00% 2008 1,906,053 1,030,000 804,491 103.90% 2009 2,356,641 2,765,000 922,711 63.91% 2010 1,794,442 2,785,000 783,961 50.28% 2011 1,321,205 1,290,000 702,530 66.31% 2012 2,388,702 925,000 651,744 151.50% 2013 2,766,160 1,365,000 598,107 140.91% 2014 3,038,983 1,430,000 642,445 146.64% Storm Sewer Revenue Bonds Storm Drainage Less:Net Utility Operating Available Debt Service Charges Expenses Revenue Principal Interest Coverage 2005 $ 1,293,841 $ 1,086,600 $ 207,241 $ 230,000 $6,210 87.74% Utility Revenue Bonds (BAB) Water and Sanitary Sewer Less:Net Utility Operating Available Debt Service Charges Expenses Revenue Principal Interest Coverage 2010 $ 5,249,263 $ 4,934,032 $ 315,231 $ - $68,081 463.02% 2011 5,421,679 5,011,775 409,904 140,000 83,438 183.45% 2012 5,889,769 5,084,012 805,757 135,000 81,562 372.07% 2013 5,951,703 5,335,477 616,226 135,000 80,188 286.37% 2014 6,151,426 5,334,905 816,521 140,000 76,902 376.45% Sources: The data for this table has been provided from City financial maintenance documents. Note: The Storm Sewer Revenue bonds were retired in 2005. Determined it was not necessary to show data beyond that year. Note: The Utility Revenue bonds were issued in 2010. Determined it was not necessary to show data prior to that year. 154 CITY OF BROOKLYN CENTER, MINNESOTA STATISTICAL SECTION (UNAUDITED) DEMOGRAPHIC AND ECONOMIC STATISTICS Table 15 Last ten fiscal years School Enrollments Per Capita No. 286 No. of Personal Personal Unemployment Median No. 11 No. 279 No. 281 Brooklyn Population Households Income Income Rate Age Anoka Osseo Robbinsdale Center 2005 28,137 11,186 $ 1,408,819,590 $ 50,070 4.6%41,596 21,792 13,368 1,679 2006 27,901 11,142 1,484,751,715 53,215 4.9%41,310 22,071 13,194 1,705 2007 27,907 11,207 1,554,866,412 55,716 5.6%34.3 40,656 21,859 12,891 1,763 2008 30,330 11,250 1,723,775,220 56,834 7.0%34.4 40,152 21,001 12,526 2,012 2009 29,810 11,175 1,572,835,220 52,762 8.9%33.6 39,822 20,903 11,947 2,250 2010 30,104 10,756 1,649,036,912 54,778 8.0%31.3 39,106 20,835 12,036 2,311 2011 30,204 10,791 1,734,223,068 57,417 7.2%32.8 38,686 20,686 12,062 2,109 2012 30,569 10,812 1,800,452,962 58,898 6.4%33.1 38,403 20,623 12,181 2,177 2013 30,426 10,862 1,843,846,026 60,601 5.1%33.3 38,183 20,689 12,266 2,182 2014 30,426 10,862 1,843,846,026 60,601 3.6%33.3 37,853 20,398 12,385 2,399 Sources: Population & Households - Metropolitan Council Personal Income - Calculated by the City Per Capita Personal Income - US Department of Commerce; Bureau of Economic Analysis Unemployment Rate - Minnesota Department of Employment and Economic Development Median Age - US Department of Commerce, Bureau of the Census School Enrollment - Minnesota Department of Education Note: Median age was added in 2013. Information prior to 2007 was not available. This will be updated on a go-forward basis. Note: Some data was not yet available for 2014. In those instances, 2013 data was shown for the current year. 155 CITY OF BROOKLYN CENTER, MINNESOTA STATISTICAL SECTION (UNAUDITED) PRINCIPAL EMPLOYERS Table 16 Current Year and Nine Years Ago 2013 2004 Percentage of Percentage of Total City Total City Employer Employees Rank Employment Employees Rank Employment Promeonlnc.,A Division ofMedtronic 1,100 1 7.06%300 3 2.09% Independent School District #286 380 2 2.44% Luther Auto Group 303 3 1.95% Wal-Mart 300 4 1.93% Presbyterian Homes, Marantha Care Center 205 5 1.32% Caribou Coffee Headquarters 200 6 1.28% University of Minnesota Physicians 200 7 1.28% City of Brooklyn Center 151 8 0.97% TCR Corporation 150 9 0.96%135 7 0.94% Target 131 10 0.84%200 4 1.39% Brookdale Center 1,700 1 11.82% Graco, Inc.832 2 5.79% Cub Foods 180 5 1.25% Ault, Inc.150 6 1.04% Cass Screw Machine Products 123 8 0.86% Best Buy 110 9 0.76% Kohl's 100 10 0.70% Totals 3,120 20.04%3,830 26.63% Sources: The data for this table has been extracted from Official Statements for bonds issued in 2004 and 2013. Note: Due to data privacy within the State, this data is not available from the Department of Employment and Economic Development. As the City did not issue bonds in 2014 or 2005, we have determined it reasonable to use the data available from the years above, as they are the closest in time to those years where data is not available. 156 CITY OF BROOKLYN CENTER, MINNESOTA STATISTICAL SECTION (UNAUDITED) FULL TIME CITY GOVERNMENT POSITIONS BY FUNCTION Table 17 Last ten fiscal years 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 General government Administrative 3.0 3.0 3.0 2.0 2.0 2.0 2.0 2.0 2.0 2.0 Elections 1.0 1.0 1.0 1.0 1.0 1.0 1.0 1.0 1.0 1.0 City Clerk 1.0 1.0 1.0 2.0 2.0 2.0 2.0 2.0 2.0 2.0 Finance 6.0 6.0 6.0 5.0 5.0 5.0 5.0 5.0 5.0 5.0 Assessor 3.0 3.0 3.0 3.0 3.0 3.0 3.0 3.0 3.5 3.5 Human Resources 2.0 2.0 2.0 2.0 3.0 3.0 3.0 3.0 3.0 3.0 Information technology 2.0 2.0 2.0 2.0 2.0 2.0 2.0 2.0 2.0 2.0 Building Maintenance 4.0 4.0 4.0 4.0 4.0 4.0 4.0 3.0 3.0 3.0 Total general government 22.0 22.0 22.0 21.0 22.0 22.0 22.0 21.0 21.5 21.5 Public safety Police Administration 3.0 3.0 3.0 2.0 2.0 2.0 2.0 2.0 2.0 2.0 Investigation 8.0 7.0 8.0 7.0 7.0 7.0 7.0 7.0 7.0 7.0 Patrol 34.0 35.0 35.0 41.0 40.0 42.0 42.0 42.0 42.0 41.0 Support Services 12.0 12.0 9.0 9.0 9.0 9.0 9.0 9.0 9.0 9.0 Facility Maintenance 1.0 1.0 1.0 1.0 1.0 1.0 1.0 1.0 1.0 1.0 Fire 1.0 1.0 1.0 1.0 1.0 1.0 1.0 1.0 1.0 1.0 Emergency Preparedness -1.0 1.0 1.0 1.0 1.0 1.0 1.0 1.0 1.0 Planning & Zoning 2.0 2.0 2.0 2.0 2.0 2.0 1.5 1.5 1.5 1.5 Inspections 4.0 4.0 4.0 4.0 4.0 4.0 4.0 4.0 4.0 5.0 Code Enforcement ---2.0 5.0 5.0 5.0 4.0 5.0 5.0 Total public safety 65.0 66.0 64.0 70.0 72.0 74.0 73.5 72.5 73.5 73.5 Public works Engineering & Admin 6.0 6.0 6.0 6.0 6.0 6.0 6.0 6.0 7.0 7.0 Street Maintenance 7.0 8.0 8.0 8.0 8.0 8.0 8.0 7.0 7.0 7.0 Traffic Control 2.0 2.0 2.0 2.0 2.0 2.0 2.0 2.0 2.0 2.0 Total public works 15.0 16.0 16.0 16.0 16.0 16.0 16.0 15.0 16.0 16.0 Parks and recreation Administration 2.0 2.0 2.0 2.0 2.0 2.0 2.0 2.0 2.0 2.0 Recreation Programs 4.0 4.0 4.0 4.0 4.0 4.0 4.0 4.0 4.0 4.0 Community Center 3.0 3.0 3.0 3.0 3.0 3.0 3.0 --- Parks Maintenance 7.0 6.0 6.0 6.0 6.0 6.0 6.0 6.0 6.0 6.0 Forestry 1.0 1.0 1.0 1.0 1.0 1.0 1.0 1.0 1.0 1.0 Total park and recreation 17.0 16.0 16.0 16.0 16.0 16.0 16.0 13.0 13.0 13.0 Economic Development 2.0 2.0 2.0 2.0 2.0 2.0 2.5 2.5 2.5 2.5 Municipal Liquor 3.0 3.0 4.0 4.0 4.0 5.0 4.0 4.0 5.0 5.0 Golf Course 1.0 1.0 1.0 1.0 1.0 1.0 1.0 1.0 1.0 1.0 Earle Brown Heritage Center 11.0 11.0 11.0 11.0 11.0 11.0 11.0 11.0 11.0 12.0 Water 5.3 5.3 5.3 5.3 5.3 5.3 5.3 5.3 5.3 5.3 Sanitary Sewer 2.3 2.3 2.3 2.3 2.3 2.3 2.3 2.3 2.3 2.3 Storm Drainage 1.4 1.4 1.4 1.4 1.4 1.4 1.4 2.4 2.4 2.4 Central Garage 5.0 5.0 5.0 5.0 5.0 5.0 5.0 5.0 5.0 5.0 Total 150.0 151.0 150.0 155.0 158.0 161.0 160.0 155.0 158.5 159.5 Sources: The data for this table has been extracted from the respective years budget document 157 I N In t N M-N N N N C N It C - -I c' -'t O C N C t N In N C -C 00 N 00 ' 0-S Cl °°tr)-C V --00 C 00 C 00 -N C I G N C C\ ©C t N N c 'N N 110 C 00 - I N - N c C N N Q c N '.0 N O\ 00 0 N N 00 '.0 '.CNN S S kri-C N '.0 -00 C 00 C -C - N S - '.0 - fl C C N N tfl C m Cl) m N '.0 N '.0 V 0.00 N - '.0 cq fl N N N N 1 fl C 00 ' C 00 C 00 C -fl tflc N--00 N '.0-00 C- N I 0. 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N N '.0 Cl)0—C' C'.— C' C' —.N '.0 — N C'C'I V.'C'V.'—N C' NN1—— I — 00 '.0 N N —C' N N N C 00'0 V.' 0'.— C' C' —N —N — N ClI "N 00 11.'C'INI 2 -*C' N Z -.O zz- ZZ E Z0E-'I) If,C)If, LI, II,0) 1 0If, r.I o °.U 2uo 2 c4 - oLn C,3 0)L0) U,0)UI-.00 This page has been left blank intentionally. 160 CITY OF BROOKLYN CENTER HENNEPIN COUNTY, MINNESOTA Special Purpose Audit Reports on Single Audit, Internal Controls, and Compliance With Laws and Regulations Year Ended December 31, 2014 THIS PAGE INTENTIONALLY LEFT BLANK CITY OF BROOKLYN CENTER HENNEPIN COUNTY, MINNESOTA Table of Contents Page Schedule of Expenditures of Federal Awards Independent Auditor's Report on Internal Control Over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements Performed in Accordance With Government Auditing Standards 2-3 Independent Auditor's Report on Compliance for Each Major Federal Program; Report on Internal Control Over Compliance; and Report on the Schedule of Expenditures of Federal Awards Required by OMB Circular A- 133 4-6 Independent Auditor's Report on Minnesota Legal Compliance 7 Schedule of Findings and Questioned Costs 8-9 THIS PAGE INTENTIONALLY LEFT BLANK CITY OF BROOKLYN CENTER Schedule of Expenditures of Federal Awards Year Ended December 31, 2014 Federal Federal Federal Grantor/Pass-Through Grantor/Program Title CFDA No. Expenditures U.S. Environmental Protection Agency Passed through Minnesota Public Facilities Authority Capitalization Grants for Drinking Water State Revolving Funds 66.468 $ 4,713,082 U.S. Department of Housing and Urban Development Passed through Hennepin County Community Development Block Grants - Entitlement Grants 14.218 228,514 Community Development Block Grants - State's Program and Non-Entitlement Grants in Hawaii 14.228 22,957 U.S. Department of Justice Direct program Bulletproof Vest Partnership Program 16.607 5,315 Passed through Hennepin County Edward Byrne Memorial Justice Assistance Grant Program 16.738 14,589 U.S. Department of Transportation Passed through the City of Brooklyn Park State and Community Highway Safety 20.600 10,106 Minimum Penalties for Repeat Offenders for Driving While Intoxicated 20.608 13,476 National Priority Safety Programs 20.616 1,679 Total federal awards $ 5,009,718 Note 1: The Schedule of Expenditures of Federal Awards is prepared on the accrual basis of accounting in accordance with the requirements of OMB Circular A-133, Audits of States, Local Governments, and Nonprofit Organizations. Therefore, the amounts presented in this schedule may differ from the amounts presented in, or used in the preparation of, the City's basic financial statements. Note 2: All pass-through entities listed above use the same CFDA numbers as the federal grantors to identify these grants, and have not assigned any additional identifying numbers. -1- THIS PAGE INTENTIONALLY LEFT BLANK VA VAr k CERTIFIED PULILIC A C C C) LI N T A N T S PRINCIPALS Thomas NI. Niontjguc. (I'; 11()mas A Ka r nowski, CPA Paul A. Radscvch, CPA \VIli.ini . Itici. CPA j.nics II. Eichtri. CPA Aaron J N idscn. Victoria I.. Holinka, CPA INDEPENDENT AUDITOR'S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT OF F[NANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS To the City Council and Management City of Brooklyn Center, Minnesota We have audited, 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, the financial statements of the governmental activities, the business-type activities, each major fund, and the aggregate remaining fund information of the City of Brooklyn Center, Minnesota (the City) as of and for the year ended December 31, 2014, and the related notes to the financial statements, which collectively comprise the City's basic financial statements, and have issued our report thereon dated May 18, 2015. INTERNAL CONTROL OVER FINANCIAL REPORTING In planning and performing our audit of the financial statements, we considered the City's internal control over financial reporting (internal control) to determine the audit procedures that are appropriate in the circumstances for the purpose of expressing our opinions on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of the City's internal control. Accordingly, we do not express an opinion on the effectiveness of the City's internal control. A deficiency in internal control exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, misstatements on a timely basis. A material weakness is a deficiency, or combination of deficiencies, in internal control, such that there is a reasonable possibility that a material misstatement of the City's financial statements will not be prevented, or detected and corrected, on a timely basis. A significant deficiency is a deficiency, or a combination of deficiencies, in internal control that is less severe than a material weakness, yet important enough to merit attention by those charged with governance. Our consideration of internal control was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control that might be material weaknesses or significant deficiencies. Given these limitations, during our audit we did not identify any deficiencies in internal control that we consider to be material weaknesses. However, material weaknesses may exist that have not been identified. (continued) -2- MaIIoy, Monagu, Karnowski, Radosvich & Co., P.A. 53i3 Wy,ao Bou It, arJ • Suite 4 Io • I> 55416 iIq'hon: 'n2-545-0124 • Tc kf '152-545-0569 • w,w.nnikr,,ni COMPLIANCE AND OTHER MATTERS As part of obtaining reasonable assurance about whether the City's financial statements are free from material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements, noncompliance with which could have a direct and material effect on the determination of financial statement amounts. However, providing an opinion on compliance with those provisions was not an objective of our audit and, accordingly, we do not express such an opinion. The results of our tests disclosed no instances of noncompliance or other matters that are required to be reported under Government Auditing Standards. PURPOSE OF THIS REPORT The purpose of this report is solely to describe the scope of our testing of internal control and compliance and the results of that testing, and not to provide an opinion on the effectiveness of the City's internal control or on compliance. This report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the City's internal control and compliance. Accordingly, this report is not suitable for any other purpose. / ldar, Kt0i; ; . J 1' 4. Minneapolis, Minnesota May 18, 2015 -3- ivVAAKR EL C F RT IF I F. DPURLIC ACCOUNTANTS PRINCIPALS F1,onis M. NIonta,uc. CI'1\ lThomas A. K rnwski, CPA Paul A. I.id,sevcIi (PA William I,aur. CPA Jauws H. Eithten. CPA Aaron I. Nielsen, CPA Victoria I.. Holinka, CI'A INDEPENDENT AUDITOR'S REPORT ON COMPLIANCE FOR EACH MAJOR FEDERAL PROGRAM; REPORT ON INTERNAL CONTROL OVER COMPLIANCE: AND REPORT ON THE SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS REQUIRED BY OMB CIRCULAR A-133 To the City Council and Management City of Brooklyn Center, Minnesota REPORT ON COMPLIANCE FOR EACH MAJOR FEDERAL PROGRAM We have audited the City of Brooklyn Center, Minnesota's (the City) compliance with the types of compliance requirements described in the U.S. Office of Management and Budget (OMB) Circular A-133 Compliance Supplement that could have a direct and material effect on each of the City's major federal programs for the year ended December 31, 2014. The City's major federal programs are identified in the summary of auditor's results section of the accompanying Schedule of Findings and Questioned Costs. MANAGEMENT'S RESPONSIBILITY Management is responsible for compliance with the requirements of laws, regulations, contracts, and grants applicable to its federal programs. AUDITOR'S RESPONSIBILITY Our responsibility is to express an opinion on compliance for each of the City's major federal programs based on our audit of the types of compliance requirements referred to above. 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 Nonprofit 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'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 on compliance for each major federal program. However, our audit does not provide a legal determination of the City's compliance. (continued) -4- Malloy, 1%,lontoguc, Kariiowski, RadostvicIi & Co., PA. 53i3 \',uo I;,I,k,,,r,I • Suit 410 • MN 55416 • TIphono 9S2-54-0424 • lrfu 2.54S069 • ,vww.n,n,kr.m OPINION ON EACH MAJOR FEDERAL PROGRAM In our opinion, the City complied, in all material respects, with the types of compliance requirements referred to on the previous page that could have a direct and material effect on each of its major federal programs for the year ended December 31, 2014. REPORT ON INTERNAL CONTROL OVER COMPLIANCE Management of the City is responsible for establishing and maintaining effective internal control over compliance with the types of compliance requirements referred to above. In planning and performing our audit of compliance, we considered the City's internal control over compliance with the types of requirements that could have a direct and material effect on each major federal program to determine the auditing procedures that are appropriate in the circumstances for the purpose of expressing an opinion on compliance for each major federal program and to test and report on internal control over compliance in accordance with OMB Circular A-133, but not for the purpose of expressing an opinion on the effectiveness of internal control over compliance. Accordingly, we do not express an opinion on the effectiveness of the City's internal control over compliance. A deficiency in internal control over compliance exists when the design or operation of a control over compliance does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, noncompliance with a type of compliance requirement of a federal program on a timely basis. A material weakness in internal control over compliance is a deficiency, or combination of deficiencies, in internal control over compliance, such that there is a reasonable possibility that material noncompliance with a type of compliance requirement of a federal program will not be prevented, or detected and corrected, on a timely basis. A significant deficiency in internal control over compliance is a deficiency, or a combination of deficiencies, in internal control over compliance with a type of compliance requirement of a federal program that is less severe than a material weakness in internal control over compliance, yet important enough to merit attention by those charged with governance. Our consideration of internal control over compliance was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control over compliance that might be material weaknesses or significant deficiencies. We did not identify any deficiencies in internal control over compliance that we consider to be material weaknesses. However, material weaknesses may exist that have not been identified. PURPOSE OF THIS REPORT The purpose of this report on internal control over compliance is solely to describe the scope of our testing of internal control over compliance and the results of that testing based on the requirements of 0M13 Circular A-133. Accordingly, this report is not suitable for any other purpose. (continued) -5- REPORT ON SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS REQUIRED BY OMB CIRCULAR A-133 We have audited the financial statements of the governmental activities, the business-type activities, each major fund, and the aggregate remaining fund information of the City as of and for the year ended December 31, 2014, and the related notes to the financial statements, which collectively comprise the City's basic financial statements. We issued our report thereon dated May 18, 2015, which contained unmodified opinions on those financial statements. Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the basic financial statements. 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 basic financial statements. Such information is the responsibility of management and was derived from and relates directly to the underlying accounting and other records used to prepare the basic financial statements. The information has been subjected to the auditing procedures applied in the audit of the financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the basic financial statements or to the basic financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the Schedule of Expenditures of Federal Awards is fairly stated, in all material respects, in relation to the basic financial statements as a whole. Minneapolis, Minnesota May 18, 2015 I on THIS PAGE INTENTIONALLY LEFT BLANK MMK CF. RT IF IF. DPUBLIC A Cc 0 UN TA NT S PRINCIPALS lIU)IliS NI. N1OIJgUC. CPA, I'ns A <a rnovski, (PA Paul A. Radoscvich. (Pi\ \Xilliani J. I:ur. (:IA janics Ii. Lichien, CPA Aaron J. Nielsen, CPA Victoria I.. Holinka, CPA INDEPENDENT AUDITOR'S REPORT ON MINNESOTA LEGAL COMPLIANCE To the City Council and Management City of Brooklyn Center, Minnesota We have audited, 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, the financial statements of the governmental activities, the business-type activities, each major fund, and the aggregate remaining fund information of the City of Brooklyn Center, Minnesota (the City) as of and for the year ended December 31, 2014, and the related notes to the financial statements, which collectively comprise the City's basic financial statements, and have issued our report thereon dated May 18, 2015. MINNESOTA LEGAL COMPLIANCE The Minnesota Legal Compliance Audit Guide for Political Subdivisions, promulgated by the Office of the State Auditor pursuant to Minnesota Statute § 6.65, contains seven categories of compliance to be tested: contracting and bidding, deposits and investments, conflicts of interest, public indebtedness, claims and disbursements, miscellaneous provisions, and tax increment financing. Our audit considered all of the listed categories. In connection with our audit, nothing came to our attention that caused us to believe that the City failed to comply with the provisions of the Minnesota Legal Compliance Audit Guide for Political Subdivisions. However, our audit was not directed primarily toward obtaining knowledge of such noncompliance. Accordingly, had we performed additional procedures, other matters may have come to our attention regarding the City's noncompliance with the above referenced provisions. PURPOSE OF THIS REPORT The purpose of this report is solely to describe the scope of our testing of compliance and the results of that testing, and not to provide an opinion on compliance. Accordingly, this report is not suitable for any other purpose. t'ee7, *cr, A(AA41W , ., f 4 Minneapolis, Minnesota May 18, 2015 -7- Malloy, Montague, Krnowski, RadoevicIi, & Co., P.A. 33 Wvii lWid,,Ard • Suitt 40 • inpoIi, MN 55416 • iIphon: 'S2.4-0124 • Tkfs. 952.1-0S69 • www.rnrnu.o CITY OF BROOKLYN CENTER Schedule of Findings and Questioned Costs Year Ended December 31, 2014 A. SUMMARY OF AUDIT RESULTS This summary is formatted to provide federal granting agencies and pass-through agencies answers to specific questions regarding the audit of federal awards. Financial Statements What type of auditor's report is issued? X Unmodified Qualified Adverse Disclaimer Internal control over financial reporting: Material weakness(es) identified? Yes X No Significant deficiency(ies) identified? Yes X None reported Noncompliance material to the financial statements noted? Yes X No Federal Awards Internal controls over major federal award programs: Material weakness(es) identified? Yes X No Significant deficiency(ies) identified? Yes X None reported Type of auditor's report issued on compliance for major programs?X Unmodified Qualified Adverse Disclaimer Any audit findings disclosed that are required to be reported in accordance with Section 5lO(a) of OMB Circular A-133? Yes X No Programs tested as major programs: Program or Cluster CFDANo. U.S. Environmental Protection Agency Capitalization Grants for Drinking Water State Revolving Funds 66.468 Threshold for distinguishing between type A and B programs: $ 300,000 Does the auditee qualify as a low-risk auditee? X Yes No -8- CITY OF BROOKLYN CENTER Schedule of Findings and Questioned Costs (continued) Year Ended December 31, 2014 B.FINDINGS - FINANCIAL STATEMENT AUDIT None. C.FINDINGS - MAJOR FEDERAL AWARD PROGRAMS AUDIT None. D.FINDINGS - MINNESOTA LEGAL COMPLIANCE AUDIT None. E.SUMMARY SCHEDULE OF PRIOR AUDIT FINDINGS - MAJOR FEDERAL AWARD PROGRAMS AUDIT None. -9- Management Report for City of Brooklyn Center, Minnesota December 31, 2014 THIS PAGE INTENTIONALLY LEFT BLANK L1 IF POINVAKK C F RT I FL F DPW3LIC A C C () U N T A N I S PRINCIPALS rhoriis NI. Mon aguc. CI'A 'hornac A Ka r IIOWSkI CPA Paul A. Radocvich. CPA \''illi,un J. latic.r. (:l'\ jaincs H. Ekho.n, CPA Anon J. Nielsen, CPA \'ica I.. Hohnka, (Pi\ To the City Council and Management City of Brooklyn Center, Minnesota We have prepared this management report in conjunction with our audit of the City of Brooklyn Center, Minnesota's (the City) financial statements for the year ended December 31, 2014. The purpose of this report is to provide comments resulting from our audit process and to communicate information relevant to city finances in Minnesota. We have organized this report into the following sections: • Audit Summary o Governmental Funds Overview o Enterprise Funds Overview o Government-Wide Financial Statements o Legislative Updates o Accounting and Auditing Updates We would be pleased to further discuss any of the information contained in this report or any other concerns that you would like us to address. We would also like to express our thanks for the courtesy and assistance extended to us during the course of our audit. The purpose of this report is solely to provide those charged with governance of the City, management, and those who have responsibility for oversight of the financial reporting process comments resulting from our audit process and information relevant to city finances in Minnesota. Accordingly, this report is not suitable for any other purpose. *4r, /24J P. 4. Minneapolis, Minnesota May 18, 2015 Mallny, Montagu, Kiriiocrski, Radoscvich & Co., P.A. 5353 W4pjjj B,uIevrd • S.itc 40 • MinnpoHc, MN 55416 • TI hono 052-545-0124 ' ToIo1n: 952-545-0569 • wwwn,nikr,oni THIS PAGE INTENTIONALLY LEFT BLANK AUDIT SUMMARY The following is a summary of our audit work, key conclusions, and other information that we consider important or that is required to be communicated to the City Council, administration, or those charged with governance of the City. OUR RESPONSIBILITY UNDER AUDITING STANDARDS GENERALLY ACCEPTED IN THE UNITED STATES OF AMERICA, GOvERNMENTAUDITING STANDARDS, AND THE U.S. OFFICE OF MANAGEMENT AND BUDGET (OMB) CIRCULAR A-133 We have audited the financial statements of the governmental activities, the business-type activities, each major fund, and the aggregate remaining fund information of the City as of and for the year ended December 31, 2014, and the related notes to the financial statements. Professional standards require that we provide you with information about our responsibilities under auditing standards generally accepted in the United States of America, Government Auditing Standards, and OMB Circular A-133, as well as certain information related to the planned scope and timing of our audit. We have communicated such information to you verbally and in our audit engagement letter. Professional standards also require that we communicate the following information related to our audit. PLANNED SCOPE AND TInNG OF THE AUDIT We performed the audit according to the planned scope and timing previously discussed and coordinated in order to obtain sufficient audit evidence and complete an effective audit. AUDIT OPINION AND FINDINGS Based on our audit of the City's financial statements for the year ended December 31, 2014: • We have issued an unmodified opinion on the City's basic financial statements. • We reported no deficiencies in the City's internal control over financial reporting that we considered to be material weaknesses. • The results of our testing disclosed no instances of noncompliance required to be reported under Government Auditing Standards. • We reported that the Schedule of Expenditures of Federal Awards is fairly stated, in all material respects, in relation to the basic financial statements. • The results of our tests indicate that the City has complied, in all material respects, with the types of compliance requirements that could have a direct and material effect on each of its major federal programs. • We reported no deficiencies in the City's internal controls over compliance with the types of compliance requirements that could have a direct and material effect on each of its major federal programs. • We reported no findings based on our testing of the City's compliance with Minnesota laws and regulations. -1- FOLLOW-UP ON PRIOR YEAR FINDINGS AND RECOMMENDATIONS As a part of our audit of the City's financial statements for the year ended December 31, 2014, we performed procedures to follow-up on the findings that resulted from our prior year audit. We reported the following two findings that were corrected by the City in the current year: 1.In our previous audit, we reported that the City did not obtain the required documentation of either a withholding affidavit or Commissioner of Revenue Form IC-134 before making final settlement with any contractor under a contract requiring the employment of employees for wages. As part of our follow-up procedures, we are pleased to report that this was not a current year finding. 2.In our previous audit, we also reported that the City did not pay each vendor obligation according to the terms of each contract or within 35 days after the receipt of the goods or services or the invoice for the goods or services. As part of our follow-up procedures, we are pleased to report that this was not a current year finding. SIGNIFICANT ACCOUNTING POLICIES Management is responsible for the selection and use of appropriate accounting policies. The significant accounting policies used by the City are described in Note 1 of the notes to basic financial statements. During the year ended December 31, 2013, the City implemented Governmental Accounting Standards Board (GASB) Statement No. 65, Items Previously Reported as Assets and Liabilities. GASB Statement No. 65 identified specific items previously reported as assets that will now be classified as either deferred outflows of resources or outflows (expenditures/expenses), and items previously reported as liabilities that will now be reported as either deferred inflows of resources or inflows (revenues). For the year ended December 31, 2013, the City had reported balances of assets held for resale as a deferred inflow of resources, similar to reporting prior to GASB Statement No. 65, as deferred revenue. However, under GASB Statement No. 65, the reporting of the balances should be included in equity. Therefore, the City determined it was necessary to restate the beginning fund balances for the Economic Development Authority and the Tax Increment District No. 3 special revenue funds of the City. We noted no transactions entered into by the City during the year for which there is a lack of authoritative guidance or consensus. All significant transactions have been recognized in the financial statements in the proper period. ACCOUNTING ESTIMATES AND MANAGEMENT JUDGMENTS Accounting estimates are an integral part of the financial statements prepared by management and are based on management's knowledge and experience about past and current events and assumptions about future events. Certain accounting estimates are particularly sensitive because of their significance to the financial statements and because of the possibility that future events affecting them may differ significantly from those expected. The most sensitive estimates affecting the financial statements were: • Depreciation - Management's estimates of depreciation expense are based on the estimated useful lives of the assets. • Net Other Post-Employment Benefit (OPEB) Liabilities - Actuarial estimates of the net OPEB obligation is based on eligible participants, estimated future health insurance premiums, and estimated retirement dates. • Compensated Absences - Management's estimate is based on current rates of pay and sick leave balances. • Land Held for Resale - Management's estimates of this asset are based on net realizable value (lower of cost or estimated sales price). -2- We evaluated the key factors and assumptions used to develop these accounting estimates in determining that they are reasonable in relation to the basic financial statements taken as a whole. The financial statement disclosures are neutral, consistent, and clear. CORRECTED AND UNCORRECTED MISSTATEMENTS Professional standards require us to accumulate all known and likely misstatements identified during the audit, other than those that are trivial, and communicate them to the appropriate level of management. Where applicable, management has corrected all such misstatements. In addition, none of the misstatements detected as a result of audit procedures and corrected by management, when applicable, were material, either individually or in the aggregate, to each opinion unit's financial statements as a whole. We proposed one uncorrected audit adjustment to the financial statements for the reporting of governmental activities and business-type activities unamortized premiums and discounts on bond proceeds totaling $185,253 and $17,233 respectively. Management has determined that the effects of these items are immaterial, both individually and taken together, to each opinion unit's financial statements taken as a whole. DIFFICULTIES ENCOUNTERED IN PERFORMING THE AUDIT We encountered no significant difficulties in dealing with management in performing and completing our audit. DISAGREEMENTS WITH MANAGEMENT For purposes of this report, professional standards define a disagreement with management as a financial accounting, reporting, or auditing matter, whether or not resolved to our satisfaction, that could be significant to the financial statements or the auditor's report. We are pleased to report that no such disagreements arose during the course of our audit. MANAGEMENT REPRESENTATIONS We have requested certain representations from management that are included in the management representation letter dated May 18, 2015. MANAGEMENT CONSULTATIONS WITH OTHER INDEPENDENT ACCOUNTANTS In some cases, management may decide to consult with other accountants about auditing and accounting matters, similar to obtaining a "second opinion" on certain situations. If a consultation involves application of an accounting principle to the City's financial statements or a determination of the type of auditor's opinion that may be expressed on those statements, our professional standards require the consulting accountant to check with us to determine that the consultant has all the relevant facts. To our knowledge, there were no such consultations with other accountants. OTHER AUDIT FINDINGS OR ISSUES We generally discuss a variety of matters, including the application of accounting principles and auditing standards, with management each year prior to retention as the City's auditors. However, these discussions occurred in the normal course of our professional relationship and our responses were not a condition to our retention. -3- OTHER MATTERS We applied certain limited procedures to the Management's Discussion and Analysis and the Schedule of Funding Progress - Other Post-Employment Benefit Plan, which are required supplementary information (RSI) that supplements the basic financial statements. Our procedures consisted of inquiries of management regarding the methods of preparing the information and comparing the information for consistency with management's responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We did not audit the RSI and do not express an opinion or provide any assurance on the RSI. We were engaged to report on the combining and individual fund statements and schedules accompanying the financial statements and the separately issued Schedule of Expenditures of Federal Awards which are not RSI. With respect to this information, we made certain inquiries of management and evaluated the form, content, and methods of preparing the information to determine that the information complies with accounting principles generally accepted in the United States of America, the method of preparing it has not changed from the prior period, and the information is appropriate and complete in relation to our audit of the financial statements. We compared and reconciled the combining and individual fund statements and schedules and Schedule of Federal Expenditures of Awards to the underlying accounting records used to prepare the financial statements or to the financial statements themselves. We were not engaged to report on the introductory section and statistical section which accompany the financial statements but are not RSI. We did not audit or perform other procedures on this other information and we do not express an opinion or provide any assurance on it. -4- GOVERNMENTAL FUNDS OVERVIEW This section of the report provides you with an overview of the financial trends and activities of the City's governmental funds, which includes the General Fund, special revenue, debt service, and capital project funds. These funds are used to account for the basic services the City provides to all of its citizens, which are financed primarily with property taxes. The governmental fund information in the City's financial statements focuses on budgetary compliance, and the sufficiency of each governmental fund's current assets to finance its current liabilities. PROPERTY TAXES Minnesota cities rely heavily on local property tax levies to support their governmental fund activities. For the 2013 fiscal year, local property tax levies provided 41.1 percent of the total governmental fund revenues for cities over 2,500 in population, and 35.5 percent for cities under 2,500 in population. Property tax levies certified by Minnesota cities for 2014 increased about 1.6 percent over 2013, compared to an increase of 2.3 percent the prior year. This moderate increase was due in part to a one-year levy limit for 2014 imposed on cities over 2,500 in population. The total market value of Minnesota cities increased about 1.1 percent for the 2014 levy year, ending a four-year trend of declining market values that began in 2010 and peaked with a state-wide decline of about 8.8 percent for levy year 2012. Market values showed modest increases in all property categories for 2014, with the largest gains in agricultural and non-homestead residential properties. Because the assessed valuation used for levying property taxes is based on values from the previous fiscal year (e.g. the market value for taxes payable in 2014 is based on estimated values as of January 1, 2013), market value improvement has lagged behind recent upturns in the housing market and the economy in general. The City's taxable market value decreased 8.8 percent for taxes payable in 2013 and 0.7 percent for taxes payable in 2014. The following graph shows the City's changes in taxable market value over the past 10 years: Taxable Market Value $2,500,000,000 $2,000,000,000 $1,500,000,000 $1,000,000,000 $500,000,000 $- 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 -5- Tax capacity is considered the actual base available for taxation. It is calculated by applying the state's property classification system to each property's market value. Each property classification, such as commercial or residential, has a different calculation and uses different rates. Consequently, a city's total tax capacity will change at a different rate than its total market value, as tax capacity is affected by the proportion of the City's tax base that is in each property classification from year-to-year, as well as legislative changes to tax rates. The City's tax capacity decreased 7.0 percent and 0.8 percent for taxes payable in 2013 and 2014, respectively. The following graph shows the City's change in tax capacities over the past 10 years: Tax Capacity $30,000,000 $25,000,000 $20,000,000 $15,000,000 $10,000,000 $5,000,000 $- 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 The following table presents the average tax rates applied to city residents for each of the last two levy years, along with comparative state-wide and metro area rates. Rates expressed as a percentage of net tax capacity All Cities Seven-County City of State-Wide Metro Area Brooklyn Center 2013 2014 2013 2014 2013 2014 Average tax rate City 48.8 48.8 46.1 46.0 71.1 74.1 County 48.5 47.6 47.1 46.6 49.5 50.0 School 28.5 28.9 30.3 30.9 39.1 39.8 Special taxing 7.2 7.3 9.4 9.5 11.3 12.2 Total 133.0 132.6 132.9 133.0 170.9 176.1 Both the City's portion and the total tax capacity rates for Brooklyn Center residents are significantly higher than the state-wide and metro area averages the last two years. These rates are higher than average due to a combination of factors, including lower than average property values, makeup of residential properties, and the use of tax increments within the City. GOVERNMENTAL FUNDS REVENUE AND EXPENDITURES The following table presents the per capita revenue of the City's governmental funds for the past three years, along with state-wide averages. We have included the most recent comparative state-wide averages available from the Office of the State Auditor to provide a benchmark for interpreting the City's data. The amounts received from the typical major sources of governmental fund revenue will naturally vary between cities based on factors such as the City's stage of development, location, size and density of its population, property values, services it provides, and other attributes. It will also differ from year-to-year due to the effect of inflation and changes in the City's operation. Also, certain data on these tables may be classified differently than how they appear on the City's financial statements in order to be more comparable to the state-wide information, particularly in separating capital expenditures from current expenditures. We have designed this section of our management report using per capita data in order to better identify unique or unusual trends and activities of your city. We intend for this type of comparative and trend information to complement, rather than duplicate, information in the Management's Discussion and Analysis. An inherent difficulty in presenting per capita information is the accuracy of the population count, which for most years is based on estimates. Governmental Funds Revenue per Capita With State-Wide Averages by Population Class State-Wide City of Brooklyn Center Year December 31, 2013 2012 2013 2014 Population 2,500-10,000 10,000-20,000 20,000-100,000 30,569 30,426 30,426 Property taxes $ 422 $ 388 $ 423 $ 471 $ 496 $ 494 Tax increments 30 42 40 88 104 125 Franchise fees and other taxes 31 39 34 50 50 51 Special assessments 63 58 72 42 62 59 Licenses and permits 27 26 38 28 36 34 Intergovernmental revenues 253 268 148 118 104 89 Charges for services 109 84 91 35 35 40 Other 56 33 30 36 22 30 Total revenue $ 991 $ 938 $ 876 $ 868 $ 909 $ 922 The City relies more on property tax revenue for its governmental funds revenue compared to the average Minnesota city. The City continues to generate significantly more tax increment revenue per capita than average, as it has made extensive use of this tool to finance commercial development. The City's per capita governmental funds revenue for 2014 was $922, an increase of about 1.4 percent from the prior year. This was primarily due to an increase in tax increments and other revenue offset by a decrease in intergovernmental revenue. Tax increments revenue increased $21 per capita due to the recent redevelopment in the tax increment financing districts. Other revenue increased $8 per capita mainly due to increased investment earnings. These increases were offset by the decrease in intergovernmental revenue, which decreased $15 per capita. During 2013, the City was awarded Community Block Grant and Neighborhood Stabilization Program Grant funds. The funding available for both of these grant funds was reduced in 2014. -7- The expenditures of governmental funds will also vary from state-wide averages and from year-to-year, based on the City's circumstances. Expenditures are classified into three types as follows: Current - These are typically the general operating type expenditures occurring on an annual basis, and are primarily funded by general sources, such as taxes and intergovernmental revenues. o Capital Outlay and Construction - These expenditures do not occur on a consistent basis, more typically fluctuating significantly from year-to-year. Many of these expenditures are project-oriented, and are often funded by specific sources that have benefited from the expenditure, such as special assessment improvement projects. • Debt Service - Although the expenditures for debt service may be relatively consistent over the term of the respective debt, the funding source is the important factor. Some debt may be repaid through specific sources such as special assessments or redevelopment funding, while other debt may be repaid with general property taxes. The City's expenditures per capita of its governmental funds for the past three years, together with state-wide averages, are presented in the following table: Governmental Funds Expenditures per Capita With State-Wide Averages by Population Class State-Wide City of Brooklyn Center Year December 31, 2013 2012 2013 2014 Population 2,500-10,000 10,000-20,000 20,000-100,000 30,569 30,426 30,426 Current General government $129 $100 $83 $97 $ 100 $ 104 Public safety 244 235 239 297 300 316 Street maintenance 123 121 91 65 65 69 Parks and recreation 83 99 85 83 82 81 Al! other 66 73 91 185 119 111 $645 $628 $589 $727 $ 666 $ 681 Capital outlay and construction $303 $288 $219 $23 $ 284 $ 130 Debt service Principal $164 $133 $102 $87 $ 87 $ 63 Interest and fiscal 55 43 39 26 29 27 $219 $176 $141 $113 $ 116 $ 90 Total expenditures $1,167 $1,092 $949 $863 $ 1,066 $ 901 The City's governmental funds current per capita expenditures are higher than state-wide averages for cities in the same population class. The City's current operating costs are higher than average due to above average general government and public safety costs. The City's per capita current expenditures increased $15 per capita in 2014. Capital outlay costs per capita decreased $154 as a result of the Kylawn Project in the prior year and the City purchasing Brookdale Square in the prior year. Debt service costs per capita decreased $26 as a result of scheduled bond payments. -8- GOVERNMENTAL FUND BALANCES The following table summarizes the changes in the fund balances of the City's governmental funds during the year ended December 31, 2014, presented both by fund balance classification and by fund: Governmental Funds Change in Fund Balance Fund Balance as of December 31 Increase 2014 2013 (As Restated) (Decrease) Fund balances of governmental funds Total by classification Nonspendable Restricted Committed Assigned Unassigned Total governmental funds $ 21,967 $26,139 $(4,172) 26,434,113 26,350,322 83,791 10,514,871 7,579,688 2,935,183 908,761 2,754,124 (1,845,363) 8,325,476 8,169,955 155,521 $ 46,205,188 $ 44,880,228 $ 1,324,960 Total by fund General $ 11,020,081 $12,382,713 $(1,362,632) Tax Increment District No. 3 17,898,749 17,827,991 70,758 Tax Increment District No. 5 (1,299,859)(1,432,495)132,636 Debt Service 1,909,441 1,190,972 718,469 Capital Improvements 6,509,230 3,072,758 3,436,472 Municipal State Aid for Construction 1,830,100 2,323,722 (493,622) Infrastructure Construction (463,193)970,142 (1,433,335) Nonmajor funds 8,800,639 8,544,425 256,214 Total - governmental funds $ 46,205,188 $ 44,880,228 $ 1,324,960 In total, the fund balances of the City's governmental funds increased by $1,324,960 during the year ended December 31, 2014. The majority of the increase was in committed fund balances offset by a decrease in assigned fund balances. Fund balances committed for capital improvements increased $3,436,472 and fund balances assigned for capital improvements decreased $1,845,363. Both of these changes were a result of a new Capital Project Funding Policy approved by the City Council to provide a recurring source of funding for the City's Capital Improvement Plan. For the year ended December 31, 2013, the City had reported balances of assets held for resale as a deferred inflow of resources, similar to reporting prior to GASB Statement No. 65, as deferred revenue. However, under GASB Statement No. 65, the reporting of the balances should be included in equity. Therefore, the City determined it was necessary to restate the beginning fund balances for the Economic Development Authority and the Tax Increment District No. 3 Special Revenue Funds. The fund balance as of December 31, 2013 in the table above has been restated to reflect this change. GENERAL FUND The City's General Fund accounts for the financial activity of the basic services provided to the community. The primary services included within this fund are the administration of the municipal operation, police and fire protection, building inspection, streets and highway maintenance, and parks and recreation. The graph below illustrates the change in the General Fund financial position over the last 10 years. We have also included a line representing annual expenditures to reflect the change in the size of the General Fund operation over the same period. General Fund Financial Position Year Ended December 31, $20,000,000 $18,000,000 $16,000,000 $14,000,000 $12,000,000 $10,000,000 $8,000,000 $6,000,000 $4,000,000 $2,000,000 $- 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Fund Balance Cash and Investments (Net of Interfund Borrowing) —Expenditures The City's General Fund cash and investments balance (net of interfund borrowing) at December 31, 2014 was $1 1,754,777, which decreased $1,283,185 from 2013. Total fund balance at December 31, 2014 was $11,020,081, down $1,362,632 from the prior year. Having an appropriate fund balance is an important factor in assessing the City's financial health because a government, like any organization, requires a certain amount of equity to operate. Generally, the amount of equity required typically increases as the size of the operation increases. A healthy financial position allows the City to avoid volatility in tax rates; helps minimize the impact of state funding changes; allows for the adequate and consistent funding of services, repairs, and unexpected costs; and can be a factor in determining the City's bond rating and resulting interest costs. The City has an approved fund balance policy that states the General Fund will manage its cash flow by having a year-end target unassigned fund balance of between 50 percent and 52 percent of next year's General Fund budgeted expenditures. At December 31, 2014, the City's General Fund had an unassigned fund balance of 52 percent of the subsequent year's budgeted expenditures. ff HO The following graph reflects the City's General Fund revenue sources for 2014 compared to budget: General Fund Revenue Taxes Licenses and Permits Intergovernmental Charges for Services Other / ç3 c:c?' çff c c ç c c' c'ç3c: c:' c' çc c'Qi Q; qII , , , El Budget El Actual Total General Fund revenues for 2014 were $18,865,622, which was $549,372 (3.0 percent) over the final budget. The majority of this variance was from licenses and permits and intergovernmental revenue. Licenses and permits revenue was $277,742 over budget from more than anticipated building-related activities. Intergovernmental revenue was $147,647 over budget due to the police aid, law enforcement training grant, and fire aid being more than anticipated in the budget. The following graph presents the City's General Fund revenues by source for the last five years. The graph reflects the City's reliance on property taxes and other local sources of revenue, and shows the lack of general state aid revenue in recent years. General Fund Revenue by Source Year Ended December 31, $16,500,000 $15,000,000 $13,500,000 $12,000,000 $10,500,000 $9,000,000 $7,500,000$6,000,000 $4,500,000 $3,000,000 $1,500,000 $- Taxes Intergovern mental Other u2010 u2011 E12012 132013 1320114 Overall, General Fund revenues increased $99,912 (0.5 percent) from the previous year. Intergovernmental revenue increased $315,285 due to increased local government aid received. This increase was offset by a decrease in other revenue of $189,912 mainly in charges for services. Charges for services related to private security contracts with individual businesses, vacant building registrations, rental conversions, and daily admissions at the Community Center were all lower when compared to the prior year. -11- The following graph illustrates the components of General Fund spending for 2014 compared to budget: General Fund Expenditures General Government Public Safety Public Works Parks and Recreation Other n nnn cac:,nnn c Izi cQ3c, 'a Budget ElActual Total General Fund expenditures for 2014 were $17,503,674, which was $862,576 (4.7 percent) less than budget. The largest areas under budgeted amounts were public safety expenditures ($548,188) and general government expenditures ($237,663). Public safety expenditures were under budget in the police protection department due to open staff positions during the year. General government expenditures were tinder budget in the government buildings and assessing departments. General government buildings had savings due to open staff positions during the year and the assessing department experienced savings from the City opting to contract for these services from Hennepin County rather than having their own department and employees. The following graph presents the City's General Fund expenditures by function for the last five years. General Fund Expenditures by Function Year Ended December 31, $10,000,000 $9,000,000 $8,000,000 $7,000,000 $6,000,000 $5,000,000 $4,000,000 $3,000,000 $2,000,000 $1,000,000 General Public Safety Public Works Parks and Other Government Recreation 112010 112011 D2012 •2013 U2014 General Fund expenditures increased by $397,430, or 2.3 percent, from the prior year, mainly due to the $511,019 increase in the public safety function offset by the $153,927 decrease in general government expenditures. Public safety expenditures increased mainly due to increased personal services. The decrease in the general government function was mainly due to open staff positions during the year and the City opting to contract for assessing services with Hennepin County rather than having their own department and employees as noted above. -12- ENTERPRISE FUNDS OVERVIEW The City maintains several enterprise funds to account for services the City provides that are financed primarily through fees charged to those utilizing the service. This section of the report provides you with an overview of the financial trends and activities of the City's enterprise funds, which includes the Municipal Liquor, Golf Course, Earle Brown Heritage Center, Water Utility, Sanitary Sewer Utility, Storm Drainage Utility, Street Light Utility, and Recycling Utility Funds. The utility funds comprise a considerable portion of the City's activities. These funds significantly help to defray overhead and administrative costs and provide additional support to general government operations by way of annual transfers. We understand that the City is proactive in reviewing these activities on an ongoing basis and we want to reiterate the importance of continually monitoring these operations. Over the years, we have emphasized to our city clients the importance of these utility operations being self-sustaining, preventing additional burdens on general government funds. This would include the accumulation of net position for future capital improvements and to provide a cushion in the event of a negative trend in operations. ENTERPRISE FUNDS FINANCIAL POSITION The following table summarizes the changes in the financial position of the City's enterprise funds during the year ended December 31, 2014, presented both by classification and by fund: Enterprise Funds Change in Financial Position Net Position as of December 31, Increase 2014 2013 (Decrease) Net position of enterprise funds Total by classification Net investment in capital assets Unrestricted Total - enterprise funds $ 48,537,132 $ 42,466,488 $ 6,070,644 7,164,916 12,546,185 (5,381,269) $ 55,702,048 $ 55,012,673 $ 689,375 Total by find Municipal Liquor $ 2,512,431 $ 2,685,412 $(172,981) Golf Course 751,336 657,068 94,268 Earle Brown Heritage Center 5,519,579 6,065,638 (546,059) Water Utility 12,120,465 11,709,616 410,849 Sanitary Sewer Utility 13,668,176 13,204,689 463,487 Storm Drainage Utility 20,086,788 19,874,022 212,766 Street Light Utility 963,994 752,477 211,517 Recycling Utility 79,279 63,751 15,528 Total - enterprise funds $ 55,702,048 $ 55,012,673 $ 689,375 In total, the net position of the City's enterprise funds increased by $689,375 during the year ended December 31, 2014. As noted above, all of the City's enterprise funds had positive operating results with the exception of the Municipal Liquor and Earle Brown Heritage Center Funds. The significant increase in net investment in capital assets and the decline in unrestricted net position relates to the significant acquisition of capital assets in the Water, Sanitary Sewer, and Storm Drainage Funds in fiscal 2014. -13- Water Fund The following graph presents 10 years of operating results for the Water Fund: Water Fund Year Ended December 31, $2,500,000 $2,250,000 $2,000,000 $1,750,000 $1,500,000 $1,250,000 $1,000,000 $750,000 $500,000 $250,000 $(250,000) 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Operating Revenue Operating Expenses Project Costs —Operating Income (Loss), Excluding Project Costs The Water Fund ended 2014 with a net position of $12,120,465, an increase of $410,849 from the prior year. Of this, $14,942,429 represents the investment in utility distribution system capital assets, leaving a deficit of ($2,821,964) in unrestricted net position. The deficit unrestricted net position balance is a result of expenses for the construction of the water treatment plant in the current year. The City issued a Taxable General Obligation Water Revenue Note in January 2015 to finance this construction. Water Fund operating revenue was $2,206,311 for 2014, a decrease of $69,456 (3.1 percent) from the prior year due to decreased water consumption offset by the increase in rates in the current year. Operating expenses of $1,838,841 were $128,116 (6.5 percent) less than last year due to fewer costs associated with a manganese action plan and fewer water main breaks during the current year. -14- Sanitary Sewer Fund The following graph presents 10 years of operating results for the Sanitary Sewer Fund: Sanitary Sewer Fund Year Ended December 3 1, $4,000,000 $3,800,000 $3,600,000 $3,400,000 $3,200,000 $3,000,000 $2,800,000 $2,600,000 $2,400,000 $2,200,000 $2,000,000 $1,800,000 $1,600,000 $1,400,000 $1,200,000 $1,000,000 $800,000 $600,000 $400,000 $200,000 $(200,000) 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 EJ Operating Revenue Operating Expenses Project Costs —Operating Income (Loss), Excluding Project Costs The Sanitary Sewer Fund ended 2014 with a net position of $13,668,176, an increase of $463,487 from the prior year. Of this, $11,342,025 represents the investment in the sanitary sewer capital assets, leaving $2,326,151 of unrestricted net position. Sanitary Sewer Fund operating revenues for 2014 were $3,945,115, which was an increase of $269,179 (7.3 percent) from the prior year, due to an approved rate increase offset by a decrease in consumption. Operating expenses for 2014 were $3,496,064, which was an increase of $127,544 (3.8 percent) from the prior year. The largest operating expense of this fund is to Metropolitan Council Environmental Services (MCES) for sewer service charges. MCES disposal charges in 2014 increased by $42,244 from the prior year. The remainder of the increase in operating costs is due to the City televising the sanitary sewer lines in the current year. -15- Storm Drainage Fund The following graph presents 10 years of operating results for the Storm Drainage Fund: Storm Drainage Fund Year Ended December 31, $2,000,000 $1,800,000 $1,600,000 $1,400,000 $1,200,000 $1,000,000 $800,000 $600,000 $400,000 $200,000 $- $(200,000) 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Operating Revenue Operating Expenses Operating Income (Loss) The Storm Drainage Fund ended 2014 with a net position of $20,086,788, an increase of $212,766 from the prior year. Of this, $15,805,594 represents the net investment in capital assets, leaving $4,281,194 of unrestricted net position. Storm Drainage Fund operating revenues for 2014 were $1,638,475, which was a slight increase of $16,563 from the prior year. Operating expenses for 2014 were $1,787,064, which was $230,706 higher than the prior year due to costs associated with the City updating/implementing their Storm Water Management Plan and increased costs for dredging out storm water ponds in the current year. -16- OTHER ENTERPRISE FUNDS Liquor Fund The following graph presents 10 years of operating results for the Liquor Fund: Liquor Fund Year Ended December 31, $6,500,000 $6,000,000 $5,500,000 $5,000,000 $4,500,000 $4,000,000 $3,500,000 $3,000,000 $2,500,000 $2,000,000 $1,500,000 $1,000,000 $500,000 $- 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Sales • Cost of Sales Operating Expenses Operating Income (Loss) The Liquor Fund ended 2014 with a net position of $2,512,431, a decrease of $172,981 from the prior year due to the $362,190 transfer to the Capital Improvement Fund as a result of a new Capital Project Funding Policy approved by the City Council. Of the net position balance, $136,583 represents the investment in liquor capital assets, leaving $2,375,848 of unrestricted net position. Liquor sales for 2014 were $5,852,465, which is $210,766 (3.5 percent) lower than the prior year. The Liquor Fund generated operating income of $204,959 in 2014, or about 3.5 percent of gross sales, which is a decrease from the 6.4 percent of gross sales in fiscal 2013. The Liquor Fund gross profit margin was 26.64 in fiscal 2014, which is lower than the average gross profit margin of 27.74 seen over the previous five years. -17- Earle Brown Heritage Center Fund The following graph presents 10 years of operating results for the Earle Brown Heritage Center Fund: Earle Brown Heritage Center Fund Year Ended December 31, $5,000,000 $4,500,000 $4,000,000 $3,500,000 $3,000,000 $2,500,000 $2,000,000 $1,500,000 $1,000,000 $500,000 $(500,000) $(1,000,000) 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Sales and User Fees Operating Expenses Cost of Sales —Operating Income (Loss) The Earle Brown Heritage Center Fund ended 2014 with a net position of $5,519,579, a decrease of $546,059 from the prior year. Of the net position balance, $3,927,364 represents investments in Earle Brown Heritage Center capital assets, leaving $1,592,215 of unrestricted net position. Earle Brown Heritage Center Fund sales and user fees for 2014 were $4,518,231, which is $246,653 (5.8 percent) higher than last year. The increase is due to the increased number of events held at the facility in 2014 compared to the prior year. Operating expenses for 2014 were $3,048,763, an increase of $352,466 from the prior year. The increase in operating expenses is directly related to the increased revenues in the current year, additional repair and maintenance costs, and costs of the installation of a video surveillance system in the current year. During fiscal 2014, this fund experienced depreciation expense totaling $683,625. -18- Golf Course Fund The following graph presents 10 years of operating results for the Golf Course Fund: Golf Course Fund Year Ended December 3 1, $350,000 $300,000 $250,000 $200,000 $150,000 $100,000 $50,000 $(50,000) $(lOO,000) $(150,000) 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Operating Revenue Operating Expenses —Operating Income (Loss) The Golf Course Fund ended 2014 with a net position of $751,336, an increase of $94,268 from the prior year. Of this, $1,694,893 represents the investment in golf course land and capital assets, leaving a deficit of ($943,557) in unrestricted net position. Golf Course Fund operating revenues for 2014 were $183,311, which is $16,031 more than last year. Operating expenses for 2014 were $271,229, up $6,970 from the prior year. On an annual basis, this fund has had to borrow from other funds to fund cash flow needs. This interfund borrowing totals $946,298 at December 31, 2014. We recommend that the City continue to monitor the financial results in this fund. We also recommend that the City continue to update the long-range financial plan for this fund, including considering alternate plans for financing the payback of the interfund borrowing in this fund. -19- GOVERNMENT-WIDE FINANCIAL STATEMENTS In addition to fund-based information, the current reporting model for governmental entities also requires the inclusion of two goverrnnent-wide financial statements designed to present a clear picture of the City as a single, unified entity. These government-wide financial statements provide information on the total cost of delivering services, including capital assets and long-term liabilities. STATEMENT OF NET POSITION The Statement of Net Position essentially tells you what your city owns and owes at a given point in time, the last day of the fiscal year. Theoretically, net position represents the resources the City has leftover to use for providing services after its debts are settled. However, those resources are not always in spendable form, or there may be restrictions on how some of those resources can be used. Therefore, the Statement of Net Position divides the net position into three components: Net Investment in Capital Assets - The portion of net position reflecting equity in capital assets (i.e. capital assets minus related debt). Restricted Net Position - The portion of net position equal to resources whose use is legally restricted minus any noncapital-related liabilities payable from those same resources. Unrestricted Net Position - The residual balance of net position after the elimination of net investment in capital assets and restricted net position. The following table presents the components of the City's net position as of December 31, 2014 and 2013 for governmental activities and business-type activities: As of December 31, Increase 2014 2013 (Decrease) Net position Governmental activities Net investment in capital assets Restricted Unrestricted Total governmental activities Business-type activities Investment in capital assets Unrestricted Total business-type activities Total net position $ 42,947,577 28,061,977 12,357,196 83,366,750 48,537,132 6,819,765 55,356,897 $ 42,281,203 27,219,086 11,205,289 80,705,578 42,466,488 12,208,126 54,674,614 $ 666,374 842,891 1,151,907 2,661,172 6,070,644 (5,388,361) 682,283 $ 138,723,647 $ 135,380,192 $ 3,343,455 The City's total net position at December 31, 2014 was $3,343,455 higher than the previous year-end. Of the increase, $2,661,172 came from governmental activities and $682,283 came from business-type activities. The increase in both of these is due to the positive operating results of the City as a whole. -20- STATEMENT OF ACTIVITIES The Statement of Activities tracks the City's yearly revenues and expenses, as well as any other transactions that increase or reduce total net position. These amounts represent the full cost of providing services. The Statement of Activities provides a more comprehensive measure than just the amount of cash that changed hands, as reflected in the fund-based financial statements. This statement includes the cost of supplies used, depreciation of long-lived capital assets, and other accrual-based expenses. The following table presents the change in the net position of the City for the years ended December 31, 2014 and 2013: 2014 2013 Program Expenses Revenues Net Change Net Change Net (expense) revenue Governmental activities General government $ 3,736,487 $ 651,188 $ (3,085,299)$ (2,375,085) Public safety 10,186,645 1,869,182 (8,317,463)(7,687,631) Public works 3,688,238 1,928,933 (1,759,305)139,704 Community service 145,503 -(145,503)(141,431) Parks and recreation 2,977,707 677,246 (2,300,461)(1,846,262) Economic development 3,234,623 898,953 (2,3 35,670)(1,976,335) Interest on long-term debt 887,190 -(887,190)(490,162) Business-type activities Municipal liquor 5,690,792 5,861,066 170,274 397,397 Golf course 271,698 365,497 93,799 (95,770) Earle Brown Heritage Center 5,137,712 4,578,433 (559,279)(540,408) Water utility 1,900,518 2,282,992 382,474 332,261 Sanitary sewer utility 3,514,687 3,958,421 443,734 306,320 Storm drainage utility 1,784,907 1,638,575 (146,332)69,685 Recycling utility 291,239 306,661 15,422 160,391 Street light utility 245,426 454,958 209,532 8,827 Total net (expense) revenue $ 43,693,372 $ 25,472,105 (18,221,267)(13,738,499) General revenues Property taxes 14,988,007 14,943,008 Tax increments 3,790,363 3,098,620 Lodging taxes 914,651 881,252 Grants and contributions not restricted to specific programs 1,499,015 590,916 Unrestricted investment earnings 345,586 (108,661) Gain on disposal of capital assets 27,100 54,211 Total general revenues 21,564,722 19,459,346 Change in net position $ 3,343,455 $ 5,720,847 One of the goals of this statement is to provide a side-by-side comparison to illustrate the difference in the way the City's governmental and business-type operations are financed. The table clearly illustrates the dependence of the City's governmental operations on general revenues, such as property taxes and unrestricted grants. It also shows if the City's business-type activities are generating sufficient program revenues (service charges and program-specific grants) to cover expenses. This is critical given the current downward pressures on the general revenue sources. -21- LEGISLATIVE UPDATES The 2014 legislative session began with a projected budget excess for the remainder of the biennium of $1.09 billion, later revised upward to a projected excess of $1.23 billion in the February 2014 economic forecast. The Legislature utilized a portion of the projected excess to bolster the state's financial condition; repaying $246 million "borrowed" from K-12 education through previous financing shifts, and using $150 million to replenish the state "Rainy Day Fund" budget reserve. The Legislature also approved increases to future funding for local government aid, and expanded the sales tax exemption approved for cities in 2013 to include joint powers entities and other instrumentalities of local government. The following is a summary of recent legislation affecting Minnesota cities in 2014 and into the future: Local Government Aid (LGA) - The Legislature completely overhauled the LGA formula for fiscal year 2014 and thereafter, creating a three-tiered formula that includes separate "need factor" calculations for cities with populations under 2,500, between 2,500 and 10,000, or over 10,000. The new formula simplified the LGA calculation, and reduced the volatility of the LGA distribution by limiting the amount it may decline in a given year. Under the new formula, the minimum LGA 2014 distribution for each city was an amount equal to their 2013 LGA. Beginning in 2015, any reduction to a city's calculated LGA distribution will be limited to the lesser of $10 per capita, or 5 percent of their previous year net tax levy. For cities that gain under the new formula, the increases will be distributed proportionate to their unmet need, as determined by the new "need factor" calculations. The state-wide LGA appropriation was $507.6 million for fiscal 2014, $516.9 million for 2015, and $519.4 million for fiscal 2016 and thereafter. Sales Tax Exemption - Cities are exempted from paying sales tax on qualifying purchases, effective for purchases made on or after January 1, 2014. Purchases of goods or services by an exempt local government for a publically provided liquor store, gas or electric utility, golf course, marina, campground, café, laundromat, solid waste hauling or recycling operation, or landfill will remain taxable. The definition of "cities" for this statute include both home-rule and statutory cities. The 2014 Legislature extended the definition of tax exempt local government to include all special district; city, county, or township instrumentalities; economic development authorities; housing and redevelopment authorities; and all joint power boards or organizations. However, this expanded exemption list is not effective until January 1, 2016. Proposed Property Tax Levy Certification Date - The deadline for cities to certify their proposed annual tax levies was extended from September 15 to September 30. Agricultural Homestead Market Value Credit - The rate of agricultural homestead market value was increased to a maximum of $490 at a market value of $270,000 and over. Capital Investment Act Requirements - The Legislature approved capital improvement projects totaling about $1.1 billion under two separate capital investment (bonding) acts. Both require that, to the extent practicable, a public entity receiving an appropriation of public money for a project under these acts must assure those facilities are built with American-made steel. Authority to Inspect Public Buildings and State-Licensed Facilities - A formal delegation process was established that must be used by the state Department of Labor and Industry (DLI) when delegating the authority to inspect public buildings and state-licensed facilities to local building officials. The new provisions did not alter the circumstances under which the DLI is required to delegate this authority in most circumstances, only the process to be followed. However, for certain smaller construction projects designated as "reserved projects," the DLI is now required to delegate inspection authority to any municipality with a designated building official without going through the formal delegation process. -22- Open Meeting Law - A change was made to the Open Meeting Law to clarify that the use of social media by members of a public body does not violate the Open Meeting Law if the use is limited to exchanges open to the public. The new statute specifically excludes email but does not otherwise define the term social media. Deputy Registrar Residency - The statutory requirement that an individual appointed as deputy registrar for a statutory or home-rule charter city be a resident of the county in which the city is located was repealed. Local Campaign Finance - Changes were made to increase the campaign contribution limits for local elections. For candidates in a territory with a population of 100,000 or less, the contribution limits were raised to $600 in an election year and $250 in a non-election year. For candidates in a territory with a population over 100,000, the limits were raised to $1,000 in an election year and $250 in a non-election year. In addition, all campaign finance reports required to be filed with a local government must now be published on the local government's website, if the local government maintains a website. Data Practices - Several changes were made to address unauthorized access of private data by public employees, requiring local governments to: establish security measures to help ensure private data is only accessible to public employees whose work assignment reasonably requires access to the data, and that the data is only being accessed by those individuals for the purposes of their work assignment; follow the data breach reporting requirements that were previously only applicable to state agencies; and perform annual security assessments of personal information maintained by the entity. The statute also states that accessing private data without authorization is a misdemeanor, and willful violation by a public employee constitutes just cause for suspension without pay or dismissal. Part-Time Peace Officers - A change in the statutes now prohibits law enforcement agencies from hiring new part-time peace officers, existing part-time peace officers from transferring to new agencies, and the Peace Officer Standards and Training Board from licensing new part-time peace officers. Part-time peace officers that are currently employed may continue to serve indefinitely with their current employer, but must turn in their license upon leaving their current place of employment or otherwise becoming unemployed. Responsible Contractor Requirement - Contractors who bid on public contracts in excess of $50,000 are now required to certify that they are a "responsible bidder" in order to be awarded a contract as the lowest responsible bidder or best value alternative. A responsible contractor must be in compliance with various state and federal requirements for income tax, workers' compensation, unemployment insurance, minimum wage, and safety. City solicitations for bid must include: the definition of "responsible contractor," which may include criteria in addition to the statutory requirements established by the city, or reference to the statutory definition; a statement that a contractor failing to meet the criteria or verify compliance is ineligible to be awarded or perform work on the contract; a statement that submitting a false verification renders the contractor ineligible and can result in termination of the contract; and a statement requiring the contractor to provide copies of verification forms for all subcontractors upon request. Cities are not obligated to verify any of the information in the contractor verification; and have no liability if reasonably relying on the certification when awarding the contract, or declining to award the contract based on a reasonable determination that a contractor failed to verify compliance. Disaster Assistance Contingency Fund - A new state account was created to provide emergency cash flow for local governments located in counties declared federal disaster areas. The fund may be used to meet non-federal fund matching requirements to speed the availability of federal funds. -23- Pensions - A number of changes to the Public Employees Retirement Association (PERA) General Plan were adopted, including: The minimum salary threshold for inclusion into the PERA General Plan was changed from $425 in any one month to $5,100 on any year for non-school employees or $3,800 in any year for school employees. Employers are required to provide written notice to any employee excluded from membership in the PERA General Plan within two weeks of the determination on a form prescribed by the PERA executive director. PERA contribution rates for both employees and employers were increased by 0.25 percent of salary effective January 1, 2015. -24- ACCOUNTING AND AUDITING UPDATES GASB STATEMENT No. 68 -ACCOUNTING AND FINANCIAL REPORTING FOR PENSIONS—AN AMENDMENT OF GASB STATEMENT Nos. 27 AND 50 The primary objective of this statement is to improve accounting and financial reporting by state and local governments for pensions. This statement replaces the requirements of GASB Statement Nos. 27 and No. 50, as they relate to pensions that are provided through pension plans administered as trusts or equivalent arrangements that meet certain criteria. The requirements of GASB Statement Nos. 27 and No. 50 remain applicable for pensions that are not covered by the scope of this statement. This statement establishes standards for measuring and recognizing liabilities, deferred outflows of resources, deferred inflows of resources, and expenses/expenditures. In addition, this statement details the recognition and disclosure requirements for employers with liabilities (payables) to a defined benefit pension plan and for employers whose employees are provided with defined contribution pensions. This statement also addresses circumstances in which a non-employer entity has a legal requirement to make contributions directly to a pension plan. This statement is effective for financial statements for fiscal years beginning after June 15, 2014. Earlier application is encouraged. Included in this statement are major changes in how employers that participate in cost-sharing pension plans, such as the Teachers' Retirement Association (TRA) and PERA, account for pension benefit expenses and liabilities. In financial statements prepared using the economic resources measurement focus and accrual basis of accounting (government-wide and proprietary funds), a cost-sharing employer that does not have a special funding situation is required to recognize a liability for its proportionate share of the net pension liability of all employers with benefits provided through the pension plan. A cost-sharing employer is required to recognize pension expense and report deferred outflows of resources and deferred inflows of resources related to pensions for its proportionate share of collective pension expense and collective deferred outflows of resources and deferred inflows of resources related to pensions. In addition, the effects of (1) a change in the employer's proportion of the collective net pension liability and (2) differences during the measurement period between the employer's contributions and its proportionate share of the total of contributions from employers included in the collective net pension liability are required to be determined. These effects are required to be recognized in the employer's pension expense in a systematic and rational manner over a closed period equal to the average of the expected remaining service lives of all active and inactive employees that are provided with pensions through the pension plan. GASB STATEMENT No. 72-FAIR VALUE MEASURE AND APPLICA TION GASB Statement No. 72 addresses accounting and financial reporting issues related to fair value measurements. The requirements of this statement are intended to enhance comparability among government financial statements by requiring certain assets and liabilities be reported at fair value, using a consistent definition of fair value and accepted valuation techniques. The requirements of this statement are effective for financial statements for periods beginning after June 15, 2015, with earlier application encouraged. GASB Statement No. 72 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Fair value measurements are generally assumed to take place in the government's principal or most advantageous market, taking into account the highest and best use for a nonfinancial asset, and assuming market participants would act in their economic best interest. The statement requires a government to use measurement techniques that are appropriate under the circumstances and for which sufficient data are available to measure fair value; consistent with a market, (replacement) cost, or income approach. It also establishes a hierarchy of inputs to be used in valuation techniques. -25- The statement establishes or clarifies the applicability of fair value measurement for certain assets and liabilities. Fair value is generally required for investments, defined as securities or other assets held primarily for the purpose of generating income, or which have a present service capacity based solely on their ability to generate cash. The statement requires measurement at acquisition value for donated capital assets, donated works of art, historical treasures, and capital assets received through a service concession arrangement. The statement also outlines the required financial statement disclosures about fair value measurements, valuation techniques, and the hierarchy of inputs used for valuation. CHANGES TO REQUIREMENTS FOR FEDERAL GRANTS In December 2013, the OMB issued Unforin Administrative Requirements, Cost Principles, and Audit Requirements for Federal Audits, which supersedes all or parts of eight OMB circulars; consolidating federal cost principles, administrative principles, and audit requirements in one document. The "Super Circular" includes a number of significant changes to the federal Single Audit process, including: an increase in dollar threshold for requiring a Single Audit from $500,000 to $750,000; changes to the thresholds and process used for determining major programs; reductions in the percentages of expenditures required to be covered by a Single Audit from 50 percent to 40 percent for high-risk auditees and from 25 percent to 20 percent for low-risk auditees; revised criteria for determining low-risk auditees; and an increase in the threshold for reporting questioned costs from $10,000 to $25,000. Auditees are required to implement the administrative requirements of the new "Super Circular" by December 26, 2014. The revised audit requirements will be effective for fiscal year 2015 city audits, with an optional one-year grace period for implementing the new procurement standards included in this guidance. -26- COSO INTERNAL CONTROL FRAMEWORK The clarified auditing standards applicable to governmental audits incorporate a definition of internal control that is based on the internal control integrated framework developed and issued in 1992 by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). In May 2013, COSO issued an updated framework which supersedes the original after December 15, 2014. The new COSO framework retains the basic definition of internal control and its five components established in its original framework, along with the fundamental requirements to consider these five components and to use judgment when assessing and evaluating the effectiveness of a system of internal controls. The new COSO framework enhances and clarifies a number of concepts from the original framework to make it easier to use and apply. One of the more significant enhancements was the establishment of 17 principles, associated with the 5 components of internal control, intended to assist users in understanding the requirements of effective internal control and designing effective systems of internal control. The 5 components of internal control and 17 underlying principles are as follows: Control Environment - 1.Organization demonstrates a commitment to integrity and ethical values. 2.Governing body is independent from management and exercises oversight control. 3.Management establishes structure, reporting lines, authority, and responsibilities. 4.Organization demonstrates a commitment to the competence of individuals involved with internal control. 5.Organization holds individuals accountable for internal control responsibilities. Risk Assessment - 6.Organization specifies clear objectives for the identification and assessment of risks. 7.Organization identifies and analyzes risk. 8.Organization assesses the potential for fraud risks. 9.Organization identifies and assesses significant changes that could impact internal control. Control Activities - 10.Organization selects and develops control activities to mitigate risks. 11.Organization selects and develops general IT controls. 12. Organization establishes and implements control policies and procedures. Information and Communication - 13.Organization uses relevant, quality information to support internal control. 14.Organization communicates internal control information internally. 15.Organization communicates internal control information externally. Monitoring - 16.Organization conducts ongoing and/or separate internal control evaluations. 17. Organization evaluates and communicates deficiencies to responsible parties for corrective action. COSO defines an effective system of internal control as one that reduces to an acceptable level the risk of failing to achieve an organizational objective in the areas of operations, compliance, or reporting. According to the new framework, an organization can achieve effective internal control by applying all of the principles listed above. To achieve this, each of these five components and the relevant principles must be present and functioning, and the five components must operate in an integrated manner. Local governments should be reviewing their internal control systems to assure these principles have been incorporated and implemented. -27-