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Home My WebLink About2015-06-03 PACKET 02.B. REQUEST OF CITY COUNCIL ACTION COUNCIL AGENDA MEETING ITEM #� � • � DATE 6/3/15 . �� PREPARED BY. Finance Robin Roland ORIGINATING DEPARTMENT STAFF AUTHOR * * * :� * � * � * * * * * * * * * * * * * * * * � � * * * * * * * * * * * * � � * * * * * * * * COUNCIL ACTION REQUEST: Matt Mayer of KDV will give a presentation on the 2014 Comprehensive Annual Financial Report. STAFF RECOMMENDATION: Accept by Motion the 2014 Comprehensive Annual Financial Report. BUDGET IMPLICATION: BUDGETED AMOUNT ACTUAL AMOUNT ADVISORY COMMISSION ACTION: DATE REVIEWED APPROVED DENIED ❑ PLANNING ❑ ❑ ❑ ❑ PUBLIC SAFETY ❑ ❑ ❑ ❑ PUBLIC WORKS ❑ ❑ ❑ ❑ PARKS AND RECREATION ❑ ❑ ❑ ❑ HUMAN SERVICES/RIGHTS ❑ ❑ ❑ ❑ ECONOMIC DEV. AUTHORITY ❑ ❑ ❑ ❑ ❑ ❑ ❑ SUPPORTING DOCUMENTS: � MEMO/LETTER: ❑ RESOLUTION: ❑ ORDINANCE: ❑ ENGINEERING RECOMMENDATION: ❑ LEGAL RECOMMENDATION: �OTHER: 2014 CAFR, Required communications & r ports from Auditors. ADMINISTRATORS COMMENTS: � � � � ity Administrator Date � � * * * � * * * * * * * :� � * * * * * * * * � � * * * * * * * � * * � * * * * * * * * * * * * COUNCIL ACTION TAKEN: ❑ APPROVED ❑ DENIED ❑ OTHER Cottage Grove _ . _. __ _ �here Pride ana PrpSPerity Meet To: Mayor and City Council Members Craig Woolery, Interim City Administrator From: Robin Roland, Finance Director Date: May 27, 2015 Subject: 2014 Comprehensive Annual Financial Report Introduction Matt Mayer with the City's auditing firm, KDV will be at the meeting to present the 2014 Financial Statements. A copy of the 2014 Comprehensive Annual Financial Report and the auditor's required communications are included herein for your review. The Letter. of Transmittal in the Financial Statements (page 3)and the Management Discussion and Analysis (page 19)summarize important data and give a good overview of the City's financial situation. In addition, the statistical section (page 138) includes supplemental detailed information and financial trends. Action Requested Following the presentation a motion to receive and accept the Comprehensive Annual Financial Report is appropriate. Cottage � Grove �here Pride and PC°SPerity Meet Com rehensive Annual p Financial Re ort p .,� �:+ ��:��„ � ,--�,� r�,�= � � � � � �_"�i=y�- v� a�'� !i ---. �� 1�� o. / �% ��'A��1�`i3O��- �s�i+�fl'. � '!; .:.:_. �'..�„ _,...,,,..zs.�.,. � . .- � _ �li��V � �:�, � ��,�. _ .��'� `° — _— � � - • r1�,%',14,1,��#;� _7d, s_ , ��y��Rtii�l.k4i�r.�+-�' 3 _ �: � /, - � , _ ,, _-� . . ,.:'..�#�"�,�.�.�..�,�.. .: ' � � ` b,- �!- --_ �.a.. : ,a.- , _.' n� r �'La a .� .. ""��,.�R -�' , :.:..� .,.. . - ..• , ti A - +fr '-�� . � i.--�. �I' � '.. �� _ �� —�� ` _ ~-._ I ` � ..� � �:��a.t? . . ��a� � . . _"''�' 9 � �''"� � i-� `, �I -.. 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' _ �_ � °-.��`'� City of Cottage Grove Annual City Photo Contest Winning Entries �`� Minnesota Year Ended December 3i, Zoi4 CTTY OF COTTAGE GROVE,MINNESOTA TABLE OF CONTENTS Reference Page Number L INTRODUCTORY SECTION Letter of Transmittal 3 Certificate of Achievement for Excellence in Financial Reporting 9 Principal City Officials 11 Organization Chart 12 IL FINANCIAL SECTION Independent Auditor's Report 15 Management's Discussion and Analysis 19 Basic Financial Statements: Government-Wide Financial Statements: Statement of Net Posirion Statement 1 33 Statement of Activities Statement 2 35 Fund Financial Statements: Balance Sheet-Governmental Funds Statement 3 36 Statement of Revenues,Expenditures,and Cl�anges in Fund Balance- Governmental Funds Statement 4 38 Reconciliarion of the Statement of Revenues,Eapenditures,and Changes in Fund Balances of Governmental Funds to the Statement of Activities Statement 5 40 Statement of Net Position-Proprietary Funds Statement 6 42 Statement of Revenues,Expenses,and Changes in Fund Net Posirion- Proprietary Funds Statement 7 43 Statement of Cash Flows-Proprietary Funds Statement 8 44 Notes to Financial Statements 45 Required Supplementary Information: Budgetary Comparison Schedule-General Fund Statement 9 78 Budgetary Comparison Schedule-Note to RSI 84 Funding Progress Schedule-Other Post Employment Health Care Benefits 86 CTTY OF COTTAGE GROVE,MINNESOTA TABLE OF CONTENTS Reference Page Number Combining and Individual Fund Statements and Schedules: Combining Balance Sheet-Nonmajor Governmental Funds Statement 10 91 Combining Statement of Revenues,Eapenditures and Cl�anges in Fund Balance- Nonmajor Governmental Funds Statement 11 92 Subcombining Balance Sheet-Nonmajor Special Revenue Funds Statement 12 94 Subcombining Statement of Revenues,Expenditures and Changes in Fund Balance-Nonmajor Special Revenue Funds Statement 13 96 Subcombining Balance Sheet-Nonmajor Debt Service Funds Statement 14 99 Subcombining Statement of Revenues,Expenditures and Changes in Fund Balance-Nonmajor Debt Service Funds Statement 15 100 Subcombining Balance Sheet-Nonmajor Capital Project Funds Statement 16 102 Subcombining Statement of Revenues,Expenditures and Changes in Fund Balance-Nonmajor Capital Project Funds Statement 17 104 Special Revenue Funds: Schedules of Revenues,Expenditures and Changes in Fund Balance-Budget and Actual: Recycling Statement 18 106 Storm Water Statement 19 107 Forfeiture/Seizure Statement 20 108 Ice Arena Statement 21 109 Golf Course Statement 22 110 Cl�aritable Gambling Statement 23 111 Internal Service Funds: Combining Statement of Net Position Statement 24 114 Combining Statement of Revenue,Expenses and Cl�anges in Fund Net Position Statement 25 115 Combining Statement of Cash Flows Statement 26 116 Component Unit Economic Development Authority: Combining Balance Sheet-All Governmental Fund Types Statement 27 118 Combining Statement of Revenues,Eapenditures and Changes in Fund Balance-All Governmental Fund Types Statement 28 119 CTTY OF COTTAGE GROVE,MINNESOTA TABLE OF CONTENTS Reference Page Number Supplementary Financial Information: Construcrion/Acquisirion Costs: Capital Projects Funds E�ibit 1 122 Combined Schedule of Bonded Indebtedness E�ibit 2 124 Debt Service Payments to Maturity E�ibit 3 126 Deferred TaY Levies E�ibit 4 128 Subcombining Balance Sheet-Pavement Management Debt Service Schedule E�ibit 5 130 Subcombining Statement of Revenues,Eapenditures,and Changes in Fund Balance- Pavement Management Debt Service Schedule E�ibit 6 131 Subcombining Balance Sheet-TaY Increment Construction Revolving Schedule E�ibit 7 132 Subcombining Statement of Revenues,Eapenditures,and Changes in Fund Balance- TaY Increment Construction Revolving Schedule E�ibit 8 133 Subcombining Balance Sheet-TIF Debt Service Revolving Schedule E�ibit 9 134 Subcombining Statement of Revenues,Eapenditures,and Changes in Fund Balance- TIF Debt Service Revolving Schedule E�ibit 10 135 CTTY OF COTTAGE GROVE,MINNESOTA TABLE OF CONTENTS Reference Page Number IIL STATISTICAL SECTION NetPosirionby Component Table 1 138 Cl�anges in Net Position Table 2 140 Fund Balances of Governmental Funds Table 3 142 Cl�anges in Fund Balances of Governmental Funds Table 4 143 Assessed and Esrimated Actual Value of TaYable Properry Table 5 144 Properry TaY Rates-Direct and Overlapping Governments Table 6 145 Principal Property TaYpayers Table 7 146 Property TaY Levies and Collecrions Table 8 147 Ratios of Outstanding Debt by Type Table 9 148 Ratios of General Bonded Debt Outstanding Table 10 149 Direct and Overlapping Governmental Acriviries Debt Table 11 150 Legal Debt Margin Information Table 12 151 Demographic and Economic Starisrics Table 13 152 Principal Employers Table 14 153 Full-time Equivalent City Government Employees by Function Table 15 154 Operating Indicators by Function/Program Table 16 155 Capital Asset Staristics by Function/Program Table 17 156 L INTRODUCTORY SECTION i -This Page Intentionally Left Blank- 2 Cottage J Grove �� Pride an�PKosPerity Me�t May 18, 2015 To the Honorable Mayor, Members of the City Council and Citizens of the City of Cottage Grove: Minnesota statutes require all cities to submit an annual audited financial statement to the Office of the State Auditor. Pursuant to that requirement, we hereby issue the Comprehensive Annual Financial Report of the City of Cottage Grove for the year ended December 31, 2014. Management assumes full responsibility for the completeness and reliability of the information contained in this report, based upon a comprehensive framework of internal control standards that it has established for this purpose. 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. Kern, DeWenter, Viere, Ltd., independent certified public accountants have issued an unmodified ("clean")opinion on the City of Cottage Grove's financial statements for the year ended December 31, 2014. The independent auditors' report is located at the front of the financial section of this report. Management's discussion and analysis (MD&A) immediately follows the independent auditors' report and provides a narrative introduction, overview, and analysis of the basic financial statements. This letter of transmittal is designed to complement the MD&A and should be read in conjunction with it. Profile of the City Cottage Grove was organized as a village on July 13, 1965 and was incorporated as a city on January 1, 1974. Cottage Grove is a suburban community located on the southern border of Washington County, sixteen miles southeast of Downtown St. Paul. The City currently occupies 34.3 square miles of land. The 2010 Census established the City population at 34,589; recent data estimates 2014 population at 35,626. Cottage Grove operates as a Statutory Plan A City under Minnesota law. Policy making and legislative authority are vested in a City Council, consisting of the Mayor and four other members, elected at large and on a non-partisan basis. Terms of office are staggered four year terms, with elections held in each even-numbered year. The City Council is responsible for passing ordinances, adopting the budget and appointing members of the various citizens' advisory boards. In addition, the Mayor and Council appoint a full-time City Administrator, who is responsible for overall supervision of City operations. CITY OF COTTAGE GROVE • 12800 Ravime Parkway• Cottage Grove, Minnesota 55016 vvww.cottage-grove.org • 651-458-2800• Fax 651-458-2897 • Equal Opportunity Employer -This Page Intentionally Left Blank- 4 Letter of Transmittal May 18, 2015 The City provides a full range of municipal services. These services include police and fire protection, ambulance services, parks and park facilities, a golf course, recreational programming an ice arena, street construction and maintenance, water, sewer and storm water utilities, planning and zoning, and general administrative functions. The Economic Development Authority (EDA) of the City of Cottage Grove is a separate legal entity organized pursuant to Minnesota Statute 469. There are seven members of the EDA who are appointed by the City Council; two appointees are Council members and the five others are appointed from the community. The EDA is included in this financial report as a discretely presented component unit, due to the EDA's relationship of financial benefit or burden to the City. The annual budget serves as the foundation for the City of Cottage Grove's financial planning and control. The budget incorporates the City's financial policies, financial operations, debt management, reserves and investments. The process by which the biennial budget document is prepared begins with the submission of department appropriation requests in June. The requests, along with projected revenues and stated City Council strategic goals, provide the starting point for budget development. Collaborative meetings are held with City Staff and workshops are held with the City Council to refine the budget document in advance of the submission of the preliminary tax levy in September each year. The preliminary levy may be reduced after it is adopted, but cannot be increased. An information session is held for taxpayers at the first City Council meeting in December in advance of adoption of the final levy and budget. The Council is required to adopt a final budget by no later than December 28m of each year. Local economy Cottage Grove is part of the Minneapolis/St. Paul seven county metropolitan area; an economically diverse environment with an equally diverse labor force. 2014 saw steady employment growth in the region and the unemployment rate dropped to 3.9%, compared to the national rate of 5.6%. However, as employment improved, wage growth and inflation remained subdued. The City's tax base is 80%residential and 20%commercial/industrial property. Although the total taxable market value declined by 37% in the four year period 2010-2013, a 5% recovery in 2014 brought the total taxable market value to $2.4 billion.Further growth in value is expected for 2015, from both new construction and increases in property values of existing building stock. The City's 600 acre business park is home to 1,150,000 square feet of industrial and manufacturing businesses, including Up North Plastics,Renewal by Andersen, and Werner Electric. Other major employers in the City include 3M Company, Target, Menard's, Walmart, and Aggregate Industries. The City's commercial areas include four community shopping centers and several restaurants. In 2014, Leafline Labs, one of two legal medical cannabis facilities in the state of Minnesota, located in the City's business park The construction of a 45,000 square foot growing/manufacturing facility will be completed in the second quarter of 2015 with full production capability by July 1, 2015. 5 Letter of Transmittal May 18, 2015 Renewal by Anderson, Werner Electric and American Logistics will all expand their facilities in 2015. Combined, these businesses will add 300,000 square feet of manufacturing and warehouse space and over 300 jobs to the Cottage Grove community. Long-term financial planning The City places a high priority on planning for future growth. Staff uses different long range revenue and expenditure models during the annual preparation of a biennial budget plan for the General Fund, Special Revenue and Enterprise Funds. The biennial budget process allows for the assurance that any change to revenues or expenditures is sustainable in the successive year. Furthermore, Council and staff compile a five year Capital Improvement Plan (CIP) which addresses the future building and infrastructure projects necessary to address the new residential and commercial property outlined in the City's 2030 Comprehensive Plan. As part of the CIP, each capital proj ect is analyzed to determine if sufficient funding exists for the proj ect and the longer term impact of each of the proj ects on the individual capital fund balances. For example, during the 2015 to 2019 period over $20 million in total Pavement Management projects are anticipated. Pavement Management is not a full road reconstruction but rather a reclamation or mill and overlay process to extend roadway life. Project funding for Pavement Management is covered by a 45% / 55% cost split: special assessments against benefiting properties with the balance of the costs covered by general obligation debt to be repaid by annual tax levies. Annual levies for debt repayment are balanced so that no more than 10%of any property tax levy is for the repayment of debt. Relevant Financial Policies The City has financial policies and plans which establish the principles that guide staff and Council members to make consistent and informed financial decisions. These policies and plans include: • Fund balance policy • Cash and investment management policy • Debt management policy • Capital improvements plan • Infrastructure Maintenance Task Force (IMTF)policy It is important for the financial stability of the City to maintain reserve funds for unanticipated expenditures or unforeseen emergencies as well as to provide adequate working capital for current operations without short term borrowing. The City's fund balance policy identifies that the unassigned fund balance in the General Fund shall be no less than 55% of annual budgeted expenditures. Major Initiatives The population of Cottage Grove has increased from 833 in 1950 to 34,589 per the 2010 census. Most of the population of the City concentrates in two age groups 0 - 19 years, 32.5% and 30 - 50 years, 38.1%. According to the 2010 census, the average age is 35 years and the median family income is $80,830. This median family income is 141% higher than the Twin Cities Metro Area. 6 Letter of Transmittal May 18, 2015 Cottage Grove has evolved from a 1970's bedroom community to a steadily growing suburb with an expanding commercial,retail and industrial base. The 1990's and early 2000's saw a residential development boom, with several years of building permits for single family homes numbering over 300 per year. Residential development slowed significantly since 2007, averaging 60 new building permits per year. Master planning of the, 9,000 acre"East Ravine" development occurred in 2005. Development of the first one thousand acres of low density residential housing with park and open space amenities and nodes of commercial and retail uses was anticipated by 2015. In reality, development of this area began in earnest in 2013 with the approval of two residential plats totaling 226 lots on 100 acres. Construction of 100 homes had been completed by the end of 2014. The City continues to encourage residential developers to pursue acreage for development in the master plan area. The City strategy of growth in the residential and commercial/industrial areas, providing more homes and jobs, will ultimately draw the retail storefronts and services the community demands. 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 Cottage Grove for its Comprehensive Annual Financial Report for the year ended December 31, 2013. This was the twenty-fourth consecutive year that the City has achieved this prestigious award. In order to receive a Certificate of Achievement, a government must publish an easily readable and efficiently organized Comprehensive Annual Financial Report. This report must satisfy both generally accepted accounting principles and applicable legal requirements. A Certificate of Achievement is valid for a period of one year only. We believe that our current Comprehensive Annual Financial Report continues to meet the Certificate of Achievement Program's requirements and we are submitting it to GFOA to determine its eligibility for another certificate. Preparation of this report would not have been possible without the dedicated service of the Finance Department staff to whom I express my appreciation, especially Brenda Malinowski, Assistant Finance Director and Cathy Mohr, Accountant. Appreciation is also due to the Mayor, City Council members and City Administrator for their support in maintaining a fiscally sound and stable organization in the service of its residents and business owners. Respectfully Submitted, CITY OF COTTAGE GROVE, MINNESOTA ,> /� Robin Roland Finance Director � -This Page Intentionally Left Blank- 8 Government Finance Officers Association Certificate of Achiever�ent for Excel��nce in Financial Reportir�g Presented to City of Cotta�� Grove Minnes��a For its Comprehensive Annual Financial Report for the Fiscal Year Ended December 31� 2013 Executive Director/CE0 9 -This Page Intentionally Left Blank- l0 CITY OF COTTAGE GROVE, MINNESOTA PRINCIPAL CITY OFFICIALS December 31, 2014 Elected Officials Term Expires Mayor: Myron Bailey December 31, 2016 Council Members: Derrick Lehrke December 31, 2014 Justin Olsen December 31, 2016 Jen Peterson December 31, 2016 Dave Thiede December 31, 2014 Appointed Personnel City Administrator Ryan Schroeder Finance Director Robin Roland City Clerk Caron Stransky City Engineer and Community Development Director Jennifer Levitt Economic Development Director Danette Parr Public Safety Director Craig Woolery Public Works Director Les Burshten Parks and Recreation Director Zac Dockter ii • • . • ' • ' J • . . . . . Cottage Grove Citizens City Council Advisory Commissions City Administrator City Attorney Economic Community Parks and Development Development Administration Finance Public Safety Recreation Public Works Planning City Clerk/ Accounting Patrol Parks Streets Elections Building/Code Human Enterprise Fleet/Building Inspections Resources Billing Investigations Recreation Maintenance Historic Community Public Safety Preservation Programs/ Payroll programs Ice Arena Utilities Communications Engineering River Oaks Golf MIS nimal&Code Forestry Course Enforcement Fire& Emergency Management EMS/Medical Services Fire Inspections Updated 4/2013 12 IL FINANCIAL SECTION 13 -This Page Intentionally Left Blank- 14 E.a;pert advice. When you need it.'"' INDEPENDENT AUDITOR'S REPORT Honorable Mayor and Members of the City Council City of Cottage Grove Cottage Grove, Minnesota Report on the Financial Statements We have audited the accompanying financial statements of the governmental activities, the business- type activities, the discretely presented component unit, each major fund and the aggregate remaining fund information of the City of Cottage Grove, Minnesota, 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. Expert advice. When you need it.� St.Cloud Twin CYties www.kdv.com 220 Park Avenue S. 3800 American Boulevard W. CertifiedPub&cAccountmits P.O.Box 1304 Suite 1000 Toll Free Wealth Management St.Cloud,Minnesota Minneapolis,Minnesota 877.912.7696 Payroll Services 56302 55431 Business Valuations Phone:320.251.7010 Phone:952.563.6800 Technolo�v Help Desk Technology Services Fax:320.251.1784 15 Fax:952.563.6801 866.400.6426 -This Page Intentionally Left Blank- 16 D We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Opinions In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities, the business-type activities, the discretely presented component unit, each maj or fund and the aggregate remaining fund information of the City of Cottage Grove, Minnesota, as of December 31, 2014, and the respective changes in financial position and, where applicable, cash flows thereof, 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, which follows this letter, and the budgetary comparison information and the Funding Progress Schedule, as noted 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 (GASB)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 of Cottage Grove's basic financial statements. The introductory section, combining and individual fund statements and schedules, supplementary financial information and statistical section, are presented for purposes of additional analysis and are not a required part of the basic financial statements. The combining and individual fund statements and schedules and supplementary financial information 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 and supplementary financial information are fairly stated, in all material respects, in relation to the basic financial statements as a whole. i� D 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. Report on Summarized Comparative Information The financial statements include partial prior year comparative information. Such information does not include all of the information required to constitute a presentation in accordance with accounting principles generally accepted in the United States of America. Accordingly, such information should be read in conjunction with the City's basic financial statements for the year ended December 31, 2013, from which such partial information was derived. We have previously audited the City's 2013 financial statements and our report, dated May 14, 2014, expressed unmodified opinions on the respective financial statements of the governmental activities, the business-type activities, the discretely presented component unit, each maj or fund and the aggregate remaining fund information. In our opinion, the summarized comparative information presented herein as of and for the year ended December 31, 2013 is consistent, in all material respects, with the audited financial statements from which it has been derived. Other Reporting Required by Government Auditing Standards In accordance with GovernmentAuditing Standards, we have also issued our report dated May 18, 2015 on our consideration of the City of Cottage Grove's internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, and 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 GovernmentAuditing Standards in considering the City of Cottage Grove's internal control over financial reporting and compliance. �'P}3/h ,�€1�/�+^�, r��.�-�.G � KERN, DEWENTER, VIERE, LTD. Minneapolis, Minnesota May 18, 2015 is MANAGEMENT'S DISCUSSION AND ANALYSIS As management of the City of Cottage Grove, we offer readers of the City of Cottage Grove's financial statements this narrative overview and analysis of the financial activities of the City for the fiscal year ended December 31, 2014. We encourage readers to consider the information presented here in conjunction with additional information that we have furnished in our letter of transmittal, which can be found on pages 3 through 7 of this report. Financial Highlights • The assets of the City of Cottage Grove exceeded its liabilities and deferred inflows of resources at the close of the most recent fiscal year by $232,837,293 (net position). Of this amount, $44,173,760 (unrestricted net position) may be used to meet the government's ongoing obligations to citizens and creditors in accordance with the City's fund designations and fiscal policies. • The City's total net position increased by $7,339,450 over the previous year. • As of the close of the current fiscal year, the City of Cottage Grove's governmental funds reported combined ending fund balances of $28,986,549 an increase of $2,392,092 compared to the previous year. Approximately 84% or $24,456,755 is available for spending according to the City's policies and constraints. • At the end of the current fiscal year, unassigned fund balance for the General fund was $8,113,424 (55%) of the total subsequent year General fund expenditures. • At the end of the current fiscal year, the City of Cottage Grove had total long-term debt outstanding of$22,501,049, a decrease of$1,466,893 or 6% compared to the previous year. The City refinanced $1.355 million in tax increment debt in 2014. Overview of the Financial Statements This discussion and analysis is intended to serve as an introduction to the City of Cottage Grove's basic financial statements. The City's basic financial statements comprise three components: 1) government-wide financial statements, 2) fund financial statements, and 3) notes to the financial statements. This report also contains other 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 of Cottage Grove's finances, in a manner similar to a private-sector business. The statement of net position presents information on all of the City of Cottage Grove's assets and liabilities, with the difference between the two reported as net position. Over time, increases or decreases in net position may serve as a useful indicator of whether the financial position of the City of Cottage Grove is improving or deteriorating. i9 Management's Discussion and Analysis(continued) The statement of activities presents information on how the City's net position changed during the most recent fiscal year. All changes in net position are reported as soon as the underlying event giving rise to the change occurs, regardless of the timing of related cash flows. Thus, revenues and expenses are reported in this statement for some items that will only result in cash flows in future fiscal periods (e.g. uncollected taxes and earned but unused personal leave time). Both of the government-wide financial statements distinguish functions of the City of Cottage Grove 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 of Cottage Grove include general government, community development, economic development, public safety, public works, and culture and recreation. The business-type activities of the City of Cottage Grove include street lighting, water and sewer, and an ambulance service. The government-wide financial statements include not only the City of Cottage Grove itself(known as the primary government), but also a legally separate EDA component unit for which the City of Cottage Grove is financially accountable. Financial information for this component unit is reported separately from the financial information presented for the primary government itself. The government-wide financial statements start on page 33 of this report. Fund financial statements: A fund is a grouping of related accounts that is used to maintain control over resources that have been segregated for specific activities or objectives. The City of Cottage Grove, like other state and local governments, uses fund accounting to ensure and demonstrate compliance with finance-related legal requirements. All of the funds of the City of Cottage Grove 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 statement. By doing so, readers may better understand the long-term impact of the City's near term financial decisions. Both the governmental fund balance sheet and governmental fund statement of revenues, expenditures, and change in fund balance provide a reconciliation to facilitate this comparison between governmental funds and governmental activities. ao Management's Discussion and Analysis(continued) Information is presented separately in the governmental fund balance sheet and in the governmental fund statement of revenues, expenditures, and changes in fund balance for the City's seven individual major governmental funds. They are as follows: • General Fund • Municipal Building Capital Proj ect Fund–Capital proj ect fund • MSA Construction Capital Proj ect Fund—Capital proj ect fund • Closed Debt Fund—Debt service fund • Pavement Management Debt Service Fund—Debt service fund • Pavement Management Capital Proj ect Fund - Capital proj ect fund • Construction Revolving Capital Proj ect Fund–Capital proj ect fund Data from the other governmental funds are combined into a single, aggregated presentation. Individual fund data for each of these non-major governmental funds is provided in the form of combining statements elsewhere in the report. The City of Cottage Grove adopts an annual appropriated budget for its general and special revenue funds. A budgetary comparison statement has been provided for those funds to demonstrate compliance with this budget. The basic governmental fund financial statements start on page 36 of this report. Proprietary funds: The City of Cottage Grove maintains four enterprise funds and three internal service funds as a part of its proprietary fund type. Enterprise funds are used to report the same functions presented as business-type activities in the governmental-wide financial statements. The City of Cottage Grove uses enterprise funds to account for street light operations, ambulance service, water operations, and sewer operations. Internal service funds are an accounting device used to accumulate and allocate costs internally among the City of Cottage Grove's various functions. The City of Cottage Grove uses internal service funds to account for self-insurance,fleet maintenance, and information technology services activity. Because these services predominantly benefit governmental rather than business-type functions, they have been included within governmental activities in the government-wide financial statements. Proprietary funds provide the same type of information as the government-wide financial statements, only in more detail. The proprietary fund financial statements provide separate information for street light operations, ambulance service, water operations, and sewer operations, all of which are considered to be maj or funds of the City of Cottage Grove. Conversely,the internal service funds are combined into a single, aggregated presentation in the proprietary fund financial statements. Individual fund data for the internal service funds is provided in the form of combining statements elsewhere in this report. The basic proprietary fund financial statements start on page 42 of this report. Notes to the financial statements: The notes provide additional information that is essential to a full understanding of the data provided in the government–wide and fund financial statements. The notes to the financial statements start on page 45 of this report. ai Management's Discussion and Analysis(continued) Other information: The combining statements referred to earlier in connection with non-maj or governmental funds and internal service funds are presented immediately following the required supplementary information. Combining and individual fund statements and schedules start on page 91 of this report. Government-wide Financial Analvsis As noted earlier, net position may serve over time as a useful indicator of a government's financial position. In the case of the City of Cottage Grove, assets exceeded liabilities by $232,837,293 at the close of the most recent fiscal year. The largest portion of the City of Cottage Grove's net position ($181,692,101 or 78%) reflects its investment in capital assets (e.g. land, buildings, machinery, and equipment) less any related debt used to acquire those assets that is still outstanding. The City of Cottage Grove uses these capital assets to provide services to citizens; consequently, these assets are not available for future spending. Although the City of Cottage Grove'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. GYty of Cottage Grove Net Position Governmental Activities Business-type Activities Total Primary Government 2014 2013 2014 2013 2014 2013 Currentandotherassets $38,476,039 $36,583,611 $16,327,364 $17,136,453 $54,803,403 $53,720,064 Capital assets 148,076,342 146,345,781 55,149,280 52,277,781 203,225,622 198,623,562 Total assets 186,552,381 182,929,392 71,476,644 69,414,234 258,029,025 252,343,626 Long-term liabilities outstanding 19,457,505 21,035,632 622,482 738,245 20,079,987 21,773,877 Otherliabilities 4,543,405 4,608,636 525,740 430,770 5,069,145 5,039,406 Totalliabilities 24,000,910 25,644,268 1,148,222 1,169,015 25,149,132 26,813,283 Deferred inflows of resources 42,600 32,500 - - 42,600 32,500 Net position: Net inveshnent in capital assets 127,260,042 124,156,059 54,432,059 51,453,195 181,692,101 175,609,254 Restricted 6,971,432 7,187,948 - - 6,971,432 7,187,948 Unrestricted 28,277,397 25,908,617 15,896,363 16,792,024 44,173,760 42,700,641 Totalnetposition $162,508,871 $157,252,624 $70,328,422 $68,245,219 $232,837,293 $225,497,843 An additional portion of the City's net position ($6,971,432 or 3%) represents resources that are subj ect to external restrictions on how they may be used. The balance of unrestricted net position, $44,173,760 may be used to meet the City's ongoing obligations to citizens and creditors. At the end of the current fiscal year, the City of Cottage Grove is able to report positive balances in all three categories of net position; for the government as a whole, as well as for its separate governmental and business-type activities. The same situation held true for the prior fiscal year. aa Management's Discussion and Analysis(continued) Governmental Activities: Governmental activities increased the City of Cottage Grove's net position by $ 5,256,247 accounting for 72% of the total growth in net position. • Program revenue decreased overall by $646,581. This is primarily related to reduced capital grants and contributions from the state and county for road construction proj ects. • Investment income increased by $701,524 due to the unrealized gain in the value of investments which are annually adjusted in accordance with accounting standards. GYty of Cottage Grove's Changes in Net Position Governmental Activities Business-Type Activities Total Primary Government 2014 2013 2014 2013 2014 2013 Revenues: Program revenues: Charges for services $4,914,710 $4,925,856 $6,305,828 $6,694,903 $11,220,538 $11,620,759 Operating grants and contributions 1,545,268 1,211,506 - - 1,545,268 1,211,506 Capital grants and contributions 9,401,775 10,370,972 1,783,762 1,051,532 11,185,537 11,422,504 General revenues: Property taxes 12,616,267 12,096,046 - - 12,616,267 12,096,046 Other taxes 1,280,553 1,506,216 - - 1,280,553 1,506,216 Grants and contributions not restricted to specific programs 83,682 29,060 - - 83,682 29,060 Unrestricted investment eamings (loss) 551,910 (149,614) 199,179 (45,902) 751,089 (195,516) Gain on sale of capital assets 43,904 3,997 - - 43,904 3,997 Total revenues 30,438,069 29,994,039 8,288,769 7,700,533 38,726,838 37,694,572 Expenses: General government 2,229,518 2,270,332 - - 2,229,518 2,270,332 Community development 946,001 903,180 - 946,001 903,180 Economic development 545,646 61,302 - - 545,646 61,302 Public safety 7,212,998 6,949,225 - - 7,212,998 6,949,225 Public works: Regularoperations 4,627,829 4,128,694 - - 4,627,829 4,128,694 Construction 2,971,353 3,992,536 - - 2,971,353 3,992,536 Culture and recreation 5,119,093 4,768,181 - - 5,119,093 4,768,181 Interest on long-term debt 808,642 976,891 - - 808,642 976,891 Street lights - - 867,690 742,410 867,690 742,410 Cottage Grove EMS - - 1,412,855 1,322,635 1,412,855 1,322,635 Water operating - - 2,216,819 2,341,555 2,216,819 2,341,555 Sewer operating - - 2,428,944 2,278,958 2,428,944 2,278,958 Total eapenses 24,461,080 24,050,341 6,926,308 6,685,558 31,387,388 30,735,899 Increase in net position before transfers and special items 5,976,989 5,943,698 1,362,461 1,014,975 7,339,450 6,958,673 Special item-loan forgiveness - 1,020,000 - - 1,020,000 Transfers (720,742) 375,266 720,742 (375,266) - - Increase in net position 5,256,247 7,338,964 2,083,203 639,709 7,339,450 7,978,673 Net position-January 1 157,252,624 149,648,235 68,245,219 67,870,935 225,497,843 217,519,170 Cumulative effect of change in accounting principle - 265,425 - (265,425) - - Netposition-Januarylasrestated 157,252,624 149,913,660 68,245,219 67,605,510 225,497,843 217,519,170 Net position-December 31 $162,508,871 $157,252,624 $70,328,422 $68,245,219 $232,837,293 $225,497,843 23 Management's Discussion and Analysis(continued) Revenues by Source - Government Activities Other taxes&tax increment Operating Grants& 40� Unrestricted Contributions � investment earnings 50� Capital Grants& 2�� Contributions � 31% �Other 0% Charges for services 16% Property Taxes 42% The following chart illustrates the City's expenses and corresponding program revenues for its governmental activities. SZo,000,000 S9,000,000 Sa,000,000 S�,000,000 S6,000,000 Ss,000,000 S4,000,000 $3,000,000 ■Revenue $2,000,000 ■Expense $1,000,000 $_ � � �e�� e�� e�� a�e� �`o�� `�`oc a�`oc ae�� Je�o e\o� e\oQ �\``h Q�ca �y,`i`? �e`ce y�oo ��O° ae, ae, �QJ �h c.° 4} ece e�e�a J�,� o�� G�oc �°,�� J\��e `��. �O `o�cC e`o� ��.p�` ��`c. � Q 24 Management's Discussion and Analysis(continued) Business-Type Activities. Business-type activities increased net position by $2,083,203. Below are graphs showing the business-type activities revenue and expense comparisons. Revenues - Business type Activities Capital grants& contributions Unrestricted � 22% � � investment earnings _.. 20/ Chargesfor services 76% Expenses and Program Revenues- Business-Type Activities $3,000,000 $2,500,000 $2,000,000 $1,500,000 $1,000,000 $500,000 $- � �,g ,��t �t �� oa�� ro ��,a �� Go� ■Expenses ■Program revenues In business type activities, changes in net position were positive for all four funds. 25 Management's Discussion and Analysis(continued) Financial Analvsis of the Government's Funds Governmental Funds. The focus of the City of Cottage Grove'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 of Cottage Grove's financing requirements. In particular,unassigned fund balance may serve as a useful measure of a government's net resources available for spending at the end of the fiscal year. At the end of the current fiscal year, the City of Cottage Grove's governmental funds reported combined ending fund balances of$28,986,549, an increase of$2,392,092. Committed, assigned and unassigned fund balance which is available for spending at the government's discretion has a balance of $24,456,755 at year end. The remainder of the fund balance is non-spendable or restricted to indicate it is not available for new spending because it has already been obligated 1)to pay debt service ($2,139,841) 2) for prepaid items ($26,548) 3) for inventory ($24,434) 4) to pay for capital improvements ($2,272,496) and 5) for future expenditures ($66,475). The General fund is the chief operating fund of the City of Cottage Grove. At the end of the current fiscal year, unassigned fund balance of the General fund was $8,113,424 while total fund balance was $9,512,141. As a measure of the general fund's liquidity, it may be useful to compare both unassigned fund balance and total fund balance to total fund expenditures. Unassigned fund balance represents 55% of total subsequent year General fund expenditures, while total fund balance represents 64% of the same amount. The General fund balance increased by $280,175. This increase is primarily due to an increase in charges for services resulting from development activity in the city. Revenues exceeded budget by $409,163 due to higher than expected building permit revenues and charges for engineering services from development and infrastructure projects. Expenditures also exceeded budget by $38,099 due to public works expenses for costs of snow and ice control. The Municipal Building Fund increased $492,712 due to property tax revenues collected for repayment of the interfund loan which funded the Public Safety/City Hall proj ect in 2012. The MSA Construction Fund increased by $2,031,896 due to the collection of County, State and private developer reimbursements for completed construction projects on 85m Street, 70m Street, Keats Avenue and Ravine Parkway. The Closed Debt Fund increased by $201,994 due to interfund loan interest and special assessment revenues. The Pavement Management Debt Service Fund increased by $271,296 due to special assessment revenues collected in excess of debt service requirements. The Pavement Management Capital Project Fund decreased by $1,813,644 due to the 2014 Pavement Management project. Municipal bonds will be issued in 2015 to finance this deficit in conjunction with the 2015 Pavement Management project. a6 Management's Discussion and Analysis(continued) The Construction Revolving Fund, a capital proj ect fund, decreased by $10,728 and was closed after the closeout of construction activity from previous year's developments. Proprietary funds: The City of Cottage Grove's proprietary funds provide the same type of information found in the government-wide financial statements, but in more detail. At the end of the year, unrestricted net position of the Street light utility, EMS (Ambulance), Water and Sewer Utility funds totaled $15,692,528 or $848,578 less than 2013. Total net position increased by $2,130,286, primarily due to contributed infrastructure from new developments. Decreases to the unrestricted net position of the Water and Sewer Utility funds were due to a decrease in water usage and therefore, a reduction in related revenues resulting in operating losses in these two funds. The EMS (Ambulance) Fund increased in both total net position and unrestricted net position for 2014. Bud�etarv Hi�hli�hts General Fund. The General Fund original budget was revised to reflect the following significant changes: • The intergovernmental revenue and fire department budgets were increased by $56,800 due to State Fire Relief funds paid to the City in 2014. • The charges for service and Mayor/Council expense budgets were both decreased by $36,250 to reflect the end of the 3M air monitoring program. • The Police budget was increased by $10,000 for capital outlay expenses which had been previously dedicated in the 2013 fund balance. • The charges for service and forestry budget were decreased by $17,700 due to the reduction in tree sales to homeowners. • Transfers out were increased by $80,889 due to the establishment of a separate Park Capital Improvements Capital Project Fund which utilized fund balance originally dedicated from the General Fund for Park Shelters and improvements. The actual results were significantly different than the final budget amounts because of the following: • Licenses and Permits categories were $241,050 more than budgeted due to increased commercial/institutional building permitting in 2014. • Charges for services were $119,132 more than budgeted due to increased engineering fees resulting from increased development activity. • Fines revenues were $49,2991ess than budgeted due to reduced revenues passed through to the City from the state and county. • Investment income was $60,571 more than budgeted due to the recovery of most of the prior year's unrealized loss in the City portfolio. Interest rates also recovered slightly in 2014 resulting in more interest income. • General government expenditures were $36,897 more than final budgeted amounts due to operational expenditures for the New City Hall facility. The 2014 budget had been prepared with less than a year's worth of data for the facility and actual operation costs were underestimated. a� Management's Discussion and Analysis(continued) • Public safety expenditures were $104,4121ess than the final budgeted amounts due to staff retirements and the resulting salary and benefit savings. • Public works expenditures were $99,258 greater than final budget due to personnel costs, supplies and contractual services related to snow and ice removal across another seemingly endless winter period. • Culture and recreation expenditures were $30,710 more than final budget due to increased operational costs in the Forestry division. Capital Asset and Debt Administration Capital assets: The City of Cottage Grove's investment in capital assets for its governmental and business-type activities as of December 31, 2014, amounts to $203,225,622 (net of accumulated depreciation). This investment in capital assets includes land, buildings, infrastructure, machinery and equipment. City of Cottage Grove's Capital Assets (Net of Depreciation) Governmental Activities Business-type Activities Total Primary Government 2014 2013 2014 2013 2014 2013 Land and land improvements $17,926,287 $17,926,287 $355,648 $356,444 $18,281,935 $18,282,731 Easements 1,157,202 1,157,202 - - 1,157,202 1,157,202 Construction in progress 606,641 3,924,613 28,909 - 635,550 3,924,613 Buildings and improvements 21,423,724 22,253,409 1,828,018 1,943,417 23,251,742 24,196,826 Equipment and furniture 282,359 371,638 - - 282,359 371,638 Machinery and equipment 4,636,672 4,399,915 686,620 559,792 5,323,292 4,959,707 Other improvements 3,037,552 2,886,949 4,682,489 3,999,637 7,720,041 6,886,586 Infrastructure: Streets 72,199,607 69,162,942 - - 72,199,607 69,162,942 Storm sewers 23,330,305 20,817,416 - - 23,330,305 20,817,416 Sidewalks/trails 3,475,993 3,445,410 - - 3,475,993 3,445,410 Water and sewer lines - - 47,567,596 45,418,491 47,567,596 45,418,491 Ending balance $148,076,342 $146,345,781 $55,149,280 $52,277,781 $203,225,622 $198,623,562 The largest addition to capital assets in 2014 were the improvements to streets and other infrastructure due to the 70th Street and 2014 Pavement Management proj ects and the Cayden Glen and East Ridge Woods residential development proj ects. Additional information on the City of Cottage Grove's capital assets can be found in Note 5. as Management's Discussion and Analysis(continued) Long-term debt: At the end of the current fiscal year,the City of Cottage Grove had total long term debt outstanding of $22,501,049, a decrease of $1,466,893. $2,421,062 of the debt outstanding is due within one year. $13,157,633 of bonds payable is for pavement management debt being repaid by a combination of special assessments and property tax levies. City of Cottage Grove's Outstanding Debt 2014 2013 Governmental activities: Bonds payable,net $15,657,633 $16,725,979 Capitallease payable-EDA 5,085,000 5,355,000 Capitallease payable—golf carts 73,667 108,743 Other postemployment benefits 59,343 50,438 Compensated absences 839,758 825,871 Total governmental activities 21,715,401 23,066,031 Business-type activities: Bonds payable,net 717,221 824,586 Other postemployment benefits 8,571 7,211 Compensated absences 59,856 70,114 Total business-type activities 785,648 901,911 Totalprimary government $22,501,049 $ 23,967,942 The City of Cottage Grove holds a general obligation debt rating of Aal from Moody's (2010 Global Ratings Scale) and of AA+/Stable from Standard and Poor's. According to S&P, Cottage Grove has "a strong financial profile, anchored by a very strong general fund balance; and good management practices that have contributed to the city's ongoing financial health." 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 of Cottage Grove is $71,894,811. Of that limit, $5,085,000 of the City's outstanding debt is counted within the statutory limitation because all other debt is either wholly or partially repaid by revenues other than general property tax levies. Additional information on the City of Cottage Grove's long-term debt can be found in Note 6. Requests for information: This financial report is designed to provide a general overview of the City of Cottage Grove'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 Finance Director, 12800 Ravine Parkway St, Cottage Grove, Minnesota 55016. a9 -This Page Intentionally Left Blank- 30 BASIC FINANCIAL STATEMENTS 31 -This Page Intentionally Left Blank- 32 CITY OF COTTAGE GROVE,MINNESOTA STATEMENT OF NET POSITION Statement 1 December 31,2014 With Comparative Data as of December 31,2013 Component Unit Primary Government Total Economic Totals Governmental Business-Type Primary Development Reporting Entity Acriviries Acriviries Government Authority 2014 2013 Assets: Cashandinvestments $ 36,643,689 $ 9,840,501 $ 46,484,190 $ 546,654 $ 47,030,844 $ 44,534,402 Accruedinterestreceivable 146,187 - 146,187 57,223 203,410 183,751 Due from other governmental units-net 884,722 5,065 889,787 - 889,787 988,167 Accountsreceivable-net 475,507 1,343,228 1,818,735 4,154 1,822,889 3,556,169 Prepaiditems 156,897 139,735 296,632 2,560 299,192 155,516 Delinquentpropertytaxesreceivable 197,875 - 197,875 1,771 199,646 283,631 Due from county 76,605 - 76,605 - 76,605 86,663 Special assessments receivable 4,531,762 - 4,531,762 - 4,531,762 4,216,302 Inventories-at cost 94,132 - 94,132 - 94,132 120,096 Internalbalances (4,998,835) 4,998,835 - - - - Lease receivable - - - 5,085,000 5,085,000 5,355,000 Propertiesheldforresale 267,498 - 267,498 311,718 579,216 579,216 Capital assets not being depreciated: Landandlandimprovements 17,926,287 325,000 18,251,287 - 18,251,287 18,251,287 Easements 1,157,202 - 1,157,202 - 1,157,202 1,157,202 Construcrioninprogress 606,641 28,909 635,550 - 635,550 3,924,613 Capital assets(net of accumulated depreciarion): Landimprovements - 30,648 30,648 - 30,648 31,444 Buildingsandimprovements 21,423,724 1,828,018 23,251,742 - 23,251,742 24,196,826 Equipment and furniture 282,359 - 282,359 - 282,359 371,638 Machinery and equipment 4,636,672 686,620 5,323,292 - 5,323,292 4,959,707 Otherimprovements 3,037,552 4,682,489 7,720,041 - 7,720,041 6,886,586 Infrastructure 99,005,905 47,567,596 146,573,501 - 146,573,501 138,844,259 Totalassets $ 186,552,381 $ 71,476,644 $ 258,029,025 $ 6,009,080 $ 264,038,105 $ 258,682,475 Laabilities: Accountspayable $ 698,482 $ 119,145 $ 817,627 $ 36,284 $ 853,911 $ 850,471 Salaries payable 474,407 50,379 524,786 8,782 533,568 486,550 Contracts payable 193,540 1,088 194,628 - 194,628 570,447 Due to other governmental units 17,711 177,243 194,954 - 194,954 495,660 Deposits payable 707,633 4,000 711,633 2,666 714,299 343,845 Accruedinterestpayable 193,736 10,719 204,455 57,223 261,678 317,749 Compensated absences payable: Due within oneyear 621,661 58,166 679,827 11,516 691,343 679,208 Due in more than one year 218,097 1,690 219,787 4,439 224,226 230,889 Other postemployment benefits: Due in more than one year 59,343 8,571 67,914 700 68,614 58,173 Capital lease payable: Due within one year 316,235 - 316,235 - 316,235 305,075 Due in more than one year 4,842,432 - 4,842,432 - 4,842,432 5,158,668 Bonds payable(net of unamortized premiums): Due within one year 1,320,000 105,000 1,425,000 280,000 1,705,000 1,490,000 Dueinmorethanoneyear 14,337,633 612,221 14,949,854 4,805,000 19,754,854 21,415,565 Totalliabiliries 24,000,910 1,148,222 25,149,132 5,206,610 30,355,742 32,402,300 Deferred inflows of resources: Unavailable revenue-other 42,600 - 42,600 - 42,600 32,500 Net posirion: Netinvestmentincapitalassets 127,260,042 54,432,059 181,692,101 - 181,692,101 175,609,254 Resh-icted for: Forfeiture and seizure 52,175 - 52,175 - 52,175 47,609 Charitable gambling 14,300 - 14,300 - 14,300 12,383 Debtrerirement 4,669,618 - 4,669,618 504,206 5,173,824 5,419,646 Taxincrementpurposes 2,235,339 - 2,235,339 - 2,235,339 1,958,917 Park trust acriviries - - - - - 242,906 Unrestricted 28,277,397 15,896,363 44,173,760 298,264 44,472,024 42,956,960 Totalnetposirion $ 162,508,871 $ 70,328,422 $ 232,837,293 $ 802,470 $ 233,639,763 $ 226,247,675 The accompanying notes are an integral part of these basic financial statements. 33 -This Page Intentionally Left Blank- 34 N i i i i i i i i i i M M i i i i 0 i i oo N O � � O O h h � M M h C Q J Vl Vl h M �O 00 7 � O '� �" O. 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'5 �' > ° �� '� � '> W cncn � � a °o. d �o �1 � �� a� a� � � � °° a� � � � � ° � Fw �o > �a �' " > '° ,o �',� ° ° `" ,� cn �a ° � � a a .� � o p � `� �a o � � °un'� � � o �a � � o ,� o"'�C�J o. o. .� .� �1 .� w � � � � b°n � °' � � ;� ;� � o � � �a� � a� a� H H � �� H � � O � o � ?, � � o o ap ap C4 U � � � o �a 3 � o ,S' U ° 2 � � U W W W � � ' v� U � v� °c�, o H � U Q � U i"i F-� O '� .C C7 Pa o W Uv� w � w a v 35 CITY OF COTTAGE GROVE,MINNESOTA BALANCESHEET GOVERNNIENTALFUNDS December 31,2014 With Compararive Data as of December 31,2013 Municipal MSA Building Construcrion General Capital Project Capital Project Closed Debt Assets: Fund Fund Fund Fund Cashandinvestments $ 9,585,732 $ 313,457 $ 3,696,047 $ 1,831,339 Accrued interest receivable 146,187 - - - Interfixnd receivable 287,314 - - - Interfund loan receivable - - - 2,000,000 Due from other governmental units-net 45,173 - 433,123 - Accounts receivable-net 27,069 - - - Prepaid items 18,019 - - - Inventories-at cost - - - - Delinquent proper[y taxes receivable 175,906 5,844 - 5,434 Due from county 76,605 - - - Special assessments receivable: Deferred 7,486 - 516,419 277,943 Delinquent 3,800 - 416 5,546 Special deferred - - 57,307 4,537 Property held for resale - - 267,498 - Total assets $ 10,373,291 $ 319,301 $ 4,970,810 $ 4,124,799 Laabilities: Accounts payable $ 140,965 $ 24,500 $ 43,998 $ - Salaries payable 408,552 - - - Interfund payable - - - - Contracts payable - - 27,830 - Due to other governmental units 12,744 - 266 - Deposits payable 60,870 - - - Interfund loan payable - 8,295,000 - - Totalliabiliries 623,131 8,319,500 72,094 - Deferred inflows of resources: Unavailable revenue-proper[y taxes 175,906 5,844 - 5,434 Unavailable revenue-special assessments 11,286 - 574,142 288,026 Unavailable revenue-intergovernmental 8,227 - 127,769 - Unavailable revenue-other 42,600 - - - Totaldeferredinflowsofresources 238,019 5,844 701,911 293,460 Fund balances(deficit): Nonspendable: Prepaid items 18,019 - - - Inventory - - - - Resh-icted for: Forfeiture and seizure - - - - Charitable gambling - - - - Debt rerirement - - - - Tax increment purposes - - - - Park trust acriviries - - - - Committed - - - - Assigned 1,380,698 - 4,196,805 3,831,339 Unassigned: General Fund 8,113,424 - - - Special Revenue Fund - - - - CapitalProjectFunds - (8,006,043) - - Totalfundbalances(deficit) 9,512,141 (8,006,043) 4,196,805 3,831,339 Total liabilities,deferred inflows of resources, and fund balances $ 10,373,291 $ 319,301 $ 4,970,810 $ 4,124,799 The accompanying notes are an integral part of these basic financial statements. 36 Statement 3 Pavement Pavement Construcrion Management Management Revolving Other Totals Debt Service Capital Project Capital Project Governmental Governmental Funds Fund Fund Fund Funds 2014 2013 $ 1,330,774 $ - $ - $ 17,172,678 $ 33,930,027 $ 30,898,444 - - - - 146,187 123,828 598,445 - - 991,739 1,877,498 642,855 - - - 3,050,000 5,050,000 5,105,000 - 358,580 - 47,846 884,722 983,020 - - - 447,878 474,947 2,086,399 - - - 8,529 26,548 23,404 - - - 24,434 24,434 31,617 6,233 - - 4,458 197,875 281,201 - - - - 76,605 86,663 2,598,474 779,580 - 255,294 4,435,196 4,011,950 5,584 - - 534 15,880 46,241 18,842 - - - 80,686 158,111 - - - - 267,498 267,498 $ 4,558,352 $ 1,138,160 $ - $ 22,003,390 $ 47,488,103 $ 44,746,231 $ 5,975 $ 78,639 $ - $ 160,039 $ 454,116 $ 440,782 - - - 42,580 451,132 412,797 - 598,445 - 1,279,053 1,877,498 642,855 - 165,710 - - 193,540 483,547 - - - 4,341 17,351 457,034 - - - 646,763 707,633 332,373 - - - 1,550,000 9,845,000 10,335,000 5,975 842,794 - 3,682,776 13,546,270 13,104,388 6,233 - - 4,458 197,875 281,201 2,622,900 779,580 - 255,828 4,531,762 4,216,302 - 42,052 - 4,999 183,047 517,383 - - - - 42,600 32,500 2,629,133 821,632 - 265,285 4,955,284 5,047,386 - - - 8,529 26,548 23,404 - - - 24,434 24,434 31,617 - - - 52,175 52,175 47,609 - - - 14,300 14,300 12,383 1,923,244 - - 216,597 2,139,841 2,042,320 - - - 2,272,496 2,272,496 2,002,632 - - - - - 242,906 - - - 329,841 329,841 416,027 - - - 17,563,037 26,971,879 24,379,976 - - - - 8,113,424 7,775,548 - - - (1,409,153) (1,409,153) (1,341,755) - (526,266) - (1,016,927) (9,549,236) (9,038,210) 1,923,244 (526,266) - 18,055,329 28,986,549 26,594,457 $ 4,558,352 $ 1,138,160 $ - $ 22,003,390 $ 47,488,103 $ 44,746,231 Fund balance reported above $ 28,986,549 $ 26,594,457 Amounts reported for governmental acriviries in the statement of net posirion are different because: Capital assets used in goverrunental activities are not financial resources,and therefore, are not reported in the funds 147,132,457 145,360,562 Other long-terxn assets are not available to pay for current-period expenditures,and therefore, are deferred in the funds 4,912,684 5,014,886 Long-terxn liabilities,including bonds payable,are not due and payable in the current period and therefore are not reported in the funds. (21,857,861) (23,264,65� Internal service fixnds are used by management to charge the cost of insurance to individual fixnds. The assets and liabiliries are included in the governmental statement of net posirion 3,335,042 3,547,375 Netpositionofgovernmentalactivities $ 162,508,871 $ 157,252,624 The accompanying notes are an integral part of these basic financial statements. 37 CITY OF COTTAGE GROVE,MINNESOTA STATEMENT OF REVENUES,EXPENDITURES AND CHANGES IN FUND BALANCE GOVERNNIENTAL FUNDS For The Year Ended December 31,2014 With Comparative Data for the Year Ended December 31,2013 Municipal MSA Building Construction General Capital Project Capital Project Closed Revenues: Fund Fund Fund Debt Fund General property taxes $ 11,357,685 $ 499,836 $ - $ 3,918 Franchise taxes - - - - Aggregate taxes - - - - Tax increment collections - - - - Special assessments 26,697 - 214,400 155,469 Licenses and perxnits 904,400 - - - Direct charges to developers - - 124,563 - Intergovernmental 958,912 - 1,984,836 - Charges for seroices 437,332 - - - Rent - 15,696 - - Fines and forfeits 151,701 - - - Investment earnings(loss) 120,571 2,983 29,749 24,017 Interest on interfixnd loan - - - 20,000 Connection charges - - - - Park dedication fees - - - - Other sales - - - - Donations 26,747 - - - Miscellaneous 44,618 91,512 - - Total revenues 14,028,663 610,027 2,353,548 203,404 Expenditures: Current: General government 1,981,162 28,538 - 1,410 Community development 919,126 - - - Economic development - - - - Public safety 6,461,773 4,000 - - Public works 2,381,005 - 79,105 - Culture and recreation 1,777,405 - - - Capital outlay: General government - - - - Public safety 374,020 - - - Public works 5,213 - 827,774 - Culture and recreation - - - - Debtservice: Principal retirement - - - - Capital lease payment - - - - Interest and fiscal charges - 84,777 - - Total expenditures 13,899,704 117,315 906,879 1,410 Revenues over(under)expenditures 128,959 492,712 1,446,669 201,994 Other financing s ources(us es): Transfersin 523,710 - 670,503 - Transfers out (372,494) - (85,276) - Bonds issued - - - - Premium on debt issued - - - - Proceeds from the sale of capital assets - - - - Total other financing sources(uses) 151,216 - 585,227 - Net increase(decrease)in fund balance 280,175 492,712 2,031,896 201,994 Fund balance-January 1 9,231,966 (8,498,755) 2,164,909 3,629,345 Cumulative effect of change in accounting principle - - - - Fund balance-January 1,as restated 9,231,966 (8,498,755) 2,164,909 3,629,345 Fundbalance-December3l $ 9,512,141 $ (8,006,043) $ 4,196,805 $ 3,831,339 The accompanying notes are an integral part of these basic financial statements. 38 Statement 4 Pavement Pavement Constnxction Management Management Revolving Other Totals Debt Service Capital Project Capital Project Governmental Governmental Funds Fund Fund Fund Funds 2014 2013 $ 585,364 $ - $ - $ 241,114 $ 12,687,917 $ 12,081,764 - - - 542,689 542,689 540,767 - - - 26,236 26,236 26,135 - - - 723,304 723,304 946,847 549,303 345,080 - 35,068 1,326,017 1,575,736 - - - - 904,400 860,954 - - - 537,298 661,861 2,106,723 - 316,528 - 671,745 3,932,021 4,642,768 - - - 3,135,019 3,572,351 4,023,844 - - - 420,279 435,975 - - - - 19,616 171,317 188,657 22,082 15,084 161 237,646 452,293 (173,267) - - - 39,066 59,066 47,025 - - - 841,434 841,434 805,261 - - - 63,595 63,595 252,386 - - - 429,750 429,750 - - - - 352,380 379,127 399,257 - - - 60,860 196,990 306,152 1,156,749 676,692 161 8,377,099 27,406,343 28,631,009 11,288 - - 3,311 2,025,709 2,071,272 - - - - 919,126 892,699 - - - 541,838 541,838 151,562 - - - 18,779 6,484,552 6,297,323 - 389,120 2,633 1,454,205 4,306,068 4,271,651 - - - 2,392,064 4,169,469 3,954,968 - - - - - 51,091 - - - 94,445 468,465 195,111 - 2,281,972 - 811,420 3,926,379 11,534,904 - - - 633,578 633,578 493,455 550,000 - - 1,920,000 2,470,000 950,000 - - - 305,076 305,076 293,953 324,165 - - 473,566 882,508 769,129 885,453 2,671,092 2,633 8,648,282 27,132,768 31,927,118 271,296 (1,994,400) (2,472) (271,183) 273,575 (3,296,109) - 180,756 - 466,026 1,840,995 759,446 - - (8,256) (747,033) (1,213,059) (638,374) - - - 1,405,000 1,405,000 7,345,000 - - - 18,461 18,461 211,507 - - - 67,120 67,120 27,195 - 180,756 (8,256) 1,209,574 2,118,517 7,704,774 271,296 (1,813,644) (10,728) 938,391 2,392,092 4,408,665 1,651,948 1,287,378 10,728 17,116,938 26,594,457 23,427,265 - - - - - (1,241,473) 1,651,948 1,287,378 10,728 17,116,938 26,594,457 22,185,792 $ 1,923,244 $ (526,266) $ - $ 18,055,329 $ 28,986,549 $ 26,594,457 The accompanying notes are an integral part of these basic financial statements. 39 CITY OF COTTAGE GROVE,NIINNESOTA RECONCILIATION OF THE STATEMENT OF REVENUES, Statement 5 EXPENDITiJRES,AND CHANGES IN FiJND BALANCES OF GOVERNMENTAL FiJNDS TO THE STATEMENT OF ACTIVITIES For The Year Ended December 31,2014 With Comparative Data for the Year Ended December 31,2013 2014 2013 Amounts reported for governmental activities in the statement of activities(page 35)are different because: Net changes in fund balances-total governmental funds(page 39) $ 2,392,092 $ 4,408,665 Governmental funds report capital outlays as expenditures. However,in the statement of activities the cost of those assets is allocated over their estimated useful lives and reported as depreciation expense. This is the amount by which capital outlays exceeded depreciation in the current period. (1,238,277) 6,545,621 The effect of various miscellaneous transactions involving capital assets is to decrease net position (i.e.sales,and trade-ins). (27,296) (23,198) Special items in the statement of activities that do not provide current financial resources are not reported as revenues in the funds.Loan forgiveness from component unit. - 1,020,000 Donations of capital assets increase net position in the statement of activities,but do not appear in the governmental funds because they are not financial resources. 3,037,468 1,065,480 Revenues in the statement of activities that do not provide current financial resources (102,202) 734,520 are not reported as revenues in the funds. The issuance of long-term debt(e.g.,bonds,leases)provides current financial resources to governmental funds,while the repayment of the principal of long-term debt consumes the current financial resources of governmental funds. Neither transaction,however,has any effect on net position. This amount is the net effect of these differences in the treatment of long-term debt and related items. 1,373,422 (6,489,882) Internal service funds are used by management to charge the cost of insurance to individual funds. This amount is net revenue(loss)attributable to governmental activities. (212,333) (37,751) Some expenses reported in the statement of activities do not require the use of current financial resources and,therefore,are not reported as expenditures in governmental funds. 33,373 115,509 Change in net position of governmental activities(page 35) $ 5,256,247 $ 7,338,964 The accompanying notes are an integral part of these basic financial statements. 40 -This Page Intentionally Left Blank- 41 CITY OF COTTAGE GROVE,MINNESOTA STATEMENT OF NET POSITION Statement 6 PROPRIETARY FUNDS December 31,2014 Business-Type Activities-Enterprise Funds Governmental Total Activities- Street Light Cottage Grove Water Sewer Enterprise Internal Fund EMS Fund Operating Operating Funds Service Funds Assets: Current assets: Cash and investments $ 1,331,858 $ 882,201 $ 4,748,232 $ 2,878,210 $ 9,840,501 $ 2,713,662 Interfund loan receivable - - 1,962,500 2,832,500 4,795,000 - Due from other governmental units-net - 5,065 - - 5,065 - Accounts receivable: Customers 83,852 483,703 226,379 334,099 1,128,033 - Certified to County - - 98,013 98,013 196,026 - Other 626 800 17,743 - 19,169 560 Prepaid items 159 5,600 1,792 132,184 139,735 130,349 Inventories-at cost - - - - - 69,698 Total current assets 1,416,495 1,377,369 7,054,659 6,275,006 16,123,529 2,914,269 Noncurrent assets: Capital assets: L,and and land improvements - - 364,803 - 364,803 424,665 Buildings and improvements - - 4,101,713 - 4,101,713 928,870 Equipment and furniture - - - - - 74,232 Machinery and equipment 139,222 773,544 1,061,247 298,093 2,272,106 178,512 Other improvements 6,937,694 - - - 6,937,694 - Water and sewer lines - - 37,727,324 26,045,169 63,772,493 - Construction in progress - - 28,909 - 28,909 - Total capital assets 7,076,916 773,544 43,283,996 26,343,262 77,477,718 1,606,279 Less: Accumulated depreciation (2,328,325) (395,264) (13,210,171) (6,394,678) (22,328,438) (662,394) Net capital assets 4,748,591 378,280 30,073,825 19,948,584 55,149,280 943,885 Total noncurrent assets 4,748,591 378,280 30,073,825 19,948,584 55,149,280 943,885 Total assets 6,165,086 1,755,649 37,128,484 26,223,590 71,272,809 3,858,154 Liabilities: Current liabilities: Accounts payable 68,282 11,362 30,841 8,660 119,145 244,366 Salaries payable 3,262 24,553 18,547 4,017 50,379 23,275 Contracts payable - - 1,088 - 1,088 - Due to other governmental units 2,573 5,121 17,774 151,775 177,243 360 Deposits payable - 4,000 - 4,000 - Accrued interest payable - - 10,719 - 10,719 - Compensated absences payable 6,405 16,332 24,717 10,712 58,166 26,474 Bonds payable-current portion - - 105,000 - 105,000 - Total current liabilities 80,522 57,368 212,686 175,164 525,740 294,475 Noncurrent liabilities: Compensated absences payable - 646 782 262 1,690 22,874 Other postemployment benefits 405 4,703 2,632 831 8,571 1,928 Bonds payable(net of unamortized premiums and discounts) - - 612,221 - 612,221 - Total noncurrent liabilities 405 5,349 615,635 1,093 622,482 24,802 Totalliabilities 80,927 62,717 828,321 176,257 1,148,222 319,277 Net position: Net investment in capital assets 4,748,591 378,280 29,356,604 19,948,584 54,432,059 943,885 Unrestricted 1,335,568 1,314,652 6,943,559 6,098,749 15,692,528 2,594,992 Totalnetposition $ 6,084,159 $ 1,692,932 $ 36,300,163 $ 26,047,333 70,124,587 $ 3,538,877 Some amounts reported for business-type activities in the statement of net position are different because certain internal service fund assets and liabilities are included with business-type activities. 203,835 $ 70,328,422 The accompanying notes are an integral part of these basic financial statements. 42 CITY OF COTTAGE GROVE,MINNESOTA STATEMENT OF REVENUES,EXPENSES AND Statement 7 CHANGES IN FLTND NET POSITION PROPRIETARY FUNDS For The Year Ended December 31,2014 Business-Type Activities-Enterprise Funds Governmental Total Activities- Street Light Cottage Grove Water Sewer Enterprise Internal Fund EMS Fund Operating Operating Funds Service Funds Operating revenues: Charges for services-user fees $ 494,180 $ 1,604,723 $ 1,793,441 $ 2,137,263 $ 6,029,607 $ 2,812,816 Water meter/street light material sales 142,300 - 34,130 - 176,430 - Insurance refunds and reimbursements - - - - - 55,234 Totaloperatingrevenues 636,480 1,604,723 1,827,571 2,137,263 6,206,037 2,868,050 Operating eapenses: Operating and maintenance: Personal services 79,823 1,057,025 416,896 91,068 1,644,812 475,358 Commodities 91,204 106,130 317,994 6,805 522,133 751,083 Commodities-items for resale 145,987 - - - 145,987 - Contractual services 390,631 164,321 465,145 142,603 1,162,700 231,753 Disposal: Contractual services-MCES - - - 1,573,180 1,573,180 - Administrative and general: Personal services - - 31,714 32,646 64,360 1,259,345 Commodities - - 17 17 34 - Contractual services - - 138,925 137,402 276,327 421,149 Depreciation 155,472 64,206 808,657 437,734 1,466,069 45,414 Totaloperatingexpenses 863,117 1,391,682 2,179,348 2,421,455 6,855,602 3,184,102 Operating income(loss) (226,637) 213,041 (351,777) (284,192) (649,565) (316,052) Nonoperating revenues(expenses): Investmentearnings 27,446 12,831 68,571 40,320 149,168 40,551 Interest on interfund debt - - 21,685 28,326 50,011 - Miscellaneous 22,330 21,597 41,371 14,493 99,791 12,005 Debt service: Interest - - (23,623) - (23,623) - Total nonoperating revenues(expenses) 49,776 34,428 108,004 83,139 275,347 52,556 Income(loss)before contributions and transfers (176,861) 247,469 (243,773) (201,053) (374,218) (263,496) Capital contributions 525,813 - 1,559,592 1,047,035 3,132,440 4,080 Transfer to General Fund (45,850) (94,680) (166,550) (181,610) (488,690) - Transfer to Capital Project Fund (26,541) - (47,210) (65,495) (139,246) - Totaltransfers (72,391) (94,680) (213,760) (247,105) (627,936) - Change in netposition 276,561 152,789 1,102,059 598,877 2,130,286 (259,416) Netposition-Januaryl 5,807,598 1,540,143 35,198,104 25,448,456 67,994,301 3,798,293 Netposition-December3l $ 6,084,159 $ 1,692,932 $ 36,300,163 $ 26,047,333 $ 70,124,587 $ 3,538,877 Change in net position reported above 2,130,286 Adjustment to reflect the consolidation of internal service fund activities related to enterprise funds (47,083) Change in net position of business-type activities(page 35) $ 2,083,203 The accompanying notes are an integral part of these basic financial statements. 43 CITY OF COTTAGE GROVE,MINNESOTA STATEMENP OF CASH FLOWS Statement 8 PROPRIETARY FUNDS For The Year Ended December 31,2014 Business-Type Activities-Enteiprise Funds Governmental Total Activities- StreetLight CottageGrove Water Sewer Enterprise Internal Fund EMS Fund Operating Operating Funds Service Funds Cash flows from operating activities: Receipts from customers and users $ 642,161 $ 1,620,400 $ 1,872,689 $ 2,189,939 $ 6,325,189 $ - Receipts from interfund services provided - - - - - 2,812,816 Receipts from insurance refunds and reimbursements - - - - - 55,234 Paymenttosuppliers (552,379) (274,293) (1,019,258) (1,848,800) (3,694,730) (1,362,433) Paymenttoemployees (80,003) (1,055,922) (452,348) (124,746) (1,713,019) (1,717,735) Miscellaneous revenue 22,330 21,597 41,371 14,493 99,791 12,005 Net cash flows from operating activities 32,109 311,782 442,454 230,886 1,017,231 (200,113) Cash flows from noncapital financing activities: Transfers out (72,391) (94,680) (213,760) (247,105) (627,936) - Net cash flows from noncapital financing activities (72,391) (94,680) (213,760) (247,105) (627,936) - Cash flows from capital and related financing activities: Acquisition of capital assets (305,552) (175,006) (724,571) - (1,205,129) - Interest paid on debt - - (27,300) - (27,300) - Principal paid on debt - - (105,000) - (105,000) - Net cash flows from capital andrelatedfinancingactivities (305,552) (175,006) (856,871) - (1,337,429) - Cash flows from investing activities: Investment earnings 27,446 12,831 68,571 40,320 149,168 40,551 Interest on interfixnd loan - - 21,685 28,326 50,011 - Payment received on interfixnd loan - - 435,000 - 435,000 - Net cash flows from investing activities 27,446 12,831 525,256 68,646 634,179 40,551 Net increase(decrease)in cash and cash equivalents (318,388) 54,927 (102,921) 52,427 (313,955) (159,562) Cash and cash equivalents-January 1 1,650,246 827,274 4,851,153 2,825,783 10,154,456 2,873,224 Cash and cash equivalents-December 31 $ 1,331,858 $ 882,201 $ 4,748,232 $ 2,878,210 $ 9,840,501 $ 2,713,662 Reconciliation of operating income/(loss)to net cash from operating activities: Operating income(loss) $ (226,637) $ 213,041 $ (351,777) $ (284,192) $ (649,565) $ (316,052) Adjustments to reconcile operating income(loss) to net cash flows from operating activities: Depreciation 155,472 64,206 808,657 437,734 1,466,069 45,414 Miscellaneous revenue 22,330 21,597 41,371 14,493 99,791 12,005 Changes in assets and liabilities: Decrease(increase)in receivables 5,681 15,677 52,590 52,676 126,624 (560) Decrease(increase)in prepaid items (159) (260) (44) (132,184) (132,647) (6,825) Decrease(increase)in inventory 19,074 - - - 19,074 (293) (Decrease)increase in payables 56,348 (2,479) (108,343) 142,359 87,885 66,198 Total adjustments 258,746 98,741 794,231 515,078 1,666,796 115,939 Net cash flows from operating activities $ 32,109 $ 311,782 $ 442,454 $ 230,886 $ 1,017,231 $ (200,113) Noncash investing,capital and financing activities: Capital asset contributions from governmental activities $ 186,966 $ - $ 778,715 $ 382,997 $ 1,348,678 $ 4,080 Capital asset contributions from developers 338,847 - 780,877 664,038 1,783,762 - Loss on disposal of capital asset - 5,151 - - 5,151 - The accompanying notes are an integral part of these basic financial statements. 44 CTTY OF COTTAGE GROVE,MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31,2014 Note 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The City of Cottage Grove was incorporated in 1974 and operates under the State of Mimlesota Statutory Plan A form of government. The governing body consists of a five member City Council elected by voters of the City. The financial statements of the City of Cottage Grove have been prepared in conformity with U.S. generally accepted accounring principles as applied to governmental units by the Governmental Accounting Standards Board (GASB). The following is a summary of the significant accounting policies. A. FINANCIAL REPORTING ENTTTY As required by generally accepted accounting principles,the financial statements of the reporting entity include those of the City of Cottage Grove(the primary government)and its component unit. The component unit discussed below is included in the City's reporting enrity because of the significance of its operarional and financial relationship with the City. COMI'ONENT UNIT The Economic Development Authority(EDA)is considered a component unit of the City because the Council appoints the members of the governing authority and because the EDA is in a relationship of financial benefits or burden to the City. It is governed by a board which is made up of two City council members and five other members. The EDA provides services to the City and to potential future business owners within the City. The financial posirion and results of operations of the EDA component unit is discretely presented in the primary government's basic financial statements. The EDA is reported in a separate column to empl�asize that it is legally separate from the City. The component unit acrivity is reported on the modified accrual basis of accounting. Separate financial statements are not prepared for the EDA. 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 informarion on all of the activiries of the primary government and its component unit. For the most part,the effect of interfund activity has been removed from these statements. Governmental activities, which normally are supported by taYes and intergovernmental revenues, are reported separately from business-type activities, which rely to a significant ea�tent on fees and charges for support. In the government-wide statement of net posirion,both the governmental and business-type acriviries columns: (a)are presented on a consolidated basis by column; and(b) are reported on a full accrual, economic resource basis, which recognizes all long-term assets and receivables as well as long-term debt and obligations. The City's net posirion is reported in three parts: (1)net investment in capital assets;(2)restricted net position;and(3)unrestricted net position. The City first utilizes restricted resources to finance qualifying acrivities. The statement of activities demonstrates the degree to which the direct expenses of a given function or business-type acrivity are offset by program revenues. Direct expenses are those that are clearly idenrifiable with a specific function or business-type activity. 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 acrivity and 2)grants and contriburions that are restricted to meeting the operational or capital requirements of a particular funcrion or business-type acrivity. TaYes 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. 45 CTTY OF COTTAGE GROVE,MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31,2014 C. MEASUREMENT FOCUS,BASIS OF ACCOUNTING,AND FINANCIAL STATEMENT PRESENTATION The government-wide financial statements are reported using the economic resources measurement focus and the accrual basis of accounting,as are the proprietary fund statements. Revenues are recorded when earned and eapenses are recorded when a liability is incurred,regardless of the riming of related cash flows. Property taYes 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 l�ave been met. Governmental fund financial statements are reported using the current financial resources measurement focus and the modified accrual basis of accounting. Revenues are recognized as soon as they are both measurable and available. Revenues are considered to be available when they are collectible within the current period or soon enough thereafter to pay liabilities of the current period. For this purpose,the government considers all revenues,except reimbursement grants, to be available if they are collected within 60 days of the end of the current fiscal period. Reimbursement grants are considered available if they are collected within one year of the end of the current fiscal period. Expenditures generally are recorded when a liability is incurred,as under accrual accounting. However,debt service expenditures, as well as expenditures related to compensated absences, and claims and judgments, are recorded only when payment is due. Property taYes, special assessments,intergovernmental revenues,charges for services and interest associated with the current fiscal period are all considered to be susceptible to accrual and so l�ave been recognized as revenues of the current fiscal period. Only the portion of special assessments receivable due within the current fiscal period is considered to be susceprible 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. The government reports the following major governmental funds: The General Fund is the government's primary operating fund. It accounts for all financial resources of the general government,except those required to be accounted for in another fund. The Municipal Building Capital Project Fund accounts for the accumularion of resources and construction or remodeling costs of municipal buildings and facilities. The MSA Construction Capital Project Fund accounts for projects related to Municipal State Aids. The Closed Debt Fund accounts for the accumularion of residual resources from debt funds that l�ave been closed as the associated debt has been satisfied. The Pavement Management Debt Service Fund accounts for debt service payments used to finance the City's various pavement management projects. Revenue is accumulated from both special assessments and properry taxes. The PavementManagement Capital Project Fund accounts for pavement management construction projects. The Construction Revolving Capital Project Fund accounts for new development construction projects tl�at are financed by developers. The government reports the following major proprietary funds: The Street Light Fund accounts for customer street light and service cl�arges which are used to finance street light operating eapenses. The Cottage Grove F.MSFund accounts for the operation of the Cottage Grove ambulance service that serves the ciries of Cottage Grove,Newport, Saint Paul Park,and Grey Cloud Island. 46 CTTY OF COTTAGE GROVE,MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31,2014 The Water Operating fund accounts for customer water service charges which are used to finance water operaring eapenses. The Sewer Operating fund accounts for customer sewer service cl�arges which are used to finance sewer operaring eapenses. Additionally,the government reports the following fund type: Internal service funds account for the City's self-insurance,fleet maintenance,and information services provided to other departments of the government on a cost reimbursement basis. As a general rule,the effect of interfund activity l�as been eliminated from the government-wide financial statements. Exceprions to this general rule are transacrions tl�at would be treated as revenues, eapenditures or expenses if they involved eaternal organizarions, such as buying goods and services or payments in lieu of taYes,are similarly treated when they involve other funds of the City of Cottage Grove. Elimination of these charges would distort the direct costs and program revenues reported for the various functions concerned. Amounts reported as program revenues include 1)charges to customers or applicants for goods,services,or privileges provided,2)operaring grants and contributions,and 3)capital grants and contriburions,including special assessments. Internally dedicated resources are reported as general revenues rather than as program revenues. Likewise, general revenues include all taxes. Proprietary funds distinguish operating revenues and expenses from non-operating items. Operating revenues and eapenses generally result from providing services and producing and delivering goods in connection with a proprietary fund's principal ongoing operations. The principal operating revenues of the water,sewer,ambulance,and street light enterprise funds are charges to customers for sales and services. The ambulance fund operating revenues are net of write off's mandated by various government agencies (including Medicare and Medicaid). Operating eapenses for enterprise funds include the cost of sales and services,administrative expenses,and depreciation on capital assets. All revenues and eapenses not meeting this definition are reported as non-operating revenues and eapenses. When both restricted and unrestricted resources are available for an allowable use,it is the government's policy to use restricted resources first,then unrestricted resources as they are needed. D. BUDGETS Budgets are adopted on a basis consistent with U.S. generally accepted accounring principles. Annual appropriated budgets are adopted for the General and Special Revenue Funds. Budgeted amounts are reported as originally adopted, and as amended by the City Council. Individual amendments were not material in relation to the original appropriations which were adjusted. Budgeted eapenditure appropriations can be carried forward to the neat budget year subject to City Council approval. E. LEGAL COMPLIANCE-BUDGETS The City follows these procedures in establishing the budgetary data reflected in the financial statements: 1. The City Administrator submits to the City Council a proposed operating budget for the fiscal year commencing the following January 1. The operating budget includes proposed eapenditures and the means of financing them. 2. The City Council reviews the proposed budget and makes appropriate changes. 3. Per Statute,public meerings are held to receive taxpayer comments. 47 CTTY OF COTTAGE GROVE,MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31,2014 4. The budget is legally enacted through passage of a resolution on a departmental basis and can be expended by each department based upon detailed budget estimates for individual expenditure accounts. 5. The City Administrator is authorized to transfer appropriations within any department budget up to $1,000. Addirional interdepartmental or interfund appropriations and deletions are authorized by the City Council with expenditure reductions,fund(conringency)reserves or addirional revenues. 6. Formal budgetary integration is employed as a management control device during the year for the General Fund, Special Revenue Funds, certain Capital Project Funds, Enterprise Funds and the Internal Service Fund. The General Fund and Special Revenue Funds are the only funds with legally adopted annual budgets. 7. Legal debt obligarion indentures determine the appropriation level and debt service taY levies for the Debt Service Funds. Supplementary budgets are adopted for the Proprietary Funds to determine and calculate user charges. These debt service and budget amounts represent general obligarion bond indenture provisions and net income for operarion and capital maintenance and are not reflected in the financial statements. 8. A capital improvement program is reviewed annually by the City Council for the Capital Project Funds. However, appropriarions for major projects are not adopted unril the actual bid award of the improvement. The appropriarions are not reflected in the financial statements. 9. Expenditures may not legally exceed budgeted appropriations at the total fund level. The legal level of budgetary control is at the expenditure category level(i.e.,personal services,commodities, contractual services and capital outlay) within each acrivity. All amounts over budget have been approved by the City Council through the disbursement approval process. 10. The City Council may authorize transfers of budgeted amounts between City funds. The following is a listing of eapenditure categories that exceed budget appropriations for non-major funds: Final Bud�et Actual Over Bud�et Nonmajor Funds: Special Revenue Funds: Recycling: Public works: Personnel services $ 26,700 $ 30,265 $ 3,565 Commodities - 8,979 8,979 Contractual services 23,674 28,842 5,168 Storm Water Maintenance: Public works: Personnel services 232,295 234,418 2,123 Ice Arena: Culture and recrearion: Commodities 31,150 35,466 4,316 Contractual services 289,760 378,905 89,145 Golf: Culture and recrearion: Debt Service: Interest and fiscal cl�arges 2,900 3,124 224 48 CTTY OF COTTAGE GROVE,MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31,2014 F. CASH AND INVESTMENTS Cash and investment balances from all funds are pooled and invested to the ea�tent available in authorized investments. Eariiings from investments are allocated to individual funds on the basis of the fund's equity in the cash and investment pool. The City provides temporary advances to funds that l�ave insufficient cash balances by means of an advance from another fund shown as interfund receivables in the advancing fund, and an interfund payable in the fund with the deficit,unril adequate resources are received. Investments are stated at fair value,based upon quoted market prices as of the balance sheet date. For purposes of the statement of cash flows for the proprietary funds,cash equivalents are considered to be all highly liquid investments with a maturity of three months or less when purcl�ased. All of the cash and investments allocated to the proprietary funds have original maturities of 90 days or less. Therefore, the entire balances in such funds are considered cash equivalents. G. 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 "interfund receivables/payables." 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 "interfund loan receivable/payable." Any residual balances outstanding between the governmental acriviries and business-type activities are reported in the government-wide financial statements as"internal balances." Property taYes, special assessments, and ambulance receivables have been reported net of esrimated uncollecrible accounts. (see Note 1 H, I and L) Because utility bills are considered liens on property, no esrimated uncollectible amounts are established. Uncollectible amounts are not material for other receivables and have not been reported. H. PROPERTY TAX REVENUE RECOGNTTION The City Council annually adopts a taY levy and certifies it to the County in December(levy/assessment date)of each year for collection in the following year. The County is responsible for billing and collecring all property taxes for itself,the City, the local school district and other taYing authoriries. Such taYes become a lien on January 1 and are recorded as receivables by the City at tl�at date. Real properry taYes are payable(by property owners)on May 15 and October 15 of each calendar year. Personal properry taxes are payable by taxpayers on February 28 and June 30 of each year. These taYes are collected by the County and remitted to the City on or before July 7 and December 2 of the same year. Delinquent collections for November and December are received the following January. The City has no ability to enforce payment of property taYes by properry owners;the County possesses this authority. GOVERNMENT-WIDE FINANCIAL STATEMENTS The City recognizes property taY revenue in the period for which the taYes were levied. Uncollectible property taYes are not material and l�ave not been reported. GOVERNMENTAL FUND FINANCIAL STATEMENTS The City recognizes property tax revenue when it becomes both measurable and available to finance expenditures of the current period. In pracrice, current and delinquent taYes received by the City in July,December and January are recognized as revenue for the current year. TaYes collected by the County by December 31 (remitted to the City the following January) and taYes and credits not received at year-end are classified as delinquent and due from County taxes receivable. The portion of delinquent taxes not collected by the City in January is fully offset by deferred inflows of resources because they are not available to finance current eapenditures. 49 CTTY OF COTTAGE GROVE,MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31,2014 L SPECIAL ASSESSMENT REVENUE RECOGNTTION Special assessments are levied against benefited properties for the cost or a portion of the cost of special assessment improvement projects in accordance with State Statutes. These assessments are collectible by the City over a term of years usually consistent with the term of the related bond issue. Collecrion of annual installments(including interest) is l�andled by the County Auditor in the same manner as property taYes. Properry owners are allowed to (and often do)prepay future installments without interest or prepayment penalties. Once a special assessment roll is adopted,the amount attributed to each parcel is a lien upon tl�at properry until full payment is made or the amount is determined to be excessive by the City Council or court acrion. If special assessments are allowed to go delinquent,the property is subject to taY forfeit sale. Proceeds of sales from taY forfeited properties are allocated first to the County's costs of administering all taY forfeit properties. Pursuant to State Statutes, a property sl�all be subject to a taY forfeit sale after three years unless it is homesteaded, agricultural or seasonal recreational land in which event the property is subject to such sale after five years. GOVERNMENT-WIDE FINANCIAL STATEMENTS The City recognizes special assessment revenue in the period that the assessment roll was adopted by the City Council. Uncollectible special assessments are not material and l�ave not been reported. GOVERNMENTAL FUND FINANCIAL STATEMENTS Revenue from special assessments is recognized by the City when it becomes measurable and available to finance expenditures of the current fiscal period. In practice,current and delinquent special assessments received by the City are recognized as revenue for the current year. Special assessments that are collected by the County by December 31 (remitted to the City the following January) are also recognized as revenue for the current year. All remaining delinquent, deferred and special deferred assessments receivable in governmental funds are completely offset by deferred inflows of resources. J. INVENTORIES Inventories are stated at cost, which approximates market, using the first-in, first-out(FIFO) method and consist of items for resale, eapendable supplies, and vehicle repair parts. The cost of such inventories is recorded as expenditures/eapenses when consumed rather than when purcl�ased in both government-wide and fund financial statements. K PREPAID TTEMS Certain payments to vendors reflect costs applicable to future accounring periods and are recorded as prepaid items in both government-wide and fund financial statements. The cost of prepaid items are recorded as eapenditures/eapenses when consumed rather than when purchased. L. ALLOWANCE FOR UNCOLLECTIBLE The City directly bills individuals for ambulance services. The City reserves an amount as uncollectible based on historical collecrion rates. The amounts of the estimated uncollecrible ambulance billings to individuals as of December 31,2014 were$330,900. 50 CTTY OF COTTAGE GROVE,MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31,2014 M. PROPERTIES HELD FOR RESALE Property is acquired by the City for redevelopment purposes and subsequent resale. Properties held for resale is reported as an asset at the lower of cost or estimated fair value. Fair value estimates have been based on estimated realizable sales proceeds net of selling eapenses. N. CAPTTAL ASSETS Capital assets,which include properry,plant,equipment and infrastructure assets(e.g.,roads,bridges,sidewalks,and similar items), are reported in the applicable governmental or business-type acrivities columns in the government- wide financial statements. Infrastructure assets l�ave been capitalized retroacrively to 1980. Capital assets are defined by the government as assets with an initial,individual cost of more than$5,000(amount not rounded)and an esrimated 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 esrimated fair market value at the date of donation. The costs of normal maintenance and repair which do not add to the value of the asset or materially eatend assets lives are not capitalized. Major outlays for capital assets and improvements are capitalized as projects are constructed. Interest incurred during the construction pl�ase of capital assets of business-type activiries 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 construcrion in progress. Capital assets not being depreciated include land, easements and construction in progress. Properry, plant and equipment of the primar�� government, as well as the component units,is depreciated using the straight-line method over the following estimated useful lives: Assets Years Buildings and improvements 20-50 Equipment and furniture 3-10 Machinery and equipment 5-20 Other improvements 5-20 Streets 50 Storm sewers 50 Sidewalks 50 Trails 20 Street lights 50 Water and sewer lines 50 Capital assets of the water and sewer utility operations include the water distribution system and sewage collection system. These systems l�ave been wholly (or substantially) financed by non-operating funds (special assessments, general taYes,federal and state grants,and other sources)and contributed to the sewer and water operating funds. City policy is to finance these assets by the sources indicated rather thanby user cl�arges. Accordingly,the water and sewer user rates are not established at levels sufficient to cover depreciarion on these assets. O. DEFERRED INFLOWS OF RESOURCES In addition to liabilities, the statement of financial position and Fund Financial statements will sometimes report a separate section for deferred inflows of resources. This separate financial statement element represents an acquisition of net posirion tl�at applies to a future period(s)and so will not be recognized as an inflow of resources(revenue)unril that rime. The City presents deferred inflows of resources on the Governmental Fund Balance Sheet as unavailable revenues. 51 CTTY OF COTTAGE GROVE,MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31,2014 P. COMPENSATED ABSENCES It is the City's policy to permit employees to accumulate earned but unused annual leave benefits. Under the City's personnel policies and collecrive bargaining agreements,city employees are granted annual leave benefits in varying amounts based on length of service. Annual Leave accruals vary from 18 to 26 days per year. As benefits accrue to employees, the accumulated leave amounts are reported as an expense and liability in the proprietary fund financial statements. A liability for these amounts is reported in governmental funds only if they l�ave matured,for example, as a result of employee resignations and retirements. In accordance with the provisions of GASB 16,Accounting for Compensated Absences, no liability is recorded for non-vesting accumulating rights to receive accumulated leave benefits.However,a liability is recognized for tl�at portion of accumulating leave benefits that is vested as severance pay. Q. LONGTERM OBLIGATIONS In the government-wide financial statements and proprietary fund types in the fund financial statements, long-term debt and other long-term obligarions are reported as liabilities in the applicable governmental acriviries,business-type activities,or proprietary fund type statement of net position. Bond premiums are deferred and amortized over the life of the bonds. In the fund financial statements, governmental fund types recognize bond premiums 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. Issuance costs whether or not withheld from the actual debt proceeds received,are reported as debt service expenditures. R FUND BALANCE In the fund financial statements, governmental funds report fund balances in classificarions tl�at disclose constraints for which amounts in those funds can be spent. These classifications are as follows: Nonspendable — Amounts that cannot be spent because they are not in spendable form, such as prepaid items and inventory. Restricted—Amounts related to ea�ternally imposed constraints established by creditors, grantors or contributors; or constraints imposed by state statutory provisions. Committed—Amounts constrained for specific purposes that are internally imposed by formal action(resolurion) of the City Council. Committed amounts cannot be used for any other purpose unless the Council modifies or rescinds the commitment by resolurion. Assigned—Amounts constrained for specific purposes that are internally imposed. The Council has adopted a fund balance policy which delegates the authority to assign fund balances to the City Administrator and/or Finance Director. Unassigned—The residual classificarion for the General fund and also negative residual amounts in other funds. The City considers restricted amounts to be spent first when both restricted and unrestricted fund balance is available. Addirionally,the City would first use committed,then assigned, and lastly unassigned amounts of unrestricted fund balance when eapenditures are made. The City formally adopted a fund balance policy for the General Fund. The policy establishes an unassigned fund balance range of no less than 55%of the subsequent year's budgeted expenditures to provide sufficient working capital and margin of safety to address local emergencies without borrowing. 52 CTTY OF COTTAGE GROVE,MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31,2014 S. NET POSITION Net position represents the difference between assets and liabilities and deferred inflows of resources in the government-wide financial statements. Net investment in capital assets consists of capital assets,net of accumulated depreciation,reduced by the outstanding balance of any long-term debt used to build or acquire the capital assets. Net position is reported as restricted in the government-wide financial statement when there are limitations on use through ea�ternal restrictions imposed by creditors,grantors or laws or regulations of other governments. T. INTERFUND TRANSACTIONS Interfund services provided and used are accounted for as revenues, eapenditures or expenses. Transactions that constitute reimbursements to a fund for expenditures/eapenses initially made from it are properly applicable to another fund, are recorded as expenditures/expenses in the reimbursing fund and as reductions of eapenditures/expenses in the fund tl�at is reimbursed. Interfund loans are reported as an interfund loan receivable or payable which offsets the movement of cash between funds. All other interfund transactions are reported as transfers. U. USE OF ESTIMATES The preparation of financial statements in accordance with U.S. generally accepted accounting principles (GAAP) requires management to make esrimates that affect the amounts reported in the financial statements during the reporting period. Actual results could differ from such esrimates. V. COMPARATIVE DATA Summarized compararive data for the prior year has been presented only for certain secrions of the accompanying financial statements in order to provide an understanding of the cl�anges in the City's financial position and operarions. Certain reclassifications have been made to prior year data to conform to the current year presentarion. The reclassifications l�ad no effect on the cl�ange in net position or total net posirion as previously reported. Note 2 RECONCILIATION OF GOVERNMENT-WIDE AND FUND FINANCIAL STATEMENTS A. EXPLANATION OF CERTAIN DIFFERENCES BETWEEN THE GOVERNMENTAL FUND BALANCE SHEET AND THE GOVERNMENT-WIDE STATEMENT OF NET POSTTION The governmental fund balance sheet includes a reconciliation between fund balance—total governmental funds and net position—governmental activities as reported in the government-wide statement of net position. One element of tl�at reconciliation eaplains that "long-term liabilities, including bonds payable, are not due and payable in the current period and therefore are not reported in the funds." The details of this $(21,857,861) difference are as follows: Bonds payable $ (15,400,000) Capital leases payable (5,158,667) Accrued interest payable (193,736) Compensated absences payable (790,410) Other post employment benefits (57,415) Unamortized premium on bonds (257,633) Net adjustment to reduce fund balance-total governmental funds to arrive at net position- governmental activiries $ (21,857,861) 53 CTTY OF COTTAGE GROVE,MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31,2014 B. EXPLANATION OF CERTAIN DIFFERENCES BETWEEN THE GOVERNMENTAL FUND STATEMENT OF REVENUES,EXPENDTTURES,AND CHANGES IN FUND BALANCES AND THE GOVERNMENT-WIDE STATEMENT OF ACTIVTTIES The governmental fund statement of revenues, eapenditures, and changes in fund balances includes a reconciliation between net changes in fund balances—total governmental funds and changes in net position of governmental activities as reported in the government-wide statement of activities. One element of tl�at reconciliation explains that"governmental funds report capital outlays as expenditures. However,in the statement of activities the cost of those assets is allocated over their estimated useful lives and reported as depreciation eapense." The details of this$(1,238,277)difference are as follows: Capital outlay $3,041,724 Depreciarion expense (4,280,001) Net adjustment to increase net cl�anges in fund balances-total governmental funds to arrive at changes in net posirion of governmental activiries $ (1,238,277) Another element of that reconciliation states tl�at "revenues in the statement of activities tl�at do not provide current financial resources are not reported as revenues in the funds." The details of this $(102,202)difference are as follows: General properry taxes: At December 31,2013 $ (281,201) At December 31,2014 197,875 Special assessments: At December 31,2013 (4,216,302) At December 31,2014 4,531,762 Intergovernmental: At December 31,2013 (517,383) At December 31,2014 183,047 Net adjustments to increase net cl�anges in fund balances- total governmental funds to arrive at changes in net position of governmental acrivities $ (102,202) 54 CTTY OF COTTAGE GROVE,MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31,2014 Another element of tl�at reconciliarion states that"the issuance of long-term debt(e.g.,bonds, leases)provides current financial resources to governmental funds, while the repayment of the long-term debt consumes the current financial resources of governmental funds." Neither transaction,however,has any effect on net position. The details of this$1,373,422 difference are as follows: Debt issued: Issuance of general obligarion bonds $(1,405,000) Plus premium on debt issued (18,461) Principal repayments: General obligarion debt 2,470,000 Capital leases 305,076 Amortization of deferred premiums 21,807 Net adjustments to increase net cl�anges in fund balances-total governmental funds to arrive at cl�anges in net posirion of governmental acrivities $ 1,373,422 Another element of that reconciliation states that"some eapenses reported in the statement of activities do not require the use of current financial resources and therefore are not reported as expenditures in governmental funds." The details of this$33,373 difference are as follows: Compensated absences: At December 31,2013 $ 780,258 At December 31,2014 (790,410) Accrued interest: At December 31,2013 245,795 At December 31,2014 (193,736) Other post employment benefits At December 31,2013 48,881 At December 31,2014 (57,415) Net adjustment to increase net cl�anges in fund balances-total governmental funds to arrive at changes in net position of governmental acriviries � 33.373 55 CTTY OF COTTAGE GROVE,MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31,2014 Note 3 DEPOSITS AND INVESTMENTS A. DEPOSITS The City maintains a cash and investment pool tl�at is available for use by all funds. Each fund type's portion of this pool is displayed on the statement of net posirion and balance sheets as"Cash and Investments." Custodial Credit Risk— Custodial credit risk for deposits is the risk tl�at in the event of a bank failure, the City will not be able to recover its deposits. Neither the City nor the Cottage Grove Economic Development Authority, a discretely presented component unit,has a deposit policy for custodial credit risk—deposits beyond the requirements of state statutes. As of December 31,2014,all of the deposits were insured or collateralized by securities held by the City or its agent in the City's name. In accordance with Miiiiiesota Statutes, the City maintains deposits at financial insritutions which are authorized by the City Council.Minnesota Statutes require that all 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 corporate surety bonds. Authorized collateral include: U.S. government treasury bills, notes, or bonds; issues of a U.S. government agency; general obligarions of a state or local government rated"A" or better;revenue obligarions of a state or local government rated"AA"or better;irrevocable standby letter of credit issued by a Federal Home Loan Bank;and rime deposits insured by a federal agency. Minnesota statutes require securiries pledged as collateral be held in safekeeping in a restricted account at the Federal Reserve Bank or at an account at a trust department of a commercial bank or other financial institurion not owned or controlled by the depository. B. INVESTMENTS Minnesota Statutes and the City's investment policy authorize the City to invest in the following: a) Direct obligations or obligarions guaranteed by the United States or its agencies, its instrumentaliries or organizations created by an act of congress,excluding mortgage-backed securities defined as high risk. b) General Obligarions of the State of Miiiiiesota or any of its municipaliries as follow: 1) general obligation of any state or local government with taxing powers which is rated"A" or better by a national bond raring service; 2) revenue obligarion of any state or local government with taYing powers which is rated "AA" or better by a national bond rating service;and 3) general obligarion of the Minnesota Housing Finance Agency rated"A"or better by a narional bond rating agency. c) Bankers acceptance of United States banks eligible for purchase by the Federal Reserve System. d) Commercial paper of the highest quality(Al,P1),and maturing in 270 days or less. e) Repurchase agreements from national or state banks that are members of the Federal Reserve System with capitalizarion exceeding$10,000,000;a primary reporting dealer in U.S.government securities to the Federal Reserve Bank of New York. �j Certificates of Deposit collateralized by FDIC or FSLIC insurance. Deposits exceeding$250,000 insurance shall be covered by a surety bond or collateralized with U.S. Treasury or agency securiries computed at market value which sl�all be at least 10% more than the amount of each deposit in excess of the insured portions. All collateral sl�all be assigned to the City from the depository. g) Shares of mutual funds holdings pursuant to M.S. 118A.04. The City participates in the Minnesota Municipal Money Market Fund(4M Fund)whereby,the fair market value of the position in the pool is the same as the value of the pool shares owned. 56 CTTY OF COTTAGE GROVE,MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31,2014 Interest rate risk-Interest rate risk is the risk tl�at changes in interest rates will adversely affect the fair value of an investment. The City's formal investment policy limits investment maturities as a means of managing its exposure to fair value losses arising from increasing interest rates. The policy also states tl�at no more than 25% of total investments should ea�tend beyond five years and in no circumstance should any ea�tend beyond ten years. Tota1 Fair Investment maturities in Years Credit Risk Investment type Market Value Less than 1 1—5 More than 5 Rating Agency U.S.Agencies Federal Home Loan Bank-FHLB $ 5,958,190 $ - $ 3,495,065 $ 2,463,125 AA/Aaa S&P/Moody's Fannie Mae—FNMA 8,701,133 - 8,701,133 - AA/Aaa S&P/Moody's Freddie Mac-FHLMC 2,253,160 - 2,253,160 - AA/Aaa S&P/Moody's Federal Farm Credit Bank 2,580,520 - 2,580,520 - AA/Aaa S&P/Moody's U.S.Treasury Securities 1,001,640 - 1,001,640 - NR N/A Term Series Investment Pool 500,000 500,000 - - NR N/A CommercialPaper 2,250,000 2,250,000 - - Al/Pl S&P/Moody's Municipal Obligations 4,601,234 1,442,620 3,158,614 - AA/Aa S&P/Moody's Negotiable CD's 15,573,508 7,599,190 7,974,318 - NR N/A Total Investments 43,419,385 $11,791,810 $29,164,450 $ 2,463,125 Money Markets 2,391,046 Deposits 1,208,653 Petry Cash and Change 11,760 Total Cash and Investments $47,030,844 NR indicates"not rated" N/A indicates"not applicable Custodial CreditRisk—For an investment,custodial credit risk is the risk tl�at,in the event of failure of the depository financial institurion, the City will not be able to recover the value of its investment or collateral securiries that are in the possession of an outside party. The City has no custodial credit risk for its investments since all the City's investments held in safekeeping by U.S. Trust in the City's name are insured and registered. CreditRisk—Credit risk is the risk tl�at an issuer or other counterparty to an investment will not fulfill its obligations. As indicated previously, Minnesota statute requires Commercial paper to be of the highest quality (Al, P1) and municipal general obligations need an"A"rating or better. Concentration of Credit Risk—The City's investment policy places no limit on the amount that may be invested in any one issuer. The following is a list of investments by issuer which individually comprise more than 5 percent of the City's total investments: Credit Type Amount Percent Federal Home Loan Bank-FHLB $5,958,190 14% Faiiiiie Mae-FNMA 8,701,133 20% Freddie Mac-FHLMC 2,253,160 5% Federal Farm Credit Bank 2,580,520 6% 57 CTTY OF COTTAGE GROVE,MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31,2014 Note 4 RECEIVABLES Significant receivable balances not eapected to be collected within one year of December 31,2014 are as follows: Special Delinquent Certified Assessment Property to Receivable TaYes County Total Primary government: Major funds: General Fund $ 6,883 $ 106,300 $ - $ 113,183 Municipal Building Capital Project Fund - 3,500 - 3,500 MSA Construction Capital Project Fund 517,613 - - 517,613 Closed Debt Fund 252,575 3,300 - 255,875 Pavement Management Debt Service Fund 2,335,163 3,700 - 2,338,863 Pavement Manage. Capital Project Fund 694,837 - - 694,837 Nonmajorfunds 227,543 2,700 - 230,243 Major Business-Type funds: WaterOperatingfund - - 57,965 57,965 SewerOperatingfund - - 57,935 57,935 Total primary government 4,034,614 119,500 115,900 4,270,014 Component unit Economic Development Authority - 1,100 - 1,100 Total reporting entity $ 4,034,614 $ 120,600 $ 115,900 $ 4,271,114 Governmental funds report deferred inflows of resources in connection with receivables for revenues tl�at are not considered to be available to liquidate liabilities of the current period. At the end of the current fiscal year, the various components of deferred inflows and unearned revenue reported in the governmental funds were as follows: Property Special Miscellaneous Taxes Assessments Intergovernmental Licenses Total Primary government: Major funds: General Fund $ 175,906 $ 11,286 $ 8,227 $ 42,600 $ 238,019 Municipal Building Capital Project Fund 5,844 - - - 5,844 MSA Construction Capital Project Fund - 574,142 127,769 - 701,911 Closed Debt Fund 5,434 288,026 - - 293,460 Pavement Management Debt Service Fund 6,233 2,622,900 - - 2,629,133 Pavement Manage. Capital Project Fund - 779,580 42,052 - 821,632 Nonmajor funds 4,458 255,828 4,999 - 265,285 Total primary government 197,875 4,531,762 183,047 42,600 4,955,284 Component unit Economic Development Authority 1,771 - - - 1,771 Total reporting entity $ 199,646 $ 4,531,762 $ 183,047 $ 42,600 $ 4,957,055 58 CTTY OF COTTAGE GROVE,MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31,2014 Note 5 CAPTTAL ASSETS Capital asset acrivity for the year ended December 31,2014 was as follows: Beginning Ending Balance Increases Decreases Balance Primary Government Governmental activities: Capital assets,not being depreciated: Land $ 17,926,287 $ - $ - $ 17,926,287 Permanenteasements 1,157,202 - - 1,157,202 Construction in progress 3,924,613 3,380,275 (6,698,247) 606,641 Tota1 capital assets,not being depreciated 23,008,102 3,380,275 (6,698,247) 19,690,130 Capital assets,being depreciated: Buildings and improvements 35,902,054 - (100,000) 35,802,054 Equipment and furniture 1,347,083 - (10,211) 1,336,872 Machinery and equipment 10,240,508 970,307 (414,403) 10,796,412 Otherimprovements 5,808,318 387,861 (15,000) 6,181,179 Infrastructure: Streets 87,236,268 4,830,127 - 92,066,395 Storm sewers 26,397,704 2,619,347 - 29,017,051 Sidewallcs/trails 4,688,362 589,522 - 5,277,884 Tota1 capital assets being Depreciated 171,620,297 9,397,164 (539,614) 180,477,847 Less accumulated depreciation for: Buildings and improvements 13,648,645 829,685 (100,000) 14,378,330 Equipment and furniture 975,445 89,279 (10,211) 1,054,513 Machinery and equipment 5,840,593 711,083 (391,936) 6,159,740 Other improvements 2,921,369 236,508 (14,250) 3,143,627 Infrastructure: Streets 18,073,326 1,793,462 - 19,866,788 Storm sewers 5,580,288 106,458 - 5,686,746 Sidewallcs/trails 1,242,952 558,939 - 1,801,891 Total accumulated depreciation 48,282,618 4,325,414 (516,397) 52,091,635 Tota1 capital assets,being depreciated,net 123,337,679 5,071,750 (23,217) 128,386,212 Governmental activities capital assets,net $ 146,345,781 $8,452,025 $(6,721,464) $ 148,076,342 59 CTTY OF COTTAGE GROVE,MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31,2014 Beginning Ending Primary Government Balance Increases Decreases Balance Business-type activities: Capital assets,not being depreciated: Land $ 325,000 $ - $ - $ 325,000 Construction in progress - 28,909 - 28,909 Tota1 capital assets,not being depreciated 325,000 28,909 - 353,909 Capital assets,being depreciated: Land improvements 39,803 - - 39,803 Buildings and improvements 4,101,713 - - 4,101,713 Machinery and equipment 2,215,822 251,057 (194,773) 2,272,106 Other improvements 6,106,329 831,365 - 6,937,694 Water and sewer lines 60,541,105 3,231,388 - 63,772,493 Tota1 capital assets,being depreciated 73,004,772 4,313,810 (194,773) 77,123,809 Less accumulated depreciation for: Land unprovements 8,359 796 - 9,155 Buildings and structures 2,158,296 115,399 - 2,273,695 Machinery and equipment 1,656,030 119,078 (189,622) 1,585,486 Other improvements 2,106,692 148,513 - 2,255,205 Water and sewer lines 15,122,614 1,082,283 - 16,204,897 Tota1 accumulated depreciation 21,051,991 1,466,069 (189,622) 22,328,438 Tota1 capital assets being depreciated-net 51,952,781 2,847,741 (5,151) 54,795,371 Business-type activities capital assets-net $52,277,781 $ 2,876,650 $ (5,151) $55,149,280 Depreciation expense was charged to funcrion/programs of the primary government as follows: Governmental activities: General government $ 182,967 Community development 10,939 Public safety 614,603 Public warks 2,757,335 Culture and recreation 759,570 Tota1 depreciation expense governmental activities $ 4,325,414 Business-type activities: Street lights $ 155,472 Cottage Grove EMS 64,206 Water operating 808,657 Sewer operating 437,734 Total depreciation expense before transfer $ 1,466,069 60 CTTY OF COTTAGE GROVE,MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31,2014 NOTE 6 LONGTERM DEBT A. GENERAL OBLIGATION DEBT The City issues general obligarion bonds to provide funds for the acquisirion and construcrion of major capital improvements. The City issues special assessmentbonds to finance various improvements and will be repaid primarily from special assessments levied on the properties benefiting from the improvements. The reporting entity's long-term debt is segregated between the amounts to be repaid from governmental activities and amounts to be repaid from business-type acrivities. As of December 31,2014,the governmental long-term debt of the financial reporting enrity consisted of the following: Final Interest Issue Maturity Original Payable Rate Date Date Issue 12/31/2014 Primary government: GOVERNMENTAL ACTIVITIES General Obligation Tax Increment Bonds: GO Tax Increment Bonds of 2004A 3.0-4.65% 7/1/2004 2/1/2024 $ 1,405,000 $ 1,095,000 GO Tax Increment Refunding Bonds of 2014A 2.0-2.50% 5/29/2014 2/1/2021 1,405,000 1,405,000 Total General Obligation Tax Increment Bonds 2,810,000 2,500,000 Special Assessment Bonds with Government Commitment GO Improvement Bonds of 2008A 3.5-3.6% 6/11/2008 2/1/2019 3,370,000 1,335,000 GO Improvement Bonds of 2009A 2.5-4.3% 4/16/2009 2/1/2024 3,650,000 2,390,000 GO Improvement Refunding Bonds of 2009C 2.0-3.0% 4/16/2009 12/1/2015 625,000 205,000 GO Improvement Bonds of 2012A .30-2.2% 3/13/2012 2/1/2027 1,865,000 1,625,000 GO Improvement Bonds of 2013A 3.0%-3.5% 9/26/2013 2/1/2029 7,345,000 7,345,000 Total Special Assessment Bonds 16,855,000 12,900,000 Bond premium - 257,633 Total Governmental Activities Bonds 19,665,000 15,657,633 Capital lease payable-EDA component unit 6,500,000 5,085,000 Capital lease payable—golf carts 176,039 73,667 Other postemployment benefits - 59,343 Compensated absences payable - 839,758 Total City indebtedness-governmental activities 26,341,039 21,715,401 BUSINESS TYPE ACTIVITIES Revenue bonds: GO Water Revenue Refunding Bonds of 2009B 2.5-4% 4/16/2009 2/1/2020 1,205,000 705,000 Bond premium - 12,221 Total Revenue Bonds 1,205,000 717,221 Other postemployment benefits - 8,571 Compensated absences payable - 59,856 Total City indebtedness-business type activities 1,205,000 785,648 Total City indebtedness-primary government $ 27,546,039 $ 22,501,049 Component Unit EDA: Lease-Purchase Revenue Bonds of 2008B 4.0-4.90% 6/11/2008 4/1/2028 $ 6,500,000 $ 5,085,000 Other postemployment benefits - 700 Compensated absences payable - 15,955 Total indebtedness-component unit $ 6,500,000 $ 5,101,655 61 CTTY OF COTTAGE GROVE,MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31,2014 Annual debt service requirements to maturity for general obligation bonds are as follows: Tax Increment Bonds Special Assessment Bonds Year Ending Governmental Activities Governmental Activities December 31 Principal Interest Principal Interest 2015 $ 205,000 $ 81,704 $ 1,115,000 $ 384,003 2016 210,000 71,710 1,010,000 350,178 2017 225,000 66,520 1,040,000 319,811 2018 240,000 61,030 1,065,000 288,075 2019 260,000 55,190 1,100,000 254,409 2020 275,000 48,820 835,000 224,367 2021 265,000 41,540 850,000 198,683 2022 255,000 31,872 870,000 172,070 2023 275,000 19,810 895,000 144,345 2024 290,000 6,743 915,000 115,518 2025 - - 675,000 91,340 2026 - - 695,000 71,725 2027 - - 640,000 51,714 2028 - - 585,000 31,587 2029 - - 610,000 10,675 Total $ 2,500,000 $ 484,939 $ 12,900,000 $ 2,708,500 Revenue Bonds Revenue Bonds Year Ending Business-Type Activities Component Unit December 31 Principal Interest Principal Interest 2015 $ 105,000 $ 24,150 $ 280,000 $ 223,292 2016 110,000 20,650 290,000 211,892 2017 115,000 16,712 300,000 199,942 2018 120,000 12,450 310,000 187,360 2019 125,000 7,700 320,000 174,288 2020 130,000 2,600 335,000 160,697 2021 - - 350,000 145,871 2022 - - 365,000 129,601 2023 - - 380,000 112,370 2024 - - 395,000 94,252 2025 - - 410,000 75,233 2026 - - 430,000 55,176 2027 - - 450,000 33,943 2028 - - 470,000 11,515 Total $ 705,000 $ 84,262 $ 5,085,000 $ 1,815,432 It is not practicable to determine the specific year for payment of long-term accrued compensated absences. Current Refundin� On May 29, 2014 the City issued $1,405,000 TaYable General Obligation TaY Increment Bonds, Series 2014A with an average interest rate of 1.8679%for a current refunding of the 2014-2021 maturities of the City's$1,775,000 Series 2004B bonds. The average interest rate on the 2004B bonds was 6.1182% net proceeds of$1,419,948 were used to retire all outstanding principal of the refunded bonds on July 1, 2014. This refunding reduced total debt service over the seven year period by$168,940 or$157,053 when discounted to present value. 62 CTTY OF COTTAGE GROVE,MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31,2014 B. CHANGES IN LONGTERM LIABILTTIES Long-term liability activity for the year ended December 31,2014,was as follows: Beginning Ending Due Within Balance Additions Reductions Balance One Year Primary Government Governmental activities: Bonds payable: General obligation bonds $ 2,600,000 $ 1,405,000 $ (1,505,000) $ 2,500,000 $ 205,000 Special assessment bonds 13,865,000 - (965,000) 12,900,000 1,115,000 Bond premiums 260,979 18,461 (21,807) 257,633 - Total bonds payable 16,725,979 1,423,461 (2,491,807) 15,657,633 1,320,000 Capitallease payable-EDA component unit 5,355,000 - (270,000) 5,085,000 280,000 Capitallease payable-golf carts 108,743 - (35,076) 73,667 36,235 Otherpostemploymentbenefits 50,438 8,905 - 59,343 - Compensated absences payable 825,871 691,136 (677,249) 839,758 621,661 Total government activities 23,066,031 2,123,502 (3,474,132) 21,715,401 2,257,896 Business-type activities: Bonds payable: Revenue bonds 810,000 - (105,000) 705,000 105,000 Bond premiums 14,586 - (2,365) 12,221 - Total bonds payable 824,586 - (107,365) 717,221 105,000 Otherpostemploymentbenefits 7,211 1,360 - 8,571 - Compensated absences payable 70,114 89,769 (100,027) 59,856 58,166 Totalbusiness-typeactivities 901,911 91,129 (207,392) 785,648 163,166 Totalprimary government $23,967,942 $ 2,214,631 $ (3,681,524) $ 22,501,049 $ 2,421,062 Component Unit Bonds payable: Revenue bonds $ 5,355,000 $ - $ (270,000) $ 5,085,000 $ 280,000 Total bonds payable 5,355,000 - (270,000) 5,085,000 280,000 Other postemployment benefits 524 176 - 700 - Compensated absences payable 14,112 8,979 (7,136) 15,955 11,516 Total component unit $ 5,369,636 $ 9,155 $ (277,136) $ 5,101,655 $ 291,516 For the governmental activiries,capital leases,other postemployment benefits and compensated absences are generally liquidated by the general fund. 63 CTTY OF COTTAGE GROVE,MINNESOTA NOTES TO 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 special assessment and revenue bond issues. Delinquent assessments receivable at December 31, 2014 totaled$15,880. D. CAPITAL LEASES In 2008,the City entered into a lease-purcl�ase agreement with the EDA(a component unit)to finance the eapansion of the ice arena. Per the agreement,the EDA issued$6,500,000 of revenue bonds and the proceeds were used by the City to finance the expansion. The lease qiialifies as a capital lease for accounring purposes, and therefore, the construction costs l�ave been capitalized in the primary government. In 2012,the City entered into a lease agreement for the purchase of 75 golf carts. This lease agreement qualifies as a capital lease for accounting purposes, and therefore, has been recorded at the present value of the future minimum lease payments as of the inceprion date. The assets acquired through capital leases are as follows: Ice Arena Asset: Eapansion Golf Carts Building and improvements $ 6,943,038 $ 176,039 Less: accumulated depreciation (1,492,010) (62,871) $ 5,451,028 $ 113,168 The following is a schedule of future minimum lease payments under the capital lease: Governmental Activiries Ice Arena Golf Course Year Expansion Machinery 2015 $ 503,292 $ 38,201 2016 501,892 38,201 2017 499,942 - 2018 497,360 - 2019 494,288 - 2020-2024 2,467,791 - 2025-2028 1,935,867 - Total minimum lease payments 6,900,432 76,402 Less amount representing interest 1,815,432 2,735 Present value of minimum lease payments $ 5,085,000 $ 73,667 64 CTTY OF COTTAGE GROVE,MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31,2014 Note 7 LEGAL DEBT MARGIN The City is subject to a statutory limitation by the State of Minnesota for bonded indebtedness payable principally from property taxes. The limitarion was 3 %of taxable market value in 2013 and 2014. The City of Cottage Grove's legal debt margin for 2014 and 2013 is computed as follows: December 31,2014 December 31,2013 Market Value(after fiscal dispariries) $ 2,396,493,700 $ 2,277,900,700 Debt Limit 71,894,811 68,337,021 Amount of debt applicable to debt limit Total bonded debt $21,190,000 $22,630,000 Less: Special assessmentbonds (12,900,000) (13,865,000) Proprietaty bonds (705,000) (810,000) TaY increment bonds (2,500,000) (2,600,000) Total debt applicable to debt limit $5,085,000 $5,355,000 Legal debt margin $ 66,809,811 $ 62,982,021 Note 8 PENSION PLANS A. PUBLIC EMPLOYEES RETIREMENT ASSOCIATION(PERA)-DEFINED BENEFIT Plan Description All full-rime and certain part-rime employees of the City are covered by defined benefit plans administered by the Public Employees Rerirement Associarion of Miiiiiesota (PERA). PERA administers the General Employees Rerirement Fund(GERF)and the Public Employees Police and Fire Fund(PEPFF)which are cost-sl�aring, mulriple- 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,firefighters and peace officers who qualify for membership by statute are covered by the PEPFF. PERA provides retirement benefits as well as disability benefits to members,and benefits to survivors upon death of eligible members. Benefits are established by state statute, and vest after 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 reriring 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 22 percent of average salary for each of the first 10 years of service and 2.7 percent for each remaining year. The annuity accrual rate for a Coordinated Plan member is 12 percent of average salary for each of the first 10 years and 1.7 percent for each remaining year.Under Method 2, the annuity accrual rate is 2.7 percent of average salary for Basic Plan members and 1.7 percent for Coordinated Plan members for eachyear of service.For PEPFF members,the annuity accrual rate is 3.0 percent for eachyear of service. For all GERF members and PEPFF 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 equals 90. Normal rerirement age is 55 for PEPFF members and 65 for Basic and Coordinated members hired prior to July 1, 1989. Normal rerirement age is the age for unreduced Social Security benefits capped at 66 for Coordinated members hired on or after July 1, 1989. A reduced rerirement annuity is available to eligible members seeking early retirement. 65 CTTY OF COTTAGE GROVE,MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31,2014 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-no survivor annuity is payable. There are also various types of joint and survivor annuity oprions available which will be payable over joint lives. Members may also leave their contriburions in the fund upon ternunation 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 secrion are current provisions and apply to active plan participants. Vested,terminated employees who are entitled to benefits but are not receiving them yet are bound by the provisions in effect at the time they last terminated their public service. PERA issues a publicly available financial report that includes financial statements and required supplementary information for GERF and PEPFF. Tl�at report may be obtained on the Internet at www.mnpera•or�,by writing to PERA,at 60 Empire Drive#200, St.Paul,Minnesota, 55103-2088 or by calling(651)296-7460 or 1-800-652-9026. Fundin�Policy Miiiiiesota Statutes Cl�apter 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 Basic Plan members and Coordinated Plan members were required to contribute 9.1%and 625%, respectively, of their annual covered salary in 2014. PEPFF members were required to contribute 102% of their annual covered salary in 2014. The City of Cottage Grove is required to contribute the following percentages of annual covered payroll: 11.78%for Basic Plan members, 725%for Coordinated Plan members, and 15.3%for PEPFF members. The City's contributions to the Public Employees Retirement Fund for the years ending December 31,2014,2013 and 2012 were$384,378,$366,774 and$335,345,respectively. The City's contributions to the Public Employees Police &Fire Fund for the years ending December 31, 2014, 2013 and 2012 were $604,030, $547,617 and $518,441 respecrively. The City's contributions were equal to the contractually required contriburions for eachyear as setby state statute. Contribution rates will increase on January 1,2015 in the Coordinated Plan(6.5% for members and 7.5%for employers)and the PEPFF(10.8%for members and 162%for employers). B. PUBLIC EMPLOYEES RETIREMENT ASSOCIATION(PERA)-DEFINED CONTRIBUTION Plan Description Five council members of the City of Cottage Grove are covered by the defined contriburion pension plan(PEDCP),a multiple-employer deferred compensation plan administered by the Public Employees Rerirement Association of Miiiiiesota (PERA). The PEDCP is a taY qualified plan under Section 401(a) of the Internal Revenue Code and all contributions by or on bel�alf of employees are tax deferred until rime of withdrawal. Plan benefits depend solely on amounts contributed to the plan plus investment earnings,less administrarive eapenses. Miiiiiesota Statutes, Cl�apter 353D.03, specifies the employee and employer contribution rates for those qualified personnel who elect to participate. An eligible elected official who decides to participate contributes 5 percent of salary which is matched by the elected official's employer. Employer and employee contriburions are combined and used to purcl�ase shares in one or more of the seven accounts of the Minnesota Supplemental Investment Fund. For administering the plan,PERA receives 2 percent of employer contributions and twenty-five hundredths of one percent of the assets in each member's account annually. Total contriburions made by the City during fiscal year 2014 were: Amount Percentage of Covered Payroll Required Emplovees Emplover Emplovees Emplover Rates PEDCP $1,139 $1,139 5.00% 5.00% 5.00% 66 CTTY OF COTTAGE GROVE,MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31,2014 C. COTTAGE GROVE FIRE RELIEF ASSOCIATION Plan Description The Volunteer Firefighters of the City of Cottage Grove are members of the Cottage Grove Fire Relief Associarion. The Cottage Grove Fire Relief Associarion is the administrator of a single employer defined benefit pension plan established to provide benefits for members of the Cottage Grove Fire Department. The plan is established and administered in accordance with Minnesota Statute,Chapter 69. The Relief Association provides rerirement benefits as well as disability benefits to members,and benefits to survivors upon death of eligible members. Benefits are established in accordance with State Statute,and vest after ten years of credited service. The defined retirement benefits are based on a member's years of service. Benefit provisions can be amended by the Relief Association within the parameters provided by State Statutes. The Relief Associarion issues a publicly available financial report tl�at includes financial statements and required supplementary information. The report may be obtained by writing to Cottage Grove Volunteer Fire Relief Associarion, 8641 80�'Street South, Cottage Grove,MN 55016. Fundin�Policy Minnesota Statutes Cl�apter 424A.092 specifies the minimum support rates required on an annual basis. The minimum support rates from the City of Cottage Grove and State Aid are determined as the amount required to meet the normal cost plus amortizing any existing prior service costs over a ten-year period. The significant actuarial assumptions used to compute the municipal support are not the same as those used to compute the accrued liability. An actuarially deternuned contriburion for funding purposes is not calculated. Contributions made: City $ 5,155 State aid $ 177,804 Actuarial valuarion date 12/31/2014 Actuarial cost method Entry age normal Amortization method Straight line closed 5 year period Asset valuation method Market Actuarial assumptions: Investment rate of return 6.5% Projected salary increases N/A Inflarion rate 2.75% Cost of living adjustments None Age of service retirement 50 Post-retirement benefit increases None 6� CTTY OF COTTAGE GROVE,MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31,2014 Schedule of Funding Progress Actuarial Actuarial Actuarial (LTnfunded)/ Valuation Value of Accrued Assets in Excess Funding Date Assets Liabili. (t�AALI of AAL(UAAL) Rario 12/31/2014 $2,404,736 $ 1,352,967 $ 1,051,769 177.74% 12/31/2013 2,242,564 1,798,706 443,858 124.68% 12/31/2012 1,944,433 1,678,259 266,174 115.86% The amount received from the State of Minnesota in Fire Relief Aid,$177,804 and then contributed to the Cottage Grove Fire Relief Association is included as a revenue and eapenditure,respecrively,in the General Fund. Note 9 INTERFUND LOANS AND TRANSFERS The City uses interfund loans when possible to finance construction activiries in order to avoid costs associated with issuing bonds. These loans are for this purpose. The interfund loan receivable and payable balances at December 31,2014 were: Fund Receivable Payable Major Governmental Funds: Municipal Building Capital Project Fund $ - $ 8,295,000 Closed Debt Fund 2,000,000 - Nonmajor Governmental Funds 3,050,000 1,550,000 Major Business-Type Funds: Water Operating Enterprise Fund 1,962,500 - Sewer Operating Enterprise Fund 2,832,500 - Total $ 9,845,000 $ 9,845,000 Interfund receivable and payable balances are used for temporary cash deficits. Interfund receivable and payable balances at December 31,2014 are as follows: Fund Receivable Payable General Fund $ 287,314 $ - Pavement Management Debt Service Fund 598,445 - Pavement Management Capital Project Fund - 598,445 Nonmajor Governmental Funds 991,739 1,279,053 Total $ 1,877,498 $ 1,877,498 6s CTTY OF COTTAGE GROVE,MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31,2014 Interfund transfers: Transfers In MSA Pavement Const. Capital Mange. Capital Nonmajor General Fund Project Fund Project Fund Govern.Funds Total Transfers Out General Fund $ - $ - $ - $ 372,494 $ 372,494 MSA Const. Capital Project Fund - - - 85,276 85,276 Const.Revolving Cap.Proj.Fund - - - 8,256 8,256 Nonmajor Governmental Funds 35,020 643,962 68,051 - 747,033 Major Business Fund Type: Street Light Fund 45,850 26,541 - - 72,391 Cottage Grove EMS Fund 94,680 - - - 94,680 Water Operating Fund 166,550 - 47,210 - 213,760 Sewer Operating Fund 181,610 - 65,495 - 247,105 Total transfers $ 523,710 $ 670,503 $ 180,756 $ 466,026 $ 1,840,995 Interfund transfers allow the City to allocate financial resources to the funds tl�at receive benefit from services provided by another fund. All transfers in 2014 were considered to be rourine in nature. Note 10 TAX INCREMENT DISTRICTS The City of Cottage Grove is the administering authority for the following TaY Increment Financing Districts: Cottages of Gateway Cottage North Industrial Grove District Park #1-8 #1-12 #1-14 Econ. Type of District Housing Redevelop Develop. Chapter 469.174 469174 469.174 Established 1991 2001 2007 District Duration 25 years 25 years 9 years Current tax capacity $ 30,306 $ 804,332 $131,250 Original tax capacity (1,268) (238,371) (5,226) Captured tax capacity 29,038 565,961 126,024 Fiscaldisparitydeduction - - (45,771) Tota1 tax capacity retained by City $ 29,038 $565,961 $ 80,253 Debt issued $ - $ 4,405,000 $ - Amountredeemed - (1,905,000) - Debt outstanding $ - $2,500,000 $ - 69 CTTY OF COTTAGE GROVE,MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31,2014 Note 11 DEFICTT FUND BALANCES/NET POSTTION The City has deficit fund balances/net position at December 31,2014 as follows: Fund Amount The deficit fund balances will be resolved through Major Governmental Funds: Municipal Building Capital Project Fund $ 8,006,043 Future taY levies Pavement Management Capital Project Fund 526,266 Future bond issue Nonmajor Governmental Funds: Golf Course Fund 1,377,166 Future excess revenues and transfers from other City resources Park Trust Fund 210,628 Future developer charges Sewer Connection and Area Fund 806,299 Future special assessments and developer cl�arges Note 12 CONTINGENCIES 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 for which the City carries commercial insurance policies. The City retains risk for the deductible portions of the insurance policies. The amount of these deductibles is considered immaterial to the financial statements. There were no significant reductions in insurance from the previous year or settlements in excess of insurance coverage for any of the past three fiscal years. Workers compensarion coverage is provided through a pooled self-insurance program through the League of Miiiiiesota Ciries Insurance Trust (LMCIT). The City pays an annual premium to LMCIT. The City is subject to supplemental assessments as deemed necessary by the LMCIT. The LMCIT reinsures through Worker's Compensarion Reinsurance Association(WCRA) as required by law. For workers compensarion,the City is subject to a$10,000 medical expense deductible. The City's 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. Property and casualty insurance coverage is provided through a pooled self-insurance program through LMCIT. The City pays an annual premium to the LMCIT.The City is subject to supplemental assessments as deemed necessary by the LMCIT. The City established a Self Insurance Fund in 1986 to account for and finance its uninsured risks of loss related to torts;theft of,damage to,and destruction of assets;errors and omissions;injuries to employees;and natural disasters. Under this program, the Self Insurance Fund provides coverage for losses up to $50,000 for each claim (annual aggregate is $100,000). The City purchases commercial insurance for claims in excess of coverage provided by the Fund and for any risk of loss not covered. Settled claims have not exceeded the commercial coverage in any of the past three fiscal years. This fund is presented as an internal service fund type. All funds of the City participate in the program and make payments to the Self Insurance Fund based on historical cost information. The claims liability of$158,905 reported in the Fund at December 31, 2014 is based on the requirements of Governmental Accounting Standards Board Statement Number 10,which requires tl�at a liability for claims be reported if information prior to the issuance of the financial statements indicates that it is probable tl�at a liability has been incurred at the date of the financial statements and the amount of the loss can be reasonably estimated. �o CTTY OF COTTAGE GROVE,MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31,2014 Cl�anges in the fund's claims liability amounts were as follows: Beginning Claims and End of Year Changes in Claim of Year �'e� Liability Estimates Payments Liability 2014 $ 130,039 $ 172,634 $ (143,768) $ 158,905 2013 59,122 130,723 (59,806) 130,039 2012 51,095 172,454 (164,427) 59,122 B. LTTIGATION The City attorney l�as indicated tl�at exisring and pending lawsuits, claims and other actions in which the City is a defendant are either covered by insurance;of an immaterial amount or,in the judgment of the City attorney,remotely recoverable by plaintiffs. C. FEDERAL AND STATE FUNDS The City receives financial assistance from federal and state governmental agencies in the form of grants. The disbursement of funds received under these programs generally requires compliance with the terms and conditions specified in the grant agreements and are subject to audit by the grantor agencies. Any disallowed claims resulting from such audits could become a liability of the applicable fund. However, in the opinion of management, any such disallowed claims will not l�ave a material effect on any of the financial statements of the individual fund types included herein or on the overall financial position of the City at December 31,2014. D. TAX INCREMENTS The City's taY increment districts are subject to review by the State of Minnesota Office of the State Auditor(OSA). Any disallowed claims or misuse of taY increments could become a liability of the applicable fund. The prior year claim payable has been removed because the OSA l�as finished their review. Note 13 DEFERRED AD VALOREM TAX LEVIES-BONDED DEBT General Obligarion bond issues sold by the City are financed by ad valorem tax levies and special assessment bond issues sold by the City are partially financed by ad valorem taY levies in addition to special assessments levied against the benefiting properties. When a bond issue to be financed partially or completely by ad valorem tax levies is sold,specific annual amounts of such taY levies are stated in the bond resolution and the County Auditor is notified and instructed to levy these taYes over the appropriate years. The future tax levies are subject to cancellarion when and if the City l�as provided alternarive sources of financing. The City Council is required to levy any additional taYes found necessary for full payment of principal and interest. These future scheduled taY levies are not shown as assets in the accompanying financial statements at December 31,2014 and 2013. Future scheduled taY levies for all bonds outstanding at December 31,2014 totaled$8,541,531 n CTTY OF COTTAGE GROVE,MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31,2014 Note 14 FUND BALANCES At December 31,2014 the City had various fund balances through legal restriction and City Council authorizarion. Fund balance appropriarions at December 31,2014 are shown on the various balance sheets as segregations of the fund balance. The fund balance classifications for governmental funds are as follows: Nonspendable Restricted Committed Assigned Unassigned Tota1 General Fund: $ - $ - $ - $ - $ 8,113,424 $ 8,113,424 Prepaid items 18,019 - - - - 18,019 Compensated absences - - - 804,771 - 804,771 MVHC aid set aside - - - 499,864 - 499,864 Emerald ash borer program - - - 40,200 - 40,200 Public safety equipment - - - 31,363 - 31,363 School bus safety - - - 4,500 - 4,500 Total General Fund 18,019 - - 1,380,698 8,113,424 9,512,141 MunicipalBuildingCapitalProjectFund (8,006,043) (8,006,043) MSA Construction Capital Project Fund: MSA construction activities - - - 4,196,805 - 4,196,805 Closed Debt Fund: Debtretirement - - - 3,831,339 - 3,831,339 Pavement Management Debt Service Fund: Debtretirement - 1,923,244 - - - 1,923,244 Pavement Management Capital Proj ect Fund: Pavement management construction activities - - - - (526,266) (526,266) Total Other Major Funds - 1,923,244 - 8,028,144 (8,532,309) 1,419,079 Nonmajor Governmental Funds: Prepaid items 8,529 - - - - 8,529 Inventory 24,434 - - - - 24,434 Forfeiture and seizure - 52,175 - - - 52,175 Chaxitable gambling - 14,300 - - - 14,300 Debtretirement - 216,597 - - - 216,597 Taxincrementpurposes - 2,272,496 - - - 2,272,496 Recycling program - - 53,942 - - 53,942 Storm water activities - - 253,014 - - 253,014 Ice arena - - 22,885 - - 22,885 Equipmentreplacement - - - 1,623,685 - 1,623,685 Street sealcoating - - - 453,075 - 453,075 Economic development - - - 4,999,862 - 4,999,862 Future pavement management - - - 1,431,412 - 1,431,412 Tree mitigation - - - 377,901 - 377,901 Future roads and trails - - - 779,610 - 779,610 Capital improvements - - - 7,897,492 - 7,897,492 Deficit Fund Balance - - - - (2,426,080) (2,426,080) TotalNonmajorFunds 32,963 2,555,568 329,841 17,563,037 (2,426,080) 18,055,329 Total Fund Balances Governmental Funds $ 50,982 $ 4,478,812 $ 329,841 $ 26,971,879 $(2,844,965) $ 28,986,549 72 CTTY OF COTTAGE GROVE,MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31,2014 Note 15 OTHER POSTEMPLOYMENT BENEFIT PLAN At December 31, 2008,the City adopted Governmental Accounting Standards Board(GASB) Statement No. 45, Accounting and Financial Reporting by Employers for Postemployment Benefits Other than Pensions. The Cit� engaged an actiiar�� to determine the City's liability for postemployment healthcare benefits other than pensions. A. PLAN DESCRIPTION The City provides benefits for retirees as required by Minnesota Statute §471.61 subdivision 2b. Acrive employees, who retire from the City when over age 50 and with 20 years of service, may conrinue coverage with respect to both themselves and their eligible dependent(s) under the City's health benefits program until age 65. Pursuant to the provisions of the plan, retirees are required to pay the total premium cost. As of December 31, 2014 there were appro�mately 109 active participants, 3 rerired participants and 1 disabled participant receiving benefits from the City's health plans. The Plan does not issue a separate report. B. FUNDING POLICY The City funds its OPEB obligarion on a pay as you go basis. For fiscal year 2014,the City contributed$12,092 to the plan. C. ANNUAL OPEB COST AND NET OPEB OBLIGATION The City's annual other postemployment benefit(OPEB) cost(eapense) is calculated based on the annual required contribution(ARC),an amount actuarially determined in accordance with the parameters of GASB Statement 45. The ARC represents a level of funding tl�at, if paid on an ongoing basis, is projected to cover normal cost each year and amortize any un-funded actuarial liabiliries over a period not to exceed thirty years. The following table shows the components of the City's annual OPEB costs for the year,the amount actually paid from the plan,and changes in the City's net OPEB obligation: Annual required Contribution $ 24,194 Interest on Net OPEB Obligation 582 Adjustment to Annual Required Contribution (2,243) Annual OPEB Cost(Expense) 22,533 Contributions Made (12,092) Increase in Net OPEB Obligation 10,441 Net OPEB Obligation-Beginning of Year 58,173 Net OPEB Obligation-End of Year $ 68,614 The City's annual OPEB cost,the percentage of the annual OPEB cost contributed to the plan,and the net OPEB obligarion for 2014: Percentage Fiscal Annual of Annual Net Year OPEB OPEB Cost OPEB Ended Cost Contributed Obligation 12/31/2014 $22,533 53.7% $ 68,614 12/31/2013 $11,244 41.4% $ 58,173 12/31/2012 $11,293 78.4% $ 51,585 73 CTTY OF COTTAGE GROVE,MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31,2014 D. FUNDED STATUS AND FUNDED PROGRESS As of January 1,2014,the most recent actuarial valuarion date,the City's unfunded actuarial accrued liability (iJAAL) was $324,523. The annual payroll for acrive employees covered by the plan in the actuarial valuation was$9,765,700 for a rario of UAAL to covered payroll of 3.3%. Actuarial valuarions of an ongoing plan involve esrimates of the value of reported amounts and assumprions about the probability of occurrence of events far into the future. Examples include assumptions about future employment, mortality, and healthcare cost trends. Amounts determined regarding the funded status of the plan and the annual required contriburions of the employer are subject to continual revision as actual results are compared with past eapectarions 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 mulriyear trend information about whether the actuarial value of plan assets is increasing or decreasing over rime relarive to the actuarial accrued liabiliries for benefits. E. ACTUARIAL METHODS AND ASSUMPTIONS Projecrions 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 rime of each valuarion and the historical pattern of sharing of benefit costs between the employer and plan members to that point. The actuarial methods and assumprions used include techniques that are designed to reduce the effects of short-term volarility in actuarial accrued liabiliries and the actuarial value of assets,consistent with the long-term perspecrive of the calcularions. In the January 1, 2014 actuarial valuation, the projected unit credit actuarial cost method was used. The actuarial assumprions included a 1%investment rate of return(net of administrarive eapenses), which is a blended rate of the expected long-term investment returns on plan assets and on the employer's own investments calculated based on the funded level of the plan at the valuation date. The inflation assumption was 1%. The initial healthcare trend rate was 8%,reduced by decrements to an ultimate rate of 3%after five years. The UAAL is being amortized as a level percentage of projected payrolls on an open basis. The remaiiiing amortization period at December 31,2014 was 23 years. Note 16 OPERATING LEASES The City leases land for the golf course under an operating lease. The lease eapired on Apri130,2010 with the option to eatend the term for three additional terms of five years each. The lease was ea�tended for an additional five years. The lease calls for monthly lease payments of$1,247 for the first five years and from that point payments will be based on fair market value per acre. This lease was amended during 1996 to require that the monthly lease payments remain at$1,247 for lease years 6 through 10 (1995 to 2000). The lease was amended again in 1999 to require that the monthly lease payments equal$1 per month for the remaining term of the lease agreement. In 2014,$12 was paid under this lease arrangement. 74 CTTY OF COTTAGE GROVE,MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31,2014 The City leases eight copiers under an operating lease and the EDA component unit leases one copier. Tota12014 payments for these leases were$16,133 for the primar��government and$2,773 for component unit. Future minimum annual lease payments at December 31,2014 are as follows: Primary Government Component Unit Golf Year Ended Course December 31 Land Copiers Copier 2015 $ 12 $ 16,743 $ 2,085 2016 - 14,280 1,738 The City entered into two operating leases during 2007 for the leasing of ice time for the Ice Arena with Independent School District 833 and the Cottage Grove Athleric Associarion. The lease payments began in 2008 when the new ice arena expansion project opened. The future minimum annual lease payments tl�at the City will receive are as follows: Independent Cottage Grove Year Ended School District Athleric December 31 833 Associarion 2015 $ 104,250 $ 400,000 2016 104,250 400,000 2017 104,250 400,000 2018 104,250 400,000 2019 104,250 400,000 2020-2024 521,250 2,000,000 2025-2029 521,250 1,919,000 Note 17 COMMTTTED CONTRACTS At December 31,2014,the City l�ad commitments of$577,919 for uncompleted construction contracts. Note 18 CONDUTT DEBT OBLIGATIONS The City has issued Industrial Revenue Bonds to provide financial assistance to private sector enriries for the acquisition and construction of industrial and commercial faciliries which are deemed to be in the public interest. The bonds are secured by the property financed and are payable solely from payments on the underlying mortgage loans. Upon repayment of the bonds, ownership of the acquired facilities transfers to the private sector entity served by the bond issue. The City is not obligated in any maiuier for the repayment of the bonds. Accordingly,the bonds are not reported as liabilities in the accompanying financial statements. 75 CTTY OF COTTAGE GROVE,MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31,2014 As of December 31,2014,a series of Industrial Revenue Bonds were outstanding. Ori�inal Issue Bond Issue Date Amount 12/31/14 Balance Maturity Date Industrial Revenue Bonds-Allina Health Systems 08/OS/1998 $4,100,000 Not available 08/OS/2018 Commercial Development Revenue Note-HSI 12/22/2004 935,000 558,638* 12/O1/2024 Commercial Development Revenue Note-ESR,Inc. 11/22/2005 76,500 38,616 11/22/2025 Commercial Development Revenue Note-ESR,Inc. OS/19/2005 853,000 549,795 12/19/2025 Subordinate Senior Housing Revenue Bonds-PHS 12/O1/2006 21,105,000 20,430,000 12/O1/2046 Subordinate Senior Housing Revenue Bonds-PHS 12/O1/2006 8,075,000 7,860,000 12/O1/2046 Variable Rate Revenue Bonds-Alliiia Health System 11/O1/2009 6,100,000 6,100,000 11/15/2022 �41244.500 �35.537.049 *Per original conduit debt bond schedule Note 19 PROPERTIES HELD FOR RESALE The City purchased land in 2010 to be resold to a future industrial occupant in the City's industrial park The occupant is not known at this time. The EDA component unit purchased land in 20ll to be resold for possible future development. The occupant is not known at this time. Note 20 SUBSEQUENT EVENT In Apri12015,the City council called for the issuance and public sale of$6,000,000 General Obligation Improvement Bonds of 2015A on May 6,2015. Note 21 NEW STANDARDS ISSUED BUT NOT YET IMPLEMENTED GASB Statement No. 68, Accounting and Financial Reporting for Pensions,replaces the requirements of Statement No. 27, Accounting for Pensions by State and Local Governmental Employers, and Statement No. 50, Pension Disclosures,as they relate to governments tl�atprovide pensions throughpensionplans administered as trusts or similar arrangements that meet certain criteria. Statement No. 68 requires governments providing defined benefit pensions to recognize their long-term obligarion for pension benefits as a liability for the first rime, and to more comprehensively and comparably measure the annual costs of pension benefits. GASB Statement No. 71, Pension Transition for Contributions Made Subsequent to the Measurement Date, an amendment of GASB Statement No. 68, requires tl�at, at transition, a government recognize a begiiiiiing deferred outflow of resources for its pension contriburions,if any, made subsequent to the measurement date of the beginning new pension liability. The provisions of this Statement should be applied simultaneously with the provisions of Statement 68 which is effective for periods beginning after June 15,2014. �6 REQUIRED SUPPLEMENTARY INFORMATION �� CITY OF COTTAGE GROVE,MINNESOTA REQUIRED SUPPLEMENTARY INFORMATION Statement 9 BUDGETARY COMPARISON SCHEDULE-GENERAL FUND Page 1 of 5 For The Year Ended December 31,2014 With Comparative Data far the Year Ended December 31,2013 Variance with 2014 Final Budget- 2013 Budgeted Amounts Actual Positive Actual Original Final Amounts (Negative) Amounts Revenue: General property taxes: Currentanddelinquent $ 11,303,030 $ 11,303,030 $ 11,357,685 $ 54,655 $ 10,858,270 SpecialAssessments 19,500 19,500 26,697 7,197 8,520 Licenses and permits: General government 76,550 76,550 82,925 6,375 78,060 Community development 555,000 555,000 792,602 237,602 752,479 Engineering - - 6,460 6,460 2,720 Public safety 31,800 31,800 22,413 (9,38'� 27,695 Total licenses and permits 663,350 663,350 904,400 241,050 860,954 Intergovernmental: Federal: Safe and sober-public safety 22,000 22,000 26,707 4,707 28,646 Assistance to firefighters grant-public safety 202,300 202,300 198,096 (4,204) - Ballistic vest grant-public safety - - 10,179 10,179 - Misa grant-general government - - - - 588 State: Local government aid 59,600 59,600 59,626 26 - Market value homestead credit - - 2,608 2,608 2,685 MSA maintenance-public works 42,000 42,000 44,715 2,715 44,715 PERA aid 21,450 21,450 21,448 (2) 21,448 Fire relief aid-public safety 121,000 177,800 177,804 4 181,742 Police relief aid-public safety 260,000 260,000 300,197 40,197 275,061 Forestry grant-culture and recreation - - - - 12,908 Other-general government - - - - 4,926 Other-public safety 16,000 16,000 17,992 1,992 20,699 Other-cukure and recreation - - - - 4,978 L,ocal: SRO program-public safety 75,000 75,000 75,000 - 75,000 Narcotics officer program-public safety 4,000 4,000 3,458 (542) 5,497 Other-public safety - - 3,617 3,617 13,167 Other-public works - - 3,764 3,764 1,585 Other-culture and recreation 19,800 19,800 13,701 (6,099) 14,446 Total intergovernmental 843,150 899,950 958,912 58,962 708,091 Charges for services: Administration charges-general government: Enterprise funds 520,710 - - - 520,760 Investment charge-general government 13,800 13,800 20,115 6,315 (8,773) Other-general government 60,300 24,050 24,172 122 47,719 Other-community development 37,500 37,500 57,020 19,520 104,971 Other-engineering 19,000 19,000 133,058 114,058 257,753 Other-public safety 48,100 48,100 41,741 (6,359) 36,805 Other-public works 17,100 17,100 22,609 5,509 25,538 Other-culture and recreation 176,350 158,650 138,617 (20,033) 129,976 Total charges for services 892,860 318,200 437,332 119,132 1,114,749 78 CITY OF COTTAGE GROVE,MINNESOTA REQUIRED SUPPLEMENTARY INFORMATION Statement 9 BUDGETARY COMPARISON SCHEDULE-GENERAL FUND Page 2 of 5 For The Year Ended December 31,2014 With Comparative Data far the Year Ended December 31,2013 Variance with 2014 Final Budget- 2013 Budgeted Amounts Actual Positive Actual Original Final Amounts (Negative) Amounts Revenue:(continued) Fines and forfeits-public safety $ 201,000 $ 201,000 $ 151,701 $ (49,299) $ 168,667 Investmentearnings(loss) 60,000 60,000 120,571 60,571 (30,389) Donations: Donations-general government 100,000 100,000 500 (99,500) 792 Donations-publicsafety 1,000 1,000 16,166 15,166 26,105 Donations-culture and recreation 7,000 10,000 10,081 81 12,495 Total donations 108,000 111,000 26,747 (84,253) 39,392 Miscellaneous: Other-general government 11,070 11,070 11,556 486 38,615 Other-public safety 12,000 12,000 11,439 (561) 19,476 Other-public works 12,000 12,000 12,765 765 8,863 Other-cukure and recreation 8,400 8,400 8,858 458 5,718 Totalmiscellaneous 43,470 43,470 44,618 1,148 72,672 Totalrevenues 14,134,360 13,619,500 14,028,663 409,163 13,800,926 Expenditures: General government: Mayor and city council: Personalservices 40,050 40,050 38,942 1,108 38,942 Commodities 1,100 1,100 938 162 1,046 Contractualservices 136,400 100,150 87,610 12,540 195,265 Total mayor and city council 177,550 141,300 127,490 13,810 235,253 Administrative: Personal services 247,450 247,450 231,059 16,391 255,635 Commodities 800 800 69 731 968 Contractual services 12,445 12,445 12,532 (87) 10,865 Total administrative 260,695 260,695 243,660 17,035 267,468 Finance: Personal services 470,800 466,400 473,249 (6,849) 474,496 Commodities 2,400 2,400 575 1,825 1,160 Contractualservices 39,185 39,185 35,971 3,214 34,435 Total finance 512,385 507,985 509,795 (1,810) 510,091 Personnel: Personal services 100,650 97,250 99,491 (2,241) 101,665 Commodities 200 200 389 (189) 100 Contractual services 10,980 10,980 5,894 5,086 8,488 Total personnel 111,830 108,430 105,774 2,656 110,253 Assessing service: Contractual services 158,400 158,400 150,315 8,085 147,882 City clerk/elections: Personal services 213,800 182,600 184,410 (1,810) 165,264 Commodities 2,300 2,300 529 1,771 352 Contractual services 18,275 18,275 16,214 2,061 10,567 Total City clerk/elections 234,375 203,175 201,153 2,022 176,183 79 CITY OF COTTAGE GROVE,MINNESOTA REQUIRED SUPPLEMENTARY INFORMATION Statement 9 BUDGETARY COMPARISON SCHEDULE-GENERAL FUND Page 3 of 5 For The Year Ended December 31,2014 With Comparative Data far the Year Ended December 31,2013 Variance with 2014 Final Budget- 2013 Budgeted Amounts Actual Positive Actual Original Final Amounts (Negative) Amounts Expenditures:(continued) General government:(continued) Legal: Contractualservices $ 173,100 $ 173,100 $ 192,864 $ (19,764) $ 191,171 Community and employee programs: Personalservices 3,000 3,000 2,623 377 3,325 Commodities 500 500 1,601 (1,101) - Contractual services 50,330 50,330 57,287 (6,957) 46,328 Total community and employee programs 53,830 53,830 61,5ll (7,681) 49,653 Government buildings: Personal services 7,300 46,300 67,529 (21,229) 14,055 Commodities 13,170 13,170 21,403 (8,233) 12,287 Contractual services 266,840 266,840 288,464 (21,624) 250,908 Total government buildings 287,310 326,310 377,396 (51,086) 277,250 Historic preservation: Personal services 10,000 10,000 9,530 470 1,243 Commodities 40 40 38 2 - Contractual services 1,000 1,000 1,636 (636) 665 Total historic preservation 11,040 11,040 11,204 (164) 1,908 Total general government 1,980,515 1,944,265 1,981,162 (36,897) 1,967,112 Community Development: Planning and zoning: Personal services 269,050 278,300 281,955 (3,655) 289,236 Commodities 900 900 1,019 (119) 1,077 Contractualservices 34,115 34,115 37,816 (3,701) 57,735 Total planning and zoning 304,065 313,315 320,790 (7,475) 348,048 Building inspections: Personalservices 422,950 413,700 409,123 4,577 398,929 Commodities 8,850 8,850 7,635 1,215 9,587 Contractual services 86,595 86,595 83,334 3,261 83,562 Total building inspections 518,395 509,145 500,092 9,053 492,078 Engineering: Personal services 74,995 74,995 53,394 21,601 2,318 Commodities 800 800 1,217 (417) 7,744 Contractualservices 45,225 45,225 43,633 1,592 42,511 Total engineering 121,020 121,020 98,244 22,776 52,573 Total community development 943,480 943,480 919,126 24,354 892,699 Public safety: Police protection: Personal services 4,747,800 4,741,950 4,660,772 81,178 4,610,840 Commodities 280,950 280,950 253,106 27,844 276,472 Contractualservices 380,850 386,700 420,7ll (34,011) 379,196 Capital outlay 116,400 126,400 136,466 (10,06� 159,910 Total police protection 5,526,000 5,536,000 5,471,055 64,945 5,426,418 Fire protection: Personal services 509,520 549,520 551,3ll (1,791) 430,499 Commodities 95,000 95,000 72,555 22,445 60,901 Contractualservices 214,865 214,865 226,599 (11,734) 230,176 Capital outlay 240,800 240,800 237,554 3,246 - Totalfireprotection 1,060,185 1,100,185 1,088,019 12,166 721,576 Fire relief: Contractualservices 123,000 179,800 183,536 (3,736) 186,422 80 CITY OF COTTAGE GROVE,MINNESOTA REQUIRED SUPPLEMENTARY INFORMATION Statement 9 BUDGETARY COMPARISON SCHEDULE-GENERAL FUND Page 4 of 5 For The Year Ended December 31,2014 With Comparative Data far the Year Ended December 31,2013 Variance with 2014 Final Budget- 2013 Budgeted Amounts Actual Positive Actual Original Final Amounts (Negative) Amounts Expenditures:(continued) Public safety:(continued) Civil defense: Personal services $ 27,700 $ 27,700 $ 13,878 $ 13,822 $ 11,269 Commodities 100 100 2,809 (2,709) 1,583 Contractualservices 50,420 50,420 46,284 4,136 15,508 Total civil defense 78,220 78,220 62,971 15,249 28,360 Animal control: Personal services 12,600 12,600 11,820 780 12,492 Commodities 4,000 4,000 3,667 333 2,411 Contractual services 29,400 29,400 14,725 14,675 15,341 Total animal control 46,000 46,000 30,212 15,788 30,244 Total public safety 6,833,405 6,940,205 6,835,793 104,412 6,393,020 Public works: Public warks administration: Personal services 269,455 269,455 273,854 (4,399) 238,527 Commodities 19,150 19,150 16,993 2,157 24,508 Contractual services 156,845 178,845 197,212 (18,367) 153,511 Capital outlay - - - - 13,000 Total public warks administration 445,450 467,450 488,059 (20,609) 429,546 Streets: Personal services 549,800 549,800 522,094 27,706 491,595 Commodities 220,950 220,950 222,322 (1,372) 265,160 Contractual services 340,320 338,320 336,830 1,490 254,429 Totalstreets 1,111,070 1,109,070 1,081,246 27,824 1,011,184 Snow and ice control: Personal services 185,350 185,350 241,905 (56,555) 241,452 Commodities 226,000 226,000 277,794 (51,794) 249,317 Contractual services 111,800 111,800 120,672 (8,872) 186,731 Capital outlay 5,300 5,300 5,213 87 - Total snow and ice control 528,450 528,450 645,584 (117,134) 677,500 Street signs/striping: Personal services 111,600 98,600 90,411 8,189 94,216 Commodities 30,590 30,590 29,474 1,116 36,562 Contractual services 59,800 52,800 51,444 1,356 70,511 Total street signs/striping 201,990 181,990 171,329 10,661 201,289 Total public warks 2,286,960 2,286,960 2,386,218 (99,258) 2,319,519 81 CITY OF COTTAGE GROVE,MINNESOTA REQUIRED SUPPLEMENTARY INFORMATION Statement 9 BUDGETARY COMPARISON SCHEDULE-GENERAL FUND Page 5 of 5 For The Year Ended December 31,2014 With Comparative Data far the Year Ended December 31,2013 Variance with 2014 Final Budget- 2013 Budgeted Amounts Actual Positive Actual Original Final Amounts (Negative) Amounts Expenditures:(continued) Culture and recreation: Forestry: Personalservices $ 71,200 $ 71,200 $ 106,308 $ (35,108) $ 103,992 Commodities 12,975 12,975 5,168 7,807 22,243 Contractual services 192,720 175,020 183,313 (8,293) 223,500 Totalforestry 276,895 259,195 294,789 (35,594) 349,735 Recreation programs: Personal services 256,200 256,200 240,378 15,822 240,390 Commodities 10,950 7,950 5,873 2,077 8,784 Contractual services 81,695 81,695 83,884 (2,189) 66,846 Total recreation programs 348,845 345,845 330,135 15,710 316,020 Parks maintenance: Personal services 679,000 679,000 682,248 (3,248) 643,425 Commodities 160,650 160,650 156,507 4,143 163,263 Contractual services 296,005 302,005 313,726 (11,721) 308,334 Capital outlay - - - - 156,295 Totalparksmaintenance 1,135,655 1,141,655 1,152,481 (10,82� 1,271,317 Total culture and recreation 1,761,395 1,746,695 1,777,405 (30,710) 1,937,072 Total expenditures 13,805,755 13,861,605 13,899,704 (38,099) 13,509,422 Revenues over(under)expenditures 328,605 (242,105) 128,959 371,064 291,504 Other financing sources(uses): Transfer from Special Revenue Fund - 35,020 35,020 - - Transfer from Enterprise Fund 3,000 488,690 488,690 - 3,000 Transfer to Special Revenue Fund (55,405) (55,405) (55,405) - - Transfer to Capital Project Fund (236,200) (317,089) (317,089) - (213,070) Total other financing sources(uses): (288,605) 151,216 151,216 - (210,070) Net increase(decrease)in fund balance $ 40,000 $ (90,889) 280,175 $ 371,064 81,434 Fund balance-January 1 9,231,966 9,150,532 Fund balance-December 31 $ 9,512,141 $ 9,231,966 82 -This Page Intentionally Left Blank- 83 CITY OF COTTAGE GROVE,MINNESOTA REQUIRED SUPPLEMENTARY INFORMATION BUDGETARY COMPARISON SCHEDULE NOTE TO RSI December 31,2014 Note A LEGAL COMPLIANCE-BUDGETS The General Fund Budget is legally adopted on a basis consistent with accounting principles generally accepted in the United States of America. The legal level of budgetary control is at the department level for both budgets. The following is a listing of expenditures that exceeded budget appropriations. Final Bud�et Actual Over Bud�et General Fund General government Administrative: Contractual services $12,445 $12,532 $87 Finance: Personal services 466,400 473,249 6,849 Personnel: Personal services 97,250 99,491 2,241 Commodities 200 389 189 City clerk/elections: Personal Services 182,600 184,410 1,810 Legal: Contractual services 173,100 192,864 19,764 Community and employee programs: Commodities 500 1,601 1,101 Contractual services 50,330 57,287 6,957 Government buildings: Personal services 46,300 67,529 21,229 Commodities 13,170 21,403 8,233 Contractual services 266,840 288,464 21,624 Historical preservation: Contractual services 1,000 1,636 636 Community development: Planning and zoning: Personal services 278,300 281,955 3,655 Commodities 900 1,019 119 Contractual services 34,115 37,816 3,701 Engineering: Commodities 800 1,217 417 Public safety: Police protection: Contractual services 386,700 420,711 34,011 Capital outlay 126,400 136,466 10,066 Fire protection: Personal services 549,520 551,311 1,791 Contractual services 214,865 226,599 11,734 Fire relief: Contractual services 179,800 183,536 3,736 Civil defense: Commodities 100 2,809 2,709 84 CITY OF COTTAGE GROVE,MINNESOTA REQUIRED SUPPLEMENTARY INFORMATION BUDGETARY COMPARISON SCHEDULE NOTE TO RSI December 31,2014 Final Bud�et Actual Over Bud�et General Fund(continued) Public works: Public warks administration: Personal services $269,455 $273,854 $4,399 Contractual services 178,845 197,212 18,367 Streets: Commodities 220,950 222,322 1,372 Snow and ice control: Personal services 185,350 241,905 56,555 Commodities 226,000 277,794 51,794 Contractual services 111,800 120,672 8,872 Culture and recreation: Forestry: Personal services 71,200 106,308 35,108 Contractual services 175,020 183,313 8,293 Recreation programs: Contractual services 81,695 83,884 2,189 Parks maintenance: Personal services 679,000 682,248 3,248 Contractual services 302,005 313,726 11,721 85 CITY OF COTTAGE GROVE,MINNESOTA REQUIRED SUPPLEMENTARY INFORMATION FCTNDING PROGRESS SCHEDULE OTHER POST EMPLOYMENT HEALTH CARE BENEFITS December 31,2014 Actuarial UAAL as a Actuarial Accrued Percentage Actuarial Value of Liability Unfunded Funded Covered of Covered Valuation Assets (AAL) AAL Ratio Payroll Payroll Date (a) (b) (b-a) (a/b) (c) ((b-a)/c) 1/1/2014 - $324,523 $324,523 - $9,765,700 3.3% 1/1/2011 - 108,298 108,298 - 8,887,000 1.2% 1/1/2008 - 146,597 146,597 - 8,750,900 1.7% 86 COMBINING AND INDIVIDUAL FUND STATEMENTS AND SCHEDULES s� -This Page Intentionally Left Blank- 88 NONMAJOR GOVERNMENTAL FUNDS s9 SPECIAL REVENUE FUNDS A Special Revenue Fund is used to account for the proceeds of specific revenue sources that are legally restricted to expenditures for specified purposes. DEBT SERVICE FUNDS The Debt Service Funds are used to account for the accumulation of resources for, and payment of, interest, principal and related costs on general long-term debt. CAPITAL PRO7ECT FUNDS The Capital Project Funds account for financial resources to be used for the acquisition or construction of maj or capital facilities (other than those financed by Proprietary Funds). 90 CITY OF COTTAGE GROVE,MINNESOTA COMBINING BALANCE SHEET Statement 10 NONMAJOR GOVERNMENTAL Fj.JNDS December 31,2014 With Comparative Data as of December 31,2013 Totals Nonmajor Special Debt Capital Governmental Funds Revenue Service Project 2014 2013 Assets: Cash and investments $ 283,695 $ 1,502,434 $ 15,386,549 $ 17,172,678 $ 15,559,921 Interfund receivable - - 991,739 991,739 642,855 Interfund loan receivable - - 3,050,000 3,050,000 3,105,000 Due from other governmental units-net 31,179 - 16,667 47,846 110,025 Accounts receivable-net 262,715 - 185,163 447,878 420,308 Prepaid items 8,529 - - 8,529 10,229 Inventories-at cost 24,434 - - 24,434 31,617 Delinquent property taxes receivable 3,909 - 549 4,458 17,920 Special assessments receivable: Deferred - - 255,294 255,294 11,695 Delinquent - - 534 534 624 Total assets $ 614,461 $ 1,502,434 $ 19,886,495 $ 22,003,390 $ 19,910,194 Liabilities: Accounts payable $ 43,142 $ - $ 116,897 $ 160,039 $ 91,689 Salaries payable 42,580 - - 42,580 36,474 Interfund payable 287,314 - 991,739 1,279,053 642,855 Contracts payable - - - - 71,398 Due to other governmental units 4,341 - - 4,341 6,003 Deposits payable 8,050 - 638,713 646,763 309,598 Interfund loan payable 1,200,000 - 350,000 1,550,000 1,605,000 Totalliabilities 1,585,427 - 2,097,349 3,682,776 2,763,017 Deferred inflows of resources: Unavailable revenue-property taxes 3,909 - 549 4,458 17,920 Unavailable revenue-special assessments - - 255,828 255,828 12,319 Unavailable revenue-intergovernmental 4,999 - - 4,999 - Total deferred inflows of resources 8,908 - 256,377 265,285 30,239 Fund balance: Nonspendable: Prepaid items 8,529 - - 8,529 10,229 Inventory 24,434 - - 24,434 31,617 Restricted for: Farfeiture and seizure 52,175 - - 52,175 47,609 Charitable gambling 14,300 - - 14,300 12,383 Debt retirement - 216,597 - 216,597 390,372 Tax increment purposes - 1,285,837 986,659 2,272,496 2,002,632 Park trust activities - - - - 242,906 Committed 329,841 - - 329,841 416,027 Assigned - - 17,563,037 17,563,037 15,844,373 Unassigned (1,409,153) - (1,016,927) (2,426,080) (1,881,210) Total fund balance (979,874) 1,502,434 17,532,769 18,055,329 17,116,938 Total liabilities,deferred inflows of resources, and fund balance $ 614,461 $ 1,502,434 $ 19,886,495 $ 22,003,390 $ 19,910,194 91 CITY OF COTTAGE GROVE,MINNESOTA COMBINING STATEMENT OF REVENUES,EXPENDITURES AND Statement 11 CHANGES IN FUND BALANCE NONMAJOR GOVERNMENTAL FUNDS For The Year Ended December 31,2014 With Comparative Data for the Year Ended December 31,2013 Totals Nonmaj or Special Debt Capital Governmental Funds Revenues: Revenue Service Project 2014 2013 Generalpropertytaxes $ 240,718 $ - $ 396 $ 241,114 $ 237,546 Franchise taxes - - 542,689 542,689 540,767 Aggregatetaxes - - 26,236 26,236 26,135 Tax increment collections - - 723,304 723,304 946,847 Specialassessments - - 35,068 35,068 167,152 Direct charges to developers - - 537,298 537,298 366,682 Intergovernmental 158,229 - 513,516 671,745 270,671 Charges for services 2,864,091 - 270,928 3,135,019 2,909,095 Rent - - 420,279 420,279 - Fines and forfeits 19,616 - - 19,616 19,990 Investmentearnings(loss) 6,187 23,868 207,591 237,646 (125,704) Interest on interfund loan - - 39,066 39,066 35,780 Connection charges - - 841,434 841,434 805,261 Parkdedicationfees - - 63,595 63,595 252,386 Other sales - - 429,750 429,750 - Donations 1,726 - 350,654 352,380 359,077 Miscellaneous 10,320 - 50,540 60,860 44,880 Total revenues 3,300,887 23,868 5,052,344 8,377,099 6,856,565 Expenditures: Current: General government - 2,835 476 3,311 1,671 Economic development - - 541,838 541,838 151,562 Public safety 15,752 - 3,027 18,779 24,723 Public works 532,391 - 921,814 1,454,205 1,590,534 Cultureandrecreation 2,117,308 - 274,756 2,392,064 2,174,191 Capital outlay: Public safety - - 94,445 94,445 35,201 Public works 66,933 - 744,487 811,420 868,471 Cultureandrecreation 134,328 - 499,250 633,578 337,160 Debt service: Principal retirement - 1,680,000 240,000 1,920,000 545,000 Capital lease payment 305,076 - - 305,076 293,953 Interest and fiscal charges 237,417 160,634 75,515 473,566 481,441 Total expenditures 3,409,205 1,843,469 3,395,608 8,648,282 6,503,907 Revenues over(under)expenditures (108,318) (1,819,601) 1,656,736 (271,183) 352,658 Other financing sources(uses): Transfers in 55,405 - 410,621 466,026 519,539 Transfers out (103,071) - (643,962) (747,033) (425,304) Bonds issued - 1,405,000 - 1,405,000 - Premium on debt issued - 18,461 - 18,461 - Proceeds from the sale of capital assets - - 67,120 67,120 27,195 Total other financing sources(uses) (47,666) 1,423,461 (166,221) 1,209,574 121,430 Net increase(decrease)in fund balance (155,984) (396,140) 1,490,515 938,391 474,088 Fund balance-January 1 (823,890) 1,898,574 16,042,254 17,116,938 17,884,323 Cumulative effect of change in accounting principle - - - - (1,241,473) Fund balance-January 1,as restated (823,890) 1,898,574 16,042,254 17,116,938 16,642,850 Fund balance-December 31 $ (979,874) $ 1,502,434 $ 17,532,769 $ 18,055,329 $ 17,116,938 92 NONMA70R SPECIAL REVENUE FUNDS Special Revenue Funds are used to account for the proceeds of specific revenue sources that are legally restricted to expenditures for particular purposes. The City maintained the following Special Revenue Funds during the year: Recvclin� — Established to account for recycling advertising, promotion, and capital expenditures. Storm Water Maintenance — Established to account for the receipt of storm water fees to be used for storm water maintenance activities. Forfeiture/Seizure — Established to account for Police Department proceeds from property seized under MS 609.53. Ice Arena Fund—Established to account for operating the City's ice arena. Golf Course Fund—Established to account for the City's eighteen hole golf course and banquet facility. Charitable Gamblin� — Established to account for the 3% tax on charitable gambling operations. 93 CTTY OF COTTAGE GROVE, MINNESOTA SUBCOMBINING BALANCE SHEET NONMAJOR SPECIAL REVENUE FUNDS December 31,2014 With Comparative Data as of December 31,2013 Storm Water Forfeiture/ Recycling Maintenance Seizure Assets: Cash and investments $ 63,345 $ 153,340 $ 52,710 Due from other governmental units-net 4,999 - - Accounts receivable-net - 108,782 - Prepaid items - - - Inventories-at cost - - - Delinquent properry taYes receivable - - - Total assets $ 68,344 $ 262,122 $ 52,710 Liabilities: Accounts payable $ 8,969 $ 3,325 $ 535 Salaries payable 434 5,783 - Interfund payable - - - Contracts payable - - - Due to other governmental units - - - Deposits payable - - - Interfund loan payable - - - Totalliabiliries 9,403 9,108 535 Deferred inflows of resources: Unavailable revenue-properry taxes - - - Unavailable revenue-intergovernmental 4,999 - - Total deferred inflows of resources 4,999 - - Fund balance: Nonspendable: Prepaid items - - - Inventory - - - Restricted for: Forfeiture and seizure - - 52,175 Charitable gambling - - - Committed for: Ice arena - - - Storm water activities - 253,014 - Recycling program 53,942 - - Unassigned - - - Total fund balance 53,942 253,014 52,175 Total liabiliries,deferred inflows of resources, and fund balance $ 68,344 $ 262,122 $ 52,710 94 Statement 12 Totals Nonmajor Ice Golf Cl�aritable Special Revenue Funds Arena Course Gambling 2014 2013 $ - $ - $ 14,300 $ 283,695 $ 294,237 26,180 - - 31,179 22,469 152,853 1,080 - 262,715 230,958 976 7,553 - 8,529 10,229 - 24,434 - 24,434 31,617 3,909 - - 3,909 5,360 $ 183,918 $ 33,067 $ 14,300 $ 614,461 $ 594,870 $ 27,819 $ 2,494 $ - $ 43,142 $ 39,854 18,800 17,563 - 42,580 36,474 107,431 179,883 - 287,314 103,400 - - - - 14,117 2,098 2,243 - 4,341 5,955 - 8,050 - 8,050 13,600 - 1,200,000 - 1,200,000 1,200,000 156,148 1,410,233 - 1,585,427 1,413,400 3,909 - - 3,909 5,360 - - - 4,999 - 3,909 - - 8,908 5,360 976 7,553 - 8,529 10,229 - 24,434 - 24,434 31,617 - - - 52,175 47,609 - - 14,300 14,300 12,383 22,885 - - 22,885 198,120 - - - 253,014 154,074 - - - 53,942 63,833 - (1,409,153) - (1,409,153) (1,341,755) 23,861 (1,377,166) 14,300 (979,874) (823,890) $ 183,918 $ 33,067 $ 14,300 $ 614,461 $ 594,870 95 CTTY OF COTTAGE GROVE, MINNESOTA SUBCOMBINING STATEMENT OF REVENUES, EXPENDITURES AND CHANGES 1N FUND BALANCE NONMAJOR SPECIAL REVENUE FUNDS For The Year Ended December 31,2014 With Comparative Data for the Year Ended December 31,2013 Storm Water Forfeiture/ Recycling Maintenance Seizure Revenues: General properry taYes $ - $ - $ - Intergovernmental: Local: Washington county 53,792 - - School district - - - Other - 47,437 - Charges for services - 684,119 - Fines and forfeits - - 19,616 Investment earnings(loss) 903 1,693 702 Donations - - - Miscellaneous 3,500 - - Total revenues 58,195 733,249 20,318 Eapenditures: Current Public safety - - 15,752 Public works 68,086 464,305 - Culture and recreation - - - Capital outlay: Public works - 66,933 - Culture and recreation - - - Debt service: Capital lease payment - - - Interest and fiscal cl�arges - - - Total expenditures 68,086 531,238 15,752 Revenues over(under)eapenditures (9,891) 202,011 4,566 Other financing sources(uses): Transfer from General Fund - - - Transfer from Capital Project Fund - - - Transfer to General Fund - (35,020) - Transfer to Capital Project Fund - (68,051) - Total other financing sources(uses) - (103,071) - Net increase(decrease)in fund balance (9,891) 98,940 4,566 Fund balance-January 1 63,833 154,074 47,609 Cumularive effect of change in accounring principle - - - Fund balance-January 1,as restated 63,833 154,074 47,609 Fund balance-December 31 $ 53,942 $ 253,014 $ 52,175 96 Statement 13 Totals Nonmajor Ice Golf Charitable Special Revenue Funds Arena Course Gambling 2014 2013 $ 240,718 $ - $ - $ 240,718 $ 237,539 - - - 53,792 88,247 57,000 - - 57,000 57,000 - - - 47,437 49,461 795,736 1,384,236 - 2,864,091 2,822,192 - - - 19,616 19,990 2,698 - 191 6,187 (6,13 8) - - 1,726 1,726 5,829 6,563 257 - 10,320 7,239 1,102,715 1,384,493 1,917 3,300,887 3,281,359 - - - 15,752 24,723 - - - 532,391 719,789 764,849 1,352,459 - 2,117,308 2,086,172 - - - 66,933 - 8,802 125,526 - 134,328 58,389 270,000 35,076 - 305,076 293,953 234,293 3,124 - 237,417 249,139 1,277,944 1,516,185 - 3,409,205 3,432,165 (175,229) (131,692) 1,917 (108,318) (150,806) - 55,405 - 55,405 - - - - - 53,000 - - - (35,020) - - - - (68,051) (70,186) - 55,405 - (47,666) (17,186) (175,229) (76,287) 1,917 (155,984) (167,992) 199,090 (1,300,879) 12,383 (823,890) 585,575 - - - - (1,241,473) 199,090 (1,300,879) 12,383 (823,890) (655,898) $ 23,861 $ (1,377,166) $ 14,300 $ (979,874) $ (823,890) 9� NONMAJOR DEBT SERVICE FUNDS The Debt Service Funds are used to account for the accumulation of resources for, and payment of, interest, principal and related costs on long-term debt. The City's Debt Service Funds account for two types of bonded indebtedness: • Improvement Bonds • Tax Increment Bonds Delveloper Financed Revolvin� — (2008A Improvements Bonds) are repaid from special assessments collected from new developments within the City. Tax Increment— (1985 Tax Increment Bonds, 2004A Tax Increment Refunding Bonds (TIF 1-3), 2004A Tax Exempt Increment Bonds (TIF 1-12), 2004B Taxable Increment Bonds and 2014A Taxable Tax Increment Refunding Bonds) are repaid primarily from taxes increments. 9s CTTY OF COTTAGE GROVE, MINNESOTA SUBCOMBINING BALANCE SHEET Statement 14 NONMAJOR DEBT SERVICE FiJNDS December 31,2014 With Comparative Data as of December 31,2013 Totals Developer Nonmajor Financed Tax Increment Debt Service Funds Revolving Funds Funds 2014 2013 Assets: Cash and inveshnents $ 216,597 $ 1,285,837 $ 1,502,434 $ 1,898,574 Total assets $ 216,597 $ 1,285,837 $ 1,502,434 $ 1,898,574 Fund balance: Restricted for: Debtretirement $ 216,597 $ - $ 216,597 $ 390,372 Taxincrementpurposes - 1,285,837 1,285,837 1,508,202 Total fund balance 216,597 1,285,837 1,502,434 1,898,574 Total fund balance $ 216,597 $ 1,285,837 $ 1,502,434 $ 1,898,574 99 CITY OF COTTAGE GROVE, NIINNESOTA SUBCOMBINING STATEMENT OF REVENUES, Statement 15 EXPENDITj.JRES AND CHANGES IN Fj.JND BALANCE NONMAJOR DEBT SERVICE Fj.JNDS For The Year Ended December 31,2014 With Comparative Data for the Year Ended December 31,2013 Totals Developer Tax Nonmajor Financed Increment Debt Service Funds Revolving Funds Funds 2014 2013 Revenues: Tax increment collections $ - $ - $ - $ 705,909 Special assessments: Current - - - 95,386 Penalties - - - 83 Investment earnings(loss) 4,288 19,580 23,868 (9,136) Total revenues 4,288 19,580 23,868 792,242 Expenditures: Current General government Contractual services - 2,835 2,835 997 Debt service: Principal retirement 175,000 1,505,000 1,680,000 315,000 Interest and fiscal chaxges 3,063 157,571 160,634 145,562 Total expenditures 178,063 1,665,406 1,843,469 461,559 Revenues over(under)expenditures (173,775) (1,645,826) (1,819,601) 330,683 Other financing sources(uses): Bonds issued - 1,405,000 1,405,000 - Premium on debt issued - 18,461 18,461 - Total other financing sources(uses) - 1,423,461 1,423,461 - Net increase(decrease)in fund balance (173,775) (222,365) (396,140) 330,683 Fund balance-January 1 390,372 1,508,202 1,898,574 1,567,891 Fund balance-December 31 $ 216,597 $ 1,285,837 $ 1,502,434 $ 1,898,574 l00 NONMAJOR CAPITAL PRO7ECT FUNDS Capital Proj ect Funds are used to account for the acquisition and construction of maj or capital facilities other than those financed by Proprietary Funds and Trust Funds. Equipment Replacement Fund — Established to accumulate monies for the replacement of capital equipment. Street Sealcoatin�—Established to account for the receipt of franchise fees to be used for sealcoating activities. Future Economic Development Fund—Established to account for the receipt and use of monies for economic development purposes. Future Proj ects —to account for the preliminary expenditures of proj ects which do not have a source of financing. Completed Construction — to account for the various surpluses (deficits) of other Special Assessment Construction Funds. Park Trust—to account for capital proj ects in new municipal parks. Park Capital Improvements—to account for capital proj ects in existing municipal parks. Water Connection and Area—to account for water connection and area charges. Sewer Connection and Area—to account for sewer connection and area charges. Future Storm Sewer Improvements—to collect storm sewer area charges which are designated for future construction. Tax Increment Construction Revolvin� Fund — to account for construction proj ects that are financed with tax increments. ioi CITY OF COTTAGE GROVE, MINNESOTA SUBCOMBINING BALANCE SHEET NONMAJOR CAPITAL PROJECT FUNDS December 31,2014 With Comparative Data as of December 31,2013 Future Equipment Street Economic Future Completed Replacement Sealcoating Development Projects Construction Assets: Cash and investments $ 1,624,483 $ 328,402 $ 3,468,149 $ 3,534,494 $ 461,921 Interfund receivable - - - - - Interfund loan receivable - - 1,550,000 - 1,500,000 Due from other governmental units-net - 16,667 - - - Accounts receivable-net - 108,006 - 57,541 - Delinquent property taxes receivable - - - 549 - Special assessments receivable: Deferred - - - - - Delinquent - - - - 534 Total assets $ 1,624,483 $ 453,075 $ 5,018,149 $ 3,592,584 $ 1,962,455 Liabilities: Accounts payable $ 798 $ - $ 18,287 $ 61,149 $ - Interfund payable - - - - - Contracts payable - - - - - Due to other governments - - - - - Deposits payable - - - 630,612 - Interfund loan payable - - - - - Totalliabilities 798 - 18,287 691,761 - Deferred inflows of resources: Unavailable revenue-property taxes - - - 549 - Unavailable revenue-special assessments - - - - 534 Total deferred inflows of resources - - - 549 534 Fund balance: Restricted for: Tax increment purposes - - - - - Park trust activities - - - - - Assigned for: Equipment replacement 1,623,685 - - - - Street sealcoating - 453,075 - - - Economic development - - 4,999,862 - - Future pavement management - - - 1,431,412 - Tree mitigation - - - 377,901 - Future roads and trails - - - 779,610 - Capital improvements - - - 311,351 1,961,921 Unassigned - - - - - Total fund balance 1,623,685 453,075 4,999,862 2,900,274 1,961,921 Total liabilities,deferred inflows of resources, and fund balance $ 1,624,483 $ 453,075 $ 5,018,149 $ 3,592,584 $ 1,962,455 102 Statement 16 Tax Increment Totals Park Water Sewer Future Construction Nonmajor Park Capital Connection Connection Storm Sewer Revolving Capital Project Funds Trust Improvements and Area and Area Improvements Fund 2014 2013 $ - $ 227,564 $ 1,721,220 $ - $ 2,683,657 $ 1,336,659 $ 15,386,549 $ 13,367,110 - 189,448 802,291 - - - 991,739 642,855 - - - - - - 3,050,000 3,105,000 - - - - - - 16,667 87,556 - 19,616 - - - - 185,163 189,350 - - - - - - 549 12,560 - - 56,183 126,359 72,752 - 255,294 11,695 - - - - - - 534 624 $ - $ 436,628 $ 2,579,694 $ 126,359 $ 2,756,409 $ 1,336,659 $ 19,886,495 $ 17,416,750 $ 21,180 $ 2,929 $ 7,965 $ 4,008 $ 581 $ - $ 116,897 $ 51,835 189,448 - - 802,291 - - 991,739 539,455 - - - - - - - 57,281 - - - - - - - 48 - 8,101 - - - - 638,713 295,998 - - - - - 350,000 350,000 405,000 210,628 11,030 7,965 806,299 581 350,000 2,097,349 1,349,617 - - - - - - 549 12,560 - - 56,183 126,359 72,752 - 255,828 12,319 - - 56,183 126,359 72,752 - 256,377 24,879 - - - - - 986,659 986,659 494,430 - - - - - - - 242,906 - - - - - - 1,623,685 1,860,300 - - - - - - 453,075 313,607 - - - - - - 4,999,862 4,471,683 - - - - - - 1,431,412 1,431,412 - - - - - - 377,901 372,624 - - - - - - 779,610 341,399 - 425,598 2,515,546 - 2,683,076 - 7,897,492 7,053,348 (210,628) - - (806,299) - - (1,016,927) (539,455) (210,628) 425,598 2,515,546 (806,299) 2,683,076 986,659 17,532,769 16,042,254 $ - $ 436,628 $ 2,579,694 $ 126,359 $ 2,756,409 $ 1,336,659 $ 19,886,495 $ 17,416,750 103 CITY OF COTTAGE GROVE,MINNESOTA SUBCOMBINING STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE NONMAJOR CAPITAL PROJECT FUNDS For The Year Ended December 31,2014 With Comparative Data for the Year Ended December 31,2013 Future Equipment Street Economic Future Completed Replacement Sealcoating Development Projects Construction Revenues: General property taxes $ - $ - $ - $ 396 $ - Franchisetaxes - 542,689 - - - Aggregate taxes - 26,236 - - - Tax increment collections - - - - - Special assessments: Current - - - - 12,288 Delinquent - - - - 316 Prepayments on deferred - - - - - Penalties - - - - 69 Direct charges to developers - 37,381 - 499,917 - Intergovernmental: Federal - - - - - State - - - - - Other - - - - - Charges for services - 270,928 - - - Rent - - - - - Investmentearnings(loss) 27,037 3,746 42,413 36,736 6,512 Interest on interfund loan - - 24,300 - 14,766 Connection charges - - - - - Park dedication fees - - - - - Other sales - - 429,750 - - Donations - - 350,654 - - Miscellaneous - - 210 - - Total revenues 27,037 880,980 847,327 537,049 33,951 Expenditures: Current General government - - - - 476 Economic development - - 319,148 - - Public safety - - - 3,027 - Public works 3,757 741,512 - 90,560 2,611 Culture and recreation - - - 7,495 - Capital outlay: Public safety 94,445 - - - - Public works 346,218 - - - - Culture and recreation 57,852 - - - - Debt service: Principal retirement - - - - - Interest and fiscal charges - - - - - Total expenditures 502,272 741,512 319,148 101,082 3,087 Revenues over(under)eapenditures (475,235) 139,468 528,179 435,967 30,864 Other financing sources(uses): Transfer from General Fund 171,500 - - - - Transfer from Capital Project Fund - - - 8,256 - Transfer to Special Revenue Fund - - - - - Transfer to Capital Project Fund - - - - - Proceeds from the sale of capital assets 67,120 - - - - Total other financing sources(uses) 238,620 - - 8,256 - Net increase(decrease)in fund balance (236,615) 139,468 528,179 444,223 30,864 Fund balance-January 1 1,860,300 313,607 4,471,683 2,456,051 1,931,057 Fund balance-December 31 $ 1,623,685 $ 453,075 $ 4,999,862 $ 2,900,274 $ 1,961,921 104 Statement 17 Tax Increment Totals Park Water Sewer Future Construction Nonmajor Park Capital Connection Connection Storm Sewer Revolving Capital Project Funds Trust Improvements and Area and Area Improvements Fund 2014 2013 $ - $ - $ - $ - $ - $ - $ 396 $ 7 - - - - - - 542,689 540,767 - - - - - - 26,236 26,135 - - - - - 723,304 723,304 240,938 - - - - - - 12,288 67,009 - - - - - - 316 3,136 - - 10,492 9,643 2,260 - 22,395 370 - - - - - - 69 1,168 - - - - - - 537,298 366,682 - - - - - - - 4,509 - - - - 114,054 - 114,054 - - - - - 399,462 - 399,462 71,454 - - - - - - 270,928 86,903 - 420,279 - - - - 420,279 - 4,068 3,192 40,468 - 29,065 14,354 207,591 (110,430) - - - - - - 39,066 35,780 - - 282,479 317,554 241,401 - 841,434 805,261 63,595 - - - - - 63,595 252,386 - - - - - - 429,750 - - - - - - - 350,654 353,248 - 44,000 - - 4,769 1,561 50,540 37,641 67,663 467,471 333,439 327,197 791,011 739,219 5,052,344 2,782,964 - - - - - - 476 674 - - - - - 222,690 541,838 151,562 - - - - - - 3,027 - - - 31,546 29,251 22,577 - 921,814 870,745 164,494 102,767 - - - - 274,756 88,019 - - - - - - 94,445 35,201 - - 136,256 101,878 160,135 - 744,487 868,471 421,403 19,995 - - - - 499,250 278,771 - - - 240,000 - - 240,000 230,000 - - - 51,215 - 24,300 75,515 86,740 585,897 122,762 167,802 422,344 182,712 246,990 3,395,608 2,610,183 (518,234) 344,709 165,637 (95,147) 608,299 492,229 1,656,736 172,781 64,700 80,889 - - - - 317,089 213,070 - - - - 85,276 - 93,532 253,469 - - - - - - - (53,000) - - (470,725) (171,697) (1,540) - (643,962) (302,118) - - - - - - 67,120 27,195 64,700 80,889 (470,725) (171,697) 83,736 - (166,221) 138,616 (453,534) 425,598 (305,088) (266,844) 692,035 492,229 1,490,515 311,397 242,906 - 2,820,634 (539,455) 1,991,041 494,430 16,042,254 15,730,857 $ (210,628) $ 425,598 $ 2,515,546 $ (806,299) $ 2,683,076 $ 986,659 $ 17,532,769 $ 16,042,254 105 CITY OF COTTAGE GROVE,MINNESOTA SPECIAL REVENUE FUND-RECYCLING Statement 18 SCHEDULE OF REVENUES,EXPENDITj_JRES AND CHANGES 1N Fj_JND BALANCE-BUDGET AND ACTUAL Far The Year Ended December 31,2014 With Comparative Data far the Year Ended December 31,2013 Variance with 2014 Final Budget- 2013 Budgeted Amounts Actual Positive Actual Original Final Amounts (Negative) Amounts Revenues: Intergovernmental: Local: Washington County recycling grant-public warks $ 53,150 $ 53,150 $ 53,792 $ 642 $ 53,150 Investment earnings(loss) - - 903 903 (416) Miscellaneous-public warks - - 3,500 3,500 3,500 Totalrevenues 53,150 53,150 58,195 5,045 56,234 Expenditures: Public works: Current Personal services 26,700 26,700 30,265 (3,565) 35,026 Commodities - - 8,979 (8,979) 96 Contractual services 23,674 23,674 28,842 (5,168) 25,087 Capital outlay 7,000 7,000 - 7,000 - Total expenditures 57,374 57,374 68,086 (10,712) 60,209 Revenues over(under)expenditures $ (4,224) $ (4,224) (9,891) $ (5,667) (3,975) Fund balance-January 1 63,833 67,808 Fund balance-December 31 $ 53,942 $ 63,833 106 CITY OF COTTAGE GROVE,MINNESOTA SPECIAL REVENUE FLJND-STORM WATER MAINTENANCE FLJND Statement 19 SCHEDULE OF REVENUES,EXPENDITURES AND CHANGES IN FUND BALANCE-BUDGET AND ACTUAL For The Year Ended December 31,2014 With Comparative Data for the Year Ended December 31,2013 Variance with 2014 Final Budget- 2013 Budgeted Amounts Actual Positive Actual Original Final Amounts (Negative) Amounts Revenue: Intergovernmental: Local: Other-public warks $ - $ - $ 47,437 $ 47,437 $ 49,461 Charges for services 675,950 675,950 684,119 8,169 649,343 Investment earnings(loss) 1,000 1,000 1,693 693 (1,736) Total revenue 676,950 676,950 733,249 56,299 697,068 Expenditures: Public works: Current Personal services 232,295 232,295 234,418 (2,123) 231,357 Commodities 54,950 54,950 2,841 52,109 3,768 Contractual services 339,160 339,160 227,046 112,114 393,555 Other charges-administrative charge 35,020 35,020 - 35,020 30,900 Capital outlay 82,000 82,000 66,933 15,067 - Total expenditures 743,425 743,425 531,238 212,187 659,580 Revenue over(under)expenditures (66,475) (66,475) 202,011 268,486 37,488 Other financing sources(uses): Transfer to General Fund - - (35,020) (35,020) - Transfer to Capital Project Fund - - (68,051) (68,051) (70,186) Total other financing sources(uses): - - (103,071) (103,071) (70,186) Net increase(decrease)in fund balance $ (66,475) $ (66,475) 98,940 $ 165,415 (32,698) Fund balance-January 1 154,074 186,772 Fund balance-December 31 $ 253,014 $ 154,074 107 CTTY OF COTTAGE GROVE,MINNESOTA SPECIAL REVENUE FUND-FORFEITURE/SEIZURE Statement 20 SCHEDULE OF REVENUES,EXPENDITURES AND CHANGES 1N FUND BALANCE-BUDGET AND ACTUAL For The Year Ended December 31,2014 With Comparative Data for the Year Ended December 31,2013 Variance with 2014 Final Budget- 2013 Budgeted Amounts Actual Posirive Actual Original Final Amounts (Negative) Amounts Revenues: Intergovernmental: County $ 8,000 $ 8,000 $ - $ (8,000) $ 35,097 Forfeitures and seizures 40,000 40,000 19,616 (20,384) 19,990 Investment earnings(loss) 500 500 702 202 (447) Totalrevenues 48,500 48,500 20,318 (28,182) 54,640 Eapenditures: Public safety: Current Commodities 2,000 2,000 - 2,000 5,763 Contractual services 20,100 20,100 15,752 4,348 18,960 Total expenditures 22,100 22,100 15,752 6,348 24,723 Revenues over(under)expenditures $ 26,400 $ 26,400 4,566 $ (21,834) 29,917 Fund balance-January 1 47,609 17,692 Fund balance-December 31 $ 52,175 $ 47,609 ios CTTY OF COTTAGE GROVE,MINNESOTA SPECIAL REVENUE FUND-ICE ARENA Statement 21 SCHEDULE OF REVENUES,EXPENDITURES AND CHANGES IN FUND BALANCE-BUDGET AND ACTUAL For The Year Ended December 31,2014 With Comparative Data for the Year Ended December 31,2013 Variance with 2014 Final Budget- 2013 Budgeted Amounts Actual Positive Actual Original Final Amounts (Negative) Amounts Revenues: General property taxes: Current and delinquent $ 240,000 $ 240,000 $ 240,718 $ 718 $ 237,539 Intergovernmental: Local: School district 57,000 57,000 57,000 - 57,000 Charges for services 923,500 923,500 795,736 (127,764) 807,352 Investment earnings(loss) 6,000 6,000 2,698 (3,302) (3,469) Miscellaneous - - 6,563 6,563 302 Totalrevenues 1,226,500 1,226,500 1,102,715 (123,785) 1,098,724 Expenditures: Culture and recreation: Current Personal services 367,600 367,600 350,478 17,122 345,279 Commodities 31,150 31,150 35,466 (4,316) 26,232 Contractual services 289,760 289,760 378,905 (89,145) 317,942 Capital outlay 120,000 120,000 8,802 111,198 11,968 Debt Service: Capital lease payment 270,000 270,000 270,000 - 260,000 Interest and fiscal charges 239,700 239,700 234,293 5,407 244,892 Total expenditures 1,318,210 1,318,210 1,277,944 40,266 1,206,313 Revenues over(under)expenditures $ (91,710) $ (91,710) (175,229) $ (83,519) (107,589) Fund balance-January 1 199,090 306,679 Fund balance-December 31 $ 23,861 $ 199,090 io9 CITY OF COTTAGE GROVE,NIINNESOTA SPECIAL REVENUE FUND-GOLF COURSE Statement 22 SCHEDULE OF REVENUES,EXPENDITiJRES AND CHANGES IN FiJND BALANCE-BUDGET AND ACTUAL For The Year Ended December 31,2014 With Comparative Data for the Year Ended December 31,2013 Variance with 2014 Final Budget- 2013 Budgeted Amounts Actual Positive Actual Original Final Amounts (Negative) Amounts Revenues: Charges for services $ 1,526,300 $ 1,526,300 $ 1,384,236 $ (142,064) $ 1,365,497 Miscellaneous 1,500 1,500 257 (1,243) 3,437 Total revenues 1,527,800 1,527,800 1,384,493 (143,307) 1,368,934 Expenditures: Culture and recreation: Current Personal services 749,800 749,800 720,993 28,807 720,559 Commodities 172,270 172,270 139,884 32,386 139,034 Contractual services 575,060 575,060 491,582 83,478 485,426 Other charges-administrative charge - - - - 51,700 Capital outlay 139,000 139,000 125,526 13,474 46,421 Debt Service: Capital lease payment 39,100 39,100 35,076 4,024 33,953 Interest and fiscal charges 2,900 2,900 3,124 (224) 4,247 Total expenditures 1,678,130 1,678,130 1,516,185 161,945 1,481,340 Revenues over(under)expenditures (150,330) (150,330) (131,692) 18,638 (112,406) Other financing sources(uses): Transfer from General Fund 55,405 55,405 55,405 - - Transfer from Capital Project Fund - - - - 53,000 Total other financing sources(uses) 55,405 55,405 55,405 - 53,000 Net increase(decrease)in fund balance $ (94,925) $ (94,925) (76,287) $ 18,638 (59,406) Fund balance-January 1 (1,300,879) - Cumulative effect of change in accounting principle - (1,241,473) Fund balance-January 1,as restated (1,300,879) (1,241,473) Fund balance-December 31 $ (1,377,166) $ (1,300,879) 110 CTTY OF COTTAGE GROVE,MINNESOTA SPECIAL REVENUE FUND-CHARITABLE GAMBLING Statement 23 SCHEDULE OF REVENUES,EXPENDITURES AND CHANGES 1N FUND BALANCE-BUDGET AND ACTUAL For The Year Ended December 31,2014 With Comparative Data for the Year Ended December 31,2013 Variance with 2014 Final Budget- 2013 Budgeted Amounts Actual Positive Actual Original Final Amounts (Negative) Amounts Revenues: Investment earnings(loss) $ - $ - $ 191 $ 191 $ (70) Donations 1,500 1,500 1,726 226 5,829 Total revenues 1,500 1,500 1,917 417 5,759 Fund balance-January 1 12,383 6,624 Fund balance-December 31 $ 14,300 $ 12,383 iii -This Page Intentionally Left Blank- 112 1NTERNAL SERVICE Self Insurance Fund —Established to provide self insurance for the City and its officers, employees and agents for claims in excess of standard deductibles and to account for the City flexible spending program and purchase of insurance. Fleet Maintenance Fund — Established to account for costs related to repair and maintenance of City equipment and vehicles. Revenues received from departments are based on level of service performed. Information Services Fund — Established to account for costs related to accessing information electronically and maintaining technology services including phone, voicemail and internet services. Revenues received from departments are based on usage of those technology services. 113 CITY OF COTTAGE GROVE,NIINNESOTA COMBINING STATEMENT OF NET POSITION Statement 24 INTERNAL SERVICE FiJNDS December 31,2014 With Comparative Data as of December 31,2013 Totals Self Fleet Information Internal Service Funds Insurance Maintenance Services 2014 2013 Assets: Current assets: Cash and investments $ 2,216,504 $ 371,888 $ 125,270 $ 2,713,662 $ 2,873,224 Accounts receivable - 560 - 560 - Prepaid items 109,729 - 20,620 130,349 123,524 Inventory-at cost - 69,698 - 69,698 69,405 Total current assets 2,326,233 442,146 145,890 2,914,269 3,066,153 Noncurrent assets: Capital assets: Land - 424,665 - 424,665 424,665 Buildings and improvements - 928,870 - 928,870 928,870 Equipment and furniture - - 74,232 74,232 74,232 Machinery and equipment - 178,512 - 178,512 158,929 Total capital assets - 1,532,047 74,232 1,606,279 1,586,696 Less:Accumulated depreciation - (625,278) (37,116) (662,394) (601,477) Total noncurrent assets - 906,769 37,116 943,885 985,219 Total assets $ 2,326,233 $ 1,348,915 $ 183,006 $ 3,858,154 $ 4,051,372 Liabilities: Current liabilities: Accounts payable $ 1,089 $ 44,299 $ 1,070 $ 46,458 $ 25,191 Health care benefits payable 39,003 - - 39,003 28,480 Unpaid claims 158,905 - - 158,905 130,039 Salaries payable 493 15,544 7,238 23,275 20,936 Due to other governmental units - 360 - 360 1,263 Compensated absences payable - 17,717 8,757 26,474 20,360 Total current liabilities 199,490 77,920 17,065 294,475 226,269 Noncurrent liabilities: Compensated absences payable - 21,401 1,473 22,874 25,253 Other post employment benefits - 1,705 223 1,928 1,557 Total noncurrent liabilities - 23,106 1,696 24,802 26,810 Totalliabilities 199,490 101,026 18,761 319,277 253,079 Net position: Net investment in capital assets - 906,769 37,116 943,885 985,219 Unrestricted 2,126,743 341,120 127,129 2,594,992 2,813,074 Total net position $ 2,126,743 $ 1,247,889 $ 164,245 $ 3,538,877 $ 3,798,293 114 CITY OF COTTAGE GROVE, NIINNESOTA INTERNAL SERVICE FiJNDS Statement 25 COMBINING STATEMENT OF REVENUES,EXPENSES AND CHANGES IN NET POSITION For The Year Ended December 31,2014 With Comparative Data for the Year Ended December 31,2013 Totals Self Fleet Information Internal Service Funds Insurance Maintenance Services 2014 2013 Operating revenues: Charges for services: User fees $ - $ 1,068,151 $ 415,210 $ 1,483,361 $ 1,409,617 Employee benefits 1,096,105 - - 1,096,105 1,077,840 Propertyinsurance 233,350 - - 233,350 227,900 Insurance refunds and reimbursements 55,234 - - 55,234 89,018 Total operating revenues 1,384,689 1,068,151 415,210 2,868,050 2,804,375 Operating expenses: Operating and maintenance: Personal services - 316,965 158,393 475,358 458,839 Commodities - 590,784 160,299 751,083 663,121 Contractual services - 129,792 101,961 231,753 170,716 Total operation and maintenance - 1,037,541 420,653 1,458,194 1,292,676 Administrative and general: Personal insurance benefits 1,259,345 - - 1,259,345 1,102,417 Contractual services 248,515 - - 248,515 225,025 Claims 172,634 - - 172,634 130,723 Total administrative and general 1,680,494 - - 1,680,494 1,458,165 Depreciation - 30,567 14,847 45,414 46,277 Total operating expenses 1,680,494 1,068,108 435,500 3,184,102 2,797,118 Operating income(loss) (295,805) 43 (20,290) (316,052) 7,257 Nonoperating revenues: Investment earnings(loss) 34,383 4,558 1,610 40,551 (23,372) Miscellaneous 4,432 7,573 - 12,005 20,565 Total nonoperating revenues 38,815 12,131 1,610 52,556 (2,807) Income(loss)before contributions and transfers (256,990) 12,174 (18,680) (263,496) 4,450 Capital Contributions - 4,080 - 4,080 - Transfers: Transfer to Enterprise Fund - - - - (31,000) Change in net position (256,990) 16,254 (18,680) (259,416) (26,550) Net position-January 1 2,383,733 1,231,635 182,925 3,798,293 3,824,843 Net position-December 31 $ 2,126,743 $ 1,247,889 $ 164,245 $ 3,538,877 $ 3,798,293 115 CITY OF COTTAGE GROVE,MINNESOTA COMBINING STATEMENT OF CASH FLOWS Statement 26 INTERNAL SERVICE FUNDS For The Year Ended December 31,2014 With Comparative Data for the Year Ended December 31,2013 Totals Self Fleet Information Internal Service Funds Insurance Maintenance Services 2014 2013 Cash flows from operating activities: Receipts from interfund services provided $ 1,329,455 $ 1,068,151 $ 415,210 $ 2,812,816 $ 2,715,357 Receipts from insurance refunds and reimbursements 55,234 - - 55,234 89,018 Paymentto suppliers (391,934) (701,153) (269,346) (1,362,433) (1,115,722) Paymenttoemployees (1,248,851) (311,245) (157,639) (1,717,735) (1,547,882) Miscellaneous revenue 4,432 7,573 - 12,005 20,565 Net cash flows from operating activities (251,664) 63,326 (11,775) (200,113) 161,336 Cash flows from noncapital financing activities: Transfer to Enterprise Fund - - - - (31,000) Cash flows from investing activities: Investment earnings(loss) 34,383 4,558 1,610 40,551 (23,372) Netincrease(decrease)in cash and cash equivalents (217,281) 67,884 (10,165) (159,562) 106,964 Cash and cash equivalents-January 1 2,433,785 304,004 135,435 2,873,224 2,766,260 Cash and cash equivalents-December 31 $ 2,216,504 $ 371,888 $ 125,270 $ 2,713,662 $ 2,873,224 Reconciliation of operating income(loss)to net cash provided(used)by operating activities: Operating income(loss) $ (295,805) $ 43 $ (20,290) $ (316,052) $ 7,257 Adjustments to reconcile operating income(loss) to net cash flows from operating activities: Depreciation - 30,567 14,847 45,414 46,277 Miscellaneous revenue 4,432 7,573 - 12,005 20,565 Changes in assets and liabilities: Decrease(increase)in receivables - (560) - (560) 190 Decrease(increase)in prepaid items 92 650 (7,567) (6,825) 3,543 Decrease(increase)in inventory - (293) - (293) 4,078 Increase(decrease)in payables 39,617 25,346 1,235 66,198 79,426 Total adjustments 44,141 63,283 8,515 115,939 154,079 Net cash flows from operating activities $ (251,664) $ 63,326 $ (11,775) $ (200,113) $ 161,336 Noncash investing,capital and financing activities: Capital asset contribution from government $ - $ 4,080 $ - $ 4,080 $ - 116 ECONOMIC DEVELOPMENT AUTHORITY CONIl'ONENT UNIT Established to account for the receipt and use of monies for economic purposes. ii� CITY OF COTTAGE GROVE,MINNESOTA COMBINING BALANCE SHEET-ALL GOVERNMENTAL FiJND TYPES Statement 27 ECONOMIC DEVELOPMENT AUTHORITY COMPONENT UNIT December 31,2014 With Comparative Data as of December 31,2013 Totals Economic Development Authority Special Debt Component Unit Revenue Service 2014 2013 Assets: Cash and investments $ - $ 546,654 $ 546,654 $ 608,278 Interfund receivable - 14,775 14,775 - Accountsreceivable 4,154 - 4,154 - Capital lease receivable from primary government - 5,085,000 5,085,000 5,355,000 Prepaid items 2,560 - 2,560 1,500 Delinquent propertytaxesreceivable 1,771 - 1,771 2,430 Property held for resale 311,718 - 311,718 311,718 Total assets $ 320,203 $ 5,646,429 $ 5,966,632 $ 6,278,926 Liabilities: Accounts payable $ 36,284 $ - $ 36,284 $ 151,894 Salaries payable 8,782 - 8,782 7,490 Interfund payable 14,775 - 14,775 - Due to other governmental units - - - 74 Deposits Payable 2,666 - 2,666 - Totalliabilities 62,507 - 62,507 159,458 Deferred inflows of resources: Unavailable revenue-property taxes 1,771 - 1,771 2,430 Total deferred inflows of resources 1,771 - 1,771 2,430 Fund balance: Nonspendable: Prepaid items 2,560 - 2,560 1,500 Assets for resale 311,718 - 311,718 311,718 Restricted for: Debt service reserve - 5,646,429 5,646,429 5,908,436 Unassigned (58,353) - (58,353) (104,616) Total fund balance 255,925 5,646,429 5,902,354 6,117,038 Total liabilities,deferred inflows of resources, and fund balance $ 320,203 $ 5,646,429 $ 5,966,632 $ 6,278,926 Fund balance reported above $ 5,902,354 Other long-term assets,including property taxes receivable,are not available to pay for current-period expenditures,and therefore,are deferred in the funds. 1,771 Long-term liabilities,including bonds payable,compensated absences and other post employment benefits,are not due and payable in the current period and therefore are not reported in the funds. (5,101,655) Net position of component unit(page 33) $ 802,470 118 CITY OF COTTAGE GROVE,MINNESOTA COMBINING STATEMENT OF REVENUES,EXPENDITURES AND Statement 28 CHANGES IN FUND BALANCE-ALL GOVERNMENTAL FUND TYPES ECONOMIC DEVELOPMENT AUTHORITY COMPONENT UNIT For The Year Ended December 31,2014 With Comparative Data far the Year Ended December 31,2013 Totals Economic Development Authority Special Debt Component Unit Revenue Service 2014 2013 Revenues: General property taxes: Current and delinquent $ 108,430 $ - $ 108,430 $ 106,992 Charges for service 230,000 - 230,000 30,000 Investment earnings(loss) 377 7,993 8,370 (5,201) Interest on loan to primary government - 234,293 234,293 244,893 Miscellaneous 114,200 - 114,200 69,703 Total revenues 453,007 242,286 695,293 446,387 Expenditures: General government: Current: Personal services 216,300 - 216,300 217,550 Commodities 7,013 - 7,013 98,135 Contractual services 182,371 - 182,371 206,450 Debt service: Principal retirement - 270,000 270,000 260,000 Interest and fiscal charges - 234,293 234,293 244,893 Total expenditures 405,684 504,293 909,977 1,027,028 Revenues over(under)expenditures 47,323 (262,007) (214,684) (580,641) Special item: Loan forgiveness to primary government - - - (1,020,000) Net increase(decrease)in fund balance 47,323 (262,00'� (214,684) (1,600,641) Fund balance-January 1 208,602 5,908,436 6,117,038 7,717,679 Fund balance-December 31 $ 255,925 $ 5,646,429 $ 5,902,354 $ 6,117,038 Net decrease in fund balance reported above $ (214,684) Revenues in the statement of activities that do not report current financial resources are not reported as revenues in the funds: General property taxes unavailable revenue: At December 31,2013 (2,430) At December 31,2014 1,771 The issuance of long-term debt(e.g.,bonds,leases)provides current financial resources to governmental funds,while the repayment of the principal of long-term debt consumes the current financial resources of governmental funds. Neither transaction,however,has any effect on net position. This amount is the net effect of these differences in the treatment of long-term debt and related items: Principal repayments 270,000 Some expenses reported in the statement of activities do not require the use of current financial resources and therefore are not reported as expenditures in governmental funds: Compensated absences: At December 31,2013 14,112 At December 31,2014 (15,955) Other post employment benefits: At December 31,2013 524 At December 31,2014 (700) Change in net position of component unit(page 35) $ 52,638 119 -This Page Intentionally Left Blank- 120 SUPPLEMENTARY FINANCIAL INFORMATION iai CTTY OF COTTAGE GROVE,MINNESOTA CONSTRUCTION/ACQUISITION COSTS CAPITAL PROJECT FUNDS December 31, 2014 Construction/Acquisirion Costs Fund Land No. Descriptions Contractor Engineer Acquisition 510 FUNDED BY FUTURE DEVELOPMENT: Jamaica/Military Realignment $ - $ 97,885 $ - Total Fund 510 - 97,885 - 520 FUNDED BY MSA: Ideal Avenue - - - Hinton Avenue Reclamation 1,068,824 195,644 - East Point Douglas street&uriliries 1,482,164 230,349 - Hardwood Avenue sidewalks&trails - - - 70th&Meadow Grass intersecrion improvements 412,276 51,024 - CSAH 19-20-22 alignment 469,814 213,874 - CSAH 19-20-22 alignment 396,852 - - Total Fund 520 3,829,930 690,891 - FUNDED BY SPECIAL ASSESSMENT BONDS: 560 Pavement Management 2013 Pavement Management 4,799,303 765,530 - 2014 Pavement Management 1,913,488 248,806 - Total Fund 560 6,712,791 1,014,336 - FUNDED BY PARK TRUST FUNDS: 570 Hamlet Park North - 27,741 - Oak Cove Park - - - Trails Everwood 4th - - - Trails - - - Total Fund 570 - 27,741 - FUNDED BY AREA FUNDS: 575 Trunk Fund Oversizing Capitalize - - - Total Fund 575 - - - 580 Trunk Fund Oversizing Capitalize - - - Total Fund 580 - - - 585 80th Street Box Culvert 1,184,308 224,387 - Trunk Fund Oversizing Capitalize - - - Total Fund 585 1,184,308 224,387 - Totals $ 11,727,029 $ 2,055,240 $ - Less: Completed construction* Work in progress-December 31,2014 i22 Exhibit 1 Construction/Acquisirion Costs Eapended Legal, ROW/ Total Prior Fiscal Easement Other Costs 2014 Years $ - $ - $ 7,008 $ 104,893 $ - $ 104,893 - - 7,008 104,893 - 104,893 - - 105,743 105,743 - 105,743 - - 11,802 1,276,270 * - 1,276,270 - - 230,035 1,942,548 * 144,603 1,797,945 - - 187,167 187,167 * 187,167 - - - 5,230 468,530 * 468,530 - - 600,957 8,157 1,292,802 * 27,474 1,265,328 - - - 396,852 * - 396,852 - 600,957 548,134 5,669,912 827,774 4,842,138 - - 86,547 5,651,380 * 86,309 5,565,071 - - 33,369 2,195,663 * 2,195,663 - - - 119,916 7,847,043 2,281,972 5,565,071 - - - 27,741 - 27,741 - - 344,618 344,618 344,618 - - - 23,646 23,646 23,646 - - - 52,469 52,469 * 16,490 35,979 - - 420,733 448,474 384,754 63,720 - - 136,256 136,256 * 136,256 - - - 136,256 136,256 136,256 - - - 101,878 101,878 * 101,878 - - - 101,878 101,878 101,878 - - - 80,074 1,488,769 * 48,621 1,440,148 - - 144,522 144,522 * 111,514 33,008 - - 224,596 1,633,291 160,135 1,473,156 $ - $ 600,957 $ 1,558,521 $ 15,941,747 $ 3,892,769 $ 12,048,978 15,335,106 $ 606,641 123 CTTY OF COTTAGE GROVE,MINNESOTA COMBINED SCHEDULE OF BONDED INDEBTEDNESS December 31, 2014 Interest Final Rate Dated Payment Primary Government General Obligation Bonds: $1,405,000 Tax Increment Bonds of 2004A 3.0-4.65% 7/1/2004 2/1/2024 $1,775,000 TaY Increment Bonds of 2004B 4.5-5.75% 7/1/2004 2/1/2021 $1,405,000 Tax Increment Refunding Bonds of 2014A 2.0-2.50% 5/29/2014 2/1/2021 Total General Obligarion Bonds Special Assessment Debt Improvement Bonds of 2008A 3.50-3.60% 6/11/2008 2/1/2019 Improvement Bonds of 2009A 2.50-4.30% 4/16/2009 2/1/2024 Improvement Refunding Bonds of 2009C 2.00-3.00% 4/16/2009 12/1/2015 Improvement Bonds of 2012A 0.30-220% 3/13/2012 2/1/2027 Improvement Bonds of 2013A 3.00-3.50% 9/26/2013 2/1/2029 Total Special Assessment Debt with Governmental Commitment Proprietary Fund Bonds: Water Revenue Refunding Bonds of 2009B 2.50-4.0% 4/16/2009 2/1/2020 Total Proprietary Fund Bonds Total Bonded Indebtedness-Primary Government Component Unit-EDA $6,500,000 Ice Arena Lease Rev Bonds of 2008B 4.0%-4.90% 6/11/2008 4/1/2028 Total Component Unit-EDA Total Bonded Indebtedness-Reporting Entity 124 Exhibit 2 Authorized Principal Due Interest Due And Issued Retired Outstanding In 2015 In 2015 $ 1,405,000 $ 310,000 $ 1,095,000 $ 35,000 $ 48,870 1,775,000 1,775,000 - - - 1,405,000 - 1,405,000 170,000 32,834 4,585,000 2,085,000 2,500,000 205,000 81,704 3,370,000 2,035,000 1,335,000 245,000 42,728 3,650,000 1,260,000 2,390,000 225,000 88,651 625,000 420,000 205,000 205,000 6,150 1,865,000 240,000 1,625,000 120,000 23,258 7,345,000 - 7,345,000 320,000 223,216 16,855,000 3,955,000 12,900,000 1,115,000 384,003 1,205,000 500,000 705,000 105,000 24,150 1,205,000 500,000 705,000 105,000 24,150 22,645,000 6,540,000 16,105,000 1,425,000 489,857 6,500,000 1,415,000 5,085,000 280,000 223,292 6,500,000 1,415,000 5,085,000 280,000 223,292 $ 29,145,000 $ 7,955,000 $ 21,190,000 $ 1,705,000 $ 713,149 125 M N O O O M � �--� 'n Ql l� M O Vl � O Vl 7 l� Vl O ^" 4' O O O O � �--i l� O �D � l� 7 �--i 7 N � l� O � � � � O Vl Vl O � O 7 M �D O M Vl M l� l� Vl �D Vl ^C O � � Ql O Ql M 7 Ql � N Ql O �D �D ��D O � � y � U �' � O O O Ql �D Vl Vl Vl Vl 7 7 M M �D �D Ql �--I N O W � � � � O Ql l� �D 7 M M M M O O O O O l� l� �D �D �D �D a � � CQ Ni N Vi �--i �--i �--i �--i �--i �--i �--i �--i �--i �--i Vi �3 �3 �3 O 7 7 � � � O O � � � � � � � � � 7 O � � N l� l� 7 N � ¢�� O l� Ql � M N � O � � `� Vi N l� l� �Ql Vi Vi l� N � �" M N Vl � � � Ql Ql Vl �, � > � � M 7 N N N N N 7 .� Q w � � 69 69 N � O O 7 7 � � � O O � � � � � � � � � 7 � O Q�' O � � N l� l� 7 N � � O � O l� Ql � M N O � O Vi N l� l��Ql Vi Vi l� Q M � w M N 7 N N N N N 7 O � � �3 �3 �3 �3 � O �D �D Vl O M Vl Ql l� M O Vl � O Vl � l� Vl �D � � O Vl Vl l� O M M � �D � l� 7 �--i 7 N � l� Vl ^� C O M M N N Ql l� �--i M �D O M Vl M l� l� Vl �D M O a� � N � Vl �D �--i �--i Ql l� Ql Ql �N Ql O �D �D �D O �--i W rr� � � O y�j � � N O O O O O O O O O � � � �D � �--� �, �C �' P� ,--i N � �--� �--� �--� �--� �--� �--� �--� �--� �--� �--� � � a � � � � � � � � 0 0 � � � � o o v� o o v� o v� o o � � v� � � o � o � w � � w � � w � w � a� � � � O � O l� l� N N l� � Vl � l� N M Ql Vl Ql Vl �D l� � Vl � Vl �D � M N � �M 7 O � �O O � O �D O � 'U � � O 7 O� 7 7 N N N N N N N N N N � N � N 7 N M � N M � N v� �D �D �D �D �D �D �D �D �D �D �D �D �D �D N � l� � O l� �--i Ql Ql e.� � � 69 69 �. � O O 7 7 � �D � � Ql N � Vl Vl O O Vl O ' 7 � O � O Vl Ql �--� Vl Ql O �--i O � l� O � l� �, O � O �--i �--i N Vl � � Vl O �--i O �D O N l� ~ � Vl � Vl l� Ni M N O 7 ��D 7 �D Ql �D �O Ni �D �" O N � � � � � � � � � � � � � � � � N �D � � � � � � � � �3 �3 � � � a O O O O O ' ' ' ' ' ' ' ' ' ' ' ' ' O �J O U O � Vl Vl Vl O � O V1 � O Vi �D � N � O O ~ ~ ~ � �D � w N N N N �3 � � �3 �3 O O Ql Ql � Vl l� Vl Vl Vl O O M ' ' ' ' Ql O � O l� l� Vl M l� M N N N O N � l� O � O M M �D M M O O Vl � � M 7 M O � O O �D �D � �D M 'n ��D �--i �D �O �D Vl �" O Ql Ql � O O Ql Ql � � l� l� �D � �p � N M 7 � M M M N N N N N N N � M � � N N N �3 �3 �3 �3 O Ql Ql 7 O O O O O O N O M ' ' ' ' Ql � O M M O N M Ql N 7 l� �--i 7 M p O Ql Ql l� l� Vl O �--I � Vl � � l� Ql s�i � 'O O 7 7 �D �--i ��--i� M �D �D 7 �D 7 � N iC � O � � � � Ql O N O � Ql Ql � O Q � O '� � � N N N M M M M N N N Q� � � O �Q N N N � �3 �3 O Ql Ql 7 O O O O O O N O M ' ' ' ' Ql O M M O �--i N M Ql N 7 l� �--� 7 M O Ql Ql l� l� Vl O �--i � Vl � � l� Ql �, � � �q -� O 7 7 �D�--i �M�D�D 7�D 7 }. 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V r�i� O � � HC7 � � �°' Q o .� � � � c`�i � � o �+- � °�' ,��- � E� � '� � o o � a� � o � �, �' � o � a� � � . � F� � �" � F� � � a� F� � ti Q O � � `� `� � � � � � � � � � � � � � � O � � a� P. � � °� � ." � o �� .� � o � � � Pz � a�i o � c�i ,� � � � � �Q-' � � � +� �v, .� °s�' � � W U � '� � '� a� �.-I Y y � tl--I �� ,-� � U � � � U �'' Q � 'y � � � P. � U � � ,� � a�i � o °s�' �� -� -� U � w � w° � w H � W v Q � 0 H � w � w w 135 -This Page Intentionally Left Blank- 136 IIL STATISTICAL SECTION (UNAUDITED) This part of the City of Cottage Grove's comprehensive annual financial report presents detailed information as a conteat for understanding what the information in the financial statements,note disclosures,and required supplementary informarion says about the City's overall financial health Financial Trends These schedules contain trend information to help the reader understand how the government's financial performance and well-being have changed over time. Table 1—Net Position by Component Table 2—Cl�anges in Net Posirion Table 3—Fund Balances of Governmental Funds Table 4—Cl�anges in Fund Balances of Governmental Funds Revenue Capacity These schedules contain information to help the reader assess the government's most significant local revenue source,property taxes. Table 5—Assessed and Estimated Actual Value of TaYable Properry Table 6—Properry TaY Rates Direct and Overlapping Governments Table 7—Principal Property TaYpayers Table 8—Properry Tax Levies and Collections Debt Capacity These schedules present information to help the reader assess the affordability of the government's current levels of outstanding debt and the government's ability to issue additional debt in the future. Table 9—Rarios of Outstanding Debt by Type Table 10—Ratios of General Bonded Debt Outstanding Table 11—Direct and Overlapping Governmental Acrivities Debt Table 12—Legal Debt Margin Information Demographic and Economic Information These schedules offer demographic and economic indicators to help the reader understand the environment within which the government's financial activities take place. Table 13—Demographic and Economic Statistics Table 14—Prinicipal Employers Operating Information These schedules contain service and infrastructure data to help the reader understand how the information in the government's financial report relates to the services the government provides and acfivifies itperforms. Table 15—Full-time Equivalent City Government Employees by Function Table 16—Operating Indicators by Funcrion/Program Table 17—Capital Assets Statisrics by Function/1'rogram Sources:Unless otherwise noted,the information in these schedules is derived from the comprehensive annual financial reports for the relevant year. 137 � N N l� Ql ' M N �--i N O M L O 7 M � O � 7 � 7 r N �3 � O �l� � N �D � N �M l� F-I �D l� l� O M Ql N Ql l� � M 0 N Q� N vi 7 � M �D Q� � N l� �D � N 7 vi O � �D 7 N N N �D vi � l� � 7 M � � N �3 �3 �3 �3 �3 �3 Ql � l� 7 Vl ' 7 Ql 7 � �--i M vi 7 ,--i N Q� N vi 7 7 7 O Q� �D �D O N N Q� �D � M �D l� � N M N Vl Ql l� O l� � � O Vl Vl Ql 7 O � O Ql 0 Ql N 7 l� N �D l� 7 N 7 l�vi l� ,--i �D � vi l�N vi N N vi vi � �D l� 7 N � � N �3 �3 �3 �3 �3 �3 Vl M l� Vl Vl ' O V�nl O M l� O � Q� 7 N 7 7 O� N M � M Ql Ql N Ni O 7 � Vi Vi O �O Ql Q1 N 7 N 7 l� M �D 0 7 N O �D N �D � �D N �D Vl N O 7 Vl Ql M 7 l� M 7 Ql l� N N 7 vi � �D l� M � � � N �3 �3 �3 �3 �3 �3 � O � M �D �D � O l� �D Ql M Ql M O N �--i 7 �D M O l� �D Vl Q�i � N O � N M N �D O �D �M 0 �D N �D �D �D M N N M �D � � N Ql 7 7 � M M l� M 7 l� Vl O M 7 Vl �--i �D �D 7 �--i � � N �3 �3 �3 �3 �3 �3 Ql M Vl l� �--I Vl �--i l� O � �D 7 l� �D Ql M 7 � �D � Ni 7 Vl N O Vl � Vl O �D �D M N Vl Ql 0 7 �Ni � O Vl Ql Vl 7 l� N M Q� 7 7 l� N N N �D �D 7 l� 0 l� � 7 O �M � O �D N O N 7 vi vi �D M N l� ��D� M Q� 7 7 � � �D 7 vi � � N � �3 �3 �3 �3 �3 �3 ^✓' U O �D l� M 7 Vl O Ql 7 �--i l� N O Vl � �--i O Ql � l� O 'n M Ql 'r�'i Vl M O Vl l� 7 O Vl Ql 7 � Vl �� N �D Ql M Ql N l� �--i �--i 0 M � N N O �D � vi 7 N � 0 l� Q� � N N �D � 7 N 7 N N�N M 7 N �D �D� vi O Q� 7 7 vi � �D 7 � � � N �3 �3 �3 �3 �3 �3 � � Vl �D Vl Vl � � � � M 7 M Ql 7 l� l� �D � �D �D O M Ql M 7 M 7 M 7 l� 7 �D � O �Ql � l� N N N l� O N O � � � N � M N QNi v�i Q� O � � O .. .. .. .. .. .. .. .. .. .. .. 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U P; ��-1 Z '—' cv r� � � � 149 CITY OF COTTAGE GROVE,MINNESOTA DIRECT AND OVERLAPPING GOVERNMENTAL ACTIVITIES DEBT Table 11 As of December 31,2014 City of Cottage Grove %of Debt Share of Net Debt Applicable Overlapping Outstanding to City Debt Overlapping: Washington County $ 120,300,000 12.2795% $ 14,772,239 School Districts ISD No.200(Hastings) 22,475,000 1.6407% 368,747 ISD No.833(South Wash.County) 259,975,000 30.7616% 79,972,470 Metro Council 155,020,000 0.9772% 1,514,855 Total Overlapping 96,628,311 City of Cottage Grove Direct Debt $ 20,816,300 100.00% 20,816,300 Total Direct and Overlapping Debt $ 578,586,300 $ 117,444,611 Source:City of Cottage Grove Municipal Disclosure Reporting Notes:Overlapping governments are those that coincide,at least in part with the geographic boundaries of the City.This schedule estimates the portion of the outstanding debt of those overlapping governments that is borne by the residents and businesses of the City. This process 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. 150 ti O o O � O O h O �--i O d oo O oo O h oo O o0 � 7 Vi 01 h M 7 Vi 01 F � 01 0o O 01 01 0o O 0o O o0 7 0o O o0 O Vi �O �O .ti Vi �O N h �O 01 h �O M N �3 �3 �3 �3 O O � � N O N 7 p � O O O oo N ^ M M V�i ONO � tC � � 0 M M 01 � �� N � � � � ;� � iC .-- 'O vUi U `�' a a w w � �� w° °' `° o o�o 0 0�0 °o\i o `� ° � � ^ � o p N M � �O r � '� �M-' � � 0 01 �O m o � �� p N M Vi 00 iC � CL 'O h �O U N :--i tC � � � W � � �� qQ � 0 � o � � � N o N N Q � � o � � o � � o � N � � � � � � o � o � o � � � o � � � o � � o N � � o ,� ,� - N „ „ � � �. � � � � 0 w N o N c� 0 0� � a a o �° o � m a N � `� � � � 0 0 v, o v, a h O h vi � � r � o� v� m o �" � °° N � � � � � c� o c� o v, o v, h O O O o0 � O vi vi O O � � � O � � � � �3 �3 �O O �O o O O O � � M Vi 00 �--i 0 � h O O ^ ^ N � � �3 �3 N O N o 01 O 01 h M O M O � � 7 N N O � � � � N � � F 0 � ¢ 69 69 .� � � � � a, o o �� U' a� a� r' W � a a A � C�i � U U � Q r�, �y, �'y F � r � W � b� Q � � � � G� Q � � p � U w O � � �� .� � � ... o, � � Y A � � � � cn v � � Q H � H � 151 CITY OF COTTAGE GROVE,MINNESOTA DEMOGRAPHIC AND ECONOMIC STATISTICS Table 13 Last Ten Fiscal Years Per Capita Fiscal Personal Personal School Unemployment Year Population(1) Income(2) Income(2) Enrollment(3) Rate(4) 2014 35,626 $ 1,927,020,274 $ 54,090 17,685 3.9% 2013 35,403 1,843,080,180 52,060 17,671 4.8% 2012 35,187 1,823,284,779 51,817 17,639 5.5% 2011 34,828 1,764,595,448 50,666 17,389 6.0% 2010 34,589 1,638,619,286 47,374 17,060 6.9% 2009 34,213 1,583,309,214 46,278 16,795 7.6% 2008 34,017 1,630,264,725 47,925 16,800 4.9% 2007 33,788 1,588,272,516 47,007 16,805 3.9% 2006 33,529 1,503,105,070 44,830 16,467 3.5% 2005 33,179 1,419,364,441 42,779 16,400 3.5% Sources: (1)Metropolitan Council-2002-2009&2012-2013. Census-2010. Cottage Grove Planning Department-2014. (2)Washington County data from Bureau of Economic Analysis. (3)Independent School District No. 833 including Valley Crossing School. (4)Minnesota Department of Employment and Economic Development. 152 CITY OF COTTAGE GROVE,MINNESOTA PRINCIPAL EMPLOYERS Table 14 Current year and nine years ago 2014 2005 Percentage Percentage of Total of Total Taxpayer Employees Rank Employment Employees Rank Employment School District 833 1,591 1 24% 1,128 1 18% 3M Cottage Grove 760 2 11% 675 2 11% Renewal by Andersen 454 3 7% 399 3 6% Up North Plastics Inc 245 4 4% 260 4 4% Werner Electric 213 5 3% - - - City of Cottage Grove 186 6 3% 175 6 3% AGCO 163 7 2% - - - Walmart 140 8 2% - - - Target 135 9 2% 150 7 2% Allina 110 10 2% 138 9 2% Cub Foods - - - 146 8 2% Menard's - - - 200 5 3% Rainbow Foods - - - 130 10 2% Total 3,997 59% 3,401 54% Sources: City of Cottage Grove Annual Municipal Disclosure Reporting and Cottage Grove Economic Development Department. 153 ,.�y O O �O O �O 00 v'� v'� 00 � O �O � �O � � O N O N �O � �O � v'� O O O M � M O 00 l� � M N M 00 M � �--� � O � 0 N � � N M � N 00 O O� O O� 00 v'� v'� 00 � O �O � l� M O O O O �O � �O � v'� O O O M M 01 00 � N �--� N M 00 M � �--� � V'� 0 N M V� N � �O O �O O �O M O O M � O �O � N O O � O � 00 v'� N N v'� O O O O� N N O� 00 � �--' O N M 00 M V� �--� � 0 N M V� N N N M � �O O v'� O v'� �O O O �O O O � � � l O N O N v'� v'� AO M � O O 00 M � '—' � 01 l� � O N N 00 cn V� � cn O U O N M V'� N N N N Q 4-i O � � r� �O O v'� O v'� �O O O �O O O � � N l O N O N v'� v'� AO M � O O 00 M � 0 � 01 l � O N N 00 cn V� � cn O 0 N M V� N N ��+ N �i W �--� � � � 0 � 0 � � 0 0 � 0 0 � � �ti � l O N O N v'� v'� AO M � O O 00 M � 01 l � O N N 00 M v'� � M O � 0 N M V� N N f� N N�+ �r .y � � 0 0 0 0 � 0 0 � 0 0 � � � w � o o �n o �o c� � o 0 0o c� � N 01 01 � N M N 01 M V'� �--� M � � � � N M V'� N N y.�.i O �, � � 3 U � .o � � � M O O O O �O O O � O O � � � �., o o � o � �n o �o o � o 0 00 0, o� �.., O N oM,� o; � �N N ri c�i o ri vi � ri � � al N '-" � � � o 0 O `� a � o 0 0 0 �o 0 0 � o o � � c� � � � O� O � O � v'� v'� �O O � O O 00 M O N � ,�—, M � N M N O � v'� � M O �' W N � Z ~ � � O �.�y 00 O M O M �O O O � O O � � O� �p O O � � O 00 O 00 v'� v'� �O O � O O 00 N � � '� � Q�, O 00 � M l0 M M N O �--� � �--� M 01 U � m r,�� O N M v'� N N '� � � � ° � � 3 � � � � � � � � � o � w � � � � � � � p" � � a' � o � � r,� � W un "n ,�.. � � W � � � � � � � � � � � � y.�'., �' C J 0 � � `� � O � d � � � � � U � � � � � v � W � � � a� � .� � w � o �� O � v� � CJ �' O � � P-a s-� � � � N Y �, �, � O .y W i"i w �J cd c�d � �' c�d W� � � O � N N � � �� C� '�" �y.y� O E-� � ^I O � U U ,� \ O � Y � U� U� O a 'v Y I--� �"� �l cC '" N c� � / N c� N � N `� '." 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