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Home My WebLink About2017 CAFRCottage Ca Grove Ipbere Pride and ?C05perity Meet Comprehensive Annual Financial Report City of Cottage Grove Minnesota Year Ended December 31, Zo1'7 -This Page Intentionally left Blank - CITY OF COTTAGE GROVE, MINNESOTA TABLE OF CONTENTS Reference Page Number I. INTRODUCTORY SECTION Letter of Transmittal 3 Certificate of Achievement for Excellence in Financial Reporting 7 Principal City Officials 9 Organization Chart 10 II. FINANCIAL SECTION Independent Auditor's Report 13 Management's Discussion and Analysis 17 Basic Financial Statements: Government -Wide Financial Statements: Statement of Net Position Statement 1 29 Statement of Activities Statement 2 30 Fund Financial Statements: Balance Sheet - Governmental Funds Statement 3 32 Statement of Revenues, Expenditures, and Changes in Fund Balance - Governmental Funds Statement 4 34 Reconciliation of the Statement of Revenues, Expenditures, and Changes in Fund Balances of Governmental Funds to the Statement of Activities Statement 5 36 Statement of Net Position - Proprietary Funds Statement 6 37 Statement of Revenues, Expenses, and Changes in Fund Net Position - Proprietary Funds Statement 7 38 Statement of Cash Flows - Proprietary Funds Statement 8 39 Notes to Financial Statements 40 Required Supplementary Information: Budgetary Comparison Schedule - General Fund Statement 9 82 Schedule of City's Proportionate share of Net Pension Liability - GERF and PEPFF 85 Schedule of City Contributions - GERF and PEPFF 86 Schedule of Employer and Non -Employer Contributions - Fire Relief 87 Schedule of Changes in Net Pension Liability - Fire Relief 88 Funding Progress Schedule - Other Post Employment Health Care Benefits 89 CITY 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 95 Combining Statement of Revenues, Expenditures and Changes in Fund Balance - Nonmajor Governmental Funds Statement 11 96 Subcombining Balance Sheet - Nonmajor Special Revenue Funds Statement 12 98 Subcombining Statement of Revenues, Expenditures and Changes in Fund Balance - Nonmajor Special Revenue Funds Statement 13 100 Subcombining Balance Sheet - Nonmajor Debt Service Funds Statement 14 103 Subcombining Statement of Revenues, Expenditures and Changes in Fund Balance - Nonmajor Debt Service Funds Statement 15 104 Subcombining Balance Sheet - Nonmajor Capital Project Funds Statement 16 106 Subcombining Statement of Revenues, Expenditures and Changes in Fund Balance - Nonmajor Capital Project Funds Statement 17 108 Special Revenue Funds: Schedules of Revenues, Expenditures and Changes in Fund Balance - Budget and Actual: Recycling Statement 18 110 Storm Water Statement 19 111 Forfeiture/Seizure Statement 20 112 Ice Arena Statement 21 113 Golf Course Statement 22 114 Charitable Gambling Statement 23 115 Internal Service Funds: Combining Statement of Net Position Statement 24 118 Combining Statement of Revenue, Expenses and Changes in Fund Net Position Statement 25 119 Combining Statement of Cash Flows Statement 26 120 Component Unit: Economic Development Authority: Combining Balance Sheet - All Governmental Fund Types Statement 27 122 Combining Statement of Revenues, Expenditures and Changes in Fund Balance - All Governmental Fund Types Statement 28 123 CITY OF COTTAGE GROVE, MINNESOTA TABLE OF CONTENTS Reference Page Number Supplementary Financial Information: Combined Schedule of Bonded Indebtedness Exhibit 1 126 Debt Service Payments to Maturity Exhibit 2 128 Deferred Tax Levies Exhibit 3 129 Subcombining Balance Sheet - Pavement Management Debt Service Schedule Exhibit 4 130 Subcombining Statement of Revenues, Expenditures, and Changes in Fund Balance - Pavement Management Debt Service Schedule Exhibit 5 131 Subcombining Balance Sheet - Tax Increment Construction Revolving Schedule Exhibit 6 132 Subcombining Statement of Revenues, Expenditures, and Changes in Fund Balance - Tax Increment Construction Revolving Schedule Exhibit 7 133 Subcombining Balance Sheet - TIF Debt Service Revolving Schedule Exhibit 8 134 Subcombining Statement of Revenues, Expenditures, and Changes in Fund Balance- TIF Debt Service Revolving Schedule Exhibit 9 135 CITY OF COTTAGE GROVE, MINNESOTA TABLE OF CONTENTS Reference Page Number III. STATISTICAL SECTION Net Position by Component Table 1 139 Changes in Net Position Table 2 140 Fund Balances of Governmental Funds Table 3 142 Changes in Fund Balances of Governmental Funds Table 4 143 Assessed and Estimated Actual Value of Taxable Property Table 5 144 Property Tax Rates - Direct and Overlapping Governments Table 6 145 Principal Property Taxpayers Table 7 146 Property Tax Levies and Collections 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 Activities Debt Table 11 150 Legal Debt Margin Information Table 12 151 Demographic and Economic Statistics 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 Statistics by Function/Program Table 17 156 I. INTRODUCTORY SECTION -This Page Intentionally left Blank - MmCottage Grove here Pride ..6 prosperity Meet May 30, 2018 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, 2017. 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. BerganKDV, 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, 2017. 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 2017 population at 36,492. 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 Ravine Parkway • Cottage Grove, Minnesota 55016 www.cottage-grove.org • 651-458-2800 • Fax 651-458-2897 • Equal Opportunity Employer 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 28th 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. 2017 continued with steady employment growth in the region and the unemployment rate at 2.7%, compared to the national rate of 4.1%. Wage growth and inflation continued at a moderate pace. The City's tax base is 80% residential and 20% commercial/industrial property. Total taxable market value in 2017 was $2.9 billion. Growth in taxable value for 2018 is expected at almost 7% due to 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, Leafline Labs, American Logistics, 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. Completion of the 92,800 sq. ft. Hy-Vee grocery store in the City's Gateway North development resulted in their Grand Opening in August 2017. The renovation of the former Home Depot property on this site is also proceeding with TJ Maxx and HomeGoods along with other retail tenant spaces which will open later in 2018. The vibrancy of this redevelopment has left retail vacancy in the Gateway district at less than 3%. 4 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 project is analyzed to determine if sufficient funding exists for the project and the longer term impact of each of the projects on the individual capital fund balances. For example, during the 2018 to 2022 period $5.6 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. Cottage Grove has evolved from a 1970's bedroom community to a steadily growing suburb with an expanding commercial 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. However, in 2017, the City issued 115 single family residential housing permits and two permits for senior rental housing projects. Projects already underway are anticipated to double that number from 2017 in 2018. Master planning of the 4,000 acre "East Ravine" development occurred in 2003-2006. Development of the first one thousand acres of low density residential housing with park and open space amenities and nodes of commercial use 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. Residential developers continue to pursue acreage for development in the master plan area and the City expects 126 acres of development there in 2018 along with construction of the majority of the Ravine Parkway which connects the area. The City strategy of growth in the residential and commercial/industrial areas, providing more homes and jobs, will ultimately draw the additional 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, 2016. This was the twenty-seventh 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 Cathy Mohr and Lauren Reichstadt-Nacar. 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 OJ Government Finance Officers Association Certificate of Achievement for Excellence in Financial Reporting Presented to City of Cottage Grove Minnesota For its Comprehensive Annual Financial Report for the Fiscal Year Ended December 31, 2016 Executive Director/CEO rN -This Page Intentionally left Blank - CITY OF COTTAGE GROVE, MINNESOTA PRINCIPAL CITY OFFICIALS December 31, 2017 Elected Officials Mayor: Myron Bailey Council Members: Steve Dennis Wayne Johnson La Rae Mills Dave Thiede Appointed Personnel City Administrator Finance Director City Clerk City Engineer/ Community Development Director Public Safety Director Public Works Director Parks and Recreation Director Term Expires December 31, 2020 December 31, 2018 December 31, 2020 December 31, 2020 December 31, 2018 Charlene Stevens Robin Roland Joe Fischbach Jennifer Levitt Craig Woolery Les Burshten Zac Dockter 9 City of Cottage Grove IF Organization Chart Community Development Economic Development Planning Building/Code Inspections Historic Preservation Engineering Administration City Clerk/ Elections Human Resources Community Programs/ Communications River Oaks Golf Course Cottage Grove Citizens City Admi nistrator Finance Accounting Enterprise Billing Payroll MIS City Council Advisory -- Commissions City Attorney Public Safety Patrol I Investigation: Public Safety Programs knimal & Code Enforcement Fire & Emergency Management EMS/Medical Services Fire Inspections Parks and Recreation Parks Recl ration I Ice Arena Forestry/ Horticulture Public Works Streets Fleet/Buildinc Maintenance Utilities Updated 11/2015 Me II. FINANCIAL SECTION -This Page Intentionally left Blank - 12 (: berganKDV 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, 2017, and the related notes to 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. Ltd_ 13 [: berganKDV Auditor's Responsibility (Continued) 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 in the first paragraph present fairly, in all material respects, the respective financial position 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 December 31, 2017, 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 Required Supplementary Information as listed in the Table of Contents be presented to supplement the basic financial statements. Such information, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board (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. 14 [: berganKav Other Matters (Continued) Other Information (Continued) 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 nonmajor 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. 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, 2016, from which such partial information was derived. We have previously audited the City's 2016 financial statements and our report, dated June 2, 2017, expressed unmodified opinions on the respective financial statements of the governmental activities, the business -type activities, the discretely presented component unit, each major 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, 2016, is consistent, in all material respects, with the audited financial statements from which it has been derived. 15 (: berganKav Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated May 30, 2018, 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 Government Auditing Standards in considering the City of Cottage Grove's internal control over financial reporting and compliance. 2-fl.rf) v66t.( Minneapolis, Minnesota May 30, 2018 16 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, 2017. 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 and deferred outflows of resources of the City of Cottage Grove and the EDA Component Unit exceeded its liabilities and deferred inflows of resources at the close of the most recent fiscal year by $235,458,402 (net position). Of this amount, $36,243,900 (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 $8,362,191. The increase is due to reimbursements and bonding for construction projects in the City. • As of the close of the current fiscal year, the City of Cottage Grove's governmental funds reported combined ending fund balances of $30,907,826 an increase of $3,720,871 compared to the previous year. Approximately 89% or $27,559,421 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 $9,233,073 (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 $36,012,907, an increase of $7,542,643 or 26.4% compared to the previous year. The City issued $9,155,000 in General Obligation Capital Improvement Plan bonds in 2017. 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 deferred outflows of resources and liabilities and deferred inflows of resources, with the difference 17 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. 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 29 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. 18 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 Project Fund — Capital project fund • MSA Construction Capital Project Fund Capital project fund • Closed Debt Fund —Debt service fund • Future Projects Fund - Capital project fund • Pavement Management Debt Service Fund —Debt service fund • Pavement Management Capital Project Fund - Capital project 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 32 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 major 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 37 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 40 of this report. 19 Other information: The combining statements referred to earlier in connection with non -major governmental funds and internal service funds are presented immediately following the required supplementary information. Combining and individual fund statements and schedules start on page 95 of this report. Government -wide Financial Analysis As noted earlier, net position may serve over time as a useful indicator of a government's financial position. In the case of the City of Cottage Grove, assets exceeded liabilities by $235,566,635 at the close of the most recent fiscal year. The largest portion of the City of Cottage Grove's net position ($196,358,995 or 83%) 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. City of Cottage Grove Net Position Governmental Activities Business -type Activities Total Primary Government 2017 2016 2017 2016 2017 2016 Current and other assets $46,982,826 $45,519,033 $13,467,170 $15,474,515 $60,449,996 $ 60,993,548 Capital assets 175,184,535 160,269,991 56,060,163 54,063,470 231,244,698 214,333,461 Total assets 222,167,334 205.789.024 69,527,333 69,537,985 291,694,688 275,327,009 Deferred outflows of resources Long-term liabilities outstanding Pension liability Other liabilities Total liabilities Deferred inflows of resources Net position: Net investment in capital assets Restricted Unrestricted 8,988,315 14,356,983 1,099,325 1,771,666 10,087,640 16,128,649 33,111,556 25,825,187 33,053 22,241 33,144,609 25,847,428 10,196,059 22,034,267 1,270,593 2,778,185 11,466,652 24,812,452 9,619,825 10,023,702 485,089 488,189 10,104,914 10,511,891 52,927,440 57,883,156 1,788,735 3,288,615 54,716,175 61,171,771 10,228,115 2,727,403 1,248,919 329,550 11,477,034 3,056,953 140,298,832 132,834,867 56,060,163 54,063,470 196,358,995 186,898,337 2,855,507 7,609,138 - - 2,855,507 7,609,138 24,845782 19,091,443 11,528,841 13,628,016 36,374,623 32,719,459 Total net position $168,000,121 $159,535,448 $67,589,004 $67,691,486 $235,589,125 $227,226,934 An additional portion of the City's net position ($2,855,507 or 1%) represents resources that are subject to external restrictions on how they may be used. The balance of unrestricted net position, $36,374,623 may be used to meet the City's ongoing obligations to citizens and creditors. 20 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. Governmental Activities: Governmental activities increased the City's net position by $8,464,673 in 2017. • Program revenue increased overall by $3,289,701. This is primarily related to increased capital grants and contributions from the state and county for road construction projects. • Investment income increased by $45,409 due to the unrealized gain in the value of investments which are annually adjusted in accordance with accounting standards. Revenues by Source - Government Activities Capital Grants & Contributions Operating Grants & Contribution 4% arges fc 17 Other taxes & tax increment Unrestricted 4% investment ings Other 0% `I Revenues: Program revenues: Charges for services Operating grants and contributions Capital grants and contributions General revenues: Property taxes Othertaxes Grants and contributions not restricted to specific programs Unrestricted investment earnings Gain on sale of capital assets Total revenues Expenses: General government Community development Economic development Public safety Public works: Regular operations Construction Culture and recreation Interest on long-term debt Street lights Cottage Grove EMS Water operating Sewer operating Total expenses Increase (decrease)in net position before transfers and special items Transfers Increase (decrease) in net position Net position - January 1 Net position - December 31 Governmental Activities 2017 2016 City of Cottage Grove's Changes in Net Position Business -Type Activities Total Primary Government $6,495,208 $6,463,450 $6,154,667 $6,405,041 $12,649,875 $12,868,491 1,408,099 1,676,805 - - 1,408,099 1,676,805 13,805,696 10,284,047 441,738 196,671 14,247,434 10,480,718 14,483,061 13,956,582 - - 14,483,061 13,956,582 1,590,980 1,332,740 - - 1,590,980 1,332,740 126,670 126,058 17,161 7,736 143,831 133,794 330,903 285,494 119,735 96,851 450,638 382,345 - - 1,988 - 1,988 38,221,132 34,125,176 6,733,301 6,708,287 44,973,918 40,833,463 2,398,669 3,450,479 - - 2,398,669 3,450,479 1,527,549 1,173,071 1,527,549 1,173,071 740,668 2,257,548 740,668 2,257,548 9,308,430 10,153,726 9,308,430 10,153,726 4,241,968 4,583,513 4,241,968 4,583,513 4,171,105 5,039,822 4,171,105 5,039,822 5,137,951 5,340,558 5,137,951 5,340,558 962,772 875,642 - - 962,772 875,642 - - 882,660 746,005 882,660 746,005 1,571,044 1,688,041 1,571,044 1,688,041 2,789,792 2,370,466 2,789,792 2,370,466 - - 2,879,119 2,727,188 2,879,119 2,727,188 28,489,112 32,874,359 8,122,615 7,531,700 36,611,727 40,406,059 9,751,505 1,250,817 (1,389,314) (822,413) 8,362,191 428,404 (1,286,832) (330,219) 1,286,832 330,219 - - 8,464,673 920,598 (102,482) (492,194) 8,362,191 428,404 159,535,448 158,614,850 67,691,486 68,183,680 227,226,934 226,798,530 $168,000,121 $159,535,448 $67,589,004 $67,691,486 $235,589,125 $227,226,934 The following chart illustrates the City's expenses and corresponding program revenues for its governmental activities. 22 12000000 10000000 8000000 6000000 4000000 2000000 0 �e� Q�eo eta\�oet oQ e\o e o�� ecoo c MI 1 11 11 0 .0 �ae� Qec oy�t sect y�o Q� o�h �yc° t Od' c ■ revenue ■ expense Business -Type Activities. Business -type activities decreased net position by $102,482. Below are graphs showing the business -type activities revenue and expense comparisons. Revenues - Business type Activities Capital grants & contributions 7% Unrestricted investment earnings 2% Charges f services 91% 23 3500000 3000000 2500000 2000000 1500000 1000000 500000 n Street Lights Cottage Grove EMS Water operating Sewer operating ■ revenues ■ expenses In business type activities, changes in net position were negative for all funds. Financial Analysis 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 $30,907,826 an increase of $3,720,871. Committed, assigned and unassigned fund balance which is available for spending at the government's discretion has a balance of $27,559,421 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 ($3,278,870) 2) for prepaid items ($11,577) 3) for inventory ($30,625) 4) to pay for capital improvements ($2,611) and 5) for future expenditures ($24,722). 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 $9,233,073 while total fund balance was $10,830,992. 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. 24 The General fund balance increased by $390,145. This increase is primarily due to an increase in charges for services resulting from development activity in the city. Revenues exceeded budget by $665,620 due to higher than expected building permit revenues and charges for engineering services from development and infrastructure projects. Expenditures were $314,240 under budget due to reduced public works expenses for snow and ice control resulting from a mild winter. The Municipal Building Fund increased $6,499,930 due to partial forgiveness of the interfund loan which funded the Public Safety/City Hall project in 2012 and the issuance of debt to pay for the construction of the Central Fire Station. The MSA Construction Fund decreased by $2,842,933 due to construction project costs on 70th Street and Jamaica Avenue and Hadley Avenue. The Closed Debt Fund decreased by $1,485,069 due to the forgiveness of the interfund loan which funded the Public Safety/City Hall project in 2012. The Future Projects Fund decreased by $412,047 due to the temporary water treatment construction project incurring expenses which are being reimbursed by a combination of state funding and city utility funds. The contributions from the utility funds will occur in 2018. The Pavement Management Debt Service Fund increased by $31,771 due to special assessment revenues collected more than debt service requirements. The Pavement Management Capital Project Fund increased by $312,176 due to 2017 Pavement Management project costs coming in less than originally expected. 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. Business -type activities decreased the City's net position by $102,482 in 2017. Budgetary Highlights General Fund. The General Fund actual results were different than the final budget amounts due to the following: • Licenses and Permits categories were $455,084 more than budgeted due to increased commercial/institutional building permitting in 2017. • Intergovernmental revenues were $65,977 more than budget due to unanticipated Federal and State grant revenues and public safety aids. • Charges for services were $195,087 more than budgeted due to increased engineering fees resulting from increased construction and development activity. • Fines revenues were $19,006 less than budgeted due to decreased revenues passed through to the City from the state and county. 25 • General government expenditures were $35,605 less than budgeted amounts due to professional service activities budgeted by the Mayor and Council division which did not occur. • Public safety expenditures were $59,493 less than budgeted amounts due to personnel changes. • Public works expenditures were $52,484 lower than budget due to lower personnel costs, supplies and contractual services related to the effects of a moderate snow and ice removal season. • Culture and recreation expenditures were $159,579 less than final budget due to reduced operational costs in Park Maintenance. 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, 2017, amounts to $231,244,613 (net of accumulated depreciation). This investment in capital assets includes land, buildings, infrastructure, machinery and equipment. Land and land improvements Easements Construction in progress Buildings and improvements Equipment and furniture Machinery and equipment Other improvements Infrastructure: Streets Storm sewers Sidewalks/trails Water and sewer lines Ending balance City of Cottage Grove's Capital Assets (Net of Depreciation) Governmental Activities Business -type Activities Total Primary Government 2017 2016 2017 2016 2017 2016 $18,105,944 $17,927,787 $508,049 $354,057 $18,613,913 $18,281,844 1,157,202 1,157,202 - - 1,157,202 1,157,202 14,172,178 9,248,106 66,211 - 14,238,389 9,248,106 19,306,988 20,086,952 1,480,643 1,595,131 20,787,634 21,682,083 208,905 244,095 - - 208,905 244,095 4,809,233 4,687,142 829,676 511,756 5,638,909 5,198,898 5,038,786 4,389,591 4,913,716 4,577,885 9,952,502 8,967,476 86,224,136 76,438,326 - - 86,224,136 76,438,326 21,758,669 21,669,116 - - 21,758,669 21,669,116 4,402,484 4,422,674 - - 4,402,484 4,422,674 - - 48,261,869 47,024,641 48,261,869 47,024,641 $175,184,535 $160,270,991 $56,060,163 $54,063,470 $231,244,613 $214,334,461 The largest addition to capital assets in 2017 were the improvements to streets and other infrastructure due to the 2017 Pavement Management project, reconstruction of the Hadley and 951h Street intersection and construction of the infrastructure in the Summers Landing residential housing development. Additional information on the City of Cottage Grove's capital assets can be found in Note 5. Long-term debt: At the end of the current fiscal year, the City of Cottage Grove had total long- term debt outstanding of $36,012,908 an increase of $7,542,643. $2,799,598 of the debt outstanding is due within one year. $19,090,012 of bonds payable is for pavement management debt being repaid by a combination of special assessments and property tax levies. 26 City of Cottage Grove's Outstanding Debt 2017 2016 Governmental activities: Bonds payable, net $34,885,704 $27,436,124 Other postemployment benefits 90,239 72,888 Compensated absences 935,212 875,507 Total governmental activities 35,911,154 28,384,519 Business -type activities: Other postemployment benefits 13,110 10,645 Compensated absences 88,643 75,101 Total business -type activities 101,753 85,746 Total primary government $36,012,908 $28,470,265 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 $100,633,167. Of that limit, $13,240,000 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. 27 -This Page Intentionally left Blank - 28 CITY OF COTTAGE GROVE, MINNESOTA STATEMENT OF NET POSITION December 31, 2017 With Comparative Data as of December 31, 2016 Assets: Cash and investments Accrued interest receivable Due from other governmental units - net Accounts receivable - net Prepaid items Delinquent property taxes receivable Due from county Special assessments receivable Inventories - at cost Internal balances Loan receivable Properties held for resale Fire relief pension asset Capital assets not being depreciated: Land and land improvements Easements Construction in progress Capital assets (net of accumulated depreciation): Land improvements Buildings and improvements Equipment and furniture Machinery and equipment Other improvements Infrastructure Total assets Statement 1 Component Unit Primary Government Total Economic Totals Governmental Business -Type Primary Development Reporting Entity Activities Activities Government Authority 2017 2016 $ 38,654,528 $ 8,225,813 $ 46,880,341 $ - $ 46,880,341 $ 47,997,880 164,513 - 164,513 - 164,513 156,712 3,225,197 25,198 3,250,395 - 3,250,395 1,319,028 599,270 1,389,817 1,989,087 3,019 1,992,106 1,959,719 204,277 155,611 359,888 495 360,383 358,202 148,269 - 148,269 1,281 149,550 127,000 102,774 - 102,774 - 102,774 85,417 6,212,014 - 6,212,014 - 6,212,014 7,615,533 127,655 - 127,655 - 127,655 120,053 (3,670,731) 3,670,731 - - - - - - - 358,943 358,943 384,608 267,498 - 267,498 311,718 579,216 579,216 947,562 - 947,562 - 947,562 1,000,396 18,105,944 479,784 18,585,728 - 18,585,728 18,252,787 1,157,202 - 1,157,202 - 1,157,202 1,157,202 14,172,178 66,211 14,238,389 - 14,238,389 9,248,106 - 28,263 28,263 - 28,263 29,057 19,306,988 1,480,643 20,787,631 - 20,787,631 21,682,083 208,915 - 208,915 - 208,915 244,095 4,809,233 829,676 5,638,909 - 5,638,909 5,198,898 5,038,786 4,913,716 9,952,502 - 9,952,502 8,967,476 112,385,289 48,261,870 160,647,159 - 160,647,159 149,554,757 222,167,361 69,527,333 291,694,694 675,456 292,370,150 276,038,225 Deferred outflows of resources: Deferred outflows related to pensions 8,988,315 1,099,325 10,087,640 32,712 10,120,352 16,185,028 Total deferred outflows of resources 8,988,315 1,099,325 10,087,640 32,712 10,120,352 16,185,028 Total assets and deferred outflows of resources $ 231,155,676 $ 70,626,658 $ 301,782,334 $ 708,168 $ 302,490,502 $ 292,223,253 Liabilities: Accounts payable Salaries payable Contracts payable Due to other governmental units Deposits payable Unearned revenue Accrued interest payable Compensated absences payable: Due within one year Due in more than one year Other postemployment benefits: Due in more than one year Net pension liability: Due in more than one year Bonds payable (net of unamortized premiums): Due within one year Due in more than one year Total liabilities Deferred inflows of resources: Deferred inflows related to pension Total deferred inflows of resources Net position: Net investment in capital assets Restricted for: Forfeiture and seizure Charitable gambling Debt retirement Tax increment purposes Unrestricted Total net position Total liabilities, deferred inflows of resources and net position $ 2,569,975 $ 295,400 $ 2,865,375 $ 14,934 $ 2,880,309 $ 4,193,204 680,671 82,620 763,291 8,931 772,222 756,290 463,322 4,992 468,314 - 468,314 445,043 637,532 33,377 670,909 652,536 1,323,445 912,405 1,970,663 - 1,970,663 2,000 1,972,663 1,780,349 47,368 47,368 - 47,368 32,214 450,696 - 450,696 - 450,696 256,216 684,598 68,700 753,298 5,528 758,826 708,912 250,614 19,943 270,557 61 270,618 249,032 90,239 13,110 103,349 1,176 104,525 84,444 10,196,059 1,270,593 11,466,652 128,570 11,595,222 24,947,501 2,115,000 - 2,115,000 - 2,115,000 1,915,000 32,770,703 - 32,770,703 - 32,770,703 25,521,124 52,927,440 1,788,735 54,716,175 813,736 55,529,911 61,801,734 10,228,115 1,248,919 11,477,034 25,155 11,502,189 3,073,792 10,228,115 1,248,919 11,477,034 25,155 11,502,189 3,073,792 140,298,832 56,060,163 196,358,995 - 196,358,995 186,898,337 24,722 - 24,722 - 24,722 23,308 - - - - - 4,457 2,828,174 - 2,828,174 - 2,828,174 7,492,592 2,611 - 2,611 - 2,611 88,781 24,845,782 11,528,841 36,374,623 (130,723) 36,243,900 32,840,252 168,000,121 67,589,004 235,589,125 (130,723) 235,458,402 227,347,727 $ 231,155,676 $ 70,626,658 $ 301,782,334 $ 708,168 $ 302,490,502 $ 292,223,253 The accompanying notes are an integral part of these basic financial statements. 29 CITY OF COTTAGE GROVE, MINNESOTA STATEMENT OF ACTIVITIES For The Year Ended December 31, 2017 With Comparative Data for the Year Ended December 31, 2016 Functions/Programs Primary government: Governmental activities: General government Community development Economic development Public safety Public works: Regular operations Construction Culture and recreation Interest on long-term debt Total governmental activities Business -type activities: Street lights Cottage Grove EMS Water operating Sewer operating Total business -type activities Total primary government Component Unit: Economic Development Authority Total component unit Expenses Program Revenues Operating Capital Charges For Grants and Grants and Services Contributions Contributions $ 2,398,669 $ 108,808 $ 173,134 $ - 1,527,549 2,240,628 - - 740,668 210 336,685 356,071 9,308,430 363,782 384,912 305,392 4,241,968 1,099,690 108,654 934,952 4,171,105 - - 11,309,802 5,137,951 2,682,090 404,714 899,479 962,772 - - - 28,489,112 6,495,208 1,408,099 13,805,696 882,660 685,560 - 37,256 1,571,044 1,510,101 - - 2,789,792 1,664,292 - 222,957 2,879,119 2,294,714 - 181,525 8,122,615 6,154,667 - 441,738 $ 36,611,727 $ 12,649,875 $ 1,408,099 $ 14,247,434 $ 412,591 $ 412,591 $ 48,783 $ 48,783 General revenues: Property taxes Franchise taxes Aggregate taxes Tax increment collections Grants and contributions not restricted to specific programs Unrestricted investment earnings Gain on sale of capital assets Transfers Total general revenues, transfers, and special item Change in net position Net position - beginning Net position - ending The accompanying notes are an integra4art of these basic financial statements. Statement 2 Net (Expense) Revenue and Component Changes in Net Position Unit Primary Government Economic Governmental Business -Type Totals Development Activities Activities 2017 2016 Authority $ (2,116,727) $ - $ (2,116,727) $ (2,616,127) $ - 713,079 - 713,079 487,294 - (47,702) - (47,702) (869,633) - (8,254,344) - (8,254,344) (8,986,900) - (2,098,672) - (2,098,672) (3,435,047) - 7,138,697 - 7,138,697 3,409,306 - (1,151,668) - (1,151,668) (1,563,308) - (962,772) - (962,772) (875,642) - (6,780,109) - (6,780,109) (14,450,057) - - (159,844) (159,844) (133,943) - - (60,943) (60,943) 78,195 - - (902,543) (902,543) (538,684) - - (402,880) (402,880) (334,556) - - (1,526,210) (1,526,210) (928,988) - (6,780,109) (1,526,210) (8,306,319) (15,379,045) - - - - - (363,808) - - - - (363,808) 14,483,061 - 14,483,061 13,956,582 110,710 560,492 - 560,492 516,931 - 28,442 - 28,442 39,748 - 1,002,046 - 1,002,046 776,061 - 126,670 17,161 143,831 133,794 - 330,903 119,735 450,638 382,345 1,582 - - 1,988 - (1,286,832) 1,286,832 - - - is 15,244,782 1,423,728 16,668,510 15,807,449 112,292 8,464,673 (102,482) 8,362,191 428,404 (251,516) 159,535,448 67,691,486 227,226,934 226,798,530 120,793 $ 168,000,121 $ 67,589,004 $ 235,589,125 $ 227,226,934 $ (130,723) The accompanying notes are an integral part of these basic financial statements. 31 CITY OF COTTAGE GROVE, MINNESOTA BALANCESHEET GOVERNMENTALFUNDS December 31, 2017 With Comparative Data as of December 31, 2016 Municipal MSA Building Construction General Capital Project Capital Project Closed Debt Assets: Fund Fund Fund Fund Cash and investments $ 7,687,901 $ 3,718,140 $ $ 2,773,978 Accrued interest receivable 164,513 - - Interfund receivable 3,402,324 Interfund loan receivable - Due from other governmental units - net 311,490 - 503,782 Accounts receivable - net 48,420 96 18,397 Prepaid items 8,750 - - Inventories - at cost - - - Delinquentpropertytaxesreceivable 132,580 5,220 1,624 Due from county 102,774 - - - Special assessments receivable: Deferred 2,883 441,800 34,228 Delinquent 1,119 7,567 4,823 Special deferred - 34,361 5,071 Property held for resale - - 267,498 - Total assets $ 11,862,754 $ 3,723,456 $ 1,273,405 $ 2,819,724 Liabilities: Accounts payable $ 223,114 $ 694,373 $ 220,963 $ - Salaries payable 593,622 - - Interfund payable - - 3,402,324 Contracts payable - 319,586 - Due to other governmental units 32,044 - 576,848 Deposits payable 500 - Unearned revenue 45,900 - Interfund loan payable - 3,490,000 - Total liabilities 895,180 4,503,959 4,200,135 Deferred inflows of resources: Unavailable revenue - property taxes 132,580 5,220 - 1,624 Unavailable revenue - special assessments 4,002 - 483,728 44,122 Unavailable revenue - intergovernmental - - 87,417 - Unavailable revenue - other - 1,468 - - Total deferred inflows of resources 136,582 6,688 571,145 45,746 Fund balances (deficit): Nonspendable: Prepaid items 8,750 - - - Inventory - Restricted for: Forfeiture and seizure Charitable gambling Debt retirement Tax increment purposes Committed - - Assigned 1,589,169 2,773,978 Unassigned: General Fund 9,233,073 - Special Revenue Fund - Capital Project Funds - (787,191) (3,497,875) - Total fund balances (deficit) 10,830,992 (787,191) (3,497,875) 2,773,978 Total liabilities, deferred inflows of resources, and fund balances $ 11,862,754 $ 3,723,456 $ 1,273,405 $ 2,819,724 The accompanying notes are an integrallpart of these basic financial statements. Statement 3 Pavement Pavement Management Management Other Future Projects Debt Service Capital Project Governmental Fund Fund Fund Funds $ 4,624,676 $ 3,087,420 $ 1,726,566 $ 12,571,906 230,024 644,537 - - 1,118,467 257,172 40,949 2,111,804 5,700 - 526,657 - 2,827 - - 30,625 123 5,868 2,854 93,597 3,940,699 477,380 1,129,505 - 12,231 - 3,582 18,498 4,670 - $ 322,839 $ 500 $ 169,097 $ 662,778 - - - 60,560 - - 874,561 132,075 11,661 - - - 27,758 1,970,162 - - - - 1,118,467 2,425,076 500 180,758 2,744,124 123 5,868 - 2,854 93,597 3,971,428 482,050 1,133,087 - - 40,949 - 93,720 3,977,296 522,999 1,135,941 2,827 30,625 24,722 3,086,920 191,950 - 2,611 - - 947,486 2,692,496 1,545,808 14,289,280 (223,325) - - - (1,003,477) 2,692,496 3,086,920 1,545,808 14,262,699 $ 5,211,292 $ 7,064,716 $ 2,249,565 $ 18,142,764 Fund balance reported above Amounts reported for governmental activities in the statement of net position are different because: Capital assets used in governmental activities are not financial resources, and therefore, are not reported in the funds Other long-term assets are not available to pay for current -period expenditures, and therefore, are deferred in the funds Deferred outflows of resources and deferred inflows of resources are created as a result of various differences related to pensions that are not recognized in the governmental funds. Deferred inflows of resources related to pensions Deferred outflows of resources related to pensions Long-term liabilities, including bonds payable, are not due and payable in the current period and therefore are not reported in the funds. Internal service funds are used by management to charge the cost of insurance to individual funds. The assets and liabilities are included in the governmental statement of net position Net position of governmental activities Totals Governmental Funds 2017 2016 $ 36,190,587 $ 35,780,530 164,513 156,712 4,276,885 2,599,284 1,118,467 4,645,804 3,225,197 1,300,298 599,270 525,949 11,577 16,945 30,625 28,750 148,269 125,927 102,774 85,417 6,120,092 7,526,702 29,322 21,213 62,600 67,618 267,498 267,498 $ 52,347,676 $ 53,148,647 $ 2,293,664 $ 3,758,266 654,182 644,673 4,276,885 2,599,284 463,322 445,043 636,650 252,156 1,970,662 1,778,349 45,900 30,788 4,608,467 8,570,804 14,949, 732 18,079,363 148,269 125,927 6,212,014 7,615,533 128,366 139,443 1,468 1,426 6,490,117 7,882,329 11,577 16,945 30,625 28,750 24,722 23,308 - 4,457 3,278,870 3,055,317 2,611 117,610 947,486 731,090 22,890,731 24,413,549 9,233,073 9,036,425 (223,325) (302,002) (5,288,543) (9,938,494) 30,907,827 27,186,955 $ 52,347,676 $ 53,148,647 $ 30,907,827 $ 27,186,955 174,121,203 159,236,454 7,436,211 8,881,299 (10,153,202) (2,667,412) 8,890,898 14,156,127 (46,118,766) (50,136,728) 2,915,950 2,878,753 $ 168,000,121 $ 159,535,448 The accompanying notes are an integral part of these basic financial statements. 33 CITY OF COTTAGE GROVE, MINNESOTA STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE GOVERNMENTAL FUNDS For The Year Ended December 31, 2017 With Comparative Data for the Year Ended December 31, 2016 Municipal MSA Building Construction General Capital Project Capital Project Closed Revenues: Fund Fund Fund Debt Fund General property taxes $ 13,174,561 $ 496,538 $ $ (261) Franchise taxes - - - Aggregate taxes Tax increment collections - - Special assessments 6,881 506,087 86,012 Licenses and permits 1,922,934 - - Direct charges to developers - - Intergovernmental 676,227 1,002,908 Charges for services 740,037 - - Rent - 34,089 Fines and forfeits 170,994 - - - Investment earnings (loss) 73,425 25,138 2,153 19,739 Interest on interfund loan - - - 20,000 Connection charges - Park dedication fees Other sales - Donations 20,110 - - Miscellaneous 155,586 18,514 823,572 - Total revenues 16,940,755 574,279 2,334,720 125,490 Expenditures: Current: General government 2,147,730 41,527 - 1,206 Community development 1,304,601 - - Economic development - Public safety 7,396,959 - Public works 2,615,431 11,949 Culture and recreation 1,995,420 - Capital outlay: General government - - Public safety 181,518 6,770,852 - Public works 770 - 5,247,123 Culture and recreation 10,966 - Debt service: Principal retirement - Capital lease payment - Interest and fiscal charges - 181,761 Total expenditures 15,653,395 6,994,140 5,259,072 1,206 Revenues over(under)expenditures 1,287,360 (6,419,861) (2,924,352) 124,284 Other financing sources (uses): Transfers in 541,500 3,667,420 81,419 390,647 Transfers out (1,438,715) - - (2,000,000) Bonds issued 8,963,050 Premium on debt issued 289,321 Proceeds from the sale of capital assets - - Total other financing sources (uses) (897,215) 12,919,791 81,419 (1,609,353) Net increase (decrease)in fund balance 390,145 6,499,930 (2,842,933) (1,485,069) Fund balance - January 1 10,440,847 (7,287,121) (654,942) 4,259,047 Fund balance - December 31 $ 10,830,992 $ (787,191) $ (3,497,875) $ 2,773,978 The accompanying notes are an integral part of these basic financial statements. 34 Statement 4 Pavement Management Future Projects Debt Service Pavement Management Other Capital Project Governmental Totals Governmental Funds 560,492 560,492 516,931 28,442 28,442 39,748 - - - 813,541 813,541 776,061 37,439 863,801 164,423 1,050,823 2,715,466 2,004,196 - - - - 1,922,934 1,323,680 236,235 - 36,965 273,200 277,860 3,184,655 927,996 2,285,265 8,077,051 5,642,451 - - 3,400,353 4,140,390 4,061,301 401,599 435,688 464,078 - - - 13,948 184,942 236,260 40,387 15,385 9,016 125,336 310,579 219,963 - - - 32,206 52,206 52,040 2,050,958 2,050,958 649,489 526,936 526,936 212,865 - - 1,048,871 - 536,804 556,914 456,938 6,721 - - 421,030 1,425,423 359,052 3,505,416 1,669,088 1,101,435 12,473,203 38,724,386 32,298,912 - 7,789 - 1,779 2,200,031 3,143,136 - - 1,304,601 1,117,760 - 695,356 695,356 2,236,464 384,369 - 16,934 7,798,262 7,447,058 46,444 5,454 1,221,069 3,900,347 4,133,659 16,845 - 2,290,786 4,303,051 4,438,628 - 24,711 24,711 24,709 178,157 - 63,253 7,193,780 557,794 3,210,229 1,588,402 3,876,372 13,922,896 15,988,949 - - - 1,274,192 1,285,158 629,767 1,115,000 800,000 1,915,000 6,570,000 - - - 327,432 - 514,528 203,951 900,240 1,023,721 3,836,044 1,637,317 1,593,856 10,468,403 45,443,433 47,639,077 (330,628) 31,771 (492,421) 2,004,800 (6,719,047) (15,340,165) - 804,597 1,626,061 7,111,644 1,648,258 (81,419) - (2,615,398) (6,135,532) (1,162,564) 191,950 9,155,000 8,935,000 - 289,321 357,684 - 19,485 19,485 15,453 (81,419) - 804,597 (777,902) 10,439,918 9,793,831 (412,047) 31,771 312,176 1,226,898 3,720,871 (5,546,334) 3,104,543 3,055,149 1,233,632 13,035,800 27,186,955 32,733,289 $ 2,692,496 $ 3,086,920 $ 1,545,808 $ 14,262,698 $ 30,907,826 $ 27,186,955 The accompanying notes are an integral part of these basic financial statements. 35 CITY OF COTTAGE GROVE, MINNESOTA RECONCILIATION OF THE STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES OF GOVERNMENTAL FUNDS TO THE STATEMENT OF ACTIVITIES For The Year Ended December 31, 2017 With Comparative Data for the Year Ended December 31, 2016 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) 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. The effect of various miscellaneous transactions involving capital assets is to decrease net position (i.e. sales, and trade-ins). 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. Revenues in the statement of activities that do not provide current financial resources are not reported as revenues in the funds. Governmental funds recognize pension contributions as expenditures at the time of payment whereas the statement of activities factors in items related to pensions on a full accrual perspective. 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. 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. 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. Change in net position of governmental activities (page 31) 2017 Statement 5 2016 $ 3,720,871 $ (5,546,334) 14,024,555 9,443,674 (56,361) (36,464) 916,555 183,013 (1,392,254) 1,621,870 (1,063,880) (2,412,713) (7,449,579) (2,320,457) 37,198 (70,085) (272,432) 58,094 $ 8,464,673 $ 920,598 The accompanying notes are an integral part of these basic financial statements. 36 CITY OF COTTAGE GROVE, MINNESOTA STATEMENT OF NET POSITION Statement 6 PROPRIETARY FUNDS December 31, 2017 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 $ 931,344 $ 844,158 $ 4,567,131 $ 1,883,180 $ 8,225,813 $ 2,463,941 Interfind loan receivable - - 657,500 - 657,500 - Due from other governmental units -net - - 15,577 9,621 25,198 Accounts receivable: Customers 100,015 466,863 243,736 356,333 1,166,947 Certified to County - - 98,679 98,679 197,358 Other 17,668 - 5,279 2,565 25,512 - Prepaid items 248 2,241 1,937 151,185 155,611 192,700 Inventories - at cost - - - - - 97,030 Total current assets 1,049,275 1,313,262 5,589,839 2,501,563 10,453,939 2,753,671 Noncurrent assets: Interfund loan receivable - - - 2,832,500 2,832,500 - Capital assets: Land and land improvements 364,803 154,785 519,588 424,665 Buildings and improvements 4,089,713 - 4,089,713 928,870 Equipment and furniture - - - - - 245,550 Machinery and equipment 109,567 864,650 1,074,005 269,175 2,317,397 289,899 Other improvements 7,640,432 - - - 7,640,432 - Water and sewer lines - 40,074,174 27,956,196 68,030,370 Construction in progress 66,211 - - 66,211 - Total capital assets 7,816,210 864,650 45,602,695 28,380,156 82,663,711 1,888,984 Less: Accumulated depreciation (2,767,458) (431,433) (15,688,654) (7,716,003) (26,603,548) (825,652) Net capital assets 5,048,752 433,217 29,914,041 20,664,153 56,060,163 1,063,332 Total noncurrent assets 5,048,752 433,217 29,914,041 23,496,653 58,892,663 1,063,332 Total assets 6,098,027 1,746,479 35,503,880 25,998,216 69,346,602 3,817,003 Deferred outflows: Deferred outflows related to pension 17,201 949,686 107,455 24,983 1,099,325 97,417 Total deferred outflows 17,201 949,686 107,455 24,983 1,099,325 97,417 Liabilities: Current liabilities: Accounts payable 41,588 7,949 204,215 41,648 295,400 276,311 Salaries payable 2,368 46,173 28,070 6,009 82,620 26,489 Contracts payable - - 4,992 - 4,992 - Due to other governmental units 994 8,766 1,476 22,141 33,377 882 Compensated absences payable 5,708 21,512 30,253 11,227 68,700 36,437 Total current liabilities 50,658 84,400 269,006 81,025 485,089 340,119 Noncurrent liabilities: Compensated absences payable - 12,309 6,367 1,267 19,943 16,095 Other postemployment benefits 625 7,085 4,135 1,265 13,110 3,722 Net pension liability 67,608 682,456 422,337 98,192 1,270,593 382,889 Total noncurrent liabilities 68,233 701,850 432,839 100,724 1,303,646 402,706 Total liabilities 118,891 786,250 701,845 181,749 1,788,735 742,825 Deferred inflows: Deferred inflows related to pension 13,228 1,133,849 82,631 19,211 1,248,919 74,913 Total deferred inflows 13,228 1,133,849 82,631 19,211 1,248,919 74,913 Net position: Net investment in capital assets 5,048,752 433,217 29,914,041 20,664,153 56,060,163 1,063,332 Unrestricted 934,357 342,849 4,912,818 5,158,086 11,348,110 2,033,350 Total net position $ 5,983,109 $ 776,066 $ 34,826,859 $ 25,822,239 67,408,273 $ 3,096,682 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. 180,731 $ 67,589,004 37 CITY OF COTTAGE GROVE, MINNESOTA STATEMENT OF REVENUES, EXPENSES AND CHANGES IN FUND NET POSITION PROPRIETARY FUNDS For The Year Ended December 31, 201 Operating revenues: Charges for services - user fees Water meter/ street light material sales Insurance refunds and reimbursements Total operating revenues Operating expenses: Personal services Commodities Commodities - items for resale Contractual services Claims Disposal: Contractual services - MCES Depreciation Total operating expenses Operating income (loss) Nonoperating revenues (expenses) Statement 7 Business -Type Activities - Enterprise Funds Governmental Total Activities - Street Light Cottage Grove Water Sewer Enterprise Internal Fund EMS Fund Operating Operating Funds Service Funds $ 563,083 $ 1,507,801 $ 1,583,845 $ 2,274,701 $ 5,929,430 $ 3,532,671 80,700 - 50,461 - 131,161 - - - - - - 69,946 643,783 1,507,801 1,634,306 2,274,701 6,060,591 3,602,617 104,059 1,243,117 654,916 168,529 2,170,621 2,269,252 101,664 68,926 527,555 16,832 714,977 563,999 69,760 - - - 69,760 - 440,904 189,746 694,853 389,402 1,714,905 578,698 - - - - - 101,893 - - - 1,845,641 1,845,641 - 168,000 72,054 902,240 462,639 1,604,933 66,454 884,387 1,573,843 2,779,564 2,883,043 8,120,837 3,580,296 (240,604) (66,042) (1,145,258) (608,342) (2,060,246) 22,321 Investment earnings 9,864 8,795 40,993 23,954 83,606 20,324 Interest on interfund debt - - 8,750 27,379 36,129 - Intergovernmental 4,936 12,225 - 17,161 Loss on disposal of property - - (11,552) - (11,552) - Miscellaneous 41,777 2,300 29,986 20,013 94,076 4,327 Total nonoperating revenues (expenses) 51,641 16,031 80,402 71,346 219,420 24,651 Income (loss) before contributions and transfers (188,963) (50,011) (1,064,856) (536,996) (1,840,826) 46,972 Capital contributions 494,333 812,333 1,398,016 2,704,682 - Transfer to General Fund (47,220) (94,430) (171,500) (187,000) (500,150) Transfer to Capital Project Fund (83,742) (80,123) (312,097) (475,962) Total transfers (130,962) (94,430) (251,623) (499,097) (976,112) - Change in net position 174,408 (144,441) (504,146) 361,923 (112,256) 46,972 Net position - January 1 5,808,701 920,507 35,331,005 25,460,316 67,520,529 3,049,710 Net position - December 31 $ 5,983,109 $ 776,066 $ 34,826,859 $ 25,822,239 $ 67,408,273 $ 3,096,682 Change in net position reported above (112,256) Adjustment to reflect the consolidation of internal service fund activities related to enterprise funds 9,774 Change in net position of business -type activities (page 35' $ (102,482) The accompanying notes are an integrgWart of these basic financial statements. CITY OF COTTAGE GROVE, MINNESOTA STATEMENT OF CASH FLOWS PROPRIETARY FUNDS For The Year Ended December 31, 2017 Cash flows from operating activities: Receipts from customers and users Receipts from interfund services provided Receipts from insurance refunds and reimbursements Payment to suppliers Payment to employees Miscellaneous revenue Net cash flows from operating activities Cash flows from noncapital financing activities: Intergovernmental revenue Transfers out Net cash flows from noncapital financing activities Cash flows from capital and related financing activities: Acquisition of capital assets Net cash flows from capital and related financing activities Cash flows from investing activities: Investment earnings Interest on interfund loan Payment received on interfund loan Net cash flows from investing activities Net increase (decrease) in cash and cash equivalents Cash and cash equivalents - January 1 Cash and cash equivalents - December 31 Reconciliation of operating income/(loss) to net cash from operating activities: Operating income (loss) Adjustments to reconcile operating income (loss) to net cash flows from operating activities: Depreciation Pension expense Miscellaneous revenue Changes in assets and liabilities: Decrease (increase) in receivables Decrease (increase) in prepaid items Decrease (increase) in inventory (Decrease) increase in payables Total adjustments Net cash flows from operating activities Statement 8 Business -Type Activities - Enterprise Funds Governmental Total Activities - Street Light Cottage Grove Water Sewer Enterprise Internal Fund EMS Fund Operating Operating Funds Service Funds $ 633,587 $ 1,579,757 $ 1,608,036 $ 2,258,638 $ 6,080,018 $ - - - - - - 3,532,671 69,946 (604,441) (263,170) (1,110,670) (2,381,724) (4,360,005) (1,257,312) (95,599) (1,191,857) (600,364) (173,705) (2,061,525) (2,242,155) 41,777 2,300 29,986 20,013 94,076 4,327 (24,676) 127,030 (73,012) (276,778) (247,436) 107,477 4,936 12,225 17,161 - (130,962) (94,430) (251,623) (499,097) (976,112) (130,962) (89,494) (239,398) (499,097) (958,951) (92,281) (260,330) (189,337) (366,548) (908,496) (95,249) (92,281) (260,330) (189,337) (366,548) (908,496) (95,249) 9,864 8,795 40,993 23,954 83,606 20,324 - - 8,750 27,379 36,129 - - 435,000 435,000 - 9,864 8,795 484,743 51,333 554,735 20,324 (238,055) (213,999) (17,004) (1,091,090) (1,560,148) 32,552 1,169,399 1,058,157 4,584,135 2,974,270 9,785,961 2,431,389 $ 931,344 $ 844,158 $ 4,567,131 $ 1,883,180 $ 8,225,813 $ 2,463,941 $ (240,604) $ (66,042) $ (1,145,258) $ (608,342) $ (2,060,246) $ 22,321 168,000 72,054 902,240 462,639 1,604,933 66,454 11,257 33,635 45,013 (5,787) 84,118 20,126 41,777 2,300 29,986 20,013 94,076 4,327 (10,196) 71,956 (26,270) (16,063) 19,427 4,241 51 (786) 661 2,618 2,544 (9,598) - - - - - (5,727) 5,039 13,913 120,616 (131,856) 7,712 5,333 215,928 193,072 1,072,246 331,564 1,812,810 85,156 $ (24,676) $ 127,030 $ (73,012) $ (276,778) $ (247,436) $ 107,477 Noncash investing, capital and financing activities: Capital asset contributions from governmental activities $ 457,077 $ $ 589,376 $ 1,216,491 $ 2,262,944 $ Capital asset contributions from developers 37,256 222,957 181,525 441,738 Loss on disposal of capital asset - (11,552) - (11,552) The accompanying notes are an integral part of these basic financial statements. 39 CITY OF COTTAGE GROVE, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2017 Note 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The City of Cottage Grove was incorporated in 1974 and operates under the State of Minnesota 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 accounting 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 ENTITY 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 entity because of the significance of its operational and financial relationship with the City. COMPONENT 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 position 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 emphasize that it is legally separate from the City. The component unit activity 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 information on all of the activities 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 taxes and intergovernmental revenues, are reported separately from business -type activities, which rely to a significant extent on fees and charges for support. In the government -wide statement of net position, both the governmental and business -type activities 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 position 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 activities. The statement of activities demonstrates the degree to which the direct expenses of a given function or business -type activity are offset by program revenues. Direct expenses are those that are clearly identifiable 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 activity and 2) grants and contributions that are restricted to meeting the operational or capital requirements of a particular function or business -type activity. Taxes and other items not included among program revenues are reported instead as general revenues. 40 CITY OF COTTAGE GROVE, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2017 Separate financial statements are provided for governmental funds and proprietary funds. Major individual governmental funds and major individual enterprise funds are reported as separate columns in the fund financial statements. C. MEASUREMENT FOCUS, BASIS OF ACCOUNTING, AND FINANCIAL STATEMENT PRESENTATION The government -wide financial statements are reported using the economic resources measurement focus and the accrual basis of accounting, as are the proprietary fund statements. Revenues are recorded when earned and expenses are recorded when a liability is incurred, regardless of the timing of related cash flows. Property taxes are recognized as revenues in the year for which they are levied. Grants and similar items are recognized as revenue as soon as all eligibility requirements imposed by the provider have been met. Governmental fund financial statements are reported using the current financial resources measurement focus and the modified accrual basis of accounting. Revenues are recognized as soon as they are both measurable and available. Revenues are considered 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 except for debt service expenditures, as well as expenditures related to compensated absences claims and judgments, are recorded only when payment is due. Property taxes, special assessments, intergovernmental revenues, charges for services and interest associated with the current fiscal period are all considered to be susceptible to accrual and so have been recognized as revenues of the current fiscal period. Only the portion of special assessments receivable due within the current fiscal period is susceptible to accrual as revenue of the current period. All other revenue items are 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 accumulation 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 accumulation of residual resources from debt funds that have been closed as the associated debt has been satisfied. The Future Projects Fund accounts for the preliminary expenditures of projects which do not have a source of funding or which have most of their funding from non -city sources. 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 property taxes. The Pavement Management Capital Project Fund accounts for pavement management construction proj ects. 41 CITY OF COTTAGE GROVE, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2017 The government reports the following major proprietary funds: The Street Light Fund accounts for customer street light and service charges which are used to finance street light operating expenses. The Cottage Grove EMS Fund accounts for the operation of the Cottage Grove ambulance service that serves the cities of Cottage Grove, Newport, Saint Paul Park, and Grey Cloud Island. The Water Operating fund accounts for customer water service charges which are used to finance water operating expenses. The Sewer Operating fund accounts for customer sewer service charges which are used to finance sewer operating expenses. 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 rule, the effect of interfund activity has been eliminated from the government -wide financial statements. Exceptions to this general rule are transactions that would be treated as revenues, expenditures or expenses if they involved external organizations, such as buying goods and services or payments in lieu of taxes, 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) operating grants and contributions, and 3) capital grants and contributions, including special assessments. Internally dedicated resources are reported as general revenues rather than as program revenues. Likewise, general revenues include all taxes. Proprietary funds distinguish operating revenues and expenses from non -operating items. Operating revenues and expenses generally result from providing services and producing and delivering goods in connection with a proprietary fund's principal ongoing operations. The principal operating revenues of the 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 offs mandated by various government agencies (including Medicare and Medicaid). Operating expenses for enterprise funds include the cost of sales and services, administrative expenses, and depreciation on capital assets. All revenues and expenses not meeting this definition are reported as non -operating revenues and expenses. 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 accounting principles. 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 expenditure appropriations can be carried forward to the next budget year subject to City Council approval. 42 CITY OF COTTAGE GROVE, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2017 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 expenditures and the means of financing them. 2. The City Council reviews the proposed budget and makes appropriate changes. Per Statute, public meetings are held to receive taxpayer comments. 3. 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. 4. The City Administrator is authorized to transfer appropriations within any department budget up to $2,500. Additional interdepartmental or interfund appropriations and deletions are authorized by the City Council with expenditure reductions, fund (contingency) reserves or additional revenues. The City Council may authorize transfers of budgeted amounts between City funds. 5. 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. 6. Legal debt obligation indentures determine the appropriation level and debt service tax levies for the Debt Service Funds. Supplementary budgets are adopted for the Proprietary Funds to determine and calculate user charges. These are not reflected in the financial statements. 7. A capital improvement program is reviewed annually by the City Council for the Capital Project Funds. However, appropriations for major projects are not adopted until the actual bid award of the improvement. The appropriations are not reflected in the financial statements. 8. 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 activity. All amounts over budget have been approved by the City Council through the disbursement approval process. The following is a listing of expenditure categories that exceed budget appropriations for non -major funds: 43 CITY OF COTTAGE GROVE, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2017 Final Budizet Actual Over Budget Nonmajor Funds: Forfeiture/Seizure: Public safety: Commodities 4,500 6,640 2,140 Ice Arena: Culture and recreation: Personnel services 364,100 375,293 11,193 Commodities 34,400 38,214 3,814 Contractual services 323,750 356,073 32,323 Golf Course: Personnel services 834,150 858,979 24,829 Charitable Gambling: Contractual services 0 4,496 4,496 F. CASH AND INVESTMENTS Cash and investment balances from all funds are pooled and invested to the extent available in authorized investments. Earnings 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 have 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, until adequate resources are received. Investments are stated at fair value, based upon quoted market prices as of the balance sheet date. Certain investments for the City are reported at fair value as disclosed in Note 3. The City categorizes its fair value measurements with the fair value hierarchy established by generally accepted accounting principles. The hierarchy is based on the valuation inputs used to measure the fair value of the asset. Level 1 inputs are quoted prices in active markets for identical assets; Level 2 inputs are significant other observable inputs; Level 3 are significant unobservable inputs. 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 purchased. 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 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, 2017 are planned to be eliminated in 2018. Long-term interfund loans are classified as "interfund loan receivable/payable." Any residual balances outstanding between the governmental activities and business -type activities are reported in the government -wide financial statements as "internal balances." Property taxes, special assessments, and ambulance receivables have been reported net of estimated uncollectible accounts. (see Note 1 H, I and L) Because utility bills are considered liens on property, no estimated uncollectible amounts are established. Uncollectible amounts are not material for other receivables and have not been reported. 44 CITY OF COTTAGE GROVE, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2017 H. PROPERTY TAX REVENUE RECOGNITION The City Council annually adopts a tax 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 collecting all property taxes for itself, the City, the local school district and other taxing authorities. Such taxes become a lien on January 1 and are recorded as receivables by the City at that date. Real property taxes are payable (by property owners) on May 15 and October 15 of each calendar year. Personal property taxes are payable by taxpayers on February 28 and June 30 of each year. These taxes 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 taxes by property owners; the County possesses this authority. GOVERNMENT -WIDE FINANCIAL STATEMENTS The City recognizes property tax revenue in the period for which the taxes were levied. Uncollectible property taxes are not material and have 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 practice, current and delinquent taxes received by the City in July, December and January are recognized as revenue for the current year. Taxes collected by the County by December 31 (remitted to the City the following January) and taxes 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 expenditures. I. SPECIAL ASSESSMENT REVENUE RECOGNITION 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. Collection of annual installments (including interest) is handled by the County Auditor in the same manner as property taxes. Property 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 that property until full payment is made or the amount is determined to be excessive by the City Council or court action. If special assessments are allowed to go delinquent, the property is subject to tax forfeit sale. Proceeds of sales from tax forfeited properties are allocated first to the County's costs of administering all tax forfeit properties. Pursuant to State Statutes, a property shall be subject to a tax 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 have not been reported. 45 CITY OF COTTAGE GROVE, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2017 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, expendable supplies, and vehicle repair parts. The cost of such inventories is recorded as expenditures/expenses when consumed rather than when purchased in both government -wide and fund financial statements. K. PREPAID ITEMS Certain payments to vendors reflect costs applicable to future accounting periods and are recorded as prepaid items in both government -wide and fund financial statements. The cost of prepaid items are recorded as expenditures/expenses 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 collection rates. The amounts of the estimated uncollectible ambulance billings to individuals as of December 31, 2017 were $420,000. 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 expenses. N. CAPITAL ASSETS Capital assets, which include property, plant, equipment and infrastructure assets (e.g., roads, bridges, sidewalks, and similar items), are reported in the applicable governmental or business -type activities columns in the government -wide financial statements. Infrastructure assets have been capitalized retroactively 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 estimated useful life more than one year. Such assets are recorded at historical cost or estimated historical cost if purchased or constructed. Donated capital assets are recorded at acquisition value at the date of donation. The costs of normal maintenance and repair which do not add to the value of the asset or materially extend assets lives are not capitalized. Major outlays for capital assets and improvements are capitalized as projects are constructed. Interest incurred during the construction phase of capital assets of business -type activities is included as part of the capitalized value of the assets constructed. For the year ended December 31, 2017, no interest was capitalized in connection with construction in progress. 46 CITY OF COTTAGE GROVE, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2017 Capital assets not being depreciated include land, easements and construction in progress. Property, plant and equipment of the primary 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 have been wholly (or substantially) financed by non -operating funds (special assessments, general taxes, 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 than by user charges. Accordingly, the water and sewer user rates are not established at levels sufficient to cover depreciation on these assets. O. DEFERRED OUTFLOWS AND 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 position that applies to a future period(s) and so will not be recognized as an inflow of resources (revenue) until that time. The City presents deferred inflows of resources on the Governmental Fund Balance Sheet as unavailable revenues. These amounts are deferred and recognized as an inflow of resources in the period that the amounts become available. The City presents deferred inflows of resources on the Statement of Net Position for amounts related to Pensions. In addition to assets, the statement of financial position will sometimes report a separate section for deferred outflows of resources. This separate financial statement element represents a consumption of net position that applies to future period(s) and so will not be recognized as an outflow of resources (expense/expenditure) until that time. The City presents deferred outflows of resources on the Statements of Net Position for amounts related to pensions. 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 collective 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 have 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 that portion of accumulating leave benefits that is vested as severance pay. 47 CITY OF COTTAGE GROVE, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2017 Q. LONG-TERM OBLIGATIONS In the government -wide financial statements and proprietary fund types in the fund financial statements, long-term debt and other long-term obligations are reported as liabilities in the applicable governmental activities, business -type activities, or proprietary fund type statement of net position. Bond premiums 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. PENSION For purposes of measuring the net pension liability, deferred outflows/inflows of resources, and pension expense, information about the fiduciary net position of the Public Employees Retirement Association (PERA) and additions to/deductions from PERA's fiduciary net position have been determined on the same basis as they are reported by PERA except that PERA's fiscal year end is June 30. For this purpose, plan contributions are recognized as of employer payroll paid dates and benefit payments and refunds are recognized when due and payable in accordance with the benefit terms. Investments are reported at fair value. S. FUND BALANCE In the fund financial statements, governmental funds report fund balances in classifications that 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 externally imposed constraints established by creditors, grantors or contributors; or constraints imposed by state statutory provisions. Committed — Amounts constrained for specific purposes that are internally imposed by formal action (resolution) of the City Council. Committed amounts cannot be used for any other purpose unless the Council modifies or rescinds the commitment by resolution. 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 classification for the General fund and also negative residual amounts in other funds. The City considers restricted amounts to be spent first when both restricted and unrestricted fund balance is available. Additionally, the City would first use committed, then assigned, and lastly unassigned amounts of unrestricted fund balance when expenditures are made. The City 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. 48 CITY OF COTTAGE GROVE, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2017 T. NET POSITION Net position represents the difference between assets and deferred outflows of resources 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 external restrictions imposed by creditors, grantors or laws or regulations of other governments. U. INTERFUND TRANSACTIONS Interfund services provided and used are accounted for as revenues, expenditures or expenses. Transactions that constitute reimbursements to a fund for expenditures/expenses initially made from it are properly applicable to another fund, are recorded as expenditures/expenses in the reimbursing fund and as reductions of expenditures/expenses in the fund that is reimbursed. 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. V. USE OF ESTIMATES The preparation of financial statements in accordance with U.S. generally accepted accounting principles (GAAP) requires management to make estimates that affect the amounts reported in the financial statements during the reporting period. Actual results could differ from such estimates. W. COMPARATIVE DATA Summarized comparative data for the prior year has been presented only for certain sections of the accompanying financial statements in order to provide an understanding of the changes in the City's financial position and operations. Certain reclassifications have been made to prior year data to conform to the current year presentation. The reclassifications had no effect on the change in net position or total net position as previously reported. 49 CITY OF COTTAGE GROVE, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2017 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 POSITION 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 that reconciliation explains 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 $(46,118,766) difference are as follows: Bonds payable $ (33,900,000) Accrued interest payable (450,696) Compensated absences payable (882,680) Other post employment benefits (86,517) Net pension liability (9,813,170) Unamortized premium on bonds (985,703) Net adjustment to reduce fund balance - total governmental funds to arrive at net position - governmental activities $ (46,118,766) B. EXPLANATION OF CERTAIN DIFFERENCES BETWEEN THE GOVERNMENTAL FUND STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES AND THE GOVERNMENT -WIDE STATEMENT OF ACTIVITIES The governmental fund statement of revenues, expenditures, and changes in fund balances includes a reconciliation between net changes in fund balances — total governmental funds and changes in net position of governmental activities as reported in the government -wide statement of activities. One element of that reconciliation explains that "governmental funds report capital outlays as expenditures. However, in the statement of activities the cost of those assets is allocated over their estimated useful lives and reported as depreciation expense." The details of this $14,024,555 difference are as follows: Capital outlay $ 18,790,548 Depreciation expense (4,765,993) Net adjustment to increase net changes in fund balances - total governmental funds to arrive at changes in net position of governmental activities $ 14,024,555 50 CITY OF COTTAGE GROVE, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2017 Another element of that reconciliation states that "revenues in the statement of activities that do not provide current financial resources are not reported as revenues in the funds." The details of this $(1,392,254) difference are as follows: General property taxes: At December 31, 2016 $ (125,927) At December 31, 2017 148,269 Special assessments: At December 31, 2016 (7,615,533) At December 31, 2017 6,212,014 Intergovernmental: At December 31, 2016 (139,443) At December 31, 2017 128,366 Net adjustments to increase net changes in fund balances - total governmental funds to arrive at changes in net position of governmental activities $(1,392,254) Another element of that reconciliation 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 $(7,449,579) difference are as follows: Debt issued: Issuance of general obligation bonds $ (9,155,000) Plus, premium on debt issued (289,321) Principal repayments: General obligation debt 1,915,000 Amortization of deferred premiums 79,742 Net adjustments to increase net changes in fund balances - total governmental funds to arrive at changes in net position of governmental activities $ (7,449,579) 51 CITY OF COTTAGE GROVE, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2017 Another element of that reconciliation states that "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." The details of this $(272,432) difference are as follows: Compensated absences: At December 31, 2016 $ 820,914 At December 31, 2017 (882,680) Accrued interest: At December 31, 2016 256,216 At December 31, 2017 (450,696) Other post -employment benefits At December 31, 2016 70,331 At December 31, 2017 (86,517) Net adjustment to increase net changes in fund balances - total governmental funds to arrive at changes in net position of governmental activities (272,432) Note 3 DEPOSITS AND INVESTMENTS A. DEPOSITS The City maintains a cash and investment pool that is available for use by all funds. Each fund type's portion of this pool is displayed on the statement of net position and balance sheets as "Cash and Investments." Custodial Credit Risk — Custodial credit risk for deposits is the risk that 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, 2017, 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 Minnesota Statutes, the City maintains deposits at financial institutions 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 includes: U.S. government treasury bills, notes, or bonds; issues of a U.S. government agency; general obligations of a state or local government rated "A" or better; revenue obligations of a state or local government rated "AA" or better; irrevocable standby letter of credit issued by a Federal Home Loan Bank; and time deposits insured by a federal agency. Minnesota statutes require securities 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 institution 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 obligations guaranteed by the United States or its agencies, its instrumentalities or organizations created by an act of congress, excluding mortgage -backed securities defined as high risk. 52 CITY OF COTTAGE GROVE, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2017 b) General Obligations of the State of Minnesota or any of its municipalities as follow: 1) general obligation of any state or local government with taxing powers which is rated "A" or better by a national bond rating service; 2) revenue obligation of any state or local government with taxing powers which is rated "AA" or better by a national bond rating service; and 3) general obligation of the Minnesota Housing Finance Agency rated "A" or better by a national 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 (A 1, 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 capitalization exceeding $10,000,000; a primary reporting dealer in U.S. government securities to the Federal Reserve Bank of New York. f) 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 securities computed at fair value which shall be at least 10% more than the amount of each deposit in excess of the insured portions. All collateral shall be assigned to the City from the depository. g) Shares of mutual funds holdings pursuant to M.S. I I8A.04. The City participates in the Minnesota Municipal Money Market Fund (4M Fund) whereby, the fair value of the position in the pool is the same as the value of the pool shares owned. Interest rate risk - Interest rate risk is the risk that 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 that no more than 25% of total investments should extend beyond five years and in no circumstance should any extend beyond ten years. Total Fair Investment maturities in Years Credit Risk Investment type Value Less than 1 1-5 More than 5 Rating Agency U.S. Agencies Federal Home Loan Bank-FHLB $7,991,127 $4,231,615 $2,758,043 $1,001,469 AA/Aaa S&P/Moody's Fannie Mae —FNMA 3,411,830 1,979,300 - 1,432,530 AA/Aaa S&P/Moody's Freddie Mac-FHLMC 7,694,885 1,996,560 4,233,640 1,464,685 AA/Aaa S&P/Moody's Federal Farm Credit Bank 1,979,715 994,200 497,705 487,810 AA/Aaa S&P/Moody's Municipal Obligations 6,481,728 1,820,746 3,586,499 1,074,483 AA/Aa S&P/Moody's Negotiable CD's 14,252,711 4,234,837 9,536,109 481,765 NR N/A Total Investments 41,811,996 $15,257,258 $20,611,996 $5,942,742 Money Markets 4,576,866 Deposits 481,518 Petty Cash and Change 9,961 Total Cash and Investments $46,880,341 NR indicates "not rated" N/A indicates "not applicable Custodial Credit Risk — For an investment, custodial credit risk is the risk that, in the event of failure of the depository financial institution, the City will not be able to recover the value of its investment or collateral securities 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. 53 CITY OF COTTAGE GROVE, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2017 Credit Risk — Credit risk is the risk that 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 $ 7,991,127 19% Fannie Mae - FNMA 3,411,830 8% Freddie Mac - FHLMC 7,694,885 18% The City has the following recurring fair value measurements as of December 31, 2017: • $41,811,996 of $41,811,996 are valued using a matrix pricing model (Level 2 inputs). Note 4 RECEIVABLES Governmental funds report deferred inflows of resources in connection with receivables for revenues that 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: Primary government: Major funds: General Fund Municipal Building Capital Project Fund MSA Construction Capital Project Fund Closed Debt Fund Future Projects Fund Pavement Management Debt Service Fund Pavement Manage. Capital Project Fund Nonmajor funds Total primary government Component unit: Economic Development Authority Total reporting entity Property Special Inter Miscellaneous Taxes Assessments governmental Revenue $ 132,580 $ 4,002 $ - 5,220 - - - 483,728 87,417 1,624 44,122 - 123 93,597 - 5,868 3,971,428 - - 482,050 40,949 2,854 1,133,087 - 148,269 6,212,014 128,366 1,468 Total $136,582 6,688 571,145 45,746 93,720 - 3,977,296 - 522,999 - 1,135,941 1,468 6,490,117 1,281 - - - 1,281 $149,550 $ 6,212,014 $ 128,366 $ 1,468 $6,491,398 54 CITY OF COTTAGE GROVE, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2017 Note 5 CAPITAL ASSETS Capital asset activity for the year ended December 31, 2017 was as follows: Beginning Ending Balance Increases Decreases Balance Primary Government Governmental activities: Capital assets, not being depreciated: Land $ 17,927,787 $178,157 - $ 18,105,944 Permanent easements 1,157,202 - - 1,157,202 Construction in progress 9,248,106 21,173,614 (16,249,542) 14,172,178 Total capital assets, not being depreciated 28,333,095 21,351,771 (16,249,542) 33,435,324 Capital assets, being depreciated: Buildings and improvements 36,021,160 - - 36,021,160 Equipment and furniture 1,246,137 61,323 (95,613) 1,211,847 Machinery and equipment 11,874,239 974,782 (508,044) 12,340,977 Other improvements 7,915,415 979,849 - 8,895,264 Infrastructure: Streets 100,170,074 11,896,456 - 112,066,530 Storm sewers 29,416,080 688,133 - 30,104,213 Sidewalks/trails 5,568,951 99,580 - 5,668,531 Total capital assets being depreciated 192,212,056 14,700,123 (603,657) 206,308,522 Less accumulated depreciation for: Buildings and improvements 15,934,208 779,964 - 16,714,172 Equipment and furniture 1,002,042 55,577 (54,687) 1,002,932 Machinery and equipment 7,187,097 837,256 (492,609) 7,531,744 Other improvements 3,525,824 330,654 - 3,856,478 Infrastructure: Streets 23,731,748 2,110,646 - 25,842,394 Storm sewers 7,746,964 598,580 - 8,345,544 Sidewalks/trails 1,146,277 119,770 - 1,266,047 Total accumulated depreciation 60,274,160 4,832,447 (547,296) 64,559,311 Total capital assets, being depreciated, net 131,937,896 9,867,676 (56,361) 141,749,211 Governmental activities capital assets, net $160,270,991 31,219,447 (16,305,903) $ 175,184,535 55 CITY OF COTTAGE GROVE, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2017 Beginning Ending Primary Government Balance Increases Decreases Balance Business -type activities: Capital assets, not being depreciated: Land $ 325,000 $ 154,785 $ - $ 479,785 Construction in progress - 66,211 - 66,211 Total capital assets, not being depreciated 325,000 220,996 - 545,996 Capital assets, being depreciated: Land improvements 39,803 - - 39,803 Buildings and improvements 4,089,713 - - 4,089,713 Machinery and equipment 2,105,718 455,882 (244,203) 2,317,397 Other improvements 7,146,099 494,333 - 7,640,432 Water and sewer lines 65,573,866 2,456,504 - 68,030,370 Total capital assets, being depreciated 78,955,199 3,406,719 (244,203) 82,117,715 Less accumulated depreciation for: Land improvements 10,745 794 - 11,539 Buildings and structures 2,494,582 114,488 - 2,609,070 Machinery and equipment 1,593,962 111,873 (218,114) 1,487,721 Other improvements 2,568,214 158,502 - 2,726,716 Water and sewer lines 18,549,226 1,219,276 - 19,768,502 Total accumulated depreciation 25,216,729 1,604,933 (218,114) 26,603,548 Total capital assets being depreciated - net 53,738,470 1,801,786 (26,089) 55,514,167 Business -type activities capital assets - net $54,063,470 $2,022,782 $(26,089) $56,060,163 Depreciation expense was charged to function/programs of the primary government as follows: Governmental activities: General government $ 172,090 Community development 7,270 Economic development 45,312 Public safety 660,441 Public works 3,168,261 Culture and recreation 779,073 Total depreciation expense governmental activities $ 4,832,447 Business -type activities Street lights $ 168,000 Cottage Grove EMS 72,054 Water operating 902,240 Sewer operating 462,639 Total depreciation expense before transfer $1,604,933 56 CITY OF COTTAGE GROVE, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2017 NOTE 6 LONG-TERM DEBT A. GENERAL OBLIGATION DEBT The City issues general obligation bonds to provide funds for the acquisition and construction of major capital improvements. The City issues special assessment bonds 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 activities. As of December 31, 2017, the governmental long-term debt of the financial reporting entity consisted of the following: Final Interest Issue Maturity Original Payable Rate Date Date Issue 12/31/2017 Primary government: GOVERNMENTAL ACTIVITIES General Obligation Tax Increment Bonds: GO Tax Increment Bonds of 2004A 3.0-4.65% 7/l/2004 2/l/2024 $ 1,405,000 $ 990,000 GO Tax Increment Refunding Bonds of 2014A 2.0-2.50% 5/29/2014 2/1/2021 1,405,000 870,000 Total General Obligation Tax Increment Bonds 2,810,000 1,860,000 GO CIP Bonds of 2017A GO Refunding Bonds of 2016A 2.50-3.25% 5/11/2017 2/l/2038 2.0-3.00% 1/28/2016 2/1/2027 Special Assessment Bonds with Government Commitment GO Improvement Bonds of 2009A 2.5-4.3% 4/16/2009 2/1/2024 GO Improvement Bonds of 2012A .30-2.2% 3/13/2012 2/1/2027 GO Improvement Bonds of 2013A 3.0%-3.5% 9/26/2013 2/1/2029 GO Improvement Bonds of 2015A 2.5%-3.0% 5/27/2015 2/1/2031 GO Improvement Bonds of 2016B 2.5%-3.0% 5/27/2015 2/1/2031 Total Special Assessment Bonds Bond premium Total Governmental Activities Bonds Other postemployment benefits Compensated absences payable Total City indebtedness - governmental activities BUSINESS TYPE ACTIVITIES Other postemployment benefits Compensated absences payable Total City indebtedness - business type activities Total City indebtedness - primary government Component Unit: EDA: Other postemployment benefits Compensated absences payable Total indebtedness - component unit 9,155,000 9,155,000 4,660,000 4,085,000 3,650,000 1,710,000 1,865,000 1,265,000 7,345,000 6,190,000 5,700,000 5,360,000 4,275,000 4,275,000 22, 835,000 18,800,000 - 985,704 39,460,000 34,885,704 - 90,239 - 935,212 39,460,000 35,911,154 - 13,110 - 88,643 - 101,753 $ 39,460,000 $ 36,012,908 - 1,176 - 5,589 $ $ 6,765 57 CITY OF COTTAGE GROVE, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2017 Annual debt service requirements to maturity for general obligation bonds are as follows: Year Ending December 31 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 Total Year Ending December 31 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 2036 2037 2038 Total Tax Increment Bonds Governmental Activities Principal 240,000 260,000 275,000 265,000 255,000 275,000 290,000 Interest 61,030 55,190 48,820 41,540 31,872 19,810 6,743 $ 1,860,000 $ 265,005 G.O. Refundine Bonds Governmental Activities Principal Interest 595,000 102.225 610,000 84,150 330,000 70,050 340,000 60,000 350,000 49,650 355,000 39,075 365,000 28,275 375,000 19,050 380,000 11,500 385,000 3,850 $ 4,085,000 $ 467,825 Special Assessment Bonds Governmental Activities Principal Interest 1,280,000 504,715 1,440,000 466,419 1,465,000 425,447 1,490,000 383,463 1,515,000 340,325 1,560,000 295,750 1,580,000 249,823 1,350,000 208,395 1,380,000 172,230 1,330,000 136,469 1,280,000 99,973 1,315,000 61,986 710,000 34,153 685,000 17,210 300,000 5,670 120,000 1 ,260 $ 18,800,000 $ 3,403,288 G.O. CIP Bonds Governmental Activities Principal Interest - 324,836 345,000 260,600 355,000 250,100 365,000 239,299 375,000 228,200 390,000 216,725 400,000 204,875 410,000 192,725 425,000 180,200 435,000 168,388 450,000 157,325 460,000 145,950 470,000 133,738 485,000 120,607 495,000 107,131 510,000 92,675 525,000 77,151 540,000 61,175 555,000 44,750 575,000 27,799 590,000 9,587 $9,155,000 $3,243,836 58 CITY OF COTTAGE GROVE, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2017 B. CHANGES IN LONG-TERM LIABILITIES Long-term liability activity for the year ended December 31, 2017, was as follows: Beginning Ending Due Within Balance Additions Reductions Balance One Year Primary Government: Governmental activities: Bonds payable: General obligation bonds $ 6,745,000 $9,155,000 $ (800,000) $15,100,000 $835,000 Special assessment bonds 19,915,000 - (1,115,000) 18,800,000 1,280,000 Bond premiums 776,124 289,322 (79,742) 985,704 - Total bonds payable 27,436,124 9,444,321 (1,994,742) 34,885,703 2,115,000 Other postemployment benefits 72,888 17,351 - 90,239 - Compensated absences payable 875,507 753,660 (693,955) 935,212 684,598 Total government activities 28,384,519 10,215,333 (2,688,697) 35,911,155 2,799,598 Business -type activities: Other postemployment benefits 10,645 2,465 - 13,110 - Compensated absences payable 75,101 91,705 (78,163) 88,643 64,684 Total business -type activities 85,746 94,170 (78,163) 101,753 64,684 Total primary government $ 28,470,265 $10,309,503 $(2,766,860) $36,012,908 $2,864,282 Component Unit: Other postemployment benefits 911 265 - 1,176 - Compensated absences payable 7,336 10,106 (11,853) 5,589 5,528 Total component unit $ 8,247 $10,371 $(11,853) $6,765 $ 5,528 For the governmental activities, other postemployment benefits and compensated absences are generally liquidated by the general fund. All long-term bonded indebtedness outstanding at December 31, 2017 is backed by the full faith and credit of the City, including special assessment and revenue bond issues. Delinquent assessments receivable at December 31, 2017 totaled $28,901. 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 limitation was 3 % of taxable market value and The City of Cottage Grove's legal debt margin for 2017 and 2016 is computed as follows: Market Value (after fiscal disparities) Debt Limit Amount of debt applicable to debt limit: Total bonded debt Less: Special assessment bonds Proprietary bonds Tax increment bonds Total debt applicable to debt limit Legal debt margin December 31, 2017 $ 3,354,438,900 100,633,167 $33,900,000 (18,800,000) (1,860,000) $13,240,000 $87,393,167 December 31, 2016 $ 3,124,680,400 93,740,412 $26,660,000 (19,915,000) (2,085,000) $4,660,000 $89,080,412 59 CITY OF COTTAGE GROVE, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2017 Note 8 PENSION PLANS The City participates in various pension plans, total pension expense for the year ended December 31, 2017 was $2,378,121. Components of pension expense are noted in the following plan summaries. A. PUBLIC EMPLOYEES RETIREMENT ASSOCIATION (PERA) - DEFINED BENEFIT Plan Description The City of Cottage Grove participates in the following cost -sharing multiple -employer defined benefit pension plans administered by the Public Employees Retirement Association of Minnesota (PERA). PERA's defined benefit pension plans are established and administered in accordance with Minnesota Statutes, Chapters 353 and 356. PERA's defined benefit pension plans are tax qualified plans under Section 401 (a) of the Internal Revenue Code. General Employees Retirement Plan (General Employees Plan(accounted for in the General Employees Fund)) All full-time and certain part-time employees of the City are covered by the General Employees Retirement Plan. General Employees Plan members belong to the Coordinated Plan. Coordinated Plan members are covered by SocialSecurity. Public Employees Police and Fire Plan (Police and Fire Plan (accounted for in the Police and Fire Fund)) The Police and Fire Plan, originally established for police officers and firefighters not covered by a local relief association, now covers all police officers and firefighters hired since 1980. Effective July 1, 1999, the Police and Fire Plan also covers police officers and firefighters belonging to local relief associations that elected to merge with and transfer assets and administration to PERA. Benefits Provided PERA provides retirement, disability, and death benefits. Benefit provisions are established by state statute and can only be modified by the state legislature. Benefit increases are provided to benefit recipients each January. Increases are related to the funding ratio of the plan. Members in plans that are at least 90% funded for two consecutive years are given 2.5% increases. Members in plans that have not exceeded 90% funded, or have fallen below 80%, are given 1% increases. The benefit provisions stated in the following paragraphs of this section are current provisions and apply to active plan participants. Vested, terminated employees who are entitled to benefits but are not receiving them yet are bound by the provisions in effect at the time they last terminated their public service. General Employees Plan Benefits Benefits are based on a member's highest average salary for any five successive years of allowable service, age, and years of credit at termination of service. Two methods are used to compute benefits for PERA's Coordinated Plan members. The retiring member receives the higher of a step -rate benefit accrual formula (Method 1) or a level accrual formula (Method 2). Under Method 1, the annuity accrual rate for a Coordinated Plan member is 1.2% of average salary for each of the first ten years and 1.7% for each remaining year. Under Method 2, the annuity accrual rate is 1.7% for Coordinated Plan members for each year of service. For members hired prior to July 1, 1989, a full annuity is available when age plus years of service equal 90 and normal retirement age is 65. For members hired on or after July 1, 1989, normal retirement age is the age for unreduced Social Security benefits capped at 66. 60 CITY OF COTTAGE GROVE, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2017 Police and Fire Plan Benefits Benefits for the Police and Fire Plan members first hired after June 30, 2010, but before July 1, 2014, vest on a prorated basis from 50% after five years up to 100% after ten years of credited service. Benefits for Police and Fire Plan members first hired after June 30, 2014, vest on a prorated basis from 50% after ten years up to 100% after twenty years of credited service. The annuity accrual rate is 3% of average salary for each year of service. For Police and Fire Plan members who were first hired prior to July 1, 1989, a full annuity is available when age plus years of service equal at least 90. Contributions Minnesota Statutes Chapter 353 sets the rates for employer and employee contributions. Contribution rates can only be modified by the state legislature. General Employees Fund Contributions Coordinated Plan members were required to contribute 6.50% of their annual covered salary in calendar year 2017. The City was required to contribute 7.50% for Coordinated Plan members in calendar year 2017. The City's contributions to the General Employees Fund for the year ended December 31, 2017, were $442,886. The City's contributions were equal to the required contributions as set by state statute. Police and Fire Fund Contributions Plan members were required to contribute 10.8% of their annual covered salary in calendar year 2017. The City was required to contribute 16.20% of pay for Police and Fire Fund members in calendar year 2017. The City's contributions to the Police and Fire Fund for the year ended December 31, 2017 were $751,583. The City's contributions were equal to the required contributions as set by state statute. Pension Costs General Employees Fund Pension Costs At December 31, 2017, the City reported a liability of $5,681,701 for its proportionate share of the General Employees Fund's net pension liability. The City's net pension liability reflected a reduction due to the State of Minnesota's contribution of $6 million to the fund in 2017. The State of Minnesota is considered a non - employer contributing entity and the State's contribution meets the definition of a special funding situation. The State of Minnesota's proportionate share of the net pension liability associated with the City totaled $71,469. The net pension liability was measured as of June 30, 2017, and the total pension liability used to calculate the net pension liability was determined by an actuarial valuation as of that date. The City's proportion of the net pension liability was based on the City's contributions received by PERA during the measurement period for employer payroll paid dates from July 1, 2016, through June 30, 2017, relative to the total employer contributions received from all of PERA's participating employers. At June 30, 2017, the City of Grove's proportion share was 0.0890% which was an increase of .0012% from its proportion measured as of June 30, 2016. For the year ended December 31, 2017, the City of Cottage Grove recognized pension expense of $751,010 for its proportionate share of the General Employees Plan's pension expense. Included in the amount, the City recognized $522 as pension expense (and grant revenue) for its proportionate share of the State of Minnesota's contribution of $6 million to the General Employees Fund. At December 31, 2017, the City of Cottage Grove reported its proportionate share of the General Employees Plan's deferred outflows of resources and deferred inflows of resources related to pensions from the following sources: 61 CITY OF COTTAGE GROVE, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2017 Deferred Outflows of Resources Deferred Inflows of Resources Differences between expected and actual economic experience $ 187,251 $ 364,160 Difference between projected and actual investment earnings 930,566 569,592 Changes in actuarial assumptions 33,248 - Changes in proportion 73,077 177,879 Contributions paid to PERA subsequent to the measurement date 221,443 - Total $ 1,445,585 $ 1,111,631 $221,443 reported as deferred outflows of resources related to pensions resulting from City contributions subsequent to the measurement date will be recognized as a reduction of the net pension liability in the year ended December 31, 2017. Other amounts reported as deferred outflows and deferred inflows of resources related to pensions will be recognized in pension expense as follows: Year ended December 31 2018 2019 2020 2021 2022 Thereafter Police and Fire Fund Pension Costs Pension Expense Amount $144,3 84 296,063 (86,759) (241,177) $112,511 At December 31, 2017, the City of Cottage Grove reported a liability of $5,913,521 for its proportionate share of the Police and Fire Fund's net pension liability. The net pension liability was measured as of June 30, 2017 and the total pension liability used to calculate the net pension liability was determined by an actuarial valuation as of that date. The City's proportion of the net pension liability was based on the City's contributions received by PERA during the measurement period for employer payroll paid dates from July 1, 2016 through June 30, 2017, relative to the total employer contributions received from all of PERA's participating employers. At June 30, 2017, the City of Cottage Grove's proportion was .438 % which was a decrease of .007% from its proportion measured at June 30, 2016. The City also recognized $39,420 for the year ended December 31, 2017 as revenue and offsetting reduction of the net pension liability for its proportionate share of the State of Minnesota's on -behalf contributions to the Police and Fire Fund. Legislation passed in 2013 required the State of Minnesota to begin contributing $9 million to the Police and Fire Fund each year starting in fiscal 2014. For the year ended December 31, 2017, the City of Cottage Grove recognized pension expense of $1,569,759 for its proportionate share of the Police and Fire Fund's pension expense. At December 31, 2017, the City of Cottage Grove reported its proportionate share of the Police and Fire Fund's deferred outflows of resources and deferred inflows of resources related to pensions from the following sources: 62 CITY OF COTTAGE GROVE, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2017 Deferred Outflows of Resources Deferred Inflows of Resources Differences between expected and actual economic experience $ 136,118 $1,594,018 Difference between projected and actual investment earnings 101,622 - Chan es in actuarial assumptions 7,862,704 8,395,732 Changes in proportion 83,324 261,100 Contributions paid to PERA subsequent to the measurement date 375,792 - Total $ 8,559,560 $10,250,850 $375,792 reported as deferred outflows of resources related to pensions resulting from City of Cottage Grove contributions subsequent to the measurement date will be recognized as a reduction of the net pension liability in the year ended December 31, 2017. Other amounts reported as deferred outflows and inflows of resources related to pensions will be recognized in pension expense as follows: Year ended December 31 2018 2019 2020 2021 2022 Thereafter Pension Expense Amount $102,116 102,121 (112,684) (459,894) (1,698,741) Total $(2,067,082) Actuarial Assumptions The total pension liability in the June 30, 2017, actuarial valuation was determined using the following actuarial assumptions: Inflation 2.50% per year Active Member Payroll Growth 3.25% per year Investment Rate of Return 7.50% Salary increases were based on a service -related table. Mortality rates for active members, retirees, survivors and disabilitants were based on RP-2014 tables for all plans for males or females, as appropriate, with slight adjustments to fit PERA's experience. Cost of living benefit increases for retirees are assumed to be 1 % per year for the General Employees Plan through 2044 and the Police and Fire Plan through 2064 and then 2.5% thereafter for both plans. Actuarial assumptions used in the June 30, 2017 valuation were based on the results of actuarial experience studies. The most recent four year experience study in the General Employees Plan was completed in 2015. The most recent five-year experience study for Police and Fire Plan was completed in 2016. The following changes in actualrial assumptions occurred in 2017: General Employees Fund • The Combined Service Annuity (CSA) loads were changed from 0.8% for active members and 60% for vested and non -vested deffed members. The revised CSA loads are now 0.0% for active member liability, 15% for vested deferred member liability and 3% for non -vested deferred member liability. • The assumed post retirement benefit increase rate was changed from 1.0% per year for all years to 1 % per year through 2044 and 2.5% per year thereafter. 63 CITY OF COTTAGE GROVE, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2017 Police and Fire Fund • Assumed salary increases were changed as recommended in the June 30, 2016 experience study. The net effect is proposed rates that average 0.34% lower than the previous rates. • Assumed rates of retirement were changed, resulting in fewer retirements. • The CSA load was 30% for vested and non -vested deferred members. The CSA has been changed to 33% for vested members and 2% for non -vested members. • The base mortality table for healthy annuitants was changed from the RP-2000 fully generational table to the RP-2014 fully generational table (with a base year of 2006), with male rates adjusted by a factor of 0.96. The mortality improvement scale was changed from Scale AA to Scale MP- 2016. The base mortality table for disabled annuitants was changed from the RP-2000 disabled mortality table to the mortality tables assumed for healthy retirees. • Assumed termination rates were decreased to 3.0% for the first three years of service. Rates beyond the select period of three years were adjusted, resulting in more expected terminations overall. • Assumed percentage of married female members was decreased from 65% to 60%. • Assumed age difference was changed from separate assumptions for male members (wives assumed to be 3 years younger) and female members (husbands assumed to be 4 years older) to the assumption that males are 2 years older than females. • The assumed percentage of female members electing Joint and Survivor annuities was increased. • The assumed post -retirement benefit increase rate was changed from 1 % for all years to 1 % per year through 2064 and 2.5% thereafter. The State Board of Investment, which manages the investments of PERA, prepares an analysis of the reasonableness of the long-term expected rate of return on a regular basis using a building-block method in which best -estimate ranges of expected future rates of return are developed for each major asset class. These ranges are combined to produce an expected long-term rate of return by weighting the expected future rates of return by the target asset allocation percentages. The target allocation and best estimates of geometric real rates of return for each major asset class are summarized in the following table: Asset Class Target Allocation Long -Term Expected Real Rate of Return Domestic Stocks 39% 5.10% International Stocks 19% 5.30% Bonds 20% 0.75% Alternative Assets 20% 5.90% Cash 2% 0.00% Discount Rate The discount rate used to measure the total pension liability in 2017 was 7.5%, a reduction from the 7.9% used in 2016. The projection of cash flows used to determine the discount rate assumed that contributions from plan members and employers will be made at rates set in Minnesota Statutes. Based on those assumptions, the fiduciary net position of the General Employees Fund and the Police and Fire fund was projected to be available to make all projected future benefit payments of current Plan members. Therefore, the long-term expected rate of return on pension plan investments was applied to all periods of projected benefit payments to determine the total pension liability. 64 CITY OF COTTAGE GROVE, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2017 Pension Liability Sensitivity The following presents the City of Cottage Grove's proportionate share of the net pension liability for all plans it participates in, calculated using the discount rate disclosed in the preceding paragraph, as well as what the City of Cottage Grove's proportionate share of the net pension liability would be if it were calculated using a discount rate 1 percentage point lower or 1 percentage point higher than the current discount rate: 1 % Decrease in Discount Rate 1 % Increase in Discount Discount Rate Rate 6.5% 7.5% 8.5% City's proportionate share of The General Employees Fund net pension liability $8,812,741 $5,681,701 $3,118,377 City's proportionate share of The Police and Fire Fund net pension liability $11,136,886 $5,913,521 $1,601,346 Pension Plan Fiduciary Net Position Detailed information about each pension plan's fiduciary net position is available in a separately -issued PERA financial report that includes financial statements and required supplementary information. That report may be obtained on the Internet at www.mnpera.org . B. PUBLIC EMPLOYEES RETIREMENT ASSOCIATION (PERA) - DEFINED CONTRIBUTION PLAN Five council members of the City of Cottage Grove are covered by the Public Employees Defined Contribution Plan, a multiple -employer deferred compensation plan administered by PERA. The Defined Contribution Plan is a tax qualified plan under Section 401(a) of the Internal Revenue Code and all contributions by or on behalf of employees are tax deferred until time of withdrawal. Plan benefits depend solely on amounts contributed to the plan plus investment earnings, less administrative expenses. Minnesota Statutes, Chapter 353D.03, specifies plan provisions, including the employee and employer contribution rates for those qualified personnel who elect to participate. An eligible elected official who decides to participate contributes 5% of salary which is matched by the elected official's employer. Employer and employee contributions are combined and used to purchase shares in one or more of the seven accounts of the Minnesota Supplemental Investment Fund. For administering the plan, PERA receives 2% of employer contributions and twenty-five hundredths of 1 % (.0025) of the assets in each member's account annually. Pension expense for the year is equal to the contributions made. Total contributions made by the City during fiscal year 2017 were: Contribution Amount Percentage of Covered Payroll Required Employee Employer Employee Employer Rate $1,473 $1,473 5% 5% 5% 65 CITY OF COTTAGE GROVE, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2017 C. COTTAGE GROVE FIRE RELIEF ASSOCIATION Plan Description The City of Cottage Grove participates in the Statewide Volunteer Firefighter Retirement Plan (Volunteer Firefighter Plan accounted for in the Volunteer Firefighter Fund), an agent multiple -employer lump -sum defined benefit pension plan administered by the Public Employees Retirement Association of Minnesota (PERA). The Volunteer Firefighter Plan covers volunteer firefighters of municipal fire departments that have elected to join the plan. As of December 31, 2017, the plan covered 50 active firefighters and 23 vested terminated firefighters whose pension benefits are deferred. The plan is established and administered in accordance with Minnesota Statutes, Chapter 353 G. Benefits Provided The Volunteer Firefighter Plan provides retirement, death, and supplemental benefits to covered firefighters and survivors. Benefits are paid based on the number of years of service multiplied by a benefit level approved by the City of Cottage Grove. Members are eligible for a lump -sum retirement benefit at 50 years of age with five years of service. Plan provisions include a pro -rated vesting schedule that increases from 5 years at 40 percent through 20 years at 100 percent. Contributions The Volunteer Firefighter Plan is funded by fire state aid, investment earnings and, if necessary, employer contributions as specified in Minnesota Statutes. The State of Minnesota contributed $192,139 in fire state aid to the fund for the year ended December 31, 2017. Required employer contributions are calculated annually based on statutory provisions. The City of Cottage Grove's statutorily -required contributions to the Volunteer Firefighter Fund for the year ended December 31, 2017, were $0. The City of Cottage Grove made a voluntary contribution of $2,081 to the plan. Pension Costs At December 31, 2017, the City of Cottage Grove reported a net pension asset of $947,562 for the Volunteer Firefighter Fund. The net pension asset was measured as of December 31, 2017. The total pension liability used to calculate the net pension asset in accordance with GASB 68 was determined by PERA applying an actuarial formula to specific census data certified by the fire department. The following table presents the changes in net pension liability during the year. Total Pension Liability Plan Fiduciary Net Position Net Pension Liability Asset Beginning Balance at December 31,2016 $1,366,724 $2,367,120 $ 1,000,396 Changes for the year Service cost 118,915 - 118,915 Interest cost 100,267 - 100,267 Projected Investment Earnings - 141,632 141,632 Contributions — State and local - 194,220 194,220 Gain or loss 329,484 172,314 157,170 Benefit Payouts - - - PERA administrative fee - 12,334 12,334 Net Changes $548,666 $495,832 $52,834 Ending Balance at December 31, 2017 $1,915,390 $2,862,952 $ 947,562 66 CITY OF COTTAGE GROVE, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2017 There were no benefit provision changes during the measurement period For the year ended December 31, 2017 the City of Cottage Grove recognized pension expense of $83,759. At December 31, 2017 the City of Cottage Grove reported deferred inflows of resources related to pensions from the following sources: Deferred Outflows of Resources Deferred Inflows of Resources Actuarial Experience Gains/Loses $115,207 $- Difference between projected and actual investment earnings - 139,706 Changes in assumption - - Total $115,207 $139,706 Actuarial Assumptions The total pension liability at December 31, 2017, was determined using the entry age normal actuarial cost method and the following actuarial assumptions: • Retirement eligibility at the later of age 50 or 20 years of service • Investment rate of return of 6.0 percent • Inflation rate of 3.0 percent Discount rate The discount rate used to measure the total pension liability was 6.0%. The projection of cash flows used to determine the discount rate assumed that contributions to the Volunteer Firefighter Fund will be made as specified in statute. Based on that assumption and considering the funding ratio of the plan, the fiduciary net position was projected to be available to make all projected future benefit payments of current active and inactive members. Therefore, the long-term expected rate of return on pension plan investments was applied to all periods of projected benefit payments to determine the total pension liability. Pension Liability Sensitivity The following presents the net pension liability for the Volunteer Firefighter Fund, calculated using the assumed discount rate, as well as what the City of Cottage Grove's net pension asset would be if it were calculated using a discount rate 1 percentage point lower or 1 percentage point higher than the current discount rate: 1% Decrease in Discount Discount Rate 1% Increase in Discount Rate Rate Discount rate 5% 6% 7% City's proportionate share of The net pension liability $ 866,652 $ 947,563 $ 1,024,336 Plan Investments Investment Policy: The Minnesota State Board of Investment (SBI) is established by Article XI of the Minnesota Constitution to invest all state funds. Its membership as specified in the Constitution is comprised of the governor (who is designated as chair of the board), state auditor, secretary of state and state attorney general. All investments undertaken by the SBI are governed by the prudent person rule and other standards codified in Minnesota Statutes, Chapter 11A and Chapter 353G. 67 CITY OF COTTAGE GROVE, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2017 Within the requirements defined by state law, the SBI, with assistance of the SBI staff and the Investment Advisory Council, establishes investment policy for all funds under its control. These investments policies are tailored to the specific needs of each fund and specify investment objectives, risk tolerance, asset allocation, investment management structure and specific performance standards. Studies guide the on -going management of the funds and are updated periodically. Asset Allocation: To match the long-term nature of the pension obligations, the SBI maintains a strategic asset allocation for the Volunteer Firefighter Plan that includes allocations to domestic equity, international equity, bonds and cash equivalents. The long-term target asset allocation and long-term expected real rate of return is the following: Asset Class Target Allocation Long -Term Expected Real Rate of Return Domestic Stocks 35% 5.10% International Stocks 15% 5.30% Bonds 45% 0.75% Cash 5% 0.00% The six percent long-term expected rate of return on pension plan investments was determined using a building- block method. Best estimates for expected future real rates of return (expected returns, net of inflation) were developed for each asset class using both long-term historical returns and long-term capital market expectations from several investment management and consulting organizations. The asset class estimates, and the target allocations were then combined to produce a geometric, long-term expected real rate of return for the portfolio. Inflation expectations were applied to derive the nominal rate of return for the portfolio. Description of significant investment policy changes during the year: The SBI made no significant changes to their investment policy during Fiscal Year 2017 for the Volunteer Firefighter Fund. Pension Plan Fiduciary Net Position Detailed information about the Volunteer Firefighter Fund's fiduciary net position as of June 30, 2017, is available in a separately -issued PERA financial report that includes financial statements and required supplementary information. That report may be obtained at www.mnpera.org_ 68 CITY OF COTTAGE GROVE, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2017 Note 9 INTERFUND LOANS AND TRANSFERS The City uses interfund loans when possible to finance construction activities to avoid costs associated with issuing bonds. These loans are for this purpose. The interfund loan receivable and payable balances at December 31, 2017 were: Fund Major Governmental Funds: Municipal Building Capital Project Fund Nonmajor Governmental Funds Major Business -Type Funds: Water Operating Enterprise Fund Sewer Operating Enterprise Fund Total Receivable Payable $ - $ 3,490,000 1,118,467 1,118,467 657,500 - 2,832,500 - $ 4,608,467 $ 4,608,467 Interfund receivable and payable balances are used for temporary cash deficits. Interfund receivable and payable balances at December 31, 2017 are as follows: Fund General Fund MSA Construction Capital Project Fund Future Projects Fund Nonmajor Governmental Funds Total Receivable Payable $3,402,324 $ - - 3,402,324 230,024 644,537 874,561 $ 4,276,885 $ 4,276,885 Interfund transfers: Municipal MSA Closed Pavement Bldg Construct Debt Fund Mange. Capital Capital Capital Nonmajor General Project Project Project Govern. Fund Fund Fund Fund Funds Total Transfers Out General Fund $ - $167,420 $ - $390,647 $111,614 $769,034 $1,438,715 Closed Debt Fund - 2,000,000 - - - - 2,000,000 Future Projects Fund - - 81,419 - - - 81,419 NonmajorGovemmental Funds 41,350 1,500,000 - - 217,021 857,027 2,615,398 Major Business Fund Type: Street Light Fund 47,220 - - - 83,742 - 130,962 Cottage Grove EMS Fund 94,430 - - - - - 94,430 Water Operating Fund 171,500 - - - 80,123 - 251,623 Sewer Operating Fund 187,000 - - - 312.097 - 499,097 Total transfers $ 541,500 $3,667,420 $81,419 $ 390,647 $804,597 $1,626,061 $7,111,644 All transfers in 2017 were considered to be routine in nature. 69 CITY OF COTTAGE GROVE, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2017 Note 10 TAX INCREMENT FINANCING The City of Cottage Grove is the administering authority for the following Tax Increment Financing Districts: Gateway North American District Logistics Gardenworld Dominium #1-12 #1-15 #1-16 #1-17 Type of District Redevelop Econ. Develop Econ. Develop. Housing Chapter 469.174 469.174 469.174 469.174 Established 2001 2015 2016 2016 District Duration 25 years 9 years 9 years 27 years Current tax capacity $ 901,517 $191,494 $ 6,499 $16,029 Original tax capacity (238,351) (131,330) (6,499) (16,008) Captured tax capacity 663,166 60,164 - 21 Fiscal disparity deduction - - - - Total tax capacity retained by City $ 663,166 $60,164 $ - $ 21 Debt issued $ 4,405,000 $ - $ - $ - Amount redeemed (2,545,000) - - - Debt outstanding $ 1,860,000 $ - $ - $ - The City has entered into one Tax Increment Financing agreement which meets the criteria for disclosure under Governmental Accounting Standards Board (GASB) Statement 77 - Tax Abatement Disclosures. The City's authority to enter into this agreement comes from Minnesota Statute 469. The City entered into this agreement for economic development. Under the agreement, the City and developer agree on an amount of development costs to be reimbursed to the developer by the City through tax revenues from the additional taxable value of the property generated by the development (tax increment). A "pay as you go" note is established for this amount, on which the City makes payments for a fixed period with available tax increment revenue after deducting certain administrative costs. During the year ended December 31, 2017 the City generated $813,541 in tax increment revenue and made $415,651 in payments to developers. • TIF District #1-12 was established in 2001 for redevelopment of certain blighted properties into retail, commercial and senior housing developments. An agreement with PHS/Cottage Grove Inc. called for up to $2.8 million to be reimbursed through tax increment over a ten-year period. During the year ended December 31, 2017 the district generated $746,360 of tax increment and $415,651 in payments on the pay as you go note were made. The balance due on the note at year end was $1,154,574. 70 CITY OF COTTAGE GROVE, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2017 Note 11 DEFICIT FUND BALANCES/NET POSITION The City has deficit fund balances/net position at December 31, 2017 as follows: Fund Major Governmental Funds: Municipal Building Capital Project Fund MSA Construction Capital Project Fund Nonmajor Governmental Funds: Golf Course Fund Sewer Connection and Area fund 2016 Improvements Capital Project Fund Tax Increment Construction Revolving Fund Note 12 CONTINGENCIES A. RISK MANAGEMENT Amount The deficit fund balances will be resolved through $ 787,191 Future tax levies 3,497,875 Future MSA revenues 190,910 Future excess revenues and transfers from other City resources 351,095 Future special assessments and developer charges 271,083 Future special assessments and developer charges 381,299 Future tax increments 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 more than insurance coverage for any of the past three fiscal years. Workers compensation coverage is provided through a pooled self-insurance program through the League of Minnesota Cities 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 Compensation Reinsurance Association (WCRA) as required by law. For workers compensation, 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 the 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 more than 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 $171,752 reported in the Fund at December 31, 2017 is based on the requirements of Governmental Accounting Standards Board Statement Number 10, which requires that a liability for claims be reported if 71 CITY OF COTTAGE GROVE, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2017 information prior to the issuance of the financial statements indicates that it is probable that a liability has been incurred at the date of the financial statements and the amount of the loss can be reasonably estimated. Changes in the fund's claims liability amounts were as follows: Beginning Claims and End of Year Changes in Claim of Year Year Liability Estimates Payments Liability 2017 $ 159,741 $74,541 $(62,015) $171,752 2016 143,708 165,035 (149,002) 159,741 2015 158,905 125,171 (140,368) 143,708 B. LITIGATION The City attorney has indicated that existing 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 have 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, 2017. D. TAX INCREMENTS The City's tax increment districts are subject to review by the State of Minnesota Office of the State Auditor (OSA). Any disallowed claims or misuse of tax increments could become a liability of the applicable fund. Note 13 DEFERRED AD VALOREM TAX LEVIES - BONDED DEBT General Obligation 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 tax 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 tax levies are stated in the bond resolution and the County Auditor is notified and instructed to levy these taxes over the appropriate years. The future tax levies are subject to cancellation when and if the City has provided alternative sources of financing. The City Council is required to levy any additional taxes found necessary for full payment of principal and interest. These future scheduled tax levies are not shown as assets in the accompanying financial statements at December 31, 2017 and 2016. Future scheduled tax levies for all bonds outstanding at December 31, 2017 totaled $13,329,400. 72 CITY OF COTTAGE GROVE, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2017 Note 14 FUND BALANCES At December 31, 2017 the City had various fund balances through legal restriction and City Council authorization. Fund balance appropriations at December 31, 2017 are shown on the various balance sheets as segregations of the fund balance. The fund balance classifications for governmental funds are as follows: Non - spendable Restricted Committed Assigned Unassigned Total General Fund: $ - $ - $ - $ - $ 9,233,073 $ 9,233,073 Prepaid items 8,750 - - - - 8,750 Compensated absences - - - 888,269 - 888,269 Future budgets - - - 500,000 - 500,000 Engineering services - - - 50,000 - 50,000 Emerald ash borer program - - - 40,200 - 40,200 Permit software purchase - - - 105,500 - 105,500 School bus safety Total General Fund Municipal Building Capital Project Fund MSA Construction Capital Project Fund: MSA construction activities Closed Debt Fund: Debt retirement Future Projects Fund: Future pavement management Tree mitigation Future roads and trails Pavement Management Debt Service Fund: Debt retirement Pavement Management Capital Project Fund: Pavement management construction activities Total Other Major Funds Nonmajor Governmental Funds: Prepaid items Inventory Forfeiture and seizure Debt retirement Tax increment purposes Ice Arena Recycling program Storm water activities Equipment replacement Street sealcoating Economic development Capital improvements Deficit Fund Balance Total Nonmajor Funds Total Fund Balances Governmental Funds - - - 5,200 - 5,200 8,750 - - 1,589,169 9,233,073 10,830,992 (787,191) (787,191) 2,773,978 - - - 1,217,605 - - - 412,423 - - - 1,062,468 - 3,086,920 - - (3,497,875) (3,497,875) 2,773,978 1,217,605 412,423 1,062,468 3,086,920 - - 1,545,808 - 1,545,808 - 3,086,920 - 7,012,282 (4,285,066) 5,814,136 2,827 - - - - 2,827 30,625 - - - - 30,625 - 24,722 - - - 24,722 191,950 - - - 191,950 2,611 - - - 2,611 - 59,487 - - 59,487 - 73,891 - - 73,891 - 814,108 - - 814,108 - - - 1,782,130 - 1,782,130 - - - 1,145,623 - 1,145,623 - - - 3,692,579 - 3,692,579 - - - 7,668,947 - 7,668,947 - - - - (1,226,802) (1,226,802) 33,452 219,283 947,486 14,287,279 (1,226,802) 14,262,698 $ 42,202 $ 3,306,203 $ 947,486 $ 22,890,730 $ 3,721,205 $ 30,907,826 73 CITY OF COTTAGE GROVE, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2017 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 City engaged an actuary 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. Active employees, who retire from the City when over age 50 and with 20 years of service, may continue 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, 2017, there were approximately 120 active participants and 3 retired participants receiving benefits from the City's health plans. The Plan does not issue a separate report. B. FUNDING POLICY The City funds its OPEB obligation on a pay as you go basis. For fiscal year 2017, the City contributed $17,050 to the plan. C. ANNUAL OPEB COST AND NET OPEB OBLIGATION The City's annual other postemployment benefit (OPEB) cost (expense) 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 that, if paid on an ongoing basis, is projected to cover normal cost each year and amortize any un-funded actuarial liabilities 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 $ 38,844 Interest on Net OPEB Obligation 2,533 Adjustment to Annual Required Contribution (4,246) Annual OPEB Cost (Expense) 37,131 Contributions Made (17,050) Increase in Net OPEB Obligation 20,081 Net OPEB Obligation- Beginning of Year 84,444 Net OPEB Obligation- End of Year $ 104,525 The City's annual OPEB cost, the percentage of the annual OPEB cost contributed to the plan, and the net OPEB obligation for 2017: Percentage Fiscal Annual of Annual Net Year OPEB OPEB Cost OPEB Ended Cost Contributed Obligation 12/31/2017 $37,131 45.9% $104,525 12/31/2016 22,026 61.2% 84,444 12/31/2015 22,212 67.2% 75,887 74 CITY OF COTTAGE GROVE, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2017 D. FUNDED STATUS AND FUNDED PROGRESS As of January 1, 2017, the most recent actuarial valuation date, the City's unfunded actuarial accrued liability (UAAL) was $397,006. The annual payroll for active employees covered by the plan in the actuarial valuation was $9,318,553 for a ratio of UAAL to covered payroll of 4.3%. Actuarial valuations of an ongoing plan involve estimates of the value of reported amounts and assumptions about the probability of occurrence of events far into the future. Examples include assumptions about future employment, mortality, and healthcare cost trends. Amounts determined regarding the funded status of the plan and the annual required contributions of the employer are subject to continual revision as actual results are compared with past expectations and new estimates are made about the future. The schedule of funding progress, presented as required supplementary information following the notes to the financial statements, presents multiyear trend information about whether the actuarial value of plan assets is increasing or decreasing over time relative to the actuarial accrued liabilities for benefits. E. ACTUARIAL METHODS AND ASSUMPTIONS Projections of benefits for financial reporting purposes are based on the substantive plan (the plan as understood by the employer and plan members) and include the types of benefits provided at the time of each valuation and the historical pattern of sharing of benefit costs between the employer and plan members to that point. The actuarial methods and assumptions used include techniques that are designed to reduce the effects of short-term volatility in actuarial accrued liabilities and the actuarial value of assets, consistent with the long-term perspective of the calculations. In the January 1, 2017 actuarial valuation, the projected unit credit actuarial cost method was used. The actuarial assumptions included a 3% investment rate of return (net of administrative expenses), 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 2.5%. The initial healthcare trend rate was 0%, reduced by decrements to an ultimate rate of 4% after five years. The UAAL is being amortized as a level percentage of projected payrolls on an open basis. The remaining amortization period at December 31, 2017 was 20 years. Note 16 OPERATING LEASES The City leases land for the golf course under an operating lease. The monthly lease payments equal $1 per month for the remaining term of the lease agreement. The lease was amended in 2015 to add a first extension option to 2020. In 2015, $60 was paid under this lease arrangement for the entire five-year extension. 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 Athletic Association. The lease payments began in 2008 when the new ice arena expansion project opened. The future minimum annual lease payments that the City will receive are as follows: 75 CITY OF COTTAGE GROVE, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2017 Independent Cottage Grove Year Ended School District Athletic December 31 833 Association 2017 104,250 400,000 2018 104,250 400,000 2019 104,250 400,000 2020 104,250 400,000 2021 104,250 400,000 2022-2026 521,250 2,000,000 2027-2029 312,750 1,200,000 Note 17 COMMITTED CONTRACTS At December 31, 2017, the City had commitments of $2,855,859 for uncompleted construction contracts. Note 18 CONDUIT DEBT OBLIGATIONS The City has issued Industrial Revenue Bonds to provide financial assistance to private sector entities for the acquisition and construction of industrial and commercial facilities 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 manner for the repayment of the bonds. Accordingly, the bonds are not reported as liabilities in the accompanying financial statements. As of December 31, 2017, a series of Industrial Revenue Bonds were outstanding. Original Issue Bond Issue Date Amount 12/31/17 Balance Maturity Date Industrial Revenue Bonds-Allina Health Systems 08/05/1998 $4,100,000 Not available 08/05/2018 Commercial Development Revenue Note-HSI 12/22/2004 935,000 413,543* 12/01/2024 Commercial Development Revenue Note-ESR, Inc. 11/22/2005 76,500 22,807 11/22/2025 Commercial Development Revenue Note-ESR, Inc. 05/19/2005 853,000 445,782 12/19/2025 Variable Rate Revenue Bonds-Allina Health System 11/01/2009 6,100,000 6,100,000 11/15/2022 Multifamily Housing Note -Legends of Cottage Grove 10/07/2016 18,422,000 18,422,000 05/01/2034 Multifamily Housing Note -Legends of Cottage Grove 10/07/2016 6,118,000 6,118,000 05/01/2034 $36,604,500 $31,522,132 *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 2011 to be resold for possible future development. The occupant is not known at this time. 76 CITY OF COTTAGE GROVE, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2017 Note 20 NEW STANDARDS ISSUED BUT NOT YET IMPLEMENTED GASB has issued GASB statement 75 relating to accounting and financial reporting for postemployment benefits other than pensions. The new statement requires governments in all types of OPEB plans to present more extensive note disclosures and required supplementary information (RSI) about OPEB liabilities. This statement will be effective for the year ending December 31, 2018. GASB Statement No. 83, Certain Asset Retirement Obligations establishes criteria for determining the timing and pattern of recognition of a liability and a corresponding deferred outflow of resources for Asset Retirement Obligations (AROs). This statement requires that recognition occur when the liability is both incurred and reasonably estimable. The determination of when the liability is incurred should be based on the occurrence of external laws, regulations, contracts, or court judgments, together with the occurrence of an internal event that obligates a government to perform asset retirement activities. Laws and regulations may require governments to take specific actions to retire certain tangible capital assets at the end of the useful lives of those capital assets, such as decommissioning nuclear reactors and dismantling and removing sewage treatment plants. Other obligations to retire tangible capital assets may arise from contracts or court judgments. Internal obligating events include the occurrence of contamination, placing into operation a tangible capital asset that is required to be retired, abandoning a tangible capital asset before it is placed into operation, or acquiring a tangible capital asset that has an existing ARO. This statement will be effective for the year ending December 31, 2019. GASB Statement No. 84, Fiduciary Activities establishes criteria for identifying fiduciary activities of all state and local governments. The focus of the criteria generally is on (1) whether a government is controlling the assets of the fiduciary activity and (2) the beneficiaries with whom a fiduciary relationship exists. Separate criteria are included to identify fiduciary component units and postemployment benefit arrangements that are fiduciary activities. This statement will be effective for the year ending December 31, 2019. GASB Statement No. 85, Omnibus 2017 addresses practice issues that have been identified during implementation and application of certain GASB statements, including issues related to blending component units, goodwill, fair value measurement and application, and post -employment benefits. This statement will be effective for the year ending December 31, 2018. GASB Statement No. 86, Certain Debt Extinguishment Issues improves consistency in accounting and financial reporting for in -substance defeasance of debt by providing guidance for transactions in which cash and other monetary assets acquired with only existing resources are placed in an irrevocable trust for the sole purpose of extinguishing debt. This statement also improves accounting and financial reporting for prepaid insurance on debt that is extinguished and notes to the financial statements for debt that is defeased in substance. This statement will be effective for the year ending December 31, 2018. GASB Statement No. 87, Leases establishes a single model for lease accounting based on the foundational principle that leases are financings of the right to use an underlying asset. Under this statement, a lessee is required to recognize a lease liability and an intangible right -to -use lease asset, and a lessor is required to recognize a lease receivable and a deferred inflow of resources, thereby enhancing the relevance and consistency of information about governments' leasing activities. This statement will be effective for the year ending December 31, 2020. 77 -This Page Intentionally left Blank - 78 REQUIRED SUPPLEMENTARY INFORMATION 79 CITY OF COTTAGE GROVE, MINNESOTA REQUIRED SUPPLEMENTARY INFORMATION BUDGETARY COMPARISON SCHEDULE - GENERAL FUND For The Year Ended December 31, 2017 With Comparative Data for the Year Ended December 31, 2016 Revenue: General property taxes: Current and delinquent Special Assessments Licenses and permits: General government Community development Engineering Public safety Total licenses and permits Intergovernmental: Federal: Safe and sober - public safety Ballistic vest grant - public safety Misc. grant - general government State: Local government aid Market value homestead credit MSA maintenance - public works PERA aid Fire relief aid - public safety Police relief aid - public safety Conservation grant - culture and recreation Other - public safety Other - planning Local: SRO program - public safety Narcotics officer program - public safety Other - public safety Other - public works Other - culture and recreation Total intergovernmental Charges for services: Administration charges - general government: Investment charge - general government Other - general government Other - community development Other - engineering Other - public safety Other - public works Other - culture and recreation Total charges for services Budgeted Amounts Original Final Statement 9 Page 1 of 5 Variance with 2017 Final Budget - 2016 Actual Positive Actual Amounts (Negative) Amounts $ 13,226,400 S 13,226,400 $ 13,174,561 $ (51,839) $ 12,573,607 19,500 19,500 6,881 (12,619) 5,703 78,650 78,650 87,363 8,713 80,225 1,368,200 1,368,200 1,774,420 406,220 1,207,047 - - 38,806 38,806 9,460 21,000 21,000 22,345 1,345 26,948 1,467,850 1,467,850 1,922,934 455,084 1,323,680 22,000 22,000 23,085 1,085 23,296 - - 4,331 4,331 3,717 - - 432 432 - 65,000 65,000 64,741 (259) 75,362 - - 5,397 5,397 5,210 43,000 43,000 43,245 245 43,245 21,450 21,450 56,532 35,082 43,613 - - 4,000 4,000 193,271 340,000 340,000 340,790 790 319,038 - - - - 150,277 16,000 16,000 26,806 10,806 38,826 - - 5,269 5,269 9,731 75,000 75,000 75,000 - 75,000 4,000 4,000 4,259 259 1,841 4,000 4,000 5,576 1,576 21,074 - - 2,629 2,629 1,750 19,800 19,800 14,135 (5,665) 14,720 610,250 610,250 676,227 65,977 1,019,971 13,800 13,800 12,825 (975) 8,691 300 300 334 34 341 41,000 41,000 107,798 66,798 84,083 269,000 269,000 355,882 86,882 357,277 47,600 47,600 60,221 12,621 53,836 30,100 30,100 58,772 28,672 25,518 143,150 143,150 144,205 1,055 142,809 544,950 544,950 740,037 195,087 672,555 80 CITY OF COTTAGE GROVE, MINNESOTA REQUIRED SUPPLEMENTARY INFORMATION BUDGETARY COMPARISON SCHEDULE - GENERAL FUND For The Year Ended December 31, 2017 With Comparative Data for the Year Ended December 31, 2016 Statement 9 Page 2 of 5 Variance with 2017 Final Budget - 2016 Budgeted Amounts Actual Positive Actual Original Final Amounts (Negative) Amounts Revenue: (continued) Fines and forfeits - public safety $ 190,000 $ 190,000 $ 170,994 $ (19,006) $ 196,360 Investment earnings (loss) 60,000 60,000 73,425 13,425 51,980 Donations: Donations - general government - - 1,045 1,045 - Donations - public safety - - 5,100 5,100 4,418 Donations - culture and recreation 4,000 4,000 13,965 9,965 2,775 Total donations 4,000 4,000 20,110 16,110 7,193 Miscellaneous: Other - general government 104,185 104,185 105,170 985 106,858 Other - public safety 20,000 20,000 25,500 5,500 37,589 Other - public works 23,000 23,000 23,576 576 21,543 Other - culture and recreation 5,000 5,000 1,340 (3,660) 159 Total miscellaneous 152,185 152,185 155,586 3,401 166,149 Total revenues 16,275,135 16,275,135 16,940,755 665,620 16,017,198 Expenditures: General government: Mayor and city council: Personal services 47,015 47,015 46,675 340 38,942 Commodities 1,100 1,100 350 750 626 Contractual services 83,400 83,400 61,510 21,890 91,721 Total mayor and city council 131,515 131,515 108,535 22,980 131,289 Administrative: Personal services 308,120 308,120 335,503 (27,383) 353,733 Commodities 800 800 1,076 (276) 496 Contractual services 14,400 14,400 14,089 311 11,426 Total administrative 323,320 323,320 350,668 (27,348) 365,655 Finance: Personal services 486,880 486,880 498,755 (11,875) 479,710 Commodities 1,700 1,700 763 937 751 Contractual services 43,895 43,895 42,117 1,778 37,393 Total finance 532,475 532,475 541,635 (9,160) 517,854 Personnel: Personal services 147,560 147,560 121,931 25,629 117,240 Commodities 200 200 334 (134) - Contractual services 36,635 36,635 9,975 26,660 14,079 Total personnel 184,395 184,395 132,240 52,155 131,319 Professional services: Contractual services 160,000 160,000 162,877 (2,877) 157,345 City clerk/elections: Personal services 100,340 100,340 108,365 (8,025) 145,181 Commodities 850 850 35 815 720 Contractual services 17,585 17,585 22,979 (5,394) 18,909 Total City clerk/elections 118,775 118,775 131,379 (12,604) 164,810 81 CITY OF COTTAGE GROVE, MINNESOTA REQUIRED SUPPLEMENTARY INFORMATION BUDGETARY COMPARISON SCHEDULE - GENERAL FUND For The Year Ended December 31, 2017 With Comparative Data for the Year Ended December 31, 2016 Statement 9 Page 3 of 5 Variance with 2017 Final Budget - 2016 Budgeted Amounts Actual Positive Actual Original Final Amounts (Negative) Amounts Expenditures: (continued) General government: (continued) Legal: Contractual services $ 200,000 $ 200,000 $ 207,250 $ (7,250) $ 199,160 Community and employee programs: Personal services - - 2,900 (2,900) 2,350 Commodities 500 500 376 124 580 Contractual services 71,300 71,300 42,815 28,485 52,284 Total community and employee programs 71,800 71,800 46,091 25,709 55,214 Government buildings: Personal services 147,550 147,550 156,492 (8,942) 137,719 Commodities 20,080 20,080 19,858 222 28,663 Contractual services 293,425 293,425 290,705 2,720 282,096 Total government buildings 461,055 461,055 467,055 (6,000) 448,478 Total general government 2,183,335 2,183,335 2,147,730 35,605 2,171,124 Community Development: Planning and zoning: Personal services 323,110 323,110 320,149 2,961 316,245 Commodities 1,440 1,440 2,769 (1,329) 2,339 Contractual services 51,530 51,530 35,187 16,343 42,285 Total planning and zoning 376,080 376,080 358,105 17,975 360,869 Building inspections: Personal services 482,400 482,400 498,760 (16,360) 441,646 Commodities 8,050 8,050 6,663 1,387 6,988 Contractual services 106,515 106,515 116,491 (9,976) 108,916 Total building inspections 596,965 596,965 621,914 (24,949) 557,550 Engineering: Personal services 288,900 288,900 275,271 13,629 173,269 Commodities 2,080 2,080 1,799 281 1,986 Contractual services 47,655 47,655 47,512 143 33,681 Total engineering 338,635 338,635 324,582 14,053 208,936 Total community development 1,311,680 1,311,680 1,304,601 7,079 1,127,355 Public safety: Police protection: Personal services 5,559,290 5,559,290 5,477,964 81,326 5,248,945 Commodities 221,804 221,804 237,166 (15,362) 280,013 Contractual services 457,491 457,491 479,772 (22,281) 462,527 Capital outlay 182,500 182,500 181,518 982 184,782 Total police protection 6,421,085 6,421,085 6,376,420 44,665 6,176,267 Fire protection: Personal services 808,200 808,200 815,350 (7,150) 739,297 Commodities 67,880 67,880 54,943 12,937 54,828 Contractual services 239,640 239,640 266,340 (26,700) 244,582 Total fire protection 1,115,720 1,115,720 1,136,633 (20,913) 1,038,707 Fire relief: Contractual services - - - 193,481 82 CITY OF COTTAGE GROVE, MINNESOTA REQUIRED SUPPLEMENTARY INFORMATION BUDGETARY COMPARISON SCHEDULE - GENERAL FUND For The Year Ended December 31, 2017 With Comparative Data for the Year Ended December 31, 2016 Statement 9 Page 4 of 5 Variance with 2017 Final Budget - 2016 Budgeted Amounts Actual Positive Actual Original Final Amounts (Negative) Amounts Expenditures: (continued) Public safety: (continued) Emergency preparedness: Personal services $ 32,900 $ 32,900 $ 29,129 $ 3,771 $ 16,297 Commodities 100 100 135 (35) 4,176 Contractual services 27,420 27,420 12,985 14,435 29,900 Total civil defense 60,420 60,420 42,249 18,171 50,373 Animal control: Personal services 15,045 15,045 14,633 412 14,633 Commodities 6,800 6,800 2,581 4,219 3,171 Contractual services 18,900 18,900 5,961 12,939 9,198 Total animal control 40,745 40,745 23,175 17,570 27,002 Total public safety 7,637,970 7,637,970 7,578,477 59,493 7,485,830 Public works: Public works administration: Personal services 374,900 374,900 391,859 (16,959) 313,884 Commodities 19,400 19,400 14,214 5,186 16,809 Contractual services 160,445 160,445 173,046 (12,601) 151,490 Total public works administration 554,745 554,745 579,119 (24,374) 482,183 Streets: Personal services 660,970 660,970 732,428 (71,458) 637,322 Commodities 266,950 266,950 238,106 28,844 221,065 Contractual services 379,770 379,770 300,527 79,243 336,329 Capital outlay - - 770 (770) 8,598 Total streets 1,307,690 1,307,690 1,271,831 35,859 1,203,314 Snow and ice control: Personal services 188,920 188,920 103,189 85,731 161,721 Commodities 254,400 254,400 249,426 4,974 225,141 Contractual services 148,300 148,300 170,163 (21,863) 158,465 Capital outlay - - - - 11,712 Total snow and ice control 591,620 591,620 522,778 68,842 557,039 Street signs/striping: Personal services 121,100 121,100 128,020 (6,920) 110,062 Commodities 34,360 34,360 33,975 385 42,011 Contractual services 59,170 59,170 80,478 (21,308) 33,000 Total street signs/striping 214,630 214,630 242,473 (27,843) 185,073 Total public works 2,668,685 2,668,685 2,616,201 52,484 2,427,609 83 CITY OF COTTAGE GROVE, MINNESOTA REQUIRED SUPPLEMENTARY INFORMATION BUDGETARY COMPARISON SCHEDULE - GENERAL FUND For The Year Ended December 31, 2017 With Comparative Data for the Year Ended December 31, 2016 Statement 9 Page 5 of 5 Variance with 2017 Final Budget - 2016 Budgeted Amounts Actual Positive Actual Original Final Amounts (Negative) Amounts Expenditures: (continued) Culture and recreation: Forestry: Personal services $ 136,900 $ 136,900 $ 136,219 $ 681 $ 115,413 Commodities 15,050 15,050 13,485 1,565 6,827 Contractual services 220,490 220,490 224,725 (4,235) 238,670 Total forestry 372,440 372,440 374,429 (1,989) 360,910 Recreation programs: Personal services 298,160 298,160 302,531 (4,371) 266,178 Commodities 9,700 9,700 4,780 4,920 5,165 Contractual services 90,155 90,155 56,497 33,658 68,484 Total recreation programs 398,015 398,015 363,808 34,207 339,827 Parks maintenance: Personal services 877,615 877,615 795,248 82,367 784,986 Commodities 180,800 180,800 143,552 37,248 138,904 Contractual services 326,095 326,095 318,383 7,712 317,564 Capital outlay 11,000 11,000 10,966 34 148,792 Total parks maintenance 1,395,510 1,395,510 1,268,149 127,361 1,390,246 Total culture and recreation 2,165,965 2,165,965 2,006,386 159,579 2,090,983 Total expenditures 15,967,635 15,967,635 15,653,395 314,240 15,302,901 Revenues over (under) expenditures 307,500 307,500 1,287,360 979,860 714,297 Other financing sources (uses): Transfer from Special Revenue Fund 41,350 41,350 41,350 - 5,000 Transfer from Enterprise Fund 500,150 500,150 500,150 520,713 Transfer to Debt Service Fund - - (390,647) (390,647) (115,388) Transfer to Special Revenue Fund (190,000) (190,000) (100,000) Transfer to Capital Project Fund (300,000) (300,000) (858,068) (558,068) (837,212) Total other financing sources (uses): 241,500 241,500 (897,215) (1,138,715) (526,887) Net increase (decrease) in fund balance $ 549,000 $ 549,000 390,145 $ (158,855) 187,410 Fund balance - January 1 10,440,847 10,253,437 Fund balance - December 31 $ 10,830,992 $ 10,440,847 84 City of Cottage Grove Schedule of City's Proportionate Share of Net Pension Liability General Employees Retirement Fund Last Ten Years City's Proportionate Share of the Net State's Pension Liablility City's City's City's Proportionate and the State's Proportionate Proportionate Proportionate Share (Amount) Proportionate Share of the Net Plan Fiduciary Share Share (Amount) of the Net Share of the Net Pension Liability Net Position as a (Percentage) of of the Net Pension Liability Pension Liablility (Asset) as a Percentage of the For Fiscal Year the Net Pension Pension Liability Associated with Associated with City's Covered- Percentage of its Total Pension Ended June 30, Liability (Asset) (Asset) the City the City Payroll Covered- Payroll Liability 2017 0.0890% $ 5,681,701 $ 71,469 $ 5,753,170 $ 5,887,025 97.73% 78.19% 2016 0.0878% $ 7,128,925 $ 43,058 $ 7,221,983 $ 5,447,306 132.58% 68.91% 2015 0.0919% $ 4,762,735 $ - - $ 5,401,220 88.18% 78.19% Note: Schedule is intended to show ten year trend. Additional years will be reported as they become available. Schedule of City's Proportionate Share of Net Pension Liability Public Employees Police and Fire Retirement Fund Last Ten Years City's Proportionate City's Share of the Net Plan Fiduciary City's Proportion Proportionate Pension Liability Net Position as a of the Net Share of the Net (Asset) as a Percentage of the For Fiscal Year Pension Liability Pension Liability City's Covered- Percentage of its Total Pension Ended June 30, (Asset) (Asset) Payroll Covered- Payroll Liability 2017 0.4380% $ 5,913,521 $ 4,639,398 127.46% 86.61% 2016 0.4450% 17,818,574 4,286,586 415.68% 63.88% 2015 0.4340% 4,931,256 3,970,895 124.19% 86.61% Note: Schedule is intended to show ten year trend. Additional years will be reported as they become available. 85 City of Cottage Grove Schedule of City Contributions General Employees Retirement Fund Last Ten Years Contributions in Relation to the Contributions as a Fiscal Year Statutorily Statutorily Contribution Percentage of Ending Required Required Deficiency City's Covered- Covered - December 31, Contribution Contributions (Excess) Payroll Employee Payroll 2016 $ 458,971 $ 458,971 $ - $ 6,119,613 7.5% 2016 $ 424,202 $ 424,202 $ - $ 5,656,027 7.5% 2015 $ 403,964 $ 403,964 $ - $ 5,401,220 7.5% Note: Schedule is intended to show ten year trend. Additional years will be reported as they become available. Schedule of City Contributions Public Employees Police and Fire Retirement Fund Last Ten Years Contributions in Relation to the Contributions as a Fiscal Year Statutorily Statutorily Contribution Percentage of Ending Required Required Deficiency City's Covered- Covered - December 31, Contribution Contributions (Excess) Payroll Employee Payroll 2016 $ 778,070 $ 778,070 $ - $ 4,802,901 16.2% 2016 $ 718,936 $ 718,936 $ - $ 4,437,877 16.2% 2015 $ 664,300 $ 664,300 $ - $ 4,100,617 16.2% Note: Schedule is intended to show ten year trend. Additional years will be reported as they become available. 86 City of Cottage Grove Schedule of City Contributions and Non -employer Contributing Entities - Fire Relief Association 2014 2015 2016 2017 Employer Statutorily determined contribution (SDC) $ - $ - $ - $ - Contribution in relation to the SDC 5,155 5,329 5,265 2,081 Contribution deficiency (excess) $ (5,155) $ (5,329) $ (5,265) $ (2,089 Non -employer 2% aid $ 177,804 $ 191,183 $ 195,271 $ 192,139 Covered employee payroll n/a n/a n/a n/a Contributions as a percentage of covered employee payroll n/a n/a n/a n/a The City implemented the provisions of Governmental Accounting Standards Board Statement No. 68 for the year ended December 31, 2015. The schedules within the Required Supplementary Information section required a ten-year presentation, but does not required retroactive reporting. Information prior to 2014 is not available. Additional years will be reported as they become available. 87 City of Cottage Grove Schedule of Changes in Net Pension Liability and Related Ratios - Fire Relief Association Total pension liability (TPL) Service cost Interest Differences between expected and actual experience Changes of assumptions Changes of benefit terms Benefit payments, including refunds or member contributions Net change in total pension liability Beginning of year End of year Plan fiduciary net pension (FNP) Contributions - employer Contributions - non -employer Net investment income Benefit payments, including refunds of member contributions Administrative expense Other Net change in plan fiduciary net position Beginning of year End of year Net pension liability (NPL) Plan fiduciary net position as a percentage of the total pension liability Covered employee payroll Net pension liability as a percentage of covered payroll Measurement Date 2014 2015 2016 2017 $ 77,691 $ 79,827 $ 109,062 $ 118,915 85,148 88,550 85,750 100,267 - - - 329,484 - 77,611 (130,240) - - 139,930 - - (84,321) (140,973) (295,760) - 78,518 244,945 (231,188) 548,666 1,274,449 1,352,967 1,597,912 1,3 66,724 $ 1,352,967 $ 1,597,912 $ 1,366,724 $ 1,915,390 $ 5,155 $ 5,329 $ 5,265 $ 2,081 177,804 191,183 195,271 192,139 98,130 (117,642) 146,660 316,265 (84,321) (140,973) (295,760) - (11,193) (15,165) (12,139) (12,334) (23,403) - 210 (2,319) 162,172 (77,268) 39,507 495,832 2,242,564 2,404,881 2,327,613 2,367,120 $ 2,404,736 $ 2,327,613 $ 2,367,120 $ 2,862,952 $ (1,051,769) $ (729,701) $ (1,000,396) $ (947,562) 177.7% 145.7% 173.2% 149.5% n/a n/a n/a n/a n/a n/a n/a n/a The City implemented the provisions of Governmental Accounting Standards Board Statement No. 68 for the year ended December 31, 2015. The schedules within the Required Supplementary Information section required a ten-year presentation, but does not required retroactive reporting. Information prior to 2014 is not available. Additional years will be reported as they become available. 88 Actuarial Valuation Date 1/1/2017 1/1/2014 1/1/2011 Actuarial Value of Assets (a) City of Cottage Grove, Minnesota Required Supplementary Information Funding Progress Schedule Other Post Employment Health Care Benefits December 31, 2017 Actuarial Accrued Liability (AAL) (b) $ 397,006 324,523 108,298 Unfunded AAL (b-a) $ 397,006 324,523 108,298 Funded Ratio (a/b) Covered Payroll (c ) $ 9,318,553 9,765,700 8,887,000 UAAL as a Percentage of Covered Payroll ((b-a)/c) 4.26% 3.30% 1.20% 89 -This Page Intentionally left Blank - 90 COMBINING AND INDIVIDUAL FUND STATEMENTS AND SCHEDULES 91 -This Page Intentionally left Blank - 92 NONMAJOR GOVERNMENTAL FUNDS 93 SPECIAL REVENUE FUNDS A Special Revenue Fund is used to account for the proceeds of specific revenue sources that are legally restricted to expenditures for specified purposes. DEBT SERVICE FUNDS The Debt Service Funds are used to account for the accumulation of resources for, and payment of, interest, principal and related costs on general long-term debt. CAPITAL PROJECT FUNDS The Capital Project Funds account for financial resources to be used for the acquisition or construction of major capital facilities (other than those financed by Proprietary Funds). 94 CITY OF COTTAGE GROVE, MINNESOTA COMBINING BALANCE SHEET NONMAJOR GOVERNMENTAL FUNDS December 31, 2017 With Comparative Data as of December 31, 2016 Statement 10 Totals Nonmaj or Special Debt Capital Governmental Funds Revenue Service Project 2017 2016 Assets: Cash and investments $ 430,556 $ 194,561 $ 11,946,789 $ 12,571,906 $ 17,777,037 Interfund receivable 293,746 - 350,791 644,537 2,194,153 Interfundloan receivable - - 1,118,467 1,118,467 2,645,804 Due from other governmental units - net 106,936 - 2,004,868 2,111,804 927,290 Accounts receivable - net 336,305 - 190,352 526,657 483,488 Prepaid items 2,827 - - 2,827 5,723 Inventories - at cost 30,625 - - 30,625 28,750 Delinquent property taxes receivable - 2,854 - 2,854 2,764 Special assessments receivable: Deferred - - 1,129,505 1,129,505 2,196,978 Delinquent - - 3,582 3,582 6,220 Total assets $ 1,200,995 $ 197,415 $ 16,744,354 $ 18,142,764 $ 26,268,207 Liabilities: Accounts payable $ 58,301 $ - $ 604,477 $ 662,778 $ 2,557,422 Salaries payable 60,560 - - 60,560 69,451 Interfund payable 293,746 - 580,815 874,561 2,194,153 Contracts payable - - - - 49,188 Due to other governmental units 6,053 - 21,705 27,758 199,662 Deposits payable - - - - 1,706,222 Interfundloan payable - - 1,118,467 1,118,467 1,145,804 Total liabilities 418,660 - 2,325,464 2,744,124 7,921,902 Deferred inflows of resources: Unavailable revenue - property taxes - 2,854 - 2,854 2,764 Unavailable revenue - special assessments - - 1,133,087 1,133,087 2,203,198 Total deferred inflows of resources - 2,854 1,133,087 1,135,941 2,205,962 Fund balance: Nonspendable: Prepaid items 2,827 - - 2,827 5,723 Inventory 30,625 - - 30,625 28,750 Restricted for: Forfeiture and seizure 24,722 - - 24,722 23,308 Charitable gambling - - - - 4,457 Debt retirement - 191,950 - 191,950 168 Tax increment purposes - 2,611 - 2,611 117,610 Committed 947,486 - - 947,486 731,090 Assigned - - 14,289,280 14,289,280 17,527,670 Unassigned (223,325) - (1,003,477) (1,226,802) (2,298,433) Total fund balance 782,335 194,561 13,285,803 14,262,699 16,140,343 Total liabilities, deferred inflows of resources, and fund balance $ 1,200,995 $ 197,415 $ 16,744,354 $ 18,142,764 $ 26,268,207 95 CITY OF COTTAGE GROVE, MINNESOTA COMBINING STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE NONMAJOR GOVERNMENTAL FUNDS For The Year Ended December 31, 2017 With Comparative Data for the Year Ended December 31, 2016 Statement 11 Totals Nonmajor Special Debt Capital Governmental Funds Revenues: Revenue Service Project 2017 2016 General property taxes $ $ 188,505 $ $ 188,505 $ 288,641 Franchise taxes - 560,492 560,492 516,931 Aggregate taxes - 28,442 28,442 39,748 Tax increment collections 175,000 638,541 813,541 776,061 Special assessments - 1,050,823 1,050,823 603,664 Direct charges to developers - 36,965 36,965 277,860 Intergovernmental 205,265 - 2,080,000 2,285,265 1,412,036 Charges for services 3,227,696 - 172,657 3,400,353 3,388,746 Rent - - 401,599 401,599 447,426 Fines and forfeits 13,948 - - 13,948 39,900 Investment earnings (loss) 5,628 2,471 117,237 125,336 100,190 Interest on interfund loan - - 32,206 32,206 32,560 Connection charges - 2,050,958 2,050,958 649,489 Park dedication fees - 526,936 526,936 212,865 Other sales - - - 1,048,871 Donations - 536,804 536,804 449,745 Miscellaneous 2,938 - 418,092 421,030 93,452 Total revenues 3,455,475 365,976 8,651,752 12,473,203 10,378,185 Expenditures: Current: General government 1,425 354 1,779 926,564 Economic development - - 695,356 695,356 2,236,464 Public safety 16,934 - - 16,934 146,010 Public works 476,881 - 744,188 1,221,069 1,709,336 Culture and recreation 2,225,391 - 65,395 2,290,786 2,496,437 Capital outlay: General government - - 24,711 24,711 24,709 Public safety - 63,253 63,253 88,648 Public works - - 3,876,372 3,876,372 3,244,017 Culture and recreation 155,637 - 1,118,555 1,274,192 480,975 Debt service: Principal retirement - 800,000 - 800,000 5,815,000 Capital lease payment - - - 327,432 Interest and fiscal charges - 186,745 17,206 203,951 367,035 Total expenditures 2,874,843 988,170 6,605,390 10,468,403 17,862,627 Revenues over (under) expenditures 580,632 (622,194) 2,046,362 2,004,800 (7,484,442) Other financing sources (uses): Transfers in 190,000 507,027 929,034 1,626,061 924,737 Transfers out (479,623) - (2,135,775) (2,615,398) (55,242) Bonds issued 191,950 191,950 4,660,000 Premium on debt issued - - - 259,764 Proceeds from the sale of capital assets - 19,485 19,485 15,453 Total other financing sources (uses) (289,623) 698,977 (1,187,256) (777,902) 5,804,712 Net increase (decrease) in fund balance 291,009 76,783 859,106 1,226,898 (1,679,730) Fund balance - January 1 491,326 117,778 12,426,696 13,035,800 17,820,073 Fund balance - December 31 $ 782,335 $ 194,561 $ 13,285,802 $ 14,262,698 $ 16,140,343 96 NONMAJOR 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: Recycling — 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 Gambling — Established to account for the 3% tax on charitable gambling operations. 97 CITY OF COTTAGE GROVE, MINNESOTA SUBCOMBINING BALANCE SHEET NONMAJOR SPECIAL REVENUE FUNDS December 31, 2017 With Comparative Data as of December 31, 2016 Assets: Cash and investments Interfund receivable Due from other governmental units - net Accounts receivable - net Prepaid items Inventories - at cost Delinquent property taxes receivable Total assets Liabilities: Accounts payable Salaries payable Interfund payable Due to other governmental units Deposits payable Total liabilities Deferred inflows of resources: Unavailable revenue - property taxes Total deferred inflows of resources Fund balance: Nonspendable: Prepaid items Inventory Restricted for: Forfeiture and seizure Charitable gambling Committed for: Ice arena Storm water activities Recycling program Unassigned Total fund balance Total liabilities, deferred inflows of resources, and fund balance Storm Water Forfeiture/ Recycling Maintenance Seizure - $ 77,953 $ 327,329 $ 25,274 - 293,746 - - 81,276 250 - 132,295 - $ 4,047 $ 13,136 $ 802 15 7,167 - 235 - 4,062 20,538 802 - - 24,722 - 814,108 - 73,891 - - 73,891 814,108 24,722 $ 77,953 $ 834,646 $ 25,524 98 Statement 12 Totals Nonmaj or Ice Golf Special Revenue Funds Arena Course 2017 2016 $ - $ - $ 430,556 $ 287,274 - - 293,746 332,850 25,410 - 106,936 26,565 191,217 12,793 336,305 317,023 1,037 1,790 2,827 5,723 - 30,625 30,625 28,750 - - - 2,661 $ 217,664 $ 45,208 $ 1,200,995 $ 1,000,846 $ 24,420 $ 15,896 $ 58,301 $ 85,516 23,351 30,027 60,560 69,451 106,264 187,482 293,746 332,850 3,105 2,713 6,053 11,287 - - - 7,755 157,140 236,118 418,660 506,859 - - - 2,661 - - - 2,661 1,037 1,790 2,827 5,723 - 30,625 30,625 28,750 - - 24,722 23,308 - - - 4,457 59,487 - 59,487 59,550 - - 814,108 614,017 73,891 57,523 - (223,325) (223,325) (302,002) 60,524 (190,910) 782,335 491,326 $ 217,664 $ 45,208 $ 1,200,995 $ 1,000,846 99 CITY OF COTTAGE GROVE, MINNESOTA SUBCOMBINING STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE NONMAJOR SPECIAL REVENUE FUNDS For The Year Ended December 31, 2017 With Comparative Data for the Year Ended December 31, 2016 Revenues: General property taxes Intergovernmental: Local: Washington county School district Charges for services Fines and forfeits Investment earnings (loss) Miscellaneous Total revenues Expenditures: Current: Public safety Public works Culture and recreation Capital outlay: Public safety Culture and recreation Debt service: Capital lease payment Interest and fiscal charges Total expenditures Revenues over (under) expenditures Other financing sources (uses): Transfer from General Fund Transfer to General Fund Transfer to Debt Service Fund Transfer to Capital Project Fund Total other financing sources (uses) Net increase (decrease) in fund balance Fund balance - January 1 Storm Water Recycling Maintenance 58,880 442 85,175 802,571 4,643 Forfeiture/ r_.____ 4,210 13,948 190 J 7,JLL VIL,J V7 1 V,JTU - - 16,934 42,954 433,927 - `TL,7 J'T 'YJJ,7L / 1 V,7J'T 16,368 458,462 1,414 (41,350) - (217,021) - - (258,371) - 16,368 200,091 1,414 57,523 614,017 23,308 Fund balance - December 31 $ 73,891 $ 814,108 $ 24,722 100 Statement 13 Totals Nonmaj or Ice Golf Charitable Special Revenue Funds Arena Course Gambling 2017 2016 $ - $ - $ - $ - $ 288,607 - - - 148,265 77,495 57,000 - - 57,000 57,000 967,874 1,457,251 - 3,227,696 3,208,519 - - - 13,948 39,900 314 - 39 5,628 1,376 1,122 1,816 - 2,938 10,692 1,026,310 1,459,067 39 3,455,475 3,683,589 - - - 16,934 28,437 - - - 476,881 525,905 769,580 1,451,315 4,496 2,225,391 2,344,491 - - - - 27,506 35,109 120,528 - 155,637 76,457 - - - - 327,432 - - - - 109,614 804,689 1,571,843 4,496 2,874,843 3,439,842 221,621 (112,776) (4,457) 580,632 243,747 - 190,000 - 190,000 100,000 - - - (41,350) (40,019) (221,252) - - (221,252) - - - - (217,021) - (221,252) 190,000 - (289,623) 59,981 369 77,224 (4,457) 291,009 303,728 60,155 (268,134) 4,457 491,326 187,598 $ 60,524 $ (190,910) $ - $ 782,335 $ 491,326 101 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 three types of bonded indebtedness: • Improvement Bonds • Refunding Bonds • Tax Increment Bonds Developer Financed Revolving — (2008A Improvements Bonds) w e r e refinanced in 2016. Refunding Bonds — these General Obligation bonds were issued to refinance the 2008A Improvement bonds and to provide funds to pay off the Capital Lease -purchase agreement with the EDA for the expansion of the Ice Arena. These bonds will be repaid using special assessments from new developments, a general tax levy and dedicated revenues from the Ice Arena. Tax Increment — 1985 Tax Increment Bonds (TIF 1-1), 2004A Tax Increment Refunding Bonds (TIF 1-3), 2004A Tax Exempt Increment Bonds (TIF 1-12), and 2014A Taxable Tax Increment Refunding Bonds (TIF 1-12) are repaid primarily from taxes increments. 102 CITY OF COTTAGE GROVE, MINNESOTA SUBCOMBINING BALANCE SHEET Statement 14 NONMAJOR DEBT SERVICE FUNDS December 31, 2017 With Comparative Data as of December 31, 2016 Totals G.O. Capital G.O. Refunding Nonmajor Improvement Bonds of Tax Increment Debt Service Funds Bonds2017A 2016A Funds 2017 2016 Assets: Cash and investments $ 191,950 $ - $ 2,611 $ 194,561 $ 1,042,801 Delinquent - property taxes receivable - 2,854 - 2,854 - Total assets $ 191,950 $ 2,854 $ 2,611 $ 197,415 $ 1,042,801 Liabilities: Accounts payable $ $ - $ - $ - $ 925,023 Total liabilities $ - $ $ - $ - $ 925,023 Deferred inflows of resources: Unavailable revenue - property taxes - 2,854 - 2,854 - Total deferred inflows of resources - 2,854 - 2,854 - Fund balance: Restricted for: Debt retirement $ 191,950 $ $ - $ 191,950 $ 168 Tax increment purposes - 2,611 2,611 117,610 Total fund balance 191,950 2,611 194,561 117,778 Total liabilities, deferred inflows of resources, and fund balance $191,950 $2,854 $2,611 $197,415 $1,042,801 103 CITY OF COTTAGE GROVE, MINNESOTA SUBCOMBINING STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE NONMAJOR DEBT SERVICE FUNDS For The Year Ended December 31, 2017 With Comparative Data for the Year Ended December 31, 2016 Statement 15 Totals G.O. Capital G.O. Refunding Tax Nonmajor Improvement Bonds of Increment Debt Service Funds Bonds2017A 2016A Funds 2017 2016 Revenues: General property taxes $ $ 188,505 $ - $ 188,505 $ - Tax increment collections - 175,000 175,000 313,000 Intergovernmental - - 565,562 Investment earnings (loss) - 2,471 2,471 20,711 Total revenues 188,505 177,471 365,976 899,273 Expenditures: Current: General government: Contractual services 475 950 1,425 926,473 Debt service: Principal retirement 575,000 225,000 800,000 5,815,000 Interest and fiscal charges 120,225 66,520 186,745 239,661 Total expenditures 695,700 292,470 988,170 6,981,134 Revenues over(under)expenditures (507,195) (114,999) (622,194) (6,081,861) Other financing sources (uses): Transfers in (out) 507,027 507,027 54,722 Bonds issued 191,950 - 191,950 4,660,000 Premium on debt issued - - - 259,764 Total other financing sources (uses) 191,950 507,027 698,977 4,974,486 Net increase (decrease) in fund balance 191,950 (168) (114,999) 76,783 (1,107,375) Fund balance - January 1 - 168 117,610 117,778 1,225,153 Fund balance - December 31 $ 191,950 $ - $ 2,611 $ 194,561 $ 117,778 104 NONMAJOR CAPITAL PROJECT FUNDS Capital Project Funds are used to account for the acquisition and construction of major 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 Sealcoating — 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. Completed Construction — to account for the various surpluses (deficits) of other Special Assessment Construction Funds. Park Trust-- to account for capital projects in new municipal parks. Inclusive Playground — to account for inclusive playground project. Park Capital Improvements — to account for capital projects 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 Revolving Fund — to account for construction projects that are financed with tax increments. 105 CITY OF COTTAGE GROVE, MINNESOTA SUBCOMBINING BALANCE SHEET NONMAJOR CAPITAL PROJECT FUNDS December 31, 2017 With Comparative Data as of December 31, 2016 Future Equipment Street Economic Completed Park Replacement Sealcoating Development Construction Trust Assets: Cash and investments $ 1,782,130 $ 1,162,349 $ 2,574,113 $ 491,207 $ 350,975 Interfund receivable - - - - - Interfund loan receivable - - 1,118,467 - - Due from other governmental units - net - 18,788 - - - Accounts receivable - net - 153,334 - 2,370 - Special assessments receivable: Deferred - - 28,050 - 104,686 Delinquent - - - - - Total assets $ 1,782,130 $ 1,334,471 $ 3,720,630 $ 493,577 $ 455,661 Liabilities: Accounts payable $ - $ 188,848 $ - $ - $ - Interfund payable - - - - - Contracts payable - - - - Due to other governments - - - - Deposits payable - - - - Interfund loan payable - - - - - Total liabilities - 188,848 - - - Deferred inflows of resources: Unavailable revenue - special assessments - - 28,050 - 104,686 Total deferred inflows of resources - - 28,050 - 104,686 Fund balance: Assigned for: Equipment replacement 1,782,130 - - - - Street sealcoating - 1,145,623 - - - Economic development - - 3,692,580 - - Capital improvements - - - 493,577 350,975 Unassigned - - - - - Total fund balance 1,782,130 1,145,623 3,692,580 493,577 350,975 Total liabilities, deferred inflows of resources, and fund balance $ 1,782,130 $ 1,334,471 $ 3,720,630 $ 493,577 $ 455,661 106 Tax Increment Park Water Sewer Future 2016 Construction Capital Connection Connection Storm Sewer Improvement Revolving Improvements and Area and Area Improvements Projects Fund Statement 16 Totals Nonmajor Capital Project Funds 2017 2016 $ 311,045 $ 543,364 $ - $ 3,966,335 $ - $ 765,271 $11,946,789 $ 12,632,960 - 350,791 - - - - 350,791 899,128 - - - - - - 1,118,467 2,568,081 - 1,984,640 1,440 - - - 2,004,868 899,941 34,648 - - - - - 190,352 166,465 - 109,711 65,686 184,431 636,941 - 1,129,505 2,072,182 - - - - 3,582 - 3,582 6,220 $ 345,693 $ 2,988,506 $ 67,126 $ 4,150,766 $ 640,523 $ 765,271 $ 16,744,354 $ 19,244,977 $ 33,095 $ 293,020 $ 1,744 $ 18,608 $ 41,059 $ 28,103 $ 604,477 $ 1,494,958 - - 350,791 - 230,024 - 580,815 1,861,303 - - - - - - 49,188 21,705 - - 21,705 188,375 - - - - - - - 251 - - - - - 1,118,467 1,118,467 1,145,804 33,095 293,020 352,535 40,313 271,083 1,146,570 2,325,464 4,739,879 - 109,711 65,686 184,431 640,523 - 1,133,087 2,078,402 109,711 65,686 184,431 640,523 - 1,133,087 2,078,402 - - - - - - 1,782,130 1,792,092 - 1,145,623 858,030 - - - - - - 3,692,580 3,337,189 312,598 2,585,775 - 3,926,022 - - 7,668,947 8,435,816 - - (351,095) - (271,083) (381,299) (1,003,477) (1,996,431) 312,598 2,585,775 (351,095) 3,926,022 (271,083) (381,299) 13,285,803 12,426,696 $ 345,693 $ 2,988,506 $ 67,126 $ 4,150,766 $ 640,523 $ 765,271 $ 16,744,354 $ 19,244,977 107 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, 2017 With Comparative Data for the Year Ended December 31, 2016 Future Equipment Street Economic Completed Park Replacement Sealcoating Development Construction Trust Revenues: Franchise taxes $ $ 560,492 $ $ $ Aggregate taxes 28,442 Tax increment collections - Special assessments: Current 11,220 12,928 41,874 Delinquent - 4 - Prepayments on deferred - Penalties - 1 Direct charges to developers 36,965 Intergovernmental: State - Other - Charges for services 172,657 Rent - - - - Investment earnings (loss) 14,555 8,389 21,300 4,336 77 Interest on interfund loan - - 17,206 15,000 - Connection charges - - - Park dedication fees 526,936 Other sales - Donations - - 336,685 - Miscellaneous 37 532 210 31,240 - Total revenues 14,592 807,477 386,621 63,509 568,887 Expenditures: Current: General government - - - 354 - Economic development - - 31,231 - Public works 71,288 519,884 - 85,170 - Culture and recreation - - - 4,941 Capital outlay: General government 24,711 - Public safety 63,253 Public works 267,620 Culture and recreation 196,201 Debt service: Interest and fiscal charges - Total expenditures 623,073 519,884 31,231 85,524 4,941 Revenues over (under) expenditures (608,481) 287,593 355,390 (22,015) 563,946 Other financing sources (uses): Transfer from General Fund 579,034 - - - Transfer from Capital Project Fund - Transfer to Debt Service Fund Transfer to Capital Project Fund - (1,500,000) Proceeds from the sale of capital assets 19,485 Total other financing sources (uses) 598,519 (1,500,000) - Net increase (decrease)in fund balance (9,962) 287,593 355,390 (1,522,015) 563,946 Fund balance - January 1 1,792,092 858,030 3,337,189 2,015,592 (212,971) Fund balance - December 31 $ 1,782,130 $ 1,145,623 $ 3,692,579 $ 493,577 $ 350,975 108 Statement 17 Tax Increment Totals Park Water Sewer Future 2016 Construction Nonmajor Inclusive Capital Connection Connection Storm Sewer Improvement Revolving Capital Project Funds Playground Improvements and Area and Area Improvements Projects Fund 2017 2016 $ $ $ $ $ $ $ $ 560,492 $ 516,931 28,442 39,748 638,541 638,541 463,061 43,885 26,275 73,772 322,955 - 532,909 479,694 1,334 3,088 1,798 - 6,224 97 - - - 495,398 495,398 84,851 160 370 216 15,545 16,292 23 - - - - 36,965 20,437 100,000 - 100,000 - - 1,980,000 1,980,000 600,000 - 172,657 180,227 - 401,599 - 401,599 447,426 970 6,338 23,882 29,200 8,190 117,237 62,046 - - - - - - 32,206 32,560 554,770 640,540 855,648 2,050,958 649,489 - - - 526,936 212,865 - - - 1,048,871 198,239 1,880 536,804 449,745 - 30,002 356,071 418,092 82,760 299,209 439,819 2,604,031 670,273 960,634 833,898 1,002,802 8,651,752 5,370,831 - - - - - - - 354 91 - - - - 664,125 695,356 2,236,464 - - 34,164 17,229 16,309 144 - 744,188 1,025,447 20,809 39,645 - - - - 65,395 120,323 - - 24,711 24,709 - - - - - 63,253 61,142 - - 2,709,073 48,600 157,168 88,194 605,717 3,876,372 3,244,017 714,896 207,458 - - - - - 1,118,555 404,518 - - 17,206 17,206 17,760 735,705 247,103 2,743,237 65,829 173,477 88,338 1,287,048 6,605,390 7,134,471 (436,496) 192,716 (139,206) 604,444 787,157 745,560 (284,246) 2,046,362 (1,763,640) - - - - - 579,034 754,792 350,000 350,000 15,223 - (285,775) (285,775) - (350,000) (1,850,000) - 19,485 15,453 350,000 (350,000) (285,775) (1,187,256) 785,468 (86,496) (157,284) (139,206) 318,669 787,157 745,560 (284,246) 859,106 (978,172) 86,496 469,882 2,724,981 (669,764) 3,138,865 (1,016,643) (97,053) 12,426,696 13,404,868 $ - $ 312,598 $ 2,585,775 $ (351,095) $ 3,926,022 $ (271,083) $ (381,299) $ 13,285,802 $ 12,426,696 109 CITY OF COTTAGE GROVE, MINNESOTA SPECIAL REVENUE FUND - RECYCLING SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE - BUDGET AND ACTUAL For The Year Ended December 31, 2017 With Comparative Data for the Year Ended December 31, 2016 Revenues: Intergovernmental: Local: Washington County recycling grant - public works Investment earnings (loss) Miscellaneous - public works Total revenues Expenditures: Public works: Current: Personal services Commodities Contractual services Capital outlay Total expenditures Revenues over (under) expenditures Fund balance - January 1 Fund balance - December 31 Budgeted Amounts Original Final Statement 18 Variance with 2017 Final Budget- 2016 Actual Positive Actual Amounts (Negative) Amounts $ 57,140 $ 57,140 $ 58,880 $ 1,740 $ 77,495 - - 442 442 340 20,350 20,350 - (20,350) 3,500 77,490 77,490 59,322 (18,168) 81,335 34,700 34,700 29,936 4,764 33,534 9,100 9,100 2,493 6,607 4,349 40,680 40,680 10,525 30,155 42,519 25,000 25,000 - 25,000 - 109,480 109,480 42,954 66,526 80,402 $ (31,990) $ (31,990) 16,368 $ 48,358 933 57,523 $ 73,891 56,590 $ 57,523 110 CITY OF COTTAGE GROVE, MINNESOTA SPECIAL REVENUE FUND - STORM WATER MAINTENANCE FUND Statement 19 SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE - BUDGET AND ACTUAL For The Year Ended December 31, 2017 With Comparative Data for the Year Ended December 31, 2016 Revenue: Intergovernmental: Local: Other - public works Charges for services Investment earnings (loss) Total revenue Expenditures: Public works: Current: Personal services Commodities Contractual services Total expenditures Revenue over (under) expenditures Other financing sources (uses): Transfer to General Fund Total other financing sources (uses): Net increase (decrease) in fund balance Fund balance - January 1 Fund balance - December 31 Variance with 2017 Final Budget- 2016 Budgeted Amounts Actual Positive Actual Original Final Amounts (Negative) Amounts $ - $ - $ 85,175 $ 85,175 $ - 786,300 786,300 802,571 16,271 756,126 1,000 1,000 4,643 3,643 799 787,300 787,300 892,389 105,089 756,925 251,120 251,120 249,120 2,000 290,223 24,030 24,030 9,716 14,314 12,395 297,850 297,850 175,091 122,759 142,885 573,000 573,000 433,927 139,073 445,503 214,300 214,300 458,462 244,162 311,422 (176,610) (176,610) (258,371) (81,761) (35,019) (176,610) (176,610) (258,371) (81,761) (35,019) $ 37,690 $ 37,690 200,091 $ 162,401 614,017 $ 814,108 276,403 337,614 $ 614,017 ill CITY OF COTTAGE GROVE, MINNESOTA SPECIAL REVENUE FUND - FORFEITURE/SEIZURE SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE - BUDGET AND ACTUAL For The Year Ended December 31, 2017 With Comparative Data for the Year Ended December 31, 2016 2017 Budgeted Amounts Actual Original Final Amounts Revenues: Intergovernmental: County $ 8,000 $ 8,000 $ 4,210 Forfeitures and seizures 21,000 21,000 13,948 Investment earnings (loss) 500 500 190 Total revenues 29,500 29,500 18,348 Expenditures: Public safety: Current: Commodities Contractual services Capital outlay Total expenditures Revenues over (under) expenditures Fund balance - January 1 Fund balance - December 31 Variance with Final Budget - Positive (Negative) Statement 20 2016 Actual Amounts $ (3,790) $ - (7,052) 39,900 (310) 185 (11,152) 40,085 4,500 4,500 6,640 (2,140) 6,613 14,620 14,620 10,294 4,326 21,824 10,000 10,000 - 10,000 27,506 29,120 29,120 16,934 12,186 55,943 $ 380 $ 380 1,414 $ 1,034 (15,858) 23,308 $ 24,722 39,166 $ 23,308 11K CITY OF COTTAGE GROVE, MINNESOTA SPECIAL REVENUE FUND - ICE ARENA SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE - BUDGET AND ACTUAL For The Year Ended December 31, 2017 With Comparative Data for the Year Ended December 31, 2016 Revenues: General property taxes: Current and delinquent Intergovernmental: Local: School district Charges for services Investment earnings (loss) Miscellaneous Total revenues Expenditures: Culture and recreation: Current: Personal services Commodities Contractual services Capital outlay Debt Service: Capital lease payment Interest and fiscal charges Total expenditures Revenues over (under) expenditures Other financing sources (uses): Transfer to Debt Service Fund Total other financing sources (uses): Net increase (decrease) in fund balance Fund balance - January 1 Fund balance - December 31 Budgeted Amounts Original Final Variance with 2017 Final Budget - Actual Positive Amounts (Negative) Statement 21 2016 Actual Amounts - $ - $ 288,607 57,000 57,000 57,000 - 57,000 989,000 989,000 967,874 (21,126) 987,895 6,000 6,000 314 (5,686) - - - 1,122 1,122 14 1,052,000 1,052,000 1,026,310 (25,690) 1,333,516 364,100 364,100 375,293 (11,193) 351,458 34,400 34,400 38,214 (3,814) 33,279 323,750 323,750 356,073 (32,323) 367,098 100,000 100,000 35,109 64,891 27,446 - - 290,000 - - - - 108,846 822,250 822,250 804,689 17,561 1,178,127 229,750 229,750 221,621 (8,129) 155,389 (220,000) (220,000) (221,252) (1,252) (220,000) (220,000) (221,252) (1,252) $ 9,750 $ 9,750 369 $ (9,381) 60,155 $ 60,524 155,389 (95,234) $ 60,155 113 CITY OF COTTAGE GROVE, MINNESOTA SPECIAL REVENUE FUND - GOLF COURSE SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE - BUDGET AND ACTUAL For The Year Ended December 31, 2017 With Comparative Data for the Year Ended December 31, 2016 Revenues: Charges for services Miscellaneous Total revenues Expenditures: Culture and recreation: Current: Personal services Commodities Contractual services Capital outlay Debt Service: Capital lease payment Interest and fiscal charges Total expenditures Revenues over (under) expenditures Other financing sources (uses): Transfer from General Fund Total other financing sources (uses) Net increase (decrease) in fund balance Fund balance - January 1 Fund balance - December 31 Statement 22 Variance with 2017 Final Budget- 2016 Budgeted Amounts Actual Positive Actual Original Final Amounts (Negative) Amounts $ 1,842,980 $ 1,842,980 $ 1,457,251 $ (385,729) $ 1,464,498 - - 1,816 1,816 7,178 1,842,980 1,842,980 1,459,067 (383,913) 1,471,676 834,150 834,150 858,979 (24,829) 952,766 173,400 173,400 141,573 31,827 149,240 581,850 580,630 450,763 129,867 490,650 194,500 194,500 120,528 73,972 49,011 - - - - 37,432 - - - - 768 1,783,900 1,782,680 1,571,843 210,837 1,679,867 59,080 60,300 (112,776) (173,076) (208,191) $ 59,080 $ 60,300 190,000 190,000 100,000 190,000 190,000 100,000 77,224 $ 16,924 (108,191) (268,134) $ (190,910) (159,943) $ (268,134) IMES CITY OF COTTAGE GROVE, MINNESOTA SPECIAL REVENUE FUND - CHARITABLE GAMBLING SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE - BUDGET AND ACTUAL For The Year Ended December 31, 2017 With Comparative Data for the Year Ended December 31, 2016 Revenues: Investment earnings (loss) Total revenues Expenditures: Culture and recreation: Current: Contractual Total expenditures Other financing sources (uses): Transfer to General Fund Total other financing sources (uses): Revenues over (under) expenditures Fund balance - January 1 Fund balance - December 31 2017 Budgeted Amounts Actual Original Final Amounts $ - $ - $ 39 39 Statement 23 Variance with Final Budget- 2016 Positive Actual (Negative) Amounts $ 39 $ 52 39 52 4,496 (4,496) - 4,496 (4,496) - (5,000) (5,000) (4,457) $ (4,457) (4,948) 4,457 9,405 $ - $ 4,457 115 -This Page Intentionally left Blank - 116 INTERNAL 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. 117 CITY OF COTTAGE GROVE, MINNESOTA COMBINING STATEMENT OF NET POSITION INTERNAL SERVICE FUNDS December 31, 2017 With Comparative Data as of December 31, 2016 Statement 24 Totals Self Fleet Information Internal Service Funds Insurance Maintenance Services 2017 2016 Assets: Current assets: Cash and investments $ 2,180,077 $ 200,981 $ 82,883 $ 2,463,941 $ 2,431,389 Accounts receivable - - - - 4,241 Prepaid items 155,308 - 37,392 192,700 183,102 Inventory - at cost - 97,030 - 97,030 91,303 Total current assets 2,335,385 298,011 120,275 2,753,671 2,710,035 Noncurrent assets: Capital assets: Land - 424,665 - 424,665 424,665 Buildings and improvements - 928,870 - 928,870 928,870 Equipment and furniture - - 245,550 245,550 184,227 Machinery and equipment - 289,899 - 289,899 255,972 Total capital assets - 1,643,434 245,550 1,888,984 1,793,734 Less: Accumulated depreciation - (708,056) (117,596) (825,652) (759,197) Total noncurrent assets - 935,378 127,954 1,063,332 1,034,537 Total assets $ 2,335,385 $ 1,233,389 $ 248,229 $ 3,817,003 $ 3,744,572 Deferred outflows: Deferred outflows related to pension - 66,357 31,060 97,417 200,856 Total deferred outflows - 66,357 31,060 97,417 200,856 Liabilities: Current liabilities: Accounts payable $ 2,795 $ 61,879 $ 8,003 $ 72,677 $ 86,170 Health care benefits payable 31,882 - - 31,882 20,937 Unpaid claims 171,752 - - 171,752 159,741 Salaries payable 566 17,382 8,541 26,489 29,567 Due to other governmental units - 882 - 882 1,038 Compensated absences payable - 28,411 8,026 36,437 28,725 Total current liabilities 206,995 108,554 24,570 340,119 326,178 Noncurrent liabilities: Compensated absences payable - 8,672 7,423 16,095 25,868 Other post employment benefits 2,640 1,082 3,722 2,557 Net pension liability 260,810 122,079 382,889 481,124 Total noncurrent liabilities - 272,122 130,584 402,706 509,549 Total liabilities 206,995 380,676 155,154 742,825 835,727 Deferred inflows: Deferred inflows related to pension - 51,028 23,885 74,913 59,991 Total deferred inflows - 51,028 23,885 74,913 59,991 Net position: Net investment in capital assets - 935,378 127,954 1,063,332 1,034,537 Unrestricted 2,128,390 (67,336) (27,704) 2,033,350 2,015,173 Total net position $ 2,128,390 $ 868,042 $ 100,250 $ 3,096,682 $ 3,049,710 118 CITY OF COTTAGE GROVE, MINNESOTA INTERNAL SERVICE FUNDS COMBINING STATEMENT OF REVENUES, EXPENSES AND CHANGES IN NET POSITION For The Year Ended December 31, 2017 With Comparative Data for the Year Ended December 31, 2016 Operating revenues: Charges for services: User fees Employee benefits Property insurance Insurance refunds and reimbursements Total operating revenues Operating expenses: Operating and maintenance: Personal services Commodities Contractual services Total operation and maintenance Administrative and general: Personal insurance benefits Contractual services Claims Total administrative and general Depreciation Total operating expenses Operating income (loss) Nonoperating revenues: Investment earnings (loss) Intergovernmental Miscellaneous Total nonoperating revenues Change in net position Net position - January 1 Net position - December 31 Self Fleet Information Tna--- T%A.int--- Q-i- Statement 25 Totals Internal Service Funds 2017 2016 $ - $ 921,125 $ 534,924 $ 1,456,049 $ 1,370,389 1,843,222 - - 1,843,222 1,616,650 233,400 - - 233,400 220,650 69,946 - - 69,946 144,271 2,146,568 921,125 534,924 3,602,617 3,351,960 - 362,573 174,935 537,508 563,952 - 520,573 43,426 563,999 492,761 - 107,450 238,763 346,213 353,900 - 990,596 457,124 1,447,720 1,410,613 1,731,744 - - 1,731,744 1,576,546 232,485 - 232,485 252,955 101,893 - - 101,893 163,454 2,066,122 - - 2,066,122 1,992,955 - 36,640 29,814 66,454 59,403 2,066,122 1,027,236 486,938 3,580,296 3,462,971 80,446 (106,111) 47,986 22,321 (111,011) 17,842 2,093 389 20,324 13,491 - - - - 1,873 3,529 798 - 4,327 6,017 21,371 2,891 389 24,651 21,381 101,817 (103,220) 48,375 46,972 (89,630) 2,026,573 971,262 51,875 3,049,710 3,139,340 $ 2,128,390 $ 868,042 $ 100,250 $ 3,096,682 $ 3,049,710 119 CITY OF COTTAGE GROVE, MINNESOTA COMBINING STATEMENT OF CASH FLOWS INTERNAL SERVICE FUNDS For The Year Ended December 31, 2017 With Comparative Data for the Year Ended December 31, 2016 Cash flows from operating activities: Receipts from interfund services provided Receipts from insurance refunds and reimbursements Payment to suppliers Payment to employees Miscellaneous revenue Net cash flows from operating activities Cash flows from noncapital financing activities: Intergovernmental revenue Cash flows from capital and related financing activities: Acquisition of capital assets Cash flows from investing activities: Investment earnings (loss) Net increase (decrease)in cash and cash equivalents Cash and cash equivalents - January 1 Cash and cash equivalents - December 31 Reconciliation of operating income (loss) to net cash provided (used) by operating activities: Operating income (loss) Adjustments to reconcile operating income (loss) to net cash flows from operating activities: Depreciation Miscellaneous revenue Pension expense Changes in assets and liabilities: Decrease (increase) in receivables Decrease (increase) in prepaid items Decrease (increase) in inventory Increase (decrease)in payables Total adjustments Net cash flows from operating activities Self Fleet Information Statement 26 Totals Internal Service Funds 2017 2016 $ 2,076,622 $ 921,125 $ 534,924 $ 3,532,671 $ 3,207,689 69,946 - - 69,946 144,271 (325,682) (606,001) (325,629) (1,257,312) (1,268,700) (1,720,784) (359,572) (161,799) (2,242,155) (2,096,121) 3,529 798 - 4,327 6,017 103,631 (43,650) 47,496 107,477 (6,844) - - 1,873 - (33,927) (61,322) (95,249) (61,534) 17,842 2,093 389 20,324 13,491 121,473 (75,484) (13,437) 32,552 (53,014) 2,058,604 276,465 96,320 2,431,389 2,484,403 $ 2,180,077 $ 200,981 S 82,883 $ 2,463,941 $ 2,431,389 $ 80,446 $ (106,111) $ 47,986 $ 22,321 $ (128,127) - 36,640 29,814 66,454 49,791 3,529 798 - 4,327 13,057 - 12,069 8,057 20,126 10,600 4,241 - - 4,241 560 4,507 (14,105) (9,598) (38,717) - (5,727) (5,727) (1,242) 10,908 18,681 (24,256) 5,333 (16,900) 23,185 62,461 (490) 85,156 17,149 $ 103,631 $ (43,650) $ 47,496 $ 107,477 $ (110,978) 120 ECONOMIC DEVELOPMENT AUTHORITY COMPONENT UNIT Established to account for the receipt and use of monies for economic purposes. 121 CITY OF COTTAGE GROVE, MINNESOTA COMBINING BALANCE SHEET - ALL GOVERNMENTAL FUND TYPES ECONOMIC DEVELOPMENT AUTHORITY COMPONENT UNIT December 31, 2017 With Comparative Data as of December 31, 2016 Assets: Loan receivable Accounts receivable Prepaid items Delinquent property taxes receivable Property held for resale Total assets Liabilities: Accounts payable Salaries payable Due to other governmental units Deposits Payable Total liabilities Deferred inflows of resources: Unavailable revenue - property taxes Total deferred inflows of resources Fund balance: Nonspendable: Assets for resale Restricted for: Unassigned Total fund balance Total liabilities, deferred inflows of resources, and fund balance Fund balance reported above Statement 27 Totals Economic Development Authority Special Component Unit Revenue 2017 2016 $ 358,943 3,019 495 1,281 311,718 $ 675,456 $ 14,934 8,931 652,536 2,000 678,401 $ 358,943 3,019 495 1,281 311,718 $ 675,456 $ 14,934 8,931 652,536 2,000 678,401 $ 384,608 13,817 1,073 311,718 $ 711,216 $ 5,995 8,401 470,271 2,000 486,667 1,281 1,281 1,073 1,281 1,281 1,073 311,718 311,718 311,718 (315,944) (315,944) (88,242) (4,226) (4,226) 223,476 $ 675,456 Other long-term assets, including property taxes receivable, are not available to pay for current -period expenditures, and therefore, are deferred in the $ 675,456 $ (4,226) 1,281 Deferred outflows of resources and deferred inflows of resources are created as a result of various differences related to pensions that are not recognized in the governmental funds. Deferred inflows of resources related to pensions (25,155) Deferred outflows of resources related to pensions 32,712 Long-term liabilities, including bonds payable, compensated absences, net pension liability and other post employment benefits, are not due and payable in the current period and therefore are not reported in the funds. (135,335) Net position of component unit (page 29) $ (130,723) $ 711,216 122 CITY OF COTTAGE GROVE, MINNESOTA COMBINING STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE - ALL GOVERNMENTAL FUND TYPES ECONOMIC DEVELOPMENT AUTHORITY COMPONENT UNIT For The Year Ended December 31, 2017 With Comparative Data for the Year Ended December 31, 2016 Revenues: General property taxes: Current and delinquent Charges for service Investment earnings (loss) Interest on loan to primary government Miscellaneous Total revenues Expenditures: General government: Current: Personal services Commodities Contractual services Debt service: Principal retirement Interest and fiscal charges Total expenditures Revenues over (under) expenditures Fund balance - January 1 Fund balance - December 31 Special De., -- $ 110,710 30,000 158 1,582 18,625 161,075 184,031 452 204,294 Statement 28 Totals Economic Development Authority Component Unit 2017 2016 $ 110,710 30,000 158 1,582 18,625 161,075 184,031 452 204,294 $ 110,981 29,997 110,793 281,091 532,862 151,497 3,703 728,543 - 4,805,000 - 108,846 388,777 5,797,589 (227,702) (227,702) (5,264,727) 223,476 223,476 5,488,203 $ (4,226) $ (4,226) $ 223,476 Net decrease in fund balance reported above $ 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, 2016 At December 31, 2017 Governmental funds recognize pension contributions as expenditures at the time of payment whereas the statement of activities factors in items related to pensions on a full accrual perspective. 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, 2016 At December 31, 2017 Other post employment benefits: At December 31, 2016 At December 31, 2017 Change in net position of component unit (page 30) (227,702) (1,073) 1,281 (25,504) 7,336 (5,589) 911 (1,176) $ (251,516) 123 -This Page Intentionally left Blank - 124 SUPPLEMENTARY FINANCIAL INFORMATION 125 CITY OF COTTAGE GROVE, MINNESOTA COMBINED SCHEDULE OF BONDED INDEBTEDNESS December 31, 2017 Interest Final Rate Dated Payment Primary Government General Obligation Bonds: $1,405,000 Tax Increment Bonds of 2004A 3.0-4.65% 7/l/2004 2/l/2024 $1,405,000 Tax Increment Refunding Bonds of 2014A 2.0-2.50% 5/29/2014 2/1/2021 $4,660,000 G.O.Refunding Bonds of 2016A 2.0-3.00% 1/28/2016 2/l/2027 $9,155,000 G.O. CIP Bonds of2017A 2.50-3.25% 5/11/2017 2/l/2038 Total General Obligation Bonds Special Assessment Debt: Improvement Bonds of 2009A 2.50-4.30% 4/16/2009 2/l/2024 Improvement Bonds of 2012A 0.30-2.20% 3/13/2012 2/l/2027 Improvement Bonds of 2013A 3.00-3.50% 9/26/2013 2/l/2029 Improvement Bonds of 2015A 2.50-3.00% 5/27/2015 2/1/2031 Improvement Bonds of 2016B 2.00-2.10% 11/16/2016 2/l/2033 Total Special Assessment Debt with Governmental Commitment Total Bonded Indebtedness - Primary Government Total Bonded Indebtedness - Reporting Entity 126 Authorized And Issued $ 1,405,000 1,405,000 4,660,000 9,155,000 16,625,000 3,650,000 1,865,000 7,345,000 5,700,000 4,275,000 22,835,000 39,460,000 $ 39,460,000 Retired $ 415,000 535,000 575,000 1,525,000 1,940,000 600,000 1,155,000 340,000 4,035,000 5,560,000 $ 5,560,000 Outstanding $ 990,000 870,000 4,085,000 9,155,000 15,100,000 1,710,000 1,265,000 6,190,000 5,360,000 4,275,000 18,800,000 33,900,000 $ 33,900,000 Principal Due In 2018 $ 35,000 205,000 595,000 835,000 230,000 1203000 4353000 3453000 1503000 1,280,000 2,115,000 $ 2,115,000 Exhibit 1 Interest Due In 2018 $ 44,320 16,710 102,225 324,836 488,091 65,038 20,857 186,840 147,560 84,420 504,715 992,806 $ 992,806 127 CITY OF COTTAGE GROVE, MINNESOTA DEBT SERVICE PAYMENTS TO MATURITY Exhibit 2 December 31, 2017 Primary Government General Obligation Bonds Special Assessment Bonds Tax Increment Revenue Bonds Pavement Management $1,405,000 $1,405,000 Tax $4,660,000 $9,155,000 Tax Increment Total G.O. G.O. Total Total Total Increment Refunding Tax Refunding CIP General $ 3,650,000 $ 1,865,000 $ 7,345,000 $ 5,700,000 $ 4,275,000 Pavement Special Bonds Bonds Increment Bonds Bonds Obligation Bonds Bonds Bonds Bonds Bonds Management Assessment of2004A of2014A Bonds of2016A of2017A Bonds of2009A of2012A of2013A of2015A of2016B Bonds Bonds Bonds payable $ 990,000 $ 870,000 $ 1,860,000 $ 4,085,000 $ 9,155,000 $ 15,100,000 $ 1,710,000 $ 1,265,000 $ 6,190,000 $ 5,360,000 $ 4,275,000 $18,800,000 $ 18,800,000 Future interest payable 225,805 39,200 265,005 467,825 3,243,836 3,976,666 253,015 119,442 1,261,491 1,074,380 694,960 3,403,288 3,403,288 Totals $ 1,215,805 $ 909,200 $ 2,125,005 $ 4,552,825 $ 12,398,836 $ 19,076,666 $ 1,963,015 $ 1,384,442 $ 7,451,491 $ 6,434,380 $ 4,969,960 $22,203,288 $ 22,203,288 Payments to maturity: 2018 79,320 221,710 301,030 697,225 324,836 1,323,091 295,037 140,858 621,840 492,560 234,420 1,784,715 1,784,715 2019 77,780 237,410 315,190 694,150 605,600 1,614,940 291,025 144,599 623,565 492,060 355,170 1,906,419 1,906,419 2020 76,240 247,580 323,820 400,050 605,100 1,328,970 286,525 148,002 624,840 481,410 349,670 1,890,447 1,890,447 2021 104,040 202,500 306,540 400,000 604,299 1,310,839 281,825 146,118 620,740 480,610 344,170 1,873,463 1,873,463 2022 286,872 - 286,872 399,650 603,200 1,289,722 276,800 144,005 621,265 474,585 338,670 1,855,325 1,855,325 2023 294,810 294,810 394,075 606,725 1,295,610 271,320 146,685 621,340 473,335 343,070 1,855,750 1,855,750 2024 296,743 296,743 393,275 604,875 1,294,893 260,483 149,070 620,965 461,935 337,370 1,829,823 1,829,823 2025 - - 394,050 602,725 996,775 - 146,200 620,140 460,385 331,670 1,558,395 1,558,395 2026 391,500 605,200 996,700 148,135 618,590 459,535 325,970 1,552,230 1,552,230 2027 388,850 603,388 992,238 70,770 620,944 449,535 325,220 1,466,469 1,466,469 2028 - 607,325 607,325 - 616,587 443,966 319,420 1,379,973 1,379,973 2029 605,950 605,950 620,675 442,691 313,620 1,376,986 1,376,986 2030 603,738 603,738 - 431,383 312,770 744,153 744,153 2031 605,607 605,607 390,390 311,820 702,210 702,210 2032 602,131 602,131 - 305,670 305,670 305,670 2033 602,675 602,675 121,260 121,260 121,260 2034 602,151 602,151 - - - 2035 601,175 601,175 2036 599,750 599,750 2037 602,799 602,799 2038 599,587 599,587 Totals $ 1,215,805 $ 909,200 $ 2,125,005 $ 4,552,825 $ 12,398,836 $ 19,076,666 $ 1,963,015 $ 1,384,442 $ 7,451,491 $ 6,434,380 $ 4,969,960 $22,203,288 $ 22,203,288 128 CITY OF COTTAGE GROVE, MINNESOTA DEFERRED TAX LEVIES December 31, 2017 Exhibit 3 Pavement Management Special Assessment Bonds Total $3,650,000 $1,865,000 $7,345,000 $5,700,000 $4,275,000 Pavement Local Local Local Local Local Management Year of Improvement Improvement Improvement Improvement Improvement Special Tax Levy/ Bonds Bonds Bonds Bonds Bonds Assessment Total Collection of 2009A of 2012A of 2013A of 2015A of 2016B Bonds All Levies 2017/18 178,243 82,855 412,936 322,804 198,540 1,195,378 1,195,378 2018/19 180,144 86,596 414,511 316,679 196,559 1,194,489 1,194,489 2019/20 181,834 84,753 410,363 321,054 194,579 1,192,583 1,192,583 2020/21 183,314 82,638 411,150 319,863 192,598 1,189,563 1,189,563 2021/22 184,322 85,567 411,466 323,765 201,117 1,206,237 1,206,237 2022/23 179,596 88,266 411,308 316,853 198,926 1,194,949 1,194,949 2023/24 - 85,326 410,678 320,440 196,736 1,013,180 1,013,180 2024/25 - 87,489 409,576 323,712 194,545 1,015,322 1,015,322 2025/26 - 42,424 412,673 318,269 197,604 970,970 970,970 2026/27 - - 409,271 318,076 195,308 922,655 922,655 2027/28 - - 414,022 321,939 193,013 928,974 928,974 2028/29 - - - 315,014 195,967 510,981 510,981 2029/30 328,911 198,816 527,727 527,727 2030/31 - - - - 196,310 196,310 196,310 2031/32 - - - - 70,082 70,082 70,082 $ 1,087,453 $ 725,914 $ 4,527,954 $ 4,167,379 $ 2,820,700 $ 13,329,400 $ 13,329,400 129 CITY OF COTTAGE GROVE, MINNESOTA SUBCOMBINING BALANCE SHEET PAVEMENT MANAGEMENT DEBT SERVICE SCHEDULE December 31, 2017 With Comparative Data as of December 31, 2016 Assets: Cash and investments Delinquent property taxes receivable Special assessments receivable: Deferred Delinquent Special deferred Total assets Liabilities: Accounts payable Total liabilities Deferred inflows of resources: Unavailable revenue - property taxes Unavailable revenue - special assessments Total deferred inflows of resources Fund balance: Restricted for debt retirement Total fund balance Total liabilities, deferred inflows of resources, and fund balance 2009A 2012A 2013A 2015A 2016B Improvement Improvement Improvement Improvement Improvement Exhibit 4 Totals Pavement Management Debt Service Schedule 2017 2016 $ 474,802 $ 317,588 $ 820,776 $ 976,886 $ 497,368 $ 3,087,420 $ 3,056,049 2,163 865 2,733 107 - 5,868 4,813 394,051 250,955 1,046,646 1,354,710 894,337 3,940,699 4,589,433 5,699 980 2,112 3,019 421 12,231 8,746 - - 5,010 5,218 8,270 18,498 29,570 $ 876,715 $ 5701388 $ 1,877,277 $ 2,339,940 $ 1,400,396 $ 7,064,716 $ 7,688,611 $ 500 $ - $ - $ - $ - $ 500 $ 900 500 - - - - 500 900 2,163 865 2,733 107 - 5,868 4,813 399,750 251,935 1,053,768 1,362,947 903,028 3,971,428 4,627,749 401,913 252,800 1,056,501 1,363,054 903,028 3,977,296 4,632,562 474,302 317,588 820,776 976,886 497,368 3,086,920 3,055,149 474,302 317,588 820,776 976,886 497,368 3,086,920 3,055,149 $ 876,715 $ 570,388 $ 1,877,277 $ 2,339,940 $ 1,400,396 $ 7,064,716 $ 7,688,611 130 CITY OF COTTAGE GROVE, MINNESOTA SUBCOMBINING STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE PAVEMENT MANAGEMENT DEBT SERVICE SCHEDULE For The Year Ended December 31, 2017 With Comparative Data for the Year Ended December 31, 2016 Exhibit 5 Totals 2009A 2012A 2013A 2015A 2016B Pavement Management Improvement Improvement Improvement Improvement Improvement Debt Service Schedule Bonds Bonds Bonds Bonds Bonds 2017 2016 Revenues: General property taxes: Current and delinquent $ 148,894 $ 69,495 $ 297,997 $ 273,516 $ - $ 789,902 $ 596,919 Special assessments: Current 102,454 49,954 150,494 226,148 107,808 636,858 965,970 Delinquent 526 - 1,144 2,383 - 4,053 2,694 Prepayments on deferred 23,752 8,394 55,661 67,600 66,437 221,844 202,353 Penalties 185 22 328 463 48 1,046 1,136 Investment earnings (loss) 2,875 1,670 3,212 4,120 3,508 15,385 9,072 Total revenues 278,686 129,535 508,836 574,230 177,801 1,669,088 1,778,144 Expenditures: Current: Contractual services 2,460 751 1,867 1,279 1,432 7,789 6,547 Debt service: Principal retirement 230,000 120,000 425,000 340,000 - 1,115,000 755,000 Interest and fiscal charges 73,375 21,818 200,190 157,835 61,310 514,528 509,900 Total expenditures 305,835 142,569 627,057 499,114 62,742 1,637,317 1,271,447 Revenues over (under) expenditures (27,149) (13,034) (118,221) 75,116 115,059 31,771 506,697 Fund balance - January 1 501,451 330,622 938,997 901,770 382,309 3,055,149 2,548,452 Fund balance - December 31 $ 474,302 $ 317,588 $ 820,776 $ 976,886 $ 497,368 $ 3,086,920 $ 3,055,149 131 CITY OF COTTAGE GROVE, MINNESOTA SUBCOMBINING BALANCE SHEET Exhibit 6 TAX INCREMENT CONSTRUCTION REVOLVING SCHEDULE December 31, 2017 With Comparative Data as of December 31, 2016 Reconciliation TIF Revolving Capital TIF TIF TIF TIF TIF TIF to Nonmajor Project Schedule 1-8 1-12 1-14 1-15 1-16 1-17 Fund 2017 2016 Assets: Cash and investments $ 403,929 $ 345,538 $ 1,345 $ 14,459 $ - $ - $ - $ 765,271 $ 1,333,250 Total assets $ 403,929 $ 345,538 $ 1,345 $ 14,459 $ - $ - $ - $ 765,271 $ 1,333,250 Liabilities: Accounts payable $ - $ 28,103 $ - $ - $ - $ - $ - $ 28,103 $ 284,499 Interfundloan payable - - 236,000 537,672 299,887 44,908 - 1,118,467 1,145,804 Total liabilities - 28,103 236,000 537,672 299,887 44,908 - 1,146,570 1,430,303 Fund balance (deficit): Restricted for: Tax increment purposes 403,929 317,435 - - - - (721,364) - - Unassigned - - (234,655) (523,213) (299,887) (44,908) 721,364 (381,299) (97,053) Total fund balance (deficit) 403,929 317,435 (234,655) (523,213) (299,887) (44,908) - (381,299) (97,053) Total liabilities, deferred inflows of resources, and fund balance $ 403,929 $ 345,538 $ 1,345 $ 14,459 $ - $ - $ - $ 765,271 $ 1,333,250 132 CITY OF COTTAGE GROVE, MINNESOTA SUBCOMBINING SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE TAX INCREMENT CONSTRUCTION REVOLVING SCHEDULE For The Year Ended December 31, 2017 With Comparative Data for the Year Ended December 31, 2016 Revenues: Tax increment collections Special assessments Investment earnings (loss) Sale of Property Miscellaneous Total revenues Expenditures: Current: Contractual services Land purchase Construction costs: Contractual services Debt service: Interest and fiscal charges Total expenditures Revenues over (under) expenditures Fund balance (deficit) - January 1 Fund balance (deficit) - December 31 TIF TIF 1-8 1-12 $ - $ 571,360 3,829 4,283 356,071 3,829 931,714 TIF TIF TIF TIF 1-14 1-15 1-16 1-17 $ - $ 67,169 $ - $ 12 66 - 12 67,235 - Exhibit 7 Totals TIF Revolving Capital Project Schedule 2017 2016 12 $ 638,541 $ 463,061 - 8,190 10,802 - - 929,905 - 356,071 5,000 12 1,002, 802 1,408,768 40,769 588,279 - 646 - 1,072 630,766 615,179 - 33,359 - - - - 33,359 696,916 - 605,717 - - - - 605,717 1,211,155 - - - 17,206 - - 17,206 17,760 40,769 1,227,355 - 17,852 - 1,072 1,287,048 2,541,010 (36,940) (295,641) 12 49,383 - (1,060) (284,246) (1,132,242) 440,869 613,076 (234,667) (572,596) (299,887) (43,848) (97,053) 1,035,189 $ 403,929 $ 317,435 $ (234,655) $ (523,213) $ (299,887) $ (44,908) $ (381,299) $ (97,053) 133 CITY OF COTTAGE GROVE, MINNESOTA SUBCOMBINING BALANCE SHEET TIF DEBT SERVICE REVOLVING SCHEDULE December 31, 2017 With Comparative Data as of December 31, 2016 2004A Tax Exempt Increment Bonds 2014A Taxable Tax Increment Refunding Bonds Exhibit 8 Totals TIF Debt Service Revolving Schedule Assets: Cash and investments $ 983 $ 1,628 $ 2,611 $ 1,042,633 Total assets $ 983 $ 1,628 $ 2,611 $ 1,042,633 Liabilities: Accounts payable $ - $ - $ - $ 925,023 Total liabilities $ - $ - $ - $ 925,023 Fund balance: Restricted for tax increment purposes $ 983 $ 1,628 $ 2,611 $ 117,610 Total fund balance 983 1,628 2,611 117,610 Total fund balance $ 983 $ 1,628 $ 2,611 $ 1,042,633 134 CITY OF COTTAGE GROVE, MINNESOTA SUBCOMBINING STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE TIF DEBT SERVICE REVOLVING SCHEDULE For The Year Ended December 31, 2017 With Comparative Data for the Year Ended December 31, 2016 Revenues: Tax increment collections Investment earnings (loss) Total revenues Expenditures: Current: Contractual services Debt service: Principal retirement Interest and fiscal charges Total expenditures Revenues over (under) expenditures Fund balance - January 1 Fund balance - December 31 Exhibit 9 2004A 2014A Taxable Tax Exempt Tax Increment Totals Increment Refunding TIF Debt Service Bonds Bonds Revolving Schedule TIF 1-12 TIF 1-12 2017 2016 $ 2,150 $ 172,850 $ 175,000 $ 313,000 1,098 1,373 2,471 5,781 3,248 174,223 177,471 318,781 475 475 950 35,000 190,000 225,000 45,860 20,660 66,520 81,335 211,135 292,470 (78,087) (36,912) (114,999) 79,070 38,540 117,610 S 983 $ 1,628 $ 2,611 925,523 210,000 72,610 1,208,133 (889,352) 1,006,962 $ 117,610 135 -This Page Intentionally left Blank - 136 III. STATISTICAL SECTION (UNAUDITED) 137 -This Page Intentionally left Blank - 138 CITY OF COTTAGE GROVE, MINNESOTA NET POSITION BY COMPONENT Last Ten Fiscal Years (accrual basis of accounting) Table 1 Fiscal Year 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Governmental activities Net investment in capital assets $ 94,590,013 $ 92,735,500 $ 94,794,079 $ 109,696,916 $ 120,412,875 $ 124,156,059 $ 127,260,042 $ 125,562,970 $ 132,834,867 $ 140,298,832 Restricted 7,828,338 8,158,356 5,841,563 4,282,305 4,210,913 7,187,948 6,971,432 8,766,706 7,609,138 2,855,507 Unrestricted 39,209,995 42,928,157 45,412,895 34,625,010 25,024,447 25,908,617 28,277,397 24,285,174 19,091,443 24,845,782 Total governmental activities net positioi $ 141,628,346 $ 143,822,013 $ 146,048,537 $ 148,604,231 $ 149,648,235 $ 157,252,624 $ 162,508,871 $ 158,614,850 $ 159,535,448 $ 168,000,121 Business -type activities Net investment in capital asset, $ 53,367,475 $ 54,106,504 $ 53,870,041 $ 53,664,161 $ 53,225,445 $ 51,453,195 $ 54,432,059 $ 54,202,710 $ 54,063,470 $ 56,060,163 Restricted 262,375 269,195 325,685 325,460 - - - - - - Unrestricted 10,922,468 12,283,780 12,829,661 13,236,680 14,645,490 16,792,024 15,896,363 13,980,970 13,628,016 11,528,841 Total business -type activities net positior $ 64,552,318 $ 66,659,479 $ 67,025,387 $ 67,226,301 $ 67,870,935 $ 68,245,219 $ 70,328,422 $ 68,183,680 $ 67,691,486 $ 67,589,004 Primary Govenunem Net investment in capital assets $ 147,957,488 $ 146,842,004 $ 148,664,120 $ 163,361,077 $ 173,638,320 $ 175,609,254 $ 181,692,101 $ 179,765,680 $ 186,898,337 $ 196,358,995 Restricted 8,090,713 8,427,551 6,167,248 4,607,765 4,210,913 7,187,948 6,971,432 8,766,706 7,609,138 2,855,507 Unrestricted 50,132,463 55,211,937 58,242,556 47,861,690 39,669,937 42,700,641 44,173,760 38,266,144 32,719,459 36,374,623 Total primary government netpositiot $ 206,180,664 $ 210,481,492 $ 213,073,924 $ 215,830,532 $ 217,519,170 $ 225,497,843 $ 232,837,293 $ 226,798,530 $ 227,226,934 $ 235,589,125 139 CITY OF COTTAGE GROVE, MINNESOTA CHANGES IN NET POSITION Table 2 Last Ten Fiscal Years (accrual basis of accounting; Fiscal Year 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Expenses Governmental activities General govemmenl Regular operations Land Sales Payment to component unit Community development Economic development Public safety Public works: Regular operations Construction Culture and recreation Interest on long-term debt Total governmental activities expense! Business -type activities: Golf course Street lights Cottage Grove EMS Water operating Sewer operating Total business -type activitie; Total primary government expense: Program Revenues Governmental activities Charges for services: General government: Regular operations Land sales Community developmen Economic development Public safety Public works: Regular operations Construction Culture and recreation Operating grants and contributions Capital grants and contributions Total governmental activities program revenue; $ 2,155,101 $ 1,868,582 $ 2,125,407 $ 2,985,571 $ 2,997,825 $ 2,270,332 $ 2,229,518 $ 2,346,805 $ 3,450,479 $ 2,398,669 (1) 678,880 - - - - - - - 893,468 1,106,256 1,140,456 - - 903,180 946,001 1,086,197 1,173,071 1,527,549 (1) - - - 1,110,214 362,009 61,302 545,646 1,460,114 2,257,548 740,668 5,705,153 5,724,450 5,888,224 6,252,530 7,069,301 6,949,225 7,212,998 7,662,393 10,153,726 9,308,430 3,197,111 3,267,455 3,364,115 3,805,839 4,074,995 4,128,694 4,627,829 4,713,100 4,583,513 4,241,968 2,188,158 2,384,980 2,547,078 2,882,276 2,534,116 3,992,536 2,971,353 2,712,945 5,039,822 4,171,105 2,604,623 2,674,781 2,992,620 2,948,075 3,059,273 4,768,181 5,119,093 5,153,844 5,340,558 5,137,951 (2) 1,163,542 1,548,704 1,056,110 846,258 827,645 976,891 808,642 1,029,228 875,642 962,772 18,586,036 18,575,208 19,114,010 20,830,763 20,925,164 24,050,341 24,461,080 26,164,626 32,874,359 28,489,112 1,617,708 1,553,921 1,447,849 1,504,006 1,614,321 - - - - - (2) 459,314 508,615 534,206 625,312 659,869 742,410 867,690 746,794 746,005 882,660 768,240 920,991 975,560 1,038,972 1,109,809 1,322,635 1,412,855 1,507,766 1,688,041 1,571,044 2,097,071 1,801,070 1,891,752 1,901,985 2,049,877 2,341,555 2,216,819 2,438,166 2,370,466 2,789,792 1,953,985 2,079,127 2,150,795 2,223,749 2,242,778 2,278,958 2,428,944 2,448,283 2,727,188 2,879,119 6,896,318 6,863,724 7,000,162 7,294,024 7,676,654 6,685,558 6,926,308 7,141,009 7,531,700 8,122,615 $ 25,482,354 $ 25,438,932 $ 26,114,172 $ 28,124,787 $ 28,601,818 $ 30,735,899 $ 31,387,388 $ 33,305,635 $ 40,406,059 $ 36,611,727 $ 288,502 $ 246,027 $ 224,719 $ 764,185 $ 883,272 $ 238,721 $ 138,768 $ 117,636 $ 665,193 $ 108,808 (1) 959,800 852,453 944,278 - - 1,115,203 989,140 1,527,836 1,660,365 2,240,628 (1) - - - 175 210 7,626 1,771 3,467 5,210 210 363,046 391,593 396,887 444,039 429,646 353,130 325,368 394,574 431,862 363,782 818,692 720,397 710,341 845,315 880,095 797,432 1,010,695 971,599 975,532 1,099,690 237 17,273 - - - - - - - - 779,941 980,003 1,178,977 1,024,516 1,026,685 2,413,744 2,448,968 3,091,072 2,725,288 2,682,090 (2) 1,252,052 1,192,559 1,210,249 1,084,928 1,075,529 1,211,506 1,545,268 1,237,805 1,676,805 1,408,099 6,156,916 2,941,206 2,464,782 5,118,546 3,064,292 10,370,972 9,401,775 5,861,631 10,284,047 13,805,696 10,619,186 7,341,511 7,130,233 9,281,704 7,359,729 16,508,334 15,861,753 13,205,620 18,424,302 21,709,003 140 Program Revenues (continued) Business -type activities Charges for services: Golf course Street lights Cottage Grove EMS Water operating Sewer operating Capital grants and contributions Total business -type activities program revenue: Total primary government program revenue; Net(Expense)/Revenue Governmental activities Business -type activitieE Total primary government net expensa General Revenues and Other Changes in Net Position Governmental activities Property taxes Franchise taxes Aggregate taxes Tax increment collections Grants and contributions not restricted to specific programs Unrestricted investment earnings (loss; Gain on sale of capital assets Transfers Special item -golf course loan forgiveness Total governmental activities Business -type activities: Grants and contributions not restricted to specific programs Unrestricted investment earnings (loss; Gain on sale of capital asset: Transfers Total business -type activities Total primary governmeni Change in Net Position Governmental activities Business -type activities Total primary governmeni Fiscal Year 2008 2009 2010 2011 2012 2013 2014 2015 1,557,213 1,563,399 1,583,098 1,399,204 1,566,035 - - - (2) 691,384 596,703 494,162 532,607 540,696 580,837 658,810 549,005 530,905 685,560 876,762 1,130,948 1,068,953 1,114,226 1,528,756 1,569,017 1,626,320 1,431,007 1,766,236 1,510,101 2,543,433 2,428,738 2,161,076 2,249,926 2,773,937 2,369,570 1,868,942 1,840,088 1,817,862 1,664,292 1,933,680 1,939,912 2,202,013 2,208,014 2,207,363 2,175,479 2,151,756 2,310,624 2,291,038 2,294,714 - - 165,266 267,465 - 1,051,532 1,783,762 361,762 196,671 441,738 7,602,472 7,659,700 7,674,568 7,771,442 8,616,787 7,746,435 8,089,590 6,492,486 6,602,712 6,596,405 $ 18,221,658 $ 15,001,211 $ 14,804,801 $ 17,053,146 $ 15,976,516 $ 24,254,769 $ 23,951,343 $ 19,698,106 $ 25,027,014 $ 28,305,408 $ (7,966,850) $ (11,233,697) $ (11,983,777) $ (11,549,059) $(13,565,435) $ (7,542,007) $ (8,599,327) $ (12,959,006) $ (14,450,057) $ (6,780,109) 706,154 795,976 674,406 477,418 940,133 1,060,877 1,163,282 (648,523) (928,988) (1,526,210) $ (7,260,696) $ (10,437,721) $ (11,309,371) $ (11,071,641) $(12,625,302) $ (6,481,130) $ (7,436,045) $ (13,607,529) $ (15,379,045) $ (8,306,319) $ 11,535,320 $ 11,808,510 $ 11,427,029 $ 11,494,758 $ 12,330,135 $ 12,096,046 $ 12,616,267 $ 13,394,585 $ 13,956,582 $ 14,483,061 396,173 399,588 517,391 535,188 537,682 540,767 542,689 526,643 516,931 560,492 13,489 24,234 30,554 26,131 26,180 26,135 26,236 37,133 39,748 28,442 909,434 1,123,774 1,253,414 946,603 892,438 939,314 711,628 710,541 776,061 1,002,046 324,378 202,751 27,050 26,146 29,742 29,060 83,682 99,137 126,058 126,670 1,864,048 998,846 502,721 624,785 368,821 (149,614) 551,910 357,170 285,494 330,903 - 4,227 23,872 12,342 10,546 3,997 43,904 (15,157) - - (3,459,013) (1,134,566) 428,270 438,800 413,895 375,266 (720,742) 613,878 (330,219) (1,286,832) - - - 1,020,000 - 11,583,829 13,427,364 14,210,301 14,104,753 14,609,439 14,880,971 13,855,574 15,723,930 15,370,655 15,244,782 - - - - - 7,736 17,161 473,098 176,619 119,772 162,296 118,396 (45,902) 199,179 137,896 96,851 119,735 - - - - - - - 1,988 - 3,459,013 1,134,566 (428,270) (438,800) (413,895) (375,266) 720,742 (613,878) 330,219 1,286,832 3,932,111 1,311,185 (308,498) (276,504) (295,499) (421,168) 919,921 (475,982) 436,794 1,423,728 $ 15,515,940 $ 14,738,549 $ 13,901,803 $ 13,828,249 $ 14,313,940 $ 14,459,803 $ 14,775,495 $ 15,247,948 $ 15,807,449 $ 16,668,510 $ 3,616,979 $ 2,193,667 $ 2,226,524 $ 2,555,694 $ 1,044,004 $ 7,338,964 $ 5,256,247 $ 2,764,924 $ 920,598 $ 8,464,673 4,638,265 2,107,161 365,908 200,914 644,634 639,709 2,083,203 (1,124,505) (492,194) (102,482) $ 8,255,244 $ 4,300,828 $ 2,592,432 $ 2,756,608 $ 1,688,638 $ 7,978,673 $ 7,339,450 $ 1,640,419 $ 428,404 $ 8,362,191 Notes: (1) Community Development is in General (2) Golf Course reclassified to a special revenue fund in 2013 141 CITY OF COTTAGE GROVE, MINNESOTA FUND BALANCES OF GOVERNMENTAL FUNDS Table 3 Last Ten Fiscal Years (modified accrual basis of accounting) Fiscal Year 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 General Fund Reserved $ 7,326 $ 8,060 $ 35,038 $ 33,905 $ $ $ $ $ $ $ Unreserved 8,382,550 8,817,737 9,096,547 9,105,235 Nonspendable: Prepaid items - - - - 24,382 5,764 13,175 18,019 15,383 11,222 8,750 Assigned 1,611,427 1,695,203 1,443,243 1,380,698 1,408,357 1,393,200 1,589,169 Unassigned 7,178,108 7,449,565 7,775,548 8,113,424 8,829,697 9,036,425 9,233,073 Total general fund $ 8,389,876 $ 8,825,797 $ 9,131,585 $ 9,139,140 $ 8,813,917 $ 9,150,532 $ 9,231,966 $ 9,512,141 $ 10,253,437 $ 10,440,847 $ 10,830,992 All other Governmental Funds Reserved reported in: Special Revenue Funds $ 1,475 $ 1,225,825 $ 1,076,850 $ 1,273 $ - $ - $ - $ - $ - $ - $ - Debt Service Funds 8,735,656 9,587,587 6,076,380 8,716,563 Capital Projects Funds 2,323,835 3,122,128 500,000 267,498 Unreserved reported in: Special Revenue Funds 5,876,378 5,494,321 6,058,259 6,366,077 Debt Service Funds 3,016,733 1,658,843 4,071,740 4,726,677 Capital Projects Funds 4,969,486 5,945,984 14,827,707 14,244,338 - - - - - - - Nonspendable: Prepaid items - - - - 938 938 10,229 8,529 7,343 5,723 2,827 Inventory - - 31,617 24,434 20,696 28,750 30,625 Restricted 3,445,145 2,997,220 4,347,850 4,478,812 4,857,365 3,200,692 3,306,203 Committed 833,500 560,321 416,027 329,841 394,204 731,090 947,486 Assigned 21,540,577 20,240,161 22,936,733 25,591,181 26,322,717 23,020,349 21,301,562 Unassigned (2,174,299) (9,521,907) (10,379,965) (10,958,389) (9,122,473) (10,240,496) (5,511,868) Total all other governmental funds $ 24,923,563 $ 27,034,688 $ 32,610,936 $ 34,322,426 $ 23,645,861 $ 14,276,733 $ 17,362,491 $ 19,474,408 $ 22,479,852 $ 16,746,108 $ 20,076,835 Total all funds $ 33,313,439 $ 35,860,485 $ 41,742,521 $ 43,461,566 $ 32,459,778 $ 23,427,265 $ 26,594,457 $ 28,986,549 $ 32,733,289 $ 27,186,955 $ 30,907,827 Notes: The implementation of Governmental Accounting Standards Board Statement No. 54 in 2011 resulted in a significant change in the City's fund balance classifications. 142 CITY OF COTTAGE GROVE, MINNESOTA CHANGES IN FUND BALANCES OF GOVERNMENTAL FUNDS Last Ten Fiscal Years (modified accrual basis of accounting) Revenues General property taxes Othertaxes Special assessments Licenses and permits Direct charges to developers Intergovernmental Charges for services Rent Fines and forfeits Investment earnings (loss) Interest on interfund loan Connection charges Park dedication fees Miscellaneous Total revenues Expenditures Current: General government Community development Economic development Public safety Public works Culture and recreation Capital outlay Debt Service: Principal retirement Capital lease payment Debt payment to component unit Interest and fiscal charges Total expenditures Excess revenues over (under) expenditures Other Financing Sources (Uses) Transfers in Transfers out Bonds issued Capital lease issued Premium on debt issued Discount on debt Issued Proceeds from sale of capital assets Total other financing sources (uses) Net change in fund balances Table 4 Fiscal Year 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 $ 11,067,434 $ 11,533,333 $ 11,745,148 $ 11,456,224 $ 11,539,640 $ 12,367,978 $ 12,081,764 $ 12,687,917 $ 13,465,987 $ 13,957,128 $ 14,649,224 1,305,231 1,319,096 1,547,576 1,801,359 1,507,922 1,456,300 1,513,749 1,292,229 1,274,317 1,332,740 1,402,475 7,322,653 4,110,568 4,372,581 2,899,954 1,875,486 1,153,019 1,575,736 1,326,017 1,499,796 2,004,196 2,715,466 1,013,351 1,029,559 683,204 753,468 593,272 831,687 860,954 904,400 1,305,442 1,323,680 1,922,934 27,442 35,787 24,786 50,047 101,913 16,555 2,106,723 661,861 307,971 277,860 273,200 4,660,453 1,158,760 1,226,818 1,166,785 3,879,411 2,684,040 4,642,768 3,932,021 2,415,754 5,642,451 8,077,051 2,183,757 2,328,913 2,630,298 2,668,428 2,494,018 2,467,187 4,023,844 3,572,351 3,808,618 4,061,301 4,140,390 - - - - - - - 435,975 450,428 464,078 435,688 223,463 224,807 192,169 201,559 246,753 198,022 188,657 171,317 228,642 236,260 184,942 1,699,306 1,412,432 508,246 350,673 448,782 196,879 (173,267) 452,293 262,799 219,963 310,579 496,478 361,341 458,001 130,000 144,500 155,301 47,025 59,066 74,340 52,040 52,206 417,092 148,434 201,463 439,238 322,009 282,265 805,261 841,434 318,092 649,489 2,050,958 788,177 21,707 64,584 145,640 62,198 41,990 252,386 63,595 9,010 212,865 526,936 2,980,621 705,107 674,038 609,809 595,218 601,255 705,409 1,005,867 1,138,274 1,864,861 1,982,337 34,185,458 24,389,844 24,328,912 22,673,184 23,811,122 22,452,478 28,631,009 27,406,343 26,559,470 32,298,912 38,724,386 4,030,450 1,978,714 1,759,695 2,071,715 2,942,106 2,689,156 2,071,272 2,025,709 2,155,327 3,143,136 2,201,856 788,811 894,642 1,102,740 1,132,127 - - 892,699 919,126 1,058,537 1,117,760 1,302,776 (1) - - - 299,614 793,046 491,040 151,562 541,838 1,456,306 2,236,464 695,356 5,125,047 5,190,603 5,295,003 5,493,307 5,827,572 6,151,677 6,297,323 6,484,552 6,751,804 7,447,058 7,798,262 3,106,491 3,358,927 3,476,794 3,337,054 3,774,559 4,059,582 4,271,651 4,306,068 4,344,837 4,133,659 3,900,347 1,975,083 2,036,414 2,023,085 2,330,909 2,326,733 2,387,655 3,954,968 4,169,469 4,154,992 4,438,628 4,303,051 14,105,231 15,003,669 2,990,009 3,383,343 10,877,928 15,420,808 12,274,561 5,028,422 7,036,802 17,201,219 22,426,545 2,700,000 1,845,000 3,755,000 1,625,000 7,135,000 1,335,000 950,000 2,470,000 1,320,000 6,570,000 1,915,000 3,374 3,627 158,900 239,189 245,000 250,000 293,953 305,076 316,235 327,432 - - 678,880 - - - - - - - - - 1,308,876 1,158,708 1,640,143 1,101,145 906,910 849,046 769,129 882,508 912,107 1,023,721 900,240 33,143,363 32,149,184 22,201,369 21,013,403 34,828,854 33,633,964 31,927,118 27,132,768 29,506,947 47,639,077 45,443,433 1,042,095 (7,759,340) 2,127,543 1,659,781 (11,017,732) (11,181,486) (3,296,109) 273,575 (2,947,477) (15,340,165) (6,719,047) 2,580,150 2,675,074 2,942,924 1,233,938 3,052,403 2,171,149 759,446 1,840,995 3,049,657 1,648,258 7,111,644 (2,580,150) (2,309,809) (2,942,924) (1,246,180) (3,048,803) (1,881,870) (638,374) (1,213,059) (2,362,952) (1,162,564) (6,135,532) 3,370,000 3,685,000 1,865,000 7,345,000 1,405,000 5,700,000 8,935,000 9,155,000 6,500,000 - - - - - - - 27,946 22,705 211,507 18,461 254,245 357,684 289,321 - (2,906) (15,852) - - - - - 22,412 43,175 49,694 71,506 12,344 10,546 27,195 67,120 53,267 15,453 19,485 22,412 10,306,386 3,754,493 59,264 15,944 2,148,973 7,704,774 2,118,517 6,694,217 9,793,831 10,439,918 $ 1,064,507 $ 2,547,046 $ 5,882,036 $ 1,719,045 $ (11,001,788) $ (9,032,513) $ 4,408,665 $ 2,392,092 $ 3,746,740 $ (5,546,334) $ 3,720,871 Debt service as a percentage of noncapital expenditures 21.1% 21.5% 28.9% 16.8% 34.6% 13.4% 10.2% 16.5% 11.3% 26.0% 12.2% Note: (1) Community Development is in General Government in 2011 & 2012 143 CITY OF COTTAGE GROVE, MINNESOTA ASSESSED AND ESTIMATED ACTUAL VALUE OF TAXABLE PROPERTY Last Ten Fiscal Years Total Taxable Residential Real and Fiscal Disparity Total Adjusted Payable Residential Commercial Agricultural Non -homestead Personal Personal Contribution (Net) Taxable Year Property Property Property 2017 $ 22,141,063 $ 5,623,028 $ 785,628 $ 2016 $ 21,377,754 $ 5,203,657 $ 767,424 $ 2015 20,730,170 5,093,035 776,575 2014 18,114,214 5,001,690 761,279 2013 17,241,606 5,076,716 700,036 2012 19,042,270 5,094,236 724,887 2011 21,316,906 5,120,056 778,196 2010 23,326,829 5,557,410 672,344 2009 24,725,529 5,511,940 613,932 2008 24,639,556 4,640,730 536,173 Source: Washington County Other Property Property and TIF Value 2,740,566 $ 716,347 $ 32,006,632 $ 2,749,793 $ 678,862 $ 30,777,490 $ 2,609,305 633,787 29,842,872 2,207,013 622,578 26,706,774 1,920,395 612,076 25,550,829 2,010,313 568,078 27,439,784 2,003,968 550,999 29,770,125 2,231,128 502,282 32,289,993 2,287,839 497,621 33,636,861 2,163,150 481,275 32,460,884 Notes: (1) The tax capacity (assessed taxable value) of the property is calculated by applying a statutory formula to the estimated market value of the property. 3,967,785 $ 35,974,417 3,557,397 $ 34,334,887 3,544,899 33,387,771 2,264,989 28,971,763 2,134,831 27,685,660 2,626,702 30,066,486 2,775,315 32,545,440 2,268,060 34,558,053 2,295,610 35,932,471 2,145,513 34,606,397 Taxable Assessed Value as a Percentage of Taxable Value 1.25% 1.23% 1.23% 1.21% 1.22% 1.22% 1.21% 1.18% 1.17% 1.16% Estimated Actual Taxable Market $ 2,889,152,300 $ 2,790,852,600 2,705,975,400 2,396,493,700 2,277,900,700 2,464,372,900 2,695,641,900 2,924,191,800 3,058,237,500 2,986,391,700 Table 5 Total Direct Tax Rate 43.010 43.140 41.591 43.812 45.046 41.446 38.255 35.415 34.632 35.189 144 CITY OF COTTAGE GROVE, MINNESOTA PROPERTY TAX RATES DIRECT AND OVERLAPPING GOVERNMENTS Last Ten Fiscal Years (rate per $1,000 of assessed value) City Direct Rate(1) Overlapping Rates Total City General Debt Service Direct Rate 2017 40.156 2.856 43.012 2016 40.422 2.717 43.139 2015 38.886 2.705 41.591 2014 40.976 2.836 43.812 2013 42.665 2.381 45.046 2012 39.065 2.381 41.446 2011 34.500 3.755 38.255 2010 31.780 3.635 35.415 2009 30.825 3.807 34.632 2008 31.548 3.641 35.189 Washington School Total County District (2) Other (4) Overlapping 30.448 34.309 4.345 69.101 30.564 36.812 4.568 71.944 30.186 35.675 4.182 70.043 32.811 39.169 5.401 77.381 34.225 41.285 5.637 81.147 31.939 37.894 5.139 74.972 29.772 35.216 4.715 69.703 27.775 31.650 4.499 63.924 26.371 30.708 4.268 61.347 25.936 29.841 4.206 59.983 Source: Washington County Overlapping rates are those of local and county governments that apply to property owners within the City of Cottage Grove. Not all overlapping rates apply to all City of Cottage Grove property owners. (1) The City Direct Rate is the Urban based rate. (2) Independent School District 833 (4) Includes Metropolitan Transit Commission, Metropolitan Council, and South Washington Watershed Table 6 Total Direct and Overlapping Tax Rate 112.113 115.083 111.634 121.193 126.193 116.418 107.958 99.339 95.979 95.172 145 CITY OF COTTAGE GROVE, MINNESOTA PRINCIPAL PROPERTY TAXPAYERS Current year and nine years ago 2017 Percentage of Total City Net Tax Tax Capacity Capacity Taxpayer Value Rank Value Xcel Energy/NSP $ 723,624 1 3M Company 649,756 2 Hinton Heights -Minneapolis LLC 361,609 3 Wal-Mart Real Estate Business Trust 251,396 4 Mars II Inc. 239,550 5 Renewal by Andersen Corporation 237,526 6 Menard Inc. 224,744 7 PHM/Cottage Grove Inc 274,917 8 MN Pipeline Co 207,462 9 Wer Dis LLC 166,888 10 Dayton -Hudson Corporation - Grove -Rainbow LP - Home Depot USA, Inc - South St Paul Agri -Properties - Soo Line Railroad Co - First Trust Co. of St. Paul - Total $ 3,337,472 Source: Washington County Table 7 2008 Percentage of Total City Net Tax Tax Capacity Capacity Value Rank Value 2.10% $ 459,554 2 1.89% 573,954 1 1.05% - 0.73% - 0.70% 170,584 5 0.69% 175,510 4 0.65% 188,272 3 0.80% - 0.60% - 0.48% - - 167,904 6 - 136,006 8 - 130,800 9 - 152,532 7 - 140.342 10 1.33% 1.66% 0.49% 0.51 % 0.54% 0.49% 0.39% 0.38% 0.44% 0.41 % 6.63% 146 CITY OF COTTAGE GROVE, MINNESOTA PROPERTY TAX LEVIES AND COLLECTIONS Last Ten Fiscal Years Collected within the Taxes Levied for the Fiscal Year Fiscal Year of Levy Percentage Fiscal Gross Operating Debt MVHC/ State Aid Total Net of Year Tax Levy Tax Levy Ag Credit (1) Cut Tax Levy Amount Levy Abatements 2017 $ 13,798,587 $ 985,000 $ (8,890) $ $ 14,774,697 $ 14,694,114 99.45% $ 10,688 2016 13,174,084 890,000 (9,707) 14,054,377 13,991,560 99.55% (6,717) 2015 12,526,600 875,500 (8,722) 13,393,378 13,326,911 99.50% 3,737 2014 11,873,130 826,000 (5,947) 12,693,183 12,610,243 99.35% 11,112 2013 11,585,100 656,150 (5,354) 12,235,896 12,114,166 99.01% (21,952) 2012 11,683,300 557,950 (4,762) 12,236,488 12,104,072 98.92% (23,267) 2011 11,035,100 1,206,150 (4,350) (690,152) 11,546,748 11,395,797 98.69% (25,901) 2010 10,903,300 1,251,700 (4,637) (629,015) 11,521,348 11,358,969 98.59% (33,547) 2009 10,784,900 1,661,600 (176,941) (412,323) 11,857,236 11,591,141 97.76% (97,610) (1) 2008 10,920,700 1,263,300 (306,555) (295,108) 11,582,337 11,354,286 98.03% (47,239) Notes: (1) In 2009 a property tax classification appeal for one property owner resulted in a large abatement. Table 8 Total Collections to Date Collections Percentage in Subsequent of Years Amount Levy $ $ 14,694,114 99.45% 13,991,560 99.55% 13,326,911 99.50% 75,201 12,685,444 99.94% 82,537 12,196,703 99.68% 99,615 12,203,687 99.73% 118,312 11,514,109 99.72% 125,137 11,484,106 99.68% 164,752 11,755,893 99.15% 177,249 11,531,535 99.56% 147 CITY OF COTTAGE GROVE, MINNESOTA RATIOS OF OUTSTANDING DEBT BY TYPE Last Ten Fiscal Years Governmental Activities Business -Type Activities Table 9 General Obligation General General Special Other Other Total Percentage Fiscal Obligation Tax Obligation Assessments Capital Long -Term Revenue Capital Long -Term Primary of Personal Per Year IncrementBonds(1) Bonds(1) Bonds(1) Leases Debt Bonds(1) Lease Debt Government Income (2) Capita(2) 2017 $ 1,868,660 $ 13,736,030 $ 19,281,013 $ $ $ $ $ $ 34,885,704 1.66% $ 979 2016 2,096,395 4,660,000 20,679,730 27,436,125 1.36% 775 2015 2,309,130 - 17,964,105 4,842,432 609,856 25,725,523 1.34% 722 2014 2,516,865 13,140,768 5,158,667 717,221 21,533,521 1.12% 605 2013 2,600,000 14,125,979 5,463,743 824,586 23,014,308 1.25% 650 2012 2,735,000 7,332,245 5,615,000 1,036,584 142,696 900,000 17,761,525 0.97% 505 2011 2,790,000 6,763,867 5,865,000 1,456,067 - 900,000 17,774,934 1.01% 510 2010 2,830,000 13,832,649 6,110,000 1,814,178 - 900,000 25,486,827 1.56% 737 2009 2,925,000 15,375,000 6,349,189 2,360,000 9,085 900,000 27,918,274 1.76% 816 2008 3,215,000 255,000 14,900,000 6,508,089 2,835,000 96,742 900,000 28,709,831 1.76% 844 Notes: Details regarding the City's outstanding debt can be found in the notes to the financial statements. (1) Presented net of original issuance discounts and premiums. (2) See the Demographic and Economic Statistics schedulefor personal income and population data, 148 CITY OF COTTAGE GROVE, MINNESOTA RATIOS OF GENERAL BONDED DEBT OUTSTANDING Last Ten Fiscal Years General Obligation General General Special Fiscal Obligation Tax Obligation Assessments Year Increment Bonds(1) Bonds(1) Bonds(1) 2017 $ 1,868,660 $ 13,736,030 $ 19,281,013 2016 2,096,395 4,660,000 20,679,729 2015 2,309,130 - 17,964,105 2014 2,516,865 - 13,140,768 2013 2,600,000 - 14,125,979 2012 2,735,000 - 7,332,245 2011 2,790,000 - 6,763,867 2010 2,830,000 - 13,832,649 2009 2,925,000 - 15,375,000 2008 3,215,000 255,000 14,900,000 Table 10 Percentage of Less: Amounts Estimated Available in Debt Actual Taxable Per Service Funds Total Market Value (2) Capita (3) $ 3,281,981 $ 31,603,722 1.09% $ 876 4,098,850 23,337,274 0.84% $ 652 3,773,605 16,499,630 0.61% 463 2,833,208 12,824,425 0.54% 360 3,550,891 13,175,088 0.58% 372 2,377,981 7,689,264 0.31% 219 1,499,819 8,054,048 0.30% 231 5,512,986 11,149,663 0.38% 322 5,031,380 13,268,620 0.43% 388 5,725,764 12,644,236 0.42% 372 Notes: Details regarding the City's outstanding debt can be found in the notes to the financial statements. (1) Presented net of original issuance discounts and premiums. (2) See the Assessed and Estimated Actual Value of Taxable Property for estimated actual taxable market value. (3) See the Demographic and Economic Statistics schedule for population data. 149 CITY OF COTTAGE GROVE, MINNESOTA DIRECT AND OVERLAPPING GOVERNMENTAL ACTIVITIES DEBT As of December 31, 2017 Table 11 City of Cottage Grove % of Debt Share of Net Debt Applicable Overlapping Outstanding to City Debt Overlapping: Washington County $ 129,790,000 12.3667% $ 16,050,740 School Districts ISD No. 200 (Hastings) 33,990,000 13.8583% 4,710,436 ISD No. 833 (South Wash. County) 309,245,000 30.8415% 95,375,797 Metro Council 146,405,000 1.1108% 1,626,267 Total Overlapping 117,763,240 City of Cottage Grove Direct Debt $ 34,885,704 100.00% 34,885,704 Total Direct and Overlapping Debt: $ 654,315,704 $ 152,648,944 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 CITY OF COTTAGE GROVE, MINNESOTA LEGAL DEBT MARGIN INFORMATION Table 12 Last Ten Fiscal Years Fiscal Year 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Debt limit $ 89,591,751 $ 91,747,125 $ 87,725,754 $ 80,869,257 $ 73,931,187 $ 68,337,021 $ 71,894,811 $ 81,179,262 $ 93,740,412 $ 100,633,167 Total net debt applicable to limit 6,755,000 6,345,000 6,110,000 5,865,000 5,615,000 5,355,000 5,085,000 4,805,000 4,660,000 13,240,000 Legal debt margin $ 82,836,751 $ 85,402,125 $ 81,615,754 $ 75,004,257 $ 68,316,187 $ 62,982,021 $ 66,809,811 $ 76,374,262 $ 89,080,412 $ 87,393,167 Total net debt applicable to the limit as a percentage of debt limit 7.54% 6.92% 6.96% 7.25% 7.59% 7.84% 7.07% 5.92% 4.97% 13.16% Legal Debt Margin Calculation for Fiscal Year 2016 Market Value (after fiscal disparities) $ 2,889,152,300 Debt limit (3% of assessed value) 86,674,569 Debt applicable to limit 13,240,000 Legal debt margin $ 73,434,569 151 CITY OF COTTAGE GROVE, MINNESOTA DEMOGRAPHIC AND ECONOMIC STATISTICS Last Ten Fiscal Years Table 13 Per Capita Fiscal Personal Personal School Unemployment Year Population(1) Income (2) Income (2) Enrollment (3) Rate (4) 2017 36,492 $ 2,213,900,353 $ 60,669 18,165 3.3% 2016 36,062 $ 2,105,690,772 $ 58,392 17,794 3.4% 2015 35,814 2,012,741,903 56,200 17,893 3.9% 2014 35,619 1,926,643,820 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% Sources: (1) Metropolitan Council-2002-2009 & 2012-2013. Census-2010. Cottage Grove Planning Department-2014-2016. (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 Current year and nine years ago Table 14 2017 2008 Percentage Percentage of Total of Total Taxpayer Employees Rank Employment Employees Rank Employment School District 833 2,513 1 32% 1,081 1 16% 3M Cottage Grove 760 2 10% 1,000 2 15% Renewal by Andersen 719 3 9% 250 4 4% Hy-Vee 407 4 5% - - - Up -North Plastics 245 5 3% 280 3 4% Werner Electric 213 6 3% - - - City of Cottage Grove 183 7 2% - 0 0% AGCO 163 8 2% - - 0% Walmart 140 9 2% - - - Target 135 10 2% 212 5 3% Cub Foods - - 0% 208 6 3% Menard's - - 0% 200 7 3% Allina - - 0% - - 0% Commercial Carriers Inc. - - - 200 7 3% Aggregate Industries - - - 165 10 2% Rainbow Foods - - - 200 7 3% Total 5,478 71 % 3,796 57% Sources: City of Cottage Grove Annual Municipal Disclosure Reporting and Cottage Grove Economic Development Department 153 CITY OF COTTAGE GROVE, MINNESOTA FULL-TIME EQUIVALENT CITY GOVERNMENT EMPLOYEES BY FUNCTIOI\ Last Ten Fiscal Years Table 15 Budgeted Full-time Equivalent Employees as of December 31 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 General Government Total General Government 22.48 21.76 21.76 21.76 22.06 23.38 23.40 23.25 25.70 27.60 Public Safety Police/Cottage Grove EMS Officers 39.00 39.00 39.00 39.00 39.00 39.00 40.00 40.00 43.56 46.84 Civilians 9.10 7.25 7.25 7.25 8.46 8.09 8.26 7.56 7.56 7.56 Fire/Emergency Management 4.00 4.00 4.00 4.00 4.00 5.00 7.00 9.00 11.75 15.10 Total Public Safety 52.10 50.25 50.25 50.25 51.46 52.09 55.26 56.56 62.87 69.50 Public Works 21.56 21.56 21.56 21.56 20.83 21.68 23.68 24.08 22.12 23.73 Recreation 3.00 2.50 2.50 2.50 2.50 2.55 2.55 2.55 2.55 2.70 Ice Arena 2.60 2.60 2.60 2.60 3.20 3.65 3.65 3.65 3.55 2.60 Water/Sewer 9.36 8.36 8.36 8.36 8.23 8.18 8.18 8.28 9.28 10.08 Storm Sewer 3.40 3.40 3.40 3.40 3.54 3.54 3.54 3.54 3.54 3.50 Golf Course Fund 5.00 5.00 5.00 5.00 5.00 5.00 5.00 5.00 5.00 5.00 Street Light Fund 1.04 1.04 1.04 1.04 1.06 1.06 1.06 1.06 1.06 1.23 Fleet Maintenance 3.84 3.84 3.84 3.84 4.04 4.04 4.04 4.04 4.04 4.00 Total 124.38 120.31 120.31 120.31 121.92 125.17 130.36 132.01 139.71 149.94 Source: City of Cottage Grove Finance Office 154 CITY OF COTTAGE GROVE, MINNESOTA OPERATING INDICATORS BY FUNCTION/PROGRAN Last Ten Years Table 16 Fiscal Year Function/Program 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 General Government Elections 2 2 2 2 2 Registered voters as of 7 am election day 20,358 20,607 21,119 20,780 21,594 Number of votes cast 19,050 13,345 19,727 11,166 19,799 Voter participation (registered) 93.58% 64.76% 93.41% 53.73% 84.50% (elections are held every other year) Community Development Inspections Building Permits (New Dwelling Units) 89 66 89 49 53 56 77 65 99 255 Code Enforcement Inspections 1,777 1,759 1,447 1,276 2,407 2,826 1,482 1,013 841 1,018 Public Safety Police Crimes -PartI 850 743 674 694 756 783 774 719 673 767 Crimes - Part II 2,472 2,478 2,055 2,117 1,614 1,473 1,434 1,419 1,424 1,471 Total Calls for Service 20,356 19,434 20,104 20,707 17,348 18,151 18,448 20,576 21,331 20,879 Fire Medical 1,442 1,765 1,968 2,000 2,347 2,437 2,562 2,464 2,681 2,790 Fire 553 556 643 456 295 280 301 290 279 280 Avg Response Time (minutes) Medical* n/a n/a n/a 8:38 6:51 6:15 6:19 6:13 6:21 6:25 Avg Response Time (minutes) Fire* n/a n/a n/a 8:24 8:04 7:25 7:34 7:06 6:54 7:05 Avg Response Time (minutes) Both* 8:54 8:59 9:01 8:36 6:59 6:22 6:27 6:16 6:24 6:28 *Entire service area Public Works Sq. Yards of Streets Sealcoated 425,577 352,953 349,349 382,374 488,210 457,275 199,725 118,159 193,249 71,152 Miles of Streets New Construction 0.00 0.00 0.26 1.12 0.30 1.23 1.99 0.56 1.11 1.02 Miles of watermain added 1.68 0.00 0.39 0.63 0.79 2.42 1.84 1.06 1.20 3.64 Source: Various City of Cottage Grove Departments Notes: (1) Information not available is labeled n/a. 155 CITY OF COTTAGE GROVE, NIINNESOTA CAPITAL ASSET STATISTICS BY FUNCTION/PROGRAM Table 17 Last Ten Years Fiscal Year Function/Program 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Public Safety Police Stations 1 1 1 1 1 1 1 1 1 1 Patrol Units 12 12 12 12 12 13 13 13 13 13 Fire Stations 4 4 4 4 4 4 4 4 4 4 Fire Trucks 6 6 6 6 6 6 6 6 6 6 Public Works City -owned Lights 2,273 2,273 2,279 2,320 2,345 2,416 2,481 2,495 2,592 2,682 Xcel owned Lights 301 301 301 301 301 301 301 301 301 301 Streets (miles) 155.45 155.45 155.71 156.83 157.13 158.36 160.35 160.91 162.02 163.04 Sidewalks/trails (miles) 44.23 44.27 46.40 48.25 48.61 53.82 57.83 59.56 61.98 64.87 Parks (acreage) Community Parks 377 377 377 377 377 377 377 400 400 400 Neighborhood Parks 201 201 201 201 244 275 303 275 275 275 Recreation facilities 21 21 21 21 21 21 21 15 15 15 County Parks 571 571 571 571 571 571 571 569 569 569 State Scientific and Nature Area 238 238 238 238 238 238 238 238 238 238 Golf Course 219 219 219 219 219 219 219 219 219 219 Other Open Space 453 453 453 453 453 581 581 961 961 961 Water Number of Connections 10,298 10,381 10,423 10,474 10,538 10,573 10,640 10,706 10,789 10,891 Miles of Water Mains and Laterals 142.85 142.85 143.24 143.87 144.66 147.08 148.92 149.98 151.18 154.82 Sanitary Sewer Number of Connections 10,209 10,330 10,382 10,433 10,486 10,532 10,604 10,670 10,667 10,983 Miles of Sanitary Sewer Mains and Laterals 126.72 126.72 127.02 127.58 127.99 129.32 131.11 131.45 132.81 135.42 Storm Sewer Miles of storm sewers 77.17 77.41 78.07 79.50 80.39 85.41 87.81 89.52 93.94 98.75 Source: Various City Departments 156