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HomeMy WebLinkAbout2005 Comprehensive Annual Financial ReportCITY OF EDINA 2005 Comprehensive Annual Financial Report CITY OF EDINA, MINNESOTA Comprehensive Annual Financial Report For the fiscal year ended December 31, 2005 Prepared by: Department of Finance John Wallin – Treasurer and Finance Director Eric Roggeman – Assistant Finance Director Paula Nelson – Accountant CITY OF EDINA, MINNESOTA TABLE OF CONTENTS Page ReferenceNo. I. INTRODUCTORY SECTION Letter of Transmittal 1 Organization 5 Organization Chart 6 II. FINANCIAL SECTION Independent Auditors' Report 7 Management's Discussion and Analysis 9 Basic Financial Statements: Government-wide Financial Statements: Statement of Net AssetsStatement 121 Statement of ActivitiesStatement 222 Fund Financial Statements: Balance Sheet - Governmental FundsStatement 325 Statement of Revenues, Expenditures, and Changes in Fund Balances - Governmental FundsStatement 426 Reconciliation of the Statement of Revenues, Expenditures, and Changes in Fund Balances of Governmental Funds to the Statement of ActivitiesStatement 527 Statement of Net Assets - Proprietary FundsStatement 628 Statement of Revenues, Expenses, and Changes in Fund Net Assets - Proprietary FundsStatement 729 Statement of Cash Flows - Proprietary FundsStatement 830 Statement of Fiduciary Net Assets - Fiduciary FundsStatement 932 Notes to the Financial Statements 33 Required Supplementary Information: Budgetary Comparison Information: Budgetary Comparison Schedule - General FundStatement 1061 Notes to Required Supplementary Information67 CITY OF EDINA, MINNESOTA TABLE OF CONTENTS Page ReferenceNo. Combining and Individual Non Major Fund Financial Statements and Schedules: Combining Balance Sheet - Nonmajor Special Revenue FundsStatement 1170 Combining Statement of Revenues, Expenditures and Changes in Fund Balances - Nonmajor Special Revenue FundsStatement 1271 Special Revenue Fund - Community Development Block Grant Schedule of Revenues, Expenditures and Changes in Fund Balances - Budget and ActualStatement 1372 Combining Statement of Net Assets - Nonmajor Proprietary FundsStatement 1474 Combining Statement of Revenues, Expenses and Changes in Fund Net Assets - Nonmajor Proprietary FundsStatement 1575 Combining Statement of Cash Flows - Nonmajor Proprietary FundsStatement 1676 Combining Statement of Changes in Assets and Liabilities - Agency FundsStatement 1777 Supplementary Financial Information: Combined Schedule of IndebtednessExhibit 180 Assessed Valuation, Tax Levies and Mill RatesExhibit 282 Schedule of Sources and Uses of Public Funds for 50th & France - #1200Exhibit 383 Schedule of Sources and Uses of Public Funds for Southeast Edina Redevelopment District - #1201Exhibit 484 Schedule of Sources and Uses of Public Funds for Grandview Area Redevelopment District - #1202Exhibit 585 Schedule of Sources and Uses of Public Funds for Southeast Edina Redevelopment District - #1203Exhibit 686 Schedule of Sources and Uses of Public Funds for 70th Street and Cahill Road District - #1207Exhibit 787 CITY OF EDINA, MINNESOTA TABLE OF CONTENTS Page ReferenceNo. III. STATISTICAL SECTION (UNAUDITED) Government-wide Information: Government-wide Expenses By FunctionTable 190 Government-wide RevenuesTable 292 Fund Information: Property Tax Levies and CollectionsTable 393 Assessed Value or Tax Capacity and Estimated Market Value of Taxable PropertyTable 494 Property Tax Rates - All Overlapping GovernmentsTable 595 Special Assessment CollectionsTable 696 Ratio of Net Bonded Debt to Assessed Value and Net Bonded Debt per CapitaTable 797 Computation of Direct and Overlapping DebtTable 898 Ratio of Annual Debt Service Expenditures for General BondedTable 999 Debt to Total General Expenditures Revenue Bond CoverageTable 10100 Property and Construction ValuesTable 11101 Principal TaxpayersTable 12102 Major Employers in the CityTable 13103 Demographic StatisticsTable 14104 Miscellaneous Statistical DataTable 15105 This page left blank intentionally. CITY OF EDINA, MINNESOTA ORGANIZATION December 31, 2005 Term Expires Mayor: James Hovland December 31, 2008 Council Members: Scot Housh December 31, 2006 Alice Hulbert December 31, 2006 Linda Masica December 31, 2008 Ann Swenson December 31, 2008 City Manager: Gordon Hughes Appointed Finance Director/Treasurer: John Wallin Appointed City Clerk: Debra Mangen Appointed 5 City of Edina Boards andCommissions HRA Personnel Elections City Clerk Human Resources Human Services Communications Technology Liquor Administration Assessing Recycling Health Water and Sewer Street Maintenance Engineering Public Works Planning Recreational Facilities Recreational Programs Park Maintenance Parks and Recreation Building Inspections Finance Civil Defense Animal Control Police Operations Police Prevention and Control EMS Special Operations Fire Public Safety City Manager City Council City Attorney Citizens 9 MANAGEMENT’S DISCUSSION AND ANALYSIS As management of the City of Edina (the City), we offer readers of the City’s financial statements this narrative overview and analysis of the financial activities of the City for the fiscal year ended December 31, 2005. We encourage readers to consider the information presented here in conjunction with additional information that we have furnished in our letter of transmittal, which can be found on pages 1 through 4 of this report. Financial Highlights • The assets of the City exceeded its liabilities at the close of the most recent fiscal year by $123,133,653 (net assets). Of this amount, $46,918,521 (unrestricted net assets) may be used to meet the government’s ongoing obligations to citizens and creditors in accordance with the City's fund designations and fiscal policies. • The City’s total net assets increased by $8,730,369. • As of the close of the current fiscal year, the City’s governmental funds reported combined ending fund balances of $43,374,873. Of this total amount, $29,359,210, or 68%, is available for spending at the City’s discretion (unreserved fund balance). • At the end of the current fiscal year, unreserved fund balance for the general fund was $11,595,433, or 48% of total general fund expenditures. • The City’s total bonded debt increased by $7,545,000 during the current fiscal year, from $60,835,000 to $68,380,000. The City issued $32,505,000 in debt during the year, including two “crossover refunding” issues. At year-end, the City had $9,049,242 in assets held by a trustee that were used to refund $9,035,000 in outstanding bonded debt on February 1, 2006. Since the refunding occurred after year-end, the principal amount of the bonds that were refunded are included in the outstanding debt total at year-end. Overview of the Financial Statements This discussion and analysis is intended to serve as an introduction to the City’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’s finances, in a manner similar to a private-sector business. Management’s Discussion and Analysis (Continued) 10 The statement of net assets presents information on all of the City’s assets and liabilities, with the difference between the two reported as net assets. Over time, increases or decreases in net assets may serve as a useful indicator of whether the financial position of the City is improving or deteriorating. The statement of activities presents information showing how the City’s net assets changed during the most recent fiscal year. All changes in net assets are reported as soon as the underlying event giving rise to the change occurs, regardless of the timing of related cash flows. Thus, revenues and expenses are reported in this statement for some items that will only result in cash flows in future fiscal periods (e.g. uncollected taxes and earned but unused vacation leave). Both of the government-wide financial statements distinguish functions of the City that are principally supported by taxes and intergovernmental revenues (governmental activities) from other functions that are intended to recover all or a significant portion of their costs through user fees and charges (business-type activities). The governmental activities of the City include general government, public safety, public works and parks. The business-type activities of the City include utilities, liquor, aquatic center, golf course and community activity centers. The government-wide financial statements can be found on pages 21 through 23 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, like other state and local governments, uses fund accounting to ensure and demonstrate compliance with finance-related legal requirements. All of the funds of the City can be divided into three categories: governmental funds, proprietary funds, and fiduciary 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 balances provide a reconciliation to facilitate this comparison between governmental funds and governmental activities. Management’s Discussion and Analysis (Continued) 11 The City maintains 4 individual major governmental funds. Information is presented separately in the governmental fund balance sheet and in the governmental fund statement of revenues, expenditures, and changes in fund balances for the general fund, debt service fund, construction fund and the Housing and Redevelopment Authority 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 are provided in the form of combining statements elsewhere in this report. The City adopts an annual appropriated budget for its general fund and one of its 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 can be found on pages 25 through 27 of this report. Proprietary funds. The City maintains four major enterprise funds. Enterprise funds are used to report the same functions presented as business-type activities in the governmental-wide financial statements. The City uses enterprise funds to account for its utility, liquor, aquatic center and golf course operations. Data from the other proprietary funds are combined into a single, aggregated presentation. Individual fund data for each of these non-major proprietary funds are provided in the form of combining statements elsewhere in this report. Proprietary funds provide the same type of information as the government-wide financial statements, only in more detail. The basic proprietary fund financial statements can be found on pages 28 through 31 of this report. Fiduciary funds. Fiduciary funds are used to account for resources held for the benefit of parties outside the government. Fiduciary funds are not reflected in the government-wide financial statements because the resources of those funds are not available to support the City’s own programs. The accounting used for fiduciary funds is much like that used for proprietary funds. The basic fiduciary fund financial statement can be found on page 32 of this report. Management’s Discussion and Analysis (Continued) 12 Notes to the financial statements. The notes provide additional information that is essential to a full understanding of the data provided in the government–wide and fund financial statements. The notes to the financial statements can be found on pages 33 through 60 of this report. Other information. The combining statements referred to earlier in connection with non- major governmental and enterprise funds are presented immediately following the required supplementary information on budgetary comparisons. Combining and individual fund statements and schedules can be found on pages 69 through 77 of this report. Government-wide Financial Analysis As noted earlier, net assets may serve over time as a useful indicator of a government's financial position. In the case of the City, assets exceeded liabilities by $123,133,653 at the close of the most recent fiscal year. The largest portion of the City's net assets ($76,136,189 or 62%) reflects its investment in capital assets (e.g. land, buildings, machinery, and equipment) less any related debt used to acquire those assets that is still outstanding. The City uses these capital assets to provide services to citizens; consequently, these assets are not available for future spending. Although the City's investment in its capital assets is reported net of related debt, it should be noted that the resources needed to repay this debt must be provided from other sources, since the capital assets themselves cannot be used to liquidate these liabilities. City of Edina’s Net Assets 200520042005200420052004 Current and other assets50,732,285$ 36,819,938$ 13,162,400$ 14,653,953$ 63,894,685$ 51,473,891$ Capital assets86,694,237 83,676,658 49,664,376 48,340,698 136,358,613 132,017,356 Total assets137,426,522$ 120,496,596$ 62,826,776$ 62,994,651$ 200,253,298$ 183,491,247$ Long-term liabilities outstanding46,150,081$ 45,184,272$ 8,855,261$ 10,323,185$ 55,005,342$ 55,507,457$ Other liabilities19,308,677 10,084,012 2,805,626 3,496,494 22,114,303 13,580,506 Total liabilities65,458,758$ 55,268,284$ 11,660,887$ 13,819,679$ 77,119,645$ 69,087,963$ Net assets: Invested in capital assets, net of related debt36,092,020$ 34,320,784$ 40,044,169$ 37,240,476$ 76,136,189$ 71,561,260$ Restricted78,943 2,145,488 - - 78,943 2,145,488 Unrestricted35,796,801 28,762,040 11,121,720 11,934,496 46,918,521 40,696,536 Total net assets71,967,764$ 65,228,312$ 51,165,889$ 49,174,972$ 123,133,653$ 114,403,284$ Governmental ActivitiesBusiness-Type ActivitiesTotals Management’s Discussion and Analysis (Continued) 13 A portion of the City's net assets represents resources that are subject to external restrictions on how they may be used. The remaining balance of unrestricted net assets ($46,918,521) may be used to meet the City's ongoing obligations to citizens and creditors. At the end of the current fiscal year, the City is able to report positive balances in all three categories of net assets, both for the government as a whole, as well as for its separate governmental and business-type activities. As shown below, the City’s net assets increased by $8,730,369 during the current fiscal year. Factors contributing to this change are discussed in the next two sections. City of Edina's Changes in Net Assets 200520042005200420052004 Revenues: Program revenues: Charges for services6,864,089$ 5,837,745$ 28,577,344$ 27,461,413$ 35,441,433$ 33,299,158$ Operating grants and contributions1,512,366 1,154,808 131,408 138,447 1,643,774 1,293,255 Capital grants and contributions2,252,491 4,192,947 - - 2,252,491 4,192,947 General revenues: Property taxes19,071,202 17,865,757 - - 19,071,202 17,865,757 Other taxes7,518,165 7,212,890 - - 7,518,165 7,212,890 Gain on disposal of asset63,674 - 22,538 6,490 86,212 6,490 Unrestricted investment earnings977,956 443,074 236,654 227,167 1,214,610 670,241 Total revenues38,259,943 36,707,221 28,967,944 27,833,517 67,227,887 64,540,738 Expenses: General government4,967,008 6,934,045 - - 4,967,008 6,934,045 Public safety12,019,027 11,063,767 - - 12,019,027 11,063,767 Public works7,185,784 5,834,490 - - 7,185,784 5,834,490 Parks5,901,648 4,248,060 - - 5,901,648 4,248,060 Interest on long-term debt2,288,524 2,399,682 - - 2,288,524 2,399,682 Utilities- - 8,254,409 7,801,580 8,254,409 7,801,580 Liquor- - 9,749,313 9,110,888 9,749,313 9,110,888 Aquatic Center- - 725,936 701,768 725,936 701,768 Golf course- - 3,580,307 3,508,741 3,580,307 3,508,741 Community Activity Centers- - 3,825,562 3,850,192 3,825,562 3,850,192 Total expenses 32,361,991 30,480,044 26,135,527 24,973,169 58,497,518 55,453,213 Increase in net assets before transfers5,897,952 6,227,177 2,832,417 2,860,348 8,730,369 9,087,525 Transfers841,500 655,227 (841,500) (655,227) - - Increase in net assets6,739,452 6,882,404 1,990,917 2,205,121 8,730,369 9,087,525 Net assets - January 165,228,312 58,345,908 49,174,972 46,969,851 114,403,284 105,315,759 Net assets - December 3171,967,764$ 65,228,312$ 51,165,889$ 49,174,972$ 123,133,653$ 114,403,284$ Governmental ActivitiesBusiness-type ActivitiesTotals Management’s Discussion and Analysis (Continued) 14 Governmental Activities Governmental activities increased the City's net assets by $6,739,452, accounting for 77% of the total growth in net assets. This increase is a combination of many surpluses and deficits, but the primary reason is that the City has chosen to delay reporting major infrastructure assets retroactively until fiscal year 2006, as described in footnote 3. Since these costs have not yet been capitalized, there is no corresponding depreciation expense recorded. Until the costs of the infrastructure can be estimated, it is impossible to estimate the impact that infrastructure depreciation will have on the financial statements next year. Below are specific graphs which provide comparisons of the governmental activities revenues and expenses: Revenues by Source - Governmental Activities Property taxes 49% Other taxes 20% Other 3% Capital grants and contributions 6% Operating grants and contributions 4% Charges for services 18% - 2 4 6 8 10 12 14 Millions General government Public safetyPublic worksParksInterest on long- term debt Expenses and Program Revenues - Governmental Activities expenses program revenue Management’s Discussion and Analysis (Continued) 15 Business-type Activities Business-type activities increased net assets by $1,990,917 accounting for 23% of the City's growth in net assets. The increase in net assets is smaller than the prior year due to larger transfers to governmental activities and decreasing golf course revenues. Key elements of the current year increase are as follows: • Charges for services for business-type activities increased 4.1% from 2004. The Aquatic Center had the largest individual percentage increase (11.2%) in charges for services, but the largest dollar increase ($722,657) was from the liquor operations. • Business-type activities made net transfers of $841,500 to governmental activities during 2005 to provide cash flow for operational and capital improvement needs. Revenues by Source - Business-type Activities Charges for services 98.7% Operating grants and contributions 0.5% Other 0.8% - 2 4 6 8 10 12 Millions UtilitiesLiquorAquatic CenterGolf courseCommunity Activity Centers Expenses and Program Revenues - Business-type Activities expenses program revenue Management’s Discussion and Analysis (Continued) 16 Financial Analysis of the City's Funds As noted earlier, the City uses fund accounting to ensure and demonstrate compliance with finance-related legal requirements. Governmental Funds. The focus of the City’s governmental funds is to provide information on near-term inflows, outflows, and balances of spendable resources. Such information is useful in assessing the City’s financing requirements. In particular, unreserved fund balance may serve as 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's governmental funds reported combined ending fund balances of $43,374,873, an increase of $11,859,361 in comparison with the prior year. Approximately 68 percent of this total amount ($29,359,210) constitutes unreserved fund balance. The remainder of the fund balance is reserved because it has already been committed 1) to provide for prepaid items ($223,351), 2) to pay committed contracts ($2,422,917), 3) for special projects ($354,649), or 4) to pay debt service ($11,014,746). The general fund is the chief operating fund of the City. At the end of the current fiscal year, unreserved fund balance of the general fund was $11,595,433. As a measure of the general fund’s liquidity, unreserved fund balance represents 48% of total general fund expenditures. The fund balance of the City’s general fund increased by $1,201,958 during the current fiscal year. Key factors in this growth are as follows: • Total general fund revenues increased by 13.2% in the current fiscal year. The largest individual increases was in license and permit fees, which increased 44% from the prior year. Ambulance revenue also increased significantly, mostly due to increased calls for service. • Total general fund expenditures increased 8.8% in the current fiscal year. Some increased costs were due to rising energy costs, but the largest factor was the City’s equipment replacement program, which was approximately $500,000 over budget due to large equipment purchases by the Police and Fire departments. • A budgeted transfer of $686,500 from the liquor fund was made to the construction fund instead of the general fund due to the relative strength of the general fund’s financial position and positive operating results. The debt service fund has a total fund balance of $11,014,746, all of which is reserved for the payment of debt service. This balance includes $9,049,242 in restricted investments which were held in trust at year-end for the crossover refunding of two bond issues ($9,035,000 combined principal) occurring in February 2006. The construction fund balance increased by $2,427,657 in 2005 due to ongoing construction for two new gymnasiums, which was financed with a bond issue in 2005. Management’s Discussion and Analysis (Continued) 17 The Housing and Redevelopment Authority fund balance decreased by $589,081 in the current fiscal year as several tax increment districts are rapidly paying down the debt that was issued. Two of the districts expire in 2009 and have the majority of the principal being paid over the next few years. Proprietary funds. The City’s proprietary funds provide the same type of information found in the government-wide financial statements, but in more detail. Operating revenues and expenses in the Utilities fund increased by 8% and 6%, respectively, in 2005, due to small rate increases that are intended to help replace aging infrastructure. The City’s continuing investments in infrastructure are reported as increases in net capital assets, which increased $1,323,678 from 2004. The liquor fund made transfers totaling $927,500 to other funds during 2005. The majority of this amount ($786,500) was transferred to the construction fund to fund future infrastructure improvements, with the remainder transferred to nonmajor proprietary funds. Aquatic center revenues increased 11% in 2005 due to increased attendance and favorable summer weather. Operating revenues for the golf course fund decreased for the second consecutive year. Combined with the effects of increasing expenses, the golf course lost $97,308 in 2005. Budgetary Highlights General Fund. There were no changes made to the original budget. During the year, revenues and expenditures exceeded budgetary estimates, and since increased revenues easily covered the increased expenditures, there was no need to draw upon existing fund balance. Capital Asset and Debt Administration Capital assets. The City’s investment in capital assets for its governmental and business type activities as of December 31, 2005, amounted to $136,358,613 (net of accumulated depreciation). This investment in capital assets included land, land improvements, buildings, vehicles and equipment. Major capital asset events during the current fiscal year included the following: • Construction started on two new Gymnasiums in 2005. • A variety of street construction, sidewalk and traffic signal projects began in 2005; construction in progress as of the close of the year reached $8,029,499. • The City added a new “infrastructure” category to our capital assets which includes streets, sidewalks, parking ramps, sewers, wells and other infrastructure. With the addition of a new category, some category reclassifications were necessary, although they have no effect on total amounts. Management’s Discussion and Analysis (Continued) 18 City of Edina’s Capital Assets (Net of Depreciation) 200520042005200420052004 Land and land improvements25,463,830$ 30,798,413$ 5,553,727$ 5,832,714$ 31,017,557$ 36,631,127$ Buildings and improvements30,219,684 29,271,125 7,747,988 8,206,831 37,967,672 37,477,956 Machinery and equipment8,859,303 9,155,646 2,296,740 2,385,570 11,156,043 11,541,216 Infrastructure16,755,486 - 31,432,356 26,321,161 48,187,842 26,321,161 Construction in progress5,395,934 14,451,474 2,633,565 5,594,422 8,029,499 20,045,896 Total86,694,237$ 83,676,658$ 49,664,376$ 48,340,698$ 136,358,613$ 132,017,356$ Governmetal ActivitiesBusiness-Type ActivitiesTotals Additional information on the City’s capital assets can be found in Note 3. Long-term debt. At the end of the current fiscal year, the City had total bonded long-term debt outstanding of $68,380,000, an increase of $7,545,000 from 2004. $13,225,000 is for general obligation improvement debt that is supported by property tax levies and special assessments. This amount increased from 2004 due to issuance of permanent improvement revolving (PIR) bonds, which finance the City’s special assessment program. In addition, $5,575,000 of this amount was retired in early 2006 as part of a crossover refunding initiated in 2005. An additional $28,905,000 of general obligation tax increment debt financed the City’s economic development program. $3,460,000 of this amount was retired in early 2006 as part of a crossover refunding initiated in 2005. Also outstanding is $16,560,000 public project revenue bonds which financed the City Hall and Police facility as well as two gymnasiums, which are under construction as of year-end. There is a total of $9,690,000 in revenue bonds for improvements to the enterprise funds. City of Edina’s Outstanding Debt 200520042005200420052004 Tax increment bonds28,905,000$ 30,760,000$ -$ -$ 28,905,000$ 30,760,000$ General obligation bonds13,225,000 7,295,000 - - 13,225,000 7,295,000 Public project revenue bonds16,560,000 11,595,000 - - 16,560,000 11,595,000 Revenue bonds- - 9,690,000 11,185,000 9,690,000 11,185,000 Total58,690,000$ 49,650,000$ 9,690,000$ 11,185,000$ 68,380,000$ 60,835,000$ Governmental ActivitiesBusiness-Type ActivitiesTotals The City maintains a Aaa rating from Moody's and a AAA rating from Standard & Poor’s. Management’s Discussion and Analysis (Continued) 19 State statutes limit the amount of general obligation debt a Minnesota city may issue to 2% of total Estimated Market Value. The current debt limitation for the City is $173,866,918. Only $11,593,838 of the City's outstanding debt is counted within the statutory limitation. Additional information on the City’s long-term debt can be found in Note 4. Economic Factors and Next Year’s Budget The City strives to provide an uncommonly high quality of life for our residents and businesses and the healthy local economy helps to make this goal a reality. The unemployment rate in Edina for March 2006 was 3.2%, well below the state and national levels. In fact, according to the State of Minnesota Department of Employment and Economic Development, the City’s unemployment rate has been lower than the national rate every month since at least 1990. The City is home to Southdale Center, the nation’s first fully enclosed climate-controlled regional shopping mall, Fairview Southdale hospital, as well as several corporate headquarters. In addition to its healthy economy, Edina is known for excellent public schools, as the Edina school system has been consistently selected as one of the best in the country. Ninety-six percent of seniors go to college and eighty-six percent finish in five years. Property values in Edina have been increasing at a rapid pace for several years. Estimated market value of all parcels increased over 8% for taxes payable in 2006 after a 16% increase the year before. The City Council is currently reviewing several redevelopment projects that would make this trend likely to continue. Market Value and Tax Capacity Annual Changes -25.0%-20.0%-15.0%-10.0% -5.0% 0.0%5.0%10.0%15.0% 20.0% 25.0% 199719981999200020012002200320042005 Tax Capacity Market Value The City collects property taxes based on tax capacity, which is roughly estimated market value multiplied by class rates for different types of parcels (commercial, residential, etc.), which are set by state statute. Tax capacity increased over 11.5% for taxes payable in 2006, and has been increasing steadily ever since the state revised property tax law in 2001. Management’s Discussion and Analysis (Continued) 20 Due to the recent increases in market value and tax capacity, property tax rates have been decreasing since the property tax law changes mentioned earlier. The City’s adopted 2006 budget includes a property tax levy of $18,560,151 for the general fund, an increase of 4.4% from the 2005 general fund levy. Requests for Information This financial report is designed to provide a general overview of the City’s finances for all those with an interest in the government’s finances. Questions concerning any of the information provided in this report or requests for additional financial information should be addressed to the Office of the Finance Director, 4801 West 50th Street, Edina, Minnesota 55424. The City’s Comprehensive Annual Financial Report can also be found on the internet at www.cityofedina.com. CITY OF EDINA, MINNESOTA STATEMENT OF NET ASSETS Statement 1 December 31, 2005 GovernmentalBusiness-type ActivitiesActivitiesTotal Assets: Current assets: Cash and cash equivalents51,239$ 293,366$ 344,605$ Investments36,621,466 8,825,686 45,447,152 Restricted investments9,049,242 - 9,049,242 Accrued interest 212,464 48,622 261,086 Accounts receivable, net409,681 2,203,501 2,613,182 Special assessments receivable3,961,943 151,160 4,113,103 Due from other governments375,540 3,482 379,022 Prepaid items223,351 - 223,351 Internal balances(500,000) 500,000 - Inventory- 1,109,991 1,109,991 Total current assets50,404,926 13,135,808 63,540,734 Noncurrent assets: Deferred charges327,359 26,592 353,951 Nondepreciable capital assets 19,702,783 3,722,530 23,425,313 Depreciable capital assets (net)66,991,454 45,941,846 112,933,300 Total noncurrent assets87,021,596 49,690,968 136,712,564 Total assets137,426,522 62,826,776 200,253,298 Liabilities: Current liabilities: Accounts payable2,465,852 729,542 3,195,394 Salaries payable295,573 71,969 367,542 Accrued interest payable953,738 164,111 1,117,849 Contracts payable213,340 830 214,170 Due to other governments61,690 136,356 198,046 Deposits payable 65,925 11,569 77,494 Unearned revenue1,930 62,532 64,462 Compensated absences payable295,330 83,717 379,047 Liabilities payable from restricted assets8,970,299 - 8,970,299 Bonds payable5,985,000 1,545,000 7,530,000 Total current liabilities19,308,677 2,805,626 22,114,303 Noncurrent liabilities: Compensated absences payable2,657,970 753,462 3,411,432 Bonds payable, net of unamortized discount43,492,111 8,101,799 51,593,910 Total noncurrent liabilities46,150,081 8,855,261 55,005,342 Total liabilities65,458,758 11,660,887 77,119,645 Net assets: Invested in capital assets, net of related debt36,092,020 40,044,169 76,136,189 Restricted for debt service78,943 - 78,943 Unrestricted35,796,801 11,121,720 46,918,521 Total net assets71,967,764$ 51,165,889$ 123,133,653$ Primary Government The accompanying notes are an integral part of these financial statements 21 CITY OF EDINA, MINNESOTA STATEMENT OF ACTIVITIES For The Year Ended December 31, 2005 OperatingCapital Charges forGrants andGrants and ExpensesServicesContributionsContributions Functions/Programs Primary government: Governmental activities: General government4,967,008$ 619,526$ 172,635$ -$ Public safety12,019,027 5,614,406 1,093,023 - Public works7,185,784 273,859 195,000 2,252,491 Parks5,901,648 356,298 51,708 - Interest on long-term debt2,288,524 - - - Total government activities32,361,991 6,864,089 1,512,366 2,252,491 Business-type activities: Utilities8,254,409 10,240,381 110,683 - Liquor9,749,313 10,752,724 - - Aquatic Center725,936 849,380 - - Golf Course3,580,307 3,482,999 - - Community Activity Centers3,825,562 3,251,860 20,725 - Total business-type activities26,135,527 28,577,344 131,408 - Total primary government 58,497,518$ 35,441,433$ 1,643,774$ 2,252,491$ The accompanying notes are an integral part of these financial statements. Program Revenues 22 Statement 2 GovernmentalBusiness-type ActivitiesActivitiesTotal (4,174,847)$ -$ (4,174,847)$ (5,311,598) - (5,311,598) (4,464,434) - (4,464,434) (5,493,642) - (5,493,642) (2,288,524) - (2,288,524) (21,733,045) - (21,733,045) - 2,096,655 2,096,655 - 1,003,411 1,003,411 - 123,444 123,444 - (97,308) (97,308) - (552,977) (552,977) - 2,573,225 2,573,225 (21,733,045) 2,573,225 (19,159,820) General revenues: Property taxes19,071,202 - 19,071,202 Tax increment collections7,060,744 - 7,060,744 Franchise taxes457,421 - 457,421 Unrestricted investment earnings977,956 236,654 1,214,610 Gain on disposal of capital assets63,674 22,538 86,212 Transfers841,500 (841,500) - Total general revenues and transfers28,472,497 (582,308) 27,890,189 Change in net assets6,739,452 1,990,917 8,730,369 Net assets - beginning65,228,312 49,174,972 114,403,284 Net assets - ending71,967,764$ 51,165,889$ 123,133,653$ Net (Expense) Revenue and Changes in Net Assets 23 This page left blank intentionally. 24 CITY OF EDINA, MINNESOTA BALANCE SHEET Statement 3 GOVERNMENTAL FUNDS December 31, 2005 Housing &NonmajorTotal DebtRedevelopmentGovernmentalGovernmental GeneralServiceConstructionAuthorityFundsFunds Assets Cash and cash equivalents34,023$ 121$ 4,314$ 8,633$ 4,148$ 51,239$ Investments - unrestricted10,628,068 1,631,162 11,313,945 12,418,027 630,264 36,621,466 Investments - restricted- 9,049,242 - - - 9,049,242 Accrued interest - 128,498 17,231 61,615 5,120 212,464 Accounts receivable278,596 - 2,653 - 128,432 409,681 Special assessments receivable- - 3,961,943 - - 3,961,943 Due from other funds1,803,000 200,000 - 435 11,000 2,014,435 Due from other governments290,260 10,022 6,201 58,952 10,105 375,540 Prepaid items223,351 - - - - 223,351 Total assets13,257,298$ 11,019,045$ 15,306,287$ 12,547,662$ 789,069$ 52,919,361$ Liabilities and fund balances Liabilities: Accounts payable881,622$ 1,299$ 847,284$ 691,641$ 44,006$ 2,465,852$ Salaries payable293,255 - 1,212 - 1,106 295,573 Contracts payable - - 213,340 - - 213,340 Due to other funds200,435 3,000 2,300,000 - 11,000 2,514,435 Due to other governments10,202 - 36,200 15,288 - 61,690 Deposits payable53,000 - 12,925 - - 65,925 Unearned revenue- - - - 1,930 1,930 Deferred revenue- - 3,925,743 - - 3,925,743 Total liabilities1,438,514 4,299 7,336,704 706,929 58,042 9,544,488 Fund balance: Reserved for: Prepaid items223,351 - - - - 223,351 Encumbrances- - 2,422,917 - - 2,422,917 Special projects- - 354,649 - - 354,649 Debt service- 11,014,746 - - - 11,014,746 Unreserved: Designated, reported in: General Fund11,595,433 - - - - 11,595,433 Capital Project Funds- - 5,192,017 - - 5,192,017 Undesignated, reported in: Special Revenue Funds- - - - 731,027 731,027 Capital Project Funds- - - 11,840,733 - 11,840,733 Total fund balance11,818,784 11,014,746 7,969,583 11,840,733 731,027 43,374,873 Total liabilities and fund balances13,257,298$ 11,019,045$ 15,306,287$ 12,547,662$ 789,069$ 52,919,361$ Fund balance reported above 43,374,873$ Amounts reported for governmental activities in the statement of net assets are different because: Capital assets used in governmental activities are not financial resources, and therefore, are not reported in the funds86,694,237 Other long-term assets are not available to pay for current-period expenditures and, therefore, are deferred in the funds3,925,743 Long-term liabilities, including bonds payable, are not due and payable in the current period and therefore are not reported in the funds.(62,027,089) Net assets of governmental activities 71,967,764$ The accompanying notes are an integral part of these financial statements. 25 CITY OF EDINA, MINNESOTA STATEMENT OF REVENUES, EXPENDITURES AND Statement 4 CHANGES IN FUND BALANCES GOVERNMENTAL FUNDS For The Year Ended December 31, 2005 Housing &NonmajorTotal DebtRedevelopmentGovernmentalGovernmental GeneralServiceConstructionAuthorityFundsFunds Revenues: General property taxes17,191,143$ 1,880,059$ -$ -$ -$ 19,071,202$ Tax increment collections- - - 7,060,744 - 7,060,744 Special assessments- - 1,354,264 - - 1,354,264 Franchise fees- - - - 457,421 457,421 License and permits3,240,622 - - - - 3,240,622 Intergovernmental1,147,345 - 219,189 - 172,635 1,539,169 Charges for services2,415,766 - 50,897 - - 2,466,663 Fines and forfeitures742,917 - - - - 742,917 Investment income181,784 215,706 283,854 281,536 15,076 977,956 Rental of property283,595 - 31,947 - - 315,542 Other revenues149,463 - 22,537 1,200 54,246 227,446 Total revenues25,352,635 2,095,765 1,962,688 7,343,480 699,378 37,453,946 Expenditures: Current: General government3,574,010 - 13,911 1,139,578 749,809 5,477,308 Public safety11,308,678 - 65,085 - - 11,373,763 Public works4,684,074 - 198,737 - - 4,882,811 Parks2,983,542 - 162,487 - - 3,146,029 Capital outlay: General government27,954 - 176,086 - - 204,040 Public safety1,040,378 - 254,590 - - 1,294,968 Public works482,937 - 4,587,966 - - 5,070,903 Parks134,149 - 1,523,131 - - 1,657,280 Debt service: Bond principal - 6,830,000 - - - 6,830,000 Interest and fiscal charges- 2,543,639 - - - 2,543,639 Total expenditures24,235,722 9,373,639 6,981,993 1,139,578 749,809 42,480,741 Revenues over (under) expenditures1,116,913 (7,277,874) (5,019,305) 6,203,902 (50,431) (5,026,795) Other financing sources (uses): Transfers in- 6,860,869 936,500 - - 7,797,369 Transfers out(50,000) - (112,886) (6,792,983) - (6,955,869) Sale of capital assets135,045 - - - - 135,045 Bonds issued- 9,162,685 6,653,480 - - 15,816,165 Discount on bonds issued- (6,143) (30,132) - - (36,275) Refunding bonds issued- 16,764,721 - - - 16,764,721 Payment to refunding escrow- (16,635,000) - - - (16,635,000) Total other financing sources (uses)85,045 16,147,132 7,446,962 (6,792,983) - 16,886,156 Net increase (decrease) in fund balance1,201,958 8,869,258 2,427,657 (589,081) (50,431) 11,859,361 Fund balance - January 110,616,826 2,145,488 5,541,926 12,429,814 781,458 31,515,512 Fund balance - December 3111,818,784$ 11,014,746$ 7,969,583$ 11,840,733$ 731,027$ 43,374,873$ The accompanying notes are an integral part of these financial statements. 26 CITY OF EDINA, MINNESOTA RECONCILIATION OF THE STATEMENT OF REVENUES,Statement 5 EXPENDITURES, AND CHANGES IN FUND BALANCES OF GOVERNMENTAL FUNDS TO THE STATEMENT OF ACTIVITIES For The Year Ended December 31, 2005 Amounts reported for governmental activities in the statement of activities (page 22-23) are different because: Net changes in fund balances - total governmental funds (page 26)11,859,361$ 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.3,093,255 The net effect of disposals of capital assets is to decrease net assets(75,676) Revenues in the statement of activities that do not provide current financial resources (property tax and special assessment receivables) are not reported as revenues in the funds.737,628 The issuance of long-term debt (e.g., bonds, leases) provides current financial resources to governmental funds, while the repayment of the principal of long-term debt consumes the current financial resources of governmental funds. Neither transaction, however, has any effect on net assets. Also, governmental funds report the effect of issuance costs, premiums, discounts and similar items when debt is first issued, whereas these amounts are deferred and amortized in the statement of activities. This amount is the net effect of these differences in the treatment of long-term debt and related items.(8,839,331) Some expenses reported in the statement of activities do not require the use of current financial resources (accrued interest and amortization on debt and compensated absences payable) and, therefore, are not reported as expenditures in governmental funds.(35,785) Change in net assets of governmental activities (page 23)6,739,452$ The accompanying notes are an integral part of these financial statements. 27 CITY OF EDINA, MINNESOTA STATEMENT OF NET ASSETS Statement 6 PROPRIETARY FUNDS December 31, 2005 Nonmajor AquaticGolfEnterprise UtilitiesLiquorCenterCourseFundsTotal Assets: Current assets: Cash and cash equivalents4,521$ 152,368$ 53,665$ 8,920$ 73,892$ 293,366$ Investments4,300,382 - - - 4,525,304 8,825,686 Interest receivable11,864 - - - 36,758 48,622 Accounts receivable, net2,068,478 - - 1,090 133,933 2,203,501 Special assessments receivable151,160 - - - - 151,160 Due from other funds- 780,000 630,000 - 25,000 1,435,000 Due from other governments3,482 - - - - 3,482 Inventory24,151 1,055,114 - 14,898 15,828 1,109,991 Total current assets6,564,038 1,987,482 683,665 24,908 4,810,715 14,070,808 Noncurrent assets: Deferred charges13,305 - 3,322 6,112 3,853 26,592 Net capital assets35,404,525 1,421,250 2,474,184 6,060,442 4,303,975 49,664,376 Total noncurrent assets35,417,830 1,421,250 2,477,506 6,066,554 4,307,828 49,690,968 Total assets41,981,868 3,408,732 3,161,171 6,091,462 9,118,543 63,761,776 Liabilities: Current liabilities: Accounts payable241,960 302,398 666 56,247 128,271 729,542 Salaries payable14,092 17,312 352 16,968 23,245 71,969 Accrued interest payable58,125 - 26,367 67,227 12,392 164,111 Contracts payable830 - - - - 830 Due to other funds280,000 - - 630,000 25,000 935,000 Due to other governments1,730 122,393 1,079 5,451 5,703 136,356 Deposits payable1,972 - - 9,597 - 11,569 Unearned revenue- 2,589 - 7,422 52,521 62,532 Compensated absences payable 18,999 16,165 - 22,844 25,709 83,717 Bonds payable - current665,000 - 105,000 575,000 200,000 1,545,000 Total current liabilities1,282,708 460,857 133,464 1,390,756 472,841 3,740,626 Noncurrent liabilities: Compensated absences payable170,990 145,485 - 205,599 231,388 753,462 Bonds payable, net of unamortized discounts3,531,622 - 1,187,375 2,740,686 642,116 8,101,799 Total noncurrent liabilities3,702,612 145,485 1,187,375 2,946,285 873,504 8,855,261 Total liabilities4,985,320 606,342 1,320,839 4,337,041 1,346,345 12,595,887 Net assets: Invested in capital assets, net of related debt31,221,208 1,421,250 1,185,131 2,750,868 3,465,712 40,044,169 Unrestricted5,775,340 1,381,140 655,201 (996,447) 4,306,486 11,121,720 Total net assets36,996,548$ 2,802,390$ 1,840,332$ 1,754,421$ 7,772,198$ 51,165,889$ Business-type Activities - Enterprise Funds The accompanying notes are an integral part of these financial statements. 28 CITY OF EDINA, MINNESOTA STATEMENT OF REVENUES, EXPENSES AND Statement 7 CHANGES IN FUND NET ASSETS PROPRIETARY FUNDS For The Year Ended December 31, 2005 Nonmajor AquaticGolfEnterprise UtilitiesLiquorCenterCourseFundsTotal Operating revenues: Sales - liquor-$ 10,752,724$ -$ -$ -$ 10,752,724$ Sales - retail- - 3,857 257,210 71,312 332,379 Sales - utilities10,008,051 - - - - 10,008,051 Sales - concessions- - 115,716 313,743 23,926 453,385 Memberships- - 416,166 109,911 82,288 608,365 Admissions- - 290,570 275,452 440,358 1,006,380 Building rental- - 22,878 76,239 1,371,011 1,470,128 Rental of equipment- - - 368,258 57,893 426,151 Greens fees- - - 1,741,561 180,895 1,922,456 Other fees217,924 - 193 340,466 1,024,177 1,582,760 Total operating revenues10,225,975 10,752,724 849,380 3,482,840 3,251,860 28,562,779 Operating expenses: Cost of sales and services30,880 7,918,705 31,591 333,812 37,435 8,352,423 Personal services1,285,071 1,167,182 277,517 1,679,532 1,749,636 6,158,938 Contractual services4,576,398 341,203 80,019 482,268 1,172,297 6,652,185 Commodities618,910 68,328 71,713 348,591 267,462 1,375,004 Central Services371,590 179,996 24,894 122,489 153,115 852,084 Depreciation1,224,190 73,899 185,814 468,793 418,460 2,371,156 Total operating expenses8,107,039 9,749,313 671,548 3,435,485 3,798,405 25,761,790 Operating income (loss)2,118,936 1,003,411 177,832 47,355 (546,545) 2,800,989 Nonoperating revenues (expenses): Intergovernmental110,683 - - - - 110,683 Investment income122,510 - - - 114,144 236,654 Donations- - - - 20,725 20,725 Miscellaneous 14,406 - - 159 - 14,565 Interest and fiscal charges(141,226) - (53,283) (135,914) (24,911) (355,334) Gain (loss) on sale of capital asset16,555 - - (3,417) 5,983 19,121 Amortization of bond discount(6,144) - (1,105) (5,491) (2,246) (14,986) Total nonoperating revenues (expenses)116,784 - (54,388) (144,663) 113,695 31,428 Income (loss) before transfers2,235,720 1,003,411 123,444 (97,308) (432,850) 2,832,417 Transfers: Transfers in- - - - 186,000 186,000 Transfers out(100,000) (927,500) - - - (1,027,500) Total transfers (100,000) (927,500) - - 186,000 (841,500) Change in net assets2,135,720 75,911 123,444 (97,308) (246,850) 1,990,917 Net assets - January 1 34,860,828 2,726,479 1,716,888 1,851,729 8,019,048 49,174,972 Net assets - December 3136,996,548$ 2,802,390$ 1,840,332$ 1,754,421$ 7,772,198$ 51,165,889$ Business-type Activities - Enterprise Funds The accompanying notes are an integral part of these financial statements. 29 CITY OF EDINA, MINNESOTA STATEMENT OF CASH FLOWS Statement 8 PROPRIETARY FUNDS For The Year Ended December 31, 2005 Nonmajor AquaticGolfEnterprise UtilitiesLiquorCenterCourseFundsTotal Cash flows from operating activities: Receipts from customers and users10,468,377$ 10,754,166$ 849,380$ 3,486,818$ 3,254,785$ 28,813,526$ Payment to suppliers(6,416,336) (8,440,539) (236,475) (1,257,705) (1,588,920) (17,939,975) Payment to employees(1,269,746) (1,139,302) (277,504) (1,661,067) (1,722,161) (6,069,780) Net cash provided by (used in) operating activities2,782,295 1,174,325 335,401 568,046 (56,296) 4,803,771 Cash flows from noncapital financing activities: State grant110,683 - - - - 110,683 Miscellaneous revenue14,406 - - 159 - 14,565 Transfer (to) from Enterprise Funds- (141,000) - - 141,000 - Transfer (to) from Capital Project Funds(100,000) (786,500) - - 45,000 (841,500) Net interfund borrowing1,395,000 (100,000) 14,477 259,214 - 1,568,691 Donations- - - - 20,725 20,725 Net cash provided by (used in) noncapital financing activities1,420,089 (1,027,500) 14,477 259,373 206,725 873,164 Cash flows from capital and related financing activities: Acquisition of capital assets(3,317,353) - (146,382) (117,574) (121,993) (3,703,302) Sale of capital assets16,555 - - 5,050 5,983 27,588 Principal paid on bonds(645,000) - (95,000) (560,000) (195,000) (1,495,000) Interest paid on bonds(148,283) - (54,831) (145,975) (26,815) (375,904) Net cash provided by (used in) capital and related financing activities(4,094,081) - (296,213) (818,499) (337,825) (5,546,618) Cash flows from investing activities: Net changes in investments(221,508) - - - 133,086 (88,422) Investment income115,733 - - - 116,915 232,648 Net cash flows provided by (used in) investing activities(105,775) - - - 250,001 144,226 Net increase (decrease) in cash and cash equivalents2,528 146,825 53,665 8,920 62,605 274,543 Cash and cash equivalents - January 11,993 5,543 - - 11,287 18,823 Cash and cash equivalents - December 314,521$ 152,368$ 53,665$ 8,920$ 73,892$ 293,366$ Business-type Activities - Enterprise Funds The accompanying notes are an integral part of these financial statements. 30 CITY OF EDINA, MINNESOTA STATEMENT OF CASH FLOWS Statement 8 PROPRIETARY FUNDS For The Year Ended December 31, 2005 Nonmajor AquaticGolfEnterprise UtilitiesLiquorCenterCourseFundsTotal Business-type Activities - Enterprise Funds Reconciliation of operating income to net cash provided (used) by operating activities: Operating income (loss) 2,118,936$ 1,003,411$ 177,832$ 47,355$ (546,545)$ 2,800,989$ Adjustments to reconcile operating income (loss) to net cash flows provided by (used in) operating activities: Depreciation1,224,190 73,899 185,814 468,793 418,460 2,371,156 Changes in assets and liabilities: Decrease (increase) in receivables225,532 1,710 - (1,010) 2,204 228,436 Decrease (increase) in special assessments12,638 - - - - 12,638 Decrease (increase) in due from other governments4,232 - - - - 4,232 Decrease (increase) in inventory(8,645) 45,839 - 619 1,140 38,953 Increase (decrease) in accounts payable(622,008) 9,423 (24,734) 25,309 46,281 (565,729) Increase (decrease) in salaries payable1,851 2,548 13 3,638 5,925 13,975 Increase (decrease) in contracts payable(189,130) - (4,542) - (5,732) (199,404) Increase (decrease) in due to other governments(747) 12,431 1,018 179 (300) 12,581 Increase (decrease) in deposits1,972 - - 3,348 - 5,320 Increase (decrease) in unearned revenue- (268) - 4,988 721 5,441 Increase (decrease) in compensated absences13,474 25,332 - 14,827 21,550 75,183 Total adjustments663,359 170,914 157,569 520,691 490,249 2,002,782 Net cash provided by (used in) operating activities2,782,295$ 1,174,325$ 335,401$ 568,046$ (56,296)$ 4,803,771$ Noncash investing, capital and financing activities: Increase (decrease) in fair value of investments 6,922$ -$ -$ -$ (68,856)$ (61,934)$ The accompanying notes are an integral part of these financial statements. 31 CITY OF EDINA, MINNESOTA STATEMENT OF FIDUCIARY NET ASSETS Statement 9 AGENCY FUNDS December 31, 2005 Agency Funds Assets Cash 539,727$ Investments 135,000 Total assets 674,727$ Liabilities Accounts payable 81,643$ Salaries payable 951 Due to other governmental units 592,133 Total liabilities 674,727$ The accompanying notes are an integral part of these financial statements. 32 CITY OF EDINA, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2005 33 Note 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The City of Edina (the City) was incorporated in 1888 and operates under the State of Minnesota Statutory Plan B 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 have been prepared in conformity with generally accepted accounting principles as applied to governmental units by the Governmental Accounting Standards Board (GASB). The following is a summary of significant accounting policies. A. FINANCIAL REPORTING ENTITY In accordance with Governmental Accounting Standards Board (GASB) Statement No. 14, “The Financial Reporting Entity” the City’s financial reporting entity consists of (a) the primary government, (b) organizations for which the primary government is financially accountable, and (c) other organizations for which the nature and significance of their relationship with the primary government are such that exclusion would cause the reporting entity’s financial statements to be misleading or incomplete. The primary government is financially accountable for the component unit if it appoints a voting majority of the component unit’s governing body and is able to impose its will on the component unit or there is a potential for the component unit to provide specific financial benefits to, or impose specific financial burdens on, the primary government. As required by generally accepted accounting principles, the financial statements of the reporting entity include those of the City of Edina (the primary government) and its component units. The component units discussed below are included in the City's reporting entity because of the significance of their operational or financial relationships with the City. COMPONENT UNITS In conformity with generally accepted accounting principles, the financial statements of the component unit have been included in the financial reporting entity as a blended component unit. The Housing and Redevelopment Authority (HRA) is an entity legally separate from the City. However, for financial reporting purposes, the HRA is reported as if it were part of the City's operations because the members of the City Council serve as HRA board members and its activity is confined to the City of Edina. The activity of the HRA is reported in the Capital Projects Funds. Separate financial statements are not prepared for the HRA. B. GOVERNMENT-WIDE AND FUND FINANCIAL STATEMENTS The government-wide financial statements (i.e., the statement of net assets and the statement of changes in net assets) report information on all of the nonfiduciary activities of the primary government. 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. CITY OF EDINA, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2005 34 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. Separate financial statements are provided for governmental funds, proprietary funds, and fiduciary funds, even though the latter are excluded from the government-wide financial statements. Major individual governmental funds and major individual enterprise funds are reported as separate columns in the fund financial statements. Aggregated information for the remaining nonmajor governmental and enterprise funds is reported in a single column 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 and Fiduciary Fund financial statements. Revenues are recorded when earned and expenses are recorded when a liability is incurred, regardless of the timing of related cash flows. Property taxes are recognized as revenues in the year for which they are levied. Grants and similar items are recognized as revenue as soon as all eligibility requirements imposed by the provider have been met. Governmental fund financial statements are reported using the current financial resources measurement focus and the modified accrual basis of accounting. Revenues are recognized as soon as they are both measurable and available. Revenues are considered to be available when they are collectible within the current period or soon enough thereafter to pay liabilities of the current period. For this purpose, the City considers all revenues, except reimbursement grants, to be available if they are collected within 60 days of the end of the current fiscal period. Expenditures generally are recorded when a liability is incurred, as under accrual accounting. However, debt service expenditures, as well as expenditures related to compensated absences and claims and judgments are recorded only when payment is due. Property taxes, special assessments, intergovernmental revenues, charges for services and interest associated with the current fiscal period are all considered to be susceptible to accrual and so have been recognized as revenues of the current fiscal period. Only the portion of special assessments receivable due within the current fiscal period is considered to be susceptible to accrual as revenue of the current period. All other revenue items are considered to be measurable and available only when cash is received by the City. CITY OF EDINA, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2005 35 The City 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 debt service fund accounts for the payment of principal and interest on the General Obligation Redevelopment, General Obligation Park Improvements and Tax Increment Bonds. The capital projects construction fund accounts for the various special assessment and state aid projects throughout the City. This fund also provides financing for capital improvements as designated in the City’s capital improvement budget. The capital projects Housing and Redevelopment Authority fund is used to account for revenues from several sources (property taxes, bond proceeds, investment earnings, etc.) that are designated for housing and redevelopment. The City reports the following major proprietary funds: The utility fund accounts for the provision of water, sewer and recycling services to the City’s residents. The liquor fund accounts for the operation of the City’s three liquor stores. The aquatic center fund accounts for the operation of the City’s aquatic center. The golf course fund accounts for the operation of the City’s three golf courses and a golf dome. Additionally, the City reports the following fund type: Agency - the police seizure and Public Safety Training Facility funds account for fees collected for other government agencies and the payroll fund accounts for payroll deductions withheld from employee paychecks but not yet sent to the appropriate party (includes federal and state taxes, health care deductions, etc). Private-sector standards of accounting and financial reporting issued prior to December 1, 1989, generally are followed in both the government-wide and proprietary fund financial statements to the extent that those standards do not conflict with or contradict guidance of the Governmental Accounting Standards Board. Governments also have the option of following subsequent private- sector guidance for their business-type activities and enterprise funds, subject to this same limitation. The City has elected not to follow subsequent private-sector guidance. CITY OF EDINA, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2005 36 As a general rule the effect of interfund activity has been eliminated from the government-wide financial statements. Exceptions to this general rule are transactions that would be treated as revenues, expenditures or expenses if they involved external organizations, such as buying goods and services or payments in lieu of taxes, are similarly treated when they involve other funds of the City of Edina. Elimination of these charges would distort the direct costs and program revenues reported for the various functions concerned. Amounts reported as program revenues include 1) charges to customers or applicants for goods, services, or privileges provided, 2) operating grants and contributions, and 3) capital grants and contributions, including special assessments. Internally dedicated resources are reported as general revenues rather than as program revenues. Likewise, general revenues include all taxes. Proprietary funds distinguish operating revenues and expenses from nonoperating items. Operating revenues and expenses generally result from providing services and producing and delivering goods in connection with a proprietary fund’s principal ongoing operations. The principal operating revenues of the utilities, liquor, aquatic center, golf course, arena, art center and Edinborough Park/Centennial Lake enterprise funds are charges to customers for sales and services. 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 nonoperating revenues and expenses. When both restricted and unrestricted resources are available for an allowable use, it is the City’s policy to use restricted resources first, then unrestricted resources as they are needed. Depreciation expense can be specifically identified by function and is included in the direct expenses of each function. Interest on long-term debt is considered an indirect expense and is reported separately on the Statement of Activities. D. CASH AND INVESTMENTS The City’s cash and cash equivalents are considered to be deposits and cash on hand. Cash balances from all funds are pooled together and invested to the maximum extent at favorable rates. This also allows certain funds to generate a temporary cash overdraft. Interest earned is allocated as determined by the Investment Advisory Committee. 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. These interfund balances are eliminated on the government-wide financial statements. The City reports its investments at fair value based on quoted market prices. Changes in fair value of securities in the City’s investment portfolio are recorded as a net change in fair value of investments in the City’s fund financial statements and within general revenues in the government-wide financial statements. Restricted investments include investments held in escrow for two crossover refundings further described in footnote 4. CITY OF EDINA, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2005 37 E. RECEIVABLES AND PAYABLES During the course of operations, numerous transactions occur between individual funds for goods provided or services rendered. Short-term interfund loans are classified as “due to/from other funds.” All short-term interfund receivables and payables at December 31, 2005 are planned to be eliminated in 2006. 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 and special assessments receivables have been reported net of estimated uncollectible accounts. 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. F. REVENUE RECOGNITION 1. 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 and State credits 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 the year end are classified as delinquent and due from County taxes receivable. The portion of delinquent taxes not collected by the City in January are fully offset by deferred revenue because they are not available to finance current expenditures. CITY OF EDINA, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2005 38 2. 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. 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. 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) and 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 revenues. G. INVENTORIES, PREPAID ITEMS AND DEFERRED CHARGES Inventories of the Proprietary Funds are stated at cost and are recorded as expenditures when consumed rather than when purchased. 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. Deferred charges represent deferred issuance costs. CITY OF EDINA, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2005 39 H. CAPITAL ASSETS Capital assets, which include property, plant, equipment and parks, are reported in the applicable governmental or business-type activities columns in the government-wide financial statements. Capital assets are also reported in the proprietary fund financial statements but not in the governmental fund financial statements. 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 in excess of three years. Such assets are recorded at historical cost or estimated historical cost if purchased or constructed. Donated capital assets are recorded at estimated fair market value at the date of donation. The costs of normal maintenance and repairs that do not add to the value of the asset or materially extend assets lives are not capitalized. Property, plant and equipment of the primary government is depreciated using the straight line method over the following estimated useful lives: Assets Life Golf course 10 - 35 years Land improvements 20 – 50 years Buildings and structures 20 - 40 years Furniture and office equipment 5 - 10 years Vehicles and equipment 3 - 20 years Parks 5 - 100 years Distribution system 50 years Collection system 10 - 50 years Storm sewers 50 years Wells 7 - 30 years I. COMPENSATED ABSENCES It is the City's policy to permit employees to accumulate earned but unused vacation and sick pay benefits. All vacation pay is accrued when incurred in the government-wide and 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 Statement of Governmental Accounting Standards No. 16, Accounting for Compensated Absences, no liability is recorded for nonvesting accumulating rights to receive sick pay benefits. However, a liability is recognized for that portion of accumulating sick leave benefits that is vested as severance pay. According to City policy, vested sick leave benefits are liquidated into a health care savings plan upon separation. CITY OF EDINA, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2005 40 J. LONG-TERM OBLIGATIONS In the government-wide financial statements and proprietary fund types in the fund financial statements, long-term debt and other long-term obligations are reported as liabilities in the applicable governmental activities, business-type activities, or proprietary fund type statement of net assets. Bond premiums and discounts, as well as issuance costs, are deferred and amortized over the life of the bond using the straight-line method. Bonds payable are reported net of the applicable bond premium or discount. Bond issuance costs are reported as deferred charges and amortized over the term of the related debt. In the fund financial statements, governmental fund types recognize bond premiums and discounts, as well as bond issuance costs, during the current period. The face amount of debt issued plus any premium received is reported as other financing sources. Discounts on debt issuances are reported as other financing uses. Issuance costs, whether or not withheld from the actual debt proceeds received, are reported as debt service expenditures. K. FUND EQUITY In the fund financial statements, governmental funds report reservations of fund balance for amounts that are not available for appropriation or are legally restricted by outside parties for use for a specific purpose. Designations of fund balance represent tentative management plans that are subject to change. L. 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 that are properly applicable to another fund, are recorded as expenditures/expenses in the reimbursing fund and as reductions of expenditures/expenses in the fund that is reimbursed. 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. M. NET ASSETS Net assets represent the difference between assets and liabilities in the government-wide and proprietary fund financial statements. Net assets invested in capital assets, net of related debt, 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 assets are reported as restricted when there are limitations imposed on their use through external restrictions imposed by creditors, grantors, or laws or regulations of other governments. CITY OF EDINA, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2005 41 N. USE OF ESTIMATES The preparation of financial statements in accordance with generally accepted accounting principles (GAAP) requires management to make estimates that affect amounts reported in the financial statements during the reporting period. Actual results could differ from such estimates. O. JOINT VENTURES The City’s investment in joint venture is reported in the statement of net assets as governmental activities capital assets and is equal to the City’s interest in the net assets of the joint venture. The City’s interest is based on the allocation in the joint powers agreement. P. FUND CONSOLIDATION During 2005 the City consolidated the construction and revolving funds reported in the prior year’s CAFR into the construction fund displayed in the current report in order to more accurately reflect the similar nature of these funds. Accordingly, the beginning fund balance shown on the Statement of Revenues, Expenditures and Changes in Fund Balances – Governmental Funds for the construction fund is equal to the combined ending balances of the construction and revolving funds from the same statement in the 2004 CAFR. Q. RECONCILIATION OF GOVERNMENT-WIDE AND FUND FINANCIAL STATEMENTS 1. EXPLANATION OF CERTAIN DIFFERENCES BETWEEN THE GOVERNMENTAL FUND BALANCE SHEET AND THE GOVERNMENT-WIDE STATEMENT OF NET ASSETS The governmental fund balance sheet includes a reconciliation between fund balance – total governmental funds and net assets – governmental activities as reported in the government- wide statement of net assets. 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 difference are as follows: Bonds payable58,690,000$ Plus: issuance premium77,003 Less: issuance discount(319,593) Less: deferred charge for issuance costs(327,359) Accrued interest payable953,738 Compensated absences2,953,300 Net adjustment to reduce fund balance - total governmental funds to arrive at net assets - governmental activities62,027,089$ CITY OF EDINA, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2005 42 2. EXPLANATION OF CERTAIN DIFFERENCES BETWEEN THE GOVERNMENTAL FUND STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES AND THE GOVERNMENT-WIDE STATEMENT OF ACTIVITIES The governmental fund statement of revenues, expenditures, and changes in fund balances includes a reconciliation between net changes in fund balances – total governmental funds and changes in net assets of governmental activities as reported in the government-wide statement of activities. One element of that reconciliation explains that “Governmental funds report capital outlays as expenditures. However, in the statement of activities the cost of those assets is allocated over their estimated useful lives and reported as depreciation expense.” The details of this difference are as follows: Capital outlay7,103,797$ Depreciation expense(4,010,542) Net adjustment to increase net changes in fund balances - total governmental funds to arrive at changes in net assets of governmental funds3,093,255$ Another element of that reconciliation states that “The net effect of disposals of capital assets is to decrease net assets.” The details of this difference are as follows: In the statement of activities, only the gain on the sale of capital assets is reported. However, in the governmental funds, the proceeds from the sale increases financial resources. Thus, the change in net assets differs from the change in fund balance by the cost of the capital assets sold(139,350)$ The statement of activities reports losses arising from the disposal of existing capital assets. Conversely, governmental funds do not report any gain or loss on a disposal of capital assets63,674 Net adjustment to decrease net changes in fund balances - total governmental funds to arrive at changes in net assets of governmental funds(75,676)$ CITY OF EDINA, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2005 43 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 assets. Also, governmental funds report the effect of issuance costs, premiums, discounts and similar items when debt is first issued whereas these amounts are deferred and amortized in the statement of activities.” The details of this difference are as follows: Debt issued: Bonds issued(15,816,165)$ Less issuance costs155,705 Less discounts36,275 Refunding bonds issued(16,764,721) Less issuance costs84,575 Principal repayments: General obligation debt6,830,000 Payment to escrow agent for refunding: Principal refunding16,635,000 Net adjustment to increase net changes in fund balances - total governmental funds to arrive at changes in net assets of governmental activities(8,839,331)$ Note 2 CASH AND INVESTMENTS A. COMPONENTS OF CASH AND INVESTMENTS Cash and investments at year-end consist of the following: Deposits868,147$ Cash on hand16,185 Investments45,582,152 Investments held by trustee9,049,242 55,515,726$ Cash and investments are presented in the financial statements as follows: Cash and cash equivalents - Statement of Net Assets344,605$ Investments - Statement of Net Assets45,447,152 Restricted investments - Statement of Net Assets9,049,242 Cash and investments - Statement of Fiduciary Net Assets674,727 55,515,726$ CITY OF EDINA, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2005 44 B. DEPOSITS In accordance with applicable Minnesota Statutes, the City maintains deposits at depository banks authorized by the City Council, including checking accounts, savings accounts and certificates of deposit. The following is considered the most significant risk associated with deposits: Custodial credit risk – In the case of deposits, this is the risk that in the event of a bank failure, the City’s deposits may be lost. Minnesota Statutes require that all deposits be protected by federal deposit insurance, corporate surety bond, or collateral. The market value of collateral pledged must equal 110% of the deposits not covered by federal deposit insurance or corporate surety bonds. Authorized collateral includes treasury bills, notes, and bonds; issues of U.S. government agencies; general obligations rated “A” or better; revenue obligations rated “AA” or better; irrevocable standard letters of credit issued by the Federal Home Loan Bank; and certificates of deposit. Minnesota Statutes require that securities pledged as collateral be held in safekeeping in a restricted account at the Federal Reserve Bank or in an account at a trust department of a commercial bank or other financial institution that is not owned or controlled by the financial institution furnishing the collateral. The City’s investment policy does not contain further restrictions on the types of investments the City may invest in. At year-end, the carrying amount of the City’s deposits was $868,147 while the balance on the bank records was $1,433,756. At December 31, 2005, all deposits were fully covered by federal depository insurance, surety bonds, or by collateral held by the City’s agent in the City’s name. CITY OF EDINA, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2005 45 C. INVESTMENTS The City has the following investments at year end: RatingAgency< 11 to 55 to 1010 +Total U.S. TreasuriesN/AN/A9,083,966$ 256,939$ 518,681$ 638,331$ 10,497,917$ SBA PoolsN/RN/A- - - 893,367 893,367 U.S. AgenciesAAA/AaaS&P/Mdy's644,478 3,905,368 218,355 3,646,132 8,414,333 U.S. AgenciesAA-/Aa2S&P/Mdy's- - 74,646 - 74,646 MunicipalsMIG1Mdy's10,037 - - - 10,037 MunicipalsAA-/Aa3S&P/Mdy's- 93,705 67,795 - 161,500 Commercial PaperA1/P1S&P/Mdy's25,293,078 - - - 25,293,078 Negotiable CD'sN/RN/A662,544 - - - 662,544 Interfund DebtN/RN/A- - 1,400,000 - 1,400,000 35,694,103$4,256,012$ 2,279,477$ 5,177,830$ 47,407,422$ Money Market*N/RN/A7,223,972 Total investments 54,631,394$ N/A - Not Applicable N/R - Not Rated * - The City's money market investments don't have maturities Credit Risk Investment Interest Risk - Maturity Duration in Years Investments are subject to various risks, the following of which are considered the most significant: Custodial credit risk – For investments, this is the risk that in the event of a failure of the counterparty to an investment transaction (typically a broker-dealer) the City would not be able to recover the value of its investments or collateral securities that are in the possession of an outside party. The City’s investment policy doesn’t specifically address this risk, but the City typically limits its exposure by purchasing insured or registered investments, or by the control of who holds the securities. CITY OF EDINA, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2005 46 Credit risk – This is the risk that an issuer or other counterparty to an investment will not fulfill its obligations. Minnesota Statutes limit the City’s investments to direct obligations or obligations guaranteed by the United States or its agencies; shares of investment companies registered under the Federal Investment Company Act of 1940 that receive the highest credit rating, are rated in one of the two highest rating categories by a statistical rating agency, and all of the investments have a final maturity of thirteen months or less; general obligations rated “AA” or better; general obligations of the Minnesota Housing Finance Agency rated “A” or better; bankers’ acceptances of United States banks eligible for purchase by the Federal Reserve System; commercial paper issued by United States corporations or their Canadian subsidiaries, rated of the highest quality category by at least two nationally recognized rating agencies, and maturing in 270 days or less; Guaranteed Investment Contracts guaranteed by a United States commercial bank, domestic branch of a foreign bank, or a United States insurance company, and with a credit quality in one of the top two highest categories; repurchase or reverse repurchase agreements and securities lending agreements with financial institutions qualified as a “depository” by the government entity, with banks that are members of the Federal Reserve System with capitalization exceeding $10,000,000, that are a primary reporting dealer in U.S. government securities to the Federal Reserve Bank of New York, or certain Minnesota securities broker-dealers. The City’s investment policies do not further address credit risk. Concentration risk – This is the risk associated with investing a significant portion of the City’s investment (considered 5 percent or more) in the securities of a single issuer, excluding U.S. guaranteed investments (such as Treasuries), investment pools, and mutual funds. The City’s investment policies do not limit the concentration of investments. At year-end, the City’s investments include 8.5%, 8.2%, 7.3%, and 5.5% in securities issued by FNMA, General Electric, Rhineland Funding, and Lockhart Funding, respectively. Interest rate risk – This is the risk of potential variability in the fair value of fixed rate investment resulting in changes in interest rates (the longer the period for which an interest rate is fixed, the greater the risk). The City’s investment policy does not limit the duration of investments. CITY OF EDINA, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2005 47 Note 3 CAPITAL ASSETS Capital asset activity for the year ended December 31, 2005 is as follows: BeginningEnding BalanceIncreasesDecreasesBalance Governmental activities: Capital assets not being depreciated: Land12,854,384$ -$ -$ 12,854,384$ Investment in joint venture1,452,465 - - 1,452,465 Construction in progress14,451,474 6,614,887 (15,670,427) 5,395,934 Total capital assets not being depreciated28,758,323 6,614,887 (15,670,427) 19,702,783 Capital assets being depreciated: Land improvements28,849,248 - (7,132,186) 21,717,062 Buildings and structures28,478,580 1,934,848 - 30,413,428 Furniture and office equipment4,417,879 18,814 (1,857,442) 2,579,251 Vehicles and equipment10,522,317 5,372,045 (3,357,509) 12,536,853 Infrastructure- 20,316,987 - 20,316,987 Parks10,778,675 609,148 (432,402) 10,955,421 Total capital assets being depreciated83,046,699 28,251,842 (12,779,539) 98,519,002 Less accumulated depreciation for: Land improvements(10,905,219) (838,509) 2,636,112 (9,107,616) Buildings and structures(6,741,761) (846,736) - (7,588,497) Furniture and office equipment(592,786) (205,788) 24,381 (774,193) Vehicles and equipment(5,191,764) (982,948) 692,104 (5,482,608) Infrastructure- (3,561,501) - (3,561,501) Parks(4,696,834) (381,480) 65,181 (5,013,133) Total accumulated depreciation(28,128,364) (6,816,962) 3,417,778 (31,527,548) Total capital assets being depreciated, net54,918,335 21,434,880 (9,361,761) 66,991,454 Governmental activities capital assets, net 83,676,658$ 28,049,767$ (25,032,188)$86,694,237$ Certain capital assets were reclassified to different categories during the year, and these reclassifications are reflected in the “Increases” and “Decreases” columns above. GASB Statement No. 34, Basic Financial Statements – and Management’s Discussion and Analysis – for State and Local Governments permits a phase-in period for reporting major infrastructure assets retroactively through the City’s fiscal year ending December 31, 2006. The costs of certain infrastructure asset networks incurred prior to January 1, 2002, primarily streets, sidewalks, traffic signals and street lighting systems have not been capitalized. Estimated historical cost data for these networks has not yet been compiled; when this process has been finalized, the City will capitalize retroactively those costs associated with each network categorized as major, before the end of the phase-in period. CITY OF EDINA, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2005 48 BeginningEnding BalanceIncreasesDecreasesBalance Business-type activities: Capital assets not being depreciated: Land1,088,965$ -$ -$ 1,088,965$ Construction in progress5,594,422 2,983,944 (5,944,801) 2,633,565 Total capital assets not being depreciated6,683,387 2,983,944 (5,944,801) 3,722,530 Capital assets being depreciated: Golf course4,615,307 - - 4,615,307 Land improvements3,285,547 34,950 - 3,320,497 Buildings and structures15,595,881 166,327 - 15,762,208 Furniture and office equipment149,436 - - 149,436 Vehicles and equipment4,668,427 277,741 (124,084) 4,822,084 Distribution and collection system32,915,025 5,024,893 - 37,939,918 Storm sewers12,996,663 866,673 - 13,863,336 Wells2,379,175 293,575 - 2,672,750 Lease property capital lease468,580 - - 468,580 Total capital assets being depreciated77,074,041 6,664,159 (124,084) 83,614,116 Less accumulated depreciation for: Golf course(1,552,024) (152,310) - (1,704,334) Land improvements(1,605,081) (161,627) - (1,766,708) Buildings and structures(7,389,050) (625,170) - (8,014,220) Furniture and office equipment(64,588) (21,415) - (86,003) Vehicles and equipment(2,367,705) (336,688) 115,616 (2,588,777) Distribution and collection system(15,429,330) (716,744) - (16,146,074) Storm sewers(5,468,514) (274,659) - (5,743,173) Wells(1,071,858) (82,543) - (1,154,401) Lease property capital lease(468,580) - - (468,580) Total accumulated depreciation(35,416,730) (2,371,156) 115,616 (37,672,270) Total capital assets being depreciated, net41,657,311 4,293,003 (8,468) 45,941,846 Business-type activities capital assets, net48,340,698$ 7,276,947$ (5,953,269)$ 49,664,376$ CITY OF EDINA, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2005 49 Depreciation expense was charged to functions/programs of the primary government as follows: Governmental activities: General government494,547$ Public safety484,797 Public works1,529,836 Parks1,501,362 Total depreciation expense - governmental activities4,010,542$ Business-type activities: Utilities1,224,190$ Liquor73,899 Aquatic Center185,814 Golf Course468,793 Arena303,544 Art Center28,669 Edinborough Park/Centennial Lakes86,247 Total depreciation expense - business-type activities2,371,156$ CONSTRUCTION COMMITMENTS At December 31, 2005, the City had construction project contracts in progress. The commitments related to the remaining contract balances are summarized as follows: ContractRemaining Project #Project DescriptionAmountCommitment N/AGymnasiums3,453,834$ 2,279,548$ 05-5 EngStreet/Sidewalk Reconstruction977,651 39,074 05-6 EngStreet/Sidewalk Reconstruction48,706 6,485 05-7 EngStreet/Sidewalk Reconstruction290,795 23,664 05-8 EngStreet/Sidewalk Reconstruction438,480 65,964 05-10 EngStreet/Sidewalk Reconstruction168,719 8,182 05-3 PWWatermain98,850 82,250 2,505,167$ CITY OF EDINA, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2005 50 Note 4 LONG-TERM DEBT The City has four types of bonded debt outstanding at December 31, 2005: tax increment bonds, general obligation bonds, public project revenue bonds and G.O. revenue bonds. The first type of bond is payable solely from tax increment monies with any deficiency to be provided for by general property taxes. The second type is payable from general property taxes or special assessments. The third type is payable solely from annual appropriation lease payments received from the City of Edina pursuant to a lease between the Edina Housing and Redevelopment Authority and the City. The fourth type is payable primarily from enterprise revenue with any deficiency to be provided for by general property taxes. 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. GOVERNMENTAL ACTIVITIES As of December 31, 2005, the governmental long-term bonded debt of the financial reporting entity consisted of the following: Final InterestIssueMaturityOriginalPayable RatesDateDateIssue12/31/2005 Tax Increment Bonds: Tax Increment Bonds, Series 1997B4.50-5.204/1/19972/1/20135,090,000$ 3,865,000$ Tax Increment Bonds, Series 2000A4.30-4.809/6/20002/1/20112,620,000 1,720,000 Tax Increment Bonds, Series 2002B3.00%8/5/20022/1/20091,400,000 1,400,000 Tax Increment Taxable Refunding Bonds of 2003B1.128-1.7493/1/20032/1/20066,570,000 1,675,000 Tax Increment Refunding Bonds, Series 2005B3.00%7/19/20052/1/200910,520,000 10,520,000 Tax Increment Taxable Refunding Bonds, Series 2005C3.75-4.257/19/20052/1/20096,220,000 6,220,000 Tax Increment Refunding Bonds, Series 2005D3.00-3.407/19/20052/1/20133,505,000 3,505,000 Total Tax Increment Bonds35,925,000 28,905,000 General Obligation Bonds: General Obligation - Park & Recreation, Series 1996B4.25-5.758/1/19962/1/20178,090,000 5,950,000 General Obligation Equipment Certificates, Series 2003A1.05-2.043/1/20032/1/20081,540,000 440,000 General Obligation - Park & Recreation Refunding, 2005A3.50-4.007/19/20052/1/20175,375,000 5,375,000 General Obligation - Permanent Improvement Revolving, 2005E3.00-3.759/13/20052/1/20161,460,000 1,460,000 Total General Obligation Bonds16,465,000 13,225,000 Public Project Revenue Bonds: Public Project Revenue, Series 20024.00-5.251/1/20022/1/202112,410,000 11,135,000 Public Project Revenue, Series 20053.50-4.139/13/20055/1/20265,425,000 5,425,000 Total Public Project Revenue Bonds17,835,000 16,560,000 Total bonded indebtedness - governmental activities70,225,000$ 58,690,000$ CITY OF EDINA, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2005 51 BUSINESS-TYPE ACTIVITIES Annual debt service requirements to maturity for the City’s bonds are as follows: Final InterestIssueMaturityOriginalPayable RatesDateDateIssue12/31/2005 Revenue Bonds: Recreational Facility Bonds, Series 1999B3.70-4.455/3/19991/1/20133,270,000$ 2,530,000$ Recreational Facility Bonds, Series 2001A2.25-4.6511/1/20011/1/20174,620,000 2,945,000 Utility Revenue Bonds, Series 1999A3.20-4.205/3/19992/1/20093,600,000 1,590,000 Utility Revenue Bonds, Series 2003C1.10-3.553/1/20032/1/20133,200,000 2,625,000 Total bonded indebtedness - business-type activities14,690,000$ 9,690,000$ PrincipalInterestPrincipalInterestPrincipalInterest 20068,445,000$ 902,607$ 6,095,000$ 421,673$ 480,000$ 779,778$ 20074,795,000 625,606 705,000 243,881 690,000 725,855 20085,650,000 445,694 725,000 221,556 715,000 696,118 20095,890,000 244,236 585,000 200,031 745,000 665,193 2010805,000 125,820 605,000 179,581 780,000 632,880 2011-20153,320,000 152,154 3,235,000 562,935 4,440,000 2,595,635 2016-2020- - 1,275,000 48,331 5,610,000 1,402,028 2021-2025- - - - 2,705,000 290,457 2026- - - - 395,000 8,147 Total28,905,000$ 2,496,117$ 13,225,000$ 1,877,988$ 16,560,000$ 7,796,091$ PrincipalInterest 20061,545,000$ 328,868$ 20071,595,000 276,999 20081,560,000 221,821 20091,600,000 163,543 2010715,000 120,095 2011-20152,500,000 209,848 2016-2020175,000 8,212 Total9,690,000$ 1,329,386$ Year Ending December 31 Year Ending December 31 Revenue Bonds Governmental Activities Business-type Activities GeneralPublic ProjectTax Increment BondsObligation BondsRevenue Bonds CITY OF EDINA, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2005 52 CHANGE IN LONG-TERM LIABILITIES Long-term liability activity for the year ended December 31, 2005, was as follows: BeginningEndingDue Within BalanceAdditionsReductionsBalanceOne Year Governmental activities: Bonds payable: Tax increment30,760,000$ 20,245,000$ (22,100,000)$ 28,905,000$ 8,445,000$ General obligation7,295,000 6,835,000 (905,000) 13,225,000 6,095,000 Public project revenue11,595,000 5,425,000 (460,000) 16,560,000 480,000 Less deferred amounts: Discount on bonds(324,906) (36,275) 41,588 (319,593) - Premiums30,780 75,886 (29,663) 77,003 - Total bonds payable49,355,874 32,544,611 (23,453,075) 58,447,410 15,020,000 Compensated absences2,953,776 1,296,212 (1,296,688) 2,953,300 295,330 Governmental activity Long-term liabilities52,309,650$ 33,840,823$ (24,749,763)$61,400,710$ 15,315,330$ Business-type activities: Bonds payable: Revenue bonds11,185,000$ -$ (1,495,000)$ 9,690,000$ 1,545,000$ Less deferred amounts: Discount on bonds(52,612) - 9,411 (43,201) - Total bonds payable11,132,388 - (1,485,589) 9,646,799 1,545,000 Compensated absences761,997 312,800 (237,618) 837,179 83,717 Business-type activity Long-term liabilities11,894,385$ 312,800$ (1,723,207)$ 10,483,978$ 1,628,717$ For governmental activities, compensated absences are generally liquidated by the general fund. The City issued $5,375,000 of General Obligation Park & Recreation Refunding Bonds, Series 2005A to provide resources for a “crossover refunding” of the 2007 through 2017 maturities of the $5,575,000 General Obligation Park & Recreation Bonds, Series 1996B. The proceeds of the 2005 issue have been placed in an escrow account pending the February 1, 2006 call date of the refunded issue. The crossover refunding includes $199,747 of City funds in addition to the refunding bond proceeds. This crossover refunding was undertaken to reduce total debt service payments by $957,250 and resulted in an economic gain of $565,887. The City also issued $10,520,000 of General Obligation Tax Increment Refunding Bonds, Series 2005B for a current refunding of $10,460,000 General Obligation Tax Increment Refunding Bonds, Series 2000C. The reacquisition price exceeded the net carrying amount of the old debt by $77,779. This amount is being netted against the new debt and amortized over the new debt’s life, which is the same as the refunded debt. The transaction was undertaken to reduce total debt service payments by $305,894 and resulted in an economic gain of $291,987. CITY OF EDINA, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2005 53 The City also issued $6,220,000 of General Obligation Taxable Tax Increment Refunding Bonds, Series 2005C for a current refunding of $6,175,000 General Obligation Taxable Tax Increment Refunding Bonds, Series 1996A. The reacquisition price exceeded the net carrying amount of the old debt by $45,022. This amount is being netted against the new debt and amortized over the new debt’s life, which is the same as the refunded debt. The transaction was undertaken to reduce total debt service payments by $224,488 and resulted in an economic gain of $209,067. The City also issued $3,505,000 of General Obligation Tax Increment Refunding Bonds, Series 2005D to provide resources for a “crossover refunding” of the 2007 through 2013 maturities of the $3,460,000 General Obligation Tax Increment Bonds, Series 1997B. The proceeds of the 2005 issue have been placed in an escrow account pending the February 1, 2006 call date of the refunded issue. This crossover refunding was undertaken to reduce total debt service payments by $263,373 and resulted in an economic gain of $229,532. The City also issued $1,460,000 of General Obligation Permanent Improvement Revolving Bonds, Series 2005E to provide financing for infrastructure improvements. The City anticipates that special assessments to benefited properties will be sufficient to pay future debt service on this issue. The City of Edina Housing and Redevelopment Authority (HRA) issued $5,425,000 of Public Project Revenue Bonds to provide funds for acquisition, construction and furnishing of two gymnasiums in Edina. Note 5 LEGAL DEBT MARGIN The City is subject to a statutory limitation by the State of Minnesota for bonded indebtedness payable principally from property taxes. The City of Edina's legal debt margin for 2005 is computed as follows: December 31, 2005 Market Value (after fiscal disparities)8,693,345,900$ Debt Limit (2% of Market Value)173,866,918$ Amount of debt applicable to debt limit: Total bonded debt68,380,000$ Less: Tax increment bonds(28,905,000) Public project revenue bonds(16,560,000) Revenue bonds(9,690,000) Cash and investments in related Debt Service Funds(1,631,162) Total debt applicable to debt limit11,593,838$ Legal debt margin 162,273,080$ CITY OF EDINA, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2005 54 Note 6 DEFINED BENEFIT PENSION PLANS - STATEWIDE A. PLAN DESCRIPTION All full-time and certain part-time employees of the City of Edina are covered by defined benefit plans administered by the Public Employees Retirement Association of Minnesota (PERA). PERA administers the Public Employees Retirement Fund (PERF) and the Public Employees Police and Fire Fund (PEPFF) which are cost-sharing, multiple-employer retirement plans. These plans are established and administered in accordance with Minnesota Statute, Chapters 353 and 356. PERF members belong to either the Coordinated Plan or the Basic Plan. Coordinated Plan members are covered by Social Security and Basic Plan members are not. All new members must participate in the Coordinated Plan. All police officers, firefighters and peace officers who qualify for membership by statute are covered by the PEPFF. PERA provides retirement benefits as well as disability benefits to members, and benefits to survivors upon death of eligible members. Benefits are established by State Statute, and vest after three years of credited service. The defined retirement benefits are based on a member’s highest average salary for any five successive years of allowable service, age, and years of credit at termination of service. Two methods are used to compute benefits for PERF’s Coordinated and Basic Plan members. The retiring member receives the higher of a step-rate benefit accrual formula (Method 1) or a level accrual formula (Method 2). Under Method 1, the annuity accrual rate for a Basic Plan member is 2.2% of average salary for each of the first 10 years of service and 2.7% for each remaining year. The annuity accrual rate for a Coordinated Plan member is 1.2% of average salary for each of the first 10 years and 1.7% for each remaining year. Under Method 2, the annuity accrual rate is 2.7% of average salary for Basic Plan members and 1.7% for Coordinated Plan members for each year of service. For PEPFF members, the annuity accrual rate is 3.0% for each year of service. For all PEPFF and PERF members hired prior to July 1, 1989 whose annuity is calculated using Method 1, a full annuity is available when age plus years of service equal 90. Normal retirement age is 55 for PEPFF and 65 for Basic and Coordinated members hired prior to July 1, 1989. Normal retirement age is the age for unreduced Social Security benefits capped at 66 for Coordinated members hired on or after July 1, 1989. A reduced retirement annuity is also available to eligible members seeking early retirement. There are different types of annuities available to members upon retirement. A single-life annuity is a lifetime annuity that ceases upon the death of the retiree – no survivor annuity is payable. There are also various types of joint and survivor annuity options available which will be payable over joint lives. Members may also leave their contributions in the fund upon termination of public service in order to qualify for a deferred annuity at retirement age. Refunds of contributions are available at any time to members who leave public service, but before retirement benefits begin. CITY OF EDINA, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2005 55 The benefit provisions stated in the previous paragraphs of this section are current provisions and apply to active plan participants. Vested, terminated employees who are entitled to benefits but are not receiving them yet are bound by the provisions in effect at the time they last terminated their public service. PERA issues a publicly available financial report that includes financial statements and required supplementary information for PERF and PEPFF. That report may be obtained on the internet at www.mnpera.org, by writing to PERA at 60 Empire Drive #200, St. Paul, Minnesota, 55103-2088 or by calling (651) 296-7460 or 1-800-652-9026. B. FUNDING POLICY Minnesota Statutes Chapter 353 sets the rates for employer and employee contributions. These statutes are established and amended by the state legislature. The City makes annual contributions to the pension plans equal to the amount required by state statutes. PERF Basic Plan members and Coordinated Plan members were required to contribute 9.10% and 5.10%, respectively, of their covered salary in 2005. Contribution rates in the Coordinated Plan will increase in 2006 to 5.5%. PEPFF members were required to contribute 6.20% of their covered salary in 2005. That rate will increase to 7.0% in 2006. The City of Edina is required to contribute the following percentages of annual covered payroll: 11.78% for Basic Plan PERF members, 5.53% for Coordinated Plan PERF members, and 9.30% for PEPFF members. Employer contribution rates for the Coordinated Plan and PEPFF will increase to 6.0% and 10.5% respectively, effective January 1, 2006. The City’s contributions to the Public Employees Retirement Fund for the years ending December 31, 2005, 2004 and 2003 were $619,212, $614,321 and $569,890, respectively. The City’s contributions to the Public Employees Police and Fire Fund for the years ending December 31, 2005, 2004 and 2003 were $539,000, $537,552 and $486,690, respectively. The City’s contributions were equal to the contractually required contributions for each year as set by state statute. C. PUBLIC EMPLOYEES RETIREMENT ASSOCIATION (PERA) - DEFINED CONTRIBUTION PLAN DESCRIPTION Three council members of the City of Edina are covered by the Public Employees Defined Contribution Plan (PEDCP), a multiple-employer deferred compensation plan administered by the Public Employees Retirement Association of Minnesota (PERA). The PEDCP is a tax qualified plan under Section 401(a) of the Internal Revenue Code and all contributions by or on behalf of employees are tax deferred until time of withdrawal. CITY OF EDINA, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2005 56 Plan benefits depend solely on amounts contributed to the plan plus investment earnings, less administrative expenses. Minnesota Statutes, Chapter 353D.03, specifies the employee and employer contribution rates for those qualified personnel who elect to participate. An eligible elected official who decides to participate contributes 5 percent of salary which is matched by the elected official's employer. For ambulance service personnel, employer contributions are determined by the employer, and for salaried employees must be a fixed percentage of salary. Employer contributions for volunteer personnel may be a unit value for each call or period of alert duty. Employees who are paid for their services may elect to make member contributions in an amount not to exceed the employer share. Employer and employee contributions are combined and used to purchase shares in one or more of the seven accounts of the Minnesota Supplemental Investment Fund. For administering the plan, PERA receives 2 percent of employer contributions and four-tenths of one percent of the assets in each member's account annually. Total contributions made by the City during fiscal year 2005 were: Required EmployeesEmployerEmployeesEmployerRates PEDCP859$ 859$ 5.00%5.00%5.00% Amount% of Coverd Payroll Note 7 INTERFUND RECEIVABLES, PAYABLES, AND TRANSFERS The composition of internal balances as of December 31, 2005, is as follows: Payable FundAmount GeneralDebt Service3,000$ Construction1,800,000 Debt ServiceGeneral200,000 Housing & Redevelopment AuthorityGeneral435 LiquorConstruction500,000 Utilities280,000 Aquatic CenterGolf Course630,000 CommunicationCommunity Development Block Grant11,000 ArenaEdinborough Park/Centennial Lakes25,000 Total 3,449,435$ Receivable Fund The City’s interfund receivables and payables eliminate what would have been negative cash balances. CITY OF EDINA, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2005 57 DebtNonmajor ServiceConstructionBusiness-typeTotal Transfer out: General Fund-$ 50,000$ -$ 50,000$ Construction Fund67,886 - 45,000 112,886 HRA Fund6,792,983 - - 6,792,983 Utilities Fund- 100,000 - 100,000 Liquor Fund- 786,500 141,000 927,500 6,860,869$ 936,500$ 186,000$ 7,983,369$ Transfer In: Interfund transfers allow the City to allocate financial resources to the funds that receive benefit from services provided by another fund. Many of the City’s interfund transfers fall under that category. Non- routine transfers include the following: 1. The liquor fund transferred $786,500 to the construction fund to fund ongoing capital improvement needs, as well as $80,000 and $61,000 to the arena and art center funds, respectively, to subsidize operations. 2. The general fund transferred $50,000 to the construction fund to fund the capital improvement program. Note 8 TAX INCREMENT DISTRICTS The City of Edina is the administering authority for the following Tax Increment Districts: District number 1200 (50th and France Commercial Area) is a redevelopment district established in 1974 pursuant to Minnesota Statutes with a termination date of 2009. District number 1201 (Southeast Edina Redevelopment District – Edinborough) is a redevelopment district established in 1977 pursuant to Minnesota Statutes with a termination date of 2009. District number 1202 (Grandview Commercial Area) is a redevelopment district established in 1984 pursuant to Minnesota Statutes with a termination date of 2010. District number 1203 (Southeast Edina Redevelopment District – Centennial Lakes) is a redevelopment district established in 1988 pursuant to Minnesota Statutes with a termination date of 2016. District number 1207 (70th and Cahill Economic Development District) is an economic district established in 1990 pursuant to Minnesota Statutes with a decertification date of 2000. Increment previously collected is available for expenditures within the larger development district that includes the Wooddale – Valley View commercial area. Tax capacity and debt for this district is not included in the following schedule as county reports no longer indicate captured tax capacity for this district and no debt is outstanding. CITY OF EDINA, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2005 58 The following table reflects values as of December 31, 2005: TIF #1200TIF #1201TIF #1202TIF #1203Total Original tax capacity112,826$ 94,319$ 164,885$ 229,691$ 601,721$ Current tax capacity1,011,121 2,884,000 1,233,622 2,803,804 7,932,547 Tax capacity change898,295 2,789,681 1,068,737 2,574,113 7,330,826 Captured tax capacity value: Retained captured tax capacity 898,295$ 2,789,681$ 1,068,737$ 2,574,113$ 7,330,826$ Total bonds issued (general obligation) *5,360,000$ 22,445,000$ 9,637,555$ 39,354,724$ 76,797,279$ Amounts redeemed5,360,000 20,770,000 6,517,555 15,244,724 47,892,279 Outstanding bonds at December 31, 2005-$ 1,675,000$ 3,120,000$ 24,110,000$ 28,905,000$ * - Amount for district #1203 includes $3,460,000 refunding that will be paid from escrow on February 1, 2006. Note 9 CONTINGENCIES A. RISK MANAGEMENT The City is exposed to various risks of loss related to torts, theft of, damage to and destruction of assets; errors and omissions; injuries to employees; and natural disasters. Worker’s compensation insurance is provided through the League of Minnesota Cities Insurance Trust (LMCIT). The City has a $10,000 deductible per occurrence, with a $500,000 annual maximum. Automobile and general liability coverage is provided through an insurance company. The City pays an annual premium for this coverage and all claims are paid from the plan up to the annual maximum of $600,000. The City is not subject to a deductible for automobile or general liability coverage. Property coverage is also provided by an insurance company. The City pays an annual premium for this coverage, and all claims are paid for by the plan. The City has $2,500 - $25,000 deductibles per occurrence depending on claim type, with an annual maximum of $83,446,936. Police professional insurance coverage is provided by an insurance company. The City pays an annual premium for this coverage, and has a $10,000 deductible per occurrence, with a $500,000 annual maximum. The City has designated $1,025,765 in the general fund to finance potential uninsured loss. Settlement claims have not exceeded insurance coverage for each of the past three years. There were not significant reductions in insurance coverage during 2005. CITY OF EDINA, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2005 59 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 is 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, 2005. D. TAX INCREMENT DISTRICTS The City’s tax increment districts are subject to review by the State of Minnesota Office of the State Auditor (OSA). Any disallowed claims or misuse of tax increments could become a liability of the applicable fund. Management is not aware of any instances of noncompliance which would have a material effect on the financial statements. Note 10 CONDUIT DEBT OBLIGATION As of December 31, 2005, the City of Edina had 3 series of Housing and Health Care Revenue Bonds, with an aggregate principal amount payable of $30,030,000. The bonds are payable solely from revenues of the respective organizations and do not constitute an indebtedness of the City, and are not a charge against its general credit or taxing power. Accordingly, the bonds are not reported as liabilities in the accompanying financial statements. Note 11 JOINT VENTURE The City is a participant with the City of Bloomington, the City of Eden Prairie and the Metropolitan Airport Commission in a joint venture to construct and operate a facility to be used for the training of law enforcement officers and firefighters. The South Metro Public Safety Training Facility Association (PSTF) is governed by a Board consisting of one representative from each Member. On dissolution of the Association, the Facility shall revert to the City of Edina, and all remaining assets shall be divided among the members based on the Cost Sharing Formula. In accordance with the joint venture agreement, each member of the association will share in the cost of the construction and operation based on the Cost Sharing Formula. The City’s net investment is reported in the governmental activities capital assets. The City’s equity interest in the PSTF was $1,452,465. Complete financial statements for PSTF can be obtained from the City of Edina, 4801 West 50th Street, Edina, MN 55424. CITY OF EDINA, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2005 60 Note 12 DESIGNATIONS AND RESERVATIONS OF FUND BALANCE At December 31, 2005 the City had designated and reserved portions of its various fund balances through legal restriction and City Council authorization. A summary of such designations is as follows: December 31, 2005 General Fund: Reserved for prepaid items223,351$ Designated for parkland dedication104,118 Designated for unrealized investment gains/losses37,983 Designated for equipment and other commitments2,847,475 Designated for insurance and severance1,025,765 Designated for cash flow7,580,092 Debt Service Fund: Reserved for debt service11,014,746 Construction Fund: Reserved for encumbrances2,422,917 Reserved for special projects354,649 Designated for capital improvements5,192,017 30,803,113$ CITY OF EDINA, MINNESOTA REQUIRED SUPPLEMENTARY INFORMATION Statement 10 BUDGETARY COMPARISON SCHEDULE - GENERAL FUND For The Year Ended December 31, 2005 Variance with 2005Final Budget - ActualOver OriginalFinalAmounts(Under) Revenues: General property taxes: Current17,143,594$ 17,143,594$ 17,178,755$ 35,161$ Penalties and interest15,000 15,000 12,388 (2,612) Total general property taxes17,158,594 17,158,594 17,191,143 32,549 Licenses and permits:2,025,193 2,025,193 3,240,622 1,215,429 Intergovernmental: Federal:51,400 51,400 353,128 301,728 State: Municipal state aid195,000 195,000 195,000 - Other56,634 56,634 123,432 66,798 State aid - police 310,000 310,000 354,587 44,587 Health programs120,000 120,000 121,198 1,198 Total intergovernmental733,034 733,034 1,147,345 414,311 Charges for services: Building Department1,800 1,800 6,365 4,565 City Clerk- - 12,361 12,361 Fire Department35,600 35,600 29,373 (6,227) Ambulance fees1,081,500 1,081,500 1,372,705 291,205 Police Department224,300 224,300 235,486 11,186 Engineering121,800 121,800 161,172 39,372 Health Department6,300 6,300 8,974 2,674 Planning Department27,000 27,000 28,342 1,342 Housing Foundation Contract31,100 31,100 11,264 (19,836) HRA Services20,000 20,000 24,166 4,166 Assessing Searches- - 20 20 Park Registration77,250 77,250 88,904 11,654 Senior Center103,169 103,169 99,955 (3,214) Other fees6,500 6,500 5,063 (1,437) 50th & France Assessment68,000 68,000 68,000 - Charges to other funds263,616 263,616 263,616 - Total charges for services2,067,935 2,067,935 2,415,766 347,831 Fines and forfeits900,000 900,000 742,917 (157,083) Miscellaneous: Rental of property280,000 280,000 283,595 3,595 Investment income110,000 110,000 181,784 71,784 Donations- - 116,747 116,747 Other5,000 5,000 32,716 27,716 Total miscellaneous395,000 395,000 614,842 219,842 Total revenues23,279,756 23,279,756 25,352,635 2,072,879 Budgeted Amounts 61 CITY OF EDINA, MINNESOTA REQUIRED SUPPLEMENTARY INFORMATION Statement 10 BUDGETARY COMPARISON SCHEDULE - GENERAL FUND (CONTINUED) For The Year Ended December 31, 2005 Variance with 2005Final Budget - ActualUnder OriginalFinalAmounts(Over) Expenditures: General government: Mayor and Council: Current: Personal services31,137$ 31,137$ 28,382$ 2,755$ Contractual services4,700 4,700 5,579 (879) Commodities1,100 1,100 1,271 (171) Central services37,044 37,044 41,474 (4,430) Total mayor and council73,981 73,981 76,706 (2,725) Administration: Current: Personal services748,072 748,072 735,375 12,697 Contractual services142,300 142,300 135,790 6,510 Commodities2,500 2,500 2,894 (394) Central services60,480 60,480 66,668 (6,188) Total current953,352 953,352 940,727 12,625 Capital outlay5,821 5,821 934 4,887 Total administration959,173 959,173 941,661 17,512 Planning: Current: Personal services310,691 310,691 304,826 5,865 Contractual services15,500 15,500 14,880 620 Commodities1,400 1,400 1,351 49 Central services39,180 39,180 43,543 (4,363) Total current366,771 366,771 364,600 2,171 Capital outlay1,800 1,800 - 1,800 Total planning368,571 368,571 364,600 3,971 Finance: Current: Personal services436,490 436,490 426,703 9,787 Contractual services96,000 96,000 93,592 2,408 Commodities2,100 2,100 938 1,162 Central services44,700 44,700 49,411 (4,711) Total current579,290 579,290 570,644 8,646 Capital outlay5,820 5,820 3,126 2,694 Total finance585,110 585,110 573,770 11,340 Election: Current: Personal services90,547 90,547 86,121 4,426 Contractual services14,944 14,944 10,842 4,102 Commodities5,280 5,280 5,975 (695) Central services6,696 6,696 7,117 (421) Total current117,467 117,467 110,055 7,412 Capital outlay- - - - Total election117,467 117,467 110,055 7,412 Budgeted Amounts 62 CITY OF EDINA, MINNESOTA REQUIRED SUPPLEMENTARY INFORMATION Statement 10 BUDGETARY COMPARISON SCHEDULE - GENERAL FUND (CONTINUED) For The Year Ended December 31, 2005 Variance with 2005Final Budget - ActualUnder OriginalFinalAmounts(Over) Budgeted Amounts Assessing: Current: Personal services568,831$ 568,831$ 560,688$ 8,143$ Contractual services100,640 100,640 83,243 17,397 Commodities2,400 2,400 1,390 1,010 Central services56,328 56,328 61,853 (5,525) Total current728,199 728,199 707,174 21,025 Capital outlay11,954 11,954 23,894 (11,940) Total assessing740,153 740,153 731,068 9,085 Legal and court services: Current: Contractual services410,000 410,000 363,838 46,162 Contingencies: Current: Contractual services123,014 123,014 50,733 72,281 Commodities- - 3,181 (3,181) Total contingencies123,014 123,014 53,914 69,100 City's share of special assessment: Current: Contractual services28,000 28,000 24,719 3,281 Human Rights Commission: Current: Contractual services83,990 83,990 83,151 839 Suburban Rate Authority: Current: Contractual services3,000 3,000 3,000 - Edina Resource Center Current: Contractual services33,372 33,372 33,372 - Human Services Planning & Coordination Current: Contractual services22,736 22,736 45,756 (23,020) Records management: Current: Contractual services27,000 27,000 - 27,000 Employee programs Current: Personal services119,200 119,200 168,062 (48,862) Contractual services10,800 10,800 9,325 1,475 Total employee programs130,000 130,000 177,387 (47,387) Dial-a-Ride: Current: Contractual services22,000 22,000 15,231 6,769 Public Artscape: Current: Contractual services25,000 25,000 3,736 21,264 Total general government3,752,567 3,752,567 3,601,964 150,603 63 CITY OF EDINA, MINNESOTA REQUIRED SUPPLEMENTARY INFORMATION Statement 10 BUDGETARY COMPARISON SCHEDULE - GENERAL FUND (CONTINUED) For The Year Ended December 31, 2005 Variance with 2005Final Budget - ActualUnder OriginalFinalAmounts(Over) Budgeted Amounts Public safety: Police protection: Current: Personal services5,210,487$ 5,210,487$ 5,104,617$ 105,870$ Contractual services322,635 322,635 341,309 (18,674) Commodities69,247 69,247 65,002 4,245 Central services747,972 747,972 803,439 (55,467) Total current6,350,341 6,350,341 6,314,367 35,974 Capital outlay243,000 243,000 547,081 (304,081) Total police protection6,593,341 6,593,341 6,861,448 (268,107) Fire protection: Current: Personal services3,068,042 3,068,042 3,012,384 55,658 Contractual services271,175 271,175 283,478 (12,303) Commodities134,300 134,300 174,171 (39,871) Central services274,788 274,788 286,880 (12,092) Total current3,748,305 3,748,305 3,756,913 (8,608) Capital outlay184,171 184,171 490,695 (306,524) Total fire protection3,932,476 3,932,476 4,247,608 (315,132) Civil defense: Current: Personal services27,733 27,733 27,729 4 Contractual services9,039 9,039 6,028 3,011 Commodities1,348 1,348 - 1,348 Total current38,120 38,120 33,757 4,363 Capital outlay5,200 5,200 - 5,200 Total civil defense43,320 43,320 33,757 9,563 Animal Control: Current: Personal services49,545 49,545 52,970 (3,425) Contractual services7,929 7,929 8,961 (1,032) Commodities3,857 3,857 238 3,619 Central services6,756 6,756 7,045 (289) Total current68,087 68,087 69,214 (1,127) Capital outlay6,895 6,895 - 6,895 Total animal control74,982 74,982 69,214 5,768 Public health: Current: Personal services236,872 236,872 214,718 22,154 Contractual services174,085 174,085 169,713 4,372 Commodities1,300 1,300 387 913 Central services26,184 26,184 28,964 (2,780) Total current438,441 438,441 413,782 24,659 Capital outlay5,200 5,200 - 5,200 Total public health443,641 443,641 413,782 29,859 64 CITY OF EDINA, MINNESOTA REQUIRED SUPPLEMENTARY INFORMATION Statement 10 BUDGETARY COMPARISON SCHEDULE - GENERAL FUND (CONTINUED) For The Year Ended December 31, 2005 Variance with 2005Final Budget - ActualUnder OriginalFinalAmounts(Over) Budgeted Amounts Inspections: Current: Personal services517,586$ 517,586$ 531,766$ (14,180)$ Contractual services84,867 84,867 110,313 (25,446) Commodities4,296 4,296 3,945 351 Central services68,160 68,160 74,621 (6,461) Total current674,909 674,909 720,645 (45,736) Capital outlay17,396 17,396 2,602 14,794 Total inspections692,305 692,305 723,247 (30,942) Total public safety11,780,065 11,780,065 12,349,056 (568,991) Public works: Administration: Current: Personal services154,481 154,481 139,194 15,287 Contractual services5,300 5,300 4,457 843 Commodities- - 309 (309) Central services17,652 17,652 19,617 (1,965) Total administration177,433 177,433 163,577 13,856 Engineering: Current: Personal services584,027 584,027 563,260 20,767 Contractual services43,050 43,050 52,568 (9,518) Commodities13,500 13,500 13,458 42 Central services67,932 67,932 74,114 (6,182) Total current708,509 708,509 703,400 5,109 Capital outlay46,750 46,750 83,340 (36,590) Total engineering755,259 755,259 786,740 (31,481) Supervision and overhead: Current: Personal services206,744 206,744 157,563 49,181 Contractual services35,200 35,200 33,185 2,015 Commodities600 600 587 13 Central services139,800 139,800 161,082 (21,282) Total supervision and overhead382,344 382,344 352,417 29,927 Street maintenance: Current: Personal services1,634,872 1,634,872 1,668,514 (33,642) Contractual services656,570 656,570 612,866 43,704 Commodities646,785 646,785 670,312 (23,527) Central services512,988 512,988 512,988 - Total current3,451,215 3,451,215 3,464,680 (13,465) Capital outlay475,374 475,374 399,597 75,777 Total street maintenance3,926,589 3,926,589 3,864,277 62,312 Total public works5,241,625 5,241,625 5,167,011 74,614 65 CITY OF EDINA, MINNESOTA REQUIRED SUPPLEMENTARY INFORMATION Statement 10 BUDGETARY COMPARISON SCHEDULE - GENERAL FUND (CONTINUED) For The Year Ended December 31, 2005 Variance with 2005Final Budget - ActualUnder OriginalFinalAmounts(Over) Budgeted Amounts Parks: Administration: Current: Personal services549,001$ 549,001$ 537,660$ 11,341$ Contractual services30,492 30,492 25,817 4,675 Commodities3,236 3,236 2,883 353 Central services59,508 59,508 65,472 (5,964) Total current642,237 642,237 631,832 10,405 Capital outlay6,487 6,487 3,274 3,213 Total administration648,724 648,724 635,106 13,618 Recreation: Current: Personal services159,203 159,203 133,497 25,706 Contractual services149,491 149,491 134,655 14,836 Commodities43,120 43,120 42,128 992 Total recreation351,814 351,814 310,280 41,534 Maintenance: Current: Personal services1,339,621 1,339,621 1,343,162 (3,541) Contractual services301,249 301,249 261,999 39,250 Commodities174,195 174,195 170,224 3,971 Central services250,920 250,920 259,246 (8,326) Total current2,065,985 2,065,985 2,034,631 31,354 Capital outlay111,206 111,206 130,875 (19,669) Total maintenance2,177,191 2,177,191 2,165,506 11,685 Deer control: Current: Contractual services9,270 9,270 6,625 2,645 Commodities- - 174 (174) Total deer control9,270 9,270 6,799 2,471 Total parks3,186,999 3,186,999 3,117,691 69,308 Total expenditures23,961,256 23,961,256 24,235,722 (274,466) Revenues over (under) expenditures(681,500) (681,500) 1,116,913 1,798,413 Other financing sources (uses): Transfer from other funds686,500 686,500 - (686,500) Transfer to other funds(50,000) (50,000) (50,000) - Sale of capital assets45,000 45,000 135,045 90,045 Total financing sources (uses)681,500 681,500 85,045 (596,455) Net increase (decrease) in fund balance-$ -$ 1,201,958$ 1,201,958$ Fund balance - January 1 10,616,826 Fund balance - December 31 11,818,784$ 66 CITY OF EDINA, MINNESOTA NOTES TO REQUIRED SUPPLEMENTARY INFORMATION December 31, 2005 67 Note A LEGAL COMPLIANCE – BUDGETS The City follows these procedures in establishing the budgetary data reflected in the financial statements: 1. The City Manager 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. Public hearings are conducted to obtain taxpayer comments. 3. The budget is legally enacted by the passage of a resolution by the City Council. 4. Formal budgetary integration is employed as a management control device during the year. 5. Budgets for the General Fund and the Community Development Block Grant Fund are adopted on a basis consistent with generally accepted accounting principles (GAAP). 6. The City Council may authorize transfers of budgeted amounts between departments. 7. Reported budget amounts are as originally adopted or as amended by Council-approved supplemental appropriations and budget transfers. 8. Expenditures may not legally exceed appropriations by department unless offset by increases in revenues. All unencumbered appropriations lapse at year-end. CITY OF EDINA, MINNESOTA NOTES TO REQUIRED SUPPLEMENTARY INFORMATION December 31, 2005 68 Note B EXCESS OF EXPENDITURES OVER APPROPRIATIONS The General Fund budget is legally adopted on a basis consistent with accounting principles generally accepted in the United States of America. The legal level of budgetary control is at the department level for the General Fund. The following is a listing of General Fund departments whose expenditures exceed budget appropriations. FinalOver BudgetActualBudget General Government: Mayor and council73,981$ 76,706$ 2,725$ Human services planning22,736 45,756 23,020 Employee programs130,000 177,387 47,387 Public Safety: Police protection6,593,341 6,861,448 268,107 Fire protection3,932,476 4,247,608 315,132 Inspections692,305 723,247 30,942 Public Works: Engineering755,259 786,740 31,481 Excess expenditures in the Mayor and Council department are funded by general fund balance designated for cash flow. Excess expenditures in the human services planning, employee programs, police protection, fire protection, and engineering departments are funded by general fund balance designated for commitments. Excess expenditures in the inspections department are funded by greater than anticipated license and permit revenue. A Special Revenue Fund is used to account for the proceeds of specific revenue sources that are legally restricted to expenditures for specified purposes. Community Development Block Grant Fund - This fund was established to account for funds received under Title I of the Housing and Community Development Act of 1974. Communications Fund - This fund was established to account for funds received from the franchise fee of the local cable television service. NONMAJOR GOVERNMENTAL FUNDS Special Revenue Funds 69 CITY OF EDINA, MINNESOTA COMBINING BALANCE SHEET Statement 11 NONMAJOR SPECIAL REVENUE FUNDS December 31, 2005 CommunityTotal Nonmajor DevelopmentSpecial Revenue Block GrantCommunicationFunds Assets Cash and cash equivalents895$ 3,253$ 4,148$ Investments- 630,264 630,264 Accounts receivable- 128,432 128,432 Accrued interest receivable- 5,120 5,120 Due from other funds- 11,000 11,000 Due from other governments10,105 - 10,105 Total assets11,000$ 778,069$ 789,069$ Liabilities and Fund Balance Liabilities: Accounts payable-$ 44,006$ 44,006$ Salaries payable- 1,106 1,106 Due to other funds11,000 - 11,000 Unearned revenue- 1,930 1,930 Total liabilities11,000 47,042 58,042 Fund balance: Unreserved: Undesignated- 731,027 731,027 Total fund balance- 731,027 731,027 Total liabilities and fund balance11,000$ 778,069$ 789,069$ 70 CITY OF EDINA, MINNESOTA COMBINING STATEMENT OF REVENUES, EXPENDITURES Statement 12 AND CHANGES IN FUND BALANCES NONMAJOR SPECIAL REVENUE FUNDS For The Year Ended December 31, 2005 CommunityTotal Nonmajor DevelopmentSpecial Revenue Block GrantCommunicationFunds Revenues: Franchise fees-$ 457,421$ 457,421$ Intergovernmental172,635 - 172,635 Investment income- 15,076 15,076 Other- 54,246 54,246 Total revenues172,635 526,743 699,378 Expenditures: Current: General government172,635 577,174 749,809 Total expenditures172,635 577,174 749,809 Net increase (decrease) in fund balance- (50,431) (50,431) Fund balance - January 1- 781,458 781,458 Fund balance - December 31-$ 731,027$ 731,027$ 71 CITY OF EDINA, MINNESOTA SPECIAL REVENUE FUND - COMMUNITY DEVELOPMENT BLOCK GRANT Statement 13 SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES - BUDGET AND ACTUAL For The Year Ended December 31, 2005 Actual OriginalFinalAmounts Revenues: Intergovernmental172,355$ 172,355$ 172,635$ Total revenues172,355 172,355 172,635 Expenditures: Current: General government172,355 172,355 172,635 Net increase (decrease) in fund balance-$ -$ -$ Fund balance - January 1 - Fund balance - December 31 -$ Budgeted Amounts 72 Enterprise funds account for the financing of self-supporting activities of governmental units which render services to the general public on a user charge basis. The following are nonmajor enterprise funds: Arena Art Center Edinborough Park/Centennial Lake NONMAJOR PROPRIETARY FUNDS Enterprise Funds 73 CITY OF EDINA, MINNESOTA COMBINING STATEMENT OF NET ASSETS Statement 14 NONMAJOR PROPRIETARY FUNDS December 31, 2005 Total ArtEdinborough ParkNonmajor ArenaCenterCentennial LakeProprietary Funds Assets Current assets: Cash and cash equivalents62,284$ 9,576$ 2,032$ 73,892$ Investments- - 4,525,304 4,525,304 Interest receivable- - 36,758 36,758 Accounts receivable130,518 - 3,415 133,933 Due from other funds25,000 - - 25,000 Inventory- 15,828 - 15,828 Total current assets217,802 25,404 4,567,509 4,810,715 Noncurrent assets: Deferred charges3,853 - - 3,853 Net capital assets3,242,321 310,863 750,791 4,303,975 Total noncurrent assets3,246,174 310,863 750,791 4,307,828 Total assets3,463,976 336,267 5,318,300 9,118,543 Liabilities: Current liabilities: Accounts payable59,664 25,983 42,624 128,271 Salaries payable7,894 3,378 11,973 23,245 Accrued interest payable12,392 - - 12,392 Due to other funds- - 25,000 25,000 Due to other governments663 1,358 3,682 5,703 Unearned revenue- 3,067 49,454 52,521 Compensated absences payable10,737 4,081 10,891 25,709 Bonds payable200,000 - - 200,000 Total current liabilities291,350 37,867 143,624 472,841 Noncurrent liabilities: Compensated absences96,633 36,733 98,022 231,388 Bonds payable, net642,116 - - 642,116 Total noncurrent liabilities738,749 36,733 98,022 873,504 Total liabilities1,030,099 74,600 241,646 1,346,345 Net assets: Invested in capital assets, net of related debt2,404,058 310,863 750,791 3,465,712 Unrestricted29,819 (49,196) 4,325,863 4,306,486 Total net assets2,433,877$ 261,667$ 5,076,654$ 7,772,198$ 74 CITY OF EDINA, MINNESOTA COMBINING STATEMENT OF REVENUES, EXPENSES Statement 15 AND CHANGES IN FUND NET ASSETS NONMAJOR PROPRIETARY FUNDS For The Year Ended December 31, 2005 Total Edinborough ParkNonmajor ArenaArt CenterCentennial LakeProprietary Funds Operating revenues: Sales - retail10,999$ 60,313$ -$ 71,312$ Sales - concessions- 3,795 20,131 23,926 Memberships4,004 29,856 48,428 82,288 Admissions71,619 - 368,739 440,358 Building rental1,151,012 - 219,999 1,371,011 Rental of equipment3,759 - 54,134 57,893 Greens fees- - 180,895 180,895 Class registration & other fees135,214 397,530 491,433 1,024,177 Total operating revenues1,376,607 491,494 1,383,759 3,251,860 Operating expenses: Cost of sales and services1,271 27,200 8,964 37,435 Personal services564,919 246,526 938,191 1,749,636 Contractual services538,475 253,188 380,634 1,172,297 Commodities50,002 46,373 171,087 267,462 Central Services39,220 31,150 82,745 153,115 Depreciation303,544 28,669 86,247 418,460 Total operating expenses1,497,431 633,106 1,667,868 3,798,405 Operating loss(120,824) (141,612) (284,109) (546,545) Nonoperating revenues (expenses): Investment income- - 114,144 114,144 Donations914 19,557 254 20,725 Interest and fiscal charges(24,911) - - (24,911) Gain (loss) on sale of capital asset- - 5,983 5,983 Amortization of bond discount(2,246) - - (2,246) Total nonoperating revenues (expenses)(26,243) 19,557 120,381 113,695 Income (loss) before transfers(147,067) (122,055) (163,728) (432,850) Transfers: Transfers in86,000 100,000 - 186,000 Total transfers 86,000 100,000 - 186,000 Change in net assets(61,067) (22,055) (163,728) (246,850) Net assets - January 1 2,494,944 283,722 5,240,382 8,019,048 Net assets - December 312,433,877$ 261,667$ 5,076,654$ 7,772,198$ 75 CITY OF EDINA, MINNESOTA COMBINING STATEMENT OF CASH FLOWS Statement 16 NONMAJOR PROPRIETARY FUNDS For The Year Ended December 31, 2005 Total ArtEdinborough ParkNonmajor ArenaCenterCentennial LakeProprietary Funds Cash flows from operating activities: Receipts from customers and users1,373,299$ 492,011$ 1,389,475$ 3,254,785$ Payment to suppliers(598,172) (358,102) (632,646) (1,588,920) Payment to employees(553,712) (243,885) (924,564) (1,722,161) Net cash provided by (used in) operating activities221,415 (109,976) (167,735) (56,296) Cash flows from noncapital financing activities: Transfer (to) from Enterprise Funds41,000 100,000 - 141,000 Transfer (to) from Capital Project Funds45,000 - - 45,000 Net interfund borrowing(25,000) - 25,000 - Donations914 19,557 254 20,725 Net cash provided by noncapital financing activities61,914 119,557 25,254 206,725 Cash flows from capital and related financing activities: Acquisition of capital assets- (531) (121,462) (121,993) Sale of capital assets- - 5,983 5,983 Principal paid on bonds(195,000) - - (195,000) Interest paid on bonds(26,815) - - (26,815) Net cash used in capital and related financing activities(221,815) (531) (115,479) (337,825) Cash flows from investing activities: Proceeds from sales of investments- - 133,086 133,086 Investment income- - 116,915 116,915 Net cash flows provided by (used in) investing activities- - 250,001 250,001 Net increase (decrease) in cash and cash equivalents61,514 9,050 (7,959) 62,605 Cash and cash equivalents - January 1770 526 9,991 11,287 Cash and cash equivalents - December 3162,284$ 9,576$ 2,032$ 73,892$ Reconciliation of operating loss to net cash provided (used) by operating activities: Operating loss (120,824)$ (141,612)$ (284,109)$ (546,545)$ Adjustments to reconcile operating loss to net cash flows from operating activities: Depreciation303,544 28,669 86,247 418,460 Changes in assets and liabilities: Decrease (increase) in receivables(3,308) - 5,512 2,204 Decrease (increase) in inventory- 1,140 - 1,140 Increase (decrease) in accounts payable30,341 4,268 11,672 46,281 Increase (decrease) in salaries payable2,020 1,181 2,724 5,925 Increase (decrease) in contracts payable- (5,732) - (5,732) Increase (decrease) in due to other governments455 133 (888) (300) Increase (decrease) in unearned revenue- 517 204 721 Increase (decrease) in compensated absences9,187 1,460 10,903 21,550 Total adjustments342,239 31,636 116,374 490,249 Net cash provided by (used in) operating activities221,415$ (109,976)$ (167,735)$ (56,296)$ Noncash investing, capital and financing activities: Increase (decrease) in fair value of investments -$ -$ (68,856)$ (68,856)$ 76 CITY OF EDINA, MINNESOTA COMBINING STATEMENT OF CHANGES IN Statement 17 ASSETS AND LIABILITIES AGENCY FUNDS For The Year Ended December 31, 2005 BalanceBalance January 1AdditionsDeductionsDecember 31 POLICE SEIZURE ASSETS: Cash 251,648$ 49,025$ -$ 300,673$ LIABILITIES: Due to other governmental units 251,648$ 49,025$ -$ 300,673$ PUBLIC SAFETY TRAINING FACILITY ASSETS: Cash11,138$ -$ 2,055$ 9,083$ Due from other governmental units172,006 - 172,006 - Investments 40,000 95,000 - 135,000 TOTAL ASSETS 223,144$ 95,000$ 174,061$ 144,083$ LIABILITIES: Accounts payable17,993$ -$ 7,027$ 10,966$ Salaries payable817 134 - 951 Contracts payable33,945 - 33,945 - Due to other governmental units 170,389 - 38,223 132,166 TOTAL LIABILITIES 223,144$ 134$ 79,195$ 144,083$ PAYROLL ASSETS: Cash -$ 229,971$ -$ 229,971$ LIABILITIES: Accounts payable-$ 70,677$ -$ 70,677$ Due to other governmental units - 159,294 - 159,294 TOTAL LIABILITIES -$ 229,971$ -$ 229,971$ TOTALS - ALL AGENCY FUNDS ASSETS: Cash262,786$ 278,996$ 2,055$ 539,727$ Investments40,000 95,000 - 135,000 Due from other governmental units 172,006 - 172,006 - TOTAL ASSETS 474,792$ 373,996$ 174,061$ 674,727$ LIABILITIES: Accounts payable17,993$ 70,677$ 7,027$ 81,643$ Salaries payable817 134 - 951 Contracts payable33,945 - 33,945 - Due to other governmental units 422,037 208,319 38,223 592,133 TOTAL LIABILITIES 474,792$ 279,130$ 79,195$ 674,727$ 77 This page left blank intentionally. 78 This page left blank intentionally. 79 CITY OF EDINA, MINNESOTA COMBINED SCHEDULE OF BONDED INDEBTEDNESS December 31, 2005 Final InterestMaturityOriginal RatesDateDateIssueRedeemed Tax Increment Bonds: Tax Increment Taxable Refunding Bonds, Series 1996A5.85 - 6.2503/01/9602/01/0911,250,000$ 4,175,000$ Tax Increment Bonds, Series 1997B4.50 - 5.2004/01/9702/01/135,090,000 975,000 Tax Increment Bonds, Series 2000A4.30 - 4.8009/06/0002/01/112,620,000 660,000 Tax Increment Bonds, Series 2000C4.50 - 4.6509/06/0002/01/0915,820,000 3,855,000 Tax Increment Bonds, Series 2002B3.00%08/05/0202/01/091,400,000 - Tax Increment Taxable Refunding Bonds, Series 2003B1.128 - 1.74903/01/0302/01/066,570,000 2,325,000 Tax Increment Refunding Bonds, Series 2005B3.00%07/19/0502/01/09- - Tax Increment Taxable Refunding Bonds, Series 2005C3.75 - 4.2507/19/0502/01/09- - Tax Increment Refunding Bonds, Series 2005D3.00 - 3.4007/19/0502/01/13- - Total Tax Increment Bonds42,750,000 11,990,000 General Obligation Bonds: GO Park & Recreation, Series 1996B4.25 - 5.7508/01/9602/01/178,090,000 1,790,000 GO Equipment Certificates, Series 2003A1.05 - 2.4003/01/0302/01/081,540,000 545,000 GO Park & Recreation Refunding Bonds, Series 2005A3.50 - 4.0007/19/0502/01/17- - GO Permanent Improvement Revolving, Series 2005E3.00 - 3.7509/13/0502/01/16- - Total General Obligation Bonds9,630,000 2,335,000 Public Project Revenue Bonds: Public Project Revenue, Series 20024.00 - 5.2501/01/0202/01/2112,410,000 815,000 Public Project Revenue, Series 20053.00 - 4.1309/13/0505/01/26- - Total Public Project Revenue Bonds12,410,000 815,000 Revenue Bonds: Recreational Facility Bonds, Series 1999B3.70 - 4.4505/03/9901/01/133,270,000 475,000 Recreational Facility Bonds, Series 2001A2.25 - 4.6511/01/0101/01/174,620,000 1,090,000 Utility Revenue Bonds, Series 1999A3.20 - 4.2005/03/9902/01/093,600,000 1,650,000 Utility Revenue Bonds, Series 2003C1.10 - 3.5503/01/0302/01/133,200,000 290,000 Total Public Project Revenue Bonds14,690,000 3,505,000 Total - Bonded indebtedness79,480,000$ 18,645,000$ Prior Years 80 Exhibit 1 PrincipalInterestInterest OutstandingPayableDueDuePayable 12/31/2004IssuedPayments12/31/2005In 2006In 2006to Maturity 7,075,000$ -$ 7,075,000$ -$ -$ -$ -$ 4,115,000 - 250,000 3,865,000 3,865,000 102,453 102,453 1,960,000 - 240,000 1,720,000 255,000 74,095 253,529 11,965,000 - 11,965,000 - - - - 1,400,000 - - 1,400,000 - 42,000 273,000 4,245,000 - 2,570,000 1,675,000 1,675,000 20,938 20,938 - 10,520,000 - 10,520,000 1,650,000 301,370 721,070 - 6,220,000 - 6,220,000 1,000,000 245,318 591,705 - 3,505,000 - 3,505,000 - 116,433 533,422 30,760,000 20,245,000 22,100,000 28,905,000 8,445,000 902,607 2,496,117 6,300,000 - 350,000 5,950,000 5,950,000 164,581 164,581 995,000 - 555,000 440,000 145,000 7,950 14,800 - 5,375,000 - 5,375,000 - 205,776 1,407,632 - 1,460,000 - 1,460,000 - 43,366 290,976 7,295,000 6,835,000 905,000 13,225,000 6,095,000 421,673 1,877,989 11,595,000 - 460,000 11,135,000 480,000 537,337 5,071,894 - 5,425,000 - 5,425,000 - 242,441 2,724,195 11,595,000 5,425,000 460,000 16,560,000 480,000 779,778 7,796,089 2,795,000 - 265,000 2,530,000 270,000 102,925 464,144 3,530,000 - 585,000 2,945,000 610,000 96,335 381,410 1,950,000 - 360,000 1,590,000 375,000 57,345 134,152 2,910,000 - 285,000 2,625,000 290,000 72,263 349,679 11,185,000 - 1,495,000 9,690,000 1,545,000 328,868 1,329,385 60,835,000$ 32,505,000$ 24,960,000$ 68,380,000$ 16,565,000$ 2,432,926$ 13,499,580$ 2005 81 CITY OF EDINA, MINNESOTA ASSESSED VALUATION, TAX LEVIES AND MILL RATES Exhibit 2 (shown by year of tax collectibility) 20022003200420052006 Total tax capacity72,583,694$ 77,665,879$ 83,447,880$ 91,309,672$ 101,947,912$ Increment valuation(6,513,676) (6,909,331) (6,949,064) (7,330,826) (7,980,069) Contribution to fiscal disparities pool(6,893,865) (7,587,409) (7,945,664) (7,635,854) (7,107,862) Tax capacity used for rate calculation59,176,153 63,169,139 68,553,152 76,342,992 86,859,981 Fiscal disparities distribution1,830,348 1,975,365 2,202,656 2,374,371 2,411,937 Adjusted net tax capacity61,006,501$ 65,144,504$70,755,808$78,717,363$ 89,271,918$ Tax levies: General fund15,990,256$ 16,171,875$ 16,489,129$ 17,772,350$ 18,560,151$ Public project revenue1,000,000 1,026,437 1,028,837 1,058,840 1,501,741 Certificates of indebtedness- 586,163 604,275 162,200 159,100 Total certified tax levies16,990,256 17,784,475 18,122,241 18,993,390 20,220,992 Referendum market value levy738,347 721,967 686,662 674,161 599,138 Total levy17,728,603$ 18,506,442$18,808,903$19,667,551$ 20,820,130$ Tax capacity rate: General fund revenue26.11624.58623.18322.53620.755 Bonds & interest1.6902.5532.3821.5491.858 Total tax capacity rate27.80627.13925.56524.08522.613 Market value rate0.0120.0110.0100.008800.00703 82 CITY OF EDINA, MINNESOTA SCHEDULE OF SOURCES AND USES OF PUBLIC FUNDS Exhibit 3 FOR 50TH & FRANCE-NO. 1200, A TAX INCREMENT FINANCING DISTRICT (Districts 1200, 1201, 1203 and 1204 are pooled) December 31, 2005 (Unaudited) Accounted OriginalAmendedfor inCurrentAmount BudgetBudgetprior yearsyearremaining Source of funds: Bond proceeds2,200,000$ 5,280,000$ 5,251,998$ -$ 28,002$ Tax increments received- 31,748,489 21,729,744 861,400 9,157,345 Real estate sales *800,000 170,782 170,782 - - State aid- 418,871 418,871 - - Special assessments- 1,321,096 728,505 - 592,591 Parking permits- 268,524 268,524 - - Community development- 186,064 186,064 - - Interest on invested funds- 2,000,000 2,689,340 41,430 (730,770) Other- 73,881 73,881 - - Total sources of funds:3,000,000 41,467,707 31,517,709 902,830 9,047,168 Uses of funds: Land acquisition- 873,061 873,061 - - Installation of public utilities and improvements3,000,000 7,867,034 7,862,032 - 5,002 Bond payments: Principal- 5,280,000 4,500,000 860,000 (80,000) Interest- 4,738,329 4,132,264 8,600 597,465 Administrative costs- 1,230,000 1,206,201 (750) 24,549 Paid to other governments- 21,000 14,009 1,633 5,358 Work orders- 16,257 16,257 - - Contingencies- 11,644 11,644 - - Interest- 463,037 463,037 - - Miscellaneous- 62,095 63,010 - (915) Transfer- 15,000,000 10,000,000 2,350,000 2,650,000 Total uses of funds:3,000,000 35,562,457 29,141,515 3,219,483 3,201,459 Funds remaining (deficit)-$ 5,905,250$ 2,376,194$ (2,316,653)$ 5,845,709$ Cost to authorityPrice paid by developer * Real estate sales Liquor store site128,064$ 105,002$ Union oil site134,506 65,780 262,570$ 170,782$ 83 CITY OF EDINA, MINNESOTA SCHEDULE OF SOURCES AND USES OF PUBLIC FUNDS Exhibit 4 FOR SOUTHEAST EDINA REDEVELOPMENT DISTRICT-NO. 1201, A TAX INCREMENT FINANCING DISTRICT (Districts 1200, 1201, 1203 and 1204 are pooled) December 31, 2005 (Unaudited) Accounted OriginalAmendedfor inCurrentAmount BudgetBudgetprior yearsyearremaining Source of funds: Bond proceeds6,165,177$ 21,470,000$ 20,219,852$ -$ 1,250,148$ Tax increments received- 75,000,000 49,550,750 2,694,507 22,754,743 Real estate sales *598,005 3,000,000 2,642,115 - 357,885 Loan proceeds- 1,321,096 - - 1,321,096 Community development- 189,221 189,221 - - Interest on invested funds- 3,500,000 2,652,263 7,885 839,852 Other- 50,000 1,357 - 48,643 Total sources of funds:6,763,182 104,530,317 75,255,558 2,702,392 26,572,367 Uses of funds: Land acquisition6,682,998 12,200,000 6,894,303 - 5,305,697 Installation of public utilities and improvements- 16,000,000 14,278,823 - 1,721,177 Site improvements or preparation costs2,885,484 2,000,000 468,098 - 1,531,902 Bond payments: Principal- 21,470,000 19,060,000 1,710,000 700,000 Interest- 20,100,000 19,692,351 58,975 348,674 Administrative costs194,700 1,800,000 1,673,988 - 126,012 Paid to other governments- 110,000 66,532 9,012 34,456 Transfers out- 17,000,000 11,447,957 1,048,742 4,503,301 Interest reduction- 1,850,000 - - 1,850,000 Parkland dedication fees- 767,852 767,852 - - Total uses of funds:9,763,182 93,297,852 74,349,904 2,826,729 16,121,219 Funds remaining (deficit)(3,000,000)$ 11,232,465$ 905,654$ (124,337)$ 10,451,148$ Cost to authorityPrice paid by developer * Real estate sales Retail site8,350$ 11,899$ Hotel site192,915 192,915 Elderly site453,740 346,534 Office site1,027,277 784,563 Coventry Townhouses1,318,103 1,318,103 3,000,385$ 2,654,014$ 84 CITY OF EDINA, MINNESOTA SCHEDULE OF SOURCES AND USES OF PUBLIC FUNDS Exhibit 5 FOR GRANDVIEW AREA REDEVELOPMENT DISTRICT-NO. 1202, A TAX INCREMENT FINANCING DISTRICT December 31, 2005 (Unaudited) Accounted OriginalAmendedfor inCurrentAmount BudgetBudgetprior yearsyearremaining Source of funds: Bond proceeds4,500,000$ 9,900,000$ 9,475,915$ -$ 424,085$ Tax increments received- 29,737,107 10,800,539 1,006,044 17,930,524 Real estate sales *- 4,700,000 5,402,344 - (702,344) Interest on invested funds- 300,000 872,763 28,731 (601,494) Other- - 59,868 1,200 (61,068) Total sources of funds:4,500,000 44,637,107 26,611,429 1,035,975 16,989,703 Uses of funds: Land acquisition- 6,500,000 3,682,581 66,918 2,750,501 Installation of public utilities and improvements4,310,000 17,127,000 9,738,935 - 7,388,065 Bond payments: Principal- 9,900,000 6,277,555 240,000 3,382,445 Interest- 9,190,000 2,691,204 127,173 6,371,623 Loan/note interest- - 1,792,067 574,939 (2,367,006) Paid to other governments- - 191,998 1,550 (193,548) Administrative costs190,000 1,920,107 1,304,012 14,687 601,408 Total uses of funds:4,500,000 44,637,107 25,678,352 1,025,267 17,933,488 Funds remaining (deficit)-$ -$ 933,077$ 10,708$ (943,785)$ Cost to authorityPrice paid by developer * Real estate sales 5229 Eden Ave.1,822,319$ 5220 Eden Circle995,000 5244 Eden Circle (condemnation deposit)309,937 5201 Eden Circle598,411 2,070,119 Project area23,832 4,005,694 3,749,499$ 6,075,813$ 85 CITY OF EDINA, MINNESOTA SCHEDULE OF SOURCES AND USES OF PUBLIC FUNDS Exhibit 6 FOR SOUTHEAST EDINA REDEVELOPMENT DISTRICT-NO. 1203, A TAX INCREMENT FINANCING DISTRICT (Districts 1200, 1201, 1203 and 1204 are pooled) December 31, 2005 (Unaudited) Accounted OriginalAmendedfor inCurrentAmount BudgetBudgetprior yearsyearremaining Source of funds: Bond proceeds41,400,000$ 41,400,000$ 33,761,677$ -$ 7,638,323$ Tax increments received80,000,000 90,000,000 26,664,213 2,498,793 60,836,994 Real estate sales *5,000,000 11,637,070 11,637,070 - - Special assessment- 1,321,096 - - 1,321,096 Interest on invested funds- 2,500,000 2,589,166 200,573 (289,739) Transfer in- 32,000,000 22,559,181 3,398,743 6,042,076 Sale of material- 255,710 255,710 - - Developer payments- 297,826 297,826 - - Other- 20,000 21,799 - (1,799) Total sources of funds:126,400,000 179,431,702 97,786,642 6,098,109 75,546,951 Uses of funds: Land acquisition13,900,000 22,981,425 22,981,425 - - Installation of public utilities and improvements26,677,000 25,871,230 16,594,753 - 9,276,477 Bond payments: Principal41,400,000 41,400,000 12,589,724 2,655,000 26,155,276 Interest38,000,000 38,000,000 31,275,365 1,133,235 5,591,400 Administrative costs1,140,800 1,600,000 1,275,223 13,292 311,485 Paid to other governments- 42,000 23,751 3,113 15,136 Loan/note interest- 14,684,711 3,057,661 455,184 11,171,866 Parkland dedication fees- 2,030,345 2,030,345 - - Total uses of funds:121,117,800 146,609,711 89,828,247 4,259,824 52,521,640 Funds remaining (deficit)5,282,200$ 32,821,991$ 7,958,395$ 1,838,285$ 23,025,311$ Cost to authorityPrice paid by developer * Real estate sales Retail and theater site3,213,720$ 3,213,720$ Medical office site815,092 815,092 Office site1,107,160 1,107,160 Office building #1449,300 449,300 Office building #21,280,702 1,280,702 Office building #31,341,533 1,341,533 Office building #41,625,849 1,625,849 Office building #51,803,714 1,803,714 11,637,070$ 11,637,070$ 86 CITY OF EDINA, MINNESOTA SCHEDULE OF SOURCES AND USES OF PUBLIC FUNDS Exhibit 7 FOR 70TH STREET AND CAHILL ROAD DISTRICT-NO. 1207, A TAX INCREMENT FINANCING DISTRICT December 31, 2005 (Unaudited) Accounted OriginalAmendedfor inCurrentAmount BudgetBudgetprior yearsyearremaining Source of funds: Bond proceeds1,911,000$ 1,911,000$ -$ -$ 1,911,000$ Tax increments received2,177,855 2,177,855 746,863 - 1,430,992 Interest on invested funds- - 186,947 11,385 (198,332) Other- - - - - Total sources of funds:4,088,855 4,088,855 933,810 11,385 3,143,660 Uses of funds: Land acquisition529,400 529,400 33,237 - 496,163 Installation of public utilities and improvements325,000 325,000 540,279 - (215,279) Demolition150,000 150,000 - - 150,000 Relocation160,000 160,000 - - 160,000 Capitalized interest150,000 150,000 - - 150,000 Debt service2,178,455 2,178,455 - - 2,178,455 Paid to other governments- - 2,730 - (2,730) Administrative costs596,000 596,000 74,830 - 521,170 Total uses of funds:4,088,855 4,088,855 651,076 - 3,437,779 Funds remaining (deficit)-$ -$ 282,734$ 11,385$ (294,119)$ 87 This page left blank intentionally. 88 This page left blank intentionally. 89 CITY OF EDINA, MINNESOTA GOVERNMENT-WIDE EXPENSES BY FUNCTION Last Three Fiscal Years (Unaudited) Interest on FiscalGeneralPublicPublicLong-Term Year*GovernmentSafetyWorksParksDebt 20035,839,893$ 10,784,215$ 5,621,291$ 4,484,685$ 2,760,022$ 20046,934,045 11,063,767 5,834,490 4,248,060 2,399,682 20054,967,008 12,019,027 7,185,784 5,901,648 2,288,524 *Government-wide expenses are not available for years prior to 2003 90 Table 1 Community AquaticGolfActivity UtilityLiquorCenterCourseCentersTotal 8,107,553$ 8,764,081$ 711,061$ 3,555,243$ 3,833,026$ 54,461,070$ 7,801,580 9,110,888 701,768 3,508,741 3,850,192 55,453,213 8,254,409 9,749,313 725,936 3,580,307 3,825,562 58,497,518 91 CITY OF EDINA, MINNESOTA GOVERNMENT-WIDE REVENUES Table 2 Last Three Fiscal Years (Unaudited) ChargesOperatingCapitalUnrestricted FiscalForGrants andGrants andPropertyTaxFranchiseInvestment Year*ServicesContributionsContributionsTaxesIncrementsTaxesEarningsTotal 200332,908,375$ 1,347,776$ 7,214,393$ 17,815,426$ 7,342,270$ -$ 673,326$ 67,301,566$ 200433,299,158 1,293,255 4,192,947 17,865,757 6,761,934 450,956 670,241 64,534,248 200535,441,433 1,643,774 2,252,491 19,071,202 7,060,744 457,421 1,214,610 67,141,675 *Government-wide revenues are not available for years prior to 2003 General RevenuesProgram Revenues 92 CITY OF EDINA, MINNESOTA PROPERTY TAX LEVIES AND COLLECTIONS Table 3 Last Ten Fiscal Years (Unaudited) TotalDelinquent TotalCurrentPercentDelinquentCollectionsOutstandingTaxes as TaxesTaxTaxof LevyTax Total Taxas Percent ofDelinquentPercent of PayableLevy (1)CollectionCollected (2)CollectionsCollectionsCurrent LevyTaxesCurrent Levy 199612,178,440$ 12,026,177$ 98.75%(262,279)$ 11,763,898$ 96.60%36,198$ 0.30% 199712,531,244 12,381,729 98.81%(244,913) 12,136,816 96.85%39,107 0.31% 199813,099,140 13,003,882 99.27%48,985 13,052,867 99.65%54,226 0.41% 199913,284,962 13,147,288 98.96%36,293 13,183,581 99.24%99,202 0.75% 200013,650,158 13,554,044 99.30%15,355 13,569,399 99.41%116,362 0.85% 200114,438,346 14,331,078 99.26%25,907 14,356,985 99.44%121,548 0.84% 200216,990,256 16,874,198 99.32%55,578 16,929,776 99.64%132,443 0.78% 200317,784,475 17,088,979 96.09%68,657 17,157,636 96.48%80,841 0.45% 200418,122,241 17,386,812 95.94%(202,429) 17,184,383 94.82%154,878 0.85% 200518,993,390 18,419,995 96.98%(32,264) 18,387,731 96.81%169,275 0.89% (1) Excludes market value referendum levy. (2) Beginning in 2003, the State of Minnesota ended reimbursement for the homestead market value credit (HMVC) program. The HMVC program reduces property taxes for certain residential properties and is phased out once a property reaches a certain assessed value. When the State ended reimbursing the City for HMVC in 2003, tax collections as a percent of levy dropped, as shown in this table. Due to the phase out provision in the HMVC program, the City anticipates that the impact of this lost revenue will decrease over time as property values rise above the phase out level. Source: Hennepin County Taxpayer Services 93 CITY OF EDINA, MINNESOTA ASSESSED VALUE OR TAX CAPACITY AND ESTIMATED MARKET VALUE OF TAXABLE PROPERTY Last Ten Fiscal Years Table 4 (Unaudited) Ratio of Total Tax Capacity to AssessmentEstimatedTotal Estimated YearTax CapacityMarket ValueMarket Value 199685,775,887$ 4,071,654,134$ 2.11% 199791,586,990 4,074,713,634 2.25% 199887,726,810 4,267,758,501 2.06% 199985,963,836 4,535,761,900 1.90% 200090,055,752 4,861,730,000 1.85% 200172,133,594 5,821,566,500 1.24% 200277,665,879 6,328,581,300 1.23% 200383,089,465 6,909,476,700 1.20% 200490,934,037 8,033,679,900 1.13% 2005101,559,484 8,693,345,900 1.17% Source: Hennepin County Taxpayer Services Real Property 94 CITY OF EDINA, MINNESOTA PROPERTY TAX RATES - Table 5 ALL OVERLAPPING GOVERNMENTS Last Ten Fiscal Years (Unaudited) Tax Rates (Per $1,000 of Assessed Valuation) Payable YearCitySchoolCountyOtherTotal 199616.33162.26837.2707.494123.363 199715.62657.21335.5156.659115.013 199816.81347.49938.3887.538110.238 199917.81050.76640.9948.553118.123 200017.66951.67839.6558.426117.428 200117.23346.83937.6248.126109.822 200227.80618.50450.4099.847106.566 200327.13923.31250.6078.993110.051 200425.56522.67047.3248.256103.815 200524.08519.69444.1728.72196.672 Source: Hennepin County Taxpayer Services 95 CITY OF EDINA, MINNESOTA SPECIAL ASSESSMENT COLLECTIONS Table 6 Last Ten Fiscal Years (Unaudited) Percent CollectionPercentof TotalTotal Totalof Currentof LevyDelinquentTotalCollections toOutstanding YearLevyYear's LevyCollectedCollectionsCollectionsTotal LevyAssessments 1996768,800$ 764,997$ 99.51%16,636$ 781,633$ 101.67%13,389$ 1997590,048 576,513 97.71%9,036 585,549 99.24%17,889 1998654,442 635,476 97.10%3,798 639,274 97.68%33,057 1999773,251 753,251 97.41%14,273 767,524 99.26%38,784 2000960,562 930,484 96.87%5,586 936,070 97.45%63,275 20011,003,856 975,921 97.22%51,173 1,027,094 102.31%40,038 2002974,141 950,417 97.56%23,756 974,173 100.00%40,006 2003978,278 964,440 98.59%24,439 988,879 101.08%29,404 2004900,817 894,713 99.32%13,019 907,732 100.77%34,427 20051,061,234 1,035,470 97.57%24,995 1,060,465 99.93%35,199 96 CITY OF EDINA, MINNESOTA RATIO OF NET BONDED DEBT Table 7 TO ASSESSED VALUE AND NET BONDED DEBT PER CAPITA Last Ten Fiscal Years (Unaudited) DebtRatio of GrossServiceNet BondedNet Bonded FiscalNet TaxBondedMoniesNet BondedDebt toDebt YearPopulation (1)CapacityDebt (2)AvailableDebtTax CapacityPer Capita 199646,845 80,087,160$ 92,680,000$ 25,429,215$ 67,250,785$ 83.97%1,436$ 199747,029 77,762,151 94,385,000 17,929,523 76,455,477 98.32%1,626 199847,113 85,259,000 70,260,000 589,371 69,670,629 81.72%1,479 199947,235 77,165,969 73,005,000 4,384,419 68,620,581 88.93%1,453 200047,425 83,715,952 88,175,000 21,251,947 66,923,053 79.94%1,411 200147,465 61,006,501 72,465,000 8,321,645 64,143,355 105.14%1,351 200247,465 65,486,283 70,735,000 3,070,758 67,664,242 103.33%1,426 200347,570 70,755,808 68,740,000 4,053,306 64,686,694 91.42%1,360 200448,156 90,934,037 60,835,000 3,102,028 57,732,972 63.49%1,199 200548,050 101,559,484 68,380,000 10,808,902 57,571,098 56.69%1,198 (1) Population estimates provided from Metropolitan Council which reflect the federal census. (2) Includes all long-term bonded general obligation and revenue debt. 97 CITY OF EDINA, MINNESOTA COMPUTATION OF DIRECT AND OVERLAPPING DEBT Table 8 INCLUDING DEBT RATIOS December 31, 2005 (Unaudited) Net GeneralPercentage Obligation BondedApplicableCity Share Overlapping Debt:Debt Outstanding (1)In Cityof Debt Hennepin County370,442,913$ 7.07%26,190,314$ Hennepin Suburban Park District45,571,202 9.31%4,242,679 Hennepin Regional Rail Authority46,547,489 7.07%3,290,907 School Districts: ISD No. 273 (Edina)117,042,947 98.39%115,158,556 ISD No. 270 (Hopkins)83,884,254 8.75%7,339,872 ISD No. 271 (Bloomington)123,154,593 0.01%12,315 ISD No. 272 (Eden Prairie)130,035,000 0.95%1,235,333 ISD No. 280 (Richfield)20,790,915 17.37%3,611,382 ISD No. 283 (St. Louis Park)86,139,752 0.02%17,228 Metro Council206,623,754 3.18%6,570,635 Total Overlapping Debt1,230,232,819 167,669,221 Direct Debt: City of Edina29,963,863 100.00%29,963,863 Total Overlapping and Direct Debt1,260,196,682$ 197,633,084$ Debt Ratios: Ratio of debt per capita (48,050 population)4,113$ Ratio of debt to estimated market valuation of $8,693,345,9002.27% (1) Calculation excludes revenue and special assessment bonds as well as sinking fund balance, if any. Source: Hennepin County Taxpayer Services 98 CITY OF EDINA, MINNESOTA RATIO OF ANNUAL DEBT SERVICE EXPENDITURES FOR Table 9 GENERAL BONDED DEBT TO TOTAL GENERAL EXPENDITURES Last Ten Fiscal Years (Unaudited) Percent of Debt Service InterestTotalTotalExpenditures FiscalandDebtGeneralTo General YearPrincipalOtherServiceExpendituresExpenditures 19961,400,000$ 4,881,475$ 6,281,475$ 23,128,537$ 27.16% 19972,120,000 4,502,948 6,622,948 24,000,082 27.60% 19982,224,724 4,099,809 6,324,533 25,390,000 24.91% 19993,275,000 3,262,266 6,537,266 25,131,088 26.01% 20006,050,000 3,108,601 9,158,601 25,814,880 35.48% 20013,740,000 3,148,719 6,888,719 28,382,482 24.27% 20025,885,000 3,094,480 8,979,480 30,675,141 29.27% 20035,700,000 2,883,377 8,583,377 30,539,932 28.11% 20046,450,000 2,478,587 8,928,587 32,799,091 27.22% 20056,830,000 2,543,639 9,373,639 34,359,170 27.28% Note: This table includes General, Special Revenue and Debt Service Funds. 99 CITY OF EDINA, MINNESOTA REVENUE BOND COVERAGE Table 10 Last Ten Fiscal Years (Unaudited) Net revenue GrossDirectavailable Fiscaloperatingoperatingfor debt Yearrevenueexpenses (1)servicePrincipalInterestTotalCoverage Utility Bond 19967,753,016 7,007,293 745,723 370,000 52,019 422,019 177 19978,110,744 7,526,033 584,711 390,000 40,744 430,744 136 19988,108,612 7,226,648 881,964 400,000 22,184 422,184 209 19998,502,423 6,713,673 1,788,750 420,000 83,429 503,429 355 20008,793,386 7,205,934 1,587,452 335,000 127,525 462,525 343 20018,556,810 7,065,589 1,491,221 310,000 116,794 426,794 349 20028,561,287 7,399,773 1,161,514 325,000 105,205 430,205 270 20039,668,434 7,769,810 1,898,624 335,000 160,691 495,691 383 20049,473,355 7,643,129 1,830,226 635,000 158,451 793,451 231 200510,225,975 8,107,039 2,118,936 645,000 141,226 786,226 270 Recreational Facility Bonds 19964,311,141 3,545,291 765,850 250,000 774,800 1,024,800 75 19974,440,202 3,945,975 494,227 295,000 762,411 1,057,411 47 19985,042,394 4,270,042 772,352 4,240,000 372,390 4,612,390 17 19995,141,606 4,332,932 808,674 430,000 522,050 952,050 85 20005,727,930 5,209,610 518,320 450,000 553,962 1,003,962 52 20015,430,507 5,231,143 199,364 470,000 531,176 1,001,176 20 20025,424,422 5,031,839 392,583 6,780,000 611,509 7,391,509 5 20035,866,300 5,511,730 354,570 745,000 265,602 1,010,602 35 20045,621,743 5,492,510 129,233 820,000 241,387 1,061,387 12 20055,708,827 5,604,464 104,363 850,000 214,108 1,064,108 10 (1) Before interest costs. Debt service requirements 100 CITY OF EDINA, MINNESOTA PROPERTY AND CONSTRUCTION VALUES Table 11 Last Ten Fiscal Years (Unaudited) Number of Number of Commercial/Residential/ YearPermitsValuePermitsValueIndustrialApartments 199627935,789,432$ 1,31831,334,870$ 745,200,700$ 3,326,107,834$ 199740737,074,290 1,78032,387,315 824,767,100 3,438,309,200 199846238,495,806 1,83035,625,118 904,869,800 3,623,187,200 199932336,708,942 3,47827,637,742 980,837,900 3,924,031,400 20001,41866,980,499 4,01348,278,737 1,069,928,100 4,387,874,100 200183486,608,740 4,97365,574,279 1,173,397,300 5,056,797,500 200275744,300,120 4,84169,612,658 1,217,214,600 5,834,821,900 200381250,696,987 4,82785,287,525 1,202,162,900 6,286,945,800 200487646,251,604 4,94383,315,920 1,176,787,600 6,856,892,300 2005857131,497,513 5,080100,027,692 1,298,757,600 7,396,894,700 * Assessor's estimated market value Source: City of Edina Building Inspections Office Property value *construction CommercialResidential construction 101 CITY OF EDINA, MINNESOTA PRINCIPAL TAXPAYERS Table 12 2005 (Unaudited) 2005 Net TaxpayerType of BusinessTax Capacity SouthdaleShopping center3,483,870$ GalleriaShopping center1,525,904 Southdale Office parkOffice building717,250 Centennial lakes Phase VOffice building543,824 Centennial Lakes Phase IVOffice building533,268 7700 FranceOffice building463,742 Southdale Medical BuildingOffice building343,884 May Department StoresRetail343,044 Centennial Lakes Phase IIIOffice building333,360 Centennial Lakes Phase IIOffice building322,194 Source: City of Edina Assessing Office 102 CITY OF EDINA, MINNESOTA MAJOR EMPLOYERS IN THE CITY Table 13 2005 (Unaudited) Approximate Number EmployerProduct/Serviceof Employees Jerry's Enterprises Inc.Grocery Stores4,500 Fairview Southdale HospitalGeneral Medical & Surgical Hospitals2,500 Marshall FieldsDepartment Stores1,200 Edina Public School ISD#273Elementary & Secondary Schools1,172 Nash Finch Co.Grocery Stores350 International Dairy Queen Inc.Full-Service Restaurants300 City of EdinaLocal Government262 J.C. PenneyDepartment Stores250 Edina RealtyReal Estate210 Con Agra FoodsSnack Food Mfg196 Source: City of Edina "Community Profile", Minnesota Department of Trade and Economic Development, 2005 103 CITY OF EDINA, MINNESOTA DEMOGRAPHIC STATISTICS Table 14 Last Ten Fiscal Years (Unaudited) PersonalPer CapitaHigh School Income (2)PersonalMedianGraduationUnemployment Population (1)(In thousands)Income (3)Age (4)Rate (4)Rate (5) 46,8451,363,049$ 29,097$ 32.788.2%1.80% 47,0291,446,612 30,760 32.788.2%1.60% 47,1131,556,896 33,046 32.788.2%1.50% 47,2351,628,002 34,466 32.788.2%1.60% 47,4251,747,042 36,838 32.788.2%2.40% 47,4651,774,194 37,379 34.991.5%3.30% 47,4651,796,693 37,853 34.991.5%4.00% 47,5701,847,429 38,836 34.991.5%4.10% 48,1561,970,303 40,915 36.293.1%3.90% 48,050N/AN/A36.293.1%3.30% N/A - Data not available Data Sources (1) U.S. Census Bureau/Metropolitan Council. (2) Estimates based on U.S. Department of Commerce Bureau of Economic Analysis data for the entire seven-county metropolitan area. (3) U.S. Department of Commerce Bureau of Economic Analysis. Per capita income is for the entire seven-county metropolitan area. (4) U.S. Census Bureau. Data is for Hennepin County. (5) State of Minnesota Department of Employment and Economic Development. 2001 2000 1999 1998 2005 2004 2003 2002 1997 1996 Fiscal Year 104 CITY OF EDINA, MINNESOTA MISCELLANEOUS STATISTICAL DATA Table 15 December 31, 2005 (Unaudited) Date of incorporationDecember 17, 1888 Form of governmentPlan B Date of adoption of Council-Manager PlanJanuary 1, 1955 Fiscal year beginsJanuary 1 Area of city16 square miles Percent of City developed with buildings97% Municipal bond ratingAaa Miles of streets224 miles Miles of sanitary sewer186.22 miles Sewer connections14,851 Fire protection: Number of stations2 Number of employees (full time)31 Police Protection: Number of stations1 Number of employees (full time)67 Park land: Present park acres and open space1,600 Total improved park acres1,007 Number of parks40 Private golf courses2 Public golf courses3 Municipal water: Number of wells18 Miles of watermain199 Gallons of storage7 million Number of consumers14,636 105